Document:

EXHIBIT 4.2

LOAN NO.: 26-5950521                                       GREENBRIER APARTMENTS
                                                        FREDERICKSBURG, VIRGINIA

                        INDEMNITY AND GUARANTY AGREEMENT

         THIS INDEMNITY AND GUARANTY  AGREEMENT (this  "Agreement"),  made as of
March 23, 2001 by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia  corporation
("Indemnitor"), whose address is 306 East Main Street, Richmond, Virginia 23219,
Attention:  Glade M. Knight,  in favor of FIRST UNION  NATIONAL BANK, a national
banking  association  ("Lender"),  whose address is One First Union Center,  301
South College Street,  Mailcode NC 0166,  Charlotte,  North Carolina 28288-0166,
Attention: Contract Finance.

                              W I T N E S S E T H:

         WHEREAS,  CRIT-VA II, INC., a Virginia  corporation  ("Borrower"),  has
obtained a loan (the "Loan") in the  principal  amount of Twelve  Million  Seven
Hundred Fifty Thousand and No/100 Dollars ($12,750,000.00) from Lender; and

         WHEREAS,  the Loan is evidenced by a Promissory Note (the "Note") dated
of even date herewith,  executed by Borrower and payable to the order of Lender,
in the stated  principal  amount of Twelve  Million Seven Hundred Fifty Thousand
and  No/100  Dollars  ($12,750,000.00),  and is  secured  by a Deed of Trust and
Security  Agreement  dated of even date  herewith  (the  "Deed of  Trust")  from
Borrower  for the benefit of Lender,  encumbering  that  certain  real  property
situated  in the  City of  Fredericksburg,  Commonwealth  of  Virginia,  as more
particularly  described on Exhibit A attached hereto and incorporated  herein by
this reference,  together with the buildings,  structures and other improvements
now or  hereafter  located  thereon  (the  "Property")  and by  the  other  Loan
Documents (as defined in the Deed of Trust); and

         WHEREAS,  as a  condition  to making the Loan to  Borrower,  Lender has
required that Indemnitor indemnify Lender from and against and guarantee payment
to Lender of those items for which Borrower has recourse liability and for which
Lender has recourse against Borrower under the terms of Section 2.6 of the Note;
and

         WHEREAS,  Indemnitor is the sole shareholder of Borrower, the extension
of the Loan to Borrower is of substantial  benefit to Indemnitor and, therefore,
Indemnitor desires to indemnify Lender from and against and guarantee payment to
Lender of those  items for which  Borrower  is  personally  liable and for which
Lender has recourse against Borrower under the terms of the Note and the Deed of
Trust.

         NOW, THEREFORE,  to induce Lender to extend the Loan to Borrower and in
consideration  of the  foregoing  premises  and  for  other  good  and  valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:

<PAGE>

         1. Indemnity and Guaranty.  Indemnitor  hereby  assumes  liability for,
hereby guarantees  payment to Lender of, hereby agrees to pay,  protect,  defend
and save Lender harmless from and against,  and hereby  indemnifies  Lender from
and against any and all liabilities,  obligations,  losses,  damages,  costs and
expenses (including, without limitation,  reasonable attorneys' fees), causes of
action,  suits,  claims,  demands  and  judgments  of any nature or  description
whatsoever  (collectively,  "Costs")  which may at any time be actually  imposed
upon, incurred by or awarded against Lender as a result of:

                  (a) Misapplication or misappropriation by Borrower of proceeds
paid under any insurance  policies (or paid to Borrower as a result of any other
claim or cause of action against any person or entity) by reason of damage, loss
or destruction to all or any portion of the Property, to the full extent of such
proceeds not previously  delivered to Lender,  but which, under the terms of the
Loan Documents, should have been delivered to Lender;

                  (b) Misapplication or misappropriation by Borrower of proceeds
or  awards   resulting  from  the  condemnation  or  other  taking  in  lieu  of
condemnation  of all or any  portion of the  Property to the full extent of such
proceeds or awards not  previously  delivered  to Lender,  but which,  under the
terms of the Loan Documents, should have been delivered to Lender;

                  (c)  Misapplication  or  misappropriation  by  Borrower of all
tenant  security  deposits  or  other  refundable  deposits  paid  to or held by
Borrower  or any other  person  or entity  under the  control  or  direction  of
Borrower,  if any,  in  connection  with  leases  of all or any  portion  of the
Property,  which are not applied in accordance  with the terms of the applicable
lease or other agreement;

                  (d) Misapplication or misappropriation by Borrower of rent and
other  payments  received from tenants under leases of all or any portion of the
Property paid more than one (1) month in advance;

                  (e) Misapplication or  misappropriation  by Borrower of rents,
issues,  profits and revenues of all or any portion of the Property  received by
Borrower  or any other  person  or entity  under the  control  or  direction  of
Borrower that are applicable to a period after the occurrence and continuance of
an Event of Default under the Loan Documents,  or any event which with notice or
the passage of time, or both,  would  constitute an Event of Default,  which are
not  either   applied  to  the  ordinary  and  necessary   expenses  or  capital
expenditures  in  connection  with owning and  operating the Property or paid to
Lender or otherwise as contemplated or permitted by the Loan Documents;

                  (f) Waste committed on the Property, or damage to the Property
as a result of the intentional misconduct or gross negligence of Borrower or any
of its officers, general partners or members, as the case may be, Indemnitor, or
any agent or employee of any such persons,  or any removal of any portion of the
Property  not  repaired as required by the Loan  Documents  in  violation of the
terms of the Loan  Documents,  to the  full  extent  of the  losses  or  damages
actually incurred by Lender on account of such occurrence;

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<PAGE>

                  (g) Failure by Borrower to pay any valid  taxes,  assessments,
mechanic's liens, materialmen's liens or other liens which could create liens on
any  portion of the  Property  which  would be  superior to the lien or security
title of the Deed of Trust or the other Loan Documents  except,  with respect to
any such taxes or assessments, to the extent that funds have been deposited with
Lender  pursuant  to the  terms  of the  Deed  of  Trust  specifically  for  the
applicable  taxes or assessments and not applied by Lender to pay such taxes and
assessments;

                  (h) All  obligations and indemnities of Borrower under Section
1.31 of the Deed of Trust and the Environmental  Indemnity Agreement (as defined
in the Note)  relating to hazardous or toxic  substances  or radon or compliance
with environmental laws and regulations; and

                  (i) Fraud, material misrepresentation or failure to disclose a
material fact by Borrower or any of its officers,  general  partners or members,
as the  case  may  be,  Indemnitor,  or any  agent,  employee  or  other  person
authorized  to make  statements,  representations  or  disclosures  on behalf of
Borrower,  any  officer,  general  partner  or  member,  as the case may be,  of
Borrower, or Indemnitor,  to the full extent of any losses, damages and expenses
actually incurred by Lender on account thereof.

         This is a guaranty of payment and  performance  and not of  collection.
The liability of Indemnitor for Costs under this  Agreement  shall be direct and
immediate and not  conditional  or  contingent  upon the pursuit of any remedies
against  Borrower or any other  person  (including,  without  limitation,  other
guarantors,  if any), nor against the collateral for the Loan. Indemnitor waives
any right to require  that an action be brought  against  Borrower  or any other
person or to require  that resort be made to any  collateral  for the Loan or to
any balance of any deposit  account or credit on the books of Lender in favor of
Borrower or any other person.  In the event, on account of the Bankruptcy Reform
Act of 1978,  as amended,  or any other debtor  relief law  (whether  statutory,
common  law,  case law or  otherwise)  of any  jurisdiction  whatsoever,  now or
hereafter  in  effect,  which may be or  become  applicable,  Borrower  shall be
relieved of or fail to incur any debt,  obligation  or  liability as provided in
the Loan  Documents,  Indemnitor  shall  nevertheless  be fully liable for Costs
hereunder. In the event of a default under the Loan Documents which is not cured
within  any  applicable  grace or cure  period,  Lender  shall have the right to
enforce  its  rights,  powers  and  remedies  (including,   without  limitation,
foreclosure of all or any portion of the collateral for the Loan)  thereunder or
hereunder, in any order, and all rights, powers and remedies available to Lender
in such event shall be non-exclusive and cumulative of all other rights,  powers
and remedies  provided  thereunder  or hereunder or by law or in equity.  If the
Costs  guaranteed  hereby  are  partially  paid or  discharged  by reason of the
exercise  of any of the  remedies  available  to Lender,  this  Agreement  shall
nevertheless remain in full force and effect, and Indemnitor shall remain liable
for all  remaining  Costs  guaranteed  hereby,  even  though  any  rights  which
Indemnitor  may have against  Borrower may be  destroyed  or  diminished  by the
exercise of any such remedy.

         2.       Indemnification Procedures.

                  (a) If any action shall be brought  against  Lender based upon
any of the Costs for which Lender is indemnified hereunder,  Lender shall notify
Indemnitor in writing thereof and

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<PAGE>

Indemnitor  shall  promptly  assume  the  defense  thereof,  including,  without
limitation,  the employment of counsel  reasonably  acceptable to Lender and the
negotiation of any settlement;  provided, however, that any failure of Lender to
notify  Indemnitor of such matter shall not impair or reduce the  obligations of
Indemnitor  hereunder.  In the  event  Indemnitor  shall  fail to  discharge  or
undertake to defend  Lender  against any Costs for which  Lender is  indemnified
hereunder,  Lender may, at its sole option and  election,  defend or settle such
claim,  loss  or  liability,  and,  upon  reasonable  prior  written  notice  to
Indemnitor,  Lender shall have the right,  at the expense of  Indemnitor  (which
expense  shall be included  in Costs),  to employ  separate  counsel in any such
action and to participate in the defense thereof. The liability of Indemnitor to
Lender  hereunder shall be conclusively  established by such settlement  (absent
manifest  error),  provided such settlement is made in good faith, the amount of
such  liability to include both the settlement  consideration  and the costs and
expenses,   including,  without  limitation,   reasonable  attorneys'  fees  and
disbursements, actually incurred by Lender in effecting such settlement. In such
event,  such settlement  consideration,  costs and expenses shall be included in
Costs and Indemnitor shall pay the same as hereinafter provided.

                  (b) Indemnitor shall not, without the prior written consent of
Lender, such consent not to be unreasonably  withheld or delayed:  (i) settle or
compromise any action, suit,  proceeding or claim or consent to the entry of any
judgment that does not include as an unconditional  term thereof the delivery by
the claimant or plaintiff  to Lender of a full and complete  written  release of
Lender  (in  form,  scope  and  substance  satisfactory  to  Lender  in its sole
discretion)  from all liability in respect of such action,  suit,  proceeding or
claim and a dismissal with prejudice of such action, suit,  proceeding or claim;
or (ii) settle or compromise any action, suit, proceeding or claim in any manner
that may adversely  affect  Lender or obligate  Lender to pay any sum or perform
any obligation as reasonably determined by Lender.

                  (c) All Costs shall be immediately reimbursable to Lender when
and as incurred and, in the event of any litigation,  claim or other proceeding,
without any requirement of waiting for the ultimate  outcome of such litigation,
claim or other proceeding,  and Indemnitor shall pay to Lender any and all Costs
within ten (10) days after  receipt of written  notice from Lender  itemizing in
reasonable  detail the amounts thereof  incurred to the date of such notice.  In
addition  to any  other  remedy  available  for the  failure  of  Indemnitor  to
periodically pay such Costs, such Costs, if not paid within said ten-day period,
shall bear interest at the Default Interest Rate (as defined in the Note).

         3. Reinstatement of Obligations.  If at any time all or any part of any
payment made by Indemnitor or received by Lender from  Indemnitor  under or with
respect to this  Agreement  is or must be  rescinded  or returned for any reason
whatsoever  (including,  but not  limited  to,  the  insolvency,  bankruptcy  or
reorganization  of Indemnitor or Borrower),  then the  obligations of Indemnitor
hereunder shall, to the extent of the payment  rescinded or returned,  be deemed
to have continued in existence,  notwithstanding  such previous  payment made by
Indemnitor,  or receipt of payment by Lender,  and the obligations of Indemnitor
hereunder  shall continue to be effective or be reinstated,  as the case may be,
as to such payment,  all as though such previous payment by Indemnitor had never
been made.

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<PAGE>

         4.       Waivers by Indemnitor. To the fullest extent permitted by law,
Indemnitor hereby waives and agrees not to assert or take advantage of:

                  (a) Any right to require Lender to proceed against Borrower or
any other person or to proceed against or exhaust any security held by Lender at
any time or to pursue  any other  remedy  in  Lender's  power or under any other
agreement before proceeding against Indemnitor hereunder;

                  (b) Any  defense  that may arise by reason of the  incapacity,
lack of  authority,  death or  disability  of any other person or persons or the
failure  of  Lender  to  file  or  enforce  a  claim   against  the  estate  (in
administration,  bankruptcy  or any other  proceeding)  of any  other  person or
persons;

                  (c) Except as expressly provided herein,  demand,  presentment
for  payment,  notice of  nonpayment,  protest,  notice of protest and all other
notices of any kind, or the lack of any thereof, including, without limiting the
generality of the foregoing,  notice of the existence,  creation or incurring of
any new or additional  indebtedness or obligation or of any action or non-action
on the part of  Borrower,  Lender,  any  endorser  or creditor of Borrower or of
Indemnitor or on the part of any other person whomsoever under this or any other
Loan Document held by Lender;

                  (d) Any defense based upon an election of remedies by Lender;

                  (e) Any right or claim or right to cause a marshalling  of the
assets of Indemnitor;

                  (f) Any principle or provision of law, statutory or otherwise,
which  is or  might  be in  conflict  with  the  terms  and  provisions  of this
Agreement;

                  (g) Any duty on the part of Lender to disclose  to  Indemnitor
any facts  Lender may now or  hereafter  know about  Borrower  or the  Property,
regardless  of  whether  Lender  has  reason  to  believe  that any  such  facts
materially  increase the risk beyond that which Indemnitor  intends to assume or
has  reason to  believe  that such  facts are  unknown  to  Indemnitor  or has a
reasonable  opportunity  to  communicate  such  facts  to  Indemnitor,  it being
understood and agreed that Indemnitor is fully responsible for being and keeping
informed  of the  financial  condition  of  Borrower,  of the  condition  of the
Property and of any and all circumstances bearing on the risk that liability may
be incurred by Indemnitor hereunder;

                  (h)  Any  lack  of  notice  of  disposition  or of  manner  of
disposition of any collateral for the Loan;

                  (i) Any invalidity, irregularity or unenforceability, in whole
or in part, of any one or more of the Loan Documents;

                  (j) Any lack of commercial  reasonableness in dealing with the
collateral for the Loan;

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<PAGE>

                  (k) Any  deficiencies  in the  collateral  for the Loan or any
deficiency in the ability of Lender to collect or to obtain performance from any
persons or entities now or hereafter  liable for the payment and  performance of
any obligation hereby guaranteed;

                  (l) An assertion or claim that the automatic  stay provided by
11  U.S.C.  ss.362  (arising  upon  the  voluntary  or  involuntary   bankruptcy
proceeding of Borrower) or any other stay provided under any other debtor relief
law (whether  statutory,  common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict,  condition,  reduce or inhibit the
ability  of  Lender to  enforce  any of its  rights,  whether  now or  hereafter
required,  which Lender may have against  Indemnitor or the  collateral  for the
Loan;

                  (m) Any  modifications of the Loan Documents or any obligation
of Borrower  relating to the Loan by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended,  or any other
debtor relief law (whether statutory,  common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise; and

                  (n) Any action,  occurrence,  event or matter  consented to by
Indemnitor  under  Section 6(h) hereof,  under any other  provision  hereof,  or
otherwise.

         5. Representation and Warranty. Indemnitor hereby represents,  warrants
and  covenants  that  Indemnitor's  net worth is,  and at all times  while  this
Agreement shall be in effect, shall be not less than $500,000,  as determined in
accordance with generally accepted accounting principles consistently applied.

         6.       General Provisions.

                  (a)  Fully  Recourse.   All  Costs  guaranteed  hereunder  are
recourse  obligations  of Indemnitor  and not  restricted  by any  limitation on
recourse liability set forth in any of the Loan Documents.

                  (b) Unsecured Obligations. Indemnitor hereby acknowledges that
Lender's  appraisal of the Property is such that Lender is not willing to accept
the  consequences  of the inclusion of  Indemnitor's  indemnity set forth herein
among the obligations  secured by the Deed of Trust and the other Loan Documents
and that Lender would not make the Loan but for the unsecured recourse liability
undertaken by Indemnitor herein.

                  (c) Survival.  This Agreement shall be deemed to be continuing
in nature  and shall  remain in full  force and  effect  and shall  survive  the
exercise  of any  remedy by  Lender  under the Deed of Trust or any of the other
Loan Documents,  including,  without limitation, any foreclosure or deed in lieu
thereof,  even if, as a part of such  remedy,  the Loan is paid or  satisfied in
full.

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<PAGE>

                  (d)   No    Subrogation;    No   Recourse    Against   Lender.
Notwithstanding  the  satisfaction  by Indemnitor  of any  liability  hereunder,
Indemnitor shall not have any right of subrogation, contribution,  reimbursement
or  indemnity  whatsoever  or any right of  recourse  to or with  respect to the
assets or property of Borrower or to any  collateral for the Loan. In connection
with  the  foregoing,   Indemnitor  expressly  waives  any  and  all  rights  of
subrogation to Lender against Borrower,  and Indemnitor hereby waives any rights
to enforce any remedy which  Lender may have  against  Borrower and any right to
participate  in any  collateral  for the Loan. In addition to and without in any
way  limiting  the  foregoing,   Indemnitor  hereby  subordinates  any  and  all
indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness
of Borrower to Lender,  and agrees with Lender that Indemnitor  shall not demand
or accept any payment of principal or interest  from  Borrower,  shall not claim
any offset or other reduction of Indemnitor's  obligations  hereunder because of
any such  indebtedness  and  shall  not take any  action  to  obtain  any of the
collateral  from the  Loan.  Further,  Indemnitor  shall  not have any  right of
recourse  against Lender by reason of any action Lender may take or omit to take
under the  provisions  of this  Agreement or under the  provisions of any of the
Loan Documents.

                  (e) Reservation of Rights. Nothing contained in this Agreement
shall  prevent or in any way diminish or interfere  with any rights or remedies,
including, without limitation, the right to contribution,  which Lender may have
against  Borrower,  Indemnitor  or  any  other  party  under  the  Comprehensive
Environmental  Response,  Compensation  and Liability  Act of 1980  (codified at
Title 42 U.S.C. ss.9601 et seq.), as it may be amended from time to time, or any
other  applicable  federal,  state or local laws,  all such rights  being hereby
expressly reserved.

                  (f)  Financial  Statements.  Indemnitor  hereby  agrees,  as a
material  inducement to Lender to make the Loan to Borrower,  to comply with the
provisions  of  Section  1.18(f)  of the Deed of Trust as  concerns  Indemnitor.
Indemnitor hereby warrants and represents unto Lender that any and all financial
data which have  heretofore  been given or may hereafter be given to Lender with
respect  to  Indemnitor  did or will at the  time of such  delivery  fairly  and
accurately present the financial condition of Indemnitor.

                  (g) Rights  Cumulative;  Payments.  Lender's rights under this
Agreement  shall be in addition to all rights of Lender under the Note, the Deed
of Trust and the other Loan  Documents.  FURTHER,  PAYMENTS  MADE BY  INDEMNITOR
UNDER THIS AGREEMENT SHALL NOT REDUCE IN ANY RESPECT BORROWER'S  OBLIGATIONS AND
LIABILITIES  UNDER THE NOTE,  THE DEED OF TRUST  AND THE  OTHER  LOAN  DOCUMENTS
EXCEPT  WITH  RESPECT  TO,  AND TO THE  EXTENT  OF,  BORROWER'S  OBLIGATION  AND
LIABILITY FOR THE PAYMENT MADE BY INDEMNITOR.

                  (h) No Limitation on Liability. Indemnitor hereby consents and
agrees that Lender may at any time and from time to time without further consent
from Indemnitor do any of the following events,  and the liability of Indemnitor
under this Agreement shall be unconditional  and absolute and shall in no way be
impaired or limited by any of the following  events,  whether  occurring with or
without  notice to Indemnitor or with or without  consideration  unless the same
shall  have the  effect  of  satisfying  Borrower's  obligations  under the Loan
Documents:  (i) any  extensions of time for  performance  required by any of the
Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or
foreclosure of the Note, the Deed of Trust or

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<PAGE>

any of the other Loan  Documents  or any sale or transfer of the  Property  (but
subject  to the  provisions  of  Section  1.5(d)(C)(5)  of the Note and  Section
1.13(b)(10)  of the Deed of  Trust);  (iii)  any  change in the  composition  of
Borrower, including, without limitation, the withdrawal or removal of Indemnitor
from any  current or future  position  of  ownership,  management  or control of
Borrower;  (iv) the accuracy or inaccuracy of the representations and warranties
made by Indemnitor  herein or by Borrower in any of the Loan Documents;  (v) the
release  of  Borrower  or of any  other  person or entity  from  performance  or
observance of any of the agreements, covenants, terms or conditions contained in
any of the  Loan  Documents  by  operation  of law,  Lender's  voluntary  act or
otherwise;  (vi) the release or substitution in whole or in part of any security
for the Loan;  (vii) Lender's failure to record the Deed of Trust or to file any
financing  statement (or Lender's  improper  recording or filing  thereof) or to
otherwise perfect, protect, secure or insure any lien or security interest given
as security for the Loan; or (viii) the  modification of the terms of any one or
more of the Loan  Documents.  No such action  which Lender shall take or fail to
take in connection  with the Loan  Documents or any collateral for the Loan, nor
any course of dealing with Borrower or any other person,  shall limit, impair or
release Indemnitor's obligations hereunder,  affect this Agreement in any way or
afford Indemnitor any recourse against Lender. Nothing contained in this Section
shall be construed  to require  Lender to take or refrain from taking any action
referred to herein.

                  (i) Entire Agreement; Amendment;  Severability. This Agreement
contains the entire agreement between the parties  respecting the matters herein
set forth and supersedes all prior agreements,  whether written or oral, between
the parties respecting such matters. Any amendments or modifications  hereto, in
order to be effective, shall be in writing and executed by the parties hereto. A
determination  that any provision of this Agreement is  unenforceable or invalid
shall not affect the enforceability or validity of any other provision,  and any
determination  that the  application  of any provision of this  Agreement to any
person  or  circumstance  is  illegal  or  unenforceable  shall not  affect  the
enforceability  or  validity  of such  provision  as it may  apply to any  other
persons or circumstances.

                  (j)  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY AND
CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE IN WHICH THE  PROPERTY  IS
LOCATED, EXCEPT TO THE EXTENT THAT THE APPLICABILITY OF ANY OF SUCH LAWS MAY NOW
OR  HEREAFTER  BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL
SO GOVERN AND BE CONTROLLING.

                  (k) Binding Effect; Waiver of Acceptance. This Agreement shall
bind Indemnitor and its heirs, personal representatives,  successors and assigns
and  shall  inure  to  the  benefit  of  Lender  and  the  officers,  directors,
shareholders,  agents  and  employees  of  Lender  and their  respective  heirs,
successors  and assigns.  Notwithstanding  the foregoing,  Indemnitor  shall not
assign any of its rights or obligations  under this Agreement  without the prior
written  consent of Lender,  which consent may be withheld by Lender in its sole
discretion. Indemnitor hereby waives any acceptance of this Agreement by Lender,
and this Agreement shall immediately be binding upon Indemnitor.

                                       8
<PAGE>

                  (l)  Notice.   All   notices,   demands,   requests  or  other
communications to be sent by one party to the other hereunder or required by law
shall be in writing and shall be deemed to have been validly  given or served by
delivery of the same in person to the intended  addressee,  or by depositing the
same with Federal Express or another  reputable private courier service for next
business day delivery to the intended  addressee at its address set forth on the
first page of this  Agreement or at such other  address as may be  designated by
such party as herein  provided,  or by depositing  the same in the United States
mail,  postage prepaid,  registered or certified mail, return receipt requested,
addressed to the  intended  addressee at its address set forth on the first page
of this Agreement or at such other address as may be designated by such party as
herein provided. All notices,  demands and requests shall be effective upon such
personal  delivery,  or one (1)  business  day after  being  deposited  with the
private courier  service,  or two (2) business days after being deposited in the
United  States mail as required  above.  Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein  required  shall be  deemed to be  receipt  of the  notice,  demand or
request  sent.  By giving to the other party hereto at least  fifteen (15) days'
prior written  notice  thereof in accordance  with the  provisions  hereof,  the
parties hereto shall have the right from time to time to change their respective
addresses  and each shall have the right to  specify  as its  address  any other
address within the United States of America.

                  (m) No Waiver;  Time of Essence;  Business Day. The failure of
any party  hereto to  enforce  any right or  remedy  hereunder,  or to  promptly
enforce any such right or remedy, shall not constitute a waiver thereof nor give
rise to any  estoppel  against  such party nor excuse any of the parties  hereto
from their respective obligations hereunder.  Any waiver of such right or remedy
must be in  writing  and  signed  by the party to be bound.  This  Agreement  is
subject to  enforcement  at law or in equity,  including  actions for damages or
specific performance.  Time is of the essence hereof. The term "business day" as
used herein shall mean a weekday,  Monday through Friday, except a legal holiday
or a day on which banking  institutions  in New York, New York are authorized by
law to be closed.

                  (n) Captions for Convenience. The captions and headings of the
sections and paragraphs of this Agreement are for  convenience of reference only
and shall not be construed in interpreting the provisions hereof.

                  (o) Reasonable  Attorney's  Fees. In the event it is necessary
for Lender to retain the  services of an attorney  or any other  consultants  in
order to enforce this Agreement,  or any portion thereof,  Indemnitor  agrees to
pay to Lender any and all costs and  expenses,  including,  without  limitation,
reasonable  attorneys'  fees,  incurred  by Lender as a result  thereof and such
costs, fees and expenses shall be included in Costs.

                  (p) Successive  Actions.  A separate right of action hereunder
shall arise each time Lender  acquires  knowledge of any matter  indemnified  or
guaranteed by Indemnitor under this Agreement.  Separate and successive  actions
may be brought hereunder to enforce any of the provisions hereof at any time and
from time to time. No action hereunder shall preclude any subsequent action, and
Indemnitor  hereby  waives and covenants not to assert any defense in the nature
of splitting of causes of action or merger of judgments.

                                       9
<PAGE>

                  (q)  Reliance.  Lender  would  not make  the Loan to  Borrower
without   this   Agreement.    Accordingly,    Indemnitor    intentionally   and
unconditionally  enters into the covenants and agreements as set forth above and
understands  that, in reliance upon and in  consideration  of such covenants and
agreements,  the Loan shall be made and,  as part and parcel  thereof,  specific
monetary and other  obligations  have been,  are being and shall be entered into
which would not be made or entered into but for such reliance.

                  (r) Counterparts. This Agreement may be executed in any number
of  counterparts,  each of which  shall be  effective  only  upon  delivery  and
thereafter  shall be deemed an  original,  and all of which shall be taken to be
one and the same  instrument,  for the same effect as if all parties  hereto had
signed the same  signature  page.  Any signature  page of this  Agreement may be
detached from any  counterpart  of this  Agreement  without  impairing the legal
effect of any signatures  thereon and may be attached to another  counterpart of
this  Agreement  identical in form hereto but having  attached to it one or more
additional signature pages.

                  (s) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

                  (1)  INDEMNITOR,  TO THE FULL EXTENT  PERMITTED BY LAW, HEREBY
         KNOWINGLY,  INTENTIONALLY AND VOLUNTARILY,  WITH AND UPON THE ADVICE OF
         COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN
         WHICH THE PROPERTY IS LOCATED OVER ANY SUIT,  ACTION OR  PROCEEDING  BY
         ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT,  (B) AGREES THAT
         ANY SUCH  ACTION,  SUIT OR  PROCEEDING  MAY BE  BROUGHT IN ANY STATE OR
         FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY AND STATE
         IN WHICH THE PROPERTY IS LOCATED,  (C) SUBMITS TO THE  JURISDICTION  OF
         SUCH COURTS,  AND (D) TO THE FULLEST  EXTENT  PERMITTED BY LAW,  AGREES
         THAT  INDEMNITOR  WILL NOT BRING ANY ACTION,  SUIT OR PROCEEDING IN ANY
         OTHER FORUM (BUT  NOTHING  HEREIN  SHALL  AFFECT THE RIGHT OF LENDER TO
         BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).

                  (2)  INDEMNITOR,  TO THE FULL EXTENT  PERMITTED BY LAW, HEREBY
         KNOWINGLY,  INTENTIONALLY AND VOLUNTARILY,  WITH AND UPON THE ADVICE OF
         COMPETENT COUNSEL,  WAIVES,  RELINQUISHES AND FOREVER FORGOES THE RIGHT
         TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,  ARISING OUT
         OF, OR IN ANY WAY RELATING TO THIS  AGREEMENT  OR ANY  CONDUCT,  ACT OR
         OMISSION OF LENDER OR INDEMNITOR, OR ANY OF THEIR DIRECTORS,  OFFICERS,
         PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
         AFFILIATED WITH LENDER OR INDEMNITOR,  IN EACH OF THE FOREGOING  CASES,
         WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

                  (t)  Waiver by  Indemnitor.  Indemnitor  covenants  and agrees
that, upon the commencement of a voluntary or involuntary  bankruptcy proceeding
by or against Borrower,

                                       10
<PAGE>

Indemnitor  shall not seek or cause  Borrower  or any other  person or entity to
seek a  supplemental  stay or other  relief,  whether  injunctive  or otherwise,
pursuant to 11 U.S.C. ss.105 or any other provision of the Bankruptcy Reform Act
of 1978, as amended, or any other debtor relief law, (whether statutory,  common
law, case law or otherwise) of any jurisdiction whatsoever,  now or hereafter in
effect, which may be or become applicable, to stay, interdict, condition, reduce
or  inhibit  the  ability  of Lender to  enforce  any  rights of Lender  against
Indemnitor  or the  collateral  for the  Loan by  virtue  of this  Agreement  or
otherwise.

                  (u) Secondary  Market.  Lender may sell,  transfer and deliver
the Loan Documents to one or more investors in the secondary mortgage market. In
connection  with such  sale,  Lender  may  retain or assign  responsibility  for
servicing  the Loan or may delegate  some or all of such  responsibility  and/or
obligations  to a servicer,  including,  but not limited to, any  subservicer or
master servicer, on behalf of the investors.

                  (v) Dissemination of Information.  If Lender determines at any
time to sell,  transfer or assign the Note, the Deed of Trust and the other Loan
Documents,  and any or all servicing  rights with respect  thereto,  or to grant
participations  therein (the  "Participations")  or issue mortgage  pass-through
certificates or other securities  evidencing a beneficial interest in a rated or
unrated  public  offering or private  placement (the  "Securities"),  Lender may
forward  to  each  purchaser,   transferee,   assignee,  servicer,  participant,
investor,   or  their  respective   successors  in  such  Participations  and/or
Securities  (collectively,  the  "Investor") or any Rating Agency (as defined in
the Deed of Trust) rating such Securities, each prospective Investor and each of
the foregoing's  respective counsel,  all documents and information which Lender
now has or may  hereafter  acquire  relating  to the Loan and to  Borrower,  any
Indemnitor and the Property, which shall have been furnished by Borrower, or any
Indemnitor as Lender determines necessary or desirable.

             [THE BALANCE OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

                                       11
<PAGE>

         IN WITNESS WHEREOF, Indemnitor has executed this Indemnity Agreement as
of the day and year first written above.

                                          INDEMNITOR:

                                          CORNERSTONE REALTY INCOME TRUST, INC.,
                                          a Virginia corporation

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

<PAGE>

                                    EXHIBIT A

                                Legal Description

                                    [Omitted]EXHIBIT 4.3

PREPARED BY AND UPON RECORDATION RETURN TO:

Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Attention:  John Nicholas Suhr, Jr., Esq.

