Document:

<PAGE>

EXHIBIT 10.18

                                OPTION AGREEMENT

                  This OPTION AGREEMENT, dated as of December 29, 1999, is made
and entered into by and between QUETZAL BILINGUAL COMM., Inc., a California
corporation("Seller"), and RADIO UNICA CORP., a Delaware corporation ("Buyer").

                  WHEREAS, Seller is the owner and operator of radio station
KURS, licensed to broadcast on frequency 1040 kHz, at San Diego, California (the
"Station");

                  WHEREAS, Buyer is the wholly owned subsidiary of Radio Unica
Communications Corp., a Delaware corporation ("Parent");

                  WHEREAS, Seller and Buyer have entered into a Time Brokerage
Agreement ("TBA"), dated as of December 29, 1999, whereby Seller has made
available to Buyer substantial broadcasting time on the Station; and

                  WHEREAS, in connection with the TBA the parties have agreed
that Seller will grant to Buyer an option to purchase the assets used in the
conduct of the business and ownership and operation of the Station on the terms
and conditions set forth herein and subject to the rules, regulations and
policies of the Federal Communications Commission ("FCC").

                  NOW THEREFORE, in consideration of the foregoing and of the
mutual promises and covenants contained herein, and other good and valuable
consideration, the parties, intending to be legally bound, hereby agree as
follows:

SECTION 1.        OPTION TO PURCHASE ASSETS

                  1.1 In consideration of Buyer entering into the TBA with
Seller upon the terms and conditions set forth therein, Seller hereby grants to
Buyer an exclusive, irrevocable option (the "Option") to purchase the assets,
real, personal and mixed, tangible and intangible, owned and held by Seller that
are used in the conduct of the business and operations of the Station (the
"Station Assets"), free and clear of all material debts, liens, encumbrances or
other liabilities, subject to the terms and conditions set forth herein.

<PAGE>

                  1.2 The Option granted hereunder may be exercised at any time
from September 1 - 30, 2000; December 1 - 31, 2000; March 1 - 31, 2001; June 1 -
30, 2001; September 1 - 30, 2001; December 1 - 31, 2001; March 1 - 31, 2002;
June 1 - 30, 2002; September 1 - 30, 2002; and December 1 - 31, 2002.

                  1.3 In the event that Buyer wishes to exercise the Option,
Buyer shall give written notice (the date of such notice being referred to as
the "Exercise Date") to Seller and the giving of such notice shall be deemed to
exercise the Option. In the event that the Option is exercised, the parties
shall, within ten (10) days of the Exercise Date, execute an Asset Purchase
Agreement (the "Purchase Agreement") in substantially the form attached hereto
as Exhibit A, it being understood that (i) the asset purchase price shall be as
set forth in Section 1.4 of this Agreement and (ii) the only changes to such
form shall be changes, if any, in the information contained in the schedules
thereto and the addition, if any, of schedules thereto that are reasonably
required to reflect events occurring after the date hereof; PROVIDED, HOWEVER,
that Buyer shall not be required to accept any such change that could reasonably
be expected to cause a materially adverse change in, or have a materially
adverse effect on, the assets to be conveyed to Buyer pursuant to the Purchase
Agreement or the ability of Seller to consummate the transactions contemplated
by the Purchase Agreement, and thereafter Buyer and Seller shall perform their
respective obligations under the Purchase Agreement, including, without
limitation, filing and prosecuting an appropriate application for FCC consent to
the assignment of the FCC licenses for the Station from Seller to Buyer.
Notwithstanding anything contained in this Agreement to the contrary, Buyer may
withdraw its notice of exercise of its Option at any time prior to its execution
of the Purchase Agreement; PROVIDED, however, that the Option will then
terminate.

                  1.4 Subject to the adjustment in Section 1.5 hereof, the
purchase price for the Station Assets shall be $10, 124,000.00 payable as
follows: $8,062,000.00 payable in immediately available funds (the "Cash
Consideration") and $2,062,000.00 payable in shares of common stock of Parent
par value $.01 per share (the "Stock Consideration"); PROVIDED, THAT Seller in
its sole discretion, upon ten business days written notice to Buyer, may elect
to receive any or all of the Cash Consideration in a promissory note in the form
attached hereto as Exhibit B. The number of shares of common stock of Parent par
value $.01 per share ("Parent Common Stock") which Seller shall be entitled to
receive pursuant to this Section 1.4 shall be determined by dividing the Stock
Consideration by the Share Price, as hereinafter defined. The Share Price shall
be the average daily price per share of the

                                       2
<PAGE>

Parent Common Stock during the week preceding the Closing Date, as defined in
the Purchase Agreement.

                  1.5 The firm of Dutreil, Rackley and Associates ("Dutreil
Rackley"), at Buyer's expense, shall evaluate the current station upgrade plans
of Seller to increase the operating power of the Station. Within thirty days of
execution of the TBA, Dutreil Rackley shall present its evaluation to Buyer. If
such upgrade plans are approved by Dutreil Rackley, Buyer agrees to reimburse
Seller for those costs preapproved by Buyer and incurred by Seller from and
after the date of execution of the TBA in connection with such upgrade plans.
The parties agree that the purchase price specified in Section 1.4 hereof, shall
be increased by such reimbursement amount, such amount payable in immediately
available funds.

                  1.6 In addition to reimbursing Seller as provided in Section
1.5 hereof, upon the execution of the TBA, Buyer agrees to pay to Seller
$30,000.00 in immediately available funds as reimbursement for engineering
costs, such amount to be paid by wire transfer to an account specified by
Quetzal in writing; PROVIDED, HOWEVER, that if Buyer does not exercise the
Option, such $30,000.00 reimbursement shall be paid back to Buyer without
interest within thirty (30) days following the termination of the TBA and owed
by Buyer to Seller.

SECTION 2.        SPECIFIC PERFORMANCE

                  The parties agree that the FCC licenses and the broadcast
business of the Station made possible thereby are unique assets not readily
available on the open market. For this reason, Seller acknowledges that monetary
damages alone would not be adequate to compensate Buyer and that specific
performance is an appropriate remedy for Buyer in the event this Agreement is
breached by Seller. The parties agree that the rights afforded by the preceding
sentence shall be in addition to any and all rights Buyer may have at law or
equity. If any action is brought by Buyer to enforce this Agreement, Seller
shall waive the defense that there is an adequate remedy at law.

SECTION 3.        REPRESENTATIONS AND WARRANTIES OF SELLER

                                       3
<PAGE>

                  Seller represents and warrants to Buyer as follows:

                  3.1 Seller is, and upon exercise of the Option will be, a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California.

                  3.2 Seller has, and upon the exercise of the Option will have,
full corporate power and authority to enter into this Agreement and the Purchase
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller and no other corporate proceedings on the
part of Seller are necessary to authorize this Agreement and the Purchase
Agreement or to consummate the transactions contemplated hereby and thereby.
This Agreement constitutes, and any other instruments contemplated hereby when
executed will constitute, the legal, valid and binding obligations of Seller,
enforceable in accordance with their terms, except as may be affected by
bankruptcy and insolvency laws and court-applied equitable principles.

                  3.3 The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the compliance with
the terms, conditions and provisions of this Agreement, with or without the
giving of notice or the passage of time, or both, will not: (i) violate any
provision of Seller's articles of incorporation or by-laws, (ii) conflict with
or result in a breach of or constitute a default under any of the terms,
conditions or provisions of any indenture, mortgage, loan or credit agreement or
any other agreement or instrument to which Seller is party or by which it or any
of the assets of Seller may be bound or affected, or any decree, judgment or
order of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, ordinance, rule or
regulation, including but not limited to the Communications Act of 1934, as
amended (the "Act"), and the rule and regulations of the FCC promulgated
thereunder.

                  3.4 All of the Station Assets are, and upon the exercise of
the Option all of the Station Assets will be, owned by Seller free and clear of
all liens, pledges, charges, claims, security interests of other encumbrances,
whether consensual, statutory or otherwise (collectively, "Liens").

SECTION 4.        COVENANTS OF SELLER

                                       4
<PAGE>

                  4.1 So long as this Agreement is in effect, Seller covenants
that it will not, without the Buyer's prior written approval, which shall not be
unreasonably withheld:

                           (a) Create, assume or suffer to exist, directly or
indirectly, any mortgage, deed of trust or Lien of any nature whatsoever, upon
any of the Station Assets, now owned or hereafter as acquired, excluding, Liens
incurred in the ordinary course of business.

                           (b) Sell, transfer, lease or otherwise dispose of any
of the Station Assets whose value exceeds $5,000.00 or 25,000.00 in the
aggregate, except in connection with the acquisition of replacement property of
equivalent kind and value.

                           (c) Enter into any agreement to consolidate or merge
with or into, or to sell all or substantially all of its capital stock,
properties or assets to, any person or entity.

                           (d) Enter into any agreement or grant any person or
entity a right to purchase the Station's FCC licenses or all or substantially
all of the Station Assets.

                           (e) Enter into any agreement or take any other action
that would interfere with, or prevent, Seller from transferring the Station
Assets to Buyer as contemplated hereunder or under the Purchase Agreement.

                           (f) Take any action that jeopardizes the validity or
enforceability of or rights under the Station's FCC licenses.

                  4.2 So long as this Agreement is in effect, Seller covenants
that it will:

                           (a) Subject to the terms and conditions of the TBA,
(i) carry on the business and activities of the Station in the ordinary course
of business, consistent with past practices of Seller, (ii) pay or otherwise
satisfy all obligations of the Station as they come due and payable; (iii)
maintain all Station Assets in customary repair, order and condition; and (iv)
maintain its books of account, records and files in substantially the same
manner as heretofore maintained.

                                       5
<PAGE>

                           (b) Maintain the validity of the Station's FCC
licenses, comply in all material respects with all requirements of the Station's
FCC licenses and the rules and regulations of the FCC, and deliver to Buyer,
within ten (10) days after filing, copies of any reports, applications or
responses to the FCC related to the Station that are filed from and after the
date hereof.

                           (c) Maintain in full force and effect all existing
casualty, liability and other insurance insuring the Station and the Station
Assets in amounts not less than those in effect on the date hereof.

                           (d) Upon receiving notice or otherwise becoming aware
of any violation relating to the Station's FCC licenses, any violation by the
Station of any rules and regulations of the FCC or any material violations under
any other applicable laws and regulations, promptly notify Buyer and, at
Seller's expense, use reasonable commercial efforts to cure all such violations
in a timely fashion.

SECTION 50        REPRESENTATIONS AND WARRANTIES OF BUYER

                  Buyer represents and warrants to Seller as follows:

                  5.1 Buyer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.

                  5.2 Buyer has full corporate power and authority to enter into
this Agreement and the Purchase Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer and no other
corporate proceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
constitutes, and any other instruments contemplated hereby when executed will
constitute, the legal, valid and binding obligations of Buyer, enforceable in
accordance with their terms, except as may be affected by bankruptcy and
insolvency laws and court-applied equitable principles.

                  5.3 The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the compliance with
the terms, conditions and provisions of this Agreement, with or without the
giving of notice or the passage of time, or both, will not: (i) violate any
provision of Buyer's articles of incorporation or by-laws, (ii) conflict with or
result in a breach of or constitute a

                                       6
<PAGE>

default under any of the terms, conditions or provisions of any indenture,
mortgage, loan or credit agreement or any other agreement or instrument to which
Buyer is party or by which it or any of the assets of Buyer may be bound or
affected, or any decree, judgment or order of any court or governmental
department, commission, board, agency or instrumentality, domestic or foreign,
or any applicable law, ordinance, rule or regulation, including but not limited
to the Act and the rule and regulations of the FCC promulgated thereunder.

SECTION 60        MISCELLANEOUS

                  6.1 If any provision or provisions contained in this Agreement
are held to be invalid, illegal or unenforceable, this shall not affect any
other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had not been contained
herein.

                  6.2 No party may assign this Agreement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld, and any purported assignment without such consent shall be null and
void and of no legal force or effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto and their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.

                  6.3 No amendment, waiver of compliance with any provision or
condition hereof, or consent pursuant to this Agreement will be effective unless
evidenced by an instrument in writing signed by the parties.

                  6.4 The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.

                  6.5 This Agreement shall be governed by, enforced under and
construed in accordance with the laws of the State of California, without giving
effect to any choice or conflict of law provision or rule thereof.

                  6.6 Any notice required hereunder shall be in writing and any
notice or other communications shall be deemed given when delivered personally
or one (1) day after deposited with a recognized overnight air courier for
overnight delivery and addressed as follows:

                                       7
<PAGE>

                  (a)      If to Buyer:

                           Radio Unica Corp.
                           8400 N.W. 52nd Street
                           Suite 101
                           Miami, Florida  33176
                           Attn:   Joaquin F. Blaya
                           Phone:   (305-442-4077

                           with a required copy to:

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           1440 New York Avenue, N.W.
                           Washington, D.C.  20005
                           Attn:  John C. Quale, Esq.
                           Phone:  (202) 371-7200

                  (b)      If to Seller:

                           Quetzal Bilingual Comm., Inc.
                           News Plaza Building
                           296 H Street, 3rd Floor
                           Chula Vista, CA 91910
                           Attn:   Jaime Bonilla
                           Phone:  (619) 427-5877

                           with a required copy to:

                           The Aventine-LaJolla
                           8910 University Center Lane
                           Suite 170
                           San Diego, CA 92122
                           Attn:  Steven McCue
                           Phone:  619-455-9210

                                       8
<PAGE>

                           and to:

                           Taylor Thiemann & Aitken, L.C.
                           908 King Street
                           Suite 300
                           Alexandria, VA 22314
                           Attn:  Robert L. Thompson
                           Phone: 703-836-9400

or such other address as the addressee may have specified in a notice duly given
to the sender as provided herein.

                  6.7 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

                  6.8 After the date hereof, Buyer shall be afforded reasonable
opportunity to inspect the Station and the books and records of the Seller
relating to the Station and the Station Assets upon reasonable advance request.

                  6.9 Buyer and Seller each agrees that it will use its best
efforts to keep confidential (except for such disclosure to attorneys, bankers,
underwriters, investors, etc. as may be appropriate in the furtherance of this
transaction and except for such filings with the FCC as may be required) all
information of a confidential nature obtained in connection with the
transactions contemplated by this Agreement and, in the event that such
transactions are not consummated, each party will return to the other party such
documents and other material obtained from the other party in connection
therewith.

                  6.10 Buyer and Seller shall jointly prepare, and determine the
timing of, any press release or other announcement to the public relating to the
execution of this Agreement. No party hereto will issue any press release or
make any other public announcement relating to the transactions contemplated
hereby without the prior consent of the other party hereto, except that any
party may make any disclosure required to be made by it under applicable law if
it determines in good faith that it is appropriate to do so and gives prior
notice to the other party.

                  6.11 Each party shall bear its respective costs incurred in
connection with the transactions contemplated by this Agreement.

                                       9
<PAGE>

                  6.12 Seller agrees that from the date hereof and during the
time period in which the Option is exercisable hereunder, or if the Option is
exercised, during the period prior to execution of the Purchase Agreement, it
shall not offer or seek to offer, or entertain or discuss any offer, to sell the
Station or the Station Assets, other than as contemplated under this Agreement.

                  6.13 This Agreement (together with the Exhibits hereto) and
the TBA embody the entire agreement between the parties regarding the subject
matter hereof and there are no other agreements, representations, warranties, or
understandings, oral or written, between them with respect to the subject matter
hereof.

                  6.14 Prior to consummation of the Purchase Agreement and to
obtaining consent from the FCC, Buyer shall not, directly or indirectly,
control, supervise or direct or attempt to control, supervise or direct the
operations of the Station or Seller; such operations, including complete
ultimate control and supervision of all of the Station's programs, employees and
policies, shall remain the sole responsibility of Seller, as set forth in the
rules and policies of the FCC.

                                       10
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed this
Option Agreement on the day and year first written above.

                                  QUETZAL BILINGUAL COMM., INC.

                                  By:
                                      ----------------------------
                                      Name:
                                      Title:

                                  RADIO UNICA CORP.

                                  By:
                                      ----------------------------
                                      Name:
                                      Title:

                                       11
<PAGE>

                                                                       EXHIBIT A

                        FORM OF ASSET PURCHASE AGREEMENT

<PAGE>

                                                                       EXHIBIT B

                             FORM OF PROMISSORY NOTEExhibit 4.4

<PAGE>

================================================================================

                                 LOAN AGREEMENT
                                 --------------

                            Dated as of June 1, 1998

                                     Between

         GPT-WINDSOR, LLC, a Delaware limited liability company;
         AVONPLACE  ASSOCIATES  LIMITED   PARTNERSHIP,   a  Connecticut  limited
         partnership;
         GR-FARMINGTON SUMMIT ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
         partnership;
         GR-NORTHEAST  APARTMENTS  I LIMITED  PARTNERSHIP,  a  Delaware  limited
         partnership;
         GR-WEST  HARTFORD CENTER  ASSOCIATES  LIMITED  PARTNERSHIP,  a Delaware
         limited partnership;
         A.N.E.   ASSOCIATES   LIMITED   PARTNERSHIP,   a  Connecticut   limited
         partnership;
         GROVE OPPORTUNITY FUND II LIMITED  PARTNERSHIP,  a Connecticut  limited
         partnership;
         GR-Enfield  Associates  Limited  Partnership,   a  Connecticut  limited
         partnership;
         GR-PROPERTIES   III  LIMITED   PARTNERSHIP,   a   Connecticut   limited
         partnership;
         FOXWOODBURG, L.P., a Delaware limited partnership;
         GROVE-WESTFIELD  ASSOCIATES LIMITED PARTNERSHIP,  a Connecticut limited
         partnership;
         GROVE-WEST  SPRINGFIELD  ASSOCIATES LIMITED PARTNERSHIP,  a Connecticut
         limited partnership; and
         GPT-PLAINVILLE LIMITED PARTNERSHIP, a Delaware limited partnership;

                                  as Borrowers

                                       and

                          LEHMAN BROTHERS HOLDINGS INC.
                                DOING BUSINESS AS
           LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.

                                    as Lender

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

I.  DEFINITIONS; PRINCIPLES OF CONSTRUCTION....................................1

      Section 1.1  Definitions.................................................1
      Section 1.2  Principles of Construction.................................17

II.  GENERAL TERMS............................................................17

      Section 2.1  Loan Commitment; Disbursement to Borrowers.................17
          2.1.1  The Loan.....................................................17
          2.1.2  Disbursement to Borrowers....................................17
          2.1.3  The Note, Mortgage and Loan Documents........................18
          2.1.4  Use of Proceeds..............................................18
      Section 2.2  Interest; Loan Payments; Late Payment Charge...............18
          2.2.1  Interest Generally...........................................18
          2.2.2  Interest Calculation.........................................18
          2.2.3  Payment Before Anticipated Repayment Date....................18
          2.2.4  Payments After Anticipated Repayment Date....................18
          2.2.5  Payment on Maturity Date.....................................18
          2.2.6  Payments after Default.......................................18
          2.2.7  Late Payment Charge..........................................19
          2.2.8  Usury Savings................................................19
          2.2.9  Loan Modification............................................20
      Section 2.3  Prepayments................................................20
          2.3.1  Voluntary Prepayments........................................20
          2.3.2  Mandatory Prepayments........................................20
          2.3.3  Prepayments After Default....................................20
      Section 2.4  Defeasance.................................................21
          2.4.1  Voluntary Defeasance.........................................21
          2.4.2  Successor Borrower(s)........................................23
      Section 2.5  Release of Property........................................23
          2.5.1  Release of Entire Property...................................23
          2.5.2  Release of Individual Property...............................23
          2.5.3  Release on Payment in Full...................................24
      Section 2.6  Manner of Making Payments; Cash Management.................24
          2.6.1  Payment of Rents to Clearing Accounts; Deposits
                 into Lockbox Accounts........................................24
          2.6.2  Making of Payments...........................................26
          2.6.3  Payments Received in the Lockbox Account.....................26
          2.6.4  No Deductions, etc...........................................26
      Section 2.7  Property Substitutions.....................................26

                                       -i-
<PAGE>

          2.7.1  Substitution of Property.....................................26
      Section 2.8  Additional Acquisitions of Certain Condominium
                   Units to Constitute Additional Collateral..................34

III.  CONDITIONS PRECEDENT....................................................35

      Section 3.1  Conditions Precedent to Closing............................35
          3.1.1  Representations and Warranties; Compliance with Conditions...35
          3.1.2  Loan Agreement and Note......................................35
          3.1.3  Delivery of Loan Documents; Title Insurance;
                 Reports; Leases..............................................35
          3.1.4  Related Documents............................................37
          3.1.5  Delivery of Organizational Documents.........................37
          3.1.6  Opinions of Borrowers' Counsel...............................37
          3.1.7  Budgets......................................................37
          3.1.8  Basic Carrying Costs.........................................37
          3.1.9  Completion of Proceedings....................................37
          3.1.10  Payments....................................................37
          [3.1.11  Reserved.].................................................37
          [3.1.12  Reserved.].................................................37
          3.1.13  Transaction Costs...........................................37
          3.1.14  Material Adverse Change.....................................38
          3.1.15  Leases and Rent Roll........................................38
          [3.1.16  Reserved]..................................................38
          3.1.17  Clearing Account Documents..................................38
          3.1.18  Cash Management Agreement...................................38
          3.1.19  Tax Lot.....................................................38
          3.1.20  Physical Conditions Reports.................................38
          3.1.21  Management Agreements.......................................38
          3.1.22  Appraisal...................................................38
          3.1.23  Financial Statements........................................38
          3.1.24  Further Documents...........................................39

IV.  REPRESENTATIONS AND WARRANTIES...........................................39

      Section 4.1  Borrower Representations...................................39
          4.1.1  Organization.................................................39
          4.1.2  Proceedings..................................................39
          4.1.3  No Conflicts.................................................40
          4.1.4  Litigation...................................................40
          4.1.5  Agreements...................................................40
          4.1.6  Title........................................................40
          4.1.7  No Bankruptcy Filing.........................................41
          4.1.8  Full and Accurate Disclosure.................................41
          4.1.9  No Plan Assets...............................................41
          4.1.10  Compliance..................................................41
          4.1.11  Financial Information.......................................42

                                      -ii-
<PAGE>

          4.1.12  Condemnation................................................42
          4.1.13  Federal Reserve Regulations.................................42
          4.1.14  Utilities and Public Access.................................42
          4.1.15  Not a Foreign Person........................................42
          4.1.16  Separate Lots...............................................42
          4.1.17  Assessments.................................................42
          4.1.18  Enforceability..............................................43
          4.1.19  No Prior Assignment.........................................43
          4.1.20  Insurance...................................................43
          4.1.21  Use of Property.............................................43
          4.1.22  Certificate of Occupancy; Licenses..........................43
          4.1.23  Flood Zone..................................................43
          4.1.24  Physical Condition..........................................43
          4.1.25  Boundaries..................................................44
          4.1.26  Leases......................................................44
          4.1.27  Survey......................................................45
          4.1.28   Value to Loan..............................................45
          4.1.29  Filing and Recording Taxes..................................45
          4.1.30  Single Purpose Entity/Separateness..........................45
          4.1.31  Management Agreements.......................................48
          4.1.32  Ground Leases...............................................48
          4.1.33  Illegal Activity............................................50
          4.1.34  No Change in Facts or Circumstances; Disclosure.............50
          4.1.35  Condominium Property Part of Validly Formed
                  and Existing Condominium Regime.............................50
          4.1.36  Ownership Structure of Borrowers and Manager................50
      Section 4.2  Survival of Representations................................50

V.  BORROWER COVENANTS........................................................50

      Section 5.1  Affirmative Covenants......................................50
          5.1.1  Existence; Compliance with Legal Requirements; Insurance.....51
          5.1.2  Taxes and Other Charges......................................51
          5.1.3  Litigation...................................................52
          5.1.4  Access to Premises...........................................52
          5.1.5  Notice of Default............................................52
          5.1.6  Cooperate in Legal Proceedings...............................52
          5.1.7  Perform Loan Documents.......................................52
          5.1.8  Insurance Benefits...........................................52
          5.1.9  Further Assurances...........................................52
          5.1.10  Supplemental Mortgage Affidavits............................53
          5.1.11  Financial Reporting.........................................53
          5.1.12  Business and Operations.....................................55
          5.1.13  Title to the Property.......................................56
          5.1.14  Costs of Enforcement........................................56

                                      -iii-
<PAGE>

          5.1.15  Estoppel Statement..........................................56
          5.1.16  Loan Proceeds...............................................56
          5.1.17  Performance by Borrower.....................................57
          5.1.18  Confirmation of Representations.............................57
          5.1.19  No Joint Assessment.........................................57
          5.1.20  Leasing Matters.............................................57
          5.1.21  Alterations.................................................58
          5.1.22  Expansions..................................................58
          5.1.23  Insurance Premium Payments..................................58
          5.1.24  Other Costs.................................................59
          5.1.25 Condominium Property.........................................59
          5.1.26  Condominium Document Changes................................59
      Section 5.2  Negative Covenants.........................................60
          5.2.1  Operation of Property........................................60
          5.2.2  Liens........................................................60
          5.2.3  Dissolution..................................................60
          5.2.4  Change In Business...........................................61
          5.2.5  Debt Cancellation............................................61
          5.2.6  Affiliate Transactions.......................................61
          5.2.7  Zoning.......................................................61
          5.2.8  Assets.......................................................61
          5.2.9  Debt.........................................................61
          5.2.10  No Joint Assessment.........................................61
          5.2.11  Principal Place of Business.................................62
          5.2.12  ERISA.......................................................62
          5.2.13  Transfers...................................................62

VI.  INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS......................63

      Section 6.1  Insurance..................................................63
      Section 6.2  Casualty...................................................66
      Section 6.3  Condemnation...............................................67
      Section 6.4  Restoration................................................67
      Section 6.5  Required Repairs...........................................71

VII.  RESERVE FUNDS...........................................................72

      Section 7.1  Required Repair Funds......................................72
          7.1.1  Deposits.....................................................72
          7.1.2  Release of Required Repair Funds.............................72
      Section 7.2  Tax and Insurance Escrow Fund..............................73
      Section 7.3  Replacements and Replacement Reserve.......................74
          7.3.1  Replacement Reserve Fund.....................................74
          7.3.2  Disbursements from Replacement Reserve Account...............75
          7.3.3  Performance of Replacements..................................76
          7.3.4  Failure to Make Replacements.................................78

                                      -iv-
<PAGE>

          7.3.5  Balance in the Replacement Reserve Account...................79
          7.3.6  Indemnification..............................................79
      Section 7.4  Reserved...................................................79
      Section 7.5  Reserved...................................................79
      Section 7.6  Reserve Funds, Generally...................................79
      Section 7.7  Security Deposits..........................................80

VIII.  DEFAULTS...............................................................80

      Section 8.1  Event of Default...........................................80
      Section 8.2  Remedies...................................................82
      Section 8.3  Remedies Cumulative; Waivers...............................83

IX.  SPECIAL PROVISIONS.......................................................84

      Section 9.1  Sale of Notes and Securitization...........................84
      Section 9.2  Securitization Indemnification.............................85
      Section 9.3  Rating Surveillance........................................87
      Section 9.4  Exculpation................................................88
      Section 9.5  Termination of Manager.....................................89
      Section 9.6  Servicer...................................................90

X.  MISCELLANEOUS.............................................................90

      Section 10.1  Survival..................................................90
      Section 10.2  Lender's Discretion.......................................91
      Section 10.3  Governing Law.............................................91
      Section 10.4  Modification, Waiver in Writing...........................92
      Section 10.5  Delay Not a Waiver........................................92
      Section 10.6  Notices...................................................93
      Section 10.7  Trial by Jury.............................................94
      Section 10.8  Headings..................................................94
      Section 10.9  Severability..............................................94
      Section 10.10  Preferences..............................................95
      Section 10.11  Waiver of Notice.........................................95
      Section 10.12  Remedies of Borrowers....................................95
      Section 10.13  Expenses; Indemnity......................................95
      Section 10.14  Schedules Incorporated...................................97
      Section 10.15  Offsets, Counterclaims and Defenses......................97
      Section 10.16  No Joint Venture or Partnership;.........................97
      Section 10.17  Publicity................................................97
      Section 10.18  Cross-Default; Cross-Collateralization;..................98
      Section 10.19  Waiver of Counterclaim...................................98
      Section 10.20  Conflict; Construction of Documents; Reliance............98
      Section 10.21  Brokers and Financial Advisors...........................99
      Section 10.22  Borrowers' Joint and Several Obligations.................99
      Section 10.23 Prior Agreements..........................................99

                                       -v-
<PAGE>

                                    SCHEDULES
                                    ---------

Schedule A                 Co-Borrowers Names And Addresses
Schedule B                 Ownership Structure

Schedule I                 Property; Manager(s); and Release Amounts
Schedule II                Required Repairs
Schedule III               List of Approved Replacements
Schedule IV                Rent Roll;  Security Deposits
Schedule V                 Approved Replacement Annual Disbursement Requirements
Schedule VI                Litigation
Schedule VII               Form of Condominium Association Estoppel Letter
Schedule VIII              [Reserved]
Schedule IX                [Reserved]

                                      -vi-

<PAGE>

                                 LOAN AGREEMENT

          THIS LOAN AGREEMENT,  dated as of June 1, 1998 (as amended,  restated,
replaced,   supplemented   or  otherwise   modified  from  time  to  time,  this
"Agreement"),  is made by and between  Lehman  Brothers  Holdings,  Inc.,  doing
business as Lehman Capital, a division of Lehman Brothers Holdings, Inc., having
an address at Three World Financial Center, New York, New York 10285 and each of
the  Borrowers  listed on Exhibit A hereto  each having an address at 598 Asylum
Avenue,  Hartford,  Connecticut  06105 (each a "Borrower" and  collectively  the
"Borrowers").

                              W I T N E S S E T H :
                              - - - - - - - - - -

          WHEREAS,  Borrowers desire to obtain the Loan (as hereinafter defined)
from Lender (as hereinafter defined) on a joint and several basis; and

          WHEREAS, Lender is willing to make the Loan to the Borrowers,  subject
to and in  accordance  with  the  terms of this  Agreement  and the  other  Loan
Documents (as hereinafter defined).

          NOW,  THEREFORE,  in consideration of the making of the Loan by Lender
and the covenants, agreements,  representations and warranties set forth in this
Agreement,  the parties hereto hereby covenant,  agree, represent and warrant as
follows:

          I.  DEFINITIONS; PRINCIPLES OF CONSTRUCTION

          Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise  expressly required or unless the context clearly indicates a contrary
intent:

          "Accrued Interest" shall have the meaning set forth in Section 2.2.4.

          "Adjusted  Release Amount" shall mean, for each  Individual  Property,
one hundred  twenty-five  percent (125%) of the Pro-Rata Release Amount for such
Individual Property.

          "Affiliate"  shall mean,  as to any  Person,  any other  Person  that,
directly or  indirectly,  is in control of, is  controlled by or is under common
control  with such  Person or is a director  or officer of such  Person or of an
Affiliate of such Person.

          "Agent"  shall  mean  BankBoston,   N.A.  or  any  successor  Eligible
Institution acting as the Lockbox Agent under the Cash Management Agreement.

          "ALTA" shall mean  American Land Title  Association,  or any successor
thereto.

<PAGE>

          "Annual Budget" shall mean the operating budget, including all planned
capital  expenditures,  for the Property prepared by Borrower for the applicable
Fiscal Year or other period.

          "Anticipated Repayment Date" shall mean June 1, 2008.

          "Applicable Interest Rate" shall mean (a) from the date hereof through
but not including the Anticipated  Repayment Date, the Regular Interest Rate and
(b) from and after the Anticipated Repayment Date through and including the date
the Loan is paid in full, the Matured Performing Rate.

          "Approved  Annual  Budget" shall have the meaning set forth in Section
5.1.11(d).

          "Approved Replacements" has the meaning given in Section 7.3.1.

          "Assignment of Lease(s)"  shall mean,  with respect to each Individual
Property,  that certain first priority Assignment of Leases,  Rents and Security
Deposits,  dated as of the date hereof,  from each  Borrower,  as  assignor,  to
Lender, as assignee,  assigning to Lender all of such Borrower's interest in and
to the Leases and Rents of such Individual Property as security for the Loan, as
the same may be amended, restated, replaced,  supplemented or otherwise modified
from time to time.

          "Assignment of Management  Agreement and  Subordination  of Management
Fees" shall mean the  Assignment of Management  Agreement and  Subordination  of
Management  Fees dated the date hereof between  Manager and Lender,  as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

          "Award" shall mean any compensation paid by any Governmental Authority
in connection with a Condemnation in respect of all or any part of the Property.

          "Basic  Carrying  Costs" shall mean,  with respect to each  Individual
Property,  the  sum of the  following  costs  associated  with  such  Individual
Property for the relevant Fiscal Year or payment period: (i) real property taxes
and  assessments  with respect to such Individual  Property,  and (ii) insurance
premiums with respect to such Individual Property; (iii) maintenance amounts due
to the condominium  association  with respect to any Condominium  Property;  and
(iv) amounts due under any ground lease.

          "Borrower";  "Borrowers"  shall  mean each of the  entities  listed on
Schedule A hereto, together with their successors and assigns. All references to
Borrower shall be deemed to refer to each individual Borrower, as well as to all
of the Borrowers, collectively.

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

                                      -2-
<PAGE>

          "Capital  Expenditures"  for any period shall mean the amount expended
for  items   capitalized   under  GAAP  (including   expenditures  for  building
improvements or major repairs, leasing commissions and tenant improvements).

          "Cash Expenses" means, for any period,  the operating expenses for the
operation  of the  Property  as set forth in an  Approved  Annual  Budget to the
extent that such expenses are actually  incurred by Borrower  minus any payments
into the Tax and Insurance Escrow Fund.

          "Cash  Management  Agreement"  shall mean that certain Cash Management
Agreement by and among Borrowers,  Manager, Agent and Lender, as the same may be
amended,  restated,  replaced,  supplemented or otherwise  modified from time to
time, relating to funds deposited in the Lockbox Account.

          "Casualty" shall have the meaning specified in Section 6.2.

          "Casualty  Consultant"  shall  have the  meaning  set forth in Section
6.4(b)(iii).

          "Casualty  Retainage"  shall  have the  meaning  set forth in  Section
6.4(b)(iv).

          "Clearing Account Banks" has the meaning given in Section 2.6.1.

          "Clearing Account Agreement" has the meaning given in Section 2.6.1.

          "Clearing Account  Documents" means the Clearing Account Agreement and
the Clearing Account Payment Direction Letters.

          "Clearing Accounts" has the meaning given in Section 2.6.1.

          "Closing Date" shall mean the date of the funding of the Loan.

          "Code" shall mean the Internal  Revenue Code of 1986, as amended,  and
as it may be further amended from time to time, any successor  statutes thereto,
and applicable U.S.  Department of Treasury  regulations issued pursuant thereto
in temporary or final form.

          "Condemnation"  shall  mean a  temporary  or  permanent  taking by any
Governmental  Authority  as the  result  or in  lieu or in  anticipation  of the
exercise of the right of condemnation  or eminent domain,  of all or any part of
the Property,  or any interest therein or right accruing thereto,  including any
right of access  thereto or any change of grade  affecting  the  Property or any
part thereof.

          "Condemnation Proceeds" has the meaning given in Section 6.4(b).

          "Condominium Documents" has the meaning given in Section 3.1.3(h).

          "Condominium Property"; "Condominium Properties" means individually or
collectively,  each Individual  Property  consisting of condominium units in the
River Bend

                                      -3-
<PAGE>

Apartment  complex or the Avon  Place  Condominium  complex in Windsor  and Avon
Connecticut, respectively.

          "Contribution  Agreement" means the  contribution  agreement dated the
date of this Agreement among the Borrowers and Lender.

          "Debt" shall mean the outstanding  principal  amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Yield Maintenance  Premium) due
to Lender in respect of the Loan under the Note, this  Agreement,  the Mortgages
or any other Loan Document.

          "Debt  Service" shall mean,  with respect to any particular  period of
time, scheduled principal and interest payments under the Note.

          "Debt Service  Coverage  Ratio" shall mean a ratio for the  applicable
period in which:

               (a)  the  numerator  is  the  Net  Operating  Income   (excluding
                    interest on credit accounts) for such period as set forth in
                    the statements required hereunder, without deduction for (i)
                    actual  management  fees  incurred  in  connection  with the
                    operation  of the  Property,  or  (ii)  amounts  paid to the
                    Reserve  Funds ,  less  (A)  management  fees  equal  to the
                    greater of (1) assumed  management fees of four percent (4%)
                    of Gross Income from Operations or (2) the actual management
                    fees  incurred,  and (B) assumed  Replacement  Reserve  Fund
                    contributions equal to $250 for each residential unit at the
                    Property; and

               (b)  the  denominator  is the  aggregate  amount of principal and
                    interest  due and  payable  on the Note or,  in the  event a
                    Defeasance Event has occurred, the Undefeased Note, for such
                    period.

          "Default"  shall mean the  occurrence of any event  hereunder or under
any other Loan Document which,  but for the giving of notice or passage of time,
or both, would be an Event of Default.

          "Default Rate" shall mean,  with respect to the Loan, a rate per annum
equal to the greater of (a) three  percent  (3%) above the  Applicable  Interest
Rate, and (b) the then  prevailing  Prime Rate plus four percent (4%);  provided
that the Default Rate shall not exceed the maximum  interest  rate  permitted by
applicable law.

          "Defeasance  Date"  shall  have  the  meaning  set  forth  in  Section
2.4.1(a)(i).

          "Defeasance  Deposit"  shall  mean an  amount  equal to the  remaining
principal  amount of the Note or the principal  amount of the Defeased  Note, as
applicable, the Yield Maintenance Premium, any costs and expenses incurred or to
be incurred in the purchase of

                                      -4-
<PAGE>

U.S.  Obligations  necessary to meet the Scheduled  Defeasance  Payments and any
revenue, documentary stamp or intangible taxes or any other tax or charge due in
connection  with the transfer of the Note or the Defeased  Note, as  applicable,
the creation of the Defeased Note and the  Undefeased  Note, if  applicable,  or
otherwise required to accomplish the agreements of Sections 2.4 and 2.5 hereof.

          "Defeasance  Event"  shall  have the  meaning  set  forth  in  Section
2.4.1(a).

          "Defeased   Note"   shall  have  the  meaning  set  forth  in  Section
2.4.1(a)(v) hereof.

          "Disclosure  Document"  shall  have the  meaning  set forth in Section
9.2(a).

          "Eligible Account" shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (i) an account or
accounts maintained with a federal or state-chartered  depository institution or
trust company which complies with the definition of Eligible Institution or (ii)
a  segregated  trust  account  or  accounts  maintained  with a federal or state
chartered  depository  institution  or trust  company  acting  in its  fiduciary
capacity which, in the case of a state chartered depository institution or trust
company is subject to regulations substantially similar to 12 C.F.R. ss.9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to  supervision  or  examination  by  federal  and state  authority.  An
Eligible Account will not be evidenced by a certificate of deposit,  passbook or
other instrument.

          "Eligible  Institution"  shall mean a depository  institution or trust
company  insured by the Federal  Deposit  Insurance  Corporation  the short term
unsecured debt  obligations or commercial  paper of which are rated at least A-1
by Standard & Poor's Ratings Group, P-1 by Moody's Investors Service,  Inc., D-1
by Duff & Phelps Credit  Rating Co. and F-1+ by Fitch IBCA,  Inc. in the case of
accounts  in  which  funds  are  held  for 30 days or less  (or,  in the case of
accounts in which funds are held for more than 30 days,  the long term unsecured
debt  obligations  of which are rated at least  "AA" by Fitch,  Duff and S&P and
"Aa" by Moody's).

          "Environmental  Indemnity" shall mean that certain  Environmental  and
Hazardous  Substance  Indemnification  Agreement  executed  by each  Borrower in
connection with the Loan for the benefit of Lender,  as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
1974, as amended.

          "Event of Default" shall have the meaning set forth in Section 8.1(a).

          "Exchange Act" shall have the meaning set forth in Section 9.2(a).

          "Extraordinary  Expense"  shall have the  meaning set forth in Section
5.1.11(e).

                                      -5-
<PAGE>

          "Fiscal  Year"  shall mean each  twelve  month  period  commencing  on
January 1 and ending on December 31 during each year of the term of the Loan.

          "GAAP" shall mean  generally  accepted  accounting  principles  in the
United States of America as of the date of the applicable financial report.

          "Governmental   Authority"  shall  mean  any  court,  board,   agency,
commission,  office  or  other  authority  of  any  nature  whatsoever  for  any
governmental  unit  (federal,  state,  county,  district,   municipal,  city  or
otherwise) whether now or hereafter in existence.

          "Gross  Income from  Operations"  shall mean all  income,  computed in
accordance  with GAAP,  derived from the ownership and operation of the Property
from whatever  source,  including,  but not limited to, Rents,  utility charges,
escalations,  forfeited security deposits,  interest on credit accounts, service
fees or charges,  license fees,  parking fees, rent concessions or credits,  and
other required  pass-throughs  but excluding  sales,  use and occupancy or other
taxes  on  receipts  required  to be  accounted  for  by  each  Borrower  to any
Government Authority,  refunds and uncollectible  accounts,  sales of furniture,
fixtures and equipment,  Insurance Proceeds (other than business interruption or
other loss of income insurance),  Awards, unforfeited security deposits, utility
and  other  similar  deposits  and any  disbursements  to the  Borrowers  or any
individual Borrower from the Reserve Funds. Gross income shall not be diminished
as a result  of the  Mortgages  or the  creation  of any  intervening  estate or
interest in the Property or any part thereof.

          "Ground  Lease" shall mean that  certain  Ground Lease dated as of the
date of this  Agreement  between  Grove  Operating,  L.P.,  a  Delaware  limited
partnership,  as landlord  (such  landlord  and its  successors  and assigns are
hereinafter  referred to as the "Ground  Lessor"),  and  GPT-Plainville  Limited
Partnership,  a Delaware limited  partnership,  as tenant, a Notice of Lease for
which is to be recorded  simultaneously  with the execution of this Agreement in
the Land  Records  of Town Clerk of  Plainville,  County of  Hartford,  State of
Connecticut,  and any  other  lease  creating  a  leasehold  estate  which  is a
Substitute Property.

          "Improvements" shall have the meaning set forth in the granting clause
of the related Mortgage with respect to each Individual Property.

          "Indebtedness"  of a  Person,  at a  particular  date,  means  the sum
(without duplication) at such date of (a) indebtedness or liability for borrowed
money; (b) obligations evidenced by bonds,  debentures,  notes, or other similar
instruments;  (c)  obligations  for the deferred  purchase  price of property or
services (including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance  facilities;  (f) all guaranties,  endorsements
(other than for collection or deposit in the ordinary  course of business),  and
other  contingent  obligations  to purchase,  to provide  funds for payment,  to
supply  funds to  invest in any  Person  or  entity,  or  otherwise  to assure a
creditor against loss; and (g) obligations secured by any Liens,  whether or not
the obligations have been assumed.

          "Independent  Director"  shall have the  meaning  set forth in Section
4.1.30(p).

                                      -6-
<PAGE>

          "Individual  Property" shall mean with respect to each Borrower,  each
parcel of real  property and the  Improvements  thereon  owned by a Borrower and
encumbered  by a  Mortgage  and all other  property  encumbered  by a  Mortgage,
together with all rights pertaining to such property and Improvements,  fixtures
and other property,  as more  particularly  described in the Granting Clauses of
each Mortgage and referred to therein as the "Property" and as further described
on Schedule I hereto.  All condominium  units now or hereafter owned by Borrower
or its  Affiliates in the River Bend  Apartments  Condominium  Property shall be
treated collectively as one Individual Property and such units in the Avon Place
Condominium Property shall be treated collectively as one Individual Property.

          "Insolvency  Opinion" shall mean that certain opinion letter dated the
date hereof delivered by Cummings & Lockwood in connection with the Loan.

          "Insurance  Premiums"  shall  have the  meaning  set forth in  Section
6.1(b).

          "Insurance  Proceeds"  shall  have the  meaning  set forth in  Section
6.4(b).

          "Interest  Period" shall mean the period commencing on the first (1st)
day of each  calendar  month  during the term of the Loan and ending on the last
day of such month.

          "Lease"  shall  mean any  lease,  sublease  or  subsublease,  letting,
license,  concession or other agreement (whether written or oral and whether now
or  hereafter  in effect)  pursuant to which any person is granted a  possessory
interest  in, or right to use or occupy  all or any  portion of any space in any
Individual Property of a Borrower,  and every  modification,  amendment or other
agreement  relating to such lease,  sublease,  subsublease,  or other  agreement
entered into in  connection  with such lease,  sublease,  subsublease,  or other
agreement  and  every  guarantee  of  the  performance  and  observance  of  the
covenants,  conditions  and agreements to be performed and observed by the other
party thereto.

          "Legal  Requirements"  shall  mean,  with  respect to each  Individual
Property, all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions
of  Governmental  Authorities  affecting  such  Individual  Property or any part
thereof or the construction,  use,  alteration or operation thereof, or any part
thereof,  whether  now or  hereafter  enacted  and in  force,  and all  permits,
licenses and authorizations and regulations relating thereto, and all covenants,
agreements,  restrictions and encumbrances contained in any instruments,  either
of record or known to a Borrower, at any time in force affecting such Individual
Property or any part thereof,  including,  without limitation, any which may (i)
require repairs,  modifications or alterations in or to such Individual Property
or any part thereof, or (ii) in any way limit the use and enjoyment thereof.

          "Lehman" shall have the meaning set forth in Section 9.2(b).

          "Lehman Group" shall have the meaning set forth in Section 9.2(b).

                                      -7-
<PAGE>

          "Lender" shall mean Lehman Brothers  Holdings,  Inc. doing business as
Lehman Capital, a division of Lehman Brothers Holdings,  Inc., together with its
successors and assigns.

          "Liabilities" shall have the meaning set forth in Section 9.2(b).

          "Licenses" shall have the meaning set forth in Section 4.1.22.

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

          "Loan"  shall  mean the loan made by Lender  to the  Borrowers  in the
original  principal  amount set forth in, and evidenced by, the Note and secured
by the  Mortgages  and the other Loan  Documents  executed and  delivered by the
Borrowers.

          "Loan Documents" shall mean,  collectively,  this Agreement, the Note,
the Mortgages and Assignments of Leases  encumbering  each Individual  Property,
the  Environmental  Indemnity for each Individual  Property,  each O&M Agreement
executed for an  Individual  Property,  if any,  the  Assignment  of  Management
Agreement and  Subordination of Management Fees, the Cash Management  Agreement,
the Clearing Account Agreements,  the Contribution Agreement,  the Institutional
Secured Loan  Deficiency  Guarantee,  and any other  document  pertaining to the
Individual  Property as well as all other documents executed and/or delivered in
connection with the Loan.

          "Loan to Value Ratio" shall mean a ratio in which the numerator is the
principal  amount of the Loan and the  denominator is the appraised value of the
Property mortgaged or pledged to secure the Loan.

          "Lockbox  Account"  shall mean the  account and  Sub-Accounts  as more
particularly described in the Cash Management Agreement for deposit of Rents and
other receipts from the Property.

          "Lockbox  Event" shall mean the occurrence of an (a) Event of Default;
(b) the failure of the  Borrower to  maintain a Debt to Service  Coverage  Ratio
equal to or greater than 1.20 to 1.0; or (c) the  occurrence of the  Anticipated
Repayment Date.

          "Management  Agreement(s)"  shall mean, with respect to any Individual
Property and its respective  owner/Borrower,  each management  agreement entered
into by and  between  Borrower(s)  and the  Manager(s),  pursuant  to which  the
Manager(s) provide management and other services with respect to said Individual
Property.

                                      -8-
<PAGE>

          "Manager"  shall  mean  Grove  Operating,  L.P.,  a  Delaware  limited
partnership, doing business as Grove Property Services.

          "Matured  Performing  Rate"  shall mean a rate per annum  equal to the
greater of (i) the Regular  Interest  Rate plus five  percentage  points (5%) or
(ii) the Treasury Rate plus five percentage points (5%).

          "Maturity  Date" shall mean June 1, 2033; or any earlier date on which
the entire  Loan is  required to be paid in full by  acceleration  or  otherwise
under this Loan Agreement or the other Loan Documents.

          "Maximum Legal Rate" has the meaning given in Section 2.2.8.

          "Monthly Debt Service  Payment  Amount" mean a constant  interest only
monthly payment of $345,975.00 to and through the Anticipated Repayment Date and
thereafter shall be calculated as that amount which will be necessary to be paid
monthly  over a twenty five (25) year term to  liquidate a loan in the amount of
the unpaid principal  balance of the Loan existing after the payment made on the
Anticipated Repayment Date bearing interest at the Regular Interest Rate.

          "Mortgage" shall mean, with respect to each Individual Property,  that
certain  first  priority  Mortgage  (or Deed of Trust or Deed to  Secure  Debt),
Assignment  of Leases and Rents and Security  Agreement,  dated the date hereof,
executed and delivered by the  applicable  Borrower as security for the Loan and
encumbering  such  Individual  Property,  as the same may be amended,  restated,
replaced, supplemented or otherwise modified from time to time.

          "Net Cash Flow" for any  period  shall  mean the  amount  obtained  by
subtracting  Operating  Expenses and Capital  Expenditures  for such period from
Gross Income from Operations for such period.

          "Net Cash Flow  After  Debt  Service"  for any  period  shall mean the
amount  obtained by subtracting  Debt Service for such period from Net Cash Flow
for such period.

          "Net Cash Flow  Schedule"  shall have the meaning set forth in Section
5.1.11(b).

          "Net  Operating  Income"  means the  amount  obtained  by  subtracting
Operating Expenses from Gross Income from Operations.

          "Net Proceeds" shall have the meaning set forth in Section 6.4(b).

          "Net Proceeds  Deficiency" shall have the meaning set forth in Section
6.4(b)(vi).

          "Note"  shall mean that certain  note of even date  herewith,  made by
Borrowers in favor of Lender,  as the same may be amended,  restated,  replaced,
supplemented or

                                      -9-
<PAGE>

otherwise modified from time to time, including any Defeased Note and Undefeased
Note that may exist from time to time.

          "O&M  Agreement"  shall mean those certain  Operations and Maintenance
Agreement, dated the date hereof between certain of the Borrowers and the Lender
given in  connection  with the  Loan,  as the  same  may be  amended,  restated,
replaced, supplemented or otherwise modified from time to time.

          "Officers'  Certificate" shall mean a certificate  delivered to Lender
by a Borrower  which is signed by an  authorized  senior  officer of the general
partner or managing member of each applicable Borrower.

          "Operating  Expenses"  shall  mean  the  total  of  all  expenditures,
computed in accordance  with GAAP,  of whatever kind relating to the  operation,
maintenance  and  management  of the  Property  that are  incurred  on a regular
monthly  or other  periodic  basis,  including  without  limitation,  utilities,
ordinary repairs and maintenance,  insurance,  license fees,  property taxes and
assessments,  advertising expenses,  management fees, payroll and related taxes,
computer  processing charges,  operational  equipment or other lease payments as
approved by Lender,  and other similar costs, but excluding  depreciation,  Debt
Service, Capital Expenditures and contributions to the Reserve Funds.

          "Other  Charges"  shall mean all  ground  rents,  maintenance  charges
(including  maintenance  and common area charges in respect of each  Condominium
Property),  impositions  other than  Taxes,  and any other  charges,  including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.

          "Payment  Date" shall mean the first (1st) day of each calendar  month
during  the  term  of the  Loan  or,  if such  day is not a  Business  Day,  the
immediately succeeding Business Day.

          "Permitted  Encumbrances"  shall mean,  with respect to an  Individual
Property, collectively, (a) the Liens and security interests created by the Loan
Documents , (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policies relating to such Individual Property or any part thereof, (c)
Liens,  if any, for Taxes imposed by any  Governmental  Authority not yet due or
delinquent,  and (d) such  other  title and  survey  exceptions  as  Lender  has
approved  or may approve in writing in Lender's  sole  discretion,  which in the
aggregate do not materially adversely affect the value or use of such Individual
Property or Borrower's ability to repay the Loan.

          "Permitted  Investments"  shall mean any one or more of the  following
obligations or securities  acquired at a purchase price of not greater than par,
including those issued by Servicer,  the trustee under any Securitization or any
of their respective Affiliates,  payable on demand or having a maturity date not
later than the Business Day immediately  prior to the first Monthly Payment Date
following  the  date  of  acquiring  such  investment  and  meeting  one  of the
appropriate standards set forth below:

                                      -10-
<PAGE>

               (i) obligations of, or obligations fully guaranteed as to payment
          of  principal  and  interest  by, the  United  States or any agency or
          instrumentality  thereof  provided such  obligations are backed by the
          full  faith and  credit of the  United  States of  America  including,
          without  limitation,  obligations of: the U.S. Treasury (all direct or
          fully  guaranteed   obligations),   the  Farmers  Home  Administration
          (certificates   of  beneficial   ownership),   the  General   Services
          Administration   (participation   certificates),   the  U.S.  Maritime
          Administration  (guaranteed  Title XI  financing),  the Small Business
          Administration  (guaranteed participation  certificates and guaranteed
          pool   certificates),   the  U.S.  Department  of  Housing  and  Urban
          Development  (local authority  bonds) and the Washington  Metropolitan
          Area Transit Authority (guaranteed transit bonds); provided,  however,
          that  the  investments  described  in  this  clause  must  (A)  have a
          predetermined  fixed dollar of principal  due at maturity  that cannot
          vary or change,  (B) if rated by S&P, must not have an "r" highlighter
          affixed to their rating,  (C) if such investments have a variable rate
          of interest, such interest rate must be tied to a single interest rate
          index plus a fixed spread (if any) and must move  proportionately with
          that  index,   and  (D)  such  investments  must  not  be  subject  to
          liquidation prior to their maturity;

               (ii) Federal Housing Administration debentures;

               (iii)  obligations  of the  following  United  States  government
          sponsored   agencies:   Federal  Home  Loan   Mortgage   Corp.   (debt
          obligations),  the Farm Credit System  (consolidated  systemwide bonds
          and  notes),   the  Federal   Home  Loan  Banks   (consolidated   debt
          obligations),   the  Federal  National   Mortgage   Association  (debt
          obligations),   the   Student   Loan   Marketing   Association   (debt
          obligations),   the  Financing  Corp.  (debt  obligations),   and  the
          Resolution Funding Corp. (debt obligations);  provided,  however, that
          the investments described in this clause must (A) have a predetermined
          fixed dollar of principal  due at maturity that cannot vary or change,
          (B) if rated by S&P, must not have an "r" highlighter affixed to their
          rating, (C) if such investments have a variable rate of interest, such
          interest  rate must be tied to a single  interest  rate  index  plus a
          fixed spread (if any) and must move  proportionately  with that index,
          and (D) such investments  must not be subject to liquidation  prior to
          their maturity;

               (iv)  federal  funds,  unsecured  certificates  of deposit,  time
          deposits,   bankers'   acceptances  and  repurchase   agreements  with
          maturities  of not more  than 365 days of any  bank,  the  short  term
          obligations  of which at all times are rated in the highest short term
          rating  category by each Rating Agency (or, if not rated by all Rating
          Agencies,  rated by at least one Rating  Agency in the  highest  short
          term rating  category and  otherwise  acceptable  to each other Rating
          Agency, as confirmed in writing that such investment would not, in and
          of itself,  result in a downgrade,  qualification or withdrawal of the
          initial,   or,  if  higher,  then  current  ratings  assigned  to  the
          Securities); provided, however, that the investments described in this
          clause must (A) have a predetermined  fixed dollar of principal due at
          maturity  that  cannot vary or change,  (B) if rated by S&P,  must not
          have an "r" highlighter affixed to their rating, (C) if

                                      -11-
<PAGE>

          such investments have a variable rate of interest,  such interest rate
          must be tied to a single  interest  rate index plus a fixed spread (if
          any) and must  move  proportionately  with  that  index,  and (D) such
          investments  must  not  be  subject  to  liquidation  prior  to  their
          maturity;

               (v) fully Federal Deposit  Insurance  Corporation-insured  demand
          and time  deposits  in, or  certificates  of deposit  of, or  bankers'
          acceptances  issued by, any bank or trust  company,  savings  and loan
          association  or savings bank,  the short term  obligations of which at
          all times are rated in the highest short term rating  category by each
          Rating  Agency (or, if not rated by all Rating  Agencies,  rated by at
          least one Rating Agency in the highest short term rating  category and
          otherwise  acceptable  to each other  Rating  Agency,  as confirmed in
          writing that such investment would not, in and of itself,  result in a
          downgrade,  qualification or withdrawal of the initial, or, if higher,
          then current ratings assigned to the Securities);  provided,  however,
          that  the  investments  described  in  this  clause  must  (A)  have a
          predetermined  fixed dollar of principal  due at maturity  that cannot
          vary or change,  (B) if rated by S&P, must not have an "r" highlighter
          affixed to their rating,  (C) if such investments have a variable rate
          of interest, such interest rate must be tied to a single interest rate
          index plus a fixed spread (if any) and must move  proportionately with
          that  index,   and  (D)  such  investments  must  not  be  subject  to
          liquidation prior to their maturity;

               (vi) debt  obligations  with maturities of not more than 365 days
          and at all times rated by each Rating  Agency (or, if not rated by all
          Rating  Agencies,  rated by at least one Rating  Agency and  otherwise
          acceptable to each other Rating  Agency,  as confirmed in writing that
          such  investment  would not, in and of itself,  result in a downgrade,
          qualification  or  withdrawal  of the  initial,  or, if  higher,  then
          current ratings  assigned to the Securities) in its highest  long-term
          unsecured rating  category;  provided,  however,  that the investments
          described in this clause must (A) have a predetermined fixed dollar of
          principal due at maturity that cannot vary or change,  (B) if rated by
          S&P, must not have an "r" highlighter  affixed to their rating, (C) if
          such investments have a variable rate of interest,  such interest rate
          must be tied to a single  interest  rate index plus a fixed spread (if
          any) and must  move  proportionately  with  that  index,  and (D) such
          investments  must  not  be  subject  to  liquidation  prior  to  their
          maturity;

               (vii)  commercial  paper  (including  both   non-interest-bearing
          discount  obligations  and  interest-bearing  obligations  payable  on
          demand or on a specified date not more than one year after the date of
          issuance  thereof) with  maturities of not more than 365 days and that
          at all times is rated by each  Rating  Agency (or, if not rated by all
          Rating  Agencies,  rated by at least one Rating  Agency and  otherwise
          acceptable to each other Rating  Agency,  as confirmed in writing that
          such  investment  would not, in and of itself,  result in a downgrade,
          qualification  or  withdrawal  of the  initial,  or, if  higher,  then
          current ratings assigned to the Securities) in its highest  short-term
          unsecured  debt  rating;  provided,   however,  that  the  investments
          described in this clause must (A) have a predetermined fixed dollar of
          principal due at maturity that cannot vary or change,  (B) if rated by
          S&P, must not have an "r" highlighter affixed to their rating,

                                      -12-
<PAGE>

          (C) if  such  investments  have a  variable  rate  of  interest,  such
          interest  rate must be tied to a single  interest  rate  index  plus a
          fixed spread (if any) and must move  proportionately  with that index,
          and (D) such investments  must not be subject to liquidation  prior to
          their maturity;

               (viii) units of taxable money market funds or mutual funds, which
          funds are regulated investment companies,  seek to maintain a constant
          net asset value per share and invest solely in  obligations  backed by
          the full faith and credit of the United  States,  which funds have the
          highest rating  available from each Rating Agency (or, if not rated by
          all Rating Agencies, rated by at least one Rating Agency and otherwise
          acceptable to each other Rating  Agency,  as confirmed in writing that
          such  investment  would not, in and of itself,  result in a downgrade,
          qualification  or  withdrawal  of the  initial,  or, if  higher,  then
          current ratings  assigned to the Securities) for money market funds or
          mutual funds; and

               (ix) any other security,  obligation or investment which has been
          approved  as a Permitted  Investment  in writing by (a) Lender and (b)
          each Rating Agency,  as evidenced by a written  confirmation  that the
          designation of such security,  obligation or investment as a Permitted
          Investment  will  not,  in  and  of  itself,  result  in a  downgrade,
          qualification  or  withdrawal  of the  initial,  or, if  higher,  then
          current ratings assigned to the Securities by such Rating Agency;

provided,  however,  that  no  obligation  or  security  shall  be  a  Permitted
Investment if (A) such obligation or security  evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments on
such  obligation  or security are derived  from an  underlying  investment  that
provides a yield to  maturity  in excess of 120% of the yield to maturity at par
of such underlying investment.

          "Permitted  Release  Date"  shall mean the date that is the earlier to
occur of (a) three (3) years from the Closing Date or (b) two (2) years from the
"startup day" of the Securities within the meaning of Section  860G(a)(9) of the
Code of the REMIC Trust.

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

          "Personal Property" means the Personal Property, Equipment (other than
Fixtures as defined in the granting  clause of the Mortgage with respect to each
Individual Property") and non-real estate rights, as more fully set forth in the
granting clause of the Mortgage with respect to each Individual Property.

          "Physical   Conditions  Report"  shall  mean,  with  respect  to  each
Individual  Property,  a report  prepared  by a company  satisfactory  to Lender
regarding the physical  condition of such Individual  Property,  satisfactory in
form and substance to Lender in its reasonable  discretion,  which report shall,
among other things, (i) confirm that such Individual

                                      -13-
<PAGE>

Property and its use complies,  in all material  respects,  with all  applicable
Legal  Requirements  (including,  without  limitation,  zoning,  subdivision and
building laws) and (ii) include a copy of a final  certificate of occupancy with
respect to all Improvements on such Individual Property.

          "Policies" shall have the meaning specified in Section 6.1(b).

          "Prime Rate" shall mean the annual rate of interest publicly announced
by Citibank,  N.A. in New York,  New York,  as its base rate, as such rate shall
change  from time to time.  If  Citibank,  N.A.  ceases to announce a base rate,
Prime Rate shall mean the rate of interest  published in The Wall Street Journal
from time to time as the Prime Rate.  If more than one Prime Rates is  published
in The Wall  Street  Journal  for a day,  the average of the Prime Rate shall be
used,  and such average  shall be rounded up to the nearest  one-quarter  of one
percent  (1/4%).  If The Wall Street  Journal ceases to publish the "Prime Rate"
the Lender shall select an equivalent  publication  that  publishes  such "Prime
Rate," and if such prime rates are no longer generally published or are limited,
regulated or  administered by a governmental  or  quasi-governmental  body, then
Lender shall select a comparable interest rate index.

          "Pro-Rata  Release Amount" shall mean, for each  Individual  Property,
the product of (a) the quotient obtained by dividing the Release Amount for such
Individual Property by the sum of the original Release Amounts for all Property,
and (b) the outstanding principal balance of the Loan.

          "Property"  shall  mean,  collectively,   each  and  every  Individual
Property which is subject to the terms of this Agreement.

          "Property  Required  Repairs"  shall  have the  meaning  set  forth in
Section 6.5.

          "Provided  Information"  shall have the  meaning  set forth in Section
9.1(a).

          "Rating  Agencies" shall mean each of Standard & Poor's Ratings Group,
a division of McGraw-Hill,  Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit  Rating  Co. and Fitch  IBCA,  Inc.,  or any other  nationally-recognized
statistical rating agency which has been determined by Lender.

          "Rating  Surveillance  Charge"  shall  have the  meaning  set forth in
Section 9.3.

          "Registration  Statement"  shall have the meaning set forth in Section
9.2(b).

          "Regular  Interest Rate" shall mean six and fifty nine  one-hundredths
percent (6.59%) per annum.

          "Release  Amount" shall mean, for an Individual  Property,  the amount
set forth on Schedule I hereto.

          "REMIC Trust" shall mean a "real estate mortgage  investment  conduit"
within the meaning of Section 860D of the Code that holds the Note.

                                      -14-
<PAGE>

          "Rents"  shall mean,  with respect to each  Individual  Property,  all
rents,  rent  equivalents,  moneys payable as damages or in lieu of rent or rent
equivalents,  royalties (including, without limitation, all oil and gas or other
mineral  royalties  and  bonuses),  income,  receivables,   receipts,  revenues,
deposits (including, without limitation,  security, utility and other deposits),
accounts,  cash,  issues,  profits,  charges for  services  rendered,  and other
consideration  of  whatever  form or  nature  received  by or paid to or for the
account of or benefit of any  Borrower or its agents or  employees  from any and
all  sources  arising  from or  attributable  to the  Individual  Property,  and
proceeds, if any, from business interruption or other loss of income insurance.

          "Replacement  Reserve  Account"  shall have the  meaning  set forth in
Section 7.3.1.

          "Replacement Reserve Fund" shall have the meaning set forth in Section
7.3.1.

          "Replacement Reserve Monthly Deposit" shall have the meaning set forth
in Section 7.3.1.

          "Replacements" shall have the meaning set forth in Section 7.3.3(2).

          "Required  Repair Account" shall have the meaning set forth in Section
7.1.1.

          "Required  Repair  Fund"  shall have the  meaning set forth in Section
7.1.1.

          "Reserve  Funds" shall mean the Tax and  Insurance  Escrow  Fund,  the
Replacement Reserve Fund, the Required Repair Fund, the Debt Service Fund or any
other escrow fund established by the Loan Documents.

          "Restoration" shall have the meaning set forth in Section 6.2.

          "Scheduled  Defeasance  Payments"  shall have the meaning set forth in
Section 2.4.1(b).

          "Securities" shall have the meaning set forth in Section 9.1.

          "Securities Act" shall have the meaning set forth in Section 9.2(a).

          "Securitization" shall have the meaning set forth in Section 9.1.

          "Security  Agreement"  shall  have the  meaning  set forth in  Section
2.4.1(a)(vi).

          "Servicer" shall have the meaning set forth in Section 9.6.

          "Servicing Agreement" shall have the meaning set forth in Section 9.6.

          "Severed Loan  Documents"  shall have the meaning set forth in Section
8.2(c).

                                      -15-
<PAGE>

          "State" shall mean, with respect to an Individual Property,  the State
or  Commonwealth  in which  such  Individual  Property  or any part  thereof  is
located.

          "Sub-Accounts"  means  collectively,  the  following  Lockbox  Account
sub-accounts:  (i) "Net Proceeds  Sub-Account" as defined in Section 6.4(b)(ii);
(ii) "Required Repair Funds Sub-Account" as defined in Section 7.1.1; (iii) "Tax
Sub-Account" as defined in Section 7.2; (iv) "Insurance Premium  Sub-Account" as
defined in Section  7.2; (v)  "Replacement  Reserve  Sub-Account"  as defined in
Section  7.3.1.;  and the "Debt  Service  Sub-Account"  as  defined  in the Cash
Management Agreement.

          "Substitute  Property"  shall  have the  meaning  set forth in Section
2.7.1.

          "Substitute  Release  Amount"  shall  have the  meaning  set  forth in
Section 2.7.1(viii).

          "Substituted  Property"  shall have the  meaning  set forth in Section
2.7.1.

          "Substitution  Conditions"  shall mean that the Release Amounts of all
Property  released during the term of the Loan do not represent in the aggregate
more than one third (1/3) of the original  aggregate of the Release  Amounts for
all of the Properties.

          "Successor  Borrower"  shall  have the  meaning  set forth in  Section
2.4.2.

          "Survey"  shall mean a survey of the  Individual  Property in question
prepared by a surveyor  licensed in the State and satisfactory to Lender and the
company or companies  issuing the Title  Insurance  Policies,  and  containing a
certification of such surveyor satisfactory to Lender.

          "Tax and  Insurance  Escrow  Fund" shall have the meaning set forth in
Section 7.2.1.

          "Taxes"  shall  mean all real  estate  and  personal  property  taxes,
assessments,  water rates or sewer rents, now or hereafter levied or assessed or
imposed against any of the Property or part thereof.

          "Title Insurance Policies" shall mean, with respect to each Individual
Property,  an ALTA mortgagee title insurance  policy in the form  (acceptable to
Lender) (or, if an  Individual  Property is in a State which does not permit the
issuance of such ALTA policy,  such form as shall be permitted in such State and
acceptable  to Lender)  issued  with  respect to such  Individual  Property  and
insuring the lien of the Mortgage encumbering such Individual Property.

          "Treasury Rate" shall mean, as of the Anticipated  Repayment Date, the
yield, calculated by linear interpolation (rounded to the nearest one-thousandth
of one  percent  (i.e.,  0.001%)  of the  yields of  noncallable  United  States
Treasury  obligations  with  terms  (one  longer and one  shorter)  most  nearly
approximating the period from such date of determination to the

                                      -16-
<PAGE>

Maturity  Date,  as  determined  by  Lender  on the  basis  of  Federal  Reserve
Statistical  Release  H.15-Selected   Interest  Rates  under  the  heading  U.S.
Governmental  Security/Treasury  Constant Maturities, or other recognized source
of financial market information selected by Lender.

          "UCC" or "Uniform  Commercial Code" shall mean the Uniform  Commercial
Code as in effect in the  applicable  State in which an  Individual  Property is
located.

          "Undefeased  Note"  shall  have  the  meaning  set  forth  in  Section
2.4.1(a)(v) hereof.

          "Underwriter  Group"  shall  have the  meaning  set  forth in  Section
9.2(b).

          "U.S.  Obligations" shall mean direct non-callable  obligations of the
United States of America.

          "Yield Maintenance Premium" shall mean the amount (if any) which, when
added to the remaining principal amount of the Note or the principal amount of a
Defeased  Note, as applicable,  will be sufficient to purchase U.S.  Obligations
providing the required Scheduled Defeasance Payments.

          Section 1.2 Principles of Construction. All references to sections and
schedules are to sections and schedules in or to this Agreement unless otherwise
specified.  All uses of the word  "including"  shall  mean  "including,  without
limitation"  unless the  context  shall  indicate  otherwise.  Unless  otherwise
specified,  the words  "hereof,"  "herein" and  "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any particular  provision of this Agreement.  Unless otherwise specified,
all meanings  attributed to defined terms herein shall be equally  applicable to
both the singular and plural forms of the terms so defined.

          The  expression   "Borrowers"  shall  include  any  of  them  and  all
agreements, undertakings, covenants, obligations, warranties and representations
given,  made or  assumed  by the  Borrowers  hereunder  or under the other  Loan
Documents  or, as shall be deemed to have been  given,  made or assumed by them,
shall be for all purposes  deemed given,  made or assumed by all of them jointly
and/or severally and construed accordingly.

          II. GENERAL TERMS

          Section 2.1 Loan Commitment; Disbursement to Borrowers.

               2.1.1 The Loan.  Subject to and upon the terms and conditions set
forth herein,  Lender hereby agrees to make and Borrowers hereby agree to accept
the Loan on the Closing Date.

               2.1.2  Disbursement  to  Borrowers.  Borrowers  may  request  and
receive only one borrowing  hereunder in respect of the Loan in a single advance
on the Closing Date and any amount  borrowed and repaid  hereunder in respect of
the Loan may not be reborrowed.

                                      -17-
<PAGE>

               2.1.3 The Note,  Mortgage and Loan  Documents.  The Loan shall be
evidenced by the Note and secured by the  Mortgages,  the  Assignments of Leases
and the other Loan Documents.

               2.1.4 Use of  Proceeds.  Borrowers  shall use the proceeds of the
Loan  disbursed to them  pursuant to Section 2.1 to (i) repay and  discharge any
existing  loans  relating to the Property,  (ii) pay all past-due Basic Carrying
Costs, if any, in respect of the Property,  (iii) make deposits into the Reserve
Funds on the Closing  Date in the amounts  provided  herein,  (iv) pay costs and
expenses  incurred in  connection  with the closing of the Loan,  as approved by
Lender,  (v) fund any working  capital  requirements  of the Property,  and (vi)
distribute the balance, if any, to the Borrowers.

          Section 2.2 Interest; Loan Payments; Late Payment Charge.

               2.2.1 Interest Generally.  Interest on the outstanding  principal
balance of the Loan shall  accrue from the  Closing  Date to but  excluding  the
Maturity Date at the Applicable Interest Rate.

               2.2.2 Interest Calculation. Interest on the outstanding principal
balance of the Loan shall be  calculated  on the basis of a three  hundred sixty
(360) day year consisting of twelve thirty day months.

               2.2.3 Payment Before Anticipated  Repayment Date. Borrowers shall
pay to Lender on each Payment Date up to and including the Anticipated Repayment
Date, an amount equal to the Monthly Debt Service Payment Amount, which payments
shall be applied to accrued and unpaid interest.

               2.2.4 Payments After Anticipated  Repayment Date. Borrowers shall
pay to Lender on each Payment Date after the  Anticipated  Repayment Date (a) an
amount  equal to the  recalculated  Monthly Debt Service  Payment  Amount,  such
payment to be applied to interest in an amount equal to interest that would have
accrued on the outstanding principal balance of the Loan (without adjustment for
Accrued  Interest)  at the  Regular  Interest  Rate and the  balance  applied to
principal  and (b) an amount  equal to the Net Cash Flow After Debt  Service for
the preceding month,  such payment to be applied to principal.  Interest accrued
at the Matured  Performing Rate and not paid pursuant to the preceding  sentence
("Accrued  Interest"),  shall be added to the outstanding  principal balance but
shall not itself earn interest.  Accrued  Interest may be prepaid in whole or in
part in accordance with Section 2.3.1.

               2.2.5 Payment on Maturity Date.  Borrowers shall pay to Lender on
the Maturity  Date the  outstanding  principal  balance,  all accrued and unpaid
interest  (including  without  limitation  the Accrued  Interest)  and all other
amounts  due  hereunder  and  under the Note,  the  Mortgage  and other the Loan
Documents.

               2.2.6 Payments after Default.  Upon the occurrence and during the
continuance of an Event of Default,  (a) interest on the  outstanding  principal
balance  of the Loan and,  to the  extent  permitted  by law,  overdue  interest
(including Accrued Interest) and

                                      -18-
<PAGE>

other  amounts  due in respect of the Loan,  shall  accrue,  in addition to Debt
Service and other amounts  required to be paid under the Loan Documents,  at the
Default Rate,  calculated  from the date such payment was due without  regard to
any grace or cure periods  contained  herein and (b) Lender shall be entitled to
receive and  Borrowers  shall pay to Lender on each Payment Date an amount equal
to the Net Cash Flow After Debt Service for the prior  month,  such amount to be
applied  by  Lender to the  payment  of the Debt in such  order as Lender  shall
determine in its sole discretion,  including,  without  limitation,  alternating
applications  thereof  between  interest and principal.  Interest at the Default
Rate and Net Cash Flow  After  Debt  Service  shall  both be  computed  from the
occurrence  of the Event of Default until the actual  receipt and  collection of
the Debt (or that portion thereof that is then due). To the extent  permitted by
applicable law, interest at the Default Rate not theretofore paid shall be added
to the Debt, shall itself accrue interest at the same rate as the Loan and shall
be  secured  by the  Mortgage.  This  paragraph  shall  not be  construed  as an
agreement or  privilege to extend the date of the payment of the Debt,  nor as a
waiver  of any  other  right or  remedy  accruing  to  Lender  by  reason of the
occurrence  of any Event of Default;  the  acceptance of any payment of Net Cash
Flow After Debt  Service  shall not be deemed to cure or  constitute a waiver of
any  Event of  Default;  and  Lender  retains  its  rights  under  this  Note to
accelerate  and to continue to demand  payment of the Debt upon the happening of
any Event of Default, despite any payment of Net Cash Flow After Debt Service.

               2.2.7 Late  Payment  Charge.  If any  principal,  interest or any
other sums due under the Loan Documents is not paid by the Borrowers on the date
on which it is due, Borrowers shall pay to Lender upon demand an amount equal to
the  lesser  of five  percent  (5%) of such  unpaid  sum or the  maximum  amount
permitted by applicable law in order to defray the expense incurred by Lender in
handling and processing such delinquent payment and to compensate Lender for the
loss of the use of such delinquent payment.  Any such amount shall be secured by
the Mortgage and the other Loan Documents to the extent  permitted by applicable
law.

               2.2.8 Usury  Savings.  This Agreement and the Note are subject to
the express  condition that at no time shall  Borrowers be obligated or required
to pay  interest  on the  principal  balance of the Loan at a rate  which  could
subject  Lender to either  civil or criminal  liability  as a result of being in
excess of the maximum  interest rate  permitted by applicable  law (the "Maximum
Legal  Rate").  If by the terms of this  Agreement or the other Loan  Documents,
Borrowers are at any time required or obligated to pay interest on the principal
balance  due  hereunder  at a rate in  excess of the  Maximum  Legal  Rate,  the
interest  rate or the Default  Rate,  as the case may be,  shall be deemed to be
immediately  reduced to the  Maximum  Legal Rate and all  previous  payments  in
excess of the  Maximum  Legal  Rate  shall be deemed  to have been  payments  in
reduction of principal  and not on account of the  interest due  hereunder.  All
sums paid or agreed to be paid to Lender for the use, forbearance,  or detention
of the sums due under the Loan,  shall,  to the extent  permitted by  applicable
law, be amortized,  prorated,  allocated,  and spread throughout the full stated
term of the Loan until payment in full so that the rate or amount of interest on
account of the Loan does not exceed the Maximum Legal Rate of interest from time
to time  in  effect  and  applicable  to the  Loan  for so  long as the  Loan is
outstanding.