Tax Map Parcel # _______________________

LOAN NO.: 26-5950521                                      GREENBRIER APARTMENTS
                                                       FREDERICKSBURG, VIRGINIA
================================================================================

                                CRIT-VA II, INC.,
                                   as Grantor

                                       to

                                  TRSTE, INC.,
                                   as Trustee

                               For the benefit of

                           FIRST UNION NATIONAL BANK,
                                 as Beneficiary

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

                      DEED OF TRUST AND SECURITY AGREEMENT

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

                              Date: March 23, 2001

================================================================================
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                Page

<S>                                                                             <C>
ARTICLE I. COVENANTS OF GRANTOR..................................................5

      1.1      Warranties of Grantor.............................................5
      1.2      Defense of Title..................................................9
      1.3      Performance of Obligations........................................9
      1.4      Insurance.........................................................9
      1.5      Payment of Taxes.................................................12
      1.6      Tax and Insurance Impound Account................................13
      1.7      Intentionally Deleted............................................14
      1.8      Replacement Reserve..............................................14
      1.9      Casualty and Condemnation........................................17
      1.10     Construction Liens...............................................20
      1.11     Rents............................................................20
      1.12     Leases...........................................................21
      1.13     Alienation and Further Encumbrances..............................23
      1.14     Payment of Utilities, Assessments, Charges, Etc..................28
      1.15     Access Privileges and Inspections................................28
      1.16     Waste; Alteration of Improvements................................28
      1.17     Zoning...........................................................29
      1.18     Financial Statements and Books and Records.......................29
      1.19     Further Documentation............................................31
      1.20     Payment of Costs; Reimbursement to Beneficiary...................31
      1.21     Security Interest................................................32
      1.22     Security Agreement...............................................33
      1.23     Easements and Rights-of-Way......................................35
      1.24     Compliance with Laws.............................................35
      1.25     Additional Taxes.................................................36
      1.26     Secured Indebtedness.............................................36
      1.27     Grantor's Waivers................................................36
      1.28     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.................37
      1.29     Attorney-in-Fact Provisions......................................38
      1.30     Management.......................................................38
      1.31     Hazardous Waste and Other Substances.............................39
      1.32     Indemnification; Subrogation.....................................43
      1.33     Covenants with Respect to Indebtedness, Operations, Fundamental
                 Changes of Grantor.............................................44
      1.34     Intentionally Deleted............................................48
      1.35     ERISA............................................................48
      1.36     Springing Lock-Box Account.......................................49

ARTICLE II. EVENTS OF DEFAULT...................................................50
         2.1      Events of Default.............................................50
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>

                                                                                Page
<S>                                                                             <C>

ARTICLE III. REMEDIES...........................................................52
         3.1      Remedies Available............................................52
         3.2      Application of Proceeds.......................................55
         3.3      Right and Authority of Receiver or Beneficiary in the Event
                    of Default; Power of Attorney...............................55
         3.4      Occupancy After Foreclosure...................................57
         3.5      Notice to Account Debtors.....................................57
         3.6      Cumulative Remedies...........................................57
         3.7      Payment of Expenses...........................................58

ARTICLE IV. MISCELLANEOUS TERMS AND CONDITIONS..................................58
         4.1      Time of Essence...............................................58
         4.2      Release of Deed of Trust......................................58
         4.3      Certain Rights of Beneficiary.................................58
         4.4      Waiver of Certain Defenses....................................58
         4.5      Notices.......................................................58
         4.6      Successors and Assigns; Joint and Several Liability...........59
         4.7      Severability..................................................59
         4.8      Gender........................................................59
         4.9      Waiver; Discontinuance of Proceedings.........................59
         4.10     Section Headings..............................................60
         4.11     GOVERNING LAW.................................................60
         4.12     Counting of Days..............................................60
         4.13     Relationship of the Parties...................................60
         4.14     Application of the Proceeds of the Note.......................60
         4.15     Unsecured Portion of Indebtedness.............................60
         4.16     Cross-Default; Cross-Collateralization; Severance of Loans....60
         4.17     Interest After Sale...........................................61
         4.18     Inconsistency with Other Loan Documents.......................61
         4.19     Construction of this Document.................................61
         4.20     No Merger.....................................................62
         4.21     Rights With Respect to Junior Encumbrances....................62
         4.22     Beneficiary May File Proofs of Claim..........................62
         4.23     Fixture Filing................................................62
         4.24     After-Acquired Trust Property.................................62
         4.25     No Representation.............................................63
         4.26     Counterparts..................................................63
         4.27     Personal Liability............................................63
         4.28     Recording and Filing..........................................63
         4.29     Entire Agreement and Modifications............................63
         4.30     Maximum Interest..............................................63
         4.31     Interest Payable by Beneficiary...............................64
         4.32     Secondary Market..............................................64
         4.33     Dissemination of Information..................................64
         4.34     Contemporaneous Notes, Contemporaneous Mortgages and
                    Contemporaneous Assignments of Leases and Rents.............65
</TABLE>
                                       ii
<PAGE>

<TABLE>
<CAPTION>

                                                                                Page

<S>                                                                             <C>

         4.35     Certain Matters Relating to Trust Property Located in the
                    Commonwealth of Virginia....................................65

ARTICLE V. CONCERNING THE TRUSTEE...............................................66

         5.1      Certain Rights................................................66
         5.2      Retention of Money............................................67
         5.3      Successor Trustees............................................67
         5.4      Perfection of Appointment.....................................68
         5.5      Succession Instruments........................................68
         5.6      No Representation by Trustee or Beneficiary...................68

                                      iii
</TABLE>

<PAGE>
                      DEED OF TRUST AND SECURITY AGREEMENT

         THIS DEED OF TRUST AND  SECURITY  AGREEMENT  (this  "Deed of Trust") is
made as of March 23,  2001 by  CRIT-VA  II,  INC.,  a Virginia  corporation,  as
Grantor ("Grantor"),  whose address is 306 East Main Street, Richmond,  Virginia
23219, to TRSTE, INC., a Virginia  corporation,  as Trustee  ("Trustee") with an
address at 213 South Jefferson Street, Roanoke,  Virginia 24011, for the benefit
of FIRST UNION NATIONAL  BANK, a national  banking  association,  as Beneficiary
("Beneficiary"),  whose  address is One First Union  Center,  301 South  College
Street, Mailcode NC 0166, Charlotte,  North Carolina 28288, Attention:  Contract
Finance.

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

         THAT  FOR AND IN  CONSIDERATION  OF THE SUM OF TEN AND  NO/100  DOLLARS
($10),  AND OTHER VALUABLE  CONSIDERATION,  THE RECEIPT AND SUFFICIENCY OF WHICH
ARE HEREBY  ACKNOWLEDGED,  GRANTOR HEREBY IRREVOCABLY GRANTS,  BARGAINS,  SELLS,
CONVEYS,  TRANSFERS,  PLEDGES, SETS OVER AND ASSIGNS, WITH POWER OF SALE, all of
Grantor's  estate,  right,  title and interest (if any) in, to and under any and
all of the following described property, whether now owned or hereafter acquired
by Grantor (exclusive of any of the following owned or leased by tenants leasing
all or part of the  Improvements  (as hereinafter  defined)  (Grantor's  estate,
right, title and interest in all such property being referred to,  collectively,
as the "Trust Property"):

         (A)  All  that   certain  real   property   situated  in  the  City  of
Fredericksburg, Commonwealth of Virginia, more particularly described on Exhibit
A attached hereto and  incorporated  herein by this reference (the  "Premises"),
together with all of the easements, rights, privileges,  franchises,  tenements,
hereditaments and appurtenances now or hereafter  thereunto  belonging or in any
way appertaining thereto, and all of the estate, right, title,  interest,  claim
and demand whatsoever of Grantor therein or thereto, either at law or in equity,
in possession or in expectancy, now or hereafter acquired;

         (B) All  structures,  buildings  and  improvements  of  every  kind and
description now or at any time hereafter  located or placed on the Premises (the
"Improvements", the Premises and the Improvements being referred to as the "Real
Property");

         (C) All furniture,  furnishings,  fixtures, goods, equipment, inventory
or personal  property owned by Grantor and now or hereafter located on, attached
to or used in and about the  Improvements,  including,  but not  limited to, all
machines,  engines,  boilers,  dynamos,  elevators,  stokers,  tanks,  cabinets,
awnings,  screens,  shades,  blinds,  carpets,  draperies,  lawn mowers, and all
appliances,   plumbing,  heating,  air  conditioning,   lighting,   ventilating,
refrigerating,  disposal  and  incinerating  equipment,  and  all  fixtures  and
appurtenances  thereto,  and such other goods and chattels and personal property
owned by Grantor and as are now or hereafter  used or furnished in operating the
Improvements, or the activities conducted therein and all building materials and
equipment  hereafter situated on or about the Premises or Improvements,  and, to
the extent

                                       1
<PAGE>

assignable,  all warranties and guaranties  relating thereto,  and all additions
thereto and substitutions and replacements therefor;

         (D) All  easements,  rights-of-way,  strips and gores of land,  vaults,
streets,  ways,  alleys,  passages,  sewer rights,  and other  emblements now or
hereafter  located  on the  Premises  or under or above  the same or any part or
parcel  thereof,  and  all  estates,  rights,  titles,   interests,   tenements,
hereditaments and appurtenances,  reversions and remainders  whatsoever,  in any
way  belonging,  relating  or  appertaining  to the  Real  Property  or any part
thereof,  or which hereafter  shall in any way belong,  relate or be appurtenant
thereto, whether now owned or hereafter acquired by Grantor;

         (E) To the extent assignable, all water, ditches, wells, reservoirs and
drains and all water,  ditch,  well,  reservoir  and  drainage  rights which are
appurtenant  to,  located  on,  under or above  or used in  connection  with the
Premises  or the  Improvements,  or any  part  thereof,  together  (i)  with all
utilities,  utility  lines,  utility  commitments,   utility  capacity,  capital
recovery charges,  impact fees and other fees paid in connection with same, (ii)
reimbursements  or other  rights  pertaining  to  utility  or  utility  services
provided to the Premises and/or Improvements and (iii) the present or future use
or  availability  of waste water  capacity,  or other utility  facilities to the
extent same pertain to or benefit the Premises and/or  Improvements,  including,
without limitation,  all reservations of or commitments covering any such use in
the future whether now existing or hereafter created or acquired;

         (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Premises;

         (G) All  funds  now  or hereafter  on  deposit in  the Impound  Account
and the  Replacement  Reserve (each as hereinafter defined);

         (H) (i) All leases (including,  without limitation oil, gas and mineral
leases),  licenses,  concessions and occupancy  agreements of all or any part of
the Premises or the Improvements (each, a "Lease" and, collectively,  "Leases"),
whether written or oral, now or hereafter entered into and all rents, royalties,
issues,  profits,  bonus  money,  revenue,  income,  rights  and other  benefits
(collectively,  the  "Rents")  of  the  Premises  or  the  Improvements,  now or
hereafter  arising from the use or  enjoyment  of all or any portion  thereof or
from any  present or future  Lease or other  agreement  arising  from any of the
Leases (as hereinafter  defined) or arising from any of the General  Intangibles
(as  hereinafter  defined)  and  all  cash or  securities  deposited  to  secure
performance  by the  tenants,  lessees  or  licensees  (each,  a  "Tenant"  and,
collectively,  "Tenants"),  as applicable,  of their  obligations under any such
Leases  whether said cash or securities  are to be held until the  expiration of
the terms of said Leases or applied to one or more of the  installments  of rent
coming due prior to the  expiration  of said  terms,  subject to,  however,  the
provisions contained in Section 1.11 of this Deed of Trust;

         (I) To the extent  assignable:  (i) all contracts and agreements now or
hereafter  entered  into by Grantor  or binding  upon  Grantor  relating  to the
management,  maintenance  or  operation  of  any  part  of the  Premises  or the
Improvements  (collectively,  the "Contracts") and all revenue, income and other
benefits thereof, including, without limitation,  management

                                       2

<PAGE>

agreements, service contracts, maintenance contracts, equipment leases, personal
property leases and (ii) any contracts or documents  relating to construction on
any  part  of the  Premises  or the  Improvements  (including  plans,  drawings,
surveys, tests, reports, bonds and governmental approvals);

         (J) To the extent  assignable,  all  present and future real estate tax
refunds  and  monetary  deposits  given to any  public or private  utility  with
respect  to  utility  services  furnished  to any  part of the  Premises  or the
Improvements;

         (K) To the extent assignable,  all present and future funds,  accounts,
instruments,  accounts receivable,  documents, causes of action, claims, general
intangibles  (including,  without limitation,  trademarks,  trade names, service
marks and  symbols  now or  hereafter  used in  connection  with any part of the
Premises  or  the  Improvements,   all  names  by  which  the  Premises  or  the
Improvements  may be  operated or known,  all rights to carry on business  under
such names,  and all rights,  interest and  privileges  which Grantor has or may
have as developer or declarant under any covenants, restrictions or declarations
now or hereafter  relating to the Premises or the Improvements) and all notes or
chattel paper  relating to the  ownership,  operation or maintenance of the Real
Property  (exclusive of any of the foregoing  owed to tenants or any other third
parties) (collectively, the "General Intangibles");

         (L) To the extent assignable,  all water taps, sewer taps, certificates
of occupancy, permits, licenses, franchises,  certificates,  consents, approvals
and other rights and privileges now or hereafter obtained in connection with the
Premises  or  the  Improvements  and  all  present  and  future  warranties  and
guaranties  relating  to  the  Improvements  or  to  any  equipment,   fixtures,
furniture,  furnishings, personal property or components of any of the foregoing
now or hereafter located or installed on the Premises or the Improvements;

         (M) All building  materials,  supplies and  equipment  now or hereafter
placed on the Premises or in the Improvements and, to the extent assignable, all
architectural renderings,  models, drawings, plans, specifications,  studies and
data now or hereafter relating to the Premises or the Improvements;

         (N) To the extent assignable,  all right, title and interest of Grantor
in any  insurance  policies  or binders now or  hereafter  relating to the Trust
Property, including any unearned premiums thereon;

         (O) All proceeds,  products,  substitutions  and accessions  (including
claims and demands therefor) of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including,  without limitation,
proceeds of insurance and condemnation awards; and

         (P) All other or greater  rights and  interests  of every nature in the
Premises or the  Improvements  and in the  possession  or use thereof and income
therefrom, whether now owned or hereafter acquired by Grantor.

                                       3
<PAGE>

         IN TRUST TO SECURE:

         (1) The debt evidenced by that certain Promissory Note (such Promissory
Note,   together   with  any  and  all  renewals,   amendments,   modifications,
consolidations and extensions thereof, is hereinafter referred to as the "Note")
of even date with this Deed of Trust,  made by  Grantor  payable to the order of
Beneficiary  in the principal  face amount of Twelve Million Seven Hundred Fifty
Thousand and No/100 Dollars ($12,750,000.00),  together with interest as therein
provided, having a maturity date on April 1, 2011;

         (2)  The  full  and  prompt  payment  and  performance  of  all  of the
provisions, agreements, covenants and obligations herein contained and contained
in agreements, documents or instruments now or hereafter evidencing, securing or
otherwise relating to the Debt (as hereinafter defined) and described on Exhibit
C attached  hereto,  the  Contemporaneous  Notes (as hereinafter  defined),  the
Contemporaneous   Mortgages  (as  hereinafter   defined),   the  Contemporaneous
Assignments  (as  hereinafter  defined),  (together  with any and all  renewals,
amendments, extensions,  modifications and restatements thereof, are hereinafter
collectively  referred to as the "Loan  Documents") and the payment of all other
sums herein or therein covenanted to be paid;

         (3) Any and all  additional  advances made by Beneficiary to protect or
preserve the Trust Property or the lien or security  interest  created hereby on
the  Trust  Property,  or  for  taxes,  assessments  or  insurance  premiums  as
hereinafter  provided  or  for  performance  of  any  of  Grantor's  obligations
hereunder or under the other Loan  Documents or for any other  purpose  provided
herein or in the other Loan Documents; and

         (4) Any and all other  indebtedness now owing or which may hereafter be
owing by Grantor to Beneficiary  under the Loan  Documents,  including,  without
limitation,  all prepayment  fees,  however and whenever  incurred or evidenced,
whether express or implied, direct or indirect,  absolute or contingent,  or due
or to become due, and all renewals, modifications,  consolidations, replacements
and extensions thereof.

(All of the sums  referred  to in  Paragraphs  (1)  through (4) above are herein
referred to as the "Debt").

         TO HAVE AND TO HOLD the Trust Property unto Trustee, its successors and
assigns forever, for the benefit of Beneficiary, its successors and assigns, and
Grantor  does hereby bind itself,  its  successors  and assigns,  to WARRANT AND
FOREVER  DEFEND the title to the Real  Property  (and such other  portion of the
Trust Property as may constitute real property under applicable law), subject to
the Permitted  Encumbrances (as hereinafter defined), to Beneficiary and Trustee
against every person  whomsoever  lawfully  claiming or to claim the same or any
part thereof;

         PROVIDED,  HOWEVER,  that if the  principal  and interest and all other
sums due or to become  due under  the Note or under  the other  Loan  Documents,
including,  without  limitation,  any prepayment  fees required  pursuant to the
terms of the Note, shall have been paid at the time and in the manner stipulated
therein and the Debt shall have been paid and all other  covenants

                                       4
<PAGE>

contained in the Loan Documents shall have been  performed,  then, in such case,
the liens, security interests,  estates and rights granted by this Deed of Trust
shall be satisfied and the estate,  right,  title and interest of Beneficiary in
the Trust Property shall cease, and upon payment to Beneficiary of all costs and
expenses incurred for the preparation of the release hereinafter  referenced and
all recording costs if allowed by law,  Beneficiary  shall promptly  satisfy and
release this Deed of Trust of record and the lien hereof by proper instrument.

                                   ARTICLE I.
                              COVENANTS OF GRANTOR

         For the purpose of further  securing the Debt and for the protection of
the security of this Deed of Trust,  for so long as the Debt or any part thereof
remains unpaid, Grantor covenants and agrees as follows:

         1.1 Warranties of Grantor.  Grantor,  for itself and its successors and
assigns,  does hereby  represent,  warrant and covenant to and with Beneficiary,
its successors and assigns, that:

                  (a) Grantor has good,  marketable and  indefeasible fee simple
title to the Real Property, subject only to those matters expressly set forth as
exceptions to or subordinate  matters in the title insurance policy insuring the
lien of this Deed of Trust delivered as of the date hereof (the "Title Insurance
Policy"),  excepting  therefrom all preprinted and/or standard  exceptions (such
items  being  the  "Permitted  Encumbrances"),  and has full  power  and  lawful
authority  to grant,  bargain,  sell,  convey,  assign,  transfer,  encumber and
mortgage its  interest in the Trust  Property in the manner and form hereby done
or  intended.  Grantor  will  preserve  its  interest  in and  title to the Real
Property and will forever warrant and defend the same to Beneficiary against any
and all claims  whatsoever and will forever  warrant and defend the validity and
priority of the lien and security  interest created herein against the claims of
all persons and parties whomsoever,  subject to the Permitted Encumbrances.  The
foregoing  warranty of title shall survive the foreclosure of this Deed of Trust
and shall inure to the benefit of and be enforceable by Beneficiary in the event
Beneficiary acquires title to or ownership of the Trust Property pursuant to any
foreclosure;

                  (b) No  bankruptcy or  insolvency  proceedings  are pending or
contemplated by Grantor or, to the best knowledge of Grantor, against Grantor or
by or against  any  endorser  or  cosigner  of the Note or of any portion of the
Debt, or any guarantor or indemnitor under the Indemnity and Guaranty  Agreement
and the Environmental  Indemnity  Agreement executed in connection with the Note
or the loan evidenced thereby and secured hereby (the "Indemnitor");

                  (c) All written  certificates,  written affidavits and written
statements  made by Grantor to Beneficiary in connection with the loan evidenced
by the Note are true and  correct in all  material  respects  and do not omit to
state  any  fact or  circumstance  necessary  to make the  statements  contained
therein not materially misleading;

                  (d) The  execution,  delivery and  performance of this Deed of
Trust, the Note and all of the other Loan Documents have been duly authorized by
all necessary action to be, and are, binding and enforceable  against Grantor in
accordance with the respective  terms thereof and

                                       5
<PAGE>
do not in any material respect contravene, result in a breach of or constitute a
default  (nor upon the giving of notice or the passage of time or both will same
constitute   a  default)   under  the   partnership   agreement,   articles   of
incorporation,  operating agreement or other organizational documents of Grantor
or any material  contract or  agreement to which  Grantor is a party or by which
Grantor or any of its property may be bound and do not violate or  contravene in
any material respect any law, order, decree, rule or regulation to which Grantor
is subject;

                  (e) Grantor is not required to obtain any consent, approval or
authorization   from  or  to  file  any   declaration  or  statement  with,  any
governmental  authority  or agency in  connection  with or as a condition to the
execution,  delivery or performance of this Deed of Trust, the Note or the other
Loan Documents which has not been so obtained or filed;

                  (f) Grantor has obtained or made all  necessary  (i) consents,
approvals  and  authorizations  and  registrations  and  filings  of or with all
governmental authorities or agencies and (ii) consents,  approvals,  waivers and
notifications of partners,  stockholders,  members, creditors, lessors and other
non-governmental persons and/or entities, in each case, which are required to be
obtained or made by Grantor in  connection  with the  execution and delivery of,
and the performance by Grantor of its obligations under, the Loan Documents;

                  (g)  Grantor  is  not an  "investment  company",  or a company
"controlled"  by  an  "investment  company",  as  such  terms are defined in the
Investment Company Act of 1940, as amended;

                  (h) No part of the proceeds of the indebtedness secured hereby
will be used for the purpose of  purchasing  or  acquiring  any  "margin  stock"
within the  meaning of  Regulation  T, U or X of the Board of  Governors  of the
Federal Reserve System or for any other purpose which would be inconsistent with
such  Regulation T, U or X or any other  Regulations of such Board of Governors,
or for  any  purpose  prohibited  by  legal  requirements  or by the  terms  and
conditions of the Loan Documents;

                  (i)  Grantor  and,  if Grantor is a  partnership,  any general
partner of Grantor, has filed all federal,  state and local tax returns required
to be filed as of the date hereof and has paid or made  adequate  provision  for
the payment of all  federal,  state and local  taxes,  charges  and  assessments
payable  by  Grantor  and its  general  partner,  if any as of the date  hereof.
Grantor and its general  partners,  if any,  believe that their  respective  tax
returns  properly  reflect  the  income and taxes of  Grantor  and said  general
partners,  if any, for the periods covered  thereby,  subject only to reasonable
adjustments  required by the Internal  Revenue  Service or other  applicable tax
authority upon audit;

                  (j) Grantor is not an "employee  benefit plan",  as defined in
section 3(3) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA and the assets of Grantor do not
constitute  "plan  assets"  of one or more such plans  within the  meaning of 29
C.F.R. Section 2510.3-101;

                  (k) The Premises and the Improvements and the current intended
use  thereof by Grantor  comply in all  material  respects  with all  applicable
restrictive covenants, zoning

                                       6
<PAGE>

ordinances,  subdivision  and building  codes,  flood disaster laws,  health and
environmental  laws  and  regulations  and  all  other  ordinances,   orders  or
requirements  issued by any state,  federal or municipal  authorities  having or
claiming  jurisdiction  over the Trust Property.  The Premises and  Improvements
constitute one or more separate tax parcels for purposes of ad valorem taxation.
To the best of Borrower's  knowledge,  information and belief,  the Premises and
Improvements  do not require any rights over,  or  restrictions  against,  other
property in order to comply with any of the aforesaid  governmental  ordinances,
orders or requirements;

                  (l) All utility services necessary and sufficient for the use,
occupancy and operation of the Premises and the  Improvements  for their current
intended  purposes are available to the Real Property,  including  water,  storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities;

                  (m) All streets,  roads,  highways and bridges  necessary  for
access for the current  use,  occupancy  and  operation  of the Premises and the
Improvements  have  been  completed,   to  the  best  of  Grantor's   knowledge,
information  and belief,  have been dedicated to and accepted by the appropriate
municipal  authority  and  are  open  and  available  to the  Premises  and  the
Improvements without further condition or cost to Grantor;

                  (n) All curb cuts,  driveways  and  traffic  signals  (if any)
shown on the survey delivered to Beneficiary prior to the execution and delivery
of this Deed of Trust (the  "Survey") are existing and, to the best of Grantor's
knowledge,  information and belief,  have been fully approved by the appropriate
governmental authority;

                  (o)  There  are  no  judicial,  administrative,  mediation  or
arbitration  actions,  suits or  proceedings  pending or  threatened  against or
affecting  Grantor  (or,  if Grantor  is a  partnership  or a limited  liability
company, any of its general partners or members) or the Trust Property which, if
adversely  determined,  would  have a material  adverse  effect on (a) the Trust
Property,  (b)  the  business,   prospects,  profits,  operations  or  condition
(financial  or  otherwise)  of  Grantor,   (c)  the  enforceability,   validity,
perfection or priority of the lien of any Loan  Document,  or (d) the ability of
Grantor to perform any  obligations  under any Loan  Document  (collectively,  a
"Material Adverse Effect");

                  (p)   The  Trust  Property  is  free from   delinquent   water
charges,  sewer  rents,  taxes and assessments;

                  (q) As of the date of this Deed of Trust, the Real Property is
free from unrepaired  material damage caused by fire,  flood,  accident or other
casualty;

                  (r) As of the  date of  this  Deed  of  Trust,  no part of the
Premises or the Improvements  has been taken in condemnation,  eminent domain or
like  proceeding nor is any such proceeding  pending or, to Grantor's  knowledge
and belief, threatened;

                                       7
<PAGE>

                  (s)  Grantor   possesses  all  material  franchises,  patents,
copyrights,  trademarks,  trade names, licenses and  permits necessary  for  the
conduct of its business substantially as now conducted;

                  (t)  Except as may  otherwise  be  disclosed  in that  certain
Property  Condition  Report  dated March 7, 2001  (Draft),  prepared by Dominion
Environmental  Group, (i) the Improvements are in good repair and (ii) all major
building systems located within the Improvements, including, without limitation,
the  heating  and air  conditioning  systems  and the  electrical  and  plumbing
systems, are in good working order and condition;

                  (u)   Grantor  has  delivered  to  Beneficiary  true,  correct
and complete copies of all Contracts and all amendments thereto or modifications
thereof;

                  (v) Each  Contract  constitutes  the legal,  valid and binding
obligation  of Grantor and, to the best of Grantor's  knowledge  and belief,  is
enforceable  against any other party  thereto.  No default  exists,  or with the
passing of time or the giving of notice or both would exist,  under any Contract
which would, in the aggregate, have a Material Adverse Effect;

                  (w)   Grantor  and the Trust  Property  are free from any past
due  obligations  for sales and payroll taxes;

                  (x) There are no security  agreements or financing  statements
affecting all or any portion of the Trust  Property of Grantor other than (i) as
disclosed in writing by Grantor to Beneficiary prior to the date hereof and (ii)
the Loan Documents;

                  (y) Grantor has delivered to  Beneficiary a true,  correct and
complete  schedule (the "Rent Roll") of all Leases  affecting the Trust Property
as of the  date  hereof,  which  accurately  and  completely  sets  forth in all
material  respects for each such Lease,  the following:  the name of the Tenant,
the lease  expiration  date,  the base rent payable,  the security  deposit held
thereunder and any other material provisions of such Lease;

                  (z) No Tenant under any Lease has, as of the date hereof, paid
rent more than thirty (30) days in advance, and the rents under such Leases have
not been waived, released, or otherwise discharged or compromised;

                  (aa) The Real  Property  forms no part of any property  owned,
used or claimed by Grantor as its  residence  or  homestead  and,  to the extent
permitted by applicable  law,  Grantor  hereby  disclaims and renounces each and
every  claim  that the  Real  Property  is  exempt  from  forced  sale  upon the
occurrence  and  continuance  of an Event of  Default  as a result  of such Real
Property being Grantor's residence or homestead;

                  (bb) Grantor is not a "foreign  person"  within the meaning of
ss.1445(f)(3) of the Internal Revenue Code of 1986, as amended,  and the related
Treasury Department regulations, including temporary regulations; and

                  (cc) As of the date hereof,  Cornerstone  Realty Income Trust,
Inc., a Virginia

                                       8
<PAGE>

corporation (the "REIT") is the sole shareholder of Grantor. The REIT's interest
in  Grantor is owned by the REIT free and clear of all  mortgages,  assignments,
pledges and security  interests and free and clear of all warrants,  options and
rights to purchase.

         1.2  Defense of Title.  If,  while this Deed of Trust is in force,  the
title to the Real Property or the interest of  Beneficiary in the Trust Property
shall be the subject, directly or indirectly, of any action at law or in equity,
or be attached  directly or  indirectly,  or  endangered,  clouded or  adversely
affected  in any  manner  except for the  Permitted  Encumbrances,  Grantor,  at
Grantor's expense,  shall take all necessary and proper steps for the defense of
said title or interest,  including the employment of counsel reasonably approved
by Beneficiary,  the prosecution or defense of litigation, and the compromise or
discharge of claims made against  said title or  interest.  Notwithstanding  the
foregoing,  if an Event of Default has  occurred  and is  continuing  under this
Section,  Beneficiary  may,  without  limiting  or waiving  any other  rights or
remedies  of  Beneficiary  hereunder,  take such steps with  respect  thereto as
Beneficiary  shall deem  necessary  or proper and any and all costs and expenses
incurred by Beneficiary in connection therewith,  together with interest thereon
at the Default  Interest Rate (as defined in the Note) from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
on  demand  and shall be  secured  by this Deed of Trust and by all of the other
Loan  Documents  securing all or any part of the  indebtedness  evidenced by the
Note.

         1.3  Performance  of  Obligations.  Grantor  shall  pay  when  due  the
principal  of and the interest on the Debt in  accordance  with the terms of the
Note.  Grantor  shall also pay all charges,  fees and other sums  required to be
paid by Grantor as provided in the Loan Documents,  in accordance with the terms
of the Loan Documents, and shall observe, perform and discharge all obligations,
covenants and agreements to be observed,  performed or discharged by Grantor set
forth in the Loan  Documents in accordance  with their terms.  Further,  Grantor
shall promptly  perform and comply in all material  respects with all covenants,
conditions,  obligations and prohibitions required of Grantor in connection with
any  other  document  or  instrument  affecting  title to the Real  Property  or
Grantor's  interest in the Trust  Property,  or any part thereof,  regardless of
whether such document or instrument is superior or  subordinate  to this Deed of
Trust.

         1.4 Insurance.  Grantor shall, at Grantor's expense,  maintain in force
and effect on the Trust Property at all times while this Deed of Trust continues
in effect the following insurance:

                  (a) Insurance  against loss or damage to the Trust Property by
fire,  windstorm,  tornado and hail and  against  loss and damage by such other,
further  and  additional  risks  as  may  be now  or  hereafter  embraced  by an
"all-risk"  or  "special  form"  type of  insurance  policy.  The amount of such
insurance  shall  be not  less  than  one  hundred  percent  (100%)  of the full
replacement cost (insurable value) of the Improvements (as established by an MAI
appraisal),  without  reduction  for  depreciation.  The  determination  of  the
replacement  cost  amount  shall  be  adjusted   annually  to  comply  with  the
requirements of the insurer issuing such coverage or, at Beneficiary's election,
by  reference  to  such  indices,   appraisals  or  information  as  Beneficiary
determines in its reasonable  discretion in order to reflect increased value due
to inflation. Absent such annual adjustment, each policy shall contain inflation
guard  coverage  insuring  that the policy limit will be increased  over time to
reflect the effect of inflation.  Full replacement cost, as

                                       9
<PAGE>

used herein, means, with respect to the Improvements,  the cost of replacing the
Improvements without regard to deduction for depreciation, exclusive of the cost
of  excavations,  foundations  and  footings  below the lowest  basement  floor.
Grantor  shall also  maintain  insurance  against  loss or damage to  furniture,
furnishings,   fixtures,  equipment  and  other  items  (whether  personalty  or
fixtures)  owned by Grantor  and  included  in the Trust  Property  and owned by
Grantor from time to time to the extent applicable.  Each policy shall contain a
replacement cost  endorsement and either an agreed amount  endorsement (to avoid
the operation of any  co-insurance  provisions) or a waiver of any  co-insurance
provisions,  all subject to Beneficiary's approval. The maximum deductible shall
be $25,000.00.

                  (b) Commercial General Liability  Insurance against claims for
personal  injury,  bodily injury,  death and property damage occurring on, in or
about the Premises or the  Improvements  in amounts not less than  $1,000,000.00
per occurrence and  $2,000,000.00 in the aggregate plus umbrella  coverage in an
amount  not less  than  $2,000,000.  Beneficiary  hereby  retains  the  right to
periodically  review the amount of said liability  insurance being maintained by
Grantor  and to require an increase  in the amount of said  liability  insurance
should Beneficiary deem an increase to be reasonably prudent under then existing
circumstances.

                  (c)  Boiler  and  machinery  insurance  is  required  if steam
boilers  or other  pressure-fired  vessels  are in  operation  at the  Premises.
Minimum  liability   coverage  per  accident  must  equal  the  greater  of  the
replacement cost (insurable  value) of the  Improvements  housing such boiler or
pressure-fired machinery or $2,000,000.00. If one or more large HVAC units is in
operation at the Premises,  "Systems Breakdowns" coverage shall be required,  as
determined by Beneficiary.  Minimum  liability  coverage per accident must equal
the value of such unit(s).

                  (d) If the  Improvements or any part thereof is situated in an
area designated by the Federal Emergency Management Agency ("FEMA") as a special
flood hazard area (Zone A or Zone V), flood  insurance in an amount equal to the
lesser of: (i) the minimum  amount  required,  under the terms of  coverage,  to
compensate for any damage or loss on a replacement  basis (or the unpaid balance
of the  Debt if  replacement  cost  coverage  is not  available  for the type of
building insured), or (ii) the maximum insurance available under the appropriate
National Flood Insurance Administration program. The maximum deductible shall be
$3,000.00 per building or a higher  minimum  amount as required by FEMA or other
applicable law.

                  (e)  During  the  period of any  construction,  renovation  or
alteration of the existing  Improvements  which exceeds the lesser of 10% of the
original principal amount of the Note or $500,000,  at Beneficiary's  request, a
completed  value,  "All Risk"  Builder's  Risk form or "Course of  Construction"
insurance  policy in  non-reporting  form, in an amount  reasonably  approved by
Beneficiary,  may be  required.  During  the period of any  construction  of any
addition to the existing  Improvements,  a completed value, "All Risk" Builder's
Risk form or "Course of Construction" insurance policy in non-reporting form, in
an amount reasonably approved by Beneficiary, shall be required

                  (f)  When  required  by  applicable  law,  ordinance  or other
regulation,  Worker's  Compensation and Employer's  Liability Insurance covering
all persons subject to the worker's  compensation laws of the state in which the
Trust Property is located.

                                       10
<PAGE>

                  (g)  Business  income  (loss of rents)  insurance  in  amounts
sufficient to compensate  Grantor for all Rents or income during a period of not
less than twelve (12) months.  The amount of coverage shall be adjusted annually
to reflect the Rents or income payable  during the succeeding  twelve (12) month
period.

                  (h) Such  other  insurance  on the  Trust  Property  or on any
replacements or substitutions  thereof or additions  thereto as may from time to
time be required by Beneficiary  against other  insurable  hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated including,  without limitation,  Sinkhole, Mine Subsidence,  Earthquake
and  Environmental  insurance,  due regard being given to the height and type of
buildings, their construction, location, use and occupancy.

         All such  insurance  shall  (i) be with  insurers  fully  licensed  and
authorized  to do business in the state within which the Premises is located and
who have  and  maintain  a  rating  of at  least A from  Standard  &  Poors,  or
equivalent,  (ii)  contain the  complete  address of the Premises (or a complete
legal  description),  (iii) be  prepaid  for three  (3)  months  (provided  that
Beneficiary may require up to twelve (12) months be prepaid in the event Grantor
is required to make payments to the Impound  Account  pursuant to Section 1.6(c)
hereof),  and (iv) be subject to the  approval of  Beneficiary  as to  insurance
companies  (provided  such  approval  as to a  particular  company  shall not be
withheld if the foregoing  minimum rating  requirement  is satisfied),  amounts,
content,  forms of policies,  method by which  premiums are paid and  expiration
dates,  and (v) include a standard,  non-contributory,  mortgagee  clause naming
EXACTLY:

         First Union National Bank,
         its Successors and Assigns ATIMA
         Attn.:  Structured Products Servicing
         8739 Research Drive, URP-4
         Charlotte, NC  28262-1075

(A) as an additional insured under all liability insurance policies,  (B) as the
first mortgagee on all property  insurance policies and (C) as the loss payee on
all loss of rents or loss of business income insurance policies.

         Grantor shall, as of the date hereof,  deliver to Beneficiary  evidence
that said  insurance  policies have been prepaid as required above and certified
copies of such insurance policies and original  certificates of insurance signed
by an authorized  agent of the applicable  insurance  companies  evidencing such
insurance  satisfactory to  Beneficiary.  Grantor shall renew all such insurance
and deliver to Beneficiary certificates and policies evidencing such renewals at
least thirty (30) days before any such insurance  shall expire.  Grantor further
agrees that each such  insurance  policy:  (i) shall provide for at least thirty
(30) days' prior written notice to Beneficiary  prior to any policy reduction or
cancellation  for any reason other than  non-payment of premium and at least ten
(10) days' prior written notice to Beneficiary  prior to any cancellation due to
non-payment  of premium;  (ii) shall contain an  endorsement or agreement by the
insurer that any loss shall be payable to  Beneficiary  in  accordance  with the
terms of such policy  notwithstanding  any act or  negligence  of Grantor  which
might otherwise  result in forfeiture of such  insurance;

                                       11
<PAGE>

(iii) shall waive all rights of  subrogation  against  Beneficiary;  (iv) in the
event that the Premises or the Improvements  constitutes a legal  non-conforming
use under  applicable  building,  zoning or land use laws or  ordinances,  shall
include an ordinance or law coverage  endorsement which will contain Coverage A:
"Loss  Due to  Operation  of Law"  (with a  minimum  liability  limit  equal  to
Replacement Cost With Agreed Value  Endorsement),  Coverage B: "Demolition Cost"
and Coverage C: "Increased Cost of  Construction"  coverages;  and (v) may be in
the form of a blanket policy  provided that, in the event that any such coverage
is provided in the form of a blanket  policy,  Grantor hereby  acknowledges  and
agrees  that  failure to pay any portion of the  premium  therefor  which is not
allocable to the Trust Property or by any other action not relating to the Trust
Property which would otherwise  permit the issuer thereof to cancel the coverage
thereof,  would  require  the  Trust  Property  to  be  insured  by a  separate,
single-property  policy.  The blanket  policy must  properly  identify and fully
protect  the Trust  Property  as if a separate  policy  were  issued for 100% of
Replacement  Cost at the time of loss and  otherwise  meet all of  Beneficiary's
applicable  insurance  requirements set forth in this Section 1.4. To the extent
permitted by applicable  law, in the event of foreclosure of this Deed of Trust,
or other transfer of title to the Trust Property in  extinguishment  in whole or
in part of the Debt,  all  right,  title and  interest  of Grantor in and to all
proceeds payable under such policies then in force concerning the Trust Property
shall thereupon vest in the purchaser at such foreclosure,  or in Beneficiary or
other  transferee in the event of such other transfer of title.  Approval of any
insurance by Beneficiary  shall not be a  representation  of the solvency of any
insurer or the  sufficiency  of any amount of  insurance.  In the event  Grantor
fails to provide,  maintain, keep in force or deliver and furnish to Beneficiary
the  policies of  insurance  required by this Deed of Trust or evidence of their
renewal as required  herein,  Beneficiary  may, but shall not be  obligated  to,
procure such insurance and Grantor shall pay all amounts advanced by Beneficiary
therefor,  together with interest  thereon at the Default Interest Rate from and
after the date  advanced  by  Beneficiary  until  actually  repaid  by  Grantor,
promptly  upon demand by  Beneficiary.  Any amounts so advanced by  Beneficiary,
together  with interest  thereon,  shall be secured by this Deed of Trust and by
all  of  the  other  Loan  Documents  securing  all or  any  part  of the  Debt.
Beneficiary  shall  not be  responsible  for nor  incur  any  liability  for the
insolvency  of the  insurer or other  failure of the  insurer to  perform,  even
though  Beneficiary has caused the insurance to be placed with the insurer after
failure of Grantor to furnish such insurance. Grantor shall not obtain insurance
for the Trust Property in addition to that required by  Beneficiary  without the
prior written  consent of  Beneficiary,  which consent will not be  unreasonably
withheld  provided that (i)  Beneficiary  is a named insured on such  insurance,
(ii)  Beneficiary  receives  complete  copies of all  policies  evidencing  such
insurance,  and  (iii)  such  insurance  complies  with  all of  the  applicable
requirements set forth herein.

         1.5 Payment of Taxes.  Grantor shall pay or cause to be paid, except to
the extent  Beneficiary  is to pay the same  pursuant to Section  1.6(a) of this
Deed of Trust,  all taxes and assessments  which are or may become a lien on the
Trust Property or which are assessed against or imposed upon the Trust Property.
If paid by Grantor,  Grantor  shall  furnish  Beneficiary  with  receipts (or if
receipts  are  not  immediately  available,   with  copies  of  canceled  checks
evidencing payment with receipts to follow promptly after they become available)
showing  payment of such taxes and  assessments at least fifteen (15) days prior
to the  applicable  delinquency  date therefor.  Notwithstanding  the foregoing,
Grantor  may,  in good  faith,  by  appropriate  proceedings  and upon notice to
Beneficiary,  contest the validity,  applicability or amount of any asserted tax
or

                                       12
<PAGE>

assessment so long as (a) such contest is diligently  pursued,  (b)  Beneficiary
determines, in its reasonable subjective opinion, that such contest suspends the
obligation to pay the tax and that nonpayment of such tax or assessment will not
result in the sale, loss,  forfeiture or diminution of the Trust Property or any
part  thereof  or any  interest  of  Beneficiary  therein,  and (c) prior to the
earlier  of the  commencement  of such  contest or the  delinquency  date of the
asserted  tax or  assessment,  Grantor  deposits  in  the  Impound  Account  (as
hereinafter  defined)  an amount  determined  by  Beneficiary  to be  reasonably
adequate  to cover  the  payment  of such  tax or  assessment  and a  reasonable
additional  sum to cover  possible  interest,  costs  and  penalties;  provided,
however,  that Grantor shall promptly cause to be paid any amount  adjudged by a
court  of  competent  jurisdiction  to be due,  with  all  interest,  costs  and
penalties  thereon,  promptly after such judgment  becomes  final;  and provided
further  that in any event each such contest  shall be concluded  and the taxes,
assessments,  interest,  costs and penalties shall be paid prior to the date any
writ or order is issued  under  which the Trust  Property  may be sold,  lost or
forfeited.

         1.6 Tax and Insurance Impound Account.  (a) Grantor shall establish and
maintain  at all times while this Deed of Trust  continues  in effect an impound
account (the  "Impound  Account")  with  Beneficiary  for payment of real estate
taxes and  assessments  and  insurance on the Trust  Property and as  additional
security for the Debt.  Simultaneously with the execution hereof,  Grantor shall
deposit  in the  Impound  Account  an amount  determined  by  Beneficiary  to be
necessary  to ensure that there will be on deposit  with  Beneficiary  an amount
which, when added to the monthly payments  subsequently required to be deposited
with  Beneficiary  hereunder on account of real estate  taxes,  assessments  and
insurance  premiums,  will result in there being on deposit with  Beneficiary in
the Impound Account an amount sufficient to pay the next due installment of real
estate taxes and  assessments on the Trust Property at least one (1) month prior
to the earlier of (a) the due date thereof or (b) any such date by which Grantor
or Beneficiary is required by law to pay same and the next due annual  insurance
premiums with respect to the Trust  Property at least one (1) month prior to the
due date thereof.  Commencing  on the first monthly  payment date under the Note
and continuing  thereafter on each monthly payment date under the Note,  Grantor
shall pay to  Beneficiary,  concurrently  with and in  addition  to the  monthly
payment  due  under the Note and  until  the Debt is fully  paid and  performed,
deposits in an amount  equal to  one-twelfth  (1/12) of the amount of the annual
real estate taxes and  assessments  that will next become due and payable on the
Trust  Property,  plus  one-twelfth  (1/12) of the amount of the annual premiums
that will next become due and payable on  insurance  policies  which  Grantor is
required to maintain hereunder, each as estimated and determined by Beneficiary.
So long as no Event of Default has occurred, and no event has occurred or failed
to occur  which with the  passage of time,  the giving of notice,  or both would
constitute an Event of Default (a  "Default"),  all sums in the Impound  Account
shall  be  held  by  Beneficiary  in the  Impound  Account  to pay  said  taxes,
assessments and insurance  premiums before the same become  delinquent.  Grantor
shall be responsible  for ensuring the receipt by  Beneficiary,  at least thirty
(30) days prior to the  respective due date for payment  thereof,  of all bills,
invoices and statements for all taxes,  assessments and insurance premiums to be
paid from the Impound Account,  and so long as no Event of Default has occurred,
Beneficiary shall pay the governmental authority or other party entitled thereto
directly  to the extent  funds are  available  for such  purpose in the  Impound
Account.  In making any payment from the Impound Account,  Beneficiary  shall be
entitled  to  rely  on  any  bill,  statement  or  estimate  procured  from  the
appropriate public office or insurance company or agent without any inquiry into
the  accuracy of

                                       13
<PAGE>

such bill,  statement  or estimate  and without any inquiry  into the  accuracy,
validity,  enforceability or contestability of any tax,  assessment,  valuation,
sale,  forfeiture,  tax lien or title or claim  thereof.  No  interest  on funds
contained  in the  Impound  Account,  if any,  shall be paid by  Beneficiary  to
Grantor.

                  (b)  Notwithstanding  anything  herein  or in any  other  Loan
Document to the contrary,  at any time prior to the Maturity Date (as defined in
the  Note),  unless and until an Event of Default  shall  have  occurred  and be
continuing,  Grantor  shall not be  required  to make  deposits  to the  Impound
Account  as  required  by Section  1.6(a) of this Deed of Trust with  respect to
insurance  premiums  (the  "Insurance  Obligations")  provided  that each of the
following conditions is satisfied at all times:

                  (i)  Simultaneously  with the execution hereof,  Grantor shall
deposit in the Impound Account the equivalent of three (3) months  of  insurance
premiums; and

                  (ii) Grantor timely delivers  satisfactory evidence of payment
         for and  renewal  of the  insurance  policy  or  policies  as  required
         hereunder.

                  (c)  If an  Event  of  Default  shall  have  occurred  and  be
continuing, including, without limitation, with respect to Grantor's obligations
under  Section 1.4 and Section  1.6(a) (as modified by Section  1.6(b))  hereof,
upon Beneficiary's request, Grantor shall promptly commence making full payments
to the Impound Account pursuant to Section 1.6(a) above.

                  (d)   Notwithstanding   anything  to  the   contrary   herein,
Beneficiary shall not require Grantor to commence making payments to the Impound
Account if a default  occurs with regard to the payment and  performance  of the
Insurance  Obligations  so long as such default  shall not have  resulted in the
expiration,  termination  or lapse of  insurance as required  under  Section 1.4
hereof and so long as Grantor  shall have cured such  default by the  earlier of
(1) seven (7) days after written notice  thereof from  Beneficiary to Grantor or
(2) prior to the date on which nonpayment of premiums would result in the lapse,
expiration or termination of insurance as required by Section 1.4 hereof.

         1.7      Intentionally Deleted.

         1.8      Replacement Reserve.

                  (a)  As  additional  security  for  the  Debt,  Grantor  shall
establish and maintain at all times while this Deed of Trust continues in effect
a repair and replacement  reserve (the  "Replacement  Reserve") with Beneficiary
for payment of costs and  expenses  incurred by Grantor in  connection  with the
performance of work related to the maintenance, replacement and/or repair of the
Trust  Property,  including  without  limitation,  work to the roofs,  chimneys,
gutters,  downspouts,  paving,  curbs,  ramps,  driveways,  balconies,  porches,
patios,  exterior  walls,  exterior doors and doorways,  windows,  elevators and
mechanical and HVAC equipment and such other work as Grantor deems  necessary or
appropriate  (collectively,  the  "Repairs").  Commencing  on the first  monthly
Payment Date under the Note and  continuing  thereafter on each monthly  Payment
Date under the Note, Grantor shall pay to Beneficiary,  concurrently with

                                       14
<PAGE>

and in addition to the monthly payments due under the Note and until the Debt is
fully  paid and  performed,  a deposit to the  Replacement  Reserve in an amount
equal to $5,375.00 per month. So long as no Event of Default has occurred and is
continuing,  all sums in the Replacement Reserve shall be held by Beneficiary in
the Replacement  Reserve to pay the costs and expense of Repairs.  So long as no
Default or Event of Default has occurred and is continuing,  Beneficiary  shall,
to the extent funds are available for such purpose in the  Replacement  Reserve,
disburse to Grantor the amount  paid or incurred by Grantor in  performing  such
Repairs  within ten (10) days  following:  (a) the receipt by  Beneficiary  of a
written request from Grantor for disbursement from the Replacement Reserve and a
certification  by Grantor that the applicable item of Repair has been completed;
(b) the delivery to Beneficiary of invoices, receipts, cancelled checks or other
evidence  reasonably   satisfactory  to  Beneficiary,   verifying  the  cost  of
performing the Repairs;  (c) for  disbursement  requests with  individual  items
costing in excess of $50,000.00, the delivery to Beneficiary of affidavits, lien
waivers,   cancelled  checks  or  other  evidence  reasonably   satisfactory  to
Beneficiary showing that all materialmen, laborers, subcontractors and any other
parties  who  might or  could  claim  statutory  or  common  law  liens  and are
furnishing or have  furnished  material or labor to the Trust Property have been
paid all amounts due for labor and  materials  furnished to the Trust  Property;
(d) for  disbursement  requests  with  individual  items  costing  in  excess of
$50,000.00,  delivery  to  Beneficiary  of a  certification  from a third  party
acceptable to  Beneficiary  describing  the completed  Repairs and verifying the
completion  of the Repairs and the value of the completed  Repairs;  and (e) for
disbursement  requests with  individual  items costing in excess of  $50,000.00,
delivery to  Beneficiary of a new  certificate of occupancy or local  equivalent
for the  portion  of the  Improvements  covered  by such  Repairs,  if said  new
certificate of occupancy is required by law, or a certification  by Grantor that
no new certificate of occupancy is required.  Beneficiary  shall not be required
to make advances from the  Replacement  Reserve more frequently than once in any
ninety (90) day  period.  In making any payment  from the  Replacement  Reserve,
Beneficiary  shall be entitled to rely on such request from Grantor  without any
inquiry  into the  accuracy,  validity  or  contestability  of any such  amount.
Beneficiary may, at Grantor's expense,  make or cause to be made during the term
of this Deed of Trust an annual  inspection  of the Trust  Property to determine
the need, as determined by Beneficiary in its reasonable  judgment,  for further
Repairs of the Trust Property.  In the event that such  inspection  reveals that
further  Repairs of the Trust Property are required,  Beneficiary  shall provide
Grantor with a written  description  of the required  Repairs and Grantor  shall
respond within thirty (30) days of such request, and, thereafter,  Grantor shall
make such Repairs, as may be mutually agreed upon by Grantor and Beneficiary and
within such time period as may be mutually  agreed upon.  Funds contained in the
Replacement Reserve shall be placed in an interest-bearing  account upon receipt
and interest thereon credited to Grantor as provided in Section 4.31 hereof.

                  (b) As additional  security for the payment and performance by
Grantor of all duties,  responsibilities  and obligations under the Note and the
other Loan Documents,  Grantor hereby  unconditionally and irrevocably  assigns,
conveys,  pledges,  mortgages,  transfers,  delivers,  deposits,  sets  over and
confirms unto Beneficiary,  and hereby grants to Beneficiary a security interest
in  Grantor's  right,  title and  interest  in,  (i) the  Impound  Account,  the
Replacement Reserve, the Repair and Remediation Reserve and any other reserve or
escrow  account  established  pursuant to the terms  hereof or of any other Loan
Document  (collectively,  the  "Reserves"),  (ii) the  accounts  into  which the
Reserves have been  deposited,  (iii) all insurance on

                                       15
<PAGE>

said accounts,  (iv) all accounts,  contract  rights and general  intangibles or
other rights and  interests  pertaining  thereto,  (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof,  (vii) all  instruments  and documents now or hereafter  evidencing the
Reserves or such accounts,  (viii) all powers, options,  rights,  privileges and
immunities  pertaining to the Reserves  (including the right to make withdrawals
therefrom),  and (ix) all proceeds of the foregoing.  Grantor hereby  authorizes
and consents to the account into which the Reserves  have been  deposited  being
held in  Beneficiary's  name or the name of any  entity  servicing  the Note for
Beneficiary  and  hereby  acknowledges  and  agrees  that  Beneficiary,   or  at
Beneficiary's  election, such servicing agent, shall have exclusive control over
said  account.  Notice  of the  assignment  and  security  interest  granted  to
Beneficiary  herein may be delivered by Beneficiary at any time to the financial
institution wherein the Reserves have been established, and Beneficiary, or such
servicing  entity,  shall have possession of all passbooks or other evidences of
such  accounts.  Grantor hereby assumes all risk of loss with respect to amounts
on deposit in the Reserves,  unless  finally  determined by a court of competent
jurisdiction to have been caused by the gross  negligence or willful  misconduct
of  Beneficiary.   Grantor  hereby  knowingly,   voluntarily  and  intentionally
stipulates,  acknowledges  and agrees that the advancement of the funds from the
Reserves as set forth herein is at Grantor's  direction  and is not the exercise
by  Beneficiary  of any right of  set-off or other  remedy  upon a Default or an
Event of  Default.  If an Event of Default  shall occur  hereunder  or under any
other of the Loan Documents and shall be continuing,  Beneficiary  may,  without
notice or demand on Grantor, at its option: (A) withdraw any or all of the funds
(including,  without  limitation,  interest)  then remaining in the Reserves and
apply  the  same,  after  deducting  all  costs  and  expenses  of  safekeeping,
collection and delivery  (including,  but not limited to, reasonable  attorneys'
fees, costs and expenses) to the Debt or any other  obligations of Grantor under
the other Loan Documents in such manner as Beneficiary shall deem appropriate in
its sole  discretion,  and the excess,  if any,  shall be paid to  Grantor,  (B)
exercise any and all rights and remedies of a secured party under any applicable
Uniform  Commercial Code, or (C) exercise any other remedies available at law or
in equity.  No such use or  application  of the funds  contained in the Reserves
shall be deemed to cure any Default or Event of Default.

                  (c)  The  Reserves  shall  not,  unless  otherwise  explicitly
required by applicable law, be or be deemed to be escrow or trust funds, but, at
Beneficiary's  option and in Beneficiary's  discretion,  may either be held in a
separate  account or be  commingled  by  Beneficiary  with the general  funds of
Beneficiary.  The  Reserves are solely for the  protection  of  Beneficiary  and
entail no  responsibility  on  Beneficiary's  part  beyond  the  payment  of the
respective items for which they are held following receipt of bills, invoices or
statements  therefor in accordance with the terms hereof and beyond the allowing
of due credit for the sums actually  received.  Upon  assignment of this Deed of
Trust by  Beneficiary  and assumption by assignee of  Beneficiary's  obligations
hereunder,  any funds in the  Reserves  shall be turned over to the assignee and
any  responsibility  of  Beneficiary,  as assignor,  with respect  thereto shall
terminate.  If the funds in the  applicable  Reserve  shall exceed the amount of
payments  actually  applied by Beneficiary  for the purposes and items for which
the  applicable  Reserve is held,  such excess may be credited by Beneficiary on
subsequent  payments  to be made  hereunder  or, at the  option of  Beneficiary,
refunded to Grantor.  If,  however,  the  applicable  Reserve  shall not contain
sufficient  funds to pay the sums  required  by the dates on which such sums are
required to be on deposit in such  account,  Grantor  shall,  within thirty (30)
days after receipt of written notice thereof,  deposit

                                       16
<PAGE>

with Beneficiary the full amount of any such  deficiency.  If Grantor shall fail
to deposit  with  Beneficiary  the full  amount of such  deficiency  as provided
above,  Beneficiary shall have the option, but not the obligation,  to make such
deposit,  and all amounts so deposited by  Beneficiary,  together  with interest
thereon at the Default  Interest Rate from the date so deposited by  Beneficiary
until actually paid by Grantor,  shall be immediately  paid by Grantor on demand
and  shall  be  secured  by this  Deed of  Trust  and by all of the  other  Loan
Documents  securing all or any part of the Debt. If there is an Event of Default
under this Deed of Trust that shall have occurred and be continuing, Beneficiary
may, but shall not be obligated to, apply at any time the balance then remaining
in any or all of the  Reserves  against the Debt in whatever  order  Beneficiary
shall subjectively  determine. No such application of any or all of the Reserves
shall be deemed to cure any Event of Default.  Upon full  payment of the Debt in
accordance with its terms or at such earlier time as Beneficiary may elect,  the
balance of any or all of the Reserves then in Beneficiary's  possession shall be
paid over to Grantor and no other party shall have any right or claim thereto.

         1.9 Casualty and  Condemnation.  Grantor shall give Beneficiary  prompt
written notice of the occurrence of any casualty  affecting,  or the institution
of any  proceedings  for eminent  domain or for the  condemnation  of, the Trust
Property  or any  portion  thereof.  Subject  to  the  following  sentence,  all
insurance  proceeds  on the Trust  Property,  and all causes of action,  claims,
compensation,  awards and recoveries for any damage,  condemnation  or taking of
all or any part of the Trust  Property or for any damage or injury to it for any
loss or diminution in value of the Trust Property, shall be paid to Beneficiary.
Beneficiary  may  participate in any suits or  proceedings  relating to any such
proceeds,  causes of action,  claims,  compensation,  awards or recoveries,  and
Beneficiary  is hereby  authorized,  in its own name or in  Grantor's  name,  to
adjust  any loss  covered by  insurance  or any  condemnation  claim or cause of
action,  and to settle or compromise  any claim or cause of action in connection
therewith,  and  Grantor  shall  from time to time  deliver to  Beneficiary  any
instruments required to permit such participation;  provided,  however, that, so
long as no Event of Default shall have occurred and be  continuing,  Beneficiary
shall not have the right to  participate  in the  adjustment  of any loss or the
receipt of any sums  hereunder  which is not in excess of the lesser of (i) five
percent  (5%) of the then  outstanding  principal  balance  of the Note and (ii)
$200,000,  and Grantor may receive such funds from any loss not in excess of the
foregoing directly to be used for repair or restoration of the Trust Property in
accordance with the terms hereof.  Beneficiary  shall apply any sums received by
it under this  Section  first to the  payment  of all of its costs and  expenses
(including,  but not  limited  to,  reasonable  legal  fees  and  disbursements)
incurred in obtaining those sums, and then, as follows:

                  (a) In the event  that less than  forty  percent  (40%) of the
Improvements  located on the Premises have been taken or destroyed,  then if and
so long as:

                           (1)      no  Event of  Default has  occurred  and  is
continuing  hereunder or under any of the other Loan Documents, and

                           (2)  the  Trust   Property   can,  in   Beneficiary's
         reasonable  judgment,  with diligent restoration or repair, be returned
         in all material  respects to a condition  substantially the same as the
         condition  thereof that existed prior to the casualty or partial

                                       17
<PAGE>

          taking  causing the loss or damage  within the earlier to occur of (i)
          nine  (9)  months   after  the  receipt  of   insurance   proceeds  or
          condemnation  awards by either Grantor or Beneficiary,  and (ii) sixty
          (60) days prior to the stated maturity date of the Note, and

                           (3)  all  necessary  governmental  approvals  can  be
          obtained to allow the rebuilding and reoccupancy of the Trust Property
          as described in Section (a)(2) above, and

                           (4)  there are  sufficient  sums  available  (through
         insurance proceeds or condemnation  awards and contributions by Grantor
         or otherwise,  the full amount of which shall, at Beneficiary's option,
         have been deposited with  Beneficiary)  for such  restoration or repair
         (including,  without limitation,  for any reasonable costs and expenses
         of  Beneficiary  to be incurred in  administering  said  restoration or
         repair) and for  payment of  principal  and  interest to become due and
         payable under the Note during such restoration or repair, and

                           (5)  the  economic  feasibility  of the  Improvements
         after such  restoration  or repair  will be such that income from their
         operation is reasonably  anticipated  to be sufficient to pay operating
         expenses  of the Trust  Property  and debt  service on the Debt in full
         with  the  same  coverage  ratio   considered  by  Beneficiary  in  its
         determination to make the loan secured hereby, and

                           (6) in the  event  that  the  insurance  proceeds  or
         condemnation  awards  received as a result of such  casualty or partial
         taking  exceed  the  lesser  of (i)  five  percent  (5%)  of  the  then
         outstanding  principal  balance of the Note and (ii) $200,000,  Grantor
         shall  have  delivered  to  Beneficiary,  at  Grantor's  sole  cost and
         expense,   an  appraisal  report  in  form  and  substance   reasonably
         satisfactory to Beneficiary  appraising the value of the Trust Property
         as  proposed  to be  restored  or  repaired  to be not  less  than  the
         appraised value of the Trust Property  considered by Beneficiary in its
         determination to make the loan secured hereby, and

                           (7) Grantor so elects by written notice  delivered to
         Beneficiary  within fifteen (15) days after settlement of the aforesaid
         insurance or condemnation  claim, then,  Beneficiary shall,  solely for
         the  purposes  of such  restoration  or repair,  advance so much of the
         remainder  of such  sums as may be  required  for such  restoration  or
         repair, and any funds deposited by Grantor therefor,  to Grantor in the
         manner and upon such terms and  conditions  as would be  required  by a
         prudent interim construction lender, including, but not limited to, the
         reasonable  prior approval by Beneficiary of plans and  specifications,
         contractors  and form of  construction  contracts and the furnishing to
         Beneficiary of permits,  bonds,  lien waivers,  invoices,  receipts and
         affidavits from contractors and  subcontractors,  in form and substance
         reasonably  satisfactory  to  Beneficiary in its  discretion,  with any
         remainder  being  applied  by  Beneficiary  for  payment of the Debt in
         whatever order Beneficiary directs in its absolute discretion.

                  (b) In all  other  cases,  namely,  in the  event  that  forty
percent  (40%) or more of the  Improvements  located on the  Premises  have been
taken or  destroyed  or  Grantor  does not

                                       18

<PAGE>

elect to restore or repair the Trust  Property  pursuant  to clause (a) above or
otherwise fails to meet the  requirements  of clause (a) above,  then, in any of
such events,  Beneficiary shall elect, in Beneficiary's  absolute discretion and
without regard to the adequacy of  Beneficiary's  security,  to do either of the
following:  (1)  apply the  remainder  of such sums  received  pursuant  to this
Section to the payment of the Debt in whatever order Beneficiary  directs in its
absolute  discretion  (and,  if  required  under  applicable  law so to  do,  to
accelerate  the maturity date of the Note and declare any and all of the Debt to
be immediately due and payable),  with any remainder  being paid to Grantor,  or
(2)  notwithstanding  that Grantor may have elected not to restore or repair the
Trust Property  pursuant to the provisions of Section  1.9(a)(7) above,  require
Grantor  to restore  or repair  the Trust  Property  in the manner and upon such
terms and  conditions  as would be  required by a prudent  interim  construction
lender,  including, but not limited to, the deposit by Grantor with Beneficiary,
within  thirty (30) days after demand  therefor,  of any  deficiency  reasonably
determined by Beneficiary to be necessary in order to assure the availability of
sufficient funds to pay for such restoration or repair,  including Beneficiary's
costs and expenses to be incurred in connection therewith,  the reasonable prior
approval by Beneficiary  of plans and  specifications,  contractors  and form of
construction contracts and the furnishing to Beneficiary of permits, bonds, lien
waivers, invoices,  receipts and affidavits from contractors and subcontractors,
in form and substance reasonably  satisfactory to Beneficiary in its discretion,
and apply the remainder of such sums toward such  restoration  and repair,  with
any balance thereafter remaining being applied by Beneficiary for payment of the
Debt  in  whatever  order  Beneficiary  directs  in  its  absolute   discretion.
Notwithstanding  Section 1.9(b)(1) hereof,  Beneficiary shall not accelerate the
maturity  date of the  Note  pursuant  to  Section  1.9(b)(1)  if the  Mortgaged
Property is released  from the lien of this Deed of Trust in  connection  with a
Defeasance  (as defined in the Note) in  accordance  with Section  1.5(d) of the
Note.