                                      -19-
<PAGE>

               2.2.9 Loan Modification.  Upon the written request of Lender made
prior to Securitization,  Lender shall have the right to modify the terms of the
Loan  Agreement to provide  that the  Maturity  Date shall mean the date defined
hereunder  as the  "Anticipated  Repayment  Date," which  modification  shall be
deemed effective on the date set forth in the Lender's request.  Borrowers agree
to execute and deliver such  modification  documents as reasonably  requested by
Lender  to effect  the  modification.  Lender  shall be under no  obligation  to
request the  modifications  set forth  above and the  election of Lender to make
such modifications shall be made in Lender's sole discretion.

          Section 2.3 Prepayments.

               2.3.1 Voluntary Prepayments. Except as otherwise provided herein,
Borrowers  shall not have the right to prepay the Loan in whole or in part prior
to the Anticipated  Repayment Date. On the Anticipated Repayment Date, or on any
Monthly Payment Date thereafter,  Borrowers may, at their option and upon thirty
(30) days prior  written  notice to Lender,  prepay the Debt in whole or in part
without payment of the Yield Maintenance  Premium.  Any partial prepayment shall
be applied to the last payments of principal due under the Loan.

               2.3.2  Mandatory  Prepayments.  On each  date on which  Borrowers
actually  receive any Net Proceeds,  if Lender is not obligated to make such Net
Proceeds  available  to the  Borrowers  for  the  restoration  of the  Property,
Borrowers  shall  prepay  the  outstanding  principal  balance of the Note in an
amount  equal to one  hundred  percent  (100%) of such Net  Proceeds,  provided,
however,  if such  prepayment  is made on a date  which is not a  Payment  Date,
Borrowers  shall  also  simultaneously  pay to Lender  the  amount  of  interest
accruing  on that  portion  of the Loan being  prepaid  from and  including  the
previous  Payment Date through the day prior to the next Payment Date as if such
prepayment  had not been made.  Provided that no Event of Default  exists at the
time of such Prepayment, no Yield Maintenance Premium shall be due in connection
with any prepayment made pursuant to this Section 2.3.2. Any partial  prepayment
under this Section  shall be applied to the last payments of principal due under
the Loan.

               2.3.3  Prepayments  After Default.  If, prior to the  Anticipated
Repayment Date and following an Event of Default,  payment of all or any part of
the Debt is tendered by Borrowers or otherwise  recovered by Lender, such tender
or recovery shall be deemed a voluntary prepayment by the Borrowers in violation
of the prohibition  against  prepayment set forth in Section 2.3.1 and Borrowers
shall pay, in addition  to the Debt,  an amount  equal to the greater of (a) one
percent (1%) of the  outstanding  principal  amount of the Loan to be prepaid or
satisfied,  as applicable,  or (b) the Yield  Maintenance  Premium that would be
required  if a  Defeasance  Event  had  occurred  in  an  amount  equal  to  the
outstanding  principal  amount  of the  Loan  to be  satisfied  or  prepaid,  as
applicable.

                                      -20-
<PAGE>

          Section 2.4 Defeasance.

               2.4.1 Voluntary Defeasance. (a)Provided no Event of Default shall
then  exist,  Borrowers  shall  have the right at any time  after the  Permitted
Release Date and prior to the Anticipated  Repayment Date to voluntarily defease
all or any  portion  of the  Loan  by and  upon  satisfaction  of the  following
conditions (such event being a "Defeasance Event"):

                    (i)  Borrowers  shall provide not less than thirty (30) days
               prior written  notice to Lender  specifying the Payment Date (the
               "Defeasance   Date")  on  which  the  Defeasance  Event  and  the
               principal amount of the Loan is to be defeased;

                    (ii)  Borrowers  shall pay to Lender all  accrued and unpaid
               interest  on the  principal  balance  of  the  Note  to  but  not
               including the Defeasance Date;

                    (iii)  Borrowers  shall pay to Lender  all other  sums,  not
               including  scheduled  interest or  principal  payments,  then due
               under the Note, this Agreement,  the Mortgage, and the other Loan
               Documents;

                    (iv)  Borrowers  shall  deliver  to  Lender  the  Defeasance
               Deposit applicable to the Defeasance Event;

                    (v) In the event only a portion  of the Loan is the  subject
               of the Defeasance  Event,  Borrowers  shall prepare all necessary
               documents to modify this  Agreement  and to amend and restate the
               Note and issue two substitute  notes, one note having a principal
               balance equal to the defeased  portion of the original Note and a
               Maturity  Date  equal  to the  Anticipated  Repayment  Date  (the
               "Defeased  Note") and the other note having a  principal  balance
               equal to the  undefeased  portion  of the Note  (the  "Undefeased
               Note").  The Defeased Note and  Undefeased  Note shall  otherwise
               have terms  identical  to the Note,  except that a Defeased  Note
               cannot be the subject of any further Defeasance Event;

                    (vi) Borrowers shall execute,  deliver and cause to be filed
               in the appropriate  official registers a security  agreement,  in
               form and  substance  satisfactory  to  Lender,  creating  a first
               priority lien on the Defeasance Deposit and the U.S.  Obligations
               purchased  with the  Defeasance  Deposit in accordance  with this
               provision of this Section 2.4 (the "Security Agreement");

                    (vii)  Borrowers  shall  deliver an  opinion of counsel  for
               Borrowers in form  satisfactory  to Lender in its sole discretion
               stating,  among other  things,  that  Borrowers  have legally and
               validly  transferred  and assigned the U.S.  Obligations  and all
               obligations,  rights and duties under and to the Note or Defeased
               Note (as  applicable) to the Successor  Borrower(s),  that Lender
               has  a  perfected  first  priority   security   interest  in  the
               Defeasance  Deposit  and  the  U.S.   Obligations   delivered  by
               Borrowers,  and  that  any  REMIC  Trust  formed  pursuant  to  a
               Securitization  will not fail to  maintain  its status as a "real
               estate mortgage investment conduit" within the meaning of Section
               860D of the Code as a result of such Defeasance Event;

                                      -21-
<PAGE>

                    (viii)  Borrowers shall deliver evidence in writing from the
               applicable  Rating  Agencies to the effect that such release will
               not result in a downgrading,  withdrawal or  qualification of the
               respective ratings in effect immediately prior to such Defeasance
               Event  for  the   Securities   issued  in  connection   with  the
               Securitization  which are then  outstanding.  If  required by the
               applicable  Rating Agencies,  the Borrowers shall also deliver or
               cause to be delivered a non-consolidation opinion with respect to
               the Successor  Borrower(s) and its  constituent  entities in form
               and substance  satisfactory  to Lender and the applicable  Rating
               Agencies;

                    (ix)  Borrowers  shall  deliver  an  Officer's   Certificate
               certifying  that  the  requirements  set  forth  in this  Section
               2.4.1(a) have been satisfied;

                    (x)  Borrowers  shall  deliver a  certificate  of Borrower's
               independent  certified public accountant certifying that the U.S.
               Obligation purchased with the Defeasance Deposit generate monthly
               amounts  equal  to  or  greater  than  the  Scheduled  Defeasance
               Payments;

                    (xi) Each Borrower  shall  deliver such other  certificates,
               documents or instruments as Lender may reasonably request; and

                    (xii)  Borrowers  shall pay all costs and expenses of Lender
               incurred in connection with the Defeasance  Event,  including any
               costs and expenses  associated  with a release of the Lien of the
               Mortgage as provided in Section 2.5 hereof as well as  reasonable
               attorneys' fees and expenses.

               (b) In connection with each Defeasance  Event,  Borrowers  hereby
appoint Lender as their agent and  attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Obligations which (x) provide payments on or
prior to, but as close as possible to, all  successive  scheduled  payment dates
after the  Defeasance  Date upon  which  interest  and  principal  payments  are
required  under (i) the Note,  in the case of a Defeasance  Event for the entire
outstanding  principal  balance of the Loan,  or (ii) the Defeased  Note, in the
case of a  Defeasance  Event for only a  portion  of the  outstanding  principal
balance  of the  Loan,  as  applicable;  and (y)  are in  amounts  equal  to the
scheduled  payments  due on such dates under the Note or the Defeased  Note,  as
applicable,  (including  without  limitation  scheduled  payments of  principal,
interest,  servicing  fees (if any),  and any other  amounts  due under the Loan
Documents  on such  dates);  and (z) with respect to clauses (i) and (ii) above,
are based on the  assumption  that such Note or Defeased Note will be prepaid in
full on the Anticipated  Repayment Date (the "Scheduled  Defeasance  Payments").
Borrowers,  pursuant to the Security  Agreement or other  appropriate  document,
shall authorize and direct that the payments received from the U.S.  Obligations
may be made  directly  to the  Lockbox  Account  (unless  otherwise  directed by
Lender) and applied to satisfy the obligations of Borrower under the Note or the
Defeased Note, as applicable. Any portion of the Defeasance Deposit in excess of
the amount necessary to purchase the U.S.  Obligations  required by this Section
2.4 and satisfy  Borrowers' other obligations under this Section 2.4 and Section
2.5 shall be remitted to the Borrowers.

                                      -22-
<PAGE>

               2.4.2  Successor  Borrower(s).  In connection with any Defeasance
Event,  Borrowers may, or at the request of Lender shall, establish or designate
a  successor  entity (the  "Successor  Borrower")  or  successor  entities  (the
"Successor Borrowers"), any of which shall be a single purpose bankruptcy remote
entity  with an  Independent  Director  approved by Lender,  and the  applicable
Borrower(s)  shall transfer and assign all obligations,  rights and duties under
and to the Note or the Defeased Note, as  applicable,  together with the pledged
U.S. Obligations to such Successor Borrower(s). Such Successor Borrower(s) shall
assume the obligations  under the Note or the Defeased Note, as applicable,  and
the Security  Agreement and the  applicable  Borrowers  shall be relieved of its
obligations  under such  documents.  The Borrowers  shall pay $1,000 to any such
Successor Borrowers as consideration for assuming the obligations under the Note
or the Defeased Note, as applicable, and the Security Agreement. Notwithstanding
anything in this  Agreement to the contrary,  no other  assumption  fee shall be
payable  upon a transfer of the Note or the Defeased  Note,  as  applicable,  in
accordance  with  this  Section  2.4.2,  but  Borrowers  shall pay all costs and
expenses incurred by Lender,  including  Lender's  attorneys' fees and expenses,
incurred in connection therewith.

          Section 2.5 Release of  Property.  Except as set forth in this Section
2.5, no  repayment,  prepayment  or defeasance of all or any portion of the Note
shall  cause,  give rise to a right to  require,  or  otherwise  result  in, the
release of any Lien of any Mortgage on any of the Property.

               2.5.1 Release of Entire Property.

                    (a) If the Borrowers have elected to defease the entire Loan
and the requirements of Section 2.4 and this 2.5 have been satisfied, all of the
Property  shall  be  released  from  the  Liens  of the  Mortgages  and the U.S.
Obligations,  pledged  pursuant  to the  Security  Agreement,  shall be the sole
source of collateral securing the Note.

                    (b)  In  connection  with  the  release  of the  Liens,  the
Borrowers  shall  submit to  Lender,  not less  than ten (10) days  prior to the
Defeasance  Date,  a  release  of Lien (and  related  Loan  Documents)  for each
Individual  Property for  execution by Lender.  Such release  shall be in a form
appropriate in each jurisdiction in which an Individual  Property is located and
satisfactory  to Lender in its sole  discretion.  In addition,  Borrowers  shall
provide all other  documentation  Lender reasonably  requires to be delivered by
Borrowers  in  connection   with  such  release,   together  with  an  Officer's
Certificate  certifying  that such  documentation  (i) is in compliance with all
Legal  Requirements,  and (ii) will effect such releases in accordance  with the
terms of this Agreement.

               2.5.2  Release of  Individual  Property.  If the  Borrowers  have
elected to defease a portion of the Loan and the requirements of Section 2.4 and
this 2.5 have  been  satisfied,  Borrowers  may  obtain  (i) the  release  of an
Individual  Property  from the Lien of the  Mortgage  thereon  (and related Loan
Documents)  and (ii) the release of the  Borrowers'  obligations  under the Loan
Documents with respect to such  Individual  Property (other than those expressly
stated to survive), upon satisfaction of each of the following conditions:

                                      -23-
<PAGE>

                    (a) The  principal  balance of the Defeased Note shall equal
or exceed the Adjusted  Release Amount for the applicable  Individual  Property;
provided,  however,  if the undefeased portion of the Loan at the time a release
is requested is less than the Adjusted  Release Amount,  the Defeased Note shall
equal the remaining undefeased portion of the Loan at the time of release;

                    (b) Borrowers  shall submit to Lender,  not less than thirty
(30) days prior to the date of such release, a release of Lien (and related Loan
Documents) for such  Individual  Property for execution by Lender.  Such release
shall be in a form  appropriate  in each  jurisdiction  in which the  Individual
Property  is  located  and  satisfactory  to Lender in its sole  discretion.  In
addition,  Borrowers  shall provide all other  documentation  Lender  reasonably
requires to be delivered by Borrowers in connection with such release,  together
with an  Officer's  Certificate  certifying  that such  documentation  (i) is in
compliance  with all  Legal  Requirements,  (ii) will  effect  such  release  in
accordance  with the  terms of this  Agreement,  and  (iii)  will not  impair or
otherwise  adversely  affect the Liens,  security  interests and other rights of
Lender under the Loan  Documents not being released (or as to the parties to the
Loan Documents and Property  subject to the Loan Documents not being  released);
and

                    (c) After giving  effect to such  release,  the Debt Service
Coverage  Ratio for all of the Property then  remaining  subject to the Liens of
the  Mortgages  shall be equal to or exceed the greater of (i) the Debt  Service
Coverage Ratio for the four (4) full calendar quarters immediately preceding the
Closing  Date,  and (ii) the Debt  Service  Coverage  Ratio  for all of the then
remaining Property  (including the Individual Property to be released and taking
into account the Debt  evidenced by the Defeased  Note in question) for the four
(4) full calendar quarters  immediately  preceding the release of the Individual
Property.

               2.5.3 Release on Payment in Full.  Lender shall, upon the written
request and at the expense of  Borrowers,  upon payment in full of all principal
and  interest on the Loan and all other  amounts due and payable  under the Loan
Documents in accordance  with the terms and provisions of the Note and this Loan
Agreement,  release the Lien of the  Mortgage on each  Individual  Property  not
theretofore released.

          Section 2.6 Manner of Making Payments; Cash Management.

               2.6.1  Payment of Rents to  Clearing  Accounts;  Tenant  Security
Deposits into Tenant Security Account;  Deposits into Lockbox Accounts. (a) Upon
the occurrence of a Lockbox Event and the giving of the Lockbox Event Notice (as
defined in the Clearing  Account  Agreement) the Borrowers  shall cause all Rent
(including  rent paid by  tenants of  Borrowers'  multi-family  properties,  but
excluding Rent required to be paid directly to the Tenant Security  Account such
as tenant  security  deposits  payable  pursuant  to  Section  2.6.1(b)  of this
Agreement)  to be paid  into  certain  designated  collection  accounts  (each a
"Clearing Account";  collectively, the "Clearing Accounts") to be established by
the  Borrowers  and  approved  by Lender in  accordance  with  clearing  account
agreement among the Borrowers,  Manager,  Lender, and a certain clearing account
bank (the "Clearing House Bank"; the "Clearing Account Agreement").

                                      -24-
<PAGE>

                    (b) Not later than the Closing Date,  Borrowers  shall,  and
shall cause Manager to deposit all existing tenant security deposits  (including
any  pre-paid  rent  given in lieu of  security  or which is in the  nature of a
security  deposit) into a separate  trust account  maintained by Borrowers  (the
"Tenant Security Account").  Borrower shall at all times maintain an independent
ledger in respect of the Tenant Security Account which allocates portions of the
Tenant Security Account to each of the Borrower's individual tenants.

                    (c) Upon the occurrence of a Lockbox Event and the giving of
the Lockbox Event  Notice,  (i) Lender may direct the Borrowers to issue payment
direction  letters in the form  Exhibit B to the Clearing  Account  Agreement to
each of Borrowers' Tenants,  which direction letters shall direct the tenants to
immediately  commence payments of rent to the Borrowers'  Clearing Account;  and
(ii)  Lender may in its sole  discretion  direct the  Clearing  Bank to restrict
Borrowers'  right to debit such  accounts.  Following  the giving of the Lockbox
Event Notice, Lender may also direct the Clearing Account Bank to debit and pay,
from time-to-time,  the current proceeds deposited into such Clearing Account to
the Lender's Lockbox Account.

                    (d) After the  occurrence  of a Lockbox Event and the giving
of the Lockbox  Event  Notice,  Lender shall have sole dominion and control over
the  Clearing  Accounts  and,  except  as  set  forth  in the  Clearing  Account
Agreement,  the  Borrowers  shall  have no rights to make  withdrawals  from the
Clearing Account.

                    (e)  Disbursements  from the Lockbox Account will be made in
accordance  with  the  terms  and  conditions  of this  Agreement  and the  Cash
Management  Agreement.  Lender  shall have sole  dominion  and control  over the
Lockbox Account and, except as set forth in the Cash Management  Agreement,  the
Borrowers shall have no rights to make withdrawals therefrom.

                    (f) After the  occurrence  of a Lockbox Event and the giving
of the Lockbox  Event Notice,  and Lender's  direction to the Borrowers to cause
all tenant Rents to be paid to the Clearing  Account,  Borrowers'  obligation to
cause Rents to be paid into the Lockbox Account from the Clearing  Account shall
remain in full  force  and  effect  until  such  time as the  Borrowers  provide
evidence satisfactory in form and substance to Lender conclusively demonstrating
that Borrowers have re-established and maintained on a consolidated basis a Debt
to  Service  Coverage  Ratio of 1.20 to 1.0 or greater  for two (2)  consecutive
fiscal  quarters,  that no Event of Default then exists and that the Anticipated
Repayment Date has also not occurred, whereupon Lender shall direct the Clearing
Account Bank in writing to cease payments of Rent to the Lockbox  Account and to
return dominion and control of the Clearing Account to the Borrowers  subject to
the terms of the Clearing  Account.  If a subsequent  Lockbox Event occurs after
the return of control of the  Clearing  Account to the  Borrowers,  the  Lockbox
provisions  shall be  reinstated  by Lender.  Upon the  occurrence  of three (3)
Lockbox  Events,  Borrower  shall  have no right to  reassume  control  over the
Clearing  Account by  re-establishment  of the mandatory  Debt Service  Coverage
Ratio.

                                      -25-
<PAGE>

               2.6.2 Making of Payments.  Each payment by Borrowers hereunder or
under the Note  shall be made in funds  settled  through  the New York  Clearing
House Interbank  Payments System or other funds immediately  available to Lender
by 11:00 a.m., New York City time, on the date such payment is due, to Lender by
deposit  to such  account  as Lender  may  designate  by  written  notice to the
Borrowers  subject to the terms of the Cash Management  Agreement.  Whenever any
payment  hereunder or under the Note shall be stated to be due on a day which is
not a  Business  Day,  such  payment  shall be made on the  first  Business  Day
preceding such scheduled due date.

               2.6.3 Payments  Received in the Lockbox Account.  Notwithstanding
anything  to  the  contrary  contained  in  this  Agreement  or the  other  Loan
Documents,  and  provided no Event of Default has  occurred  and is  continuing,
Borrowers'  obligations  with respect to the monthly  payment of  principal  and
interest and amounts due for the Reserve Funds shall be deemed  satisfied to the
extent  sufficient  amounts are deposited in the Lockbox Account to satisfy such
obligations  on the dates each such payment is required and remain therein until
applied by Lender,  regardless  of whether any of such amounts are so applied by
Lender.

               2.6.4  No  Deductions,   etc.  All  payments  made  by  Borrowers
hereunder  or  under  the  Note  or the  other  Loan  Documents  shall  be  made
irrespective  of,  and  without  any  deduction  for,  any  setoff,  defense  or
counterclaims.

          Section 2.7 Property Substitutions.

               2.7.1  Substitution  of  Property.   Subject  to  the  terms  and
conditions set forth in this Section 2.7, a Borrower may obtain a release of the
Lien of a Mortgage (and the related Loan  Documents)  encumbering  an Individual
Property  (a   "Substituted   Property")  by   substituting   therefor   another
multi-family  property  acquired by such Borrower  (individually,  a "Substitute
Property" and collectively,  the "Substitute  Property"),  provided that (a) the
Substitution  Condition is  satisfied,  and (b) no such  substitution  may occur
after the Anticipated  Repayment  Date.  Borrower shall have no further right to
substitute Individual Properties when the allocated loan amounts of any proposed
Substituted  Property  when  added to the  allocated  loan  amounts of all prior
Substituted property exceed one-third of the outstanding principal amount of the
Loan (the  initial  allocated  loan  amounts  are set forth in the  Contribution
Agreement).

               In  addition,  any such  substitution  shall be subject,  in each
case, to the satisfaction of the following conditions precedent:

               (i)  Lender shall have  received a copy of (A) a deed,  or (B) an
                    assignment and assumption of lessee's interest in the Ground
                    Lease (together with the ground lessor's  consent  thereto),
                    as applicable,  conveying all of Borrower's right, title and
                    interest  in and to the  Substituted  Property  to an entity
                    other than Borrower and a letter from Borrower countersigned
                    by a title insurance company  acknowledging  receipt of such
                    deed or

                                      -26-
<PAGE>

                    assignment and  assumption,  as applicable,  and agreeing to
                    record  such  deed  or   assignment   and   assumption,   as
                    applicable,  in the real  estate  records  for the county in
                    which the Substituted Property is located.

               (ii) Lender shall have  received an  appraisal of the  Substitute
                    Property  dated no more than one  hundred  and twenty  (120)
                    days prior to the substitution by an appraiser acceptable to
                    the Rating  Agencies,  indicating an appraised  value of the
                    Substitute  Property  that is equal to or  greater  than the
                    value of the Substituted  Property as shown in the appraisal
                    delivered  to Lender at the time of the  encumbrance  of the
                    Substituted Property by the related Mortgage at or about the
                    Closing Date.

              (iii) After giving effect to the substitution,  (a) the Borrowers'
                    Debt Service  Coverage Ratio for the prior twelve (12) month
                    period for all of the  Property  (including  the  Substitute
                    Property but excluding the Substituted Property) is not less
                    than the greater of the  Borrowers'  Debt  Service  Coverage
                    Ratio  for  such  --------  period  for all of the  Property
                    (including  the  Substituted   Property  but  excluding  the
                    Substitute  Property)  as of the Closing  Date and as of the
                    date  immediately  preceding the  substitution;  and (b) the
                    Borrowers'  Loan to  Value  Ratio  for  all of the  Property
                    (including  the   Substitute   Property  but  excluding  the
                    Substituted  Property)  is not more  than the  lesser of the
                    Loan  to  Value  Ratio  for all of the  Property  ----------
                    (including  the  Substituted   Property  but  excluding  the
                    Substitute  Property)  as of the Closing  Date and as of the
                    date immediately preceding the substitution.

               (iv) The Net Operating  Income for the  Substitute  Property does
                    not  show  a  downward   trend  over  the  three  (3)  years
                    immediately  prior  to the  date of  substitution  or,  with
                    respect  to a  Substitute  Property  for  which  information
                    regarding  the  Net  Operating  Income  of  such  Substitute
                    Property  for the three (3) years  immediately  prior to the
                    date of  substitution  cannot be obtained by Borrower  after
                    Borrower's  exercise of diligent efforts,  the Net Operating
                    Income  shall not show a downward  trend for such  period of
                    time immediately prior to the date of substitution as may be
                    determined from the information regarding such Net Operating
                    Income available.

               (v)  The Net  Operating  Income and Debt Service  Coverage  Ratio
                    (for the twelve (12) month period immediately  preceding the
                    substitution)  for the  Substitute  Property  is equal to or
                    greater  than the Net  Operating  Income  and  Debt  Service
                    Coverage Ratio (for the twelve (12) month period immediately
                    preceding  the  substitution)  for the  related  Substituted
                    Property.

                                      -27-
<PAGE>

               (vi) Lender  shall have  received  evidence  in writing  from the
                    Rating  Agencies to the effect that such  substitution  will
                    not result in a  withdrawal,  qualification  or downgrade of
                    the respective  ratings in effect  immediately prior to such
                    substitution  for the Securities  issued in connection  with
                    the Securitization that are then outstanding.

              (vii) No Default or Event of Default  shall have  occurred  and be
                    continuing  and  Borrower  shall  be in  compliance  in  all
                    material respects with all terms and conditions set forth in
                    this Agreement and in each Loan Document on Borrower's  part
                    to be observed or  performed.  Lender shall have  received a
                    certificate from Borrower confirming the foregoing,  stating
                    that  the   representations   and   warranties  of  Borrower
                    contained in this Agreement and the other Loan Documents are
                    true and correct in all  material  respects on and as of the
                    date of the  substitution  with  respect  to  Borrower,  the
                    Property  and the  Substitute  Property and  containing  any
                    other   representations   and  warranties  with  respect  to
                    Borrower,  the Property, the Substitute Property or the Loan
                    as the Rating Agencies may require,  such  certificate to be
                    in form and substance satisfactory to the Rating Agencies.

             (viii) Borrower shall  have  executed,  acknowledged  and delivered
                    to Lender (A) a Mortgage,  an  Assignment  of Leases and two
                    UCC  Financing  Statements  with  respect to the  Substitute
                    Property, together with a letter from Borrower countersigned
                    by a title insurance company  acknowledging  receipt of such
                    Mortgage,   Assignment   of  Leases   and  UCC-1   Financing
                    Statements  and agreeing to record or file,  as  applicable,
                    such Mortgage, Assignment of Leases and Rents and one of the
                    UCC-1  Financing  Statements in the real estate  records for
                    the county in which the  Substitute  Property is located and
                    to file one of the UCC-1  Financing  Statement in the office
                    of  the  Secretary  of  State  of the  state  in  which  the
                    Substitute  Property is located, so as to effectively create
                    upon such recording and filing valid and  enforceable  Liens
                    upon the Substitute Property,  of the requisite priority, in
                    favor of Lender  (or such  other  trustee  as may be desired
                    under local law), subject only to the Permitted Encumbrances
                    and such other Liens as are  permitted  pursuant to the Loan
                    Documents and (B) an Environmental Indemnity with respect to
                    the Substitute Property. The Mortgage, Assignment of Leases,
                    UCC-1 Financing Statements and Environmental Indemnity shall
                    be the same in form and  substance  as the  counterparts  of
                    such  documents  executed and delivered  with respect to the
                    related   Substituted   Property  subject  to  modifications
                    reflecting  the   Substitute   Property  as  the  Individual
                    Property  that is the  subject  of such  documents  and such
                    modifications  reflecting the laws of the state in which the
                    Substitute  Property is located as shall be  recommended  by
                    the   counsel   admitted  to  practice  in  such  state  and
                    delivering  the  opinion  as to the  enforceability  of such
                    documents

                                      -28-
<PAGE>

                    required  pursuant  to  clause  (xiv)  below.  The  Mortgage
                    encumbering the Substitute Property shall secure all amounts
                    evidenced by the Note,  provided  that in the event that the
                    jurisdiction  in which the  Substitute  Property  is located
                    imposes a mortgage recording, intangibles or similar tax and
                    does not  permit  the  allocation  of  indebtedness  for the
                    purpose of determining  the amount of such tax payable,  the
                    principal  amount secured by such Mortgage shall be equal to
                    one hundred fifty  percent  (150%) of the amount of the Loan
                    allocated to the Substitute Property. The amount of the Loan
                    allocated  to, and the  Release  Amount  of, the  Substitute
                    Property (such amount being  hereinafter  referred to as the
                    "Substitute  Release Amount") shall equal the Release Amount
                    of the related Substituted Property.

               (ix) Lender  shall  have  received  (A) any  "tie-in"  or similar
                    endorsement to each Title Insurance Policy insuring the Lien
                    of an existing  Mortgage as of the date of the  substitution
                    available  with  respect  to  the  Title  Insurance   Policy
                    insuring  the  Lien  of the  Mortgage  with  respect  to the
                    Substitute  Property and (B) a Title Insurance  Policy (or a
                    marked,  signed and redated  commitment  to issue such Title
                    Insurance   Policy)   insuring  the  Lien  of  the  Mortgage
                    encumbering  the  Substitute  Property,  issued by the title
                    company that issued the Title  Insurance  Policies  insuring
                    the Lien of the existing  Mortgages and dated as of the date
                    of the  substitution,  with  reinsurance  and direct  access
                    agreements that replace such agreements issued in connection
                    with the Title  Insurance  Policy  insuring  the Lien of the
                    Mortgage  encumbering  the Substituted  Property.  The Title
                    Insurance  Policy  issued  with  respect  to the  Substitute
                    Property  shall (1)  provide  coverage  in the amount of the
                    Substitute   Release  Amount  if  the  "tie-in"  or  similar
                    endorsement   described  above  is  available  or,  if  such
                    endorsement  is not  available,  in an  amount  equal to one
                    hundred  fifty  percent  (150%)  of the  Substitute  Release
                    Amount, (2) insure Lender that the relevant Mortgage creates
                    a valid  first lien on the  Substitute  Property  encumbered
                    thereby,  free and  clear of all  exceptions  from  coverage
                    other than Permitted  Encumbrances  and standard  exceptions
                    and  exclusions  from  coverage (as modified by the terms of
                    any   endorsements),   (3)  contain  such  endorsements  and
                    affirmative   coverages  as  are   contained  in  the  Title
                    Insurance  Policies  insuring  the  Liens  of  the  existing
                    Mortgages,  and (4) name Lender as the insured.  Lender also
                    shall have received copies of paid receipts showing that all
                    premiums in respect of such endorsements and Title Insurance
                    Policies have been paid.

               (x)  Lender shall have  received a current  title survey for each
                    Substitute  Property,  certified  to the title  company  and
                    Lender and their  successors  and assigns,  in the same form
                    and having  the same  content  as the  certification  of the
                    Survey   of  the   Substituted   Property   prepared   by  a
                    professional  land  surveyor  licensed in the state in which
                    the Substitute

                                      -29-
<PAGE>

                    Property is located and acceptable to the Rating Agencies in
                    accordance   with   the   1992   Minimum   Standard   Detail
                    Requirements  for ALTA/ACSM Land Title Surveys.  Such survey
                    shall  reflect the same legal  description  contained in the
                    Title Insurance Policy relating to such Substitute  Property
                    and shall  include,  among other things,  a metes and bounds
                    description  of the real  property  comprising  part of such
                    Substitute Property. The surveyor's seal shall be affixed to
                    each survey and each survey shall  certify that the surveyed
                    property is not located in a "one-hundred-year  flood hazard
                    area."

               (xi) Lender shall have received valid  certificates  of insurance
                    indicating  that  the   requirements  for  the  policies  of
                    insurance required for an Individual Property hereunder have
                    been satisfied  with respect to the Substitute  Property and
                    evidence  of the  payment of all  premiums  payable  for the
                    existing policy period.

              (xii) Lender shall have  received a Phase I  environmental  report
                    and, if recommended under the Phase I environmental  report,
                    a Phase II  environmental  report,  which  conclude that the
                    Substitute Property does not contain any Hazardous Substance
                    (as defined in the  Mortgage) and is not subject to any risk
                    of contamination from any off-site Hazardous  Substance.  If
                    any such report  discloses  the  presence  of any  Hazardous
                    Substance  or the risk of  contamination  from any  off-site
                    Hazardous  Substance,  such report shall include an estimate
                    of the cost of any related  remediation  and Borrower  shall
                    deposit  with Lender an amount  equal to one  hundred  fifty
                    percent (150%) of such estimated  cost,  which deposit shall
                    constitute  additional  security  for the Loan and  shall be
                    released to Borrower  upon the  delivery to Lender of (A) an
                    update to such report indicating that there is no longer any
                    Hazardous Substance on the Substitute Property or any danger
                    of contamination from any off-site Hazardous  Substance that
                    has  not  been  fully   remediated  and  (B)  paid  receipts
                    indicating that the costs of all such  remediation work have
                    been paid.

             (xiii) Borrower  shall  deliver  or cause to be delivered to Lender
                    (A) updates  certified  by  Borrower  of all  organizational
                    documentation  related to  Borrower  and/or  the  formation,
                    structure,  existence, good standing and/or qualification to
                    do  business  delivered  to  Lender in  connection  with the
                    Closing Date; (B) good standing  certificates,  certificates
                    of qualification to do business in the jurisdiction in which
                    the  Substitute  Property  is located  (if  required in such
                    jurisdiction)  and (C) resolutions of the general partner of
                    Borrower  authorizing the substitution and any actions taken
                    in connection with such substitution.

                                      -30-
<PAGE>

              (xiv) Lender  shall  have  received  the  following   opinions  of
                    Borrower's  counsel:  (A) an opinion or  opinions of counsel
                    admitted  to  practice  under the laws of the state in which
                    the  Substitute  Property is located  stating  that the Loan
                    Documents  delivered with respect to the Substitute Property
                    pursuant to clause (viii) above are valid and enforceable in
                    accordance with their terms,  subject to the laws applicable
                    to  creditors'  rights and  equitable  principles,  and that
                    Borrower is qualified  to do business  and in good  standing
                    under  the laws of the  jurisdiction  where  the  Substitute
                    Property  is located or that  Borrower  is not  required  by
                    applicable   law  to   qualify  to  do   business   in  such
                    jurisdiction;  (B) an opinion of Cummings & Lockwood or such
                    other counsel acceptable to the Rating Agencies stating that
                    the Loan Documents  delivered with respect to the Substitute
                    Property   pursuant  to  clause   (viii)   above  were  duly
                    authorized,  executed and delivered by Borrower and that the
                    execution  and  delivery  of  such  Loan  Documents  and the
                    performance by Borrower of its  obligations  thereunder will
                    not cause a breach of, or a default  under,  any  agreement,
                    document or  instrument  to which  Borrower is a party or to
                    which it or its  properties  are  bound;  (C) an  opinion of
                    counsel  acceptable  to the  Rating  Agencies  stating  that
                    subjecting  the  Substitute  Property  to  the  Lien  of the
                    related  Mortgage  and the  execution  and  delivery  of the
                    related  Loan  Documents  does not and will  not  affect  or
                    impair the ability of Lender to enforce its  remedies  under
                    all of the Loan  Documents or to realize the benefits of the
                    cross-collateralization  provided  for  thereunder;  (D)  an
                    update  of  the  Insolvency   Opinion  indicating  that  the
                    substitution does not affect the opinions set forth therein;
                    (E) an opinion of counsel  acceptable to the Rating Agencies
                    stating that the substitution  and the related  transactions
                    do not constitute a fraudulent  conveyance  under applicable
                    bankruptcy and insolvency laws and (F) an opinion of counsel
                    acceptable to the Rating Agencies that the substitution does
                    not  constitute  a  "significant  modification"  of the Loan
                    under  Section 1001 of the Code or otherwise  cause a tax to
                    be imposed on a "prohibited  transaction" by any REMIC Trust
                    .

               (xv) Borrower  shall have paid all Basic  Carrying Costs relating
                    to the  Property  and  the  Substitute  Property,  including
                    without   limitation,   (i)  accrued  but  unpaid  insurance
                    premiums   relating  to  the  Property  and  the  Substitute
                    Property,   (ii)  currently  due  Taxes  (including  any  in
                    arrears)   relating  to  the  Property  and  the  Substitute
                    Property and (iii)  currently due Other Charges  relating to
                    the Property and Substitute Property.

              (xvi) Borrower shall have paid or reimbursed  Lender for all costs
                    and  expenses   incurred  by  Lender   (including,   without
                    limitation,  reasonable attorneys fees and disbursements) in
                    connection  with the  substitution  and Borrower  shall have
                    paid all recording charges, filing fees, taxes or other

                                      -31-
<PAGE>

                    expenses  (including,   without  limitation,   mortgage  and
                    intangibles  taxes and  documentary  stamp taxes) payable in
                    connection with the  substitution.  Borrower shall have paid
                    all costs and  expenses of the Rating  Agencies  incurred in
                    connection with the substitution.

             (xvii) Lender shall  have  received annual operating statements and
                    occupancy  statements  for the  Substitute  Property for the
                    most current  completed fiscal year and a current  operating
                    statement for the  Substituted  Property,  each certified to
                    Lender as being  true and  correct  and a  certificate  from
                    Borrower certifying that there has been no adverse change in
                    the financial condition of the Substitute Property since the
                    date of such operating statements.

            (xviii) [Reserved]

              (xix) Lender shall have  received  copies of all tenant leases and
                    any ground leases  affecting the  Substitute  Property which
                    Lender  desires to receive  certified  by  Borrower as being
                    true and correct.  Lender shall have received a current rent
                    roll of the  Substitute  Property  certified  by Borrower as
                    being true and correct.

               (xx) [Reserved]

              (xxi) Lender shall have received (A) an  endorsement  to the Title
                    Insurance   Policy   insuring   the  Lien  of  the  Mortgage
                    encumbering  the  Substitute   Property  insuring  that  the
                    Substitute  Property  constitutes  a separate tax lot or, if
                    such an  endorsement  is not available in the state in which
                    the Substitute  Property is located, a letter from the title
                    insurance   company  issuing  such  Title  Insurance  Policy
                    stating that the  Substitute  Policy  constitutes a separate
                    tax  lot  or  (B)  a  letter  from  the  appropriate  taxing
                    authority stating that the Substitute Property constitutes a
                    separate tax lot.

             (xxii) Lender  shall  have  received a Physical  Conditions  Report
                    with  respect to the  Substitute  Property  stating that the
                    Substitute  Property  and its  use  comply  in all  material
                    respects with all applicable Legal Requirements  (including,
                    without limitation,  zoning,  subdivision and building laws)
                    and that the  Substitute  Property is in good  condition and
                    repair and free of damage or waste.  If compliance  with any
                    Legal   Requirements  are  not  addressed  by  the  Physical
                    Conditions  Report,  such  compliance  shall be confirmed by
                    delivery to Lender of a certificate of an architect licensed
                    in the state in which the Substitute  Property is located, a
                    letter  from the  municipality  in which  such  Property  is
                    located, a certificate of a surveyor that is licensed in the
                    state in which the  Substitute  Property  is  located  (with
                    respect to zoning and subdivision laws), an ALTA 3.1 zoning

                                      -32-
<PAGE>

                    endorsement to the Title Insurance Policy delivered pursuant
                    to clause  (ix) above  (with  respect  to zoning  laws) or a
                    subdivision   endorsement  to  the  Title  Insurance  Policy
                    delivered  pursuant to clause  (ix) above  (with  respect to
                    subdivision   laws).  If  the  Physical   Conditions  Report
                    recommends  that any  repairs  be made with  respect  to the
                    Substitute  Property,  such Physical Conditions Report shall
                    include an estimate of the cost of such recommended  repairs
                    and  Borrower  shall  deposit with Lender an amount equal to
                    one hundred fifty  percent  (150%) of such  estimated  cost,
                    which deposit shall constitute  additional  security for the
                    Loan and shall be released to Borrower  upon the delivery to
                    Lender of (A) an update to such Physical  Conditions  Report
                    or a letter from the engineer  that  prepared  such Physical
                    Conditions  Report  indicating that the recommended  repairs
                    were completed in good and  workmanlike  manner and (B) paid
                    receipts  indicating that the costs of all such repairs have
                    been paid.