Any reduction in the Debt resulting from  Beneficiary's  application of any sums
received  by it  hereunder  shall take  effect  only when  Beneficiary  actually
receives  such sums and elects to apply such sums to the Debt and, in any event,
the unpaid portion of the Debt shall remain in full force and effect and Grantor
shall not be  excused in the  payment  thereof.  Partial  payments  received  by
Beneficiary,  as described in the preceding sentence,  shall be applied first to
the final payment due under the Note and  thereafter to  installments  due under
the  Note in the  inverse  order  of  their  due  date.  If  Grantor  elects  or
Beneficiary  directs  Grantor to restore or repair the Trust  Property after the
occurrence  of a casualty  or partial  taking of the Trust  Property as provided
above, Grantor shall promptly and diligently, at Grantor's sole cost and expense
and  regardless  of whether the insurance  proceeds or  condemnation  award,  as
appropriate,  shall be sufficient for the purpose,  restore, repair, replace and
rebuild the Trust Property as nearly as practicable to its value,  condition and
character  immediately  prior to such  casualty or partial  taking in accordance
with the foregoing provisions and Grantor shall pay to Beneficiary all costs and
expenses of Beneficiary  incurred in administering said rebuilding,  restoration
or repair,  provided that Beneficiary makes such proceeds or award available for
such  purpose.  Grantor  agrees to execute  and  deliver  from time to time such
further  instruments as may be requested by Beneficiary to confirm the foregoing
assignment to Beneficiary of any award, damage,  insurance proceeds,  payment or
other compensation.  Beneficiary is hereby irrevocably constituted and appointed
the attorney-in-fact of Grantor (which power of attorney shall be irrevocable so
long as any portion of the Debt is outstanding,  shall be deemed coupled with an
interest,  shall survive the voluntary or involuntary dissolution of Grantor and
shall not be  affected  by any  disability  or  incapacity

                                       19
<PAGE>

suffered  by  Grantor  subsequent  to the  date  hereof),  with  full  power  of
substitution,  subject to the terms of this Section,  to settle for, collect and
receive  any  such  awards,  damages,  insurance  proceeds,  payments  or  other
compensation  from the parties or authorities  making the same, to appear in and
prosecute  any  proceedings  therefor  and to  give  receipts  and  acquittances
therefor.

         1.10  Construction  Liens.  Grantor  shall pay when due all  claims and
demands of mechanics, materialmen, laborers and others for any work performed or
materials  delivered for the Premises or the  Improvements;  provided,  however,
that,  Grantor  shall  have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to  Beneficiary  and provided that neither the Trust  Property nor any
interest  therein would be in any danger of sale, loss or forfeiture as a result
of such proceeding or contest. In the event Grantor shall contest any such claim
or demand,  Grantor  shall  promptly  notify  Beneficiary  of such  contest  and
thereafter shall, upon Beneficiary's  reasonable request, if an Event of Default
shall have occurred and is continuing,  promptly provide a bond, cash deposit or
other  security   sufficient  to  pay  such  claim  to  Beneficiary  to  protect
Beneficiary's  interest  and  security  should the contest be  unsuccessful.  If
Grantor shall fail to immediately discharge or provide security against any such
claim or demand as  aforesaid,  Beneficiary  may do so and any and all  expenses
incurred by Beneficiary,  together with interest thereon at the Default Interest
Rate from the date incurred by Beneficiary until actually paid by Grantor, shall
be  immediately  paid by  Grantor on demand and shall be secured by this Deed of
Trust and by all of the other  Loan  Documents  securing  all or any part of the
Debt.

         1.11 Rents.  As additional and  collateral  security for the payment of
the Debt and cumulative of any and all rights and remedies  herein provided for,
Grantor hereby absolutely and presently assigns to Beneficiary  Grantor's right,
title and interest (if any) in all existing  and future  Rents.  Grantor  hereby
grants to Beneficiary the sole,  exclusive and immediate  right,  without taking
possession of the Trust  Property,  to demand,  collect (by suit or  otherwise),
receive and give valid and  sufficient  receipts  for any and all of said Rents,
for which purpose Grantor does hereby  irrevocably make,  constitute and appoint
Beneficiary  its  attorney-in-fact  with full power to appoint  substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable
so long as any portion of the Debt is outstanding, shall be deemed to be coupled
with an interest,  shall survive the  voluntary or  involuntary  dissolution  of
Grantor and shall not be affected by any  disability or  incapacity  suffered by
Grantor  subsequent to the date hereof).  Beneficiary shall be without liability
for any loss  which may arise  from a failure or  inability  to  collect  Rents,
proceeds or other payments.  However, until the occurrence and continuance of an
Event of  Default  under  this  Deed of Trust  or  under  any  other of the Loan
Documents,  Grantor shall have a license to collect,  receive, use and enjoy the
Rents when due and prepayments  thereof for not more than one (1) month prior to
the due  date  thereof.  Upon  the  occurrence  and  continuance  of an Event of
Default,  Grantor's  license shall  automatically  terminate  without  notice to
Grantor and Beneficiary may thereafter,  without taking  possession of the Trust
Property,  collect the Rents itself or by an agent or  receiver.  From and after
the  termination  of such license,  Grantor shall be the agent of Beneficiary in
collection  of the Rents,  and all of the Rents so collected by Grantor shall be
held in trust by Grantor for the sole and exclusive benefit of Beneficiary,  and
Grantor  shall,  within three (3) business days after receipt of any Rents,  pay
the same to Beneficiary  to be applied by Beneficiary as hereinafter  set forth.
Neither the demand for or collection of Rents by  Beneficiary  shall  constitute
any assumption by

                                       20

<PAGE>

Beneficiary of any obligations under any agreement relating thereto. Beneficiary
is  obligated  to  account  only for such  Rents as are  actually  collected  or
received  by  Beneficiary.  Grantor  irrevocably  agrees and  consents  that the
respective payors of the Rents shall, upon demand and notice from Beneficiary of
the  occurrence  and  continuance  of an Event  of  Default,  pay said  Rents to
Beneficiary  without liability to determine the actual existence of any Event of
Default claimed by Beneficiary. Grantor hereby waives any right, claim or demand
which Grantor may now or hereafter have against any such payor by reason of such
payment of Rents to  Beneficiary,  and any such  payment  shall  discharge  such
payor's  obligation  to make such  payment to Grantor.  All Rents  collected  or
received  by  Beneficiary  may be applied  against all  expenses of  collection,
including,  without  limitation,  reasonable  attorneys' fees,  against costs of
operation and management of the Trust Property and against the Debt, in whatever
order or priority as to any of the items so mentioned as Beneficiary  directs in
its sole  subjective  discretion  and  without  regard  to the  adequacy  of its
security.  Neither the exercise by  Beneficiary of any rights under this Section
nor the application of any Rents to the Debt shall cure or be deemed a waiver of
any Event of Default. The assignment of Rents hereinabove granted shall continue
in full force and effect during any period of  foreclosure  or  redemption  with
respect to the Trust Property.  Grantor has executed an Assignment of Leases and
Rents dated of even date herewith  (the  "Assignment")  in favor of  Beneficiary
covering all of the right, title and interest of Grantor, as landlord, lessor or
licensor,  in and to any Leases.  All rights and remedies granted to Beneficiary
under the  Assignment  shall be in addition to and  cumulative of all rights and
remedies granted to Beneficiary hereunder.

         1.12     Leases .

                  (a)  Prior  to  execution  of  any  Leases  of  space  in  the
Improvements  after the date hereof,  Grantor shall submit to  Beneficiary,  for
Beneficiary's prior approval, which approval shall not be unreasonably withheld,
a copy  of  the  form  Lease  Grantor  plans  to use  in  leasing  space  in the
Improvements  or at the  Trust  Property,  but only to the  extent  such form is
materially adversely modified from the form submitted to Beneficiary at or prior
to the date hereof.  No further  submittals  of the form Lease shall be required
unless the form is  materially  adversely  modified  from the form most recently
approved by Beneficiary.  All such Leases of space in the Improvements or at the
Trust Property shall be on terms consistent with the terms for similar leases in
the market area of the Premises, shall provide for free rent only if the same is
consistent with prevailing market conditions, and shall provide for market rents
then  prevailing in the market area of the Premises,  and shall be for a term of
not less than three (3) months or greater  than one (1) year.  Such Leases shall
also  provide  for  security  deposits in  reasonable  amounts  consistent  with
prevailing  market  conditions.  Grantor  shall also submit to  Beneficiary  for
Beneficiary's  approval,  which approval shall not be unreasonably withheld, any
proposed  material adverse  modification of the form Lease of the  Improvements.
Grantor  shall not  execute  any Lease for all or a  substantial  portion of the
Trust Property, except for an actual occupancy by the Tenant, lessee or licensee
thereunder,  and shall at all times promptly and faithfully perform, or cause to
be performed,  all of the covenants,  conditions and agreements contained in all
Leases with respect to the Trust  Property,  now or hereafter  existing,  on the
part of the landlord,  lessor or licensor  thereunder to be kept and  performed.
Grantor shall furnish to Beneficiary, within thirty (30) days after a request by
Beneficiary to do so, but in any event by January 1 of each year, a current Rent
Roll,  certified by Grantor as being true and correct,  containing  the names of
all

                                       21
<PAGE>

Tenants  with  respect  to the Trust  Property,  the  terms of their  respective
Leases,  the spaces occupied and the rentals or fees payable  thereunder and the
amount of each Tenant's security deposit.

                  (b) Grantor shall not do or suffer to be done any act, or omit
to take any action,  that might result in a default by the  landlord,  lessor or
licensor under any such Lease or allow the Tenant thereunder to withhold payment
of rent or cancel or terminate  same and shall not further assign any such Lease
or any such Rents. Grantor, at no cost or expense to Beneficiary, shall enforce,
short of termination, the performance and observance of each and every condition
and  covenant  of each of the parties  under such  Leases and Grantor  shall not
anticipate, discount, release, waive, compromise or otherwise discharge any rent
payable under any of the Leases.  Grantor  shall not,  without the prior written
consent  of  Beneficiary,  modify  any of the  Leases,  terminate  or accept the
surrender of any Leases,  waive or release any other party from the  performance
or  observance of any  obligation  or condition  under such Leases except in the
normal  course  of  business  in a manner  which is  consistent  with  sound and
customary  leasing  and  management  practices  for  similar  properties  in the
community in which the Trust  Property is located.  Grantor shall not permit the
prepayment  of any  rents  under any of the  Leases  for more than one (1) month
prior to the due date thereof.

                  (c) Upon the occurrence and continuance of an Event of Default
under  this Deed of Trust,  whether  before  or after  the whole  principal  sum
secured hereby is declared to be immediately  due or whether before or after the
institution of legal  proceedings  to foreclose  this Deed of Trust,  forthwith,
upon  demand  of  Beneficiary,  Grantor  shall  surrender  to  Beneficiary,  and
Beneficiary  shall be entitled to take actual  possession of, the Trust Property
or any part thereof  personally,  or by its agent or  attorneys.  In such event,
Beneficiary shall have, and Grantor hereby gives and grants to Beneficiary,  the
right,  power and  authority  to make and enter into Leases with  respect to the
Trust  Property  or  portions  thereof  for such  rents and for such  periods of
occupancy and upon  conditions and provisions as Beneficiary  may deem desirable
in its sole discretion,  and Grantor expressly  acknowledges and agrees that the
term of any such Lease may extend beyond the date of any foreclosure sale of the
Trust Property, it being the intention of Grantor that in such event Beneficiary
shall be deemed  to be and  shall be the  attorney-in-fact  of  Grantor  for the
purpose of making and  entering  into  Leases of parts or  portions of the Trust
Property  for the rents and upon the terms,  conditions  and  provisions  deemed
desirable to Beneficiary in its sole  discretion and with like effect as if such
Leases had been made by Grantor as the owner in fee simple of the Trust Property
free and clear of any  conditions  or  limitations  established  by this Deed of
Trust.  The  power  and  authority  hereby  given  and  granted  by  Grantor  to
Beneficiary  shall be  deemed  to be  coupled  with an  interest,  shall  not be
revocable  by Grantor so long as any portion of the Debt is  outstanding,  shall
survive the  voluntary or  involuntary  dissolution  of Grantor and shall not be
affected by any disability or incapacity  suffered by Grantor  subsequent to the
date hereof. In connection with any action taken by Beneficiary pursuant to this
Section,  Beneficiary  shall not be liable  for any loss  sustained  by  Grantor
resulting from any failure to let the Trust  Property,  or any part thereof,  or
from any other act or omission of  Beneficiary  in managing the Trust  Property,
nor shall Beneficiary be obligated to perform or discharge any obligation,  duty
or liability  under any Lease covering the Trust Property or any part thereof or
under or by reason of this  instrument  or the  exercise  of rights or  remedies
hereunder.  Grantor shall, and does hereby,  indemnify

                                       22
<PAGE>

Beneficiary  for,  and  hold  Beneficiary  harmless  from,  any and all  claims,
actions, demands,  liabilities, loss or damage which may or might be incurred by
Beneficiary  under any such Lease or under this Deed of Trust or by the exercise
of  rights  or  remedies  hereunder  and from  any and all  claims  and  demands
whatsoever  which may be asserted  against  Beneficiary by reason of any alleged
obligations  or  undertakings  on its part to  perform or  discharge  any of the
terms,  covenants  or  agreements  contained  in any such Lease other than those
finally determined by a court of competent  jurisdiction to have resulted solely
from  the  gross  negligence  or  willful  misconduct  of  Beneficiary.   Should
Beneficiary  incur any such liability,  the amount thereof,  including,  without
limitation,  costs,  expenses and  reasonable  attorneys'  fees,  together  with
interest  thereon  at the  Default  Interest  Rate  from  the date  incurred  by
Beneficiary until actually paid by Grantor, shall be immediately due and payable
to  Beneficiary  by Grantor on demand and shall be secured  hereby and by all of
the other Loan Documents  securing all or any part of the Debt.  Nothing in this
Section shall impose on Beneficiary any duty,  obligation or responsibility  for
the  control,  care,  management  or repair of the  Trust  Property,  or for the
carrying  out of any of the  terms and  conditions  of the  Lease,  nor shall it
operate to make Beneficiary responsible or liable for any waste committed on the
Trust  Property by the Tenants or by any other  parties or for any  dangerous or
defective  condition  of the  Trust  Property,  or  for  any  negligence  in the
management,  upkeep,  repair or control of the Trust  Property.  Grantor  hereby
assents  to,  ratifies  and  confirms  any and all actions of  Beneficiary  with
respect to the Trust Property taken under this Section.

         1.13     Alienation and Further Encumbrances.

                  (a) Grantor  acknowledges that Beneficiary has relied upon the
principals  of Grantor and their  experience  in owning and  operating the Trust
Property and  properties  similar to the Trust  Property in connection  with the
closing of the loan evidenced by the Note.  Accordingly,  except as specifically
allowed hereinbelow in this Section and notwithstanding anything to the contrary
contained  in Section  4.6 hereof,  in the event that the Trust  Property or any
part  thereof  or  interest  therein  shall  be  sold,  conveyed,  disposed  of,
alienated,  hypothecated, leased (except to Tenants of space in the Improvements
in  accordance  with the  provisions  of  Section  1.12  hereof  and  except for
condemnation),  assigned,  pledged,  mortgaged,  further encumbered or otherwise
transferred  or Grantor shall be divested of its title to the Trust  Property or
any  interest   therein,   in  any  manner  or  way,   whether   voluntarily  or
involuntarily,  without the prior  written  consent of  Beneficiary  being first
obtained,  which consent may be withheld in Beneficiary's sole discretion,  then
the same shall  constitute  an Event of Default and  Beneficiary  shall have the
right,  at its option,  to declare any or all of the Debt,  irrespective  of the
maturity  date  specified  in the  Note,  immediately  due  and  payable  and to
otherwise exercise any of its other rights and remedies contained in Article III
hereof. For the purposes of this Section: (i) in the event either Grantor or any
of its  general  partners  or  members  is a  corporation  or  trust,  the sale,
conveyance,  transfer  or  disposition  of  more  than  50%  of the  issued  and
outstanding  capital stock of Grantor or any of its general  partners or members
or of the  beneficial  interest of such trust (or the  issuance of new shares of
capital stock in Grantor or any of its general  partners or managing  members so
that immediately  after such issuance (in one or a series of  transactions)  the
total capital stock then issued and  outstanding  is more than 150% of the total
immediately  prior to such  issuance)  shall be  deemed to be a  transfer  of an
interest  in the Trust  Property;  and (ii) in the event  Grantor or any general
partner or  managing  member of Grantor is a limited or

                                       23
<PAGE>

general partnership, a joint venture or a limited liability company, a change of
more than 50% in the  ownership  interests  in any  general  partner,  any joint
venturer or any managing member, either voluntarily, involuntarily or otherwise,
or the sale, conveyance,  transfer,  disposition,  alienation,  hypothecation or
encumbering  of all or any portion of the interest of any such general  partner,
joint venturer or managing member in Grantor or such general partner or managing
member  (whether in the form of a beneficial or  partnership  interest or in the
form of a power of direction,  control or management,  or  otherwise),  shall be
deemed to be a transfer of an interest  in the Trust  Property.  Notwithstanding
the foregoing,  however, (i) limited partnership  interests in Grantor or in any
general  partner or member of Grantor shall be freely  transferable  without the
consent of  Beneficiary,  (ii) any  involuntary  transfer caused by the death of
Grantor  or  any  general  partner,  shareholder,   joint  venturer,  member  or
beneficial  owner of a trust shall not be an Event of Default under this Deed of
Trust so long as Grantor is reconstituted, if required, following such death and
so long as those persons  primarily  responsible for the management of the Trust
Property  and  Grantor  remain  unchanged  as a  result  of  such  death  or any
replacement management is approved by Beneficiary,  (iii) shares in the REIT may
be offered and sold to  investors  in an offering of such shares  which has been
registered with the Securities and Exchange  Commission,  or is exempt from such
registration, without regard to the limits referred to above, and (iv) gifts for
estate planning  purposes of any individual's  interests in Grantor or in any of
Grantor's general partners, managing members or joint venturers to the spouse or
any lineal  descendant of such individual,  or to a trust for the benefit of any
one or more of such  individual,  spouse or lineal  descendant,  shall not be an
Event of Default  under this Deed of Trust so long as Grantor is  reconstituted,
if  required,  following  such  gift  and so long  as  those  persons  primarily
responsible  for  the  management  of the  Trust  Property  and  Grantor  remain
unchanged  following  such gift or any  replacement  management  is  approved by
Beneficiary.

                  (b) Notwithstanding the foregoing  provisions of this Section,
Beneficiary  shall  consent  to an  unlimited  number of sales,  conveyances  or
transfers  of the  Trust  Property  in its  entirety,  together  with all  Other
Mortgaged  Properties (as defined in Section 4.34 hereof)  (hereinafter,  each a
"Sale") to any person or entity  provided that each of the  following  terms and
conditions are satisfied as to each Sale:

                           (1) No Event of Default is then continuing  hereunder
         or under any of the other Loan Documents;

                           (2) Except in the case of a Sale  permitted  pursuant
         to subparagraph (c) below,  Grantor,  or its successor  pursuant to the
         proposed or any prior Sale under the terms and conditions hereof, gives
         Beneficiary  written notice of the terms of such  prospective  Sale not
         less  than  sixty  (60)  days  before  the date on which  such  Sale is
         scheduled to close and, concurrently  therewith,  gives Beneficiary all
         such  information  concerning  the  proposed  transferee  of the  Trust
         Property  (hereinafter,   "Buyer")  as  Beneficiary  would  require  in
         evaluating  an initial  extension of credit to a borrower  under a loan
         comparable  to the  Loan  and  pays  to  Beneficiary  a  non-refundable
         application  fee in the  amount of $5,000.  Beneficiary  shall have the
         right to approve or  disapprove  the  proposed  Buyer.  In  determining
         whether  to  give or  withhold  its  approval  of the  proposed  Buyer,
         Beneficiary  shall consider the Buyer's  experience and track record in
         owning and  operating  facilities  similar to the Trust  Property,  the
         Buyer's financial  strength,  the

                                       24
<PAGE>

         Buyer's general  business  standing and the Buyer's  relationships  and
         experience  with  contractors,  vendors,  tenants,  lenders  and  other
         business   entities;    provided,    however,   that,   notwithstanding
         Beneficiary's   agreement   to  consider  the   foregoing   factors  in
         determining  whether to give or withhold such  approval,  such approval
         shall  be  given  or  withheld  based  on what  Beneficiary  reasonably
         determines  to  be  commercially   reasonable  in  Beneficiary's   sole
         discretion  and,  if given,  may be given  subject  to such  reasonable
         conditions as Beneficiary may deem appropriate;

                           (3) Except in the case of a Sale  permitted  pursuant
         to  subparagraph  (c) below,  Grantor,  or its successor  pursuant to a
         prior Sale under the terms and  conditions  hereof,  pays  Beneficiary,
         concurrently with the closing of such Sale, a non-refundable assumption
         fee  in an  amount  equal  to all  out-of-pocket  costs  and  expenses,
         including, without limitation,  reasonable attorneys' fees, incurred by
         Beneficiary  in  connection  with the  Sale,  plus an  amount  equal to
         one-half  of one  percent  (0.50%)  of the then  outstanding  principal
         balance of the Note.  Notwithstanding  anything  contained herein or in
         any of the other  Loan  Documents  to the  contrary,  if the  aggregate
         original  principal  balance of the Note,  together  with the aggregate
         original principal balances of the  Contemporaneous  Notes, at the time
         of such sale exceeds $40,000,000.00 (the "Aggregate Loan Balance"), the
         assumption  fee shall be an amount  equal to one quarter of one percent
         (0.25%);

                           (4) The Buyer  assumes and agrees to pay the Debt (or
         ratifies  such  obligation)  subject to the  provisions of Section 4.27
         hereof and, prior to or concurrently with the closing of such Sale, the
         Buyer  executes,  without  any cost or  expense  to  Beneficiary,  such
         assumption (or ratification, as applicable) documents and agreements as
         Beneficiary  shall  reasonably  require to evidence and effectuate said
         assumption  and  delivers  such  legal  opinions  as  Beneficiary   may
         reasonably require;

                           (5) The current  Indemnitor or its successor ratifies
         its  obligations  under its guaranty or indemnity  agreement or a party
         associated   with  the  Buyer  approved  by  Beneficiary  in  its  sole
         discretion  assumes the obligations of the current Indemnitor under its
         guaranty or  indemnity  agreement  and such party  associated  with the
         Buyer  executes,  without  any cost or  expense to  Beneficiary,  a new
         guaranty  or  indemnity  agreement  in form  and  substance  reasonably
         satisfactory  to  Beneficiary  and  delivers  such  legal  opinions  as
         Beneficiary may reasonably require;

                           (6) Upon request if reasonably required,  Grantor, or
         its  successor  pursuant  to the  proposed  or any prior Sale under the
         terms and conditions hereof, and the Buyer execute, without any cost or
         expense to Beneficiary, new financing statements or financing statement
         amendments  and  any  additional   documents  reasonably  requested  by
         Beneficiary;

                           (7) Upon request if reasonably required,  Grantor, or
         its  successor  pursuant  to the  proposed  or any prior Sale under the
         terms and conditions hereof, delivers to Beneficiary,  without any cost
         or expense to Beneficiary,  such  endorsements to  Beneficiary's  title
         insurance policy,  hazard insurance policy endorsements or certificates
         as Beneficiary may deem  reasonably  necessary at the time of the Sale,
         all in form  and

                                       25
<PAGE>

         substance reasonably  satisfactory to Beneficiary,  including,  without
         limitation,  an  endorsement or  endorsements  to  Beneficiary's  title
         insurance policy insuring the lien of this Deed of Trust, extending the
         effective  date of such policy to the date of  execution  and  delivery
         (or, if later,  of recording) of the  assumption  agreement  referenced
         above  in  subparagraph  (4)  of  this  Section,   with  no  additional
         exceptions added to such policy except those approved by Beneficiary in
         its discretion, and insuring that fee simple title to the Real Property
         is vested in the Buyer;

                           (8)  Grantor,   or  its  successor  pursuant  to  the
         proposed  or any prior  Sale  under the  terms and  conditions  hereof,
         executes  and delivers to  Beneficiary,  without any cost or expense to
         Beneficiary,  a  release  of  Beneficiary,  its  officers,   directors,
         employees  and agents,  from all claims and  liability  relating to the
         transactions evidenced by the Loan Documents, through and including the
         date of the closing of the Sale,  which  agreement shall be in form and
         substance  reasonably  satisfactory to Beneficiary and shall be binding
         upon the Buyer;

                           (9) Subject to the  provisions of Section 4.27 hereof
         and the provisions of  subparagraph  (c) of this Section,  such Sale is
         not construed so as to relieve  Grantor,  or its successor  pursuant to
         the proposed or any prior Sale under the terms and  conditions  hereof,
         of any  personal  liability  under  the Note or any of the  other  Loan
         Documents for any acts or events occurring or obligations arising prior
         to or simultaneously with the closing of such Sale, whether or not same
         is  discovered  prior or  subsequent  to the closing of such Sale,  and
         Grantor,  or its  successor  pursuant to the proposed or any prior Sale
         under the terms and conditions  hereof,  executes,  without any cost or
         expense to  Beneficiary,  such  documents and agreements as Beneficiary
         shall reasonably require to evidence and effectuate the ratification of
         said personal liability. Grantor shall be released from and relieved of
         any  personal  liability  under  the  Note  or any of  the  other  Loan
         Documents for any acts or events occurring or obligations arising after
         the  closing of such Sale which are not caused by or arising out of any
         acts  or  events   occurring  or   obligations   arising  prior  to  or
         simultaneously with the closing of such Sale;

                           (10) Subject to the  provisions of  subparagraph  (c)
         below,  such  Sale  is  not  construed  so as to  relieve  any  current
         Indemnitor  or its successor of its  obligations  under any guaranty or
         indemnity  agreement  for any acts or events  occurring or  obligations
         arising prior to or  simultaneously  with the closing of such Sale, and
         each such current Indemnitor  executes,  without any cost or expense to
         Beneficiary,   such  documents  and  agreements  as  Beneficiary  shall
         reasonably  require to evidence and effectuate the ratification of each
         such guaranty and  indemnity  agreement.  Each such current  Indemnitor
         shall be released from and relieved of any of its obligations under any
         guaranty or indemnity  agreement  executed in connection  with the loan
         secured hereby for any acts or events occurring or obligations  arising
         after the  closing of such Sale which are not caused by or arising  out
         of any acts or events  occurring  or  obligations  arising  prior to or
         simultaneously with the closing of such Sale;

                           (11)  The  Buyer  shall  furnish,  if the  Buyer is a
         corporation,  partnership or other entity, all documents evidencing the
         Buyer's  capacity  and  good  standing,  and the

                                       26
<PAGE>

         qualification   of  the  signers  to  execute  the  assumption  of  the
         indebtedness  secured hereby, which documents shall include, but not in
         any way be limited to,  certified  copies of all documents  relating to
         the  organization  and formation of the Buyer and of the  entities,  if
         any,  which are partners of the Buyer.  The Buyer and such  constituent
         partners,  members or  shareholders  of Buyer (as the case may be),  as
         Beneficiary  may  require,   shall  be   single-purpose,   single-asset
         "bankruptcy  remote"  entities,  whose  formation  documents  shall  be
         approved by counsel to  Beneficiary.  An individual  recommended by the
         Buyer  and  approved  by  Beneficiary  shall  serve  as an  Independent
         Director  (as defined in Section  1.33(z) of this Deed of Trust) of the
         Buyer (if the Buyer is a corporation) or the Buyer's  corporate general
         partner  or an  independent  member  or, in  Beneficiary's  discretion,
         manager of Buyer if the Buyer is a limited liability company. Unanimous
         consent of the board of directors (including the Independent  Director)
         shall be required for, among other things,  any merger,  consolidation,
         dissolution,  bankruptcy or insolvency of any such constituent partner,
         member  or  shareholder  of the  Buyer  (as the  case may be) or of the
         Buyer;

                           (12) The Buyer,  if required by  Beneficiary  and, in
         the  case  of  clauses  (i) and  (ii)  herein  only if the  outstanding
         principal  balance  of the  Loan is in  excess  of  $15,000,000,  shall
         furnish  an  opinion of counsel  satisfactory  to  Beneficiary  and its
         counsel  (i) that  the  Buyer's  formation  documents  provide  for the
         matters  described in subparagraph  (11) of this Section 1.13(b),  (ii)
         that the assets of the Buyer will not be  consolidated  with the assets
         of any other entity  (including the Buyer's general partner or members,
         if any), as applicable, having an interest in, or affiliation with, the
         Buyer,  in the event of  bankruptcy or insolvency of any such entity or
         such  general  partner or  members,  (iii) that the  assumption  of the
         indebtedness  evidenced hereby has been duly  authorized,  executed and
         delivered,   and  that  the  Loan  Documents  are  valid,  binding  and
         enforceable against the Buyer in accordance with their terms, (iv) that
         the Buyer and any entity which is a  controlling  stockholder,  general
         partner  or  member of Buyer,  have  been  duly  organized,  and are in
         existence  and  good  standing,  and (v)  with  respect  to such  other
         matters, as Beneficiary may request; and

                           (13) If required  under the operative  documents with
         respect to a Secondary  Market  Transaction (as  hereinafter  defined),
         Beneficiary  shall have  received  evidence in writing  from the Rating
         Agency to the effect that the  proposed  transfer  will not result in a
         re-qualification,  reduction,  downgrade  or  withdrawal  of any rating
         initially  assigned or to be assigned in a Secondary Market Transaction
         or, if no such  rating has been  issued,  in  Beneficiary's  good faith
         judgment,  such transfer  shall not have an adverse effect on the level
         of rating obtainable in connection with the loan secured hereby.

                  (c) Notwithstanding anything contained herein or in any of the
other Loan  Documents to the contrary,  Grantor shall have a one-time free right
to transfer or Sale (including,  without limitation,  by merger or consolidation
or by other disposition of assets) of the Trust Property and all Other Mortgaged
Properties so long as (1) Grantor gives Beneficiary  written notice of the terms
of such transfer or sale not less than thirty (30) days before the date on which
such  transfer or Sale is scheduled to close,  (2) the Buyer has total assets of
at least  $750,000,000.00  and financial  statements  evidencing such value have
been presented to

                                       27
<PAGE>

Beneficiary  and (3)  Grantor  shall  have  submitted,  in  lieu  of the  $5,000
application   fee  stated  in  subparagraph   (b)(2)  above,  a   non-refundable
application  fee in the amount of $15,000.00.  In the event of any such transfer
or Sale pursuant to this subparagraph (c), the provisions of clauses (2) and (3)
of subparagraph (b) of this Section 1.13 shall not apply.