            (xxiii) Lender  shall  have received  duly amended  Clearing Account
                    Documents  and a  certified  copy  of an  amendment  to  the
                    Management   Agreement   and  Clearing   Account   Agreement
                    reflecting the deletion of the Substituted  Property and the
                    addition of the  Substitute  Property as a property  managed
                    pursuant   thereto  and  Manager  shall  have  executed  and
                    delivered   to  Lender  an  amendment  to  the  Consent  and
                    Subordination  of  Management   Agreement   reflecting  such
                    amendment to the Management  Agreement and Clearing  Account
                    Agreement.

            (xxiv)  Lender   shall   have   received  such   other  and  further
                    approvals, opinions, documents and information in connection
                    with  the  substitution  as the  Rating  Agencies  may  have
                    requested.

              (xxv) Lender  shall  have  received  copies of all  contracts  and
                    agreements  relating  to the leasing  and  operation  of the
                    Substitute  Property  (other than the Management  Agreement)
                    together with a certification  of Borrower  attached to each
                    such contract or agreement certifying that the attached copy
                    is a true and correct copy of such contract or agreement and
                    all amendments thereto.

             (xxvi) Borrower  shall  submit to Lender, not less than thirty (30)
                    days  prior to the date of such  substitution,  a release of
                    Lien  (and  related  Loan  Documents)  for  the  Substituted
                    Property for execution by Lender. Such release shall be in a
                    form   appropriate   for  the   jurisdiction  in  which  the
                    Substituted  Property is located and  satisfactory to Lender
                    in its sole discretion.  Borrower shall deliver an Officer's
                    Certificate  certifying that the  requirements  set forth in
                    this Section 2.7.1 have been satisfied.

                                      -33-
<PAGE>

            (xxvii) If  the  Substitute  Property  involves  a leasehold estate,
                    the form and substance of the lease shall  contain  mortgage
                    protective  provisions  at least as good as contained in the
                    Ground Lease (unless the Rating Agencies  permit  otherwise)
                    and otherwise complies with Section 4.1.32 hereof.

Upon the satisfaction of the foregoing conditions precedent, Lender will release
its  Lien  from the  Substituted  Property  to be  released  and the  Substitute
Property  shall be deemed to be an  Individual  Property  for  purposes  of this
Agreement  and the  Substitute  Release  Amount with respect to such  Substitute
Property  shall  be  deemed  to be the  Release  Amount  with  respect  to  such
Substitute Property for all purposes hereunder.

          Section 2.8 Additional Acquisitions of Condominium Units to Constitute
Additional Collateral.

               (a)   GPT-Windsor,   LLC   and   Avonplace   Associates   Limited
Partnerships  may purchase  from time to time  additional  condominium  units in
their  respective  condominium  developments.  Notwithstanding  anything  to the
contrary in this Agreement,  Lender hereby consents to such future acquisitions,
provided that the following covenants of this Section 2.8 are satisfied:

               (b) GPT-Windsor LLC and Avon Place Associates Limited Partnership
and each of the other  Borrowers,  each covenant that should any Borrower or its
Affiliate  desire  to  purchase  additional  condominium  units  in  River  Bend
Apartments  or Avon  Place  Condominiums,  GPT-Windsor  LLC  shall  be the  sole
acquirer  of all  such  apartments  in River  Bend  Apartments  and  Avon  Place
Associates Limited Partnership shall be the sole acquirer of all such apartments
in Avon Place Condominiums.

               (c) Each of  GPT-Windsor  LLC and Avon Place  Associates  Limited
Partnership  further  covenants  that should such Borrower,  acquire  additional
condominium units in the condominium  projects described in paragraph (a) above,
unless agreed in advance and in writing by the Lender,  the applicable  Borrower
shall within ten (10) days of the acquisition of such condominium  units, at its
own cost and expense, (i) execute and deliver to Lender a mortgage  modification
agreement  in  the  form  approved  by  Lender  subjecting  the  newly  acquired
condominium  units  to  the  lien  of the  Mortgage  encumbering  the  pertinent
condominium  Property,  and (ii) obtain and deliver to Lender such  supplemental
Title Insurance Policies, and property and liability insurance as are consistent
with those delivered to Lender in connection with the other units  encumbered by
the Mortgage.

               (d)  Each of the  Borrowers  agrees  and  covenants  that  should
GPT-Windsor LLC or Avon Place Associates Limited  Partnership acquire additional
condominium  Properties,  the  definition in this Loan  Agreement of "Individual
Property",  as applicable to such  Borrower,  shall be deemed amended to include
all  condominium  units  acquired  by  such  Borrower  after  the  date  of this
Agreement.

                                      -34-
<PAGE>

          III. CONDITIONS PRECEDENT

          Section 3.1 Conditions  Precedent to Closing. The obligation of Lender
to make the Loan hereunder is subject to the  fulfillment by Borrowers or waiver
by Lender of the following conditions precedent, no later than the Closing Date:

               3.1.1 Representations and Warranties; Compliance with Conditions.
The  representations and warranties of the Borrowers contained in this Agreement
and the other Loan Documents shall be true and correct in all material  respects
on and as of the Closing  Date with the same effect as if made on and as of such
date,  and no  Default  or an  Event  of  Default  shall  have  occurred  and be
continuing;  and Borrowers shall be in compliance in all material  respects with
all terms and  conditions  set forth in this  Agreement  and in each  other Loan
Document on its part to be observed or performed.

               3.1.2 Loan  Agreement  and Note.  Lender  shall have  received an
original counterpart of this Agreement and the Note, in each case, duly executed
and delivered on behalf of the Borrowers.

               3.1.3  Delivery  of Loan  Documents;  Title  Insurance;  Reports;
Leases.

                    (a)  Mortgages,   Assignments  of  Leases,   Assignments  of
Agreements.  Lender  shall have  received  from  Borrowers  fully  executed  and
acknowledged  counterparts  of the  Mortgages  and  the  Assignments  of  Leases
relating to the Property and evidence  that  counterparts  of the  Mortgages and
Assignments of Leases have been delivered to the title company for recording, in
the  reasonable  judgment  of  Lender,  so as to  effectively  create  upon such
recording valid and enforceable Liens upon such Property, of the first priority,
in favor of Lender (or such other  trustee as may be required  or desired  under
local law),  subject only to the Permitted  Encumbrances and such other Liens as
are permitted  pursuant to the Loan  Documents.  Lender shall have also received
from Borrowers fully executed counterparts of the Environmental  Indemnity,  O&M
Agreement,  Assignment of Management  Agreement and  Subordination of Management
Fees and Contribution Agreement.

                    (b)  Title  Insurance.  Lender  shall  have  received  Title
Insurance  Policies issued by a title company  acceptable to Lender and dated as
of the Closing Date, with reinsurance and direct access agreements acceptable to
Lender.  Such Title  Insurance  Policies  shall (A) provide  coverage in amounts
satisfactory to Lender,  (B) insure Lender that the relevant  Mortgage creates a
valid  lien on the  Individual  Property  encumbered  thereby  of the  requisite
priority,  free and clear of all  exceptions  from coverage other than Permitted
Encumbrances  and standard  exceptions and exclusions from coverage (as modified
by the terms of any endorsements), (C) with respect to the Condominium Property,
insure  against loss by reason of each pertinent  Individual  Property not being
part of a  validly  created  condominium,  (D)  contain  such  endorsements  and
affirmative  coverages as Lender may reasonably request,  and (E) name Lender as
the insured. The Title Insurance Policies shall be assignable. Lender also shall
have  received  evidence  that all  premiums in respect of such Title  Insurance
Policies have been paid.

                                      -35-
<PAGE>

                    (c)  Survey.  Lender  shall have  received  a current  title
survey for each Individual  Property,  certified to the title company and Lender
and their successors and assigns, in form and content satisfactory to Lender and
prepared by a professional and properly  licensed land surveyor  satisfactory to
Lender in accordance  with the 1992 Minimum  Standard  Detail  Requirements  for
ALTA/ACSM Land Title Surveys.  The survey should meet the  classification  of an
"Urban  Survey" and the  following  additional  items from the list of "Optional
Survey  Responsibilities  and Specifications"  (Table A) should be added to each
survey:  2, 3, 4, 6, 8, 9, 10, 11 and 13.  Such  survey  shall  reflect the same
legal  description  contained in the Title Insurance  Policies  relating to such
Individual  Property  referred to in clause (ii) above and shall include,  among
other things,  a metes and bounds  description  of the real property  comprising
part  of  such  Individual  Property  reasonably  satisfactory  to  Lender.  The
surveyor's seal shall be affixed to each survey and the surveyor shall provide a
certification for each survey in form and substance acceptable to Lender.

                    (d) Insurance. Lender shall have received valid certificates
of insurance for the policies of insurance required  hereunder,  satisfactory to
Lender in its sole  discretion,  and  evidence  of the  payment of all  premiums
payable for the existing policy period.

                    (e)  Environmental  Reports.  Lender shall have  received an
environmental  report  in  respect  of each  Individual  Property,  in each case
satisfactory to Lender.

                    (f) Zoning. With respect to each Individual Property, Lender
shall have  received,  at Lender's  option,  (i) letters or other  evidence with
respect to each Individual Property from the appropriate  municipal  authorities
(or other Persons) concerning  applicable zoning and building laws, (ii) an ALTA
3.1 zoning  endorsement  for the applicable  Title  Insurance  Policy or (iii) a
zoning opinion  letter,  in each case in substance  reasonably  satisfactory  to
Lender.

                    (g) Encumbrances. Borrowers shall have taken or caused to be
taken  such  actions in such a manner so that  Lender has a valid and  perfected
first  Lien  as of the  Closing  Date  with  respect  to  each  Mortgage  on the
applicable   Individual   Property,   subject  only  to   applicable   Permitted
Encumbrances  and  such  other  Liens  as are  permitted  pursuant  to the  Loan
Documents, and Lender shall have received satisfactory evidence thereof.

                    (h)  Condominium  Property  Documents.   Lender  shall  have
received, all constitutive documents of the condominium association; evidence of
the effectiveness of the condominium  regime; the Condominium  Declaration;  the
condominium  association's financial statements;  the condominium  association's
insurance  polices  naming Lender and  Borrowers as the insureds;  all mortgagee
protection   documentation  reasonably  required  by  Lender;  and  an  estoppel
agreement  from the  condominium  association  to Lender,  all of which shall be
reasonably  satisfactory  in form and  substance  to Lender  (collectively,  the
"Condominium Documents").

                                      -36-
<PAGE>

               3.1.4   Related   Documents.   Each   additional   document   not
specifically  referenced herein,  but relating to the transactions  contemplated
herein,  shall have been duly authorized,  executed and delivered by all parties
thereto and Lender shall have received and approved certified copies thereof.

               3.1.5  Delivery  of  Organizational  Documents.  On or before the
Closing Date, each Borrower shall deliver or cause to be delivered to Lender (i)
copies certified by Borrower of all organizational  documentation related to the
particular Borrower and/or the formation,  structure,  existence,  good standing
and/or  qualification  to do  business,  as  Lender  may  request  in  its  sole
discretion,   including,   without  limitation,   good  standing   certificates,
qualifications  to do business  in the  appropriate  jurisdictions,  resolutions
authorizing the entering into of the Loan and incumbency  certificates as may be
requested by Lender, all of which shall be in form and substance satisfactory to
Lender.

               3.1.6 Opinions of Borrowers' Counsel.  Lender shall have received
opinions of Borrowers' counsel (i) with respect to non-consolidation,  true sale
or true contribution,  and fraudulent  transfer issues, and (ii) with respect to
due execution,  authority,  enforceability  of the Loan Documents and such other
matters as Lender may require,  all such  opinions in form,  scope and substance
satisfactory to Lender and Lender's counsel in their sole discretion.

               3.1.7 Budgets.  Borrowers shall have delivered,  and Lender shall
have approved, the Annual Budget for the current Fiscal Year.

               3.1.8 Basic Carrying  Costs.  Borrowers shall have paid all Basic
Carrying Costs relating to the Property which are in arrears,  including without
limitation,  (i) accrued but unpaid insurance premiums relating to the Property,
(ii) currently due Taxes  (including  any in arrears)  relating to the Property,
and (iii)  currently due Other Charges  relating to the Property,  which amounts
shall be funded  with  proceeds  of the Loan and (iv) any  amounts due under any
Ground Lease.

               3.1.9   Completion  of  Proceedings.   All  corporate  and  other
proceedings   taken  or  to  be  taken  in  connection  with  the   transactions
contemplated  by this  Agreement  and other  Loan  Documents  and all  documents
incidental  thereto shall be satisfactory  in form and substance to Lender,  and
Lender shall have received all such counterpart originals or certified copies of
such documents as Lender may reasonably request.

               3.1.10 Payments. All payments, deposits or escrows required to be
made or  established by Borrower  under this  Agreement,  the Note and the other
Loan Documents on or before the Closing Date shall have been paid.

               [3.1.11 Reserved.]

               [3.1.12 Reserved.]

               3.1.13 Transaction Costs. Borrowers shall have paid or reimbursed
Lender for all title  insurance  premiums,  recording and filing fees,  costs of
environmental reports, the

                                      -37-
<PAGE>

Cash Management  Agent's,  Clearing  Account Bank and Manager's  fees,  Physical
Conditions Reports,  appraisals and other reports, the reasonable fees and costs
of Lender's counsel and all other third party out-of-pocket expenses incurred in
connection with the origination of the Loan.

               3.1.14 Material Adverse Change. There shall have been no material
adverse change in the financial condition or business condition of the Borrowers
or the Property since the date of the most recent financial statements delivered
to  Lender.  The income and  expenses  of the  Property,  the  occupancy  leases
thereof,  and all other features of the  transaction  shall be as represented to
Lender without  material  adverse  change.  Neither the Borrowers nor any of its
constituent Persons shall be the subject of any bankruptcy,  reorganization,  or
insolvency proceeding.

               3.1.15 Leases and Rent Roll. Lender shall have received certified
copies of the standard forms of tenant leases and certified copies of all ground
leases  affecting the Property.  Lender shall have received a current  certified
rent roll of the  Property,  reasonably  satisfactory  in form and  substance to
Lender together with a listing of all security deposits paid to the Borrowers by
its  tenants  and the  address  of the  depository  bank and  pertinent  account
number(s).

               [3.1.16 Reserved.]

               3.1.17 Clearing  Account  Documents.  Borrowers have delivered to
Lender executed copies of the required Clearing Account Agreement.

               3.1.18 Cash  Management  Agreement.  Borrowers have delivered the
executed Cash Management Agreement.

               3.1.19 Tax Lot.  Lender shall have  received  evidence  that each
Individual  Property  constitutes a separate tax lot,  which  evidence  shall be
reasonably satisfactory in form and substance to Lender.

               3.1.20 Physical  Conditions  Reports.  Lender shall have received
Physical  Conditions  Reports with respect to each  Individual  Property,  which
reports shall be reasonably satisfactory in form and substance to Lender.

               3.1.21  Management  Agreements.  Lender  shall  have  received  a
certified  copy of each  Management  Agreement  covering an Individual  Property
which shall be satisfactory in form and substance to Lender.

               3.1.22 Appraisal. Lender shall have received an appraisal of each
Individual  Property,  which  shall be  satisfactory  in form and  substance  to
Lender.

               3.1.23 Financial Statements. Lender shall have received

                                      -38-
<PAGE>

                    (a) (i) with respect to each Individual Property for the two
most recent  Fiscal Years  unaudited  operating  statements  and  statements  of
income, each in form and substance satisfactory to Lender; and

                    (ii) with  respect  to the  Property,  a balance  sheet with
respect to for the two most recent  Fiscal  Years and  statements  of income and
statements  of cash flows with respect to the Property for the three most recent
Fiscal Years, each in form and substance  satisfactory to Lender,  provided such
balance  sheet and  income and  statements  of cash  flows  shall  also  contain
financial   information   relating  to  other  properties  owned  by  Borrowers'
Affiliate.

                    (b)  The  reports  and  financial   statements  required  by
paragraphs (i) and (ii) above shall not be required to be audited, provided that
on the request of Lender,  Borrower hereby  covenants to hire at its expense and
submit such financial  reports as requested by Lender to a qualified third party
auditor to verify by procedures  acceptable to Lender the results  thereof;  the
form of such  verification  and the  auditor  shall  be  acceptable  to  Lender.
Borrower  shall use its best  efforts  to have such  verification  delivered  to
Lender within thirty days after such request is made.

               3.1.24  Further  Documents.  Lender  or its  counsel  shall  have
received such other and further approvals,  opinions,  documents and information
as  Lender or its  counsel  may have  reasonably  requested  including  the Loan
Documents in form and substance satisfactory to Lender and its counsel.

          IV. REPRESENTATIONS AND WARRANTIES

          Section 4.1 Borrower  Representations.  Each Borrower  represents  and
warrants as of the date hereof and as of the Closing Date that:

          4.1.1  Organization.  Borrower has been duly  organized and is validly
existing and in good  standing  with  requisite  power and  authority to own its
properties and to transact the  businesses in which it is now engaged.  Borrower
is duly  qualified to do business and is in good  standing in each  jurisdiction
where it is required  to be so  qualified  in  connection  with its  properties,
businesses and operations.  Borrower possesses all rights, licenses, permits and
authorizations,  governmental  or otherwise,  necessary to entitle it to own its
properties  and to transact the  businesses in which it is now engaged,  and the
sole  business of Borrower is the  ownership,  management  and  operation of the
Property.

          4.1.2  Proceedings.   Borrower  has  taken  all  necessary  action  to
authorize the  execution,  delivery and  performance  of this  Agreement and the
other Loan  Documents.  This  Agreement and such other Loan  Documents have been
duly  executed and delivered by or on behalf of Borrower and  constitute  legal,
valid and  binding  obligations  of  Borrower  enforceable  against  Borrower in
accordance  with  their  respective  terms,  subject to  applicable  bankruptcy,
insolvency  and  similar  laws  affecting  rights of  creditors  generally,  and
subject, as to

                                      -39-
<PAGE>

enforceability,   to  general   principles  of  equity  (regardless  of  whether
enforcement is sought in a proceeding in equity or at law).

               4.1.3 No Conflicts.  The execution,  delivery and  performance of
this  Agreement and the other Loan  Documents by Borrower will not conflict with
or  result in a breach of any of the terms or  provisions  of, or  constitute  a
default  under,  or result in the creation or imposition of any lien,  charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower pursuant to the terms of any indenture,  mortgage, deed of
trust, loan agreement, partnership agreement or other agreement or instrument to
which  Borrower is a party or by which any of  Borrower's  property or assets is
subject,  nor, to the best of Borrower's  knowledge,  will such action result in
any violation of the provisions of any statute or any order,  rule or regulation
of any court or governmental agency or body having jurisdiction over Borrower or
any of  Borrower's  properties  or  assets,  and,  to  the  best  of  Borrower's
knowledge,  any  consent,  approval,   authorization,   order,  registration  or
qualification  of or with any court or any such  regulatory  authority  or other
governmental agency or body required for the execution, delivery and performance
by Borrower of this  Agreement or any other Loan Documents has been obtained and
is in full force and effect.

               4.1.4  Litigation.  Except as otherwise  set forth on Schedule VI
hereto,  there are no actions,  suits or  proceedings  at law or in equity by or
before any  Governmental  Authority  or other  agency now pending or  threatened
against or affecting  Borrower or any of the Property,  which actions,  suits or
proceedings,  if  determined  against  Borrower  or any of the  Property,  might
materially  adversely affect the condition  (financial or otherwise) or business
of Borrower or the condition or ownership of any of the Property.

               4.1.5  Agreements.  Borrower is not a party to any  agreement  or
instrument or subject to any  restriction  which might  materially and adversely
affect Borrower or any of the Property,  or Borrower's  business,  properties or
assets,  operations  or condition,  financial or  otherwise.  Borrower is not in
default in any material respect in the performance, observance or fulfillment of
any of the  obligations,  covenants or conditions  contained in any agreement or
instrument  to which it is a party or by which  Borrower or any of its  Property
are bound.  Borrower has no material  financial  obligation under any indenture,
mortgage,  deed of trust,  loan  agreement or other  agreement or  instrument to
which  the  Borrower  is a party or by which the  Borrower  or the  Property  is
otherwise bound,  other than obligations  incurred in the ordinary course of the
operation of the Property and other than obligations under the Loan Documents.

               4.1.6 Title.  Borrower has good,  marketable  and  insurable  fee
simple title to the real property (and  GPT-Plainville  Limited  partnership has
good,  marketable  and  insurable  leasehold  title with respect to the Property
subject to the Ground Lease)  comprising  part of its Property and good title to
the balance of such Property,  free and clear of all Liens whatsoever except the
Permitted  Encumbrances,  such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. Each Mortgage intended to
encumber any of the Property, when properly recorded in the appropriate records,
together

                                      -40-
<PAGE>

with any Uniform  Commercial Code financing  statements  required to be filed in
connection therewith,  will create (i) a valid, perfected lien on the applicable
Individual  Property,  subject  only to  Permitted  Encumbrances  and the  Liens
created by the Loan Documents and (ii) perfected  security  interests in and to,
and perfected collateral  assignments of, all personalty (including the Leases),
all in  accordance  with the terms  thereof,  in each case  subject  only to any
applicable Permitted Encumbrances, such other Liens as are permitted pursuant to
the Loan  Documents  and the Liens created by the Loan  Documents.  There are no
claims for payment for work,  labor or  materials  affecting  any of  Borrower's
Property which are or may become a lien prior to, or of equal priority with, the
Liens created by the Loan Documents.

               4.1.7  No  Bankruptcy  Filing.  Neither  Borrower  nor any of its
constituent  Persons  are  contemplating  either the filing of a petition  by it
under any state or federal  bankruptcy or insolvency  laws or the liquidation of
all or a major  portion of  Borrower's  assets or property,  and Borrower has no
knowledge of any Person contemplating the filing of any such petition against it
or such constituent Persons.

               4.1.8 Full and Accurate Disclosure.  No statement of fact made by
Borrower in this  Agreement or in any of the other Loan  Documents  contains any
untrue  statement  of a  material  fact or  omits  to state  any  material  fact
necessary to make statements  contained herein or therein not misleading.  There
is no material fact presently  known to Borrower which has not been disclosed to
Lender  which  adversely  affects,  nor as far as Borrower  can  foresee,  might
adversely affect,  any of the Property or the business,  operations or condition
(financial or otherwise) of Borrower.

               4.1.9 No Plan Assets. Borrower is not an "employee benefit plan,"
as defined in Section  3(3) of ERISA,  subject to Title I of ERISA,  and none of
the assets of Borrower  constitutes or will  constitute  "plan assets" of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(i) Borrower is not a "governmental plan" within the meaning of Section 3(32) of
ERISA  and  (ii)  transactions  by or with  Borrower  are not  subject  to state
statutes  regulating  investment of, and fiduciary  obligations with respect to,
governmental  plans similar to the provisions of Section 406 of ERISA or Section
4975 of the Code currently in effect,  which prohibit or otherwise  restrict the
transactions contemplated by this Loan Agreement.

               4.1.10 Compliance. To the best of Borrower's knowledge,  Borrower
and the Property and the use thereof  comply in all material  respects  with all
applicable  Legal  Requirements,  including,  without  limitation,  building and
zoning  ordinances and codes,  provided,  however,  Lender is aware that certain
Properties are legally nonconforming. Borrower is not in default or violation of
any order, writ, injunction, decree or demand of any Governmental Authority, the
violation of which might materially adversely affect the condition (financial or
otherwise) or business of Borrower.  There has not been committed by Borrower or
any other person in occupancy  of or involved  with the  operation or use of the
Property any act or omission  affording  the federal  government or any state or
local  government  the right of forfeiture as against any of the Property or any
part thereof or any monies paid in performance of Borrower's  obligations  under
any of the Loan Documents.

                                      -41-
<PAGE>

               4.1.11  Financial  Information.  All financial  data,  including,
without  limitation,  the  statements  of cash  flow and  income  and  operating
expense,  that have been  delivered to Lender in respect of the Property (i) are
true, complete and correct in all material respects,  (ii) accurately  represent
the  financial  condition  of the Property as of the date of such  reports,  and
(iii) to the extent prepared by an independent certified public accounting firm,
have been  prepared in  accordance  with GAAP  throughout  the periods  covered,
except as disclosed therein.  Borrower does not have any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated  losses from any unfavorable  commitments that are known to Borrower
and reasonably likely to have a materially adverse effect on the Property or the
operation thereof as multifamily  apartment complexes,  except as referred to or
reflected  in said  financial  statements.  Since  the  date  of such  financial
statements,  there  has  been no  materially  adverse  change  in the  financial
condition,  operations  or  business  of  Borrower  from  that set forth in said
financial statements.

               4.1.12 Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower's best knowledge,  is contemplated with respect to all
or any  portion  of any of the  Property  or  for  the  relocation  of  roadways
providing access to any of the Property.

               4.1.13 Federal  Reserve  Regulations.  No part of the proceeds of
the Loan will be used for the purpose of  purchasing  or  acquiring  any "margin
stock"  within the  meaning of  Regulation  U of the Board of  Governors  of the
Federal Reserve System or for any other purpose which would be inconsistent with
such  Regulation U or any other  Regulations of such Board of Governors,  or for
any purposes  prohibited by Legal Requirements or by the terms and conditions of
this Agreement or the other Loan Documents.

               4.1.14  Utilities  and Public  Access.  Each of the  Property has
rights of access to public ways and is served by water,  sewer,  sanitary  sewer
and storm drain facilities  adequate to service such Property for its respective
intended uses. All public utilities  necessary or convenient to the full use and
enjoyment of the Property are located either in the public right-of-way abutting
such Property  (which are connected so as to serve the Property  without passing
over other  property) or in recorded  easements  serving such  Property and such
easements  are set forth in and  insured by the Title  Insurance  Policies.  All
roads  necessary  for the  use of the  Property  for  their  current  respective
purposes  have been  completed  and  dedicated to public use and accepted by all
Governmental Authorities.

               4.1.15 Not a Foreign Person.  Borrower is not a "foreign  person"
within the meaning ofss.1445(f)(3) of the Code.

               4.1.16 Separate Lots.  Each  Individual  Property is comprised of
one (1) or more parcels which constitute a separate tax lot or lots and does not
constitute  a  portion  of any  other  tax lot  not a part  of  such  Individual
Property.

               4.1.17  Assessments.  There are no pending or proposed special or
other  assessments  for public  improvements  or otherwise  affecting any of the
Property, nor are there

                                      -42-
<PAGE>

any  contemplated  improvements  to any of the Property  that may result in such
special or other assessments.

               4.1.18 Enforceability.  The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by Borrower, including the
defense  of  usury,  nor  would  the  operation  of any of the terms of the Loan
Documents,  or the exercise of any right  thereunder,  render the Loan Documents
unenforceable,  and Borrower has not asserted any right of rescission,  set-off,
counterclaim or defense with respect thereto.

               4.1.19 No Prior Assignment. There are no prior assignments of the
Leases or any  portion of the Rents due and payable or to become due and payable
which are presently outstanding.

               4.1.20  Insurance.  Borrower has  obtained  and has  delivered to
Lender  certified  copies of all  insurance  policies  reflecting  the insurance
coverages, amounts and other requirements set forth in this Agreement. No claims
which would have a  materially  adverse  effect on the  Borrower or its Property
have been made under any such policy,  and no Person,  including  Borrower,  has
done, by act or omission,  anything  which would impair the coverage of any such
policy.

               4.1.21 Use of Property.  Each of the Property is used exclusively
for multifamily purposes and other appurtenant and related uses.

               4.1.22  Certificate of Occupancy;  Licenses.  Except as otherwise
disclosed  to Lender,  all  certifications,  permits,  licenses  and  approvals,
including without  limitation,  certificates of completion and occupancy permits
required  for the legal  use,  occupancy  and  operation  of the  Property  as a
multifamily apartment complex (collectively, the "Licenses"), have been obtained
and are in full force and  effect.  The  Borrower  shall keep and  maintain  all
licenses necessary for the operation of the Property as a multifamily  apartment
complex.  The use being made of each  Individual  Property is in conformity with
the certificate of occupancy issued for such Individual Property.

               4.1.23  Flood  Zone.  None  of  the  Improvements  on  any of the
Property  are  located  in an  area  as  identified  by  the  Federal  Emergency
Management Agency as an area having special flood hazards.

               4.1.24  Physical  Condition.  Each  of the  Property,  including,
without limitation, all buildings,  improvements, parking facilities, sidewalks,
storm drainage systems,  roofs,  plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment,  elevators,  exterior sidings and doors,
landscaping,  irrigation  systems  and all  structural  components,  are in good
condition, order and repair in all material respects; there exists no structural
or other material  defects or damages in any of the Property,  whether latent or
otherwise,  and Borrower has not received  notice from any insurance  company or
bonding company of any defects or  inadequacies  in any of the Property,  or any
part thereof, which would adversely affect the insurability of the same or cause
the imposition of extraordinary

                                      -43-
<PAGE>

premiums or charges thereon or of any  termination or threatened  termination of
any policy of insurance or bond.

               4.1.25  Boundaries.  Except as  otherwise  disclosed in the Title
Insurance  Policies and Surveys,  all of the improvements which were included in
determining the appraised  value of each  Individual  Property lie wholly within
the boundaries and building restriction lines of such Individual  Property,  and
no improvements on adjoining  properties encroach upon such Individual Property,
and no easements or other encumbrances upon the applicable  Individual  Property
encroach  upon  any  of  the  improvements,   so  as  to  affect  the  value  or
marketability  of the  applicable  Individual  Property  except  those which are
insured against by title insurance.

               4.1.26 Leases. As of April 30, 1998, the Property was not subject
to any Leases other than the Leases  described in the lease rent rolls delivered
to Lender; however, Borrower may have entered into additional leases after April
30, 1998,  which leases  conform to the  standard  forms of leases  delivered to
Lender. No person has any possessory interest in any of the Property or right to
occupy the same except under and pursuant to the provisions of the Leases.

               To  Borrower's  best  knowledge,  the current  Leases are in full
force and effect and there are no defaults  thereunder by either party and there
are no  conditions  that,  with the passage of time or the giving of notice,  or
both,  would  constitute  defaults  thereunder.   No  Rent  (including  security
deposits)  has been  paid more  than one (1)  month in  advance  of its due date
(except for Individual Property located in the State of Massachusetts,  in which
case the  pertinent  Borrower  has  obtained  the last  month's  rent in lieu of
security  deposits).  All work to be performed by Borrower  under each Lease has
been performed as required and has been accepted by the applicable  tenant,  and
any  payments,  free  rent,  partial  rent,  rebate  of rent or other  payments,
credits, allowances or abatements required to be given by Borrower to any tenant
has already been received by such tenant. There has been no prior sale, transfer
or  assignment,  hypothecation  or pledge of any Lease or of the Rents  received
therein.

               To Borrower's best knowledge, no tenant listed on Schedule IV has
assigned its Lease or sublet all or any portion of the premises demised thereby,
no such tenant holds its leased premises under assignment or sublease,  nor does
anyone  except such tenant and its  employees  occupy such leased  premises.  No
tenant under any Lease has a right or option pursuant to such Lease or otherwise
to purchase all or any part of the leased  premises or the building of which the
leased premises are a part. To Borrower's best knowledge, no hazardous wastes or
toxic  substances,  as defined by applicable  federal,  state or local statutes,
rules and regulations, have been disposed, stored or treated by any tenant under
any Lease on or about the leased  premises nor does  Borrower have any knowledge
of any  tenant's  intention to use its leased  premises for any activity  which,
directly  or  indirectly,  involves  the use,  generation,  treatment,  storage,
disposal or  transportation  of any petroleum  product or any toxic or hazardous
chemical, material, substance or waste.

                                      -44-
<PAGE>

               4.1.27 Survey.  To the best of Borrower's  knowledge,  the Survey
for the Property  delivered to Lender in connection with this Agreement has been
prepared in accordance with the provisions of Section 3.1.3(c) hereof,  and does
not fail to reflect any  material  matter  affecting  any of the Property or the
title thereto.

               4.1.28 Value of the Property. The Loan is secured by interests in
real property having a fair market value as of the date hereof at least equal to
eighty (80%) of the original principal balance of the Loan.

               4.1.29  Filing and  Recording  Taxes.  All transfer  taxes,  deed
stamps,  intangible  taxes or other  amounts  in the  nature of  transfer  taxes
required to be paid by any Person under applicable Legal Requirements  currently
in effect in connection  with the transfer of the Property to Borrower have been
paid,  except for such taxes where the failure to make payment  would not have a
material  adverse  effect  on the  condition,  financial  or  otherwise,  of the
Borrower.. All mortgage,  mortgage recording, stamp, intangible or other similar
tax  required  to be paid by any  Person  under  applicable  Legal  Requirements
currently in effect in connection  with the  execution,  delivery,  recordation,
filing,  registration,  perfection or enforcement of any of the Loan  Documents,
including,  without limitation, the Mortgages encumbering the Property have been
paid,  and,  under current Legal  Requirements,  the Mortgages  encumbering  the
Property is enforceable in accordance with their  respective terms by Lender (or
any subsequent holder thereof).

               4.1.30   Single   Purpose   Entity/Separateness.   Each  Borrower
represents, warrants and covenants as follows:

                    (a) The purpose for which the  Borrower is  organized is and
shall be limited solely to (i) owning, holding, selling, leasing,  transferring,
exchanging,  operating and managing its  respective  Individual  Property,  (ii)
entering  into  this Loan  Agreement  with the  Lender,  (iii)  refinancing  the
Property  in  connection  with a  permitted  repayment  of  the  Loan  and  (iv)
transacting  any and all lawful  business  for which a Borrower may be organized
under its  constitutive  law that is  incident,  necessary  and  appropriate  to
accomplish the foregoing.

                    (b)  Borrower  does not own and  will  not own any  asset or
property other than (i) its Individual  Property,  and (ii) incidental  personal
property  necessary for and used or to be used in connection  with the ownership
or operation of the Property.

                    (c) Borrower will not engage in any business  other than the
ownership, management and operation of the Individual Property.

                    (d)  Borrower  will not enter into any contract or agreement
with any Affiliate of Borrower,  any constituent party of Borrower, any owner of
Borrower,  any guarantors of the obligations of Borrower or any Affiliate of any
constituent party,  owner or guarantor  (collectively,  the "Related  Parties"),
except  upon terms and  conditions  that are  intrinsically  fair,  commercially
reasonable  and  substantially  similar to those that would be  available  on an
arms-length basis with third parties not so affiliated with the Borrower or such
Related Parties.

                                      -45-
<PAGE>

                    (e)  Borrower  has not  incurred  and  will  not  incur  any
Indebtedness  other than (i) the Loan, (ii) trade and operational  debt incurred
in the ordinary course of business with trade creditors in amounts as are normal
and reasonable under the circumstances, provided such debt is not evidenced by a
note,  is not in excess of sixty days past due and does not exceed  $50,000  per
Individual  Property,  and  (iii)  Capital  Expenditures  having  a cost  in the
aggregate  (taking  into account all Capital  Expenditures  which are ongoing or
which  have not been paid for in full) not in excess of  $1,000,000  for all the
Property and is not in excess of 60 days past due.

                    (f)  Borrower  has not made  and will not make any  loans or
advances to any Person and shall not acquire  obligations  or  securities of any
Related Party.

                    (g) Borrower is and will remain  solvent and  Borrower  will
pay its debts and liabilities  (including,  as applicable,  shared personnel and
overhead expenses) from its assets as the same shall become due.

                    (h)  Borrower  has done or caused to be done and will do all
things  necessary  to  observe  organizational   formalities  and  preserve  its
existence, and Borrower will not, nor will Borrower permit any Related Party to,
amend,  modify or  otherwise  change the  partnership  certificate,  partnership
agreement,  articles of incorporation and bylaws, operating agreement,  trust or
other  organizational  documents of Borrower or such Related  Party  without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided  the change does not relate to the matters  contained  in this  Section
4.1.30.

                    (i)  Borrower  will  maintain  all  of its  books,  records,
financial  statements and bank accounts  separate from those of any other Person
and Borrower's assets will not be listed as assets on the financial statement of
any other  Person.  Borrower  will file its own tax  returns and will not file a
consolidated  federal  income tax return with any other Person.  Borrower  shall
maintain its books, records, resolutions and agreements as official records.

                    (j) Borrower  will be, and at all times will hold itself out
to the public as, a legal entity  separate  and  distinct  from any other Person
(including  any  Affiliate  or other  Related  Party),  shall  correct any known
misunderstanding  regarding  its  status as a  separate  entity,  shall  conduct
business in its own name,  shall not identify itself or any of its Affiliates as
a  division  or part of the other  and shall  maintain  and  utilize a  separate
telephone number and separate stationery, invoices and checks.

                    (k) Borrower will maintain  adequate  capital for the normal
obligations  reasonably  foreseeable in a business of its size and character and
in light of its contemplated business operations.

                    (l) Neither  Borrower  nor any  Related  Party will seek the
dissolution,  winding up,  liquidation,  consolidation  or merger in whole or in
part, or the sale of material assets of the Borrower.

                                      -46-
<PAGE>

                    (m) Borrower will not commingle its assets with those of any
other Person and will hold all of its assets in its own name;

                    (n) Borrower will not guarantee or become  obligated for the
debts of any other  Person  and does not and will not hold  itself  out as being
responsible for the debts or obligations of any other Person.

                    (o)  Borrowers  are  all  limited   partnerships   with  the
exception of GPT - Windsor,  LLC, a Delaware limited liability company ("GPTW").
Borrowers' sole general partner, or Managing Member in the case of GPTW, are the
single purpose corporate entities identified on Schedule B hereto (each, an "SPC
Party").

               Each SPC Party is a corporation  whose sole asset is its interest
in  Borrower.  Each such SPC  Party  will at all times  comply,  and will  cause
Borrower to comply, with each of the representations,  warranties, and covenants
contained in this Section 4.1.30 as if such representation, warranty or covenant
was made directly by such SPC Party.  Upon the withdrawal or the  disassociation
of the SPC Party from Borrower, Borrower shall immediately appoint a new general
partner or member whose articles of incorporation are  substantially  similar to
those of the SPC Party and deliver a new Insolvency Opinion to the Rating Agency
or Rating  Agencies,  as  applicable,  with respect to the new SPC Party and its
equity owners.