         1.14 Payment of Utilities, Assessments, Charges, Etc. Grantor shall pay
when due all utility charges which are incurred by Grantor or which may become a
charge or lien against any portion of the Trust  Property for gas,  electricity,
water and sewer services  furnished to the Premises and/or the  Improvements and
all other  assessments  or  charges  of a similar  nature  (excluding  taxes and
assessments escrowed in the Impound Account), or assessments payable pursuant to
any  restrictive  covenants,  whether public or private,  affecting the Premises
and/or the Improvements or any portion thereof,  whether or not such assessments
or charges  are or may become  liens  thereon.  Notwithstanding  the  foregoing,
Grantor  may,  in good  faith,  by  appropriate  proceedings  and upon notice to
Beneficiary,  contest  the  validity,  applicability  or amount of any  asserted
utilities, assessments or other charges that may become a charge or lien against
any  portion of the Trust  Property  as long as (a) such  contest is  diligently
pursued, (b) Beneficiary determines,  in its reasonable subjective opinion, that
such contest  suspends the obligation to pay such utility charges or assessments
and that non-payment of such charges or assessments will not result in the sale,
loss,  forfeiture or diminution of the Trust Property or any part thereof or any
interest of Beneficiary therein, and (c) prior to the earlier of commencement of
such  contest or the  delinquency  date of the  asserted  charge or  assessment,
Grantor  deposits the Impound Account an amount  determined by Beneficiary to be
reasonably  adequate  to  cover  payment  of such  charge  or  assessment  and a
reasonable  additional  sum to cover  possible  interest,  costs and  penalties;
provided,  however,  that  Grantor  shall  promptly  cause to be paid any amount
adjudged by a court of competent  jurisdiction be due, with all interest,  costs
and penalties  thereon,  promptly  after such judgment  becomes final beyond any
appeal period;  and provided,  further,  that in any event such contest shall be
concluded  and the  charges or  assessments  shall be paid prior to the date any
writ or order is issued  under  which the Trust  Property  may be sold,  lost or
forfeited.

         1.15 Access  Privileges and  Inspections.  Beneficiary  and the agents,
representatives  and employees of  Beneficiary  shall,  subject to the rights of
Tenants,  have full and free access to the Premises and the Improvements and any
other location where books and records concerning the Trust Property are kept at
all  reasonable  times and,  except in the event of an emergency,  upon not less
than three (3) days  prior  notice  (which  notice  may be  telephonic)  for the
purposes of inspecting the Trust  Property and of examining,  copying and making
extracts from the books and records of Grantor  relating to the Trust  Property.
Grantor shall lend assistance to all such agents,  representatives and employees
of Beneficiary.

         1.16  Waste;  Alteration  of  Improvements.  Grantor  shall not commit,
suffer or permit any waste on the Trust Property nor take any actions that might
invalidate any insurance  carried on the Trust Property.  Grantor shall maintain
the Trust Property in good condition and repair. No part of the Improvements may
be removed,  demolished or materially altered, without the prior written consent
of Beneficiary  except as provided herein.  Without the prior written consent of
Beneficiary,  Grantor shall not commence construction of any improvements on the
Premises

                                       28
<PAGE>

other than  improvements  required for the maintenance or repair of the
Trust Property or as otherwise provided herein.

         1.17 Zoning.  Without the prior written consent of Beneficiary,  not to
be  unreasonably  withheld or delayed,  Grantor  shall not seek,  make,  suffer,
consent to or acquiesce in any change in the zoning or  conditions of use of the
Premises  or the  Improvements.  Grantor  shall  have the same  right to contest
zoning, conditions on use and other land use matters and/or any proposed changes
in the same in a manner  similar to the  provisions  relating to the contests of
Environmental Laws as provided for in Section 1.31 hereof.  Grantor shall comply
with and make all  payments  required  under the  provisions  of any  covenants,
conditions or restrictions  affecting the Premises or the Improvements.  Grantor
shall  comply with all  existing  and future  requirements  of all  governmental
authorities having  jurisdiction over the Real Property.  Grantor shall keep all
licenses, permits, franchises and other approvals necessary for the operation of
the Trust  Property in full force and  effect.  Grantor  shall  operate the Real
Property as an apartment  development and incidental and ancillary uses or other
lawful use approved by Beneficiary for so long as the Debt is  outstanding.  If,
under applicable zoning  provisions,  the use of all or any part of the Premises
or the  Improvements is or becomes a nonconforming  use, Grantor shall not cause
or permit such use to be  discontinued  or abandoned  without the prior  written
consent of Beneficiary.  Further,  without  Beneficiary's prior written consent,
Grantor  shall not file or subject any part of the Premises or the  Improvements
to any  declaration of condominium  or  co-operative  or convert any part of the
Premises or the  Improvements  to a condominium,  co-operative  or other form of
multiple ownership and governance.

         1.18  Financial  Statements  and Books and Records.  Grantor shall keep
accurate  books  and  records  of  account  of the  Trust  Property  and its own
financial affairs  sufficient to permit the preparation of financial  statements
therefrom  in  accordance  with  generally   accepted   accounting   principles.
Beneficiary  and its duly  authorized  representatives  shall  have the right to
examine, copy and audit Grantor's records and books of account at all reasonable
times. Prior to the first Sale hereunder,  and for so long as this Deed of Trust
continues in effect,  Grantor shall provide to  Beneficiary,  in addition to any
other  financial  statements  required  hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified  to  Beneficiary  as being true and correct by the chief  financial
officer  of the  REIT,  and,  with  respect  to  the  financial  statements  and
information  set forth in  subsection  (e)  hereof,  audited  by an  independent
certified public  accountant,  be prepared in accordance with generally accepted
accounting  principles  consistently  applied  and  be  in  form  and  substance
acceptable to Beneficiary:

                  (a) monthly balance sheets and statement of operations for the
Trust Property, within thirty (30) days after the end of each of the first (1st)
twelve (12) calendar months following the date hereof; and

                  (b) quarterly  balance  sheets and statement of operations for
the Trust Property,  within thirty (30) days after the end of each March,  June,
September and December  commencing  with the first (1st) of such months to occur
following the first (1st) anniversary of the date hereof;

                                       29
<PAGE>

                  (c) copy of the REIT's 10-Q as filed with the  Securities  and
Exchange Commission,  within forty-five (45) days after the end of each calendar
quarter following the date hereof;

                  (d)  annual balance sheets and statement of operations for the
 Trust Property;

                  (e)  the REIT's annual  financial  statements,  within  ninety
(90) days after the end of each fiscal year of the REIT;

                  (f) annual  occupancy  summary for the Real  Property  setting
forth the occupancy  rates,  average daily room rates and room revenues for each
month of the preceding  calendar  year, as well as annual  averages of the same,
and such other information as may customarily be reflected thereon or reasonably
requested by Beneficiary.

         Following  the first  Sale  hereunder,  and for so long as this Deed of
Trust continues in effect, Grantor shall provide to Beneficiary,  in addition to
any other financial statements required hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified to  Beneficiary  as being true and correct by Grantor or the person
or entity to which  they  pertain,  as  applicable,  and,  with  respect  to the
financial statements and information set forth in subsection (d) hereof, audited
by an independent  certified public  accountant,  be prepared in accordance with
generally accepted accounting principles consistently applied and be in form and
substance acceptable to Beneficiary:

                  (a)  copies  of  all tax  returns  filed  by  Grantor,  within
thirty (30) days after the date of filing;

                  (b)  monthly  operating  statements  for the  Trust  Property,
within  fifteen  (15) days after the end of each of the first (1st)  twelve (12)
calendar months following the date hereof; and

                  (c) quarterly  operating  statements  for the Trust  Property,
within  thirty  (30)  days  after the end of each  March,  June,  September  and
December  commencing  with the first (1st) of such months to occur following the
first (1st) anniversary of the date hereof;

                  (d) annual  balance  sheets for the Trust  Property and annual
financial  statements for Grantor and each  Indemnitor,  within ninety (90) days
after the end of each calendar year; and

                  (e) such other information with respect to the Trust Property,
Grantor,  the principals or general  partners in Grantor,  and each  Indemnitor,
which may be reasonably  requested  from time to time by  Beneficiary,  within a
reasonable time after the applicable request.

         If any of the aforementioned materials are not furnished to Beneficiary
within the  applicable  time periods or  Beneficiary  is  dissatisfied  with the
contents   of  any  of  the   foregoing   and  has   notified   Grantor  of  its
dissatisfaction,  in addition to any other  rights and  remedies of  Beneficiary
contained  herein,  Beneficiary  shall have the right,  but not the  obligation,
after

                                       30
<PAGE>

Grantor's  failure to cure such  satisfaction  within  thirty (30) business days
following  Grantor's  receipt of such notice,  to obtain the same by means of an
audit by an independent certified public accountant selected by Beneficiary,  in
which event Grantor agrees to pay, or to reimburse  Beneficiary for, any expense
of such audit and further  agrees to provide all necessary  information  to said
accountant and to otherwise cooperate in the making of such audit.

         1.19  Further   Documentation.   Grantor  shall,   on  the  request  of
Beneficiary  and at the expense of  Grantor:  (a)  promptly  correct any defect,
error or omission  which may be discovered in the contents of this Deed of Trust
or in the contents of any of the other Loan  Documents;  (b)  promptly  execute,
acknowledge,  deliver and record or file such  further  instruments  (including,
without limitation,  further mortgages, deeds of trust, security deeds, security
agreements,  financing  statements,  continuation  statements and assignments of
rents  or  leases)  and  promptly  do such  further  acts  as may be  necessary,
desirable or proper to carry out more  effectively  the purposes of this Deed of
Trust and the other Loan  Documents  and to  subject  to the liens and  security
interests  hereof and thereof  any  property  intended  by the terms  hereof and
thereof to be covered hereby and thereby,  including  specifically,  but without
limitation,   any   renewals,   additions,   substitutions,    replacements   or
appurtenances to the Trust Property; (c) promptly execute, acknowledge, deliver,
procure and record or file any document or instrument  (including  specifically,
without  limitation,  any financing  statement)  reasonably  deemed advisable by
Beneficiary to protect,  continue or perfect the liens or the security interests
hereunder  against the rights or  interests of third  persons;  and (d) promptly
furnish to Beneficiary,  upon Beneficiary's request, a duly acknowledged written
statement  and  estoppel  certificate  addressed  to such  party or  parties  as
directed by  Beneficiary  and in form and  substance  supplied  by  Beneficiary,
setting  forth all  amounts  due under the Note,  stating  whether  any Event of
Default has  occurred  hereunder  and is  continuing,  and  stating  whether any
offsets or defenses exist against the Debt.

         1.20 Payment of Costs; Reimbursement to Beneficiary.  Grantor shall pay
all  reasonable  costs and expenses of every  character  reasonably  incurred in
connection with the closing of the loan evidenced by the Note and secured hereby
or otherwise  attributable  or  chargeable  to Grantor as the owner of the Trust
Property,  including,  without  limitation,   appraisal  fees,  recording  fees,
documentary,   stamp,   mortgage  or  intangible   taxes,   brokerage  fees  and
commissions,  title policy  premiums and title search fees,  uniform  commercial
code/tax  lien/litigation  search fees,  escrow fees and  reasonable  attorneys'
fees. If Grantor defaults in any such payment, which default is not cured within
any applicable  grace or cure period,  Beneficiary  may, after  reasonable prior
written notice to Grantor, pay the same and Grantor shall reimburse  Beneficiary
on demand  for all such  costs and  expenses  incurred  or paid by  Beneficiary,
together with such interest  thereon at the Default Interest Rate from and after
the date of  Beneficiary's  making such payment until  reimbursement  thereof by
Grantor.  Any such sums  disbursed by  Beneficiary,  together with such interest
thereon,  shall be additional  indebtedness  of Grantor  secured by this Deed of
Trust and by all of the other  Loan  Documents  securing  all or any part of the
Debt.  Further,  Grantor shall  promptly  notify  Beneficiary  in writing of any
litigation or threatened  litigation affecting the Trust Property,  or any other
demand  or claim  which,  if  enforced,  could  impair  or  threaten  to  impair
Beneficiary's  security hereunder.  Without limiting or waiving any other rights
and remedies of  Beneficiary  hereunder,  if Grantor fails to perform any of its
covenants or  agreements  contained in this Deed of Trust or in any of the other
Loan Documents and such failure is not cured within any applicable grace or cure
period,  or if any

                                       31
<PAGE>

action or proceeding of any kind (including, but not limited to, any bankruptcy,
insolvency,  arrangement,  reorganization or other debtor relief  proceeding) is
commenced  which  might  adversely  affect  Beneficiary's  interest in the Trust
Property or Beneficiary's  right to enforce its security,  then Beneficiary may,
at its option, with or without notice to Grantor, make any appearances, disburse
any sums and take any actions as may be  necessary  or  desirable  to protect or
enforce  the  security of this Deed of Trust or to remedy the failure of Grantor
to perform its covenants and agreements (without,  however,  waiving any default
of  Grantor).  Grantor  agrees to pay on demand all expenses of  Beneficiary  or
Trustee incurred with respect to the foregoing  (including,  but not limited to,
reasonable fees and disbursements of counsel), together with interest thereon at
the  Default  Interest  Rate  from and after  the date on which  Beneficiary  or
Trustee incurs such expenses until  reimbursement  thereof by Grantor.  Any such
expenses so incurred by Beneficiary,  together with interest thereon as provided
above, shall be additional indebtedness of Grantor secured by this Deed of Trust
and by all of the other Loan Documents securing all or any part of the Debt. The
necessity for any such actions and of the amounts to be paid shall be determined
by Beneficiary in its discretion.  Beneficiary is hereby  empowered to enter and
to authorize others to enter upon the Trust Property or any part thereof for the
purpose  of  performing  or  observing  any such  defaulted  term,  covenant  or
condition without thereby becoming liable to Grantor or any person in possession
holding under Grantor.  Grantor hereby acknowledges and agrees that the remedies
set forth in this Section 1.20 shall be exercisable by Beneficiary,  and any and
all payments  made or costs or expenses  incurred by  Beneficiary  in connection
therewith  shall be secured  hereby and shall be,  without  demand,  immediately
repaid  by  Grantor  with  interest   thereon  at  the  Default  Interest  Rate,
notwithstanding  the fact that such  remedies  were  exercised and such payments
made and costs  incurred  by  Beneficiary  after  the  filing  by  Grantor  of a
voluntary case or the filing against Grantor of an involuntary  case pursuant to
or within the meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11
U.S.C.,  or after any similar  action  pursuant to any other  debtor  relief law
(whether  statutory,  common law,  case law or  otherwise)  of any  jurisdiction
whatsoever,  now or hereafter in effect,  which may be or become  applicable  to
Grantor,  Beneficiary,  any  Indemnitor,  the Debt or any of the Loan Documents.
Grantor hereby  indemnifies and holds Beneficiary  harmless from and against all
loss, cost and expenses with respect to any Event of Default  hereof,  any liens
(i.e., judgments, mechanics' and materialmen's liens, or otherwise), charges and
encumbrances  filed against the Trust Property,  and from any claims and demands
for damages or injury,  including claims for property damage, personal injury or
wrongful  death,  arising out of or in  connection  with any accident or fire or
other  casualty on the  Premises or the  Improvements  or any  nuisance  made or
suffered thereon, except those that are due to Beneficiary's gross negligence or
willful misconduct as finally  determined by a court of competent  jurisdiction,
including,  without limitation,  in any case,  reasonable attorneys' fees, costs
and expenses as aforesaid,  whether at pretrial,  trial or appellate  level, and
such indemnity shall survive payment in full of the Debt. This Section shall not
be construed to require Beneficiary to incur any expenses,  make any appearances
or take any actions.

         1.21 Security Interest. This Deed of Trust is also intended to encumber
and create a security  interest in, and Grantor  hereby grants to  Beneficiary a
security interest in, Grantor's right, title and interest in all sums on deposit
with  Beneficiary  pursuant  to the  provisions  of Section  1.6 and Section 1.8
hereof or any other  Section  hereof or of any other Loan Document and Grantor's
right,  title  and  interest  (if  any)  in all  fixtures,  chattels,  accounts,
equipment,

                                       32
<PAGE>

inventory,  contract  rights,  general  intangibles and other personal  property
included  within the Trust  Property,  all renewals,  replacements of any of the
aforementioned  items,  or  articles  in  substitution  therefor  or in addition
thereto or the  proceeds  thereof  (said  property  is  hereinafter  referred to
collectively as the "Collateral"),  whether or not the same shall be attached to
the Premises or the Improvements in any manner.  It is hereby agreed that to the
extent  permitted  by  law,  all  of  the  foregoing  Collateral  consisting  of
furniture,  fixtures and  equipment is to be deemed and held to be a part of and
affixed to the Premises and the  Improvements.  The foregoing  security interest
shall also cover Grantor's  leasehold  interest in any of the foregoing property
which is leased by Grantor. Grantor shall, from time to time upon the request of
Beneficiary,  supply  Beneficiary  with  a  current  inventory  of  all  of  the
Collateral in which  Beneficiary is granted a security  interest  hereunder,  in
such detail as  Beneficiary  may  reasonably  require.  Grantor  shall  promptly
replace all of the Collateral  subject to the lien or security  interest of this
Deed of Trust when worn or obsolete with  Collateral  comparable to the worn out
or obsolete  Collateral when new and will not, without the prior written consent
of  Beneficiary,  remove  from  the  Premises  or  the  Improvements  any of the
Collateral subject to the lien or security interest of this Deed of Trust except
such as is  replaced  by an article of  similar  suitability  and value as above
provided,  owned by  Grantor  free and  clear of any lien or  security  interest
except that created by this Deed of Trust and the other Loan  Documents.  All of
the Collateral shall be kept at the location of the Premises except as otherwise
required by the terms of the Loan  Documents.  Grantor  shall not use any of the
Collateral  in  violation  of any  applicable  statute,  ordinance  or insurance
policy.

         1.22  Security  Agreement.  This Deed of Trust  constitutes  a security
agreement  between  Grantor and  Beneficiary  with respect to the  Collateral in
which Beneficiary is granted a security interest  hereunder,  and, cumulative of
all other rights and remedies of Beneficiary  hereunder,  Beneficiary shall have
all of the rights and remedies of a secured party under any  applicable  Uniform
Commercial  Code.  Grantor  hereby  agrees to execute  and deliver on demand and
hereby irrevocably  constitutes and appoints Beneficiary the attorney-in-fact of
Grantor to execute and deliver and, if appropriate, to file with the appropriate
filing  officer or  office,  such  security  agreements,  financing  statements,
continuation  statements  or other  instruments  as  Beneficiary  may request or
require in order to impose,  perfect or continue the  perfection  of the lien or
security interest created hereby. To the extent specifically provided herein and
subject to the rights of Tenants  under the Leases and the terms and  provisions
thereof, Beneficiary shall have the right of possession of all cash, securities,
instruments,  negotiable  instruments,  documents,  certificates  and any  other
evidences  of cash or other  property or evidences of rights to cash rather than
property,  which are now or hereafter a part of the Trust Property,  and Grantor
shall promptly deliver the same to Beneficiary, endorsed to Beneficiary, without
further  notice from  Beneficiary.  Grantor agrees to furnish  Beneficiary  with
notice of any change in the name, identity, organizational structure, residence,
or  principal  place of business or mailing  address of Grantor  within ten (10)
days of the effective date of any such change.  Upon the occurrence of any Event
of Default, Beneficiary shall have the rights and remedies as prescribed in this
Deed of  Trust,  or as  prescribed  by  general  law,  or as  prescribed  by any
applicable  Uniform  Commercial  Code,  all  at  Beneficiary's   election.   Any
disposition  of the Collateral  following the  occurrence and  continuance of an
Event of Default may be  conducted by an employee or agent of  Beneficiary.  Any
person,  including both Grantor and  Beneficiary,  shall be eligible to purchase
any part or all of the Collateral at any such disposition. Expenses of retaking,
holding,

                                       33
<PAGE>

preparing  for  sale,  selling  or  the  like  (including,  without  limitation,
Beneficiary's  reasonable  attorneys'  fees and legal  expenses),  together with
interest  thereon  at the  Default  Interest  Rate  from  the date  incurred  by
Beneficiary  until actually paid by Grantor,  shall be paid by Grantor on demand
and  shall  be  secured  by this  Deed of  Trust  and by all of the  other  Loan
Documents securing all or any part of the Debt. Beneficiary shall have the right
to enter upon the Premises and the  Improvements  or any real property where any
of the property which is the subject of the security  interest granted herein is
located to take  possession  of,  assemble  and collect the same or to render it
unusable, or Grantor,  upon demand of Beneficiary,  shall assemble such property
and make it available to  Beneficiary  at the  Premises,  or at a place which is
mutually agreed upon or, if no such place is agreed upon, at a place  reasonably
designated  by  Beneficiary  to be  reasonably  convenient  to  Beneficiary  and
Grantor.  If notice is required by law,  Beneficiary shall give Grantor at least
ten (10) days' prior written  notice of the time and place of any public sale of
such property,  or  adjournments  thereof,  or of the time of or after which any
private sale or any other  intended  disposition  thereof is to be made,  and if
such  notice is sent to  Grantor,  as the same is  provided  for the  mailing of
notices herein,  it is hereby deemed that such notice shall be and is reasonable
notice to Grantor.  No such notice is necessary for any such  property  which is
perishable,  threatens to decline  speedily in value or is of a type customarily
sold on a recognized  market.  Any sale made pursuant to the  provisions of this
Section shall be deemed to have been a public sale  conducted in a  commercially
reasonable manner if held  contemporaneously with a foreclosure sale as provided
in Section 3.1(e) hereof upon giving the same notice with respect to the sale of
the  Trust  Property  hereunder  as  is  required  under  said  Section  3.1(e).
Furthermore, to the extent permitted by law, in conjunction with, in addition to
or in substitution for the rights and remedies available to Beneficiary pursuant
to any applicable Uniform Commercial Code:

                  (a) In  the  event  of a foreclosure sale, the Trust  Property
may,  at the  option  of Beneficiary, be sold as a whole; and

                  (b) It shall not be necessary that Beneficiary take possession
of the aforementioned  Collateral,  or any part thereof,  prior to the time that
any sale  pursuant to the  provisions  of this Section is conducted and it shall
not be necessary that said  Collateral,  or any part thereof,  be present at the
location of such sale; and

                  (c)  Beneficiary  may  appoint  or  delegate  any  one or more
persons as agent to perform  any act or acts  necessary  or incident to any sale
held by  Beneficiary,  including  the  sending of notices and the conduct of the
sale, but in the name and on behalf of Beneficiary.

The name and  address  of  Grantor  (as  Debtor  under  any  applicable  Uniform
Commercial Code) are:

                           CRIT-VA II, INC.
                           306 East Main Street
                           Richmond, Virginia 23219

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<PAGE>

The name and  address of  Beneficiary  (as Secured  Party  under any  applicable
Uniform Commercial Code) are:

                           FIRST UNION NATIONAL BANK
                           Commercial Real Estate Finance Group
                           One First Union Center
                           301 South College Street
                           Mailcode NC 0166
                           Loan Number:  26-5950521
                           Charlotte, North Carolina  28288
                           Attention:     Contract Finance

         1.23 Easements and Rights-of-Way.  Grantor shall not grant any easement
or  right-of-way  with  respect  to all or any  portion of the  Premises  or the
Improvements  without the prior written consent of Beneficiary,  which shall not
be  unreasonably  withheld or delayed.  The  purchaser at any  foreclosure  sale
hereunder may, at its discretion, disaffirm any easement or right-of-way granted
in  violation  of any of the  provisions  of this  Deed of  Trust  and may  take
immediate  possession of the Trust Property free from, and despite the terms of,
such grant of easement or right-of-way.  If Beneficiary consents to the grant of
an easement or  right-of-way,  Beneficiary  agrees to grant such consent without
charge to Grantor other than reasonable expenses, including, without limitation,
reasonable  attorneys' fees,  incurred by Beneficiary in the review of Grantor's
request and in the preparation of documents effecting the subordination.

         1.24  Compliance  with Laws. (a) Grantor shall at all times comply with
all   statutes,    ordinances,    regulations   and   other    governmental   or
quasi-governmental  requirements and private covenants now or hereafter relating
to  the  ownership,  construction,  use or  operation  of  the  Trust  Property,
including,  but not limited to, those concerning  employment and compensation of
persons  engaged in  operation  and  maintenance  of the Trust  Property and any
environmental or ecological requirements,  even if such compliance shall require
structural changes to the Trust Property;  provided, however, that, Grantor may,
upon providing  Beneficiary with security  satisfactory to Beneficiary,  proceed
diligently  and in good faith to contest the  validity or  applicability  of any
such  statute,  ordinance,  regulation  or  requirement  so long as during  such
contest the Trust  Property  shall not be subject to any lien,  charge,  fine or
other liability and shall not be in danger of being  forfeited,  lost or closed.
Grantor  shall not use or occupy,  or allow the use or  occupancy  of, the Trust
Property  in any  manner  which  violates  any Lease of or any  other  agreement
applicable to the Trust  Property or any  applicable  law,  rule,  regulation or
order or which  constitutes  a public or private  nuisance  or which makes void,
voidable or cancelable, or increases the premium of, any insurance then in force
with respect thereto.

                  (b) Grantor  agrees that the Trust Property shall at all times
comply to the extent  applicable  with the  requirements  of the Americans  with
Disabilities Act of 1990, the Fair Housing  Amendments Act of 1988 and all other
state and local laws and ordinances related to handicapped access and all rules,
regulations,  and orders issued pursuant thereto including,  without limitation,
the Americans with Disabilities Act  Accessibility  Guidelines for Buildings and
Facilities  (collectively,  the "Access  Laws").  Grantor  agrees to give prompt
notice to  Beneficiary  of the receipt by Grantor of any  complaints  related to
violations  of any Access Laws

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<PAGE>

and of the  commencement  of any proceedings or  investigations  which relate to
compliance with applicable Access Laws.

         1.25  Additional  Taxes.  In the event of the enactment  after the date
hereof of any law of the state in which the Trust  Property is located or of any
other governmental entity deducting from the value of the Trust Property for the
purpose  of taxing any lien or  security  interest  thereon,  or  imposing  upon
Beneficiary  the payment of the whole or any part of the taxes or assessments or
charges or liens herein  required to be paid by Grantor,  or changing in any way
the laws  relating  to the  taxation  of deeds of trust,  mortgages  or security
agreements or debts secured by deeds of trust,  mortgages or security agreements
or the interest of the beneficiary, Beneficiary or secured party in the property
covered  thereby,  or the manner of collection of such taxes, so as to adversely
affect  this  Deed of Trust or the Debt or  Beneficiary,  then,  and in any such
event, Grantor, upon demand by Beneficiary,  shall pay such taxes,  assessments,
charges or liens, or reimburse Beneficiary therefor;  provided, however, that if
in the  opinion of counsel for  Beneficiary  (a) it might be unlawful to require
Grantor to make such payment,  or (b) the making of such payment might result in
the imposition of interest beyond the maximum amount  permitted by law, then and
in either  such  event,  Beneficiary  may elect,  by notice in writing  given to
Grantor,  to declare  all of the Debt to be and  become due and  payable in full
thirty (30) days from the giving of such  notice,  and, in  connection  with the
payment of such Debt, no prepayment  premium or fee shall be due unless,  at the
time of such  payment,  an Event of Default or a Default shall have occurred and
is continuing,  which Default or Event of Default is unrelated to the provisions
of this Section 1.25, in which event any applicable prepayment premium or fee in
accordance with the terms of the Note shall be due and payable.

         1.26 Secured  Indebtedness.  It is understood and agreed that this Deed
of Trust shall secure payment of not only the indebtedness evidenced by the Note
but also any and all substitutions, replacements, renewals and extensions of the
Note, any and all  indebtedness  and obligations  arising  pursuant to the terms
hereof and any and all  indebtedness  and  obligations  arising  pursuant to the
terms of any of the other Loan Documents,  all of which  indebtedness is equally
secured  with and has the same  priority as any amounts  advanced as of the date
hereof.  It is agreed that any future advances made by Beneficiary to or for the
benefit of Grantor  from time to time under this Deed of Trust or the other Loan
Documents  and whether or not such  advances are  obligatory  or are made at the
option of Beneficiary,  or otherwise,  made for any purpose,  within twenty (20)
years from the date hereof, and all interest accruing thereon,  shall be equally
secured by this Deed of Trust and shall have the same  priority as all  amounts,
if any,  advanced as of the date hereof and shall be subject to all of the terms
and provisions of this Deed of Trust.

         1.27 Grantor's  Waivers.  To the full extent  permitted by law, Grantor
agrees that Grantor shall not at any time insist upon, plead,  claim or take the
benefit or  advantage of any law now or  hereafter  in force  providing  for any
appraisement,  valuation,  stay,  moratorium  or  extension,  or any  law now or
hereafter in force providing for the reinstatement of the Debt prior to any sale
of the Trust Property to be made pursuant to any provisions  contained herein or
prior to the entering of any decree, judgment or order of any court of competent
jurisdiction,  or any right  under any  statute to redeem all or any part of the
Trust  Property  so sold.  Grantor,  for Grantor and  Grantor's  successors  and
assigns,  and for any and all persons  ever  claiming  any interest in the Trust
Property,  to the full extent permitted by law, hereby knowingly,  intentionally

                                       36
<PAGE>

and  voluntarily,  with and upon the advice of  competent  counsel:  (a) waives,
releases,   relinquishes   and  forever   forgoes   all  rights  of   valuation,
appraisement,  stay of  execution,  reinstatement  and  notice  of  election  or
intention  to  mature  or  declare  due the Debt  (except  such  notices  as are
specifically  provided  for  herein);  (b) waives,  releases,  relinquishes  and
forever  forgoes all right to a marshaling  of the assets of Grantor,  including
the Trust Property,  to a sale in the inverse order of alienation,  or to direct
the  order in which  any of the  Trust  Property  shall be sold in the  event of
foreclosure of the liens and security  interests  hereby created and agrees that
any court having jurisdiction to foreclose such liens and security interests may
order  the  Trust  Property  sold  as an  entirety;  and (c)  waives,  releases,
relinquishes  and forever forgoes all rights and periods of redemption  provided
under  applicable  law. To the full extent  permitted by law,  Grantor shall not
have or assert  any right  under any  statute or rule of law  pertaining  to the
exemption of homestead or other exemption under any federal,  state or local law
now or hereafter in effect,  the administration of estates of decedents or other
matters whatever to defeat,  reduce or affect the right of Beneficiary under the
terms of this Deed of Trust to a sale of the Trust Property,  for the collection
of the Debt without any prior or different  resort for collection,  or the right
of Beneficiary  under the terms of this Deed of Trust to the payment of the Debt
out of the proceeds of sale of the Trust  Property in  preference to every other
claimant  whatever.  Furthermore,  Grantor hereby  knowingly,  intentionally and
voluntarily,  with and upon the advice of competent counsel,  waives,  releases,
relinquishes  and forever forgoes all present and future statutes of limitations
as a defense to any action to enforce the provisions of this Deed of Trust or to
collect  any of the  Debt  to the  fullest  extent  permitted  by  law.  Grantor
covenants and agrees that upon the  commencement  of a voluntary or  involuntary
bankruptcy  proceeding  by  or  against  Grantor,   Grantor  shall  not  seek  a
supplemental  stay or otherwise  shall not seek pursuant to 11 U.S.C.  ss.105 or
any other  provision of the  Bankruptcy  Reform Act of 1978, as amended,  or any
other debtor relief law (whether statutory,  common law, case law, or otherwise)
of any  jurisdiction  whatsoever,  now or hereafter  in effect,  which may be or
become applicable, to stay, interdict,  condition, reduce or inhibit the ability
of  Beneficiary  to enforce any rights of  Beneficiary  against any guarantor or
indemnitor  of the secured  obligations  or any other party  liable with respect
thereto by virtue of any indemnity, guaranty or otherwise.

         1.28     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

                  (a)  GRANTOR,  TO THE FULL  EXTENT  PERMITTED  BY LAW,  HEREBY
KNOWINGLY,  INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PREMISES
IS LOCATED OVER ANY SUIT,  ACTION OR  PROCEEDING  BY ANY PERSON  ARISING FROM OR
RELATING  TO THE NOTE,  THIS  DEED OF TRUST OR ANY OTHER OF THE LOAN  DOCUMENTS,
(ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE
OR FEDERAL  COURT OF COMPETENT  JURISDICTION  SITTING IN THE COUNTY IN WHICH THE
PREMISES IS LOCATED,  (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv)
TO THE  FULLEST  EXTENT  PERMITTED  BY LAW,  AGREES  THAT IT WILL NOT  BRING ANY
ACTION,  SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING  HEREIN SHALL AFFECT
THE RIGHT OF  BENEFICIARY  TO BRING ANY ACTION,  SUIT OR PROCEEDING IN ANY OTHER
FORUM).

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<PAGE>

                  (b)  GRANTOR,  TO THE FULL  EXTENT  PERMITTED  BY LAW,  HEREBY
KNOWINGLY,  INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL,  WAIVES,  RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING  BASED UPON,  ARISING OUT OF, OR IN ANY WAY RELATING
TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF BENEFICIARY OR GRANTOR, OR ANY OF
THEIR RESPECTIVE DIRECTORS,  OFFICERS,  PARTNERS,  MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS,  OR ANY OTHER PERSONS AFFILIATED WITH BENEFICIARY OR GRANTOR, IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

         1.29 Attorney-in-Fact Provisions. With respect to any provision of this
Deed of Trust or any other Loan Document whereby Grantor grants to Beneficiary a
power-of-attorney,  provided no Event of Default has occurred under this Deed of
Trust,  Beneficiary  shall first give Grantor  written  notice at least five (5)
days prior to acting  under such power,  which  notice shall demand that Grantor
first take the proposed  action within such period and advising  Grantor that if
it fails to do so, Beneficiary will so act under the power;  provided,  however,
that,  in the event that a Default or an Event of Default  has  occurred,  or if
necessary to prevent imminent death, serious injury, damage, loss, forfeiture or
diminution  in value to the Trust  Property  or any  surrounding  property or to
prevent  any adverse  affect on  Beneficiary's  interest in the Trust  Property,
Beneficiary may act  immediately  and without first giving such notice.  In such
event, Beneficiary will give Grantor notice of such action as soon thereafter as
reasonably practical.

         1.30  Management.  The  management  of the Trust  Property  shall be by
either:  (a) Grantor,  the REIT or an entity affiliated with Grantor or the REIT
reasonably  approved by  Beneficiary  for so long as Grantor or said  affiliated
entity is managing the Trust Property consistent with the provisions of the Loan
Documents; or (b) a professional property management company reasonably approved
by  Beneficiary.  If  management  is  by  a  third-party  professional  property
management  company not  affiliated  with Grantor or the REIT,  such  management
shall be pursuant to a written agreement reasonably approved by Beneficiary.  In
no event shall any manager be removed or replaced or the terms of any management
agreement  materially  adversely  modified or amended  without the prior written
consent of  Beneficiary.  After an Event of Default or a material  default under
any  management  contract then in effect,  which default is not cured within any
applicable grace or cure period,  Beneficiary shall have the right to terminate,
or to direct  Grantor to terminate,  such  management  contract upon thirty (30)
days' notice and to retain,  or to direct  Grantor to retain,  a new  management
agent reasonably approved by Beneficiary. All Rents generated by or derived from
the Trust Property shall first be utilized for current expenses  attributable to
the  ownership  and  operation  of  the  Trust  Property,   including,   without
limitation,  current expenses relating to Grantor's  liabilities and obligations
with respect to this Deed of Trust and the other Loan Documents, and none of the
Rents  generated  by or derived  from the Trust  Property  shall be  diverted by
Grantor and utilized  for any other  purposes  until all such  current  expenses
attributable  to the  ownership  and  operation of the Trust  Property have been
fully paid and satisfied.

                                       38
<PAGE>

         1.31     Hazardous Waste and Other Substances.

                  (a) Grantor  hereby  represents  and  warrants to  Beneficiary
that, as of the date hereof: (i) to the best of Grantor's knowledge, information
and  belief,  none of  Grantor  nor the  Trust  Property  nor any  Tenant at the
Premises nor the operations conducted thereon is in direct or indirect violation
of or otherwise exposed to any liability under any local,  state or federal law,
rule or regulation or common law duty  pertaining to human health as affected by
the  environment,  natural  resources  or the  environment,  including,  without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42  U.S.C.ss.9601 et seq.), the Resource  Conservation and Recovery
Act of 1976 (42  U.S.C.ss.6901 et seq.), the Federal Water Pollution Control Act
(33  U.S.C.ss.1251 et seq.),  the Clean Air Act (42  U.S.C.ss.7401 et seq.), the
Emergency Planning and  Community-Right-to-Know Act (42 U.S.C.ss.11001 et seq.),
the Endangered  Species Act (16  U.S.C.ss.1531  et seq.),  the Toxic  Substances
Control Act (15  U.S.C.ss.2601 et seq.), the Occupational  Safety and Health Act
(29  U.S.C.ss.651 et seq.) and the Hazardous  Materials  Transportation  Act (49
U.S.C.ss.1801 et seq.),  including any regulations  promulgated pursuant to said
laws,  all as  amended  from time to time  ("Environmental  Laws") or  otherwise
exposed to any liability  under any  Environmental  Law relating to or affecting
the Trust  Property,  whether or not used by or within the  control of  Grantor;
(ii) to the best of Grantor's  knowledge,  information and belief, no hazardous,
toxic or harmful  substances,  wastes,  materials,  pollutants  or  contaminants
(including, without limitation, materials containing more than 1% asbestos, lead
based paint,  polychlorinated  biphenyls,  petroleum  or  petroleum  products or
byproducts,  flammable explosives,  radioactive materials, infectious substances
or raw materials which include  hazardous  constituents) or any other substances
or  materials  which are  included  under or  regulated  by  Environmental  Laws
(collectively,  "Hazardous Substances") are located on, in or under or have been
handled,  generated,  stored,  processed  or  disposed  of  on  or  released  or
discharged from the Trust Property (including underground contamination), except
for those  substances  used by Grantor or any Tenant in the  ordinary  course of
their respective  businesses and in compliance with all  Environmental  Laws and
where such would not  reasonably  be  expected to give rise to  liability  under
Environmental  Laws; (iii) to the best of Grantor's  knowledge,  information and
belief,  radon is not present at the Trust Property in excess or in violation of
any  applicable  thresholds  or  standards  or in  amounts  that  require  under
applicable  law  disclosure to any tenant or occupant of or invitee to the Trust
Property or to any governmental  agency or the general public;  (iv) to the best
of  Grantor's  knowledge,  information  and  belief,  the Trust  Property is not
subject to any private or governmental lien or judicial or administrative notice
or action arising under  Environmental  Laws;  (v) there is no pending,  nor, to
Grantor's knowledge,  information or belief, threatened litigation arising under
Environmental Laws affecting Grantor or the Trust Property;  (vi) to the best of
Grantor's  knowledge,  information  and  belief,  there  are no and have been no
existing  or  closed  underground  storage  tanks or other  underground  storage
receptacles  for  Hazardous  Substances  or  landfills  or  dumps  on the  Trust
Property;  (vii) Grantor has received no notice of, and to the best of Grantor's
knowledge and belief, there exists no investigation, action, proceeding or claim
by any agency, authority or unit of government or by any third party which could
result in any liability,  penalty,  sanction or judgment under any Environmental
Laws with respect to any condition,  use or operation of the Trust Property, nor
does Grantor know of any basis for such an investigation,  action, proceeding or
claim;  (viii)  Grantor has  received no notice

                                       39
<PAGE>

of and, to the best of Grantor's  knowledge and belief,  there has been no claim
by any party that any use,  operation  or  condition  of the Trust  Property has
caused any  nuisance or any other  liability  or adverse  condition on any other
property, nor does Grantor know of any basis for such an investigation,  action,
proceeding or claim.

                  (b)  Grantor  has not  received  nor to the best of  Grantor's
knowledge,   information   and  belief  has  there  been  issued,   any  notice,
notification,  demand, request for information,  citation,  summons, or order in
any way  relating to any actual,  alleged or  potential  violation  or liability
arising under Environmental Laws.

                  (c)  To the  best  of  Grantor's  knowledge,  information  and
belief, the Trust Property is not listed or, to the best of Grantor's knowledge,
information  and belief,  proposed for listing on the National  Priorities  List
promulgated  pursuant  to CERCLA,  on CERCLIS  (as  defined in CERCLA) or on any
similar federal or state list of sites requiring environmental  investigation or
clean-up.

                  (d) Grantor  shall  comply with all  applicable  Environmental
Laws.  Grantor  shall  keep or cause  the  Trust  Property  to be kept free from
Hazardous  Substances  (except those substances used by Grantor or any Tenant in
the ordinary course of their respective businesses and except in compliance with
all  Environmental  Laws and where such would not reasonably be expected to give
rise  to  liability  under  Environmental  Laws)  and  in  compliance  with  all
Environmental  Laws,  Grantor shall not install or use any  underground  storage
tanks,  shall  expressly  prohibit  the  use,  generation,   handling,  storage,
production,  processing  and disposal of Hazardous  Substances by all Tenants in
quantities  or conditions  that would violate or give rise to any  obligation to
take remedial or other action under any applicable  Environmental  Laws. Without
limiting the generality of the foregoing, during the term of this Deed of Trust,
Grantor shall not install in the  Improvements  or permit to be installed in the
Improvements any asbestos or asbestos-containing materials.

                  (e) Grantor shall promptly notify Beneficiary if Grantor shall
become  aware  of (i)  the  actual  or  potential  existence  of  any  Hazardous
Substances  on the Trust  Property  other than those  occurring  in the ordinary
course of Grantor's  business and which do not violate,  or would not  otherwise
give rise to liability  under  Environmental  Laws,  (ii) any direct or indirect
violation of, or other  exposure to liability  under,  any  Environmental  Laws,
(iii)  any lien,  action or notice  affecting  the  Trust  Property  or  Grantor
resulting  from any  violation  or alleged  violation of or liability or alleged
liability   under  any   Environmental   Laws,   (iv)  the  institution  of  any
investigation,  inquiry or proceeding  concerning  Grantor or the Trust Property
pursuant  to  any  Environmental   Laws  or  otherwise   relating  to  Hazardous
Substances, or (v) the discovery of any occurrence,  condition or state of facts
which would  render any  representation  or warranty  contained  in this Deed of
Trust  incorrect in any material  respect if made at the time of such discovery.
Immediately upon receipt of same,  Grantor,  shall deliver to Beneficiary copies
of any and all  requests  for  information,  complaints,  citations,  summonses,
orders,  notices,  reports or other communications,  documents or instruments in
any way relating to any actual,  alleged or potential  violation or liability of
any nature whatsoever arising under Environmental Laws and relating to the Trust
Property or to Grantor. Grantor shall remedy or cause to be remedied in a timely
manner  (and in any  event  within  the  time  period  permitted  by  applicable
Environmental  Laws) any violation of  Environmental  Laws or any condition that
could give rise to liability  under  Environmental  Laws.  Without  limiting the
foregoing,  Grantor shall,  at its own expense,  take all actions as required by
applicable  Environmental

                                       40
<PAGE>

Laws,  for the clean-up of any and all  portions of the Trust  Property or other
affected property, including, without limitation, all investigative, monitoring,
removal,  containment  and remedial  actions in accordance  with all  applicable
Environmental  Laws (and in all events in a manner  reasonably  satisfactory  to
Beneficiary)  and  shall  further  pay or  cause to be paid,  at no  expense  to
Beneficiary,  all clean-up,  administrative  and enforcement costs of applicable
governmental  agencies  which  may  be  asserted  against  the  Trust  Property.
Notwithstanding  the  foregoing,  Grantor  may,  in good faith,  by  appropriate
proceedings   and  upon  notice  to   Beneficiary,   contest  the   validity  or
applicability  of any  such  Environmental  Laws  to any  portion  of the  Trust
Property as long as (a) such  contest is  diligently  pursued,  (b)  Beneficiary
determines, in its reasonable subjective opinion, that such contest suspends the
requirement  for Grantor to comply with such  Environmental  Laws.  Prior to the
earlier  commencement  of such contest or the  delinquency  date of any asserted
costs related thereto,  Grantor shall deposit into the Impound Account an amount
determined by  Beneficiary to the reasonably  adequate  covered  payment of such
costs and a reasonable  additional  sum to cover  possible  interest,  costs and
penalties;  provided,  however, that Grantor shall promptly cause to be paid any
amount adjudged by a court of competent  jurisdiction be due, with all interest,
costs and penalties  thereon,  promptly after such judgment  becomes final;  and
provided,  further,  that in any event such contest  shall be concluded  and the
charges  or  assessments  shall  be paid  prior to the date any writ or order is
issued under which the Trust  Property may be sold,  lost or  forfeited.  In the
event Grantor fails to do so, Beneficiary may, if required by Environmental Laws
(and  after  reasonable  prior  written  notice  to  Grantor),  but shall not be
obligated to, cause the Trust  Property or other  affected  property to be freed
from any  Hazardous  Substances  or  otherwise  brought  into  conformance  with
Environmental Laws and any and all costs and expenses incurred by Beneficiary in
connection  therewith,  together with interest  thereon at the Default  Interest
Rate from the date incurred by Beneficiary until actually paid by Grantor, shall
be  immediately  paid by  Grantor on demand and shall be secured by this Deed of
Trust and by all of the other  Loan  Documents  securing  all or any part of the
Debt.  Grantor hereby grants to Beneficiary and its agents and employees  access
to the Trust Property and a license to remove any items deemed by Beneficiary to
be Hazardous Substances and to do all things Beneficiary shall deem necessary to
bring the Trust Property into conformance with Environmental Laws.

                  (f) Grantor  covenants and agrees,  at Grantor's sole cost and
expense,  to  indemnify,  defend  (at  trial  and  appellate  levels,  and  with
attorneys,  consultants and experts reasonably  acceptable to Beneficiary),  and
hold Beneficiary harmless from and against any and all liens, damages (including
without  limitation,   punitive  or  exemplary  damages),   losses,  liabilities
(including,  without  limitation,  strict  liability),  obligations,  settlement
payments,  penalties,  fines,  assessments,   citations,   directives,   claims,
litigation,   demands,   defenses,   judgments,   suits,   proceedings,   costs,
disbursements  or expenses of any kind as required by  applicable  Environmental
Laws or of any nature  whatsoever  (including,  without  limitation,  reasonable
attorneys',  consultants' and experts' fees and disbursements  actually incurred
in investigating,  defending,  settling or prosecuting any claim,  litigation or
proceeding)  which may at any time be imposed  upon,  incurred by or asserted or
awarded against  Beneficiary or the Trust Property,  and arising from or out of:
(i) any  violation or alleged  violation  of, or liability or alleged  liability
under, any Environmental Law; (ii) the presence, release or threat of release of

                                       41
<PAGE>

or exposure to any Hazardous  Substances or radon on, in, under or affecting all
or any portion of the Trust  Property or any  surrounding  areas,  regardless of
whether or not caused by or within the control of Grantor;  (iii) any transport,
treatment,  recycling,  storage,  disposal or arrangement  therefor of Hazardous
Substances  whether on the Trust Property,  originating from the Trust Property,
or otherwise  associated  with Grantor or any operations  conducted on the Trust
Property at any time; (iv) the failure by Grantor to comply fully with the terms
and  conditions of this Section 1.31;  (v) the breach of any  representation  or
warranty  contained  in this  Section  1.31 in any  material  respect;  (vi) the
enforcement of this Section 1.31,  including,  without  limitation,  the cost of
assessment,  investigation,  containment,  removal and/or remediation of any and
all Hazardous  Substances  from all or any portion of the Trust  Property or any
surrounding areas as required by applicable  Environmental Laws, the cost of any
actions taken in response to the  presence,  release or threat of release of any
Hazardous  Substances  on,  in,  under or  affecting  any  portion  of the Trust
Property or any surrounding  areas to prevent or minimize such release or threat
of release so that it does not migrate or otherwise  cause or threaten danger to
present or future public health, safety,  welfare or the environment,  and costs
incurred to comply with Environmental Laws in connection with all or any portion
of the Trust Property or any surrounding  areas. The indemnity set forth in this
Section  1.31 shall also  include any  diminution  in the value of the  security
afforded by the Trust Property or any future reduction in the sales price of the
Trust  Property  by reason of any matter  set forth in this  Section  1.31.  The
foregoing  indemnity shall  specifically  not include any such costs relating to
Hazardous  Substances  which  are  initially  placed  on,  in or under the Trust
Property  after  foreclosure  or other taking of title to the Trust  Property by
Beneficiary or its successor or assigns. Beneficiary's rights under this Section
shall survive  payment in full of the Debt and shall be in addition to all other
rights of  Beneficiary  under  this Deed of Trust,  the Note and the other  Loan
Documents.

                  (g)  Upon  Beneficiary's  request,  at  any  time  during  the
continuance  of an Event of Default or at such  other  time as  Beneficiary  has
reasonable  grounds  to  believe,  and  so  notifies  Grantor,   that  Hazardous
Substances  are or have  been  released,  stored  or  disposed  of on the  Trust
Property,  or on property contiguous with the Trust Property,  or that the Trust
Property may be in violation of the Environmental Laws, Grantor shall perform or
cause to be performed, at Grantor's sole cost and expense and in scope, form and
substance reasonably satisfactory to Beneficiary,  an inspection or audit of the
Trust Property prepared by a hydrogeologist  or environmental  engineer or other
appropriate  consultant  approved  by  Beneficiary  indicating  the  presence or
absence  of  Hazardous  Substances  on the Trust  Property,  the  compliance  or
non-compliance status of the Trust Property and the operations conducted thereon
with  applicable  Environmental  Laws,  or an  inspection  or audit of the Trust
Property  prepared by an engineering or consulting firm  reasonably  approved by
Beneficiary indicating the presence or absence of friable asbestos or substances
containing  asbestos in excess of 1% or lead or  substances  containing  lead or
lead based paint ("Lead Based Paint") on the Trust Property. If Grantor fails to
provide  reports of such  inspection or audit within thirty (30) days after such
request,   Beneficiary  may  order  the  same,  and  Grantor  hereby  grants  to
Beneficiary  and its employees  and agents  access to the Trust  Property and an
irrevocable  license to undertake  such  inspection  or audit.  The cost of such
inspection or audit, together with interest thereon at the Default Interest Rate
from the date incurred by Beneficiary  until actually paid by Grantor,  shall be
immediately paid by Grantor on demand and shall be secured by this Deed of Trust
and by all of the other Loan Documents securing all or any part of the Debt.

                                       42
<PAGE>

                  (h) Reference is made to that certain Environmental  Indemnity
Agreement of even date herewith by and among Grantor,  the REIT and  Beneficiary
(the "Environmental Indemnity Agreement").  The provisions of this Deed of Trust
and the Environmental Indemnity Agreement shall be read together to maximize the
coverage  with  respect  to  the  subject  matter  thereof,   as  determined  by
Beneficiary.

                  (i) If, prior to the date hereof,  it was determined  that the
Trust  Property  contains  Lead Based Paint,  Grantor had prepared an assessment
report  describing  the location and  condition of the Lead Based Paint (a "Lead
Based Paint Report").  If, at any time hereafter,  Lead Based Paint is suspected
of being present on the Trust  Property,  Grantor  agrees,  at its sole cost and
expense and within  sixty (60) days  thereafter,  to cause to be prepared a Lead
Based Paint  Report  prepared by an expert,  and in form,  scope and  substance,
acceptable to Beneficiary.

                  (j)  Grantor  agrees  that if it has  been,  or if at any time
hereafter it is,  determined that the Trust Property  contains Lead Based Paint,
on  or  before  thirty  (30)  days  following  (i)  the  date  hereof,  if  such
determination was made prior to the date hereof or (ii) such  determination,  if
such determination is hereafter made, as applicable,  Grantor shall, at its sole
cost  and  expenses,  develop  and  implement,  and  thereafter  diligently  and
continuously  carry out (or cause to be developed and implemented and thereafter
diligently  and  continually  to be carried out), an  operations,  abatement and
maintenance  plan for the Lead  Based  Paint on the Trust  Property,  which plan
shall be prepared by an expert, and be in form, scope and substance,  acceptable
to Beneficiary  (together with any Lead Based Paint Report, the "O&M Plan"). (If
an O&M Plan has been  prepared  prior to the  date  hereof,  Grantor  agrees  to
diligently and continually carry out (or cause to be carried out) the provisions
thereof.)  Compliance  with the O&M Plan shall  require or be deemed to require,
without  limitation,  the proper  preparation  and  maintenance  of all records,
papers and forms required under the Environmental Laws.

         1.32     Indemnification; Subrogation.

                  (a)  Grantor  shall  indemnify,  defend  and hold  Beneficiary
harmless  against:  (i) any and all claims for  brokerage,  leasing,  finders or
similar fees which may be made relating to the Trust  Property or the Debt,  and
(ii) any and all liability,  obligations,  losses, damages,  penalties,  claims,
actions,   suits,  costs  and  expenses  (including   Beneficiary's   reasonable
attorneys'  fees) of  whatever  kind or nature  which may be  asserted  against,
imposed on or incurred by Beneficiary in connection  with the Debt, this Deed of
Trust, the Trust Property,  or any part thereof,  or the exercise by Beneficiary
of any rights or  remedies  granted  to it under  this Deed of Trust;  provided,
however,  that  nothing  herein  shall  be  construed  to  obligate  Grantor  to
indemnify,  defend and hold  harmless  Beneficiary  from and against any and all
liabilities,  obligations,  losses, damages, penalties,  claims, actions, suits,
costs and expenses  enacted  against,  imposed on or incurred by  Beneficiary by
reason of Beneficiary's  willful misconduct or gross negligence or in connection
with Beneficiary effecting a Secondary Market Transaction.

                  (b) If Beneficiary is made a party defendant to any litigation
or any claim is threatened or brought against Beneficiary  concerning the making
or enforcement of the Debt, this Deed of Trust, the Trust Property,  or any part
thereof, or any interest therein, or the

                                       43
<PAGE>

construction,  maintenance,  operation or occupancy or use thereof, then Grantor
shall  indemnify,  defend and hold  Beneficiary  harmless  from and  against all
liability  by  reason  of  said  litigation  or  claims,   including  reasonable
attorneys'  fees and expenses  incurred by Beneficiary in any such litigation or
claim, whether or not any such litigation or claim is prosecuted to judgment. If
Beneficiary  commences  an action  against  Grantor to enforce  any of the terms
hereof or to  prosecute  any breach by Grantor of any of the terms  hereof or to
recover any sum secured hereby,  Grantor shall pay to Beneficiary its reasonable
attorneys'  fees and expenses.  The right to such  attorneys'  fees and expenses
shall be deemed to have accrued on the commencement of such action, and shall be
enforceable  whether or not such action is  prosecuted  to judgment.  If Grantor
breaches any term of this Deed of Trust,  Beneficiary may engage the services of
an attorney or  attorneys to protect its rights  hereunder,  and in the event of
such engagement  following any breach by Grantor,  Grantor shall pay Beneficiary
reasonable attorneys' fees and expenses incurred by Beneficiary,  whether or not
an action is actually  commenced  against Grantor by reason of such breach.  All
references to "attorneys" in this Subsection and elsewhere in this Deed of Trust
shall  include,  without  limitation,  any  attorney  or  law  firm  engaged  by
Beneficiary and Beneficiary's  in-house counsel, and all references to "fees and
expenses" in this  Subsection and elsewhere in this Deed of Trust shall include,
without limitation, any fees of such attorney or law firm, any appellate counsel
fees,  if  applicable,  and any  allocation  charges  and  allocation  costs  of
Beneficiary's in-house counsel.

                  (c) A waiver of subrogation  shall be obtained by Grantor from
its insurance  carrier and,  consequently,  Grantor  waives any and all right to
claim or  recover  against  Beneficiary,  its  officers,  employees,  agents and
representatives, for loss of or damage to Grantor, the Trust Property, Grantor's
property  or the  property  of others  under  Grantor's  control  from any cause
insured against or required to be insured against by the provisions of this Deed
of Trust.

         1.33 Covenants with Respect to  Indebtedness,  Operations,  Fundamental
Changes of Grantor. Grantor hereby represents,  warrants and covenants as of the
date  hereof and until such time as the Debt is paid in full,  that  Grantor has
been, is, and shall remain a  Single-Purpose  Entity (as  hereinafter  defined).
Grantor has  complied and will at all times  comply,  or if Grantor is a limited
partnership  or a limited  liability  company,  each general  partner or the SPE
Member (as hereinafter  defined) of Grantor (each,  an "SPE Equity Owner"),  has
complied,  will at all times comply, and will cause Grantor to comply, with each
of the representations,  warranties and covenants contained in this Section 1.33
as if such representation,  warranty or covenant was made directly by Grantor or
such SPE Equity Owner,  as the case may be. A  "Single-Purpose  Entity" or "SPE"
means a corporation, limited partnership, or limited liability company that:

                  (a) if a  corporation,  must  have at  least  one  Independent
Director (as hereinafter defined), or if requested by Beneficiary (which request
Grantor shall comply with within five (5) business  days) in  connection  with a
Secondary Market Transaction,  two Independent Directors,  and must not take any
action that,  under the terms of any  certificate or articles of  incorporation,
by-laws,  or any voting trust  agreement  with respect to such  entity's  common
stock,  requires the  unanimous  affirmative  vote of 100% of the members of the
board of directors unless all of the directors,  including,  without limitation,
all  Independent   Directors,   shall  have  participated  in  such  vote  ("SPE
Corporation"); provided, however, the foregoing

                                       44
<PAGE>

Independent  Director  requirement  shall not apply  unless and until a Sale and
pursuant to the requirements of Section 1.13(b)(11) hereof;

                  (b) if a limited partnership, must  have  each general partner
be an SPE Corporation;

                  (c) if a limited  liability  company,  must have one  managing
member (the "SPE Member") and such managing  member must be an SPE  Corporation.
Only the SPE Member may be designated as a manager under the Grantor's operating
agreement and pursuant to the law where the Grantor is organized. Grantor may be
a single member Delaware  limited  liability  company without an SPE Corporation
managing member so long as Grantor has two "special  members" who shall serve as
Independent Directors of Grantor;  provided,  however, the foregoing Independent
Director requirement shall not apply unless and until a Sale and pursuant to the
requirements of Section 1.13(b)(11) hereof;

                  (d) was and will be  organized  solely for the  purpose of (i)
owning an interest in the Trust  Property  and the Other  Mortgaged  Properties,
(ii) acting as a general partner of a limited  partnership that owns an interest
in the Trust Property and the Other Mortgaged Properties, or (iii) acting as the
member  of a  limited  liability  company  that  owns an  interest  in the Trust
Property and the Other Mortgaged Properties;

                  (e) will not, nor will any partner, limited or general, member
or shareholder  thereof,  as applicable,  amend,  modify or otherwise change its
partnership  certificate,  partnership  agreement,  articles  of  incorporation,
by-laws,  operating  agreement,  articles of  organization,  or other  formation
agreement or document,  as applicable,  in any material term or manner,  or in a
manner which adversely affects  Grantor's  existence as a single purpose entity,
bankruptcy-remote entity;

                  (f) will not liquidate or dissolve (or suffer any  liquidation
or dissolution),  or enter into any transaction of merger or  consolidation,  or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of any entity;

                  (g) has not and will not guarantee,  pledge its assets for the
benefit of, or otherwise  become liable on or in connection with, any obligation
of any other person or entity;

                  (h) does not own and will not own any asset other than (i) the
Trust  Property,  (ii) the  Other  Mortgaged  Properties  and  (iii)  incidental
personal  property  necessary  for the  operation of the Trust  Property and the
Other Mortgaged Properties;

                  (i) is not  engaged and will not  engage,  either  directly or
indirectly,  in any business other than the ownership,  management and operation
of the Trust Property and the Other Mortgaged Properties;

                  (j) will not enter into any  contract  or  agreement  with any
general partner, affiliate or member of Grantor, as applicable, or any affiliate
of any general  partner or member of

                                       45
<PAGE>

Grantor,  except  upon  terms and  conditions  that are  intrinsically  fair and
substantially  similar to those that would be available on an arms-length  basis
with third parties other than an affiliate;

                  (k) has not incurred  and will not incur any debt,  secured or
unsecured,  direct or contingent (including guaranteeing any obligation),  other
than (i) the Debt, (ii) affiliate advances or trade payables or accrued expenses
incurred in the ordinary  course of business of operating the Trust Property and
the Other Mortgaged Properties  customarily satisfied within thirty (30) days in
an  aggregate  amount,  as to the  Trust  Property  or each of  Other  Mortgaged
Properties,  not to exceed one percent (1%) of the outstanding principal balance
of the Note or the respective  Contemporaneous Note, as applicable, and no other
debt will be secured (senior, subordinate or pari passu) by the Trust Property;

                  (l) has not made and will not make any loans  or  advances  to
any third party  (including  any affiliate);

                  (m) is and will be solvent and pay its debts  from  its assets
as the same shall become due;

                  (n) has  done or  caused  to be done  and  will do all  things
necessary  to   preserve  its  existence,  and   will  observe  all  formalities
applicable to it;

                  (o) will  conduct and operate its business in its own name and
as  presently  conducted  and operated;

                  (p) will maintain financial statements,  books and records and
bank  accounts  separate  from  those  of  its  affiliates,  including,  without
limitation, its general partners or members, as applicable;

                  (q) will be,  and at all  times  will hold  itself  out to the
public  as,  a  legal  entity  separate  and  distinct  from  any  other  entity
(including,  without limitation,  any affiliate,  general partner, or member, as
applicable,  or any  affiliate of any general  partner or member of Grantor,  as
applicable);

                  (r) will file its own tax returns;  provided  that for so long
as the Grantor is a qualified  REIT  subsidiary or includible on a  consolidated
basis in the tax return of the REIT,  Grantor shall only be required to have its
own employer identification number;

                  (s) 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;

                  (t) will  establish  and maintain an office  through which its
business will be conducted  separate and apart from those of its  affiliates and
shall allocate  fairly and reasonably any overhead and expense for shared office
space;

                                       46
<PAGE>

                  (u)      will not  commingle  the funds  and  other  assets of
Grantor  with  those of any  general partner, member,  affiliate,  principal  or
any other person;

                  (v) has and will  maintain its assets in such a manner that it
is not costly or difficult to  segregate,  ascertain or identify its  individual
assets from those of any affiliate or any other person;

                  (w) does not and will not hold  itself  out to be  responsible
for the debts or obligations of any other person;

                  (x) will pay any liabilities  out of its own funds,  including
salaries of its employees, not funds of any affiliate;

                  (y) will use  stationery,  invoices,  and checks separate from
its affiliates; and

                  (z) As used in this Section 1.33, "Independent Director" shall
mean a duly appointed  member of the board of directors of an SPE Corporation or
single member Delaware  limited  liability  company who has not been at any time
during the five (5) years  preceding his or her initial  appointment,  and shall
not be at any time while serving as  Independent  Director any of the following:
(a) a stockholder, director (other than in his or her capacity as an Independent
Director),  officer,  employee,  partner,  or member of Grantor,  any SPE Equity
Owner,  any  partner,  shareholder  or member of any SPE  Equity  Owner,  or any
affiliate  of  any of  the  foregoing;  (b) a  stockholder,  director,  officer,
employee,  partner,  or member of any customer of, supplier or service  provider
(including  professionals)  to, or other person who derives more than 10% of its
purchases,  revenues,  compensation,  or other financial  remuneration  from its
activities  with Grantor,  any SPE Equity  Owner,  any partner,  shareholder  or
member of any SPE Equity Owner,  any affiliate of any of the  foregoing,  or any
person or  entity  who  otherwise  is  financially  dependent  upon an  officer,
director, or employee of Grantor, any SPE Equity Owner, any partner or member of
any SPE Equity  Owner,  or any family  member (by blood or marriage) of any such
officer,  director, or employee, or a business entity owned or controlled by any
of the  foregoing;  (c) a person or other  entity  controlling  or under  common
control with any such stockholder, director, officer, employee, partner, member,
customer,  supplier or other person;  or (d) a member of the immediate family of
any  individual  described  in clause  (a),  (b) or (c)  above.  Notwithstanding
anything to the contrary contained herein, the Independent Director of a general
partner  or  managing  member  of  Grantor  shall  be  permitted  to serve as an
Independent  Director of other Special Purpose Entities which are now, or may in
the future be, established by any affiliate of Grantor, or any partner or member
of Grantor. As used in this subsection, the term "control" means the possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management  and  policies of a person or entity,  whether  through  ownership of
voting  securities,   by  contract  or  otherwise.  As  used  herein,  the  term
"affiliate" shall mean:

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

                                       47
<PAGE>

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

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

                  (iv) any officer,  director or partner of such other person or
         entity;

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

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

         1.34     Intentionally Deleted

         1.35     ERISA.

                  (a) Grantor  shall not engage in any  transaction  which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Beneficiary of any of its rights under the Note, this Deed of Trust or any of
the  other  Loan   Documents)   to  be  a  non-exempt   (under  a  statutory  or
administrative class exemption) prohibited transaction under ERISA.