                    (p) Unless otherwise approved by Lender, each Borrower shall
at all times cause there to be at least one duly  appointed  member of the board
of directors (an  "Independent  Director") of Borrower (if a corporation)  or of
each SPC Party (if  Borrower  is a limited  partnership  or a limited  liability
company)  reasonably  satisfactory  to Lender  who is not at the time of initial
appointment  and has not been at any time during the  preceding  five (5) years:
(a) a stockholder,  director, officer, employee, partner, attorney or counsel of
Borrower or such SPC Party or any  Affiliate of either of them;  (b) a customer,
supplier or other person who derives more than 10% of its  purchases or revenues
from its  activities  with the  Borrower or such SPC Party or any  Affiliate  of
either of them;  (c) a Person  controlling or under common control with any such
stockholder, partner, customer, supplier or other Person; or (d) a member of the
immediate family of any such stockholder,  director, officer, employee, partner,
customer,  supplier or other Person.  (As used herein,  the term "control" means
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction of  management,  policies or activities of a Person,  whether  through
ownership of voting  securities,  by contract or otherwise.)  The appointment of
the initial  Independent  Director acting as a member of the Borrower's board of
directors as of the date hereof has been approved by the Lender. Notwithstanding
the  foregoing  requirements,   the  same  individual  serving  as  the  initial
Independent  Director of the Borrower's board of directors will also serve as an
Independent Director of a number of corporate Affiliates of the Borrower and the
Partnership  (collectively,  the  "Other  Corporate  Affiliates").  Each  of the
Partnership  and certain other  borrowers (for which all of the Other  Corporate
Affiliates  act as either a  corporate  general  partner or  corporate  managing
member) are co-borrowers (collectively, the "Co-Borrowers") under a Loan made by
the  Lender,  which  Loan  is  collateralized  by  properties  owned  by the Co-
Borrowers.  In  addition,  if the  initial  Independent  Director  or such other
Independent Director

                                      -47-
<PAGE>

is no longer  able to serve as the  Independent  Director  of the  Corporation's
board of  directors  for any reason,  the  Corporation  shall  promptly  appoint
another Independent  Director as a replacement,  provided that during the period
of  time  following  the  resignation  of  any  Independent   Director  and  the
replacement of such Independent Director,  the Board of Directors shall not take
any  action on behalf  of the  Corporation  that  would  require  the vote of an
Independent Director.

               It is agreed that a single Independent  Director may serve as the
Independent Director for each of the Borrowers.

                    (q)  Borrower  shall  not  cause  or  permit  the  board  of
directors  of an SPC  Party to take any  action  which,  under  the terms of any
certificate of incorporation, by-laws or any voting trust agreement with respect
to any common  stock,  requires  the vote of any SPC Party unless at the time of
such action there shall be at least one member who is an Independent Director.

                    (r)  Borrower  shall  allocate  fairly  and  reasonably  any
overhead expenses that are shared with an affiliate, including paying for office
space and services performed by any employee of an Affiliate or Related Party.

                    (s)  Borrower shall not pledge its assets for the benefit of
any other Person other than with respect to the Loan.

                    (t) Borrower shall maintain a sufficient number of employees
in light of its contemplated business operations and pay the salaries of its own
employees from its own funds.

                    (u)  Borrower   shall  conduct  its  business  so  that  the
assumptions  made with respect to Borrower in the  Insolvency  Opinion  shall be
true and correct in all respects.

               4.1.31   Management   Agreements.   The   Borrower's   respective
Management  Agreement  is in full  force  and  effect  and  there is no  default
thereunder by any party thereto and no event has occurred that, with the passage
of time and/or the giving of notice would constitute a default thereunder.

               4.1.32 Ground Leases.  Borrower hereby represents and warrants to
Lender the following with respect to the Ground Leases:

                    (i)  Recording;  Modification  A notice of lease for each of
               the Ground Leases has been duly recorded.  The Ground Leases each
               permit the interest of Borrower to be encumbered by a mortgage or
               the respective  ground lessors have has approved and consented to
               the  encumbrance of the Property by the Mortgage.  There have not
               been  amendments  or  modifications  to the  terms of the  Ground
               Leases  since their  recordation,  with the  exception of written
               instruments  which have been recorded.  The Ground Leases may not
               be canceled, terminated, surrendered or amended without the prior
               written consent of Lender.

                                      -48-
<PAGE>

                    (ii)  No  Liens  Except  for  the  Permitted   Encumbrances,
               Borrower's  interest in the Ground  Leases are not subject to any
               Liens or encumbrances superior to, or of equal priority with, the
               Mortgage other than the ground lessor's related fee interest.

                    (iii) Ground Leases Assignable  Borrower's  interests in the
               Ground  Leases  are  assignable  to Lender  upon  notice  to, but
               without  the  consent  of, the ground  lessors  (or,  if any such
               consent is required,  it has been  obtained  prior to the Closing
               Date).  The Ground Leases are further  assignable by Lender,  its
               successors and assigns without the consent of the ground lessor.

                    (iv) Default As of the date hereof, the Ground Leases are in
               full  force and  effect and no  default  has  occurred  under the
               Ground Leases and there is no existing  condition  which, but for
               the  passage of time or the giving of notice,  could  result in a
               default under the terms of the Ground Leases.

                    (v) Notice  Each of the  Ground  Leases  require  the ground
               lessor to give notice of any  default by Borrower to Lender.  The
               Ground Leases,  or estoppel  letters  received by Lender from the
               ground lessors,  further provide that notice of termination given
               under the Ground Leases is not effective  against Lender unless a
               copy of the  notice  has been  delivered  to Lender in the manner
               described in the Ground Leases.

                    (vi) Cure Lender is permitted  the  opportunity  (including,
               where  necessary,  sufficient  time  to  gain  possession  of the
               interest of Borrower under the respective  Ground Leases) to cure
               any default under the Ground  Leases,  which is curable after the
               receipt of notice of any of the default  before the ground lessor
               thereunder may terminate the Ground Lease.

                    (vii)  Term  Each  of the  Ground  Leases  has a term  which
               extends not less than ten (10) years beyond the Maturity Date.

                    (viii)  New Lease  Each of the Ground  Leases  requires  the
               ground lessor to enter into a new lease upon  termination of such
               Ground Lease for any reason,  including  rejection of such Ground
               Lease in a bankruptcy proceeding.

                    (ix)  Insurance  Proceeds  Under  the  terms  of each of the
               Ground  Leases and the  Mortgage,  taken  together,  any  related
               insurance and condemnation proceeds will be applied either to the
               repair or restoration of all or part of the Property, with Lender
               having the right to hold and  disburse the proceeds as the repair
               or restoration  progresses,  or to the payment of the outstanding
               principal  balance of the Loan together with any accrued interest
               thereon.

                    (x)  Subleasing  None  of  the  Ground  Leases  imposes  any
               restrictions on subleasing.

                                      -49-
<PAGE>

               4.1.33 Illegal  Activity.  No portion of the Property has been or
will be purchased with proceeds of any illegal activity.

               4.1.34  No  Change  in Facts or  Circumstances;  Disclosure.  All
information  submitted  by Borrower to Lender and in all  financial  statements,
rent rolls,  reports,  certificates and other documents  submitted in connection
with the Loan or in satisfaction of the terms thereof and all statements of fact
made by Borrower in this Agreement or in any other Loan Document,  are accurate,
complete  and  correct  in all  material  respects.  There has been no  material
adverse change in any condition, fact, circumstance or event that would make any
such information inaccurate,  incomplete or otherwise misleading in any material
respect or that otherwise  materially and adversely  affects or might materially
and  adversely  affect the Property or the business  operations or the financial
condition of Borrower.  Borrower has disclosed to Lender all material  facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading.

               4.1.35  Condominium  Property Part of Validly Formed and Existing
Condominium  Regime. Each individual unit constituting a part of the Condominium
Property  is a unit in a validly  formed and  existing  residential  condominium
complying  with all of the  requirements  of the  pertinent  Legal  Requirements
governing the formation of a valid residential condominium.

               4.1.36 Ownership Structure of Borrowers and Manager.

                    (a) The  partners or members,  as the case may be, set forth
on Schedule B annexed  hereto are the sole  partners/  members of Borrowers  and
have the legal and beneficial ownership interest in Borrowers set forth therein;
and

                    (b) the  partners/  members  set forth on Schedule B annexed
hereto  are the sole  partners/  members of the  Manager  and have the legal and
beneficial ownership interests in Borrower set forth therein.

          Section 4.2 Survival of  Representations.  Borrowers agree that all of
the representations and warranties of each Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount  remains  owing to Lender under this  Agreement or any of the
other  Loan  Documents  by  the  Borrowers.  All  representations,   warranties,
covenants and  agreements  made in this Agreement or in the other Loan Documents
by each Borrower  individually and those collectively made by Borrowers shall be
deemed to have been  relied  upon by Lender  notwithstanding  any  investigation
heretofore or hereafter made by Lender or on its behalf.

          V.  BORROWER COVENANTS

          Section  5.1  Affirmative  Covenants.  From the date  hereof and until
payment and  performance in full of all  obligations of Borrowers under the Loan
Documents or the earlier  release of the Liens of all Mortgages  encumbering the
Property (and all related

                                      -50-
<PAGE>

obligations)  in accordance  with the terms of this Agreement and the other Loan
Documents, each Borrower hereby covenants and agrees with Lender that:

               5.1.1 Existence;  Compliance with Legal Requirements;  Insurance.
Borrower  shall do or cause to be done all things  necessary to preserve,  renew
and keep in full force and effect its existence,  rights, licenses,  permits and
franchises  and  comply  with all Legal  Requirements  applicable  to it and its
Property.  There shall  never be  committed  by Borrower or any other  person in
occupancy  of or involved  with the  operation or use of its Property any act or
omission  affording the federal  government or any state or local government the
right of  forfeiture  as against any of its  Property or any part thereof or any
monies  paid in  performance  of  Borrower's  obligations  under any of the Loan
Documents.  Borrower hereby covenants and agrees not to commit, permit or suffer
to exist any act or omission affording such right of forfeiture.  Borrower shall
at all times  maintain,  preserve and protect all franchises and trade names and
preserve all the  remainder of its Property used or useful in the conduct of its
business and shall keep all of its  Property in good  working  order and repair,
and from  time to time  make,  or cause to be  made,  all  reasonably  necessary
repairs,  renewals,  replacements,  betterments and improvements thereto, all as
more fully provided in the Mortgages  encumbering such Property.  Borrower shall
keep its  Property  insured  at all times by  financially  sound  and  reputable
insurers, to such extent and against such risks, and maintain liability and such
other insurance, as is more fully provided in this Agreement.

               5.1.2 Taxes and Other  Charges.  Borrower shall pay all Taxes and
Other  Charges  now or  hereafter  levied or  assessed  or imposed  against  its
Property  or any part  thereof  as the same  become due and  payable;  provided,
however,  Borrower's  obligation to directly pay Taxes shall be suspended for so
long as Borrower  complies with the terms and  provisions of Section 7.3 hereof.
Borrower  will  deliver  to  Lender  receipts  for  payment  or  other  evidence
satisfactory to Lender that the Taxes and Other Charges have been so paid or are
not then  delinquent  no later than ten (10) days prior to the date on which the
Taxes and/or Other Charges would  otherwise be delinquent if not paid.  Borrower
shall  furnish  to Lender  receipts  for the  payment of the Taxes and the Other
Charges prior to the date the same shall become delinquent  (provided,  however,
that  Borrower is not required to furnish such  receipts for payment of Taxes in
the event  that such  Taxes have been paid by Lender  pursuant  to  Section  7.3
hereof).  Borrower  shall not  suffer  and shall  promptly  cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against its Property,  and shall promptly pay for all utility services  provided
to its Property.  After prior  written  notice to Lender,  Borrower,  at its own
expense,  may contest by appropriate  legal proceeding,  promptly  initiated and
conducted  in good  faith and with due  diligence,  the  amount or  validity  or
application in whole or in part of any Taxes or Other Charges, provided that (i)
no Default or Event of Default has occurred and remains  uncured;  (ii) Borrower
is  permitted  to do so under the  provisions  of any  mortgage or deed of trust
superior in lien to the  applicable  Mortgage;  (iii) such  proceeding  shall be
permitted  under and be conducted in accordance with the provisions of any other
instrument  to which  Borrower  is subject  and shall not  constitute  a default
thereunder  and  such  proceeding  shall be  conducted  in  accordance  with all
applicable  statutes,  laws and ordinances;  (iv) no Individual Property nor any
part  thereof or interest  therein  will be in danger of being sold,  forfeited,
terminated, canceled or lost; (v) Borrower

                                      -51-
<PAGE>

shall promptly upon final determination thereof pay the amount of any such Taxes
or Other Charges,  together with all costs,  interest and penalties which may be
payable  in  connection  therewith;  (vi)  such  proceeding  shall  suspend  the
collection of Taxes or Other Charges from the  applicable  Individual  Property;
and (vii)  Borrower  shall  furnish  such  security  as may be  required  in the
proceeding,  or as may be requested by Lender, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon. Lender
may pay over  any such  cash  deposit  or part  thereof  held by  Lender  to the
claimant  entitled  thereto at any time when,  in the  judgment  of Lender,  the
entitlement of such claimant is established.

               5.1.3  Litigation.  Borrower  shall give prompt written notice to
Lender of any  litigation  or  governmental  proceedings  pending or  threatened
against Borrower which might materially  adversely affect  Borrower's  condition
(financial or otherwise) or business or any of its Property.

               5.1.4  Access  to  Premises.   Borrower   shall  permit   agents,
representatives  and  employees  of Lender to inspect any of its Property or any
part thereof at reasonable hours upon reasonable advance notice.

               5.1.5 Notice of Default. Borrower shall promptly advise Lender of
any material adverse change in Borrower's condition,  financial or otherwise, or
of the  occurrence  of any  Default or Event of Default  of which  Borrower  has
knowledge.

               5.1.6  Cooperate in Legal  Proceedings.  Borrower shall cooperate
fully with Lender with  respect to any  proceedings  before any court,  board or
other  Governmental  Authority  which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith,  permit Lender, at its election, to participate in
any such proceedings.

               5.1.7 Perform Loan Documents. Borrower shall observe, perform and
satisfy all the terms,  provisions,  covenants and  conditions of, and shall pay
when due all costs,  fees and  expenses  to the extent  required  under the Loan
Documents executed and delivered by, or applicable to, Borrower.

               5.1.8 Insurance Benefits. Borrower shall cooperate with Lender in
obtaining  for  Lender  the  benefits  of any  Insurance  Proceeds  lawfully  or
equitably  payable in connection  with any of the Property,  and Lender shall be
reimbursed  for  any  expenses  incurred  in  connection   therewith  (including
reasonable attorneys' fees and disbursements, and the payment by Borrower of the
expense of an appraisal on behalf of Lender in case of a fire or other  casualty
affecting  any of the  Property  or any  part  thereof)  out of  such  Insurance
Proceeds.

               5.1.9 Further Assurances. Borrower shall, at Borrower's sole cost
and expense:

                    (a) furnish to Lender all instruments,  documents,  boundary
surveys, footing or foundation surveys, certificates,  plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document, certificate, agreement

                                      -52-
<PAGE>

and instrument required to be furnished by Borrower pursuant to the terms of the
Loan Documents or reasonably requested by Lender in connection therewith;

                    (b)  execute   and   deliver  to  Lender   such   documents,
instruments,  certificates,  assignments and other  writings,  and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the obligations of Borrower under the
Loan Documents, as Lender may reasonably require; and

                    (c)  do  and  execute  all  and  such  further   lawful  and
reasonable  acts,  conveyances  and assurances for the better and more effective
carrying  out of the intents and purposes of this  Agreement  and the other Loan
Documents, as Lender shall reasonably require from time to time.

               5.1.10 Supplemental  Mortgage Affidavits.  As of the date hereof,
Borrower  represents to the best of its  knowledge,  that it has paid all state,
county and  municipal  recording  and all other taxes imposed upon the execution
and recordation of the Mortgages encumbering the Property. If at any time Lender
determines,  based on  applicable  law,  that Lender is not being  afforded  the
maximum  amount of security  available from any one or more of the Property as a
direct or indirect result of applicable  taxes not having been paid with respect
to any such Property,  Borrower  agrees that Borrower will execute,  acknowledge
and  deliver  to  Lender,   immediately  upon  Lender's  request,   supplemental
affidavits increasing the amount of the Debt attributable to any such Individual
Property (as set forth as the Release  Amount on Schedule I annexed  hereto) for
which all applicable  taxes have been paid to an amount  determined by Lender to
be equal to the  lesser  of (a) the  greater  of the  fair  market  value of the
applicable Individual Property (i) as of the date hereof and (ii) as of the date
such supplemental  affidavits are to be delivered to Lender,  and (b) the amount
of the Debt  attributable to any such  Individual  Property (as set forth as the
Release Amount on Schedule I annexed hereto), and Borrower shall, on demand, pay
any additional taxes.

               5.1.11 Financial Reporting.

                    (a) Each Borrower will keep and maintain, and will cause the
other Borrowers to keep and maintain, on a Fiscal Year basis, in accordance with
GAAP (or such other accounting basis acceptable to Lender),  proper and accurate
books,  records and accounts reflecting all of the financial affairs of Borrower
and all items of income and expense in  connection  with the operation (i) on an
individual  basis of each Individual  Property and (ii) on a consolidated  basis
with respect to all Property of the Borrowers.  Lender shall have the right from
time to time at all times during normal business hours upon reasonable notice to
examine  such  books,  records  and  accounts at the office of Borrower or other
Person  maintaining such books,  records and accounts and to make such copies or
extracts  thereof as Lender shall  desire.  After the  occurrence of an Event of
Default, Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower's  accounting  records  with respect to the  Property,  as Lender shall
determine to be necessary or appropriate in the protection of Lender's interest.

                                      -53-
<PAGE>

                    (b)  Borrower  will  furnish  to  Lender  quarterly,  within
forty-five days following the end of each calendar quarter, and annually, within
one  hundred  and twenty  (120) days  following  the end of each  Fiscal Year of
Borrower,  (i) a complete copy of all of Grove  Property  Trust's  quarterly and
audited annual financial statements  containing statements of profit and loss, a
balance sheet and statements of net cash flow on a consolidated  basis; and (ii)
operating  statements and statements of net cash flow for each of the Individual
Properties and on a combined basis for all the Properties. Statements concerning
the combined  Properties shall set forth the financial condition and the results
of  operations  for the Property  for such  quarter and Fiscal  Year,  and shall
include,  but not be  limited  to,  amounts  representing  Net  Cash  Flow,  Net
Operating  Income,  Gross Income from  Operations  and Operating  Expenses.  The
required annual financial statements shall be accompanied by (i) a comparison of
the  budgeted  income and  expenses  and the actual  income and expenses for the
prior Fiscal Year, (ii) a certificate executed by the chief financial officer of
each Borrower or the general  partner of each Borrower,  as applicable,  stating
that  each  such  annual  financial  statement  presents  fairly  the  financial
condition and the results of  operations of the Borrower and the Property  being
reported  upon and has been  prepared  in  accordance  with GAAP,  and (iii),  a
schedule  reconciling Net Operating  Income to Net Cash Flow (the "Net Cash Flow
Schedule"),  which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow.  Together with Borrower's annual financial  statements,
each Borrower shall furnish to Lender an Officer's Certificate  certifying as of
the date thereof whether there exists an event or circumstance which constitutes
a Default or Event of Default  under the Loan  Documents  executed and delivered
by, or applicable to, Borrower,  and if such Default or Event of Default exists,
the nature thereof,  the period of time it has existed and the action then being
taken to remedy the same.

                    (c) Borrower  will  furnish,  or cause to be  furnished,  to
Lender on or before  forty-five (45) days after the end of each calendar quarter
the following items, accompanied by a certificate of the chief financial officer
of Borrower or the general partner of Borrower, as applicable, stating that such
items are true, correct, accurate, and complete and fairly present the financial
condition and results of the operations of Borrower,  Borrowers and the Property
on a  combined  basis as well as each  Individual  Property  (subject  to normal
year-end  adjustments)  as applicable:  (i) a rent roll for the subject  quarter
accompanied by an Officer's Certificate with respect thereto; (ii) quarterly and
year-to-date  operating statements (including Capital Expenditures) prepared for
each  calendar  quarter,   noting  Net  Operating  Income,   Gross  Income  from
Operations,  and Operating  Expenses (not  including  any  contributions  to the
Replacement  Reserve Fund),  and other  information  necessary and sufficient to
fairly represent the financial position and results of operation of the Property
during such calendar quarter, and containing a comparison of budgeted income and
expenses and the actual income and expenses  together with an explanation of any
variances of five percent (5%) or more between  budgeted and actual  amounts for
such  periods   (provided  no  variance  of  less  than  $5,000  shall  need  an
explanation),  all in form satisfactory to Lender;  (iii) for (x) all Individual
Property  owned  by  a  Borrower  and  for  (y)  the  Borrowers'  Property  on a
consolidated  basis, a calculation  reflecting the annual Debt Service  Coverage
Ratio for the immediately  preceding twelve (12) month period as of the last day
of such month accompanied by an Officer's  Certificate with respect thereto; and
(iv) a Net Cash Flow Schedule. In

                                      -54-
<PAGE>

addition,  such  certificate  shall also be  accompanied by a certificate of the
chief financial  officer of Borrower or the general partner of Borrower  stating
that the  representations  and  warranties  of  Borrower  set  forth in  Section
4.1.30(e) are true and correct as of the date of such certificate and that there
are no trade  payables  outstanding  for more than sixty (60) days  (other  than
those being genuinely disputed and for which security is provided).

                    (d) For the  partial  year  period  commencing  on the  date
hereof, and for each Fiscal Year thereafter, the Borrower shall submit to Lender
an Annual Budget not later than the first day of the applicable Fiscal Year (but
Borrower  shall use its best  efforts  to submit  same not later than sixty (60)
days prior to the commencement of such period or Fiscal Year) in form reasonably
satisfactory to Lender. The Annual Budget submitted for the Fiscal Year in which
the  Anticipated  Repayment  Date occurs,  and for each Fiscal Year  thereafter,
shall be subject to  Lender's  written  approval  (each such Annual  Budget,  an
"Approved Annual Budget"). In the event that Lender objects to a proposed Annual
Budget  submitted by Borrower,  Lender shall advise  Borrower of such objections
within fifteen (15) business days after receipt thereof (and deliver to Borrower
a  reasonably  detailed  description  of such  objections)  and  Borrower  shall
promptly revise such Annual Budget and resubmit the same to Lender. Lender shall
advise  Borrower of any objections to such revised Annual Budget within ten (10)
business days after receipt  thereof and Borrower shall promptly revise the same
in accordance  with the process  described in this  subsection  until the Lender
approves  the Annual  Budget.  Until such time that  Lender  approves a proposed
Annual Budget,  the most recently  Approved Annual Budget shall apply;  provided
that, such Approved Annual Budget shall be adjusted to reflect actual  increases
in real estate taxes, insurance premiums and utilities expenses.

                    (e) In the event that, after the Anticipated Repayment Date,
the Borrower must incur an  extraordinary  operating  expense or capital expense
not set forth in the Approved Annual Budget (each an  "Extraordinary  Expense"),
then the  Borrower  shall  promptly  deliver  to  Lender a  reasonably  detailed
explanation of such proposed Extraordinary Expense for the Lender's approval.

                    (f) Borrower  shall  furnish to Lender,  within  twenty (20)
Business  Days  after  request  (or as  soon  thereafter  as  may be  reasonably
possible),  such further  detailed  information with respect to the operation of
any of the Property and the  financial  affairs of Borrower as may be reasonably
requested by Lender.

                    (g) Any reports, statements or other information required to
be delivered under this Agreement shall be delivered (a) in paper form, (b) on a
diskette,  and (c) if  requested  by  Lender  and  within  the  capabilities  of
Borrower's data systems without change or  modification  thereto,  in electronic
form and prepared using a Microsoft Word for Windows or WordPerfect  for Windows
files (which files may be prepared using a spreadsheet program and saved as word
processing files).

               5.1.12 Business and Operations.  Borrower will continue to engage
in the  businesses  presently  conducted by it as and to the extent the same are
necessary for the

                                      -55-
<PAGE>

ownership, maintenance,  management and operation of the Property. Borrower will
qualify to do business and will remain in good  standing  under the laws of each
jurisdiction  as and to the  extent  the same are  required  for the  ownership,
maintenance, management and operation of the Property.

               5.1.13 Title to the  Property.  Borrower  will warrant and defend
(i) the title to its  Property  and every part  thereof,  subject  only to Liens
permitted hereunder  (including Permitted  Encumbrances),  and (ii) the validity
and priority of the Liens of the Mortgages and the  Assignments of Leases on the
Property,  subject  only  to  Liens  permitted  hereunder  (including  Permitted
Encumbrances),  in each  case  against  the  claims of all  Persons  whomsoever.
Borrower  shall  reimburse  Lender for any  losses,  costs,  damages or expenses
(including  reasonable attorneys' fees and court costs) incurred by Lender if an
interest  in any of the  Property,  other  than a  Permitted  Encumbrance  or as
otherwise permitted hereunder, is claimed by another Person.

               5.1.14 Costs of  Enforcement.  In the event (i) that any Mortgage
encumbering  any of the Property is  foreclosed  in whole or in part or that any
such Mortgage is put into the hands of an attorney for collection,  suit, action
or  foreclosure,  (ii) of the foreclosure of any mortgage prior to or subsequent
to any Mortgage  encumbering any of the Property in which  proceeding  Lender is
made a party, or (iii) of the bankruptcy,  insolvency,  rehabilitation  or other
similar  proceeding in respect of Borrower or any of its constituent  Persons or
an assignment by Borrower or any of its  constituent  Persons for the benefit of
its creditors, Borrower, its successors or assigns, shall be chargeable with and
agrees  to pay  all  costs  of  collection  and  defense,  including  reasonable
attorneys'  fees and  costs,  incurred  by  Lender  or  Borrower  in  connection
therewith and in  connection  with any  appellate  proceeding  or  post-judgment
action involved therein, together with all required service or use taxes.

               5.1.15 Estoppel Statement.  (a) After request by Lender, Borrower
shall within ten (10) days furnish  Lender with a statement,  duly  acknowledged
and certified,  setting forth (i) the amount of the original principal amount of
the Note,  (ii) the unpaid  principal  amount of the Note,  (iii) the Applicable
Interest  Rate of the  Note,  (iv)  the date  installments  of  interest  and/or
principal  were last paid,  (v) any  offsets or  defenses  to the payment of the
Debt,  if any, and (vi) that the Note,  this  Agreement,  the  Mortgages and the
other Loan Documents are valid, legal and binding  obligations and have not been
modified or if modified, giving particulars of such modification.

                    (b) Borrower  shall deliver to Lender upon  request,  tenant
estoppel  certificates from each commercial tenant leasing space at the Property
in form and substance  reasonably  satisfactory to Lender provided that Borrower
shall not be required to deliver such  certificates more frequently than two (2)
times in any calendar year.

               5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan
received by it on the Closing  Date only for the  purposes  set forth in Section
2.1.4.

                                      -56-
<PAGE>

               5.1.17 Performance by Borrower. Borrower shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision of each
Loan Document  executed and delivered by, or applicable to, Borrower,  and shall
not enter into or otherwise suffer or permit any amendment,  waiver, supplement,
termination or other  modification  of any Loan Document  executed and delivered
by, or applicable to, Borrower without the prior written consent of Lender.

               5.1.18 Confirmation of  Representations.  Borrower shall deliver,
at the request of Lender, in connection with any Securitization, (i) one or more
Officer's Certificates certifying as to the accuracy of all representations made
by  Borrower  in the  Loan  Documents  as of the  date  of the  closing  of such
Secondary   Market   Transaction  in  all  relevant   jurisdictions,   and  (ii)
certificates   of  the  relevant   Governmental   Authorities  in  all  relevant
jurisdictions indicating the good standing and qualification of Borrower and its
general partner as of the date of the Secondary Market Transaction.

               5.1.19 No Joint Assessment.  Borrower shall not suffer, permit or
initiate the joint assessment of any Individual Property (i) with any other real
property constituting a tax lot separate from such Individual Property, and (ii)
which  constitutes  real property with any portion of such  Individual  Property
which may be deemed to  constitute  personal  property,  or any other  procedure
whereby the lien of any taxes which may be levied against such personal property
shall be  assessed  or levied or  charged to such real  property  portion of the
Individual Property.

               5.1.20  Leasing  Matters.  Any  Leases  of space  other  than for
residential  occupancy by the tenant  thereunder  with respect to an  Individual
Property  written after the date hereof,  for more than 10,000 square feet shall
be  approved  by Lender,  which  approval  shall not be  unreasonably  withheld,
conditioned  or  delayed.  Upon  request,  Borrower  shall  furnish  Lender with
executed  copies of all Leases.  All renewals of Leases and all proposed  Leases
shall provide for rental rates  comparable to existing  local market rates.  All
proposed Leases shall be on commercially  reasonable terms and shall not contain
any  terms  which  would  materially  affect  Lender's  rights  under  the  Loan
Documents. All Leases executed after the date hereof shall provide that they are
subordinate to the Mortgage  encumbering the applicable  Individual Property and
that the  lessee  agrees  to attorn  to  Lender  or any  purchaser  at a sale by
foreclosure  or power of sale.  Borrower  (i)  shall  observe  and  perform  the
obligations  imposed  upon  the  lessor  under  the  Leases  in  a  commercially
reasonable  manner;  (ii) shall  enforce and may amend or  terminate  the terms,
covenants  and  conditions  contained  in the Leases upon the part of the lessee
thereunder to be observed or performed in a commercially  reasonable  manner and
in a manner not to impair the value of the Individual  Property  involved except
that no  termination  by Borrower or  acceptance of surrender by a tenant of any
Leases shall be permitted  unless by reason of a tenant default and then only in
a commercially reasonable manner to preserve and protect the Individual Property
provided, however, that no such termination or surrender of any Lease other than
for  residential  use  covering  more than 10,000  square feet will be permitted
without the written consent of Lender;  (iii) shall not collect any of the rents
more than one (1) month in advance  (other  than  security  deposits),  provided
that,  Borrower's owning  Individual  Property in the State of Massachusetts may
collect one months'

                                      -57-
<PAGE>

additional pre-paid rent in lieu of security deposits,  ; (iv) shall not execute
any other assignment of lessor's  interest in the Leases or the Rents (except as
contemplated by the Loan Documents);  (v) shall not alter,  modify or change the
terms of the Leases in a manner  inconsistent  with the  provisions  of the Loan
Documents;  and (vi) shall execute and deliver at the request of Lender all such
further assurances,  confirmations and assignments in connection with the Leases
as Lender shall from time to time reasonably require.

               5.1.21 Alterations.  Borrower shall obtain Lender's prior written
consent,  which consent shall not be  unreasonably  withheld or delayed,  to any
alterations to any Improvements on the Property that may have a material adverse
effect on Borrower's financial  condition,  the value of the Property or the Net
Operating Income with respect to the Property, other than (i) tenant improvement
work performed pursuant to the terms of any Lease executed on or before the date
hereof,  (ii)  tenant  improvement  work  performed  pursuant  to the  terms and
provisions of a Lease and not adversely  affecting any  structural  component of
any  Improvements,  any utility or HVAC system  contained in any Improvements or
the exterior of any building  constituting a part of any Improvements,  or (iii)
alterations  performed in connection  with the restoration of the Property after
the occurrence of a casualty in accordance with the terms and provisions of this
Agreement.  If the  total  unpaid  amounts  due  and  payable  with  respect  to
alterations  to  the  Improvements  (other  than  such  amounts  to be  paid  or
reimbursed by tenants under the Leases) shall at any time exceed One Million and
00/100 Dollars  ($1,000,000) (the "Threshold  Amount"),  Borrower shall promptly
deliver to Lender as security for the payment of such amounts and as  additional
security  for  Borrower's  obligations  under  the  Loan  Documents  any  of the
following: (A) cash, (B) U.S. Obligations,  (C) other securities having a rating
acceptable to Lender and that the applicable  Rating  Agencies have confirmed in
writing  will not,  in and of  itself,  result  in a  downgrade,  withdrawal  or
qualification  of the initial,  or, if higher,  then current ratings assigned in
connection with any Securitization, or (D) a completion bond or letter of credit
issued by a financial  institution  having a rating by Standard & Poor's Ratings
Group of not less  than  A-1+ if the term of such bond or letter of credit is no
longer  than three (3) months or, if such term is in excess of three (3) months,
issued by a financial  institution  having a rating that is acceptable to Lender
and that the applicable  Rating  Agencies have confirmed in writing will not, in
and of  itself,  result  in a  downgrade,  withdrawal  or  qualification  of the
initial,  or, if higher,  then current  ratings  assigned in connection with any
Securitization.  Such security  shall be in an amount equal to the excess of the
total unpaid  amounts with respect to  alterations  to the  Improvements  on the
Property  (other than such amounts to be paid or reimbursed by tenants under the
Leases)  over the  Threshold  Amount and may be reduced from time to time at the
option of  Lender  by the cost  estimated  by  Lender  to  terminate  any of the
alterations  and restore the  Property  to the extent  necessary  to prevent any
material adverse effect on the value of the Property.

               5.1.22  Expansions.  Borrower shall obtain Lender's prior written
consent  prior to  constructing  any  additional  improvements  on  vacant  land
constituting part of its Property.

               5.1.23  Insurance  Premium  Payments.   Borrower  shall  pay  all
insurance premiums in respect to insurance coverage required under Section 6. in
advance on a monthly basis unless otherwise agreed in writing by the Lender.

                                      -58-
<PAGE>

               5.1.24  Other Costs.  Borrower  shall pay the ongoing fees of the
Agent under the Cash Management Agreement;  each Clearing Account Bank under the
Clearing   Account   Agreements;   and  the  Manager(s)   under  the  Management
Agreement(s).

               5.1.25 Condominium Property  Obligations.  Each Borrower owning a
Condominium  Property shall pay all  maintenance and common area charges on each
condominium unit  constituting  party of the Condominium  Property and comply in
all material respects with all requirements of the Condominium Documents.

               5.1.26 Condominium  Document Changes.  (a) Each Borrower owning a
Condominium  Property  shall timely notify  Lender of any proposed  termination,
modification  or  amendment  to the  declaration,  by-laws or other  constituent
documents  establishing  or governing the  condominium  regime,  and any vote or
votes cast by the  Borrower  with regard to such  termination,  modification  or
amendment shall be subject to the advance  approval of the Lender if the subject
matter of such vote is covered by any of the categories set forth below:

                    (i) The termination of the condominium regime;

                    (ii)  The  material  amendment  of  any  provisions  of  the
declaration, by-laws or equivalent documents of the condominium, or the addition
of any material  provisions  thereto,  which  establish,  provide for, govern or
regulate any of the following:

                           (A)  Voting;

                           (B)  Reserves for maintenance, repair and replacement
                                of the common elements;

                           (C)  Insurance or fidelity bonds;

                           (D)  Rights to use of the common elements;

                           (E)  Responsibility for maintenance and repair of the
                                various portions of the condominium;

                           (F)  Expansion  or  contraction  of  the  condominium
                                regime or the addition, annexation or withdrawal
                                of property to or from the condominium regime;

                           (G)  Boundaries of any unit;

                           (H)  The interests in the  general  or limited common
                                elements;

                           (I)  Convertibility  of units into common elements or
                                of common elements into units;

                           (J)  Leasing of units;

                                      -59-
<PAGE>

                           (K)  Imposition  of any  right  of first  refusal  or
                                similar restriction on the right of a unit owner
                                to sell,  transfer,  or otherwise  convey his or
                                her unit in the condominium;

                           (L)  Establishment   of    self-management   by   the
                                condominium association;

                           (M)  Condemnation.

                    (iii)  The  amendment  of  any  provisions  included  in the
declaration,  by-laws or equivalent  documents of the condominium  which are for
the express  benefit of holders or insurers of first  mortgages  on units in the
condominium.

               (b) Each  Borrower  owning a Condominium  Property  covenants and
agrees that its failure to vote on such  matters in a manner  approved by Lender
shall render its vote a nullity and shall be an event of default hereunder. Each
such Borrower  further  covenants and agrees to deliver a conformed copy of this
Agreement with the  Condominium  Board and to furnish  Lender with  satisfactory
proof of such delivery.

          Section 5.2 Negative Covenants. From the date hereof until payment and
performance in full of all  obligations of Borrowers under the Loan Documents or
the earlier  release of the Liens of all Mortgages  encumbering  the Property in
accordance with the terms of this Agreement and the other Loan  Documents,  each
Borrower  covenants  and agrees  with  Lender  that it will not do,  directly or
indirectly, any of the following:

               5.2.1  Operation of  Property.  Borrower  shall not,  without the
prior consent of Lender  (which  consent  shall not be  unreasonably  withheld),
terminate  its  Management  Agreement or otherwise  replace the Manager or enter
into any other management agreement with respect to any of its Property.

               5.2.2  Liens.  Borrower  shall  not,  without  the prior  written
consent  of  Lender,  create,  incur,  assume or suffer to exist any Lien on any
portion of any of its Property or permit any such action to be taken, except:

                    (i) Permitted Encumbrances;

                    (ii) Liens  created  by or  permitted  pursuant  to the Loan
Documents;

                    (iii) Liens for Taxes or Other Charges not yet due.

               5.2.3   Dissolution.   Borrower  shall  not  (i)  engage  in  any
dissolution,  liquidation  or  consolidation  or  merger  with or into any other
business  entity,  (ii)  engage in any  business  activity  not  related  to the
ownership and operation of the Property,  (iii) transfer,  lease or sell, in one
transaction or any  combination of  transactions,  any assets (other than in the
ordinary  course of business) or all or  substantially  all of the properties or
assets of the Borrower  except to the extent  permitted  by the Loan  Documents,
(iv) modify, amend, waive or terminate its

                                      -60-
<PAGE>

organizational   documents  or  its  qualification  and  good  standing  in  any
jurisdiction  or (v) cause the SPC General  Partner to (A) dissolve,  wind up or
liquidate  or take any action,  or omit to take an action,  as a result of which
the SPC General  Partner would be dissolved,  wound up or liquidated in whole or
in  part,  or  (B)  amend,   modify,  waive  or  terminate  the  certificate  of
incorporation  or bylaws  of the SPC  General  Partner,  in each  case,  without
obtaining the prior written consent of Lender or Lender's designee.

               5.2.4 Change In Business.  Borrower shall not enter into any line
of business other than the ownership and operation of its Property,  or make any
material change in the scope or nature of its business  objectives,  purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.

               5.2.5 Debt  Cancellation.  Borrower shall not cancel or otherwise
forgive  or  release  any claim or debt  (other  than  termination  of Leases in
accordance  herewith)  owed to  Borrower  by any  Person,  except  for  adequate
consideration  and in the  ordinary  course of  Borrower's  business  other than
receivables  from  previous  limited  partners of the  Borrowers in an aggregate
amount not to exceed $1,000,000.

               5.2.6 Affiliate  Transactions.  Borrower shall not enter into, or
be a party to, any  transaction  with an  Affiliate  of  Borrower  or any of the
partners of Borrower except in the ordinary course of business and on terms that
are no less  favorable to Borrower or such Affiliate than would be obtained in a
comparable arm's-length transaction with an unrelated third party.

               5.2.7  Zoning.  Borrower  shall not  initiate  or  consent to any
zoning  reclassification  of any  portion  of any of its  Property  or seek  any
variance  under any  existing  zoning  ordinance or use or permit the use of any
portion  of any of its  Property  in any manner  that  could  result in such use
becoming a non-conforming use under any zoning ordinance or any other applicable
land use law, rule or regulation, without the prior consent of Lender.

               5.2.8  Assets.  Borrower  shall not  without  the  prior  written
consent of Lender purchase or own any properties other than its Property, except
that,  GPT-Windsor,  LLC and  Avon  Place  Associates  Limited  Partnership  may
continue to purchase  Condominium Units in their respect  Individual  Properties
pursuant to the terms of Section 2.8 hereof.

               5.2.9  Debt.  Borrower  shall not  create,  incur or  assume  any
Indebtedness  other  than the Debt  except  to the  extent  expressly  permitted
hereby.

               5.2.10 No Joint Assessment.  Borrower shall not suffer, permit or
initiate the joint  assessment  of its Property (i) with any other real property
constituting a tax lot separate from its Property,  and (ii) with any portion of
its Property which may be deemed to constitute  personal property,  or any other
procedure  whereby  the lien of any  taxes  which  may be  levied  against  such
personal property shall be assessed or levied or charged to its Property.

                                      -61-
<PAGE>

               5.2.11 Principal Place of Business. Borrower shall not change its
principal  place of  business  set  forth on the  first  page of this  Agreement
without first giving Lender thirty (30) days prior written notice.

               5.2.12 ERISA.  Borrower shall not engage in any transaction which
would cause any  obligation,  or action taken or to be taken,  hereunder (or the
exercise by Lender of any of its rights  under the Note,  this  Agreement or the
other Loan  Documents) to be a non-exempt  (under a statutory or  administrative
class exemption) prohibited  transaction under ERISA. Borrower further covenants
and agrees to deliver to Lender such  certifications or other evidence from time
to time  throughout  the term of the Loan,  as  requested  by Lender in its sole
discretion,  that:  (A)  Borrower  is not subject to state  statutes  regulating
investments and fiduciary  obligations  with respect to governmental  plans; and
(B) one or more of the following circumstances is true:

                            (i)    Equity  interests  in Borrower  are  publicly
                                   offered securities,  within the meaning of 29
                                   C.F.R. ss.2510.3-101(b)(2);

                            (ii)   Less than  twenty-five  percent (25%) of each
                                   outstanding  class  of  equity  interests  in
                                   Borrower are held by "benefit plan investors"
                                   within      the       meaning      of      29
                                   C.F.R.ss.2510.3-101(f)(2); or

                            (iii)  Borrower qualifies as an "operating  company"
                                   or a "real estate  operating  company" within
                                   the meaning of 29 C.F.R.  ss.2510.3-101(c) or
                                   (e),  or  an  investment  company  registered
                                   under The Investment Company Act of 1940.

               5.2.13 Transfers.

                    (i) Without  the prior  written  consent of Lender,  neither
Borrower nor any other Person having an ownership or beneficial interest, direct
or indirect, in Borrower or the SPC Party shall

                    (A) directly or indirectly sell, transfer, convey, mortgage,
grant,  bargain,  encumber,  pledge,  or assign  Borrower's  Property,  any part
thereof or any interest therein (including any ownership interest in Borrower or
the SPC Party), except for Permitted Transfers;

                    (B) further  encumber,  alienate,  grant a Lien or grant any
other  interest  in  Borrower's  Property  or any part  thereof  (including  any
ownership  interest  in  Borrower  and the SPC Party),  whether  voluntarily  or
involuntarily;

                    (C) enter  into any  easement  or other  agreement  granting
rights in or restricting the use or development of Borrower's Property; or

                                      -62-
<PAGE>

                    (D) fail to comply with all transfer  restrictions set forth
in  Article  6 of the  Mortgage  (Due  on  Sale/Encumbrance)  of  the  Mortgage,
provided, no such compliance is required for Permitted Transfer.

                    (ii)  For  purposes  of  this  Section  5.2.13,  each of the
following shall constitute a "Permitted Transfer":

                    (a) with respect to  Borrower's  and their SPC Parties which
are limited partnerships, the transfer of any limited partnership interest owned
by an entity other than Grove Property Trust or Grove Operating L.P., a Delaware
limited partnership;

                    (b) with respect to Grove Property  Trust,  publicly  traded
shares in such entity as are traded over a national security exchange; and

                    (c) with respect to Grove Property  Trust,  publicly  traded
shares in such entity as are otherwise traded in private transactions,  provided
that such private trades do not exceed on an annual basis 35% of the outstanding
shares in Grove Property Trust.

          VI.  INSURANCE; CASUALTY; CONDEMNATION; REQUIRED
               REPAIRS

          Section 6.1 Insurance.

               (a) Each  Borrower  agrees to cause the  Borrowers  to obtain and
maintain,  or  cause  to be  maintained,  insurance  for the  Borrowers  and the
Property providing at least the following coverages:

                    (i) comprehensive all risk insurance on the Improvements and
the Personal Property, including contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements,  in each
case  (A) in an  amount  equal  to  one  hundred  percent  (100%)  of the  "Full
Replacement  Cost,"  which for  purposes  of this  Agreement  shall mean  actual
replacement value (exclusive of costs of excavations,  foundations,  underground
utilities and footings) with a waiver of  depreciation,  but the amount shall in
no event  be less  than the  outstanding  principal  balance  of the  Loan;  (B)
containing an agreed amount  endorsement  with respect to the  Improvements  and
Personal  Property  waiving all  co-insurance  provisions;  (C) providing for no
deductible in excess of Ten Thousand and No/100  Dollars  ($10,000) for all such
insurance  coverage;  and (D)  containing  an  "Ordinance  or Law  Coverage"  or
"Enforcement"  endorsement  if  any  of  the  Improvements  or  the  use  of the
Individual Property shall at any time constitute legal non-conforming structures
or uses.  In addition,  the Borrowers  shall  obtain:  (y) if any portion of the
Improvements  is currently  or at any time in the future  located in a federally
designated  "special  flood hazard  area",  flood hazard  insurance in an amount
equal to the lesser of (1) the outstanding  principal balance of the Note or (2)
the  maximum  amount  of such  insurance  available  under  the  National  Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood  Insurance  Reform Act of 1994,  as each may be  amended  or such  greater
amount as Lender shall require;  and (z) earthquake  insurance in amounts and in
form and substance satisfactory

                                      -63-
<PAGE>

to Lender in the event the Individual Property is located in an area with a high
degree of seismic activity,  provided that the insurance pursuant to clauses (y)
and (z) hereof  shall be on terms  consistent  with the  comprehensive  all risk
insurance policy required under this subsection (i).

                    (ii) commercial  general liability  insurance against claims
for personal injury,  bodily injury, death or property damage occurring upon, in
or about each  Individual  Property,  such  insurance (A) to be on the so-called
"occurrence" form with a combined limit,  including  umbrella  coverage,  of not
less than Eleven  Million and No/100 Dollars  ($11,000,000);  (B) to continue at
not less than the  aforesaid  limit  until  required  to be changed by Lender in
writing  by  reason  of  changed  economic  conditions  making  such  protection
inadequate;  and (C) to cover at least the following  hazards:  (1) premises and
operations;  (2) products and  completed  operations  on an "if any" basis;  (3)
independent  contractors;  (4)  blanket  contractual  liability  for  all  legal
contracts;  and (5) contractual  liability covering the indemnities contained in
Article 9 of the Mortgages to the extent the same is available;

                    (iii)  business  income  insurance  (A) with loss payable to
Lender;  (B) covering all risks required to be covered by the insurance provided
for in subsection  (i) above;  (C)  containing  an extended  period of indemnity
endorsement  which provides that after the physical loss to the Improvements and
Personal  Property  has been  repaired,  the  continued  loss of income  will be
insured  until such income  either  returns to the same level it was at prior to
the loss,  or the  expiration  of  eighteen  (18)  months from the date that the
Property is repaired or replaced and  operations  are resumed,  whichever  first
occurs, and notwithstanding  that the policy may expire prior to the end of such
period;  and  (D) in an  amount  equal  to one  hundred  percent  (100%)  of the
projected  gross  income from the  Individual  Property for a period of eighteen
(18) months from the date that the  Individual  Property is repaired or replaced
and operations are resumed.  The amount of such business income  insurance shall
be  determined  prior to the date hereof and at least once each year  thereafter
based on  Borrowers'  reasonable  estimate of the gross income from the Property
for the succeeding  eighteen (18) month period.  All proceeds  payable to Lender
pursuant to this subsection  shall be held by Lender and shall be applied to the
obligations  secured  by the Loan  Documents  from time to time due and  payable
hereunder and under the Note; provided,  however,  that nothing herein contained
shall be deemed to relieve  Borrowers of their obligation to pay the obligations
secured by the Loan Documents on the respective dates of payment provided for in
the Note and the other Loan  Documents  except to the extent  such  amounts  are
actually paid out of the proceeds of such business income insurance;

                    (iv) at all  times  during  which  structural  construction,
repairs or alterations are being made with respect to the Improvements, and only
if the Individual  Property  coverage form does not otherwise apply, (A) owner's
contingent or protective  liability  insurance covering claims not covered by or
under  the  terms  or  provisions  of the  above  mentioned  commercial  general
liability insurance policy; and (B) the insurance provided for in subsection (i)
above  written  in a  so-called  builder's  risk  completed  value form (1) on a
non-reporting   basis,  (2)  against  all  risks  insured  against  pursuant  to
subsection (i) above, (3)

                                      -64-
<PAGE>

including permission to occupy the Individual  Property,  and (4) with an agreed
amount endorsement waiving co-insurance provisions;

                    (v) workers'  compensation,  subject to the statutory limits
of the  state in which  the  Individual  Property  is  located,  and  employer's
liability  insurance  with a limit of at least One  Million  and No/100  Dollars
($1,000,000)  per  accident  and per disease per  employee,  and One Million and
No/100  Dollars  ($1,000,000)  for disease  aggregate  in respect of any work or
operations  on or about  the  Individual  Property,  or in  connection  with the
Individual Property or its operation (if applicable);

                    (vi)  comprehensive  boiler  and  machinery  insurance,   if
applicable,  in  amounts  as shall be  reasonably  required  by  Lender on terms
consistent  with  the  commercial   property  insurance  policy  required  under
subsection (i) above;

                    (vii)  umbrella  liability  insurance  in an amount not less
than Ten  Million  and No/100  Dollars  ($10,000,000)  per  occurrence  on terms
consistent with the commercial general liability insurance policy required under
subsection (ii) above;

                    (viii) motor  vehicle  liability  coverage for all owned and
non-owned  vehicles,  including  rented and leased vehicles  containing  minimum
limits per occurrence, including umbrella coverage, of Eleven Million and No/100
Dollars ($11,000,000); and

                    (ix) upon  sixty  (60)  days'  written  notice,  such  other
reasonable  insurance and in such reasonable amounts as Lender from time to time
may reasonably  request against such other  insurable  hazards which at the time
are commonly  insured  against for property  similar to the Individual  Property
located in or around the region in which the Individual Property is located.

               (b)  All  insurance  provided  for in  Section  6.1(a)  shall  be
obtained under valid and enforceable policies  (collectively,  the "Policies" or
in the singular,  the "Policy"),  and shall be subject to the approval of Lender
as to insurance companies,  amounts,  deductibles, loss payees and insureds. The
Policies  shall  be  issued  by  financially  sound  and  responsible  insurance
companies  authorized  to do  business  in the  state in which the  Property  is
located and having a claims paying  ability rating of "AA" or better by at least
two (2) of the Rating  Agencies one of which shall be Standard & Poor's  Ratings
Group  (provided,  however,  that as long as  Borrower's  current  insurer has a
rating by such two (2) Rating Agencies of "AA-" or better, such insurer shall be
acceptable).  The Policies  described in Section 6.1 (other than those  strictly
limited to liability  protection) shall designate Lender as loss payee. Not less
than ten (10) days prior to the  expiration  dates of the  Policies  theretofore
furnished  to  Lender,   certificates  of  insurance   evidencing  the  Policies
accompanied  by evidence  satisfactory  to Lender of payment of the premiums due
thereunder (the "Insurance Premiums"), shall be delivered by Borrower to Lender.

               (c) Any blanket insurance Policy shall  specifically  allocate to
the  Individual  Property  the  amount of  coverage  from time to time  required
hereunder and shall otherwise

                                      -65-
<PAGE>

provide the same protection as would separate  Policies insuring each Individual
Property in compliance with the provisions of Section 6.1(a).

               (d) All Policies of insurance  provided  for or  contemplated  by
Section 6.1(a),  except for the Policy  referenced in Section  6.1(a)(v),  shall
name the  relevant  Borrower,  or the  Tenant,  as the insured and Lender as the
additional  insured,  as its interests  may appear,  and in the case of property
damage, boiler and machinery,  flood and earthquake  insurance,  shall contain a
so-called New York standard non-contributing mortgagee clause in favor of Lender
providing that the loss thereunder shall be payable to Lender.

               (e) All Policies of insurance  provided for in Section  6.1(a)(v)
shall contain clauses or endorsements to the effect that:

                    (i) no act or negligence of any of the Borrowers,  or anyone
acting for any of the Borrowers,  or of any Tenant or other occupant, or failure
to comply with the provisions of any Policy,  which might otherwise  result in a
forfeiture  of the  insurance or any part  thereof,  shall in any way affect the
validity or enforceability of the insurance insofar as Lender is concerned;

                    (ii) the Policy shall not be materially  changed (other than
to increase the coverage  provided  thereby) or canceled without at least thirty
(30) days'  written  notice to Lender and any other  party  named  therein as an
additional insured; and

                    (iii) each Policy  shall  provide  that the issuers  thereof
shall give written  notice to Lender if the Policy has not been renewed  fifteen
(15) days prior to its expiration; and

                    (iv) Lender shall not be liable for any  Insurance  Premiums
thereon or subject to any assessments thereunder.

               (f) If at any time  Lender is not in receipt of written  evidence
that all insurance required hereunder is in full force and effect,  Lender shall
have the right,  without notice to the Borrowers,  to take such action as Lender
deems  necessary to protect its  interest in the  Property,  including,  without
limitation,  the  obtaining  of such  insurance  coverage  as Lender in its sole
discretion deems  appropriate and all premiums  incurred by Lender in connection
with such action or in obtaining  such  insurance and keeping it in effect shall
be paid by the  Borrowers  to Lender upon demand and until paid shall be secured
by the Mortgages and shall bear interest at the Default Rate.

          Section 6.2 Casualty.  If any Individual  Property shall be damaged or
destroyed,  in whole  or in part,  by fire or  other  casualty  (a  "Casualty"),
Borrowers shall give prompt notice of such damage  exceeding  $100,000 to Lender
and shall  promptly  commence and  diligently  prosecute  the  completion of the
repair and  restoration of the Individual  Property as nearly as possible to the
condition the Individual Property was in immediately prior to such fire or other
casualty,  with such  alterations  as may be  reasonably  approved  by Lender (a
"Restoration") and otherwise in accordance with Section 6.4. Borrowers shall pay
all costs

                                      -66-
<PAGE>

of such Restoration  whether or not such costs are covered by insurance.  Lender
may, but shall not be obligated to make proof of any loss exceeding  $100,000 if
not made promptly by Borrowers;

          Section 6.3 Condemnation.  Borrowers shall promptly give Lender notice
of the actual or threatened  commencement of any proceeding for the Condemnation
of any of the Property and shall  deliver to Lender copies of any and all papers
served in connection with such  proceedings.  Lender may participate in any such
proceedings,  and  Borrowers  shall  from time to time  deliver  to  Lender  all
instruments  requested by it to permit such  participation.  Borrowers shall, at
their expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense  of any such  proceedings.  Notwithstanding  any taking by any public or
quasi-public  authority  through  Condemnation  or otherwise  (including but not
limited to any transfer  made in lieu of or in  anticipation  of the exercise of
such taking),  Borrowers  shall  continue to pay the Debt at the time and in the
manner  provided for its payment in the Note and in this  Agreement and the Debt
shall not be reduced  until any Award  shall  have been  actually  received  and
applied by  Lender,  after the  deduction  of  expenses  of  collection,  to the
reduction or discharge of the Debt.  Lender shall not be limited to the interest
paid on the Award by the  condemning  authority but shall be entitled to receive
out of the award interest at the rate or rates  provided  herein or in the Note.
If the  Property  or any  portion  thereof is taken by a  condemning  authority,
Borrowers  shall promptly  commence and diligently  prosecute the Restoration of
the Property and  otherwise  comply with the  provisions  of Section 6.4. If the
Property is sold,  through  foreclosure  or  otherwise,  prior to the receipt by
Lender of the Award,  Lender  shall have the right,  whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive the
Award, or a portion thereof sufficient to pay the Debt.

          Section  6.4  Restoration.  The  following  provisions  shall apply in
connection with the Restoration of any Individual Property:

               (a) If the Net Proceeds shall be less than Five Hundred  Thousand
and No/100 Dollars  ($500,000) and the costs of completing the Restoration shall
be less than Five  Hundred  Thousand  and  No/100  Dollars  ($500,000),  the Net
Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all
of the conditions set forth in Section  6.4(b)(i) are met and Borrower  delivers
to Lender a written undertaking to expeditiously  commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.

               (b) If the Net Proceeds are equal to or greater than Five Hundred
Thousand  and  No/100  Dollars   ($500,000)  or  the  costs  of  completing  the
Restoration is equal to or greater than Five Hundred Thousand and No/100 Dollars
($500,000)  Lender shall make the Net Proceeds  available for the Restoration in
accordance  with the provisions of this Section 6.4. The term "Net Proceeds" for
purposes of this  Section 6.4 shall  mean:  (i) the net amount of all  insurance
proceeds received by Lender pursuant to Section 6.1 (a)(i),  (iv), (vi) and (ix)
as a result of such damage or  destruction,  after  deduction of its  reasonable
costs and expenses (including,  but not limited to, reasonable counsel fees), if
any, in collecting same ("Insurance

                                      -67-
<PAGE>

Proceeds"),  or  (ii)  the net  amount  of the  Award,  after  deduction  of its
reasonable costs and expenses (including, but not limited to, reasonable counsel
fees), if any, in collecting same ("Condemnation Proceeds"),  whichever the case
may be.

                         (i)  The  Net  Proceeds  shall  be  made  available  to
                    Borrower for Restoration provided that each of the following
                    conditions are met:

                                   (A) no Event of Default  shall have  occurred
                            and be continuing;

                                   (B) (1) in the  event  the Net  Proceeds  are
                            Insurance  Proceeds,  less than twenty-five  percent
                            (25%) of the total floor area of the Improvements on
                            the Individual Property has been damaged,  destroyed
                            or  rendered  unusable  as a result  of such fire or
                            other  casualty or (2) in the event the Net Proceeds
                            are  Condemnation  Proceeds,  less than ten  percent
                            (10%)  of  the  land   constituting  the  Individual
                            Property  is taken,  and such land is located  along
                            the   perimeter  or  periphery  of  the   Individual
                            Property,  and no  portion  of the  Improvements  is
                            located on such land;

                                   (C)  Leases   demising  in  the  aggregate  a
                            percentage  amount  equal  to or  greater  than  the
                            Rentable  Space  Percentage  of the  total  rentable
                            space  in the  Individual  Property  which  has been
                            demised  under  executed  and  delivered  Leases  in
                            effect as of the date of the occurrence of such fire
                            or other casualty or taking,  whichever the case may
                            be, shall remain in full force and effect during and
                            after   the    completion   of   the    Restoration,
                            notwithstanding  the  occurrence of any such fire or
                            other casualty or taking, whichever the case may be,
                            and will make all necessary repairs and restorations
                            thereto  at their  sole cost and  expense.  The term
                            "Rentable  Space  Percentage"  shall mean (1) in the
                            event the Net Proceeds  are  Insurance  Proceeds,  a
                            percentage amount equal to sixty-seven percent (67%)
                            and  (2)  in  the   event  the  Net   Proceeds   are
                            Condemnation  Proceeds, a percentage amount equal to
                            sixty-seven percent (67%);

                                   (D) Borrower shall  commence the  Restoration
                            as soon as reasonably  practicable  (but in no event
                            later than one hundred  and twenty  (120) days after
                            such damage or destruction or taking,  whichever the
                            case may be, occurs) and shall diligently pursue the
                            same to satisfactory completion;

                                   (E)  Lender  shall  be  satisfied   that  any
                            operating deficits, including all scheduled payments
                            of principal and interest under the Note, which will
                            be incurred with respect to the Individual  Property
                            as a result  of the  occurrence  of any such fire or
                            other casualty or taking,

                                      -68-
<PAGE>

                            whichever  the case may be,  will be covered  out of
                            (1) the Net  Proceeds,  (2) the  insurance  coverage
                            referred to in Section  6.1(a)(iii),  if applicable,
                            or (3) by other funds of Borrower;

                                   (F)  Lender  shall  be  satisfied   that  the
                            Restoration  will  be  completed  on or  before  the
                            earliest to occur of (1) the  Anticipated  Repayment
                            Date,  (2)  the  earliest  date  required  for  such
                            completion  under the terms of any Leases,  (3) such
                            time as may be required under applicable zoning law,
                            ordinance, rule or regulation in order to repair and
                            restore  the  Property  to the  condition  it was in
                            immediately  prior to such fire or other casualty or
                            to as nearly as  possible  the  condition  it was in
                            immediately  prior to such taking,  as applicable or
                            (4)  the   expiration  of  the  insurance   coverage
                            referred to in Section 6.1(a)(iii);

                                   (G)  the  Individual  Property  and  the  use
                            thereof after the Restoration  will be in compliance
                            with and permitted under all applicable zoning laws,
                            ordinances, rules and regulations;

                                   (H)  the   Restoration   shall  be  done  and
                            completed by Borrower in an expeditious and diligent
                            fashion  and  in  compliance   with  all  applicable
                            governmental laws, rules and regulations (including,
                            without  limitation,  all  applicable  environmental
                            laws); and

                                   (I) such fire or other casualty or taking, as
                            applicable, does not result in the loss of access to
                            the Individual Property or the related Improvements.

                         (ii) The Net  Proceeds  shall be held by  Lender  in an
                    interest-bearing  account (the "Net  Proceeds  Sub-Account")
                    and,  until  disbursed in accordance  with the provisions of
                    this Section 6.4(b),  shall constitute  additional  security
                    for the Debt and other obligations under the Loan Documents.
                    The Net  Proceeds  shall be  disbursed  by Lender  to, or as
                    directed by, Borrower from time to time during the course of
                    the  Restoration,  upon receipt of evidence  satisfactory to
                    Lender that (A) all  materials  installed and work and labor
                    performed (except to the extent that they are to be paid for
                    out of the requested  disbursement)  in connection  with the
                    Restoration  have been paid for in full, and (B) there exist
                    no  notices  of  pendency,   stop  orders,   mechanic's   or
                    materialman's liens or notices of intention to file same, or
                    any other liens or encumbrances of any nature  whatsoever on
                    the Individual Property arising out of the Restoration which
                    have not either  been fully  bonded to the  satisfaction  of
                    Lender and discharged of record or in the alternative  fully
                    insured to the  satisfaction  of Lender by the title company
                    issuing the Title Insurance Policy.

                         (iii)  All  plans  and   specifications   required   in
                    connection  with the  Restoration  shall be subject to prior
                    review and acceptance in all respects by

                                      -69-
<PAGE>

                    Lender and by an independent consulting engineer selected by
                    Lender (the  "Casualty  Consultant").  Lender shall have the
                    use  of  the  plans  and  specifications  and  all  permits,
                    licenses and  approvals  required or obtained in  connection
                    with  the  Restoration.  The  identity  of the  contractors,
                    subcontractors  and materialmen  engaged in the Restoration,
                    as well as the contracts under which they have been engaged,
                    shall be subject to prior  review and  acceptance  by Lender
                    and the Casualty Consultant. All costs and expenses incurred
                    by  Lender  in  connection  with  making  the  Net  Proceeds
                    available for the Restoration including, without limitation,
                    reasonable  counsel fees and  disbursements and the Casualty
                    Consultant's fees, shall be paid by Borrower.

                         (iv) In no event  shall  Lender  be  obligated  to make
                    disbursements  of the Net  Proceeds  in  excess of an amount
                    equal to the costs  actually  incurred from time to time for
                    work in place as part of the  Restoration,  as  certified by
                    the Casualty Consultant,  minus the Casualty Retainage.  The
                    term "Casualty  Retainage" shall mean an amount equal to ten
                    percent  (10%) of the costs  actually  incurred  for work in
                    place  as  part  of the  Restoration,  as  certified  by the
                    Casualty   Consultant,   until  the   Restoration  has  been
                    completed.  The Casualty  Retainage  shall in no event,  and
                    notwithstanding  anything to the contrary set forth above in
                    this Section  6.4(b),  be less than the amount actually held
                    back  by  Borrower  from  contractors,   subcontractors  and
                    materialmen   engaged  in  the  Restoration.   The  Casualty
                    Retainage   shall  not  be  released   until  the   Casualty
                    Consultant certifies to Lender that the Restoration has been
                    completed in accordance  with the provisions of this Section
                    6.4(b) and that all approvals necessary for the re-occupancy
                    and use of the  Individual  Property have been obtained from
                    all   appropriate    governmental   and   quasi-governmental
                    authorities,  and Lender receives  evidence  satisfactory to
                    Lender that the costs of the  Restoration  have been paid in
                    full or will be paid in full out of the Casualty  Retainage;
                    provided,  however,  that Lender will release the portion of
                    the  Casualty  Retainage  being  held  with  respect  to any
                    contractor,  subcontractor  or  materialman  engaged  in the
                    Restoration   as  of  the  date  upon  which  the   Casualty
                    Consultant   certifies   to  Lender  that  the   contractor,
                    subcontractor  or materialman has  satisfactorily  completed
                    all work and has supplied all materials in  accordance  with
                    the  provisions  of  the  contractor's,  subcontractor's  or
                    materialman's  contract,  the contractor,  subcontractor  or
                    materialman  delivers  the  lien  waivers  and  evidence  of
                    payment  in  full  of  all  sums  due  to  the   contractor,
                    subcontractor or materialman as may be reasonably  requested
                    by  Lender  or  by  the  title  company  issuing  the  Title
                    Insurance Policy,  and Lender receives an endorsement to the
                    Title Insurance  Policy  insuring the continued  priority of
                    the lien of the related  Mortgage and evidence of payment of
                    any  premium  payable for such  endorsement.  If required by
                    Lender,  the  release of any such  portion  of the  Casualty
                    Retainage shall be approved by the surety  company,  if any,
                    which has issued a payment or performance  bond with respect
                    to the contractor, subcontractor or materialman.

                                      -70-
<PAGE>

                         (v) Lender shall not be obligated to make disbursements
                    of the Net Proceeds more frequently than once every calendar
                    month.

                         (vi) If at any time the Net Proceeds or the undisbursed
                    balance  thereof  shall  not,  in the  opinion  of Lender in
                    consultation with the Casualty Consultant,  be sufficient to
                    pay in full the balance of the costs which are  estimated by
                    the Casualty  Consultant to be incurred in  connection  with
                    the  completion of the  Restoration,  Borrower shall deposit
                    the deficiency (the "Net Proceeds  Deficiency")  with Lender
                    before any further disbursement of the Net Proceeds shall be
                    made.  The Net  Proceeds  Deficiency  deposited  with Lender
                    shall be held by  Lender  and shall be  disbursed  for costs
                    actually  incurred in connection with the Restoration on the
                    same  conditions  applicable to the  disbursement of the Net
                    Proceeds,  and until so  disbursed  pursuant to this Section
                    6.4(b) shall constitute additional security for the Debt and
                    other obligations under the Loan Documents.

                         (vii) The excess,  if any, of the Net  Proceeds and the
                    remaining  balance,  if any, of the Net Proceeds  Deficiency
                    deposited   with  Lender  after  the   Casualty   Consultant
                    certifies to Lender that the  Restoration has been completed
                    in accordance  with the  provisions of this Section  6.4(b),
                    and the receipt by Lender of evidence satisfactory to Lender
                    that all costs incurred in connection  with the  Restoration
                    have  been  paid in full,  shall be  remitted  by  Lender to
                    Borrower,  provided no Event of Default  shall have occurred
                    and shall be continuing  under the Note,  this  Agreement or
                    any of the Other Security Documents.

               (c) All Net Proceeds not  required (i) to be made  available  for
the  Restoration  or (ii) to be  returned  to  Borrower  as excess Net  Proceeds
pursuant to Section 6.4(b)(vii) may be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order,  priority
and proportions as Lender in its sole discretion  shall deem proper,  or, at the
discretion  of  Lender,  the same may be paid,  either  in whole or in part,  to
Borrower for such purposes as Lender shall designate, in its discretion.

               (d) In the event of  foreclosure  of the Mortgage with respect to
the Individual  Property,  or other transfer of title to the Individual Property
in extinguishment in whole or in part of the Debt all right,  title and interest
of Borrower in and to the Policies  that are not blanket  Policies then in force
concerning the Individual  Property and all proceeds  payable  thereunder  shall
thereupon  vest  in the  purchaser  at  such  foreclosure  or  Lender  or  other
transferee in the event of such other transfer of title.

          Section 6.5 Required  Repairs.  Borrower  shall perform the repairs at
its  Property,  as more  particularly  set forth on Schedule  II hereto,  all as
recommend by Lender's engineering and environmental  consultants,  (such repairs
hereinafter referred to as "Property Required Repairs"). As to those items which
indicate  "Soil  Remediation"  on Schedule  II: (a)  Borrower  shall not have to
perform same if the "Test Borings" shown on Schedule II are

                                      -71-
<PAGE>

satisfactory to Lender and its  consultants (in which case the amounts  reserved
for Soil  Remediation  shall be returned to Borrower if no Event of Default then
exists) and (b) if the Test Borings are not  satisfactory,  the Soil Remediation
shall consist of those items required by Lender and its  consultants.  Borrowers
shall complete the Property Required Repairs on or before June 1, 1999. It shall
be an Event of Default under this Agreement if (i) Borrowers do not complete the
Property Required Repairs at each Individual Property by such required deadline,
and (ii)  Borrowers do not satisfy  each  condition  contained in Section  7.1.2
hereof. Upon the occurrence of such an Event of Default,  Lender, at its option,
may withdraw all Required Repair Funds from the Required Repair  Sub-Account and
Lender  may apply such  funds  either to  completion  of the  Property  Required
Repairs  at one or more of the  Property  or toward  payment of the Debt in such
order,  proportion and priority as Lender may determine in its sole  discretion.
Lender's right to withdraw and apply Required  Repair Funds shall be in addition
to all other rights and remedies provided to Lender under this Agreement and the
other Loan  Documents.  The charges of Lender's  engineering  and  environmental
consultants shall be paid by Borrower.

          VII. RESERVE FUNDS

               Section 7.1 Required Repair Funds.

                    7.1.1 Deposits. On the Closing Date, Borrowers shall deposit
with Lender the amount for each  Individual  Property set forth on such Schedule
II hereto to perform the Property Required Repairs for such Individual Property.
Amounts so deposited with Lender shall be held by Lender in an interest  bearing
account.  Amounts so deposited  shall  hereinafter  be referred to as Borrowers'
"Required  Repair  Fund" and the  account in which such  amounts  are held shall
hereinafter be referred to as Borrowers' "Required Repair Sub-Account".

                    7.1.2  Release  of  Required  Repair  Funds.   Lender  shall
disburse to the  Borrowers  the Required  Repair Funds from the Required  Repair
Sub-Account from time to time upon  satisfaction by the Borrowers of each of the
following  conditions:  (i) Borrowers shall submit a written request for payment
to Lender at least  thirty  (30) days  prior to the date on which the  Borrowers
request such payment be made and specifies the Property  Required  Repairs to be
paid,  (ii) on the date such  request is received by Lender and on the date such
payment is to be made,  no Default  or Event of Default  shall  exist and remain
uncured,  (iii) Lender shall have received a certificate  from the Borrowers (A)
stating that all Property Required Repairs at the applicable Individual Property
to be funded by the  requested  disbursement  have  been  completed  in good and
workmanlike  manner and in accordance  with all  applicable  federal,  state and
local laws, rules and regulations,  such certificate to be accompanied by a copy
of any license,  permit or other approval by any Governmental Authority required
to commence and/or complete the Property Required Repairs,  (B) identifying each
Person that supplied materials or labor in connection with the Property Required
Repairs  performed  at such  Individual  Property to be funded by the  requested
disbursement,  and (C)  stating  that each such  Person has been paid in full or
will be paid in full upon such disbursement,  such certificate to be accompanied
by lien waivers or other  evidence of payment  satisfactory  to Lender,  (iv) at
Lender's option, a title search for such Individual

                                      -72-
<PAGE>

Property indicating that such Individual Property is free from all liens, claims
and other  encumbrances not previously  approved by Lender, and (v) Lender shall
have received such other  evidence as Lender shall  reasonably  request that the
Property  Required  Repairs  at such  Individual  Property  to be  funded by the
requested disbursement have been completed and are paid for or will be paid upon
such  disbursement  to the  Borrowers.  Lender  shall  not be  required  to make
disbursements   from  the  Required  Repair  Sub-Account  with  respect  to  any
Individual  Property unless such requested  disbursement is in an amount greater
than  $25,000 (or a lesser  amount if the total  amount in the  Required  Repair
Sub-Account  is less than $25,000,  in which case only one  disbursement  of the
amount  remaining in the account shall be made) and such  disbursement  shall be
made only upon satisfaction of each condition contained in this Section 7.1.2.

          Section 7.2 Tax and Insurance Escrow Fund.

               (a) Except as provided in Clause  7.2(b) below,  Borrowers  shall
pay to Lender on each monthly  Payment Date (a)  one-twelfth of the Taxes on all
Property that Lender  estimates  will be payable  during the next ensuing twelve
(12) months in order to accumulate with Lender  sufficient funds to pay all such
Taxes at least  thirty  (30) days prior to their  respective  due dates and such
amounts will be held in an account with the Lender (the "Tax Sub-Account"),  and
(b) one-twelfth of the Insurance  Premiums that Lender estimates will be payable
for the renewal of the  coverage  afforded by the Policies  upon the  expiration
thereof in order to  accumulate  with  Lender  sufficient  funds to pay all such
Insurance  Premiums  at least  thirty (30) days prior to the  expiration  of the
Policies and such amounts will be held in an account with Lender (the "Insurance
Premium   Sub-Account")   (said  amounts  in  (a)  and  (b)  above   hereinafter
collectively  called the "Tax and Insurance Escrow Fund"). The Tax and Insurance
Escrow Fund and the payments of interest or principal or both,  payable pursuant
to the Note,  shall be added  together and shall be paid as an aggregate  sum by
Borrowers  to Lender.  Lender  will apply the Tax and  Insurance  Escrow Fund to
payments  of  Taxes  and  Insurance  Premiums  required  to be made by  Borrower
pursuant to Section 5.1.2 hereof and under the Mortgages.  In making any payment
relating to the Tax and Insurance Escrow Fund, Lender may do so according to any
bill,  statement or estimate  procured from the appropriate  public office (with
respect to Taxes) or  insurer or agent  (with  respect to  Insurance  Premiums),
without  inquiry into the  accuracy of such bill,  statement or estimate or into
the  validity of any tax,  assessment,  sale,  forfeiture,  tax lien or title or
claim thereof.  If the amount of the Tax and Insurance  Escrow Fund shall exceed
the  amounts due for Taxes and  Insurance  Premiums  pursuant  to Section  5.1.2
hereof, Lender shall, in its sole discretion, return any excess to the Borrowers
or  credit  such  excess  against  future  payments  to be  made  to the Tax and
Insurance Escrow Fund. Any amount remaining in the Tax and Insurance Escrow Fund
after the Debt has been paid in full  shall be  returned  to the  Borrowers.  In
allocating such excess,  Lender may deal with the person shown on the records of
Lender  to be the  owner  of the  Property.  If at any  time  Lender  reasonably
determines  that  the  Tax and  Insurance  Escrow  Fund  is not or  will  not be
sufficient to pay Taxes and Insurance Premiums by the dates set forth in (a) and
(b) above,  Lender shall  notify the  Borrowers  of such  determination  and the
Borrowers  shall  increase  its  monthly  payments  to Lender by the amount that
Lender estimates is sufficient to make up the

                                      -73-
<PAGE>

deficiency  at least thirty (30) days prior to  delinquency  of the Taxes and/or
thirty (30) days prior to expiration of the Policies, as the case may be.

               (b)  Notwithstanding  the  requirements  of clause  7.2(a) above,
Borrowers'  advance payments for insurance will be conditionally  waived so long
as the Borrower  delivers  evidence to Lender that the Borrowers are continually
paying all insurance  premiums in advance on a monthly basis in accordance  with
Section 5.1.23 hereof;  and provided  further,  that no Lockbox Event shall have
occurred and be continuing.

          Section 7.3 Replacements and Replacement Reserve.

               7.3.1 Replacement Reserve Fund.

                    (a) Except as provided in clause 7.3.1(b)  below,  Borrowers
shall  pay to  Lender  on each  Payment  Date one  twelfth  of the  amount  (the
"Replacement  Reserve Monthly  Deposit")  reasonably  estimated by Lender in its
sole  discretion  to be due for  replacements  and repairs of the type listed on
Schedule III hereof, but not for Required Repairs (the "Approved Replacements"),
required  to be made to the  Property  during  the  calendar  year.  Amounts  so
deposited shall  hereinafter be referred to as Borrowers'  "Replacement  Reserve
Fund" and the  account  in which such  amounts  are held  shall  hereinafter  be
referred to as Borrowers' "Replacement Reserve Sub-Account". Lender may reassess
its estimate of the amount necessary for the Replacement  Reserve Fund from time
to time and, and may increase the monthly amounts  required to be deposited into
the  Replacement  Reserve Fund by thirty (30) days notice to the Borrowers if it
determines  in its  reasonable  discretion  that an  increase  is  necessary  to
maintain the proper  maintenance and operation of the Property.  Any amount held
in the Replacement  Reserve Sub-Account and allocated for an Individual Property
shall be retained by Lender and credited toward the future Replacement  Reserves
Monthly  Deposits  required  by Lender  hereunder  in the event such  Individual
Property is released from the Lien of its related  Mortgage in  accordance  with
Section 2.5 hereof.

                    (b)  Notwithstanding  the  requirements  of clause  7.3.1(a)
above,  Borrowers'  obligation to pay the Replacement Reserve Monthly Deposit is
conditionally waived, provided, that

                    (i) within sixty (60) days  following the end of each Fiscal
                    Year, the Borrowers  deliver to Lender a statement and other
                    evidence to the Lender,  acceptable in form and substance to
                    Lender,  stating  the  type of  Approved  Replacements  made
                    during the course of the prior  Fiscal  Year and the amounts
                    expended thereon; and

                    (ii)  Borrowers  have  spent  annually  on  each  Individual
                    Property,  an  amount  not  less  than the  amount  shown on
                    Schedule V (that is, as to each Individual Property, the per
                    unit amount multiplied by the number of residential units at
                    the Individual Property) for the Approved Replacements shown
                    on  Schedule  III for the  Individual  Property  in question
                    (each  such  amount  being  referred  to as  the  Individual
                    Property's applicable "Target Amount"); and

                                      -74-
<PAGE>

                    (iii)  that no Lockbox  Event  shall  have  occurred  and be
                    continuing.