                  (b)  Grantor  further  covenants  and  agrees  to  deliver  to
Beneficiary such  certifications  or other evidence from time to time throughout
the  term of this  Deed of  Trust,  as  requested  by  Beneficiary  in its  sole
discretion,  that (i) Grantor is not an  "employee  benefit  plan" as defined in
Section 3(32) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section  3(3) of ERISA;  (ii) Grantor is not subject
to state statutes regulating  investments and fiduciary obligations with respect
to governmental  plans; and (iii) one or more of the following  circumstances is
true:

                  (1)  Equity   interests  in  Grantor  are   publicly   offered
          securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);

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

                  (3) Grantor  qualifies as an  "operating  company"  within the
         meaning  of 29  C.F.R.  Section  2510.3-101  or an  investment  company
         registered under the Investment Company Act of 1940.

                  (c) Grantor shall  indemnify  Beneficiary  and defend and hold
Beneficiary  harmless from and against all civil  penalties,  excise  taxes,  or
other loss, cost damage and expense (including,  without limitation,  reasonable
attorneys'  fees and  disbursements  and costs  incurred  in

                                       48
<PAGE>

the  investigation,  defense  and  settlement  of claims and losses  incurred in
correcting any prohibited  transaction or in the sale of a prohibited  loan, and
in obtaining any individual  prohibited  transaction  exemption under ERISA that
may be required,  in Beneficiary's  sole discretion) that Beneficiary may incur,
directly  or  indirectly,  as a result of a default  under  this  Section.  This
indemnity  shall survive any  termination,  satisfaction  or foreclosure of this
Deed of Trust.

         1.36 Springing  Lock-Box Account.  At Beneficiary's  election following
the  occurrence  and  continuance  of an Event of Default or if the debt service
coverage ratio of the Trust Property and all Other  Mortgaged  Properties  falls
below 1.15:1,  as determined by Beneficiary,  Beneficiary may require Grantor to
enter into one or more clearing and deposit agreements acceptable to Beneficiary
between  Grantor,  Beneficiary  and one or more certain  financial  institutions
(which  may  be  Beneficiary  or an  affiliate  or  subsidiary  of  Beneficiary)
acceptable  to   Beneficiary   (together  with  any   modification,   amendment,
substitution or replacement thereof, hereinafter collectively referred to as the
"Lock-Box  Agreement") in  Beneficiary's  then current form which shall provide,
among other  things,  that all Rents and other sums  collected  from, or arising
with respect to, the Trust  Property be  deposited  in the deposit  account (the
"Lock-Box  Account")  established  in connection  with such Lock-Box  Agreement,
which  may be an  interest-bearing  account,  and  that  such  amounts  shall be
disbursed in accordance  with the Lock-Box  Agreement.  Grantor shall not have a
right of  withdrawal in respect to the Lock-Box  Account.  Grantor shall pay all
reasonable costs and expenses  incurred in creating and maintaining the Lock-Box
Agreement and all of Beneficiary's  reasonable  out-of-pocket costs and expenses
in connection with the  preparation  and negotiation of the Lock-Box  Agreement.
Immediately following  Beneficiary's  election to require that Grantor establish
the Lock-Box  Account,  Grantor shall deliver to  Beneficiary  for delivery,  at
Grantor's expense,  by certified mail, return receipt requested,  to all Tenants
of the Trust Property an irrevocable  written notice in the form attached hereto
as Exhibit D (or such other form as may be attached to the  Lock-Box  Agreement)
directing  such  tenants to pay their  rent and other  amounts  due under  their
leases to the  depository  under the  Lock-Box  Agreement  for deposit  into the
Lock-Box Account. Additionally,  each Lease executed on or after the date of the
Lock-Box  Agreement  affecting any of the Premises or Improvements must provide,
in a manner  approved  by  Beneficiary,  that the Tenant is required to make all
payments  due to Grantor  under the terms of such  lease,  license or  occupancy
agreement to the depository of the Lock-Box Account by check,  cashiers check or
money order made payable to Beneficiary  or its successors or assigns.  Upon the
occurrence and continuance of any Event of Default,  Beneficiary shall apply any
sums then held pursuant to the Lock-Box Agreement (other than security deposits)
to the payment of the Debt in any order in its sole  discretion.  Until expended
or applied,  amounts  held in the  Lock-Box  Account  pursuant  to the  Lock-Box
Agreement (other than security  deposits) shall constitute  additional  security
for the Debt.  The Lock-Box  Agreement,  when and if executed,  shall be a "Loan
Document" for all purposes under the Note, this Deed of Trust and the other Loan
Documents.  Grantor hereby irrevocably  constitutes and appoints Beneficiary the
attorney-in-fact  of Grantor,  coupled  with an  interest,  to,  upon  Grantor's
failure to do so in accordance with the terms hereof, without notice to Grantor,
execute and deliver the Lock-Box  Agreement and the notices to tenants described
in this  Section  1.36 and to take any  other  action  reasonably  necessary  or
desirable in  Beneficiary's  judgment to carry out the intention of this Section
1.36.

                                       49
<PAGE>

                                   ARTICLE II.
                                EVENTS OF DEFAULT

         2.1      Events of Default.  The  occurrence of  any  of the  following
events shall be an Event of Default hereunder:

                  (a)  Grantor  fails to pay any money to  Beneficiary  required
hereunder at the time or within any applicable  grace period set forth herein or
in any  other  Loan  Document,  or if no grace  period  is set  forth  herein or
therein,  then  within  seven (7) days after the date of  Beneficiary's  written
notice to Grantor that such payment is due (except those  regarding  payments to
be made under the Note,  which failure is subject to any grace periods set forth
in the Note).

                  (b) Grantor fails to provide  insurance as required by Section
1.4 hereof or fails to perform any  material  covenant,  agreement,  obligation,
term or condition  set forth in Section  1.31 or Section 1.33 hereof  (provided,
however, so long as Grantor shall be undertaking any obligations  required under
Section 1.31 in accordance with Environmental Laws, Grantor shall be entitled to
such time as may reasonably  required to fulfill such obligations so long as the
same are completed  within any timeframe  established  under  applicable  law or
governmental authority).

                  (c) Grantor  fails to perform any other  covenant,  agreement,
obligation,  term or condition  set forth herein or in any other Loan  Document,
other than those  otherwise  described in this  Section 2.1,  and, to the extent
such failure or default is susceptible of being cured,  the  continuance of such
failure  or default  for thirty  (30) days after  written  notice  thereof  from
Beneficiary to Grantor;  provided,  however, that if such default is susceptible
of cure but such cure cannot be accomplished  with reasonable  diligence  within
said period of time,  and if Grantor  commences  to cure such  default  promptly
after  receipt  of written  notice  thereof  from  Beneficiary,  and  thereafter
prosecutes the curing of such default with reasonable diligence,  such period of
time shall be extended  for such period of time as may be necessary to cure such
default with reasonable  diligence,  but not to exceed an additional ninety (90)
days.

                  (d) Any  representation  or  warranty  made  herein,  in or in
connection with any application or commitment  relating to the loan evidenced by
the Note, or in any of the other Loan Documents to  Beneficiary  by Grantor,  by
any general  partner,  manager or member in  Grantor,  or by any  Indemnitor  is
determined  by  Beneficiary  to have been false or  misleading  in any  material
respect  at the time made and any such  false or  misleading  representation  or
warranty has resulted in a Material Adverse Effect.

                  (e)   There   shall  be  a  sale,   conveyance,   disposition,
alienation,  hypothecation, leasing, assignment, pledge, mortgage, granting of a
security  interest in or other  transfer or further  encumbrancing  of the Trust
Property,  Grantor or its general partners or managing  members,  or any portion
thereof or any interest therein, in violation of Section 1.13 hereof.

                  (f) Grantor,  general partner or managing member in Grantor or
any Indemnitor becomes insolvent,  or makes a transfer in fraud of creditors, or
makes an  assignment

                                       50
<PAGE>

for  the  benefit  of  creditors,  or  files a  petition  in  bankruptcy,  or is
voluntarily adjudicated insolvent or bankrupt or admits in writing the inability
to pay its debts as they mature,  or petitions or applies to any tribunal for or
consents  to or  fails  to  contest  the  appointment  of a  receiver,  trustee,
custodian  or similar  officer  for  Grantor,  for any such  general  partner or
managing  member of Grantor or for any  Indemnitor or for a substantial  part of
the assets of Grantor, of any such general partner or managing member of Grantor
or of any  Indemnitor,  or commences any case,  proceeding or other action under
any bankruptcy,  reorganization,  arrangement, readjustment or debt, dissolution
or liquidation law or statute of any  jurisdiction,  whether now or hereafter in
effect.

                  (g) A  petition  is filed  or any  case,  proceeding  or other
action is commenced  against  Grantor,  against any general  partner or managing
member, as the case may be, of Grantor or against any Indemnitor seeking to have
an order for relief  entered  against  it as debtor or  seeking  reorganization,
arrangement,  adjustment,  liquidation,  dissolution or composition of it or its
debts  or  other  relief  under  any law  relating  to  bankruptcy,  insolvency,
arrangement,  reorganization,  receivership or other debtor relief under any law
or statute of any  jurisdiction,  whether now or hereafter in effect, or a court
of competent  jurisdiction  enters an order for relief against Grantor,  against
any  general  partner  or  managing  member,  as the case may be, of  Grantor or
against any Indemnitor,  as debtor,  or an order,  judgment or decree is entered
appointing,  with or without the consent of Grantor, of any such general partner
or  managing  member,  as the case may be, of  Grantor or of any  Indemnitor,  a
receiver,  trustee,  custodian  or similar  officer  for  Grantor,  for any such
general  partner or managing  member,  as the case may be, of Grantor or for any
Indemnitor,  or for any substantial part of any of the properties of Grantor, of
any such general partner or managing  member,  as the case may be, of Grantor or
of any  Indemnitor,  and if any such event shall  occur,  such  petition,  case,
proceeding, action, order, judgment or decree is not dismissed within sixty (60)
days after being commenced.

                  (h) The  Trust  Property  or any  part  thereof  is  taken  on
execution  or  other  process  of law  in any  final  and  non-appealable  legal
proceeding,  without  the right of  redemption  against  Grantor,  other than in
connection  a  condemnation  or the  exercise of the power of eminent  domain or
police power.

                  (i) Grantor  abandons  all or a material  portion of the Trust
Property for a period in excess of thirty (30)  consecutive days other than as a
result of a force majeure.

                  (j) The holder of any lien or  security  interest on the Trust
Property  (without  implying  the consent of  Beneficiary  to the  existence  or
creation of any such lien or security interest), whether superior or subordinate
to this Deed of Trust or any of the other Loan Documents, declares a default and
such default is not cured within any  applicable  grace or cure period set forth
in the  applicable  document  or such  holder  institutes  foreclosure  or other
proceedings for the enforcement of its remedies thereunder.

                  (k) The Trust Property,  or any part thereof,  is subjected to
waste or to removal,  demolition or material alteration so that the value of the
Trust Property is materially diminished thereby and Beneficiary  determines that
it is not  adequately  protected  from  any  loss,  damage  or  risk  associated
therewith.

                                       51

<PAGE>

                  (l)  Any   dissolution,   termination,   partial  or  complete
liquidation,  merger or  consolidation  of Grantor,  any general  partner or any
managing member, or any Indemnitor.

                  (m) The  occurrence  and  continuance  of an Event of  Default
under any of the  Contemporaneous  Notes, the  Contemporaneous  Mortgages or the
Contemporaneous Assignments.

                                  ARTICLE III.
                                    REMEDIES

         3.1 Remedies Available. If there shall occur and be continuing an Event
of  Default  under  this Deed of Trust,  then this Deed of Trust is  subject  to
foreclosure  as  provided  by law and  Beneficiary  may, at its option and by or
through  a  trustee,   nominee,   assignee  or  otherwise  (including,   without
limitation,  the Trustee),  to the fullest extent permitted by law, exercise any
or all of the following rights,  remedies and recourses,  either successively or
concurrently:

                  (a) Acceleration. Accelerate the maturity date of the Note and
declare any or all of the Debt to be  immediately  due and  payable  without any
presentment,  demand,  protest,  notice or action of any kind whatever  (each of
which is hereby  expressly  waived by Grantor),  whereupon the same shall become
immediately  due and  payable.  Upon  any  such  acceleration,  payment  of such
accelerated amount shall constitute a prepayment of the principal balance of the
Note and any  applicable  prepayment  fee provided for in the Note shall then be
immediately due and payable.

                  (b) Entry on the Trust Property. Either in person or by agent,
with or without bringing any action or proceeding, or by a receiver appointed by
a court and without regard to the adequacy of its security,  enter upon and take
possession of the Trust  Property,  or any part  thereof,  without force or with
such force as is  permitted  by law and  without  notice or process or with such
notice or process as is  required  by law,  unless  such  notice and  process is
waivable,  in which case Grantor  hereby waives such notice and process,  and do
any and all  acts  and  perform  any and all  work  which  may be  desirable  or
necessary in Beneficiary's  judgment to complete any unfinished  construction on
the Premises,  to preserve the value,  marketability or rentability of the Trust
Property,  to  increase  the income  therefrom,  to manage and operate the Trust
Property or to protect the security hereof, and all sums expended by Beneficiary
therefor,  together with interest thereon at the Default Interest Rate, shall be
immediately  due and  payable to  Beneficiary  by Grantor on demand and shall be
secured hereby and by all of the other Loan  Documents  securing all or any part
of the Debt.

                  (c) Collect Rents.  With or without  taking  possession of the
Trust Property, sue or otherwise collect the Rents, including those past due and
unpaid.

                  (d)  Appointment  of Receiver.  Upon,  or at any time prior or
after,  initiating the exercise of any power of sale,  instituting  any judicial
foreclosure  or  instituting  any other  foreclosure  of the liens and  security
interests  provided for herein or any other legal  proceedings  hereunder,  make
application to a court of competent  jurisdiction  for appointment of a receiver

                                       52
<PAGE>

for all or any part of the  Trust  Property,  as a matter  of  strict  right and
without  notice to  Grantor  and  without  regard to the  adequacy  of the Trust
Property for the  repayment of the Debt or the solvency of Grantor or any person
or  persons  liable  for the  payment  of the  Debt,  and  Grantor  does  hereby
irrevocably  consent  to such  appointment,  waive  any and all  notices  of and
defenses to such appointment and agree not to oppose any application therefor by
Beneficiary, but nothing herein is to be construed to deprive Beneficiary of any
other right, remedy or privilege  Beneficiary may now have under the law to have
a receiver appointed,  provided, however, that the appointment of such receiver,
trustee or other  appointee by virtue of any court order,  statute or regulation
shall not impair or in any manner prejudice the rights of Beneficiary to receive
payment of the Rents  pursuant to other terms and  provisions  hereof.  Any such
receiver  shall have all of the usual  powers and duties of receivers in similar
cases,  including,  without limitation,  the full power to hold, develop,  rent,
lease,  manage,  maintain,  operate and  otherwise  use or permit the use of the
Trust  Property  upon such terms and  conditions as said receiver may deem to be
prudent  and  reasonable  under  the  circumstances  as more  fully set forth in
Section  3.3 below.  Such  receivership  shall,  at the  option of  Beneficiary,
continue  until  full  payment  of all of the Debt or until  title to the  Trust
Property subject to foreclosure shall have passed by foreclosure sale under this
Deed of Trust or deed in lieu of foreclosure.

                  (e) Foreclosure.  Immediately  commence an action to foreclose
this Deed of Trust or to specifically enforce its provisions with respect to any
of the Debt,  pursuant to applicable  law, and sell the Trust  Property or cause
the Trust  Property  subject to  foreclosure  hereunder to be sold in accordance
with the  requirements  and  procedures  provided  by said  statutes in a single
parcel  or in  several  parcels  at the  option  of  Beneficiary.  In the  event
foreclosure proceedings are instituted by Beneficiary,  all expenses incident to
such proceedings,  including, but not limited to, reasonable attorneys' fees and
costs,  shall be paid by Grantor and secured by this Deed of Trust and by all of
the other Loan Documents  securing all or any part of the Debt. The Debt and all
other obligations secured by this Deed of Trust, including,  without limitation,
interest at the Default  Interest  Rate any  prepayment  charge,  fee or premium
required to be paid under the Note in order to prepay  principal  (to the extent
permitted by applicable law),  reasonable  attorneys' fees and any other amounts
due  and  unpaid  to  Beneficiary  under  the  Loan  Documents,  may  be  bid by
Beneficiary  in the event of a  foreclosure  sale  hereunder.  In the event of a
judicial sale pursuant to a foreclosure decree, it is understood and agreed that
Beneficiary  or its assigns may become the  purchaser of such Trust  Property or
any part thereof.

                  (f) Judicial Remedies.  Proceed by suit or suits, at law or in
equity,  instituted  by or on behalf of  Beneficiary,  upon  written  request of
Beneficiary,  to enforce  the  payment of the Debt or the other  obligations  of
Grantor hereunder or pursuant to the Loan Documents,  to foreclose the liens and
security interests of this Deed of Trust as against all or any part of the Trust
Property,  and to have all or any part of the  Trust  Property  sold  under  the
judgment or decree of a court of  competent  jurisdiction.  This remedy shall be
cumulative of any other  non-judicial  remedies  available to  Beneficiary  with
respect  to the Loan  Documents.  Proceeding  with the  request or  receiving  a
judgment  for  legal  relief  shall not be or be  deemed  to be an  election  of
remedies or bar any available non-judicial remedy of Beneficiary.

                  (g)  Sale  of  Property.   (i)  Trustee,  at  the  request  of
Beneficiary,  shall  have the  power  to sell  the  Trust  Property  subject  to
foreclosure  hereunder or any part thereof at public

                                       53
<PAGE>

auction,  in such  manner,  at  such  time,  and  place,  upon  such  terms  and
conditions,  and upon such  public  notice as may be required  or  permitted  by
applicable  law,   consisting  of   advertisement  in  a  newspaper  of  general
circulation  in the  jurisdiction  and for such  period  as  applicable  law may
require  and at such other  times and by such other  methods,  if any, as may be
required by law to convey such Trust  Property in fee simple by  trustee's  deed
with special  warranty of title to and at the cost of the  purchaser,  who shall
not be liable to see to the application of the purchase  money.  The proceeds or
avails of any sale made under or by virtue of this paragraph,  together with any
other  sums  which  then may be held by  Beneficiary  under  this Deed of Trust,
whether under the provisions of this paragraph or otherwise, shall be applied as
provided  in Section  3.2  hereof.  Beneficiary,  Trustee  and any  receiver  or
custodian of the Trust  Property or any part thereof  shall be liable to account
for only those rents, issues, proceeds and profits actually received by it.

                  (ii) Beneficiary and Trustee, as applicable,  may adjourn from
time to time any sale by it to be made  under or by virtue of this Deed of Trust
by  announcement  at the  time and  place  appointed  for such  sale or for such
adjourned sale or sales and, except as otherwise provided by any applicable law,
Beneficiary or Trustee,  without  further notice or  publication,  may make such
sale at the time and place to which the same shall be so adjourned.

                  (iii)  Upon the  completion  of any sale or sales  ordered  by
Beneficiary  and  made  by  Trustee  under  or  by  virtue  of  this  paragraph,
Beneficiary  or Trustee,  or any officer of any court  empowered to do so, shall
execute  and  deliver  to the  accepted  purchaser  or  purchasers  a  good  and
sufficient instrument, or good and sufficient instruments,  granting, conveying,
assigning and transferring all estate,  right,  title and interest in and to the
property and rights sold. Trustee is hereby  irrevocably  appointed the true and
lawful  attorney-in-fact for Grantor (coupled with an interest), in its name and
stead, to make all necessary conveyances,  assignments, transfers and deliveries
of the property and rights so sold and for that purpose  Trustee may execute all
necessary instruments of conveyance,  assignment, transfer and delivery, and may
substitute  one or more persons with like power,  Grantor  hereby  ratifying and
confirming all that its said  attorney-in-fact or such substitute or substitutes
shall lawfully do by virtue hereof.  Nevertheless,  Grantor,  if so requested by
Trustee  or  Beneficiary,  shall  ratify and  confirm  any such sale or sales by
executing and delivering to Beneficiary,  or to such purchaser or purchasers all
such instruments as may be advisable,  in the sole judgment of Beneficiary,  for
such purpose,  and as may be designated in such request.  Any such sale or sales
made under or by virtue or this paragraph,  whether made under the power of sale
herein  granted or under or by virtue of judicial  proceedings  or a judgment or
decree of foreclosure and sale,  shall operate to divest all the estate,  right,
title,  interest,  claim and demand whatsoever,  whether at law or in equity, of
Grantor in and to the  property  and rights so sold,  and shall,  to the fullest
extent permitted under law, be a perpetual bar both at law and in equity against
Grantor and against any and all persons  claiming or who may claim the same,  or
any party thereof, from, through or under Grantor.

                  (iv) In the event of any sale made  under or by virtue of this
Deed of Trust  (whether made under the power of sale herein  granted or under or
by virtue of judicial  proceedings  or a judgment or decree of  foreclosure  and
sale),  the entire Debt relative to the Trust  Property,  immediately  thereupon
shall,  anything  in the  Note,  this  Deed of  Trust  or any  other of the Loan
Documents to the contrary notwithstanding, become due and payable.

                                       54
<PAGE>

                  (v) Upon any sale  under or by  virtue  of this  Deed of Trust
(whether  made under the power of sale  herein  granted or under or by virtue of
judicial  proceedings  or  a  judgment  or  decree  of  foreclosure  and  sale),
Beneficiary  may bid for and acquire the Trust  Property or any part thereof and
in lieu of paying cash therefor may make  settlement  for the purchase  price by
crediting the Debt to and against the net sales price after deducting  therefrom
the expenses of the sale and the costs of the action.

                  (vi) No recovery of any judgment by Beneficiary and no levy of
an execution  under any judgment upon the Trust  Property or any part thereof or
upon any other  property of Grantor shall release the lien of this Deed of Trust
upon the Trust  Property or any part thereof,  or any liens,  rights,  powers or
remedies of Beneficiary  hereunder,  but such liens, rights, powers and remedies
of Beneficiary shall continue unimpaired until the entire Debt is paid in full.

                  (h)  Other.  Exercise  any  other  right or  remedy  available
hereunder, under any of the other Loan Documents or at law or in equity.

         3.2  Application of Proceeds.  To the fullest extent  permitted by law,
the proceeds of any sale under this Deed of Trust  following the  occurrence and
continuance of an Event of Default shall be applied,  to the extent funds are so
available, to the following items in such order as Beneficiary in its discretion
may determine:

                  (a) To payment of the reasonable  costs,  expenses and fees of
taking possession of the Trust Property, and of holding, operating, maintaining,
using,  leasing,  repairing,  improving,  marketing  and selling the same and of
otherwise  enforcing  Beneficiary's  rights and remedies hereunder and under the
other Loan Documents,  including,  but not limited to,  receivers'  fees,  court
costs, attorneys',  accountants',  appraisers', managers' and other professional
fees, title charges and transfer taxes.

                  (b) To payment of all sums expended by  Beneficiary  under the
terms of any of the Loan Documents and not yet repaid, together with interest on
such sums at the Default Interest Rate.

                  (c) To payment of the Debt and all other  obligations  secured
by this Deed of Trust,  including,  without limitation,  interest at the Default
Interest  Rate and, to the extent  permitted by applicable  law, any  prepayment
fee,  charge or  premium  required  to be paid under the Note in order to prepay
principal,  subject to applicable law, in any order that Beneficiary  chooses in
its sole discretion.

                  (d) The remainder, if any, of such funds shall be disbursed to
Grantor or to the person or persons legally entitled thereto.

         3.3 Right and  Authority  of  Receiver or  Beneficiary  in the Event of
Default;  Power of Attorney.  Upon the occurrence and continuance of an Event of
Default,  and entry upon the Trust Property pursuant to Section 3.1(b) hereof or
appointment  of a receiver  pursuant to Section  3.1(d)  hereof,  and under such
terms and conditions as may be prudent and reasonable under the circumstances in
Beneficiary's  or the  receiver's  sole  discretion,  all at Grantor's  expense,

                                       55
<PAGE>

Beneficiary  or said  receiver,  or such other persons or entities as they shall
hire,  direct or engage, as the case may be, may do or permit one or more of the
following,  successively or concurrently: (a) enter upon and take possession and
control of any and all of the Trust Property;  (b) take and maintain  possession
of all  documents,  books,  records,  papers and accounts  relating to the Trust
Property; (c) exclude Grantor and its agents, servants and employees wholly from
the Trust Property;  (d) manage and operate the Trust Property; (e) preserve and
maintain  the Trust  Property;  (f) make  repairs and  alterations  to the Trust
Property; (g) complete any construction or repair of the Improvements, with such
changes,  additions or modifications of the plans and specifications or intended
disposition  and  use of  the  Improvements  as  Beneficiary  may  in  its  sole
discretion  deem  appropriate  or desirable to place the Trust  Property in such
condition as will, in Beneficiary's sole discretion, make it or any part thereof
readily marketable or rentable;  (h) conduct a marketing or leasing program with
respect to the Trust Property,  or employ a marketing or leasing agent or agents
to do so, directed to the leasing or sale of the Trust Property under such terms
and conditions as Beneficiary  may in its sole  discretion  deem  appropriate or
desirable; (i) employ such contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, marketing agents, or other employees,
agents, independent contractors or professionals, as Beneficiary may in its sole
discretion deem  appropriate or desirable to implement and effectuate the rights
and powers herein granted;  (j) execute and deliver,  in the name of Beneficiary
as attorney-in-fact and agent of Grantor or in its own name as Beneficiary, such
documents  and  instruments  as  are  necessary  or  appropriate  to  consummate
transactions  authorized  hereunder;  (k) enter such leases,  whether of real or
personal  property,  or tenancy  agreements,  under such terms and conditions as
Beneficiary  may in its sole  discretion  deem  appropriate  or  desirable;  (1)
collect  and  receive the Rents from the Trust  Property;  (m) eject  tenants or
repossess personal property,  as provided by law, for breaches of the conditions
of their leases or other agreements;  (n) sue for unpaid Rents, payments, income
or  proceeds  in the name of Grantor or  Beneficiary;  (o)  maintain  actions in
forcible  entry and detainer,  ejectment for  possession and actions in distress
for rent;  (p) compromise or give  acquittance  for Rents,  payments,  income or
proceeds  that may become  due;  (q)  delegate  or assign any and all rights and
powers  given to  Beneficiary  by this Deed of Trust;  and (r) do any acts which
Beneficiary in its sole discretion deems appropriate or desirable to protect the
security hereof and use such measures, legal or equitable, as Beneficiary may in
its sole  discretion  deem  appropriate or desirable to implement and effectuate
the  provisions  of this Deed of Trust.  This Deed of Trust shall  constitute  a
direction  to and full  authority  to any  lessee,  or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Grantor or
Beneficiary,  at  the  request  of  Beneficiary  following  the  occurrence  and
continuance  of an  Event  of  Default  or as  otherwise  provided  in the  Loan
Documents,  to pay all  amounts  owing  under any lease,  contract,  concession,
license or other agreement to Beneficiary  without proof of the Event of Default
relied upon. Any such lessee or third party is hereby irrevocably  authorized to
rely upon and comply with (and shall be fully  protected by Grantor in so doing)
any request,  notice or demand by Beneficiary  for the payment to Beneficiary of
any Rents or other sums which may be or  thereafter  become due under its lease,
contract,  concession, license or other agreement, or for the performance of any
undertakings  under  any such  lease,  contract,  concession,  license  or other
agreement,  and  shall  have no right or duty to  inquire  whether  any Event of
Default  under this Deed of Trust or under any of the other Loan  Documents  has
actually occurred or is then existing.  Grantor hereby  constitutes and appoints
Beneficiary, its assignees,  successors,  transferees and nominees, as Grantor's
true and lawful  attorney-in-fact  and agent, with full

                                       56
<PAGE>

power of substitution in the Trust Property, in Grantor's name, place and stead,
to do or permit any one or more of the  foregoing  described  rights,  remedies,
powers and authorities, successively or concurrently, and said power of attorney
shall be deemed a power coupled with an interest and  irrevocable so long as any
portion  of the Debt is  outstanding.  Any  money  advanced  by  Beneficiary  in
connection with any action taken under this Section 3.3,  together with interest
thereon at the Default Interest Rate from the date of making such advancement by
Beneficiary  until actually paid by Grantor,  shall be a demand obligation owing
by  Grantor  to  Beneficiary  and shall be  secured by this Deed of Trust and by
every other instrument securing all or any portion of the Debt.

         3.4 Occupancy  After  Foreclosure.  In the event there is a foreclosure
sale hereunder  resulting  from the  occurrence  and  continuance of an Event of
Default,  and at the time of such sale,  Grantor or  Grantor's  representatives,
successors or assigns,  or any other persons  claiming any interest in the Trust
Property  by,  through  or  under  Grantor  (except  Tenants  of  space  in  the
Improvements subject to Leases),  are occupying or using the Trust Property,  or
any part thereof, then, to the extent not prohibited by applicable law, each and
all shall,  at the option of  Beneficiary  or the purchaser at such sale, as the
case may be,  immediately become the tenant of the purchaser at such sale, which
tenancy  shall be a tenancy from  day-to-day,  terminable  at the will of either
landlord or tenant,  at a reasonable  rental per day based upon the value of the
Trust Property  occupied or used,  such rental to be due daily to the purchaser.
Further,  to the extent  permitted  by  applicable  law, in the event the tenant
fails to surrender possession of the Trust Property upon the termination of such
tenancy, the purchaser shall be entitled to institute and maintain an action for
unlawful  detainer of the Trust Property in the appropriate  court of the county
in which the Premises is located.

         3.5 Notice to Account  Debtors.  Beneficiary may, at any time after the
occurrence and  continuance of an Event of Default,  notify the account  debtors
and obligors of any accounts,  chattel  paper,  negotiable  instruments or other
evidences  of  indebtedness  to Grantor  included  in the Trust  Property to pay
Beneficiary  directly.  Grantor  shall at any time or from time to time upon the
request of Beneficiary  following the occurrence and  continuance of an Event of
Default,  provide to Beneficiary a current list of all such account  debtors and
obligors and their addresses.

         3.6 Cumulative  Remedies.  All remedies contained in this Deed of Trust
are cumulative and  Beneficiary  shall also have all other remedies  provided at
law and in equity or in any other Loan  Documents.  Such remedies may be pursued
separately,  successively or  concurrently  at the sole subjective  direction of
Beneficiary and may be exercised in any order and as often as occasion  therefor
shall arise. No act of Beneficiary  shall be construed as an election to proceed
under any  particular  provisions  of this Deed of Trust to the exclusion of any
other  provision  of this Deed of Trust or as an  election  of  remedies  to the
exclusion  of any other  remedy  which may then or  thereafter  be  available to
Beneficiary.  No delay or failure by Beneficiary to exercise any right or remedy
under  this Deed of Trust  shall be  construed  to be a waiver of that  right or
remedy or of any Event of Default.  Beneficiary  may exercise any one or more of
its rights and  remedies  at its option  without  regard to the  adequacy of its
security.

                                       57
<PAGE>

         3.7  Payment  of  Expenses.   Grantor   shall  pay  on  demand  all  of
Beneficiary's expenses incurred in any efforts to enforce any terms of this Deed
of Trust,  whether or not any lawsuit is filed and whether or not foreclosure is
commenced but not completed,  including,  but not limited to,  reasonable  legal
fees and  disbursements,  foreclosure  costs and title  charges,  together  with
interest thereon from and after the date incurred by Beneficiary  until actually
paid by Grantor at the Default  Interest  Rate, and the same shall be secured by
this Deed of Trust and by all of the other Loan  Documents  securing  all or any
part of the Debt.