                    If it shall be determined by Lender that Borrower shall have
spent less for Approved Replacements than the Target Amount for the prior Fiscal
Year for the  Individual  Property  in  question,  Borrowers  shall pay into the
Replacement  Reserve  Sub-Account  the  difference  of (x) the  amount  shown on
Schedule V hereto and (y) the amount actually spent by the Borrowers on Approved
Replacements in the prior Fiscal year.

                    7.3.2  Disbursements from Replacement Reserve Account.

                    (a) Lender  shall make  disbursements  from the  Replacement
Reserve  Sub-Account to pay Borrower only for the costs of those items listed on
Schedule III hereto (the "Replacements").  Lender shall not be obligated to make
disbursements from the Replacement  Reserve  Sub-Account to reimburse  Borrowers
for the costs of routine  maintenance  to an  Individual  Property  or for costs
which are to be reimbursed from the Required Repair Fund.

                    (b) Lender  shall,  upon written  request from the Borrowers
and satisfaction of the  requirements set forth in this Section 7.3.2,  disburse
to the Borrowers amounts from the Replacement Reserve  Sub-Account  necessary to
pay for the actual  approved costs of Replacements or to reimburse the Borrowers
therefor,  upon completion of such Replacements (or, upon partial  completion in
the case of  Replacements  made  pursuant to Section  7.3.2(f)) as determined by
Lender.  In no event  shall  Lender be  obligated  to  disburse  funds  from the
Replacement Reserve Sub-Account if a Default or an Event of Default exists.

                    (c) Each  request  for  disbursement  from  the  Replacement
Reserve Sub-Account shall be in a form specified or approved by Lender and shall
specify (i) the specific  Replacements  for which the disbursement is requested,
(ii) the quantity and price of each item purchased,  if the Replacement includes
the purchase or replacement of specific items,  (iii) the price of all materials
(grouped by type or category) used in any Replacement other than the purchase or
replacement  of specific  items,  and (iv) the cost of all  contracted  labor or
other  services  applicable  to each  Replacement  for which  such  request  for
disbursement  is made.  With  each  request  Borrowers  shall  certify  that all
Replacements have been made in accordance with all applicable Legal Requirements
of any Governmental Authority having jurisdiction over the applicable Individual
Property  to which  the  Replacements  are  being  provided.  Each  request  for
disbursement  shall  include  copies  of  invoices  for all  items or  materials
purchased and all contracted labor or services provided and, unless Lender is to
issue  joint  checks  as  described   below  in  connection  with  a  particular
Replacement,  each request  shall  include  evidence  satisfactory  to Lender of
payment  of all such  amounts.  Except as  provided  in Section  7.3.2(e),  each
request for disbursement from the Replacement  Reserve Sub-Account shall be made
only after  completion of the Replacement  for which  disbursement is requested.
Borrowers shall provide Lender evidence of completion  satisfactory to Lender in
its reasonable judgment.

                    (d) Borrowers  shall pay all invoices in connection with the
Replacements  with  respect  to  which a  disbursement  is  requested  prior  to
submitting such request for

                                      -75-
<PAGE>

disbursement from the Replacement  Reserve Sub-Account or, at the request of the
Borrowers,  Lender will issue joint  checks,  payable to the  Borrowers  and the
contractor,  supplier,  materialman,  mechanic,  subcontractor or other party to
whom payment is due in connection  with a  Replacement.  In the case of payments
made by joint  check,  Lender  may  require a waiver  of lien  from each  Person
receiving payment prior to Lender's  disbursement  from the Replacement  Reserve
Account.  In addition,  as a condition to any  disbursement,  Lender may require
Borrower to obtain lien waivers  from each  contractor,  supplier,  materialman,
mechanic or subcontractor  who receives payment in an amount equal to or greater
than $25,000 for completion of its work or delivery of its  materials.  Any lien
waiver  delivered  hereunder shall conform to the requirements of applicable law
and shall cover all work performed and materials supplied  (including  equipment
and  fixtures)  for the  applicable  Individual  Property  by  that  contractor,
supplier, subcontractor, mechanic or materialman through the date covered by the
current reimbursement request (or, in the event that payment to such contractor,
supplier, subcontractor, mechanic or materialmen is to be made by a joint check,
the release of lien shall be effective  through the date covered by the previous
release of funds request).

                    (e) If (i) the cost of a Replacement  exceeds $25,000,  (ii)
the contractor  performing such Replacement  requires periodic payments pursuant
to terms of a written  contract,  and (iii)  Lender has  approved  in writing in
advance such periodic payments, a request for reimbursement from the Replacement
Reserve  Sub-Account may be made after completion of a portion of the work under
such contract,  provided (A) such contract  requires  payment upon completion of
such portion of the work, (B) the materials for which the request is made are on
site at the applicable Individual Property and are properly secured or have been
installed  in  such  Individual  Property,  (C)  all  other  conditions  in this
Agreement  for  disbursement  have been  satisfied,  (D) funds  remaining in the
Replacement  Reserve  Sub-Account  are,  in  Lender's  judgment,  sufficient  to
complete such  Replacement  and other  Replacements  when  required,  and (E) if
required by Lender,  each contractor or subcontractor  receiving  payments under
such contract  shall provide a waiver of lien with respect to amounts which have
been paid to that contractor or subcontractor.

                    (f) Borrowers shall not make a request for disbursement from
the Replacement  Reserve  Sub-Account  more frequently than once in any calendar
month and (except in connection with the final  disbursement)  the total cost of
all Replacements in any request shall not be less than $25,000.00.

                    7.3.3  Performance of Replacements.

                    (a) Borrowers shall make Replacements when required in order
to keep each Individual  Property in condition and repair  consistent with other
first class, full service  multifamily  properties in the same market segment in
the metropolitan  area in which the respective  Individual  Property is located,
and to keep each Individual  Property or any portion thereof from deteriorating.
Borrowers shall complete all  Replacements  in a good and workmanlike  manner as
soon as practicable following the commencement of making each such Replacement.

                                      -76-
<PAGE>

                    (b) Lender reserves the right, at its option, to approve all
contracts or work orders with materialmen, mechanics, suppliers, subcontractors,
contractors or other parties providing labor or materials in connection with the
Replacements.  Upon  Lender's  request,  Borrowers  shall assign any contract or
subcontract to Lender.

                    (c)  In  the  event  Lender  determines  in  its  reasonable
discretion  that any  Replacement  is not being  performed in a  workmanlike  or
timely manner or that any Replacement has not been completed in a workmanlike or
timely manner,  Lender shall have the option to withhold  disbursement  for such
unsatisfactory  Replacement  and  to  proceed  under  existing  contracts  or to
contract  with  third  parties to  complete  such  Replacement  and to apply the
Replacement  Reserve Fund toward the labor and  materials  necessary to complete
such Replacement, without providing any prior notice to Borrower and to exercise
any and all  other  remedies  available  to  Lender  upon an  Event  of  Default
hereunder.

                    (d) In order to facilitate  Lender's completion or making of
the Replacements  pursuant to Section 7.3.3(c) above, the Borrowers grant Lender
the right to enter onto any Individual Property and perform any and all work and
labor necessary to complete or make the  Replacements  and/or employ watchmen to
protect such Individual Property from damage. All sums so expended by Lender, to
the extent not from the Replacement  Reserve Fund,  shall be deemed to have been
advanced under the Loan to the Borrowers and secured by the Mortgages.  For this
purpose   Borrowers   constitute  and  appoint  Lender  their  true  and  lawful
attorney-in-fact  with full power of  substitution  to complete or undertake the
Replacements  in the name of the  Borrowers.  Such  power of  attorney  shall be
deemed to be a power  coupled with an interest and cannot be revoked.  Borrowers
empower  said  attorney-in-fact  as  follows:  (i)  to  use  any  funds  in  the
Replacement  Reserve  Sub-Account  for the purpose of making or  completing  the
Replacements;  (ii) to make  such  additions,  changes  and  corrections  to the
Replacements  as shall be necessary  or desirable to complete the  Replacements;
(iii)  to  employ  such  contractors,  subcontractors,  agents,  architects  and
inspectors  as shall be  required  for such  purposes;  (iv) to pay,  settle  or
compromise  all existing  bills and claims which are or may become Liens against
any Individual Property,  or as may be necessary or desirable for the completion
of the Replacements,  or for clearance of title; (v) to execute all applications
and  certificates  in the name of  Borrower  which may be required by any of the
contract  documents;  (vi) to prosecute and defend all actions or proceedings in
connection with any Individual  Property or the rehabilitation and repair of any
Individual Property;  and (vii) to do any and every act which Borrowers might do
in its own behalf to fulfill the terms of this Agreement.

                    (e) Nothing in this  Section  7.3.3  shall:  (i) make Lender
responsible  for making or completing the  Replacements;  (ii) require Lender to
expend funds in addition to the Replacement Reserve Fund to make or complete any
Replacement;  (iii) obligate  Lender to proceed with the  Replacements;  or (iv)
obligate Lender to demand from Borrowers additional sums to make or complete any
Replacement.

                    (f) Borrowers  shall permit  Lender and Lender's  agents and
representatives (including, without limitation, Lender's engineer, architect, or
inspector) or third parties making  Replacements  pursuant to this Section 7.3.3
to enter onto each Individual Property

                                      -77-
<PAGE>

during normal  business hours upon the giving of reasonable  notice  (subject to
the rights of  tenants  under  their  Leases) to  inspect  the  progress  of any
Replacements  and all materials being used in connection  therewith,  to examine
all plans and shop drawings  relating to such  Replacements  which are or may be
kept at each Individual Property, and to complete any Replacements made pursuant
to this Section 7.3.3.  Borrowers shall cause all contractors and subcontractors
to  cooperate  with Lender or  Lender's  representatives  or such other  persons
described  above  in  connection  with  inspections  described  in this  Section
7.3.4(f) or the completion of Replacements pursuant to this Section 7.3.3.

                    (g)  Lender  may  require an  inspection  of the  Individual
Property at Borrowers'  expense prior to making a monthly  disbursement from the
Replacement   Reserve   Sub-Account  in  order  to  verify   completion  of  the
Replacements  for which  reimbursement  is sought.  Lender may require that such
inspection be conducted by an  appropriate  independent  qualified  professional
selected by Lender and/or may require a copy of a  certificate  of completion by
an  independent  qualified  professional  acceptable  to  Lender  prior  to  the
disbursement  of any amounts from the  Replacement  Reserve  Account.  Borrowers
shall pay the expense of the  inspection  as required  hereunder,  whether  such
inspection is conducted by Lender or by an independent qualified professional.

                    (h) The Replacements and all materials, equipment, fixtures,
or any other item  comprising a part of any  Replacement  shall be  constructed,
installed  or  completed,  as  applicable,  free and  clear  of all  mechanic's,
materialman's  or other liens  (except  for those Liens  existing on the date of
this Agreement which have been approved in writing by Lender).

                    (i) Before each  disbursement  from the Replacement  Reserve
Account,  Lender may require  Borrowers to provide Lender with a search of title
to the applicable Individual Property effective to the date of the disbursement,
which search shows that no mechanic's or  materialmen's  liens or other liens of
any nature have been placed against the applicable Individual Property since the
date of  recordation of the related  Mortgage and that title to such  Individual
Property  is free and clear of all  Liens  (other  than the lien of the  related
Mortgage and any other Liens  previously  approved in writing by the Lender,  if
any).

                    (j) All Replacements  shall comply with all applicable Legal
Requirements  of all  Governmental  Authorities  having  jurisdiction  over  the
applicable Individual Property and applicable insurance requirements  including,
without   limitation,   applicable   building   codes,   special  use   permits,
environmental regulations, and requirements of insurance underwriters.

                    (k) In addition  to any  insurance  required  under the Loan
Documents,   Borrowers   shall  provide  or  cause  to  be  provided   workmen's
compensation insurance, builder's risk, and public liability insurance and other
insurance to the extent  required  under  applicable  law in  connection  with a
particular Replacement. All such policies shall be in form and amount reasonably
satisfactory  to Lender.  All such policies  which can be endorsed with standard
mortgagee  clauses  making  loss  payable to Lender or its  assigns  shall be so
endorsed. Certified copies of such policies shall be delivered to Lender.

                    7.3.4  Failure to Make Replacements.

                                      -78-
<PAGE>

                    (a) It shall be an Event of Default under this  Agreement if
Borrowers fail to comply with any provision of this Section 7.3 and such failure
is not  commenced  within  thirty (30) days after notice from  Lender.  Upon the
occurrence of such an Event of Default,  Lender may use the Replacement  Reserve
Fund (or any portion  thereof)  for any  purpose,  including  but not limited to
completion of the  Replacements  as provided in Section 7.3.3,  or for any other
repair or replacement  to any Individual  Property or toward payment of the Debt
in such  order,  proportion  and  priority as Lender may  determine  in its sole
discretion.  Lender's right to withdraw and apply the Replacement  Reserve Funds
shall be in addition to all other rights and  remedies  provided to Lender under
this Agreement and the other Loan Documents.

                    (b)  Other  than as  expressly  agreed  in  this  Agreement,
nothing in this Agreement  shall obligate  Lender to apply all or any portion of
the Replacement Reserve Fund on account of an Event of Default to payment of the
Debt or in any specific order or priority.

                    7.3.5  Balance  in  the  Replacement  Reserve  Account.  The
insufficiency of any balance in the Replacement  Reserve  Sub-Account  shall not
relieve  Borrowers  from  their  obligation  to  fulfill  all  preservation  and
maintenance covenants in the Loan Documents.

                    7.3.6  Indemnification.  Borrower shall indemnify Lender and
hold  Lender  harmless  from and  against any and all  actions,  suits,  claims,
demands,  liabilities,  losses,  damages,  obligations  and costs  and  expenses
(including  litigation costs and reasonable attorneys fees and expenses) arising
from or in any way connected with the performance of the Replacements. Borrowers
shall  assign to Lender all rights and claims  Borrowers  may have  against  all
persons  or  entities  supplying  labor  or  materials  in  connection  with the
Replacements,  provided  such  loss  or  damage  does  not  arise  out of  gross
negligence or willful or reckless misconduct of Lender; provided,  however, that
Lender may not pursue  any such  right or claim  unless an Event of Default  has
occurred and remains uncured.

          Section 7.4 Reserved.

          Section 7.5 Reserved.

          Section 7.6 Reserve Funds, Generally.

               7.6.1  Borrowers  grant  to  Lender  a  first-priority  perfected
security  interest  in each of the  Reserve  Funds and any and all monies now or
hereafter  deposited in each Reserve Fund as additional  security for payment of
the Debt.  Until expended or applied in accordance  herewith,  the Reserve Funds
shall constitute additional security for the Debt.

               7.6.2 Upon the occurrence of an Event of Default,  Lender may, in
addition to any and all other rights and remedies available to Lender, apply any
sums then present in any or all of the Reserve  Funds to the payment of the Debt
in any order in its sole discretion.

               7.6.3 Reserve Funds shall not  constitute  trust funds and may be
commingled with other monies held by Lender.

                                      -79-
<PAGE>

               7.6.4 Reserve Funds  interest  shall be held in interest  bearing
accounts.  All  earnings  or  interest  on a Reserve  Fund shall be added to and
become a part of such  Reserve Fund and shall be disbursed in the same manner as
other monies deposited in such Reserve Fund.

               7.6.5  Borrowers shall not,  without  obtaining the prior written
consent of Lender,  further pledge, assign or grant any security interest in any
Reserve Fund or the monies  deposited  therein or permit any lien or encumbrance
to  attach  thereto,  or any levy to be made  thereon,  or any  UCC-1  Financing
Statements,  except those naming Lender as the secured  party,  to be filed with
respect thereto.

               7.6.6  Lender  shall not be liable for any loss  sustained on the
investment of any funds constituting the Replacement Reserve Fund.

               7.6.7 All payments of Reserve Funds required to be paid to Lender
shall be paid into the pertinent sub-accounts under the Lockbox Account.

          7.7  Security  Deposits.  Borrowers  shall  pay  all  tenant  security
deposits in respect of the Properties into an interest  bearing security deposit
sub-account in Borrower's  name (the "Security  Sub-Account").  All existing and
future security deposits shall be deposited to the Security Deposit Sub-Account.
All such security  funds shall be held in trust for the Borrowers'  tenants.  To
the extent that such funds are forfeited in whole or in part by a tenant, due to
non-payment  of rent or damage to the premises  leased to such tenant,  provided
that there is no Event of  Default,  the  Borrowers  may apply to the Lender for
release of such funds accompanied by Borrowers'  written  confirmation that such
funds will be applied to repairs or unpaid rents.

          VIII. DEFAULTS

               Section 8.1 Event of Default.

                    (a) Each of the following  events shall  constitute an event
of default hereunder (an "Event of Default"):

                           (i)  if any portion of the Debt is not paid when due;

                           (ii) if any of  the Taxes  or Other  Charges  are not
paid when the same are due and payable;

                           (iii)if the Policies are  not kept  in full force and
effect,  or if certified copies of the Policies are not delivered to Lender upon
request;

                           (iv) if Borrowers  transfer or encumbers  any portion
of the Property  without  Lender's  prior  written consent or otherwise violates
the provisions of Article 6 (Due on Sale/ Encumbrance) of any Mortgage;

                                      -80-
<PAGE>

                           (v)  if   any  representation  or  warranty  made  by
Borrower herein or in any other Loan Document,  or in  any report,  certificate,
financial  statement  or other  instrument,  agreement  or document furnished to
Lender shall  have been false  or misleading  in  any material respect as of the
date the representation or warranty was made;

                           (vi) if  the  Borrowers or  any guarantor  under  any
guaranty issued in connection with  the Loan  shall make an  assignment for  the
benefit of creditors;

                           (vii) if a receiver, liquidator  or trustee  shall be
appointed for the  Borrowers or  any  guarantor  under any  guarantee  issued in
connection with the Loan or if Borrowers or such guarantor  shall be adjudicated
a bankrupt or insolvent, or  if any petition  for  bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar  federal or state
law, shall be filed by or against, consented to, or acquiesced in by,  Borrowers
or such  guarantor,  or if any  proceeding  for the dissolution  or  liquidation
of Borrowers or such guarantor  shall be instituted; provided,  however, if such
appointment,  adjudication,  petition  or  proceeding  was involuntary  and  not
consented to by Borrowers or such guarantor, upon the same not being discharged,
stayed or dismissed within sixty (60) days;

                          (viii) if the Borrowers attempt to assign their rights
under this  Agreement or any of the other Loan Documents or any  interest herein
or therein in contravention of the Loan Documents;

                           (ix) if the Borrowers breach  any of their respective
negative covenants contained in Section 5.2 or any covenant contained in Section
4.1.30 hereof;

                           (x)  with respect to any term,  covenant or provision
set forth  herein which  specifically  contains  a notice  requirement or  grace
period,  if the Borrowers shall  be  in  default under such  term,  covenant  or
condition  after  the  giving  of such  notice or the expiration of  such  grace
period;

                           (xi) if  any  of the  assumptions  contained  in  the
Insolvency Opinion, or in  any  other  "non-consolidation"opinion  delivered  to
Lender  in  connection  with  the  Loan,  or  in  any  other "non-consolidation"
delivered subsequent to  the closing of  the  Loan, is or shall become untrue in
any material respect;

                           (xii)  if  the  Borrowers  shall  continue  to  be in
Default under any of the other  terms, covenants or conditions of this Agreement
not  specified  in  subsections (i) to (xi)  above,  for  thirty (30) days after
notice to the Borrowers  from Lender,  in the case of  any Default which  can be
cured by the payment of a sum of  money, or  for thirty (30) days  after  notice
from  Lender  in the case of any other  Default; provided, however, that if such
non-monetary  Default  is  susceptible  of  cure  but cannot reasonably be cured
within a thirty (30) day period and  provided  further  that Borrower shall have
commenced  to  cure such  Default  within  such  30-day  period  and  thereafter
diligently and expeditiously proceeds to cure the same, such 30-day period shall
be  extended  for such  time as is  reasonably  necessary  for  the Borrowers in
the exercise of due diligence to cure such  Default, such  additional period not
to exceed ninety (90) days; or

                                      -81-
<PAGE>

                           (xiii)  if  there  shall be  default under any of the
other Loan Documents  beyond any  applicable  cure  periods  contained  in  such
documents,  whether as to Borrower or any of the Property, or if  any other such
event shall occur  or condition shall exist,  if the  effect of   such  event or
condition is to accelerate the maturity of any portion of the Debt or  to permit
Lender to  accelerate  the  maturity  of all or any portion of the Debt;

                    (b) Upon the  occurrence of an Event of Default  (other than
an Event of Default described in clauses (vi), (vii) or (viii) above) and at any
time  thereafter  the Lender may,  in  addition to any other  rights or remedies
available to it pursuant to this  Agreement  and the other Loan  Documents or at
law or in equity,  Lender may take such action,  without notice or demand,  that
Lender deems  advisable to protect and enforce its rights  against the Borrowers
and in and to all  or  any  of  the  Property,  including,  without  limitation,
declaring the Debt to be immediately due and payable,  and Lender may enforce or
avail  itself of any or all rights or remedies  provided  in the Loan  Documents
against  the  Borrowers  and  any or all of  the  Property,  including,  without
limitation,  all rights or remedies  available at law or in equity; and upon any
Event of Default  described in clauses (vi), (vii) or (viii) above, the Debt and
all other  obligations of Borrower  hereunder and under the other Loan Documents
shall  immediately and automatically  become due and payable,  without notice or
demand,  and  Borrowers  hereby  expressly  waives  any such  notice or  demand,
anything  contained  herein  or in any  other  Loan  Document  to  the  contrary
notwithstanding.

          Section 8.2 Remedies.

               (a) Upon the occurrence of an Event of Default, all or any one or
more of the rights,  powers,  privileges and other remedies  available to Lender
against  Borrowers  under  this  Agreement  or any of the other  Loan  Documents
executed and delivered by, or  applicable  to,  Borrowers or at law or in equity
may be exercised by Lender at any time and from time to time, whether or not all
or any of the Debt shall be declared due and payable,  and whether or not Lender
shall  have  commenced  any  foreclosure  proceeding  or  other  action  for the
enforcement  of its rights and  remedies  under any of the Loan  Documents  with
respect to all or any of the Property. Any such actions taken by Lender shall be
cumulative   and   concurrent   and  may  be  pursued   independently,   singly,
successively,  together or  otherwise,  at such time and in such order as Lender
may determine in its sole  discretion,  to the fullest extent  permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents.  Without  limiting the generality of the foregoing,  Borrowers  agree
that if an Event of Default is continuing  (i) Lender is not subject to any "one
action" or  "election  of  remedies"  law or rule,  and (ii) all liens and other
rights, remedies or privileges provided to Lender shall remain in full force and
effect until Lender has exhausted  all of its remedies  against the Property and
each  Mortgage  has been  foreclosed,  sold and/or  otherwise  realized  upon in
satisfaction of the Debt or the Debt has been paid in full.

               (b) With  respect  to the  Borrowers  and the  Property,  nothing
contained  herein or in any other Loan Document  shall be construed as requiring
Lender to resort to any Individual  Property for the  satisfaction of any of the
Debt in preference or priority to any other

                                      -82-
<PAGE>

Individual Property, and Lender may seek satisfaction out of all of the Property
or any part  thereof,  in its  absolute  discretion  in respect of the Debt.  In
addition,  Lender shall have the right from time to time to partially  foreclose
the Mortgages in any manner and for any amounts  secured by the  Mortgages  then
due and  payable  as  determined  by  Lender in its sole  discretion  including,
without  limitation,  the following  circumstances:  (i) in the event  Borrowers
default  beyond  any  applicable  grace  period  in the  payment  of one or more
scheduled  payments of principal and interest,  Lender may foreclose one or more
of the  Mortgages  to recover  such  delinquent  payments,  or (ii) in the event
Lender elects to accelerate less than the entire  outstanding  principal balance
of the Loan,  Lender may  foreclose  one or more of the  Mortgages to recover so
much of the  principal  balance  of the Loan as Lender may  accelerate  and such
other  sums  secured  by one or more  of the  Mortgages  as  Lender  may  elect.
Notwithstanding  one or more partial  foreclosures,  the  Property  shall remain
subject to the Mortgages to secure  payment of sums secured by the Mortgages and
not previously recovered.

               (c)  Lender  shall  have the right from time to time to sever the
Note and the other Loan Documents into one or more separate notes, mortgages and
other security documents (the "Severed Loan Documents") in such denominations as
Lender shall  determine in its sole  discretion  for purposes of evidencing  and
enforcing its rights and remedies  provided  hereunder.  Borrowers shall execute
and deliver to Lender from time to time, promptly after the request of Lender, a
severance agreement and such other documents as Lender shall request in order to
effect  the  severance  described  in the  preceding  sentence,  all in form and
substance  reasonably  satisfactory to Lender.  Borrowers hereby  absolutely and
irrevocably  appoint Lender as their true and lawful  attorney,  coupled with an
interest, in their name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance,  Borrowers ratify all that its said
attorney  shall do by virtue  thereof.  Except as may be required in  connection
with a securitization pursuant to Section 9.1 hereof, (i) Borrowers shall not be
obligated  to pay  any  costs  or  expenses  incurred  in  connection  with  the
preparation,  execution,  recording or filing of the Severed Loan Documents, and
(ii)  the  Severed  Loan  Documents  shall  not  contain  any   representations,
warranties  or  covenants  not  contained  in the  Loan  Documents  and any such
representations  and warranties  contained in the Severed Loan Documents will be
given by Borrowers only as of the Closing Date.

          Section 8.3  Remedies  Cumulative;  Waivers.  The  rights,  powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right,  power or remedy  which  Lender may have against the  Borrowers
pursuant to this Agreement or the other Loan Documents, or existing at law or in
equity or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently  or  otherwise,  at such  time  and in such  order  as  Lender  may
determine  in Lender's  sole  discretion.  No delay or omission to exercise  any
remedy,  right or power  accruing upon an Event of Default shall impair any such
remedy,  right or power or shall be construed as a waiver thereof,  but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed  expedient.  A waiver of one Default or Event of Default  with respect to
the Borrowers shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy,  right or power consequent
thereon.

                                      -83-
<PAGE>

          IX. SPECIAL PROVISIONS

          Section  9.1 Sale of Notes and  Securitization.  At the request of the
holder of the Note and,  to the extent not  already  required  to be provided by
Borrower under this Agreement,  Borrower shall use reasonable efforts to satisfy
the  market  standards  to which the holder of the Note  customarily  adheres or
which may be reasonably required in the marketplace or by the Rating Agencies in
connection  with the sale of the Note or  participations  therein  or the  first
successful    securitization    (such   sale    and/or    securitization,    the
"Securitization")  of rated single or multi-class  securities (the "Securities")
secured by or  evidencing  ownership  interests  in the Note and the  Mortgages,
including, without limitation, to:

               (a)  (i)  provide  such  financial  and  other  information  with
                    respect to the Property,  the Borrower and the Manager, (ii)
                    provide  budgets  relating  to the  Property  (iii)  provide
                    historical  financial  performance  statements  verified  by
                    third  party  auditors  and  prepared  in  accordance   with
                    criteria  and  procedures  agreed in advance by Borrower and
                    Lender,  and  (iv) to  perform  or  permit  or  cause  to be
                    performed or  permitted  such site  inspection,  appraisals,
                    market studies, environmental reviews and reports (Phase I's
                    and, if appropriate,  Phase II's),  engineering  reports and
                    other due diligence  investigations of the Property,  as may
                    be  reasonably  requested  by the  holder of the Note or the
                    Rating  Agencies or as may be  necessary or  appropriate  in
                    connection   with   the   Securitization    (the   "Provided
                    Information"),  together,  if  customary,  with  appropriate
                    verification  and/or  consents of the  Provided  Information
                    through  letters  of  auditors  or  opinions  of  counsel of
                    independent  attorneys  acceptable  to the  Lender  and  the
                    Rating Agencies;

               (b)  at Borrower's  expense,  cause  counsel to render  opinions,
                    which may be  relied  upon by the  holder  of the Note,  the
                    Rating  Agencies and their  respective  counsel,  agents and
                    representatives,   as   to   non-consolidation,   fraudulent
                    conveyance,  and true sale and/or lease or any other opinion
                    customary in securitization transactions with respect to the
                    Property and Borrower and its affiliates,  which counsel and
                    opinions shall be reasonably  satisfactory  to the holder of
                    the Note and the Rating Agencies;

               (c)  make such  representations  and warranties as of the closing
                    date of the  Securitization  with  respect to the  Property,
                    Borrower, and the Loan Documents as are customarily provided
                    in  securitization  transactions  and as  may be  reasonably
                    requested  by the holder of the Note or the Rating  Agencies
                    and   consistent    with   the   facts   covered   by   such
                    representations  and  warranties  as they  exist on the date
                    thereof,  including the  representations and warranties made
                    in the Loan Documents; and

                                      -84-
<PAGE>

               (d)  execute  such   amendments   to  the  Loan   Documents   and
                    organizational  documents,  enter into a  lockbox,  clearing
                    account or similar arrangement with respect to the Rents and
                    establish  and fund such reserve funds  (including,  without
                    limitation,  reserve  funds  for  deferred  maintenance  and
                    capital  improvements)  as may be requested by the holder of
                    the Note or the Rating  Agencies or  otherwise to effect the
                    Securitization;  provided,  however, that the Borrower shall
                    not be required to modify or amend any Loan Document if such
                    modification  or  amendment  would (i) change  the  interest
                    rate, the stated  maturity or the  amortization of principal
                    set  forth in the  Note,  or (ii)  modify or amend any other
                    material economic term of the Loan.

          Borrowers  shall be responsible  for reasonable  third party costs and
expenses  incurred  by Lender  in  connection  with  Borrower's  complying  with
requests made under this Section 9.1 provided, however, the cost for updating of
reports  submitted  by  Borrower to Lender as of the date  hereof  which  become
outdated because of the passage of time shall be at the cost of Lender. Borrower
shall bear no share of the costs of Lender in the Securitization.

          Section 9.2  Securitization Indemnification.

               (a) Borrowers understand that certain of the Provided Information
may be included in disclosure  documents in connection with the  Securitization,
including,  without limitation,  a prospectus,  prospectus supplement or private
placement memorandum (each, a "Disclosure Document") and may also be included in
filings with the Securities and Exchange  Commission  pursuant to the Securities
Act of 1933, as amended (the  "Securities  Act"), or the Securities and Exchange
Act of 1934, as amended (the "Exchange  Act"),  or provided or made available to
investors or prospective investors in the Securities,  the Rating Agencies,  and
service  providers  relating  to the  Securitization.  In  the  event  that  the
Disclosure  Document  is  required  to be  revised  prior  to  the  sale  of all
Securities, the Borrowers will cooperate with the holder of the Note in updating
the Disclosure Document by providing all current  information  necessary to keep
the Disclosure Document accurate and complete in all material respects.

               (b) Borrowers  agree to provide in connection  with each of (i) a
preliminary and a private  placement  memorandum or (ii) a preliminary and final
prospectus  or  prospectus   supplement,   as  applicable,   an  indemnification
certificate  (A)  certifying  that the Borrowers  have  carefully  examined such
memorandum or  prospectus,  as applicable,  including  without  limitation,  the
sections  entitled  "Special  Considerations,"  "Description  of the Mortgages,"
"Description of the Mortgage Loans and Mortgaged  Property," "The Manager," "The
Borrowers" and "Certain  Legal Aspects of the Mortgage  Loan," and such sections
(and  any  other  sections  reasonably  requested)  do not  contain  any  untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances  under which they
were made, not  misleading,  (B)  indemnifying  Lender (and for purposes of this
Section 9.2, Lender  hereunder  shall include its officers and  directors),  the
affiliate of Lehman  Brothers Inc.  ("Lehman")  that has filed the  registration
statement relating to the securitization (the "Registration Statement"), each of
its directors, each of its officers

                                      -85-
<PAGE>

who have  signed  the  Registration  Statement  and each  person or  entity  who
controls the affiliate within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively,  the "Lehman Group"),  and Lehman,
each of its directors and each person who controls  Lehman within the meaning of
Section  15  of  the   Securities  Act  and  Section  20  of  the  Exchange  Act
(collectively,  the  "Underwriter  Group")  for any losses,  claims,  damages or
liabilities (collectively,  the "Liabilities") to which Lender, the Lehman Group
or the Underwriter Group may become subject insofar as the Liabilities arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material  fact  contained in such sections or arise out of or are based upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated in such  sections or  necessary in order to make the  statements  in such
sections  or in light of the  circumstances  under  which  they were  made,  not
misleading  and (C)  agreeing  to  reimburse  Lender,  the Lehman  Group and the
Underwriter Group for any legal or other expenses  reasonably incurred by Lender
and Lehman in  connection  with  investigating  or  defending  the  Liabilities;
provided,  however,  that the  Borrowers  will be liable in any such case  under
clauses (B) or (C) above only to the extent that any such loss claim,  damage or
liability  arises out of or is based upon any such untrue  statement or omission
made therein in reliance upon and in conformity  with  information  furnished to
Lender by or on behalf of the Borrowers in connection  with the  preparation  of
the memorandum or prospectus or in connection with the underwriting of the debt,
including, without limitation,  financial statements of the Borrowers, operating
statements,  rent rolls,  environmental  site  assessment  reports and  property
condition reports with respect to the Property. This indemnity agreement will be
in addition to any liability which Borrowers may otherwise have.  Moreover,  the
indemnification  provided  for in Clauses (B) and (C) above  shall be  effective
whether or not an indemnification certificate described in (A) above is provided
and  shall  be  applicable  based  on  information  previously  provided  by the
Borrowers   or  their   Affiliates   if  the   Borrowers   do  not  provide  the
indemnification certificate.

               (c) In connection with filings under the Exchange Act,  Borrowers
agree to indemnify (i) Lender,  the Lehman Group and the  Underwriter  Group for
Liabilities  to which  Lender,  the Lehman  Group or the  Underwriter  Group may
become  subject  insofar as the  Liabilities  arise out of or are based upon the
omission or alleged  omission to state in the  Provided  Information  a material
fact  required  to be stated in the  Provided  Information  in order to make the
statements  in the Provided  Information,  in light of the  circumstances  under
which they were made not misleading and (ii) reimburse Lender,  the Lehman Group
or the Underwriter Group for any legal or other expenses  reasonably incurred by
Lender,  the Lehman Group or the Underwriter  Group in connection with defending
or investigating the Liabilities.

               (d) Promptly  after  receipt by an  indemnified  party under this
Section 9.2 of notice of the commencement of any action,  such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under  this  Section  9.2,  notify  the  indemnifying  party in  writing  of the
commencement  thereof, but the omission to so notify the indemnifying party will
not relieve the  indemnifying  party from any liability  which the  indemnifying
party may have to any  indemnified  party  hereunder  except to the extent  that
failure to notify causes prejudice to the indemnifying  party. In the event that
any action is brought  against  any  indemnified  party,  and its  notifies  the
indemnifying party of the

                                      -86-
<PAGE>

commencement thereof, the indemnifying party will be entitled,  jointly with any
other indemnifying  party, to participate therein and, to the extent that it (or
they) may elect by written notice  delivered to the  indemnified  party promptly
after receiving the aforesaid notice from such indemnified  party, to assume the
defense  thereof with counsel  satisfactory  to such  indemnified  party.  After
notice from the indemnifying  party to such indemnified party under this Section
9.2 the indemnifying  party shall be responsible for any legal or other expenses
subsequently  incurred by such indemnified  party in connection with the defense
thereof other than reasonable costs of investigation;  provided, however, if the
defendants  in any such  action  include  both  the  indemnified  party  and the
indemnifying  party and the indemnified  party shall have  reasonably  concluded
that  there are any legal  defenses  available  to it and/or  other  indemnified
parties  that  are  different  from or  additional  to  those  available  to the
indemnifying  party,  the  indemnified  party or parties shall have the right to
select  separate  counsel  to  assert  such  legal  defenses  and  to  otherwise
participate in the defense of such action on behalf of such indemnified party to
parties.  The  indemnifying  party shall not be liable for the  expenses of more
than one such separate counsel unless an indemnified party shall have reasonably
concluded  that there may be legal  defenses  available to it that are different
from or additional to those available to another indemnified party.

               (e) In order to provide for just and  equitable  contribution  in
circumstances in which the indemnity  agreements  provided for in Section 9.2(b)
or (c) is or are for any reason held to be unenforceable by an indemnified party
in respect of any losses,  claims,  damages or liabilities (or action in respect
thereof)  referred  to therein  which would  otherwise  be  indemnifiable  under
Section  9.2(b) or (c), the  indemnifying  party shall  contribute to the amount
paid or payable by the  indemnified  party as a result of such  losses,  claims,
damages or liabilities (or action in respect thereof);  provided,  however, that
no person guilty of fraudulent  misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any person
who was not guilty of such  fraudulent  misrepresentation.  In  determining  the
amount of  contribution  to which  the  respective  parties  are  entitled,  the
following  factors shall be  considered:  (i) Lehman's and  Borrowers'  relative
knowledge and access to information  concerning the matter with respect to which
claim was asserted; (ii) the opportunity to correct and prevent any statement or
omission;  and (iii)  any  other  equitable  considerations  appropriate  in the
circumstances.  Lender and Borrowers hereby agree that it would not be equitable
if the amount of such  contribution  were  determined  by pro rata or per capita
allocation.

               (f) The  liabilities and obligations of both Borrowers and Lender
under this Section 9.2 shall survive the  termination  of this Agreement and the
satisfaction and discharge of the Debt.

          Section 9.3  Rating Surveillance.

          The  Borrowers  will  retain the  Rating  Agencies  to provide  rating
surveillance  services  on any  certificates  issued  in a  Securitization.  The
expense of such rating surveillance  services (the "Rating Surveillance Charge")
will be paid by Lender.

                                      -87-
<PAGE>

          Section 9.4  Exculpation.

          Subject to the  qualifications  below,  Lender  shall not  enforce the
liability  and  obligation  of Borrowers to perform and observe the  obligations
contained in the Note, this Agreement, the Mortgages or the other Loan Documents
by any action or proceeding  wherein a money  judgment  shall be sought  against
Borrowers,  except that  Lender may bring a  foreclosure  action,  an action for
specific  performance  or any other  appropriate  action or proceeding to enable
Lender to enforce and realize upon its interest under the Note,  this Agreement,
the Mortgages and the other Loan  Documents,  or in the Property,  the Rents, or
any other collateral  given to Lender pursuant to the Loan Documents;  provided,
however,  that, except as specifically provided herein, any judgment in any such
action or  proceeding  shall be jointly and  severally  enforceable  against the
Borrowers  only to the extent of  Borrowers'  interest in the  Property,  in the
Rents and in any other collateral given to Lender,  and Lender, by accepting the
Note, this Agreement, the Mortgages and the other Loan Documents, agrees that it
shall not sue for, seek or demand any deficiency  judgment against the Borrowers
in any such action or proceeding under or by reason of or under or in connection
with the Note,  this Agreement,  the Mortgages or the other Loan Documents.  The
provisions of this section shall not, however, (a) constitute a waiver,  release
or  impairment  of any  obligation  evidenced  or  secured  by  any of the  Loan
Documents;  (b)  impair  the right of Lender  to name the  Borrowers  as a party
defendant  in any  action  or suit for  foreclosure  and sale  under  any of the
Mortgages;  (c) affect the validity or enforceability of or any guaranty made in
connection  with  the  Loan or any of the  rights  and  remedies  of the  Lender
thereunder;  (d)  impair  the right of Lender to  obtain  the  appointment  of a
receiver;  (e) impair the enforcement of any of the  Assignments of Leases;  (f)
constitute a prohibition  against Lender to seek a deficiency  judgment  against
the Borrowers but only in order to fully realize the security granted by each of
the Mortgages or to commence any other appropriate action or proceeding in order
for  Lender  to  exercise  its  remedies  against  all of the  Property;  or (g)
constitute  a waiver  of the  right of  Lender  to  enforce  the  liability  and
obligation  of the  Borrowers,  by money  judgment or otherwise but only, to the
extent of any loss, damage, cost, expense,  liability, claim or other obligation
incurred by Lender  (including  attorneys' fees and costs  reasonably  incurred)
arising out of or in connection with the following:

                     (i)    fraud or intentional  misrepresentation by Borrowers
                            or any guarantor in connection with the Loan;

                     (ii)   the  gross  negligence  or  willful   misconduct  of
                            Borrowers;

                     (iii)  the breach of any representation, warranty, covenant
                            or  indemnification  provision in the  Environmental
                            Indemnity   or   in   the    Mortgages    concerning
                            environmental   laws,   hazardous   substances   and
                            asbestos  and any  indemnification  of  Lender  with
                            respect thereto in either document;

                     (iv)   the removal or disposal of any  material  portion of
                            the Property after an Event of Default;

                                      -88-
<PAGE>

                     (v)    the misapplication or conversion by Borrowers of (A)
                            any  insurance  proceeds paid by reason of any loss,
                            damage  or  destruction  to the  Property,  (B)  any
                            awards or other amounts  received in connection with
                            the   condemnation  of  all  or  a  portion  of  the
                            Property,  or (C) any  Rents  following  an Event of
                            Default;

                     (vi)   failure to pay  charges  for labor or  materials  or
                            other  charges  that can create liens on any portion
                            of the Property;

                     (vii)  any security deposits, advance deposits or any other
                            deposits  collected  with  respect  to the  Property
                            which are not delivered to Lender upon a foreclosure
                            of the Property or action in lieu thereof, except to
                            the extent any such  security  deposits were applied
                            in accordance  with the terms and  conditions of any
                            of the Leases prior to the  occurrence  of the Event
                            of  Default  that gave rise to such  foreclosure  or
                            action in lieu thereof; and

                     (viii) Borrowers'  indemnifications  of Lender set forth in
                            Section 9.2 (Securitization Indemnification) hereof,
                            and in  Section  9.2  (Mortgage  Transfer  Tax)  and
                            Section   9.3   (ERISA   Indemnification)   of   the
                            Mortgage.;

          Notwithstanding  anything to the contrary in this Agreement,  the Note
or any of the Loan Documents,  (A) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a),  506(b),  1111(b) or any other
provisions  of the U.S.  Bankruptcy  Code to file a claim for the full amount of
the Debt  secured by the  Mortgages  or to  require  that all  collateral  shall
continue to secure all of the Debt owing to Lender in  accordance  with the Loan
Documents,  and (B) the Debt shall be fully  recourse  to the  Borrowers  in the
event that:  (i) the first full monthly  payment of principal and interest under
the Note is not paid when due; (ii) Borrowers fail to permit on-site inspections
of the Property,  fails to provide financial information,  fails to maintain its
status as a single  purpose  entity or fails to appoint a new  property  manager
upon the request of Lender  after an Event of Default,  each as required by, and
in  accordance  with the terms and  provisions  of, this Loan  Agreement and the
Mortgages;  (iii) Borrowers fail to obtain Lender's prior written consent to any
subordinate  financing or other voluntary lien encumbering the Property; or (iv)
Borrowers  fail to obtain  Lender's  prior  written  consent to any  assignment,
transfer,  or conveyance of the Property or any interest  therein as required by
the Mortgage or hereunder.

          Section 9.5 Termination of Manager.

          If (a) at any time,  the Debt Service  Coverage Ratio for the Property
for the immediately preceding twelve (12) month period is less than 1.20 to 1.0,
(b) the amounts evidenced by the Note have been accelerated  pursuant to Section
8.1(b) hereof or (c) at the  Anticipated  Repayment Date, the Debt is not repaid
in full, the Borrowers shall, at the request of Lender, terminate the Management
Agreement(s)  and replace the Manager  with a  manager(s)  approved by Lender on
terms and conditions satisfactory to Lender, it being

                                      -89-
<PAGE>

understood and agreed that the management  fee for such  replacement  manager(s)
shall not exceed then prevailing market rates. Notwithstanding the foregoing, if
the reason for termination of the Manager is subsection (a) above, Borrowers may
elect from time to time to provide  additional  collateral  for a portion of the
Loan such that, if the outstanding  principal  balance of the Loan were equal to
such  principal  balance  less the lower of (as  determined  by Lender) the face
amount or fair  market  value of the  additional  collateral,  the Debt  Service
Coverage  Ratio (after  adjusting the Debt Service  accordingly to reflect same)
would  equal or  exceed  1.20 to 1.0,  in  which  case no  termination  would be
effective.  Any such  additional  collateral  would  not be  released  until the
Borrowers have  demonstrated a Debt Service  Coverage Ratio in excess of 1.20 to
1.0  without  taking into  account the  additional  collateral.  All  additional
collateral  must be U.S.  Obligations and must be accompanied by such additional
security  agreements,  financing  statements and other documents or instruments,
including  opinions of Borrowers'  counsel,  which in the reasonable  opinion of
Lender and its counsel  would be  necessary  or  advisable to create in Lender a
first perfected security interest in the additional collateral.  In addition and
as a condition to the posting of such additional  collateral,  Lender shall have
received written affirmation from the Rating Agencies that the credit ratings of
the  Securities  immediately  prior  to  such  posting  will  not be  qualified,
downgraded or withdrawn as a result of such posting,  which  affirmation  may be
granted or withheld in the Rating Agencies' sole and absolute discretion.

                  Section 9.6  Servicer.

                  At the  option  of  Lender,  the  Loan  may be  serviced  by a
servicer/trustee (the "Servicer") selected by Lender and Lender may delegate all
or any portion of its  responsibilities  under this Agreement and the other Loan
Documents  to the Servicer  pursuant to a servicing  agreement  (the  "Servicing
Agreement")  between Lender and Servicer.  Borrower shall not be responsible for
payment of the fees due to the Servicer under the Servicing Agreement.

          X.  MISCELLANEOUS

          Section 10.1 Survival.

          This  Agreement and all  covenants,  agreements,  representations  and
warranties made herein and in the certificates  delivered  pursuant hereto shall
survive  the  making by Lender of the Loan and the  execution  and  delivery  to
Lender of the Note,  and shall  continue in full force and effect so long as all
or any of the Debt is outstanding and unpaid unless a longer period is expressly
set forth herein or in the other Loan Documents.  Whenever in this Agreement any
of the parties hereto is referred to, such reference  shall be deemed to include
the legal representatives,  successors and assigns of such party. All covenants,
promises and  agreements in this  Agreement,  by or on behalf of the  Borrowers,
shall inure to the benefit of the legal representatives,  successors and assigns
of Lender.

                                      -90-
<PAGE>

          Section 10.2 Lender's Discretion.

          Whenever pursuant to this Agreement,  Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be satisfactory
to Lender,  the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not  satisfactory  shall (except as is
otherwise  specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.

          Section 10.3 Governing Law.

          (A) THIS  AGREEMENT WAS  NEGOTIATED IN THE STATE OF NEW YORK, AND MADE
BY LENDER  AND  ACCEPTED  BY EACH  BORROWER  IN THE  STATE OF NEW YORK,  AND THE
PROCEEDS OF THE NOTE DELIVERED  PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK,  WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL  RELATIONSHIP  TO THE
PARTIES AND TO THE UNDERLYING  TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING,  WITHOUT  LIMITING  THE  GENERALITY  OF  THE  FOREGOING,  MATTERS  OF
CONSTRUCTION,  VALIDITY AND  PERFORMANCE,  THIS  AGREEMENT  AND THE  OBLIGATIONS
ARISING  HEREUNDER  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT  REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA,  EXCEPT THAT AT ALL TIMES THE  PROVISIONS  FOR THE
CREATION,  PERFECTION,  AND  ENFORCEMENT  OF THE  LIENS AND  SECURITY  INTERESTS
CREATED  PURSUANT  HERETO  AND  PURSUANT  TO THE OTHER LOAN  DOCUMENTS  SHALL BE
GOVERNED  BY AND  CONSTRUED  ACCORDING  TO THE LAW OF THE  STATE  IN  WHICH  THE
APPLICABLE  INDIVIDUAL  PROPERTY IS LOCATED,  IT BEING  UNDERSTOOD  THAT, TO THE
FULLEST EXTENT  PERMITTED BY THE LAW OF SUCH STATE,  THE LAW OF THE STATE OF NEW
YORK SHALL  GOVERN THE  CONSTRUCTION,  VALIDITY AND  ENFORCEABILITY  OF ALL LOAN
DOCUMENTS AND ALL OF THE  OBLIGATIONS  ARISING  HEREUNDER OR THEREUNDER.  TO THE
FULLEST  EXTENT  PERMITTED BY LAW,  EACH  BORROWER  HEREBY  UNCONDITIONALLY  AND
IRREVOCABLY  WAIVES ANY CLAIM TO ASSERT  THAT THE LAW OF ANY OTHER  JURISDICTION
GOVERNS THIS  AGREEMENT AND THE NOTE,  AND THIS  AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

          (B) ANY LEGAL SUIT,  ACTION OR PROCEEDING  AGAINST  LENDER OR BORROWER
ARISING  OUT OF OR  RELATING  TO  THIS  AGREEMENT  MAY  AT  LENDER'S  OPTION  BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,  COUNTY OF NEW
YORK, AND BORROWERS WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR

                                      -91-
<PAGE>

HEREAFTER  HAVE BASED ON VENUE  AND/OR  FORUM NON  CONVENIENS  OF ANY SUCH SUIT,
ACTION  OR  PROCEEDING,   AND  BORROWER  HEREBY   IRREVOCABLY   SUBMITS  TO  THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT,  ACTION OR PROCEEDING.  BORROWERS DO
HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEMS AT 1633 BROADWAY,  NEW YORK,
NEW YORK 10019 AS ITS AUTHORIZED  AGENT TO ACCEPT AND  ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS  WHICH MAY BE SERVED IN ANY SUCH SUIT,  ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,  NEW YORK, AND AGREES THAT
SERVICE OF PROCESS  UPON SAID AGENT AT SAID  ADDRESS AND WRITTEN  NOTICE OF SAID
SERVICE MAILED OR DELIVERED TO BORROWERS IN THE MANNER  PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWERS, IN ANY SUCH
SUIT,  ACTION OR PROCEEDING  IN THE STATE OF NEW YORK.  BORROWERS (I) SHALL GIVE
PROMPT  NOTICE  TO LENDER  OF ANY  CHANGED  ADDRESS  OF THEIR  AUTHORIZED  AGENT
HEREUNDER,  (II) MAY AT ANY TIME AND FROM TIME TO TIME  DESIGNATE  A  SUBSTITUTE
AUTHORIZED  AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH  SUBSTITUTE  AGENT
AND  OFFICE  SHALL BE  DESIGNATED  AS THE  PERSON  AND  ADDRESS  FOR  SERVICE OF
PROCESS),  AND  (III)  SHALL  PROMPTLY  DESIGNATE  SUCH A  SUBSTITUTE  IF  THEIR
AUTHORIZED  AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.

          Section 10.4 Modification, Waiver in Writing.

          No  modification,  amendment,  extension,  discharge,  termination  or
waiver of any provision of this Agreement,  or of the Note, or of any other Loan
Document,  nor consent to any  departure  by Borrowers  therefrom,  shall in any
event be  effective  unless the same  shall be in a writing  signed by the party
against whom  enforcement  is sought,  and then such waiver or consent  shall be
effective only in the specific instance,  and for the purpose,  for which given.
Except as  otherwise  expressly  provided  herein,  no  notice  to, or demand on
Borrowers,  shall  entitle  Borrowers to any other or future notice or demand in
the same, similar or other circumstances.

          Section 10.5 Delay Not a Waiver.

          Neither any  failure nor any delay on the part of Lender in  insisting
upon  strict  performance  of any term,  condition,  covenant or  agreement,  or
exercising any right, power, remedy or privilege hereunder, or under the Note or
under  any  other  Loan  Document,  or any other  instrument  given as  security
therefor, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise,  or the exercise of
any other right,  power, remedy or privilege.  In particular,  and not by way of
limitation,  by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document,  Lender shall not be deemed
to have waived any right either to require  prompt payment when due of all other
amounts due under this Agreement, the Note or

                                      -92-
<PAGE>

the other Loan  Documents,  or to declare a default for failure to effect prompt
payment of any such other amount.

          Section 10.6  Notices.

          All notices,  consents,  approvals and requests  required or permitted
hereunder or under any other Loan  Document  shall be given in writing and shall
be  effective  for all purposes if hand  delivered  or sent by (a)  certified or
registered  United  States  mail,  postage  prepaid,  or (b)  expedited  prepaid
delivery service,  either commercial or United States Postal Service, with proof
of  attempted  delivery,  and by  telecopier  (with  answer back  acknowledged),
addressed as follows (or at such other address and person as shall be designated
from time to time by any party hereto,  as the case may be, in a written  notice
to the other parties hereto in the manner provided for in this Section):

                  If to Lender:

                           Lehman Brothers Holdings Inc.,
                                    doing business as Lehman Capital,
                                    a division of Lehman Brothers Holding Inc.
                           Three World Financial Center, 12th Floor
                           Commercial Mortgage Group
                           New York, New York  10285
                           Attention:  Scott Weiner
                           Facsimile No.:  (212) 528-3746

                  with a copy to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, New York  10038
                           Attention:  John M. Zizzo, Esq.
                           Facsimile No.:  (212) 504-6666

                  If to Borrowers or any Borrower:

                           care of: Grove Property Trust
                           598 Asylum Avenue
                           Hartford, Connecticut 06105
                           Attention:  Joseph R. LaBrosse
                           Telecopier:  (860) 947-6960

                                      -93-
<PAGE>

                  with a copy to:

                           Cummings & Lockwood
                           Four Stamford Plaza
                           PO Box 120
                           Stamford, CT 06904
                           Telecopier:  (203) 351-4534
                           Attention:  Catherine A. Birch, Esq.

A notice shall be deemed to have been given:  in the case of hand  delivery,  at
the  time of  delivery;  in the  case of  registered  or  certified  mail,  when
delivered or the first  attempted  delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy,  upon the first attempted delivery on a
Business Day.

          Section 10.7  Trial by Jury.

          BOTH LENDER AND BORROWERS HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY,  AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT  THAT ANY SUCH RIGHT SHALL NOW OR  HEREAFTER  EXIST WITH REGARD TO
THE LOAN  DOCUMENTS,  OR ANY  CLAIM,  COUNTERCLAIM  OR OTHER  ACTION  ARISING IN
CONNECTION  THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND  VOLUNTARILY  BY BOTH LENDER AND  BORROWERS,  AND IS  INTENDED TO  ENCOMPASS
INDIVIDUALLY  EACH  INSTANCE  AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWERS.

          Section 10.8  Headings.

          The Article and/or Section  headings and the Table of Contents in this
Agreement are included  herein for  convenience  of reference only and shall not
constitute a part of this Agreement for any other purpose.

          Section 10.9  Severability.

          Wherever   possible,   each  provision  of  this  Agreement  shall  be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if any provision of this  Agreement  shall be prohibited by or invalid under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

                                      -94-
<PAGE>

          Section 10.10 Preferences.

          Lender  shall  have the  continuing  and  exclusive  right to apply or
reverse and reapply any and all payments by the  Borrowers to any portion of the
obligations of the Borrowers  hereunder.  To the extent Borrowers make a payment
or  payments  to Lender,  which  payment or  proceeds  or any part  thereof  are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or  required  to be repaid to a trustee,  receiver  or any other party under any
bankruptcy  law, state or federal law, common law or equitable  cause,  then, to
the extent of such payment or proceeds  received,  the obligations  hereunder or
part  thereof  intended to be  satisfied  shall be revived and  continue in full
force and  effect,  as if such  payment or  proceeds  had not been  received  by
Lender.

          Section 10.11  Waiver of Notice.

          Borrowers  shall  not  be  entitled  to  any  notices  of  any  nature
whatsoever  from Lender except with respect to matters for which this  Agreement
or the other Loan Documents specifically and expressly provide for the giving of
notice by Lender to the  Borrowers  and except with respect to matters for which
Borrowers are not, pursuant to applicable Legal Requirements, permitted to waive
the giving of notice.  Borrowers hereby expressly waive the right to receive any
notice from Lender with  respect to any matter for which this  Agreement  or the
other Loan Documents do not specifically and expressly provide for the giving of
notice by Lender to the Borrowers.

          Section 10.12  Remedies of Borrowers.

          In the event that a claim or  adjudication  is made that Lender or its
agents have acted unreasonably or unreasonably  delayed acting in any case where
by law or under  this  Agreement  or the other  Loan  Documents,  Lender or such
agent, as the case may be, has an obligation to act reasonably or promptly, each
Borrower  agrees  that  neither  Lender nor its  agents  shall be liable for any
monetary  damages,  and  each  Borrower's  sole  remedies  shall be  limited  to
commencing an action joined by each of the Borrowers  seeking  injunctive relief
or declaratory judgment.  The parties hereto agree that any action or proceeding
to determine whether Lender has acted reasonably shall be determined by a single
action joined by all of the Borrowers seeking declaratory judgment.

          Section 10.13  Expenses; Indemnity.

               (a) Borrowers  covenant and agree to pay, or if Borrowers fail to
pay to  reimburse,  Lender  upon  receipt of written  notice from Lender for all
reasonable  costs  and  expenses  (including   reasonable  attorneys'  fees  and
disbursements)  incurred  by  Lender  in  connection  with (i) the  preparation,
negotiation,  execution  and  delivery  of this  Agreement  and the  other  Loan
Documents  and the  consummation  of the  transactions  contemplated  hereby and
thereby  and all the  costs  of  furnishing  all  opinions  by  counsel  for the
Borrowers  (including  without limitation any opinions requested by Lender as to
any legal matters  arising under this Agreement or the other Loan Documents with
respect to the Property);  (ii) Borrowers' ongoing performance of and compliance
with Borrowers' respective agreements and covenants

                                      -95-
<PAGE>

contained  in this  Agreement  and the other  Loan  Documents  on its part to be
performed  or  complied  with  after  the  Closing  Date,   including,   without
limitation, confirming compliance with environmental and insurance requirements;
(iii)  Lender's  ongoing  performance  and  compliance  with all  agreements and
conditions  contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date;  (iv) the  negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other  modifications  to this  Agreement and the other Loan Documents
and any other documents or matters requested by Lender; (v) securing  Borrowers'
compliance  with any  requests  made  pursuant to Section  9.1 hereof;  (vi) the
filing and recording fees and expenses,  title insurance and reasonable fees and
expenses of counsel for  providing to Lender all required  legal  opinions,  and
other similar expenses incurred in creating and perfecting the Liens in favor of
Lender pursuant to this Agreement and the other Loan Documents;  (vii) enforcing
or preserving any rights,  in response to third party claims or the  prosecuting
or  defending  of any action or  proceeding  or other  litigation,  in each case
against,  under or  affecting  the  Borrowers,  this  Agreement,  the other Loan
Documents,  the Property,  or any other  security given for the Loan; and (viii)
enforcing any  obligations  of or collecting any payments due from the Borrowers
under this  Agreement,  the other Loan Documents or with respect to the Property
or  in  connection  with  any  refinancing  or   restructuring   of  the  credit
arrangements  provided  under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings;  provided, however, that the Borrowers
shall not be liable for the payment of any such costs and expenses to the extent
the same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct  of Lender.  Any cost and  expenses  due and payable to Lender may be
paid from any amounts in the Lockbox Account.

               (b) Borrowers  shall  indemnify,  defend and hold harmless Lender
from and against any and all other liabilities,  obligations,  losses,  damages,
penalties,  actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including,  without limitation, the reasonable
fees  and   disbursements   of  counsel  for  Lender  in  connection   with  any
investigative,  administrative or judicial  proceeding  commenced or threatened,
whether or not Lender shall be designated a party thereto),  that may be imposed
on, incurred by, or asserted against Lender in any manner relating to or arising
out of (i) any  breach  by the  Borrowers  of their  obligations  under,  or any
material  misrepresentation  by Borrowers  contained  in, this  Agreement or the
other Loan  Documents,  or (ii) the use or intended  use of the  proceeds of the
Loan (collectively, the "Indemnified Liabilities");  provided, however, that the
Borrowers  shall not have any obligation to Lender  hereunder to the extent that
such  Indemnified  Liabilities  arise from the gross  negligence,  illegal acts,
fraud or willful  misconduct of Lender.  To the extent that the  undertaking  to
indemnify,  defend and hold harmless set forth in the preceding  sentence may be
unenforceable because it violates any law or public policy,  Borrowers shall pay
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified  Liabilities  incurred by the
Lender.

                                      -96-
<PAGE>

          Section 10.14 Schedules Incorporated.

          The Schedules annexed hereto are hereby  incorporated herein as a part
of this Agreement with the same effect as if set forth in the body hereof.

          Section 10.15 Offsets, Counterclaims and Defenses.

          Any assignee of Lender's  interest in and to this Agreement,  the Note
and the other Loan Documents  shall take the same free and clear of all offsets,
counterclaims  or  defenses  which are  unrelated  to such  documents  which the
Borrowers may otherwise have against any assignor of such documents, and no such
unrelated  counterclaim  or  defense  shall be  interposed  or  asserted  by the
Borrowers in any action or  proceeding  brought by any such  assignee  upon such
documents and any such right to interpose or assert any such  unrelated  offset,
counterclaim  or defense in any such action or  proceeding  is hereby  expressly
waived by the Borrowers.

          Section 10.16 No Joint Venture or Partnership;
                        No Third Party Beneficiaries.

               (a) Borrowers and Lender  intend that the  relationships  created
hereunder  and under the other Loan  Documents  be solely that of  borrower  and
lender.  Nothing  herein or  therein  is  intended  to  create a joint  venture,
partnership,  tenancy-in-common, or joint tenancy relationship between Borrowers
and Lender nor to grant Lender any  interest in the Property  other than that of
mortgagee, beneficiary or lender.

               (b) This  Agreement  and the other Loan  Documents are solely for
the benefit of Lender and the Borrowers and nothing  contained in this Agreement
or the other Loan Documents shall be deemed to confer upon anyone other than the
Lender and the Borrowers any right to insist upon or to enforce the  performance
or  observance  of any of the  obligations  contained  herein  or  therein.  All
conditions to the  obligations  of Lender to make the Loan hereunder are imposed
solely and  exclusively for the benefit of Lender and no other Person shall have
standing to require  satisfaction  of such  conditions in accordance  with their
terms or be  entitled  to assume that Lender will refuse to make the Loan in the
absence of strict  compliance  with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or
all of which may be freely  waived in whole or in part by Lender if, in Lender's
sole discretion, Lender deems it advisable or desirable to do so.

          Section 10.17 Publicity.

          All news releases,  publicity or advertising by the Borrowers or their
Affiliates  through any media  intended to reach the general public which refers
to the Loan Documents or the financing  evidenced by the Loan Documents,  to the
Lender, Lehman, or any of their Affiliates shall be subject to the prior written
approval of Lender. The foregoing  provision shall not be construed to limit any
obligation of Borrowers or entities controlling Borrowers in

                                      -97-
<PAGE>

respect of any filing required by the Securities and Exchange  Commission or any
other securities regulator.

          Section 10.18  Cross-Default; Cross-Collateralization;
                         Waiver of Marshaling of Assets.

               (a) The Borrowers each acknowledges that Lender has made the Loan
to the Borrowers upon the security of its collective interests in their Property
and in reliance  upon the  aggregate of the  Property  taken  together  being of
greater  value  as  collateral  security  than  the  sum of the  Property  taken
separately.   The   Borrowers   agree  that  the   Mortgages  are  and  will  be
cross-collateralized and cross-defaulted with each other so that (i) an Event of
Default  under any of the Mortgages  shall  constitute an Event of Default under
each of the other  Mortgages  which  secure  the Note;  (ii) an Event of Default
under the Note or this Loan Agreement shall constitute an Event of Default under
each Mortgage; and (iii) each Mortgage shall constitute security for the Note as
if a single  blanket lien were placed on all of the Property as security for the
Note.

               (b) To the  fullest  extent  permitted  by  law,  Borrowers,  for
themselves and their successors and assigns, waive all rights to a marshaling of
the assets of any Borrower, the Borrowers collectively,  Borrowers' partners and
others with  interests in any  Borrower,  and of the  Property,  or to a sale in
inverse  order of alienation  in the event of  foreclosure  of all or any of the
Mortgages,  and agrees not to assert any right under any laws  pertaining to the
marshaling  of  assets,  the  sale in  inverse  order of  alienation,  homestead
exemption,  the  administration  of estates of  decedents,  or any other matters
whatsoever  to  defeat,  reduce  or affect  the  right of Lender  under the Loan
Documents to a sale of the Property for the  collection  of the Debt without any
prior or  different  resort  for  collection  or of the  right of  Lender to the
payment of the Debt out of the net  proceeds of the  Property in  preference  to
every other claimant whatsoever.  In addition, the Borrowers, for themselves and
their successors and assigns, waive in the event of foreclosure of any or all of
the Mortgages,  any equitable right  otherwise  available to the Borrowers which
would require the separate sale of the Property or require Lender to exhaust its
remedies  against any  Individual  Property or any  combination  of the Property
before  proceeding  against  any other  Individual  Property or  combination  of
Property;  and further in the event of such  foreclosure the Borrowers do hereby
expressly consent to and authorize, at the option of the Lender, the foreclosure
and sale either separately or together of any combination of the Property.

          Section 10.19  Waiver of Counterclaim.

          Borrowers hereby waive the right to assert a counterclaim,  other than
a compulsory  counterclaim,  in any action or proceeding  brought  against it by
Lender or its agents.

          Section 10.20  Conflict; Construction of Documents; Reliance.

          In the  event of any  conflict  between  the  provisions  of this Loan
Agreement  and any of the other  Loan  Documents,  the  provisions  of this Loan
Agreement shall control. The

                                      -98-
<PAGE>

parties hereto  acknowledge that they were  represented by competent  counsel in
connection  with the  negotiation,  drafting and execution of the Loan Documents
and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrowers  acknowledge that,
with respect to the Loan,  Borrowers shall rely solely on their own judgment and
advisors  in  entering  into the  Loan  without  relying  in any  manner  on any
statements,   representations  or  recommendations  of  Lender  or  any  parent,
subsidiary or affiliate of Lender. Lender shall not be subject to any limitation
whatsoever  in the exercise of any rights or remedies  available to it under any
of the Loan Documents or any other  agreements or  instruments  which govern the
Loan by virtue of the ownership by it or any parent,  subsidiary or affiliate of
Lender of any equity  interest  any of them may  acquire in the  Borrowers,  and
Borrowers  hereby  irrevocably  waive the right to raise any defense or take any
action on the basis of the  foregoing  with respect to Lender's  exercise of any
such  rights or  remedies.  Borrowers  acknowledge  that  Lender  engages in the
business  of real  estate  financings  and other real  estate  transactions  and
investments  which may be viewed as adverse to or competitive  with the business
of the Borrowers or their affiliates.

          Section 10.21  Brokers and Financial Advisors.

          Each Borrower  hereby  represents  that it has dealt with no financial
advisors,  brokers,  underwriters,   placement  agents,  agents  or  finders  in
connection with the transactions  contemplated by this Agreement.  Each Borrower
hereby agrees to indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities,  costs and expenses of any kind (including Lender's
attorneys'  fees and expenses) in any way relating to or arising from a claim by
any Person that such Person acted on behalf of Borrowers or Lender in connection
with the transactions  contemplated herein. The provisions of this Section 10.21
shall survive the expiration  and  termination of this Agreement and the payment
of the Debt.

          Section 10.22  Borrowers' Joint and Several Obligations.

          The Borrowers agree to all terms and agreements in this Agreement on a
joint and several basis and the  liability of each of the  Borrowers  under this
Agreement  shall be joint and several.  A default  hereunder or under any of the
Loan  Documents by any of the Borrowers  shall be deemed a default by all of the
other Borrowers.

          Section 10.23  Prior Agreements

          This  Agreement  and the  other  Loan  Documents  contain  the  entire
agreement  of the  parties  hereto and  thereto  in respect of the  transactions
contemplated hereby and thereby,  and all prior agreements among or between such
parties, whether oral or written, including, without limitation, the Preliminary
Non-Binding Mortgage Loan Term Sheet between Grove Property Trust and Lender are
superseded by the terms of this Agreement and the other Loan Documents.

                                      -99-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives,  all as of the day
and year first above written.

                        BORROWERS:
                        ----------

                        GPT-Windsor, LLC, a Delaware limited liability company;

                                 By: GPTWLLC, Inc., a Delaware corporation,
                                     as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        Avonplace Associates Limited Partnership, a Connecticut
                        limited partnership;

                                 By: Avon Watch Hill, Inc., a Connecticut
                                     corporation, as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        GR-Farmington Summit Associates Limited Partnership, a
                        Delaware limited partnership;

                                 By: GR-FSALP, Inc., a Delaware corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        GR-Northeast Apartments I Limited Partnership, a
                        Delaware limited partnership;

                                 By: GR-NEALP, Inc., a Delaware corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

<PAGE>

                        GR-West Hartford Center Associates Limited Partnership,
                        a Delaware limited partnership;

                                 By: GR-WHCALP, Inc., a Delaware corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        A.N.E. Associates Limited Partnership, a Connecticut
                        limited partnership;

                                 By: Grove A.N.E. Corp., a Connecticut
                                     corporation, as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        Grove Opportunity Fund II Limited Partnership, a
                        Connecticut limited partnership;

                                 By: GOF II, Inc., a Connecticut corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        GR-Enfield Associates Limited Partnership, a Connecticut
                        limited partnership;

                                 By: GEALP, Inc., a Connecticut corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        GR-Properties III Limited Partnership, a Connecticut
                        limited partnership;

                                 By: Grove Investment Group, Inc., a Connecticut
                                     corporation, as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

<PAGE>

                        Foxwoodburg, Limited Partnership, a Delaware limited
                        partnership;

                                 By: FWB, Inc., a Delaware corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        Grove-Westfield Associates Limited Partnership, a
                        Connecticut limited partnership;

                                 By: Grove Investment Group, Inc., a Connecticut
                                     corporation, as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        Grove-West Springfield Associates Limited Partnership,
                        a Connecticut limited partnership; and

                                 By: Grove Investment Group, Inc., a Connecticut
                                     corporation, as general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

                        GPT-Plainville Limited Partnership, a Delaware limited
                        partnership;

                                 By: GPTPLP, Inc., a Connecticut corporation, as
                                     general partner

                                 By: /s/ JOSEPH R. LaBROSSE
                                     -----------------------------------------
                                            Name: Joseph R. LaBrosse
                                            Title: Treasurer

<PAGE>

                        LENDER:
                        -------

                        Lehman Brothers Holdings, Inc.,
                             doing business as Lehman Capital, a
                             division of Lehman Brothers Holdings, Inc.,

                        By: /s/ LARRY J. KRAVETZ
                            -------------------------------------------------
                            Name:
                                 --------------------------------------------
                            Title:
                                  -------------------------------------------

<PAGE>

                                   SCHEDULE A
                         CO-BORROWERS NAMES AND ADDRESS
                         ------------------------------

The following entities  constitute all of the Borrowers under the foregoing Loan
Agreement:

1)   GPT-Windsor, LLC, a Delaware limited liability company

2)   Avon  Place  Associates   Limited   Partnership,   a  Connecticut   limited
     partnership

3)   GR-Farmington  Summit Associates  Limited  Partnership,  a Delaware limited
     partnership

4)   GR-Northeast   Apartments  I  Limited   Partnership,   a  Delaware  limited
     partnership

5)   GR-West Hartford Center Associates Limited Partnership,  a Delaware limited
     partnership

6)   A.N.E. Associates Limited Partnership, a Connecticut limited partnership

7)   Grove  Opportunity  Fund II  Limited  Partnership,  a  Connecticut  limited
     partnership

8)   GR-Enfield   Associates   Limited   Partnership,   a  Connecticut   limited
     partnership

9)   GR-Properties III Limited Partnership, a Connecticut limited partnership

10)  Foxwoodburg, Limited Partnership, a Delaware limited partnership

11)  Grove-Westfield  Associates  Limited  Partnership,  a  Connecticut  limited
     partnership

12)  Grove-West  Springfield  Associates  Limited  Partnership,   a  Connecticut
     limited partnership

13)  GPT-Plainville Limited Partnership, a Delaware limited partnership

                                 END OF EXHIBIT

<PAGE>

                                   SCHEDULE B

                               OWNERSHIP STRUCTURE
                               -------------------

1.   BORROWER:  GPT-Windsor,  LLC, a Delaware limited liability company is owned
     solely by the following partners in the percentages indicated:

          I.   GPTWLLC,  Inc., a Delaware corporation,  as sole general partner:
               .01% which corporation is owned wholly by Grove Property Trust, a
               publicly traded Maryland Real estate Investment Trust.

          II.  Grove Operating  Limited  Partnership as limited  partner:  99.9%
               which company is owned by the owners indicated below.

2.   BORROWER:  Avonplace Associates Limited Partnership,  a Connecticut limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   Avon Watch Hill,  Inc.,  a  Connecticut  corporation,  as sole general
          partner:  1%;  which  corporation  is owned  wholly by Grove  Property
          Trust, a publicly traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  98% which
          company is owned by the owners indicated below.

3.   BORROWER:  GR-Farmington Summit Associates Limited Partnership,  a Delaware
     limited  partnership  is owned  solely  by the  following  partners  in the
     percentages indicated:

     I.   GR-FSALP, Inc., a Delaware corporation,  as sole general partner: .01%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

4.   BORROWER: GR-Northeast Apartments I Limited Partnership, a Delaware limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   GR-NEALP, Inc., a Delaware corporation,  as sole general partner: .01%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

<PAGE>

5.   BORROWER:   GR-West  Hartford  Center  Associates  Limited  Partnership,  a
     Delaware limited  partnership is owned solely by the following  partners in
     the percentages indicated:

     I.   GR-WHCALP, Inc., a Delaware corporation, as sole general partner: .01%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

6.   BORROWER:  A.N.E.  Associates Limited  Partnership,  a Connecticut  limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   Grove  A.N.E.  Corp.,  a  Connecticut  corporation,  as  sole  general
          partner:  .01% which  corporation  is owned  wholly by Grove  Property
          Trust, a publicly traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

7.   BORROWER:  Grove  Opportunity  Fund II Limited  Partnership,  a Connecticut
     limited  partnership  is owned  solely  by the  following  partners  in the
     percentages indicated:

     I.   GOF II, Inc., a Connecticut  corporation,  as sole general partner: 1%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove  Operating  Limited  Partnership as limited  partner:  96% which
          company is owned by the owners indicated below.

8.   BORROWER:  GR-Enfield Associates Limited Partnership, a Connecticut limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   GEALP, Inc., a Connecticut corporation,  as sole general partner: .01%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove  Operating  Limited  Partnership as limited  partner:  97% which
          company is owned by the owners indicated below.

<PAGE>

9.   BORROWER:  GR-Properties  III Limited  Partnership,  a Connecticut  limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   Grove  Investment  Group,  Inc., a  Connecticut  corporation,  as sole
          general  partner:  1%;  which  corporation  is owned  wholly  by Grove
          Property  Trust,  a publicly  traded  Maryland Real estate  Investment
          Trust.

     II.  Grove  Operating  Limited  Partnership as limited  partner:  91% which
          company is owned by the owners indicated below.

10.  BORROWER: Foxwoodburg, L.P., a Delaware limited partnership is owned solely
     by the following partners in the percentages indicated:

     I.   FWB, Inc., a Delaware corporation, as sole general partner: .01% which
          corporation is owned wholly by Grove Property Trust, a publicly traded
          Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

11.  BORROWER:  Grove-Westfield  Associates Limited  Partnership,  a Connecticut
     limited  partnership  is owned  solely  by the  following  partners  in the
     percentages indicated:

     I.   Grove  Investment  Group,  Inc., a  Connecticut  corporation,  as sole
          general  partner:  1%;  which  corporation  is owned  wholly  by Grove
          Property  Trust,  a publicly  traded  Maryland Real estate  Investment
          Trust.

     II.  Grove  Operating  Limited  Partnership as limited  partner:  88% which
          company is owned by the owners indicated below.

12.  BORROWER:   Grove-West  Springfield   Associates  Limited  Partnership,   a
     Connecticut  limited  partnership is owned solely by the following partners
     in the percentages indicated:

     I.   Grove  Investment  Group,  Inc., a  Connecticut  corporation,  as sole
          general  partner:  1%;  which  corporation  is owned  wholly  by Grove
          Property  Trust,  a publicly  traded  Maryland Real estate  Investment
          Trust.

     II.  Grove  Operating  Limited  Partnership as limited  partner:  88% which
          company is owned by the owners indicated below.

<PAGE>

13.  BORROWER:   GPT-Plainville   Limited   Partnership,   a  Delaware   limited
     partnership  is owned solely by the following  partners in the  percentages
     indicated:

     I.   GPTPLP, Inc., a Connecticut corporation, as sole general partner: .01%
          which  corporation is owned wholly by Grove Property Trust, a publicly
          traded Maryland Real estate Investment Trust.

     II.  Grove Operating Limited  Partnership as limited partner:  99.99% which
          company is owned by the owners indicated below.

                       **********************************

As of March 31, 1998, Grove Operating Limited Partnership, a Connecticut limited
partnership,  doing  business  as  Grove  Operating  Services,  is  owned by the
following partners in the percentages indicated:

          I.   Grove Property  Trust, a publicly  traded Maryland
               Real Estate  Investment Trust, as the sole general
               partner:                                                 74%

          II.  The parties identified on Exhibit A as the limited
               partners:                                                26%

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