                                   ARTICLE IV.
                       MISCELLANEOUS TERMS AND CONDITIONS

         4.1 Time of Essence.  Time  is  of  the essence  with  respect  to  all
provisions of this Deed of Trust.

         4.2 Release of Deed of Trust.  If all of the Debt be paid,  then and in
that  event  only,  all  rights  under  this  Deed of  Trust,  except  for those
provisions  hereof which by their terms survive,  shall  terminate and the Trust
Property shall become wholly clear of the liens, security interests, conveyances
and assignments  evidenced hereby, which shall be promptly released of record by
Beneficiary  in due form at Grantor's  cost. No release of this Deed of Trust or
the lien hereof shall be valid unless executed by Beneficiary.

         4.3  Certain  Rights  of  Beneficiary.   Without  affecting   Grantor's
liability for the payment of any of the Debt,  Beneficiary may from time to time
and without notice to Grantor:  (a) release any person liable for the payment of
the Debt;  (b) extend or modify  the terms of  payment  of the Debt;  (c) accept
additional  real  or  personal  property  of any  kind  as  security  or  alter,
substitute  or release any property  securing the Debt;  (d) recover any part of
the Trust Property;  (e) consent in writing to the making of any subdivision map
or plat thereof;  (f) join in granting any easement therein;  or (g) join in any
extension  agreement of this Deed of Trust or any  agreement  subordinating  the
lien hereof.

         4.4 Waiver of Certain  Defenses.  No action for the  enforcement of the
lien hereof or of any  provision  hereof  shall be subject to any defense  which
would not be good and available to the party  interposing  the same in an action
at law upon the Note or any of the other Loan Documents.

         4.5 Notices. All notices,  demands, requests or other communications to
be sent by one  party to the  other  hereunder  or  required  by law shall be in
writing and shall be deemed to have been validly  given or served by delivery of
the same in person to the intended  addressee,  or by  depositing  the same with
Federal Express or another  reputable  private courier service for next business
day  delivery,  or by  depositing  the same in the United  States mail,  postage
prepaid,  registered or certified mail, return receipt  requested,  in any event
addressed to the  intended  addressee at its address set forth on the first page
of this Deed of Trust or at such  other  address  as may be  designated  by such
party as herein provided.  All notices,  demands and requests shall be effective
upon such personal delivery,  or one (1) business day after being deposited with
the private courier  service,  or two (2) business days after being deposited in
the United States mail as required  above.  Rejection or other refusal to accept
or the  inability to deliver  because of

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<PAGE>

changed  address of which no notice was given as herein required shall be deemed
to be receipt of the  notice,  demand or  request  sent.  By giving to the other
party  hereto at least  fifteen  (15)  days'  prior  written  notice  thereof in
accordance with the provisions  hereof,  the parties hereto shall have the right
from time to time to change their  respective  addresses and each shall have the
right to specify as its address any other  address  within the United  States of
America.

         4.6 Successors  and Assigns;  Joint and Several  Liability.  The terms,
provisions,  indemnities,  covenants and conditions hereof shall be binding upon
Grantor and the successors  and assigns of Grantor,  including all successors in
interest of Grantor in and to all or any part of the Trust  Property,  and shall
inure to the benefit of  Beneficiary,  its  directors,  officers,  shareholders,
employees  and agents and their  respective  successors  and  assigns  and shall
constitute covenants running with the land. All references in this Deed of Trust
to  Grantor  or  Beneficiary  shall be  deemed  to  include  all  such  parties'
successors  and assigns,  and the term  "Beneficiary"  as used herein shall also
mean  and  refer  to  any  lawful  holder  or  owner,   including  pledgees  and
participants, of any of the Debt.

         4.7  Severability.  A determination  that any provision of this Deed of
Trust is  unenforceable  or  invalid  shall not  affect  the  enforceability  or
validity of any other provision,  and any determination  that the application of
any provision of this Deed of Trust to any person or  circumstance is illegal or
unenforceable  shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.

         4.8  Gender.  Within this Deed of Trust,  words of any gender  shall be
held and construed to include any other gender,  and words in the singular shall
be held and construed to include the plural, and vice versa,  unless the context
otherwise requires.

         4.9 Waiver;  Discontinuance  of Proceedings.  Beneficiary may waive any
single Event of Default by Grantor  hereunder without waiving any other prior or
subsequent  Event of  Default.  Beneficiary  may  remedy any Event of Default by
Grantor  hereunder  without waiving the Event of Default  remedied.  Neither the
failure by Beneficiary to exercise,  nor the delay by Beneficiary in exercising,
any right,  power or remedy upon any Event of Default by Grantor hereunder shall
be construed as a waiver of such Event of Default or as a waiver of the right to
exercise any such right,  power or remedy at a later date.  No single or partial
exercise by Beneficiary of any right,  power or remedy  hereunder  shall exhaust
the same or shall preclude any other or further exercise thereof, and every such
right,  power or remedy  hereunder may be exercised at any time and from time to
time.  No  modification  or waiver of any  provision  hereof nor  consent to any
departure by Grantor  therefrom shall in any event be effective  unless the same
shall be in writing and signed by  Beneficiary,  and then such waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
given.  No notice to nor demand on  Grantor in any case shall of itself  entitle
Grantor  to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.  Acceptance by  Beneficiary of any payment in an amount less than
the amount then due on any of the Debt shall be deemed an  acceptance on account
only and shall not in any way affect the  existence  of an Event of Default.  In
case  Beneficiary  shall have proceeded to invoke any right,  remedy or recourse
permitted hereunder or under the other Loan Documents and shall thereafter elect
to  discontinue or abandon the same for any reason,  Beneficiary  shall have the
unqualified right to do so and, in such an event,  Grantor and Beneficiary shall
be  restored  to their  former

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<PAGE>

positions with respect to the Debt, the Loan  Documents,  the Trust Property and
otherwise, and the rights,  remedies,  recourses and powers of Beneficiary shall
continue as if the same had never been invoked.

         4.10  Section  Headings. The headings of the sections  and  paragraphs
of this Deed of Trust are for  convenience of  reference  only,  are not  to  be
considered a part hereof and shall not limit or otherwise   affect  any  of  the
terms hereof.

         4.11  GOVERNING  LAW.  THIS  DEED  OF  TRUST  WILL BE  GOVERNED  BY AND
CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE IN WHICH THE  PREMISES  IS
LOCATED,  PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER
BE  PREEMPTED  BY  FEDERAL  LAW,  SUCH  FEDERAL  LAW  SHALL  SO  GOVERN  AND  BE
CONTROLLING,  AND  PROVIDED  FURTHER  THAT  THE LAWS OF THE  STATE IN WHICH  THE
PREMISES IS LOCATED SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF
LIENS AND SECURITY INTERESTS IN THE TRUST PROPERTY LOCATED IN SUCH STATE.

         4.12  Counting of Days.  The term  "days"  when used herein  shall mean
calendar  days.  If any  time  period  ends on a  Saturday,  Sunday  or  holiday
officially  recognized  by the state within  which the Premises is located,  the
period  shall be deemed to end on the next  succeeding  business  day.  The term
"business  day" when used herein shall mean a weekday,  Monday  through  Friday,
except a legal holiday or a day on which banking  institutions  in New York, New
York are authorized by law to be closed.

         4.13 Relationship of the Parties.  The relationship between Grantor and
Beneficiary is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent,  employee,  joint venturer or
partner of the other party.

         4.14  Application  of the  Proceeds  of the Note.  To the  extent  that
proceeds  of the Note are used to pay  indebtedness  secured by any  outstanding
lien, security interest, charge or prior encumbrance against the Trust Property,
such  proceeds  have been  advanced  by  Beneficiary  at  Grantor's  request and
Beneficiary  shall be subrogated to any and all rights,  security  interests and
liens  owned  by any  owner  or  holder  of  such  outstanding  liens,  security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released.

         4.15 Unsecured Portion of Indebtedness.  If any part of the Debt cannot
be lawfully  secured by this Deed of Trust or if any part of the Trust  Property
cannot be lawfully subject to the lien and security  interest hereof to the full
extent of such  indebtedness,  then all  payments  made shall be applied on said
indebtedness  first in discharge of that portion  thereof  which is unsecured by
this Deed of Trust.

         4.16  Cross-Default;   Cross-Collateralization;   Severance  of  Loans.
Grantor acknowledges that Beneficiary has made the loan evidenced by the Note to
Grantor upon the security of its  collective  interest in the Trust Property and
Other  Mortgaged  Properties  and in reliance  upon the  aggregate  of the Trust
Property and Other Mortgaged Properties taken together

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<PAGE>

being of greater value as collateral security than the sum of the Trust Property
and Other Mortgaged  Properties taken separately.  Grantor agrees that this Deed
of   Trust   and  the   other   Contemporaneous   Mortgages   are  and  will  be
cross-collateralized and cross-defaulted with each other so that (i) an Event of
Default under either this Deed of Trust or any of the Contemporaneous  Mortgages
shall  constitute  an Event of  Default  under  both  this Deed of Trust and the
Contemporaneous  Mortgages which secure the Note and the Contemporaneous  Notes;
(ii) an Event of  Default  under the Note shall  constitute  an Event of Default
under each of this Deed of Trust, the Contemporaneous Notes, the Contemporaneous
Mortgages and the  Contemporaneous  Assignments;  and (iii) each of this Deed of
Trust,  the  Contemporaneous  Notes and the  Contemporaneous  Mortgages  and the
Contemporaneous  Assignments  shall  constitute  security  for the  Note and the
Contemporaneous  Notes as if a single  blanket  lien  were  placed  on the Trust
Property  and  Other  Mortgaged  Properties  as  security  for the  Note and the
Contemporaneous  Notes.  Beneficiary  shall  have the right from time to time to
sever the Note,  Contemporaneous  Notes, this Deed of Trust, the Contemporaneous
Mortgages  and the  respective  other  security  documents  into two (2) or more
cross-defaulted and  cross-collateralized  pools (the "New Loan Pools"). Grantor
shall  execute  and  deliver  to  Beneficiary,  promptly  after the  request  of
Beneficiary,  a severance  agreement,  deed of trust  amendments  and such other
documents  as  Beneficiary  shall  reasonably  request  in order to  effect  the
severance  described  in the  preceding  sentence,  all in  form  and  substance
reasonably  satisfactory to  Beneficiary;  provided that the same shall be at no
cost or expense to Grantor and shall not affect  Grantor's rights or obligations
hereunder or under any of the other Loan  Documents.  Grantor hereby  absolutely
and irrevocably  appoints  Beneficiary as its true and lawful attorney,  coupled
with an  interest,  in its name and  stead to make  and  execute  all  documents
necessary or desirably to effect the aforesaid severance,  Grantor ratifying all
that its said attorney shall do by virtue  thereof;  however,  that  Beneficiary
shall not make or execute  any such  documents  under such power  until five (5)
days after  notice has been given to  Grantor by  Beneficiary  of  Beneficiary's
intent to exercise  its rights  under such power.  In  connection  with any such
severance,  the Aggregate Loan Balance for the reduced  assumption fee under the
last sentence of Section 1.13(b)(3) hereof shall be ratably reduced based on the
aggregate original principal balances of each of the New Loan Pools.

         4.17 Interest  After Sale. In the event the Trust  Property or any part
thereof  shall be sold upon  foreclosure  as provided  hereunder,  to the extent
permitted  by law,  the sum for which the same shall have been sold  shall,  for
purposes of redemption  (pursuant to the laws of the state in which the Premises
is located), bear interest at the Default Interest Rate.

         4.18  Inconsistency  with  Other  Loan  Documents.  In the event of any
inconsistency  between the  provisions  hereof and the  provisions in any of the
other Loan  Documents,  it is  intended  that the  provisions  of the Note shall
control over the  provisions of this Deed of Trust,  and that the  provisions of
this Deed of Trust shall control over the provisions of the Assignment of Leases
and Rents, the Guaranty and Indemnity  Agreement,  the  Environmental  Indemnity
Agreement, and the other Loan Documents.

         4.19 Construction of this Document. This document may be construed as a
mortgage,   security  deed,  deed  of  trust,   chattel  mortgage,   conveyance,
assignment,  security agreement,  pledge, financing statement,  hypothecation or
contract, or any one or more of the foregoing,  in

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<PAGE>

order to fully  effectuate the liens and security  interests  created hereby and
the purposes and agreements herein set forth.

         4.20 No Merger.  It is the desire and  intention of the parties  hereto
that this Deed of Trust and the lien hereof do not merge in fee simple  title to
the Trust Property.  It is hereby understood and agreed that should  Beneficiary
acquire any  additional  or other  interests in or to the Trust  Property or the
ownership  thereof,  then, unless a contrary intent is manifested by Beneficiary
as evidenced by an appropriate  document duly  recorded,  this Deed of Trust and
the lien hereof shall not merge in such other or  additional  interests in or to
the Trust Property,  toward the end that this Deed of Trust may be foreclosed as
if owned by a stranger to said other or additional interests.

         4.21 Rights With Respect to Junior  Encumbrances.  Any person or entity
purporting  to have or to take a junior  mortgage  or other  lien upon the Trust
Property or any interest  therein shall be subject to the rights of  Beneficiary
to amend,  modify,  increase,  vary, alter or supplement this Deed of Trust, the
Note or any of the other Loan Documents,  and to extend the maturity date of the
Debt,  and to  increase  the amount of the Debt,  and to waive or  forebear  the
exercise of any of its rights and  remedies  hereunder or under any of the other
Loan  Documents and to release any  collateral or security for the Debt, in each
and every case without  obtaining  the consent of the holder of such junior lien
and  without  the lien or  security  interest  of this Deed of Trust  losing its
priority over the rights of any such junior lien.

         4.22  Beneficiary  May  File  Proofs  of  Claim.  In  the  case  of any
receivership, insolvency, bankruptcy,  reorganization,  arrangement, adjustment,
composition or other proceedings  affecting  Grantor or the principals,  general
partners  or managing  members in  Grantor,  or their  respective  creditors  or
property, Beneficiary, to the extent permitted by law, shall be entitled to file
such proofs of claim and other  documents  as may be  necessary  or advisable in
order to have the  claims of  Beneficiary  allowed in such  proceedings  for the
entire  Debt at the  date of the  institution  of such  proceedings  and for any
additional  amount which may become due and payable by Grantor  hereunder  after
such date.

         4.23 Fixture  Filing.  This Deed of Trust shall be  effective  from the
date of its recording as a financing  statement  filed as a fixture  filing with
respect to all goods constituting part of the Trust Property which are or are to
become  fixtures.  This Deed of Trust  shall also be  effective  as a  financing
statement  covering  minerals or the like  (including  oil and gas) and is to be
filed for record in the real estate  records of the county where the Premises is
situated.  The mailing  address of Grantor and the address of  Beneficiary  from
which  information  concerning  the security  interests  may be obtained are set
forth in Section 1.22 above.

         4.24  After-Acquired  Trust Property.  All property acquired by Grantor
after  the date of this  Deed of Trust  which by the terms of this Deed of Trust
shall be subject to the lien and the security  interest  created  hereby,  shall
immediately  upon  the  acquisition  thereof  by  Grantor  and  without  further
mortgage,  conveyance  or  assignment  become  subject to the lien and  security
interest  created by this Deed of Trust.  Nevertheless,  Grantor shall  execute,
acknowledge,  deliver  and record or file,  as  appropriate,  all and every such
further mortgages,  security agreements,

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<PAGE>

financing  statements,  assignments and assurances as Beneficiary  shall require
for accomplishing the purposes of this Deed of Trust.

         4.25 No  Representation.  By accepting delivery of any item required to
be observed,  performed or fulfilled or to be given to  Beneficiary  pursuant to
the Loan Documents,  including,  but not limited to, any officer's  certificate,
balance  sheet,  statement  of  profit  and loss or other  financial  statement,
survey,  appraisal or insurance policy,  Beneficiary shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term,  provision or condition  thereof,  and
such  acceptance of delivery  thereof  shall not be or constitute  any warranty,
consent or affirmation with respect thereto by Beneficiary.

         4.26 Counterparts.  This Deed of Trust may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an  original,  and all of which shall be taken to be one and the
same  instrument,  for the same effect as if all  parties  hereto had signed the
same  signature  page.  Any signature page of this Deed of Trust may be detached
from any counterpart of this Deed of Trust without impairing the legal effect of
any signatures  thereon and may be attached to another  counterpart of this Deed
of  Trust  identical  in  form  hereto  but  having  attached  to it one or more
additional signature pages.

         4.27  Personal  Liability.  Notwithstanding  anything  to the  contrary
contained  in this Deed of Trust,  the  liability  of Grantor and its  officers,
directors,  general partners,  managers, members and principals for the Debt and
for the performance of the other agreements, covenants and obligations contained
herein and in the Loan Documents shall be limited as set forth in Section 2.6 of
the Note.

         4.28  Recording and Filing.  Grantor will cause the Loan  Documents and
all  amendments  and  supplements  thereto  and  substitutions  therefor  to  be
recorded,  filed,  re-recorded and re-filed in such manner and in such places as
Beneficiary shall reasonably request, and will pay on demand all such recording,
filing,  re-recording and re-filing taxes, fees and other charges. Grantor shall
reimburse  Beneficiary,  or its  servicing  agent,  for the  costs  incurred  in
obtaining  a tax  service  company  to verify the status of payment of taxes and
assessments on the Trust Property.

         4.29 Entire  Agreement  and  Modifications.  This Deed of Trust and the
other Loan Documents contain the entire agreements  between the parties relating
to the  subject  matter  hereof and thereof  and all prior  agreements  relative
hereto and thereto  which are not  contained  herein or therein are  terminated.
This Deed of Trust and the other Loan  Documents  may not be  amended,  revised,
waived,  discharged,  released  or  terminated  orally  but  only  by a  written
instrument or instruments executed by the party against which enforcement of the
amendment,  revision, waiver, discharge, release or termination is asserted. Any
alleged amendment,  revision, waiver, discharge, release or termination which is
not so documented shall not be effective as to any party.

         4.30 Maximum Interest.  The provisions of this Deed of Trust and of all
agreements  between Grantor and  Beneficiary,  whether now existing or hereafter
arising and whether written

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<PAGE>

or  oral,  are  hereby  expressly  limited  so that in no  contingency  or event
whatsoever,  whether by reason of demand or  acceleration of the maturity of the
Note or otherwise,  shall the amount paid, or agreed to be paid  ("Interest") to
Beneficiary for the use,  forbearance or retention of the money loaned under the
Note exceed the maximum amount  permissible  under  applicable law. If, from any
circumstance  whatsoever,  performance or fulfillment of any provision hereof or
of any agreement between Grantor and Beneficiary  shall, at the time performance
or  fulfillment of such  provision  shall be due,  exceed the limit for Interest
prescribed  by law or otherwise  transcend  the limit of validity  prescribed by
applicable  law, then,  ipso facto,  the obligation to be performed or fulfilled
shall be  reduced  to such  limit,  and if,  from any  circumstance  whatsoever,
Beneficiary  shall ever receive  anything of value deemed Interest by applicable
law in excess of the maximum  lawful  amount,  an amount equal to any  excessive
Interest shall be applied to the reduction of the principal  balance owing under
the Note in the inverse  order of its maturity  (whether or not then due) or, at
the option of  Beneficiary,  be paid over to Grantor,  and not to the payment of
Interest. All Interest (including any amounts or payments deemed to be Interest)
paid or agreed to be paid to  Beneficiary  shall,  to the  extent  permitted  by
applicable law, be amortized, prorated, allocated and spread throughout the full
period until  payment in full of the  principal  balance of the Note so that the
Interest  thereon  for such full  period  will not  exceed  the  maximum  amount
permitted by applicable  law. This Section will control all  agreements  between
Grantor and Beneficiary.

         4.31 Interest Payable by Beneficiary.  Beneficiary shall cause funds in
the Replacement  Reserve and the Repair and Remediation  Reserve to be deposited
into interest bearing accounts of the type customarily maintained by Beneficiary
or its servicing  agent for the investment of similar  reserves,  which accounts
may not yield the highest interest rate then available. Interest payable on such
amounts  shall  be  computed  based  on the  daily  outstanding  balance  in the
Replacement Reserve and the Repair and Remediation Reserve, as applicable.  Such
interest  shall be calculated on a simple,  non-compounded  interest basis based
solely on  contributions  made to the  Replacement  Reserve  and the  Repair and
Remediation  Reserve by Grantor.  All interest earned on amounts  contributed to
the Replacement Reserve and the Repair and Remediation Reserve shall be retained
by  Beneficiary  and  accumulated  for the  benefit of Grantor  and added to the
balance in the  Replacement  Reserve or the Repair and Remediation  Reserve,  as
applicable,  and shall be  disbursed  for  payment of the items for which  other
funds in the  Replacement  Reserve  or the Repair and  Remediation  Reserve,  as
applicable, are to be disbursed.

         4.32  Secondary  Market.  Beneficiary  may sell,  assign,  participate,
transfer or deliver  the Note and the Loan  Documents  to one or more  investors
(directly  or through a trust of other  entity  which may sell  certificates  or
other  instruments to investor) in the secondary  mortgage  market (a "Secondary
Market Transaction").  In connection with such sale, assignment,  participation,
transfer  or  delivery,  Beneficiary  may  retain or assign  responsibility  for
servicing  the loan  evidenced by the Note or may  delegate  some or all of such
responsibility and/or obligations to a servicer,  including, but not limited to,
any subservicer or master servicer, on behalf of the investors.

         4.33  Dissemination  of Information.  If Beneficiary  determines at any
time to sell,  transfer  or assign  the Note,  this Deed of Trust and other Loan
Documents,  and any or all servicing  rights with respect  thereto,  or to grant
participations  therein (the  "Participations")  or

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<PAGE>

issue  mortgage  pass-through  certificates  or other  securities  evidencing  a
beneficial  interest in a rated or unrated public offering or private  placement
(the  "Securities"),  Beneficiary  may  forward to each  purchaser,  transferee,
Beneficiary,  servicer, participant, investor, or their respective successors in
such  Participations  and/or Securities  (collectively,  the "Investors") or any
Rating Agency rating such Securities,  each prospective Investor and each of the
foregoing's  respective counsel, all documents and information which Beneficiary
now has or may  hereafter  acquire  relating to the Debt,  to  Beneficiary,  any
guarantor,  any  indemnitor,  and the  Trust  Property,  which  shall  have been
furnished by Beneficiary and any Indemnitor, as Beneficiary determines necessary
or  desirable.  If  at  any  time  during  which  the  Loan  is  an  asset  of a
securitization  or is  otherwise  an asset  of any  rated  transaction,  "Rating
Agency" or "Rating  Agencies"  shall mean the rating  agency or rating  agencies
that from time to time rate the securities,  certificates  or other  instruments
issued in connection with such securitization or other transaction.

         4.34    Contemporaneous    Notes,    Contemporaneous    Mortgages   and
Contemporaneous  Assignments  of Leases  and  Rents.  This Deed of Trust is made
contemporaneously  with  six (6)  other  promissory  notes,  each  of even  date
herewith (the  "Contemporaneous  Notes"),  six (6) other deeds of trust, each of
even  date  herewith  (the  "Contemporaneous   Mortgages")  and  six  (6)  other
Assignment of Leases and Rents, each of even date herewith (the "Contemporaneous
Assignments"),  given by Grantor, CRIT-NC III, LLC or CAC II Limited Partnership
to or for the benefit of Beneficiary  covering  properties  listed together with
the Trust Property, on Exhibit B attached hereto and incorporated herein by this
reference (the "Other Mortgaged Properties").

         4.35     Certain  Matters  Relating  to Trust  Property  Located in the
Commonwealth   of   Virginia.  With  respect   to the  Trust  Property  which is
located  in the  Commonwealth  of  Virginia, notwithstanding  anything contained
herein to the contrary:

                  (a) Acceleration;  Remedies.  At any time during the existence
of an Event of Default,  Beneficiary,  at Beneficiary's  option, may declare the
Debt to be immediately due and payable  without  further demand,  and may invoke
the power of sale and any other  remedies  permitted by Virginia law or provided
in this Deed of Trust or in any other Loan Document.  Grantor  acknowledges that
the power of sale granted in this Deed of Trust may be exercised by  Beneficiary
without  prior  judicial  hearing.  Grantor  has the right to bring an action to
assert  that an Event of  Default  does not exist or to raise any other  defense
Grantor  may have to  acceleration  and sale.  Beneficiary  shall be entitled to
collect all costs and expenses  incurred in pursuing  such  remedies,  including
attorneys' fees, costs of documentary evidence, abstracts and title reports.

                  If  Beneficiary  invokes  the  power of sale,  Beneficiary  or
Trustee  shall  deliver  a copy of a notice  of sale to  Grantor  in the  manner
prescribed by Virginia law.  Trustee shall give public notice of the sale in the
manner  prescribed by Section  55-59.2 of the Code of Virginia  (1950) and shall
sell the Trust  Property in accordance  with Virginia law.  Grantor  agrees that
publication of a notice of sale once (1) per week for four (4) successive  weeks
in a newspaper  having  general  circulation  in the city or county in which the
Trust  Property  is  located  shall  constitute  sufficient  notice of the sale.
Trustee,  without  demand on  Grantor,  shall sell the Trust  Property at public
auction  to the  highest  bidder  at the time and  place  and  under  the  terms
designated  in the  notice of sale in one or more  parcels  and in such order as
Trustee may  determine.  Trustee may postpone the sale of all or any part of the
Trust  Property by public

                                       65
<PAGE>

announcement  at the  time  and  place of any  previously  scheduled  sale or by
advertising  in  accordance  with  Virginia law.  Beneficiary  or  Beneficiary's
designee may purchase the Trust Property at any sale.

                  Trustee shall  deliver to the purchaser at the sale  Trustee's
deed  conveying the Trust Property so sold with special  warranty of title.  The
recitals in  Trustee's  deed shall be prima  facie  evidence of the truth of the
statements made in those recitals.  Trustee shall apply the proceeds of the sale
in the  following  order:  (a) to all costs and expenses of the sale,  including
Trustee's fees of one percent (1%) of the gross sale price,  attorneys' fees and
costs of title evidence;  (b) to the discharge of all taxes, if any, as provided
by Virginia law; (c) to the Debt in such order as Beneficiary,  in Beneficiary's
discretion,  directs;  and (d) the  excess,  if any,  to the  person or  persons
legally entitled to the excess, including, if any, the holders of liens inferior
to this Deed of Trust in the order of their priority,  provided that Trustee has
actual notice of such liens. Trustee shall not be required to take possession of
the  Trust  Property  before  the sale or to  deliver  possession  of the  Trust
Property to the purchaser at the sale.

                  (b)   Statutory   Provisions.  The   following  provisions  of
Section 55-60,  Code of Virginia (1950), as amended, are made applicable to this
 Deed of Trust:

                           Exemptions waived
                           Subject to all upon default
                           Renewal or extension permitted
                           Substitution of trustee permitted
                           Any trustee may act

                  (c) WAIVER OF TRIAL BY JURY.  GRANTOR AND BENEFICIARY EACH (A)
COVENANTS  AND  AGREES  NOT TO ELECT A TRIAL BY JURY WITH  RESPECT  TO ANY ISSUE
ARISING  OUT OF THIS DEED OF TRUST OR THE  RELATIONSHIP  BETWEEN  THE PARTIES AS
BORROWER  AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH  RESPECT TO SUCH  ISSUE TO THE EXTENT  THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN BY EACH PARTY,  KNOWINGLY  AND  VOLUNTARILY  WITH THE BENEFIT OF COMPETENT
LEGAL COUNSEL.

                                   ARTICLE V.
                             CONCERNING THE TRUSTEE

         5.1 Certain  Rights.  With the approval of  Beneficiary,  Trustee shall
have the  right to take any and all of the  following  actions:  (i) to  select,
employ  and  consult  with  counsel  (who may be, but need not be,  counsel  for
Beneficiary)  upon any matters  arising  hereunder,  including the  preparation,
execution and interpretation of the Loan Documents, and shall be fully protected
in relying as to legal matters on the advice of counsel,  (ii) to execute any of
the trusts and powers hereof and to perform any duty hereunder  either  directly
or through his or her agents or  attorneys,  (iii) to select and employ,  in and
about  the  execution  of his or her  duties  hereunder,

                                       66
<PAGE>

suitable accountants, engineers and other experts, agents and attorneys-in-fact,
either  corporate  or  individual,  not  regularly in the employ of Trustee (and
Trustee shall not be answerable for any act, default,  negligence, or misconduct
of any such accountant, engineer or other expert, agent or attorney-in-fact,  if
selected  with  reasonable  care,  or for any error of  judgment  or act done by
Trustee in good faith,  or be otherwise  responsible  or  accountable  under any
circumstances  whatsoever,  except for Trustee's gross negligence or bad faith),
and (iv) any and all other lawful action that  Beneficiary may instruct  Trustee
to take to protect or enforce Beneficiary's rights hereunder.  Trustee shall not
be personally  liable in case of entry by Trustee,  or anyone entering by virtue
of the powers  herein  granted to  Trustee,  upon the Trust  Property  for debts
contracted  for or liability or damages  incurred in the management or operation
of the Trust  Property.  Trustee shall have the right to rely on any instrument,
document, or signature authorizing or supporting any action taken or proposed to
be taken by Trustee hereunder,  believed by Trustee in good faith to be genuine.
Trustee shall be entitled to reimbursement  for expenses  incurred by Trustee in
the performance of Trustee's duties hereunder and to reasonable compensation for
such of Trustee's  services  hereunder as shall be rendered.  Grantor will, from
time to time, pay reasonable compensation due to Trustee hereunder and reimburse
Trustee for, and save and hold Trustee harmless  against,  any and all liability
and reasonable  expenses which may be incurred by Trustee in the  performance of
Trustee's duties.

         5.2 Retention of Money.  All moneys  received by Trustee  shall,  until
used or applied as herein provided,  be held in trust for the purposes for which
they were received, and shall be segregated from any other moneys of Trustee.

         5.3 Successor  Trustees.  Trustee may resign by the giving of notice of
such  resignation  in writing to  Beneficiary.  If Trustee shall die,  resign or
become  disqualified  from acting in the execution of this trust, or if, for any
reason, Beneficiary, in Beneficiary's sole discretion and with or without cause,
shall prefer to appoint a substitute trustee or multiple substitute trustees, or
successive  substitute trustees or successive multiple substitute  trustees,  to
act  instead of the  aforenamed  Trustee,  Beneficiary  shall have full power to
appoint a substitute trustee (or, if preferred, multiple substitute trustees) in
succession who shall succeed (and if multiple substitute trustees are appointed,
each of such multiple  substitute  trustees  shall  succeed) to all the estates,
rights,  powers and duties of the aforenamed  Trustee.  Such  appointment may be
executed by any authorized  agent of Beneficiary,  and if such  Beneficiary be a
corporation  and such  appointment  be  executed on its behalf by any officer of
such corporation, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient  without proof of any action by
the board of  directors  or any  superior  officer of the  corporation.  Grantor
hereby ratifies and confirms any and all acts which the aforenamed  Trustee,  or
his or her successor or  successors  in this trust,  shall do lawfully by virtue
hereof.  If multiple  substitute  trustees are appointed,  each of such multiple
substitute  trustees  shall be empowered and authorized to act alone without the
necessity of the joinder of the other multiple substitute trustees, whenever any
action or undertaking of such substitute trustees is requested or required under
or pursuant to this Deed of Trust or applicable  law. Any prior  election to act
jointly  or  severally  shall  not  prevent  either  or both  of  such  multiple
substitute Trustees from subsequently  executing,  jointly or severally,  any or
all of the provisions hereof.

                                       67
<PAGE>

         5.4  Perfection  of  Appointment.   Should  any  deed,  conveyance,  or
instrument  of any nature be required  from Grantor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to Trustee or substitute
Trustee such estates,  rights, powers, and duties, then, upon request by Trustee
or substitute trustee, any and all such deeds, conveyances and instruments shall
be made,  executed,  acknowledged,  and  delivered  and  shall be  caused  to be
recorded and/or filed by Grantor.

         5.5 Succession  Instruments.  Any substitute trustee appointed pursuant
to any of the  provisions  hereof  shall,  without  any  further  act,  deed  or
conveyance, become vested with all the estates, properties,  rights, powers, and
trusts of its, his or her  predecessor in the rights  hereunder with like effect
as if originally  named as Trustee herein;  but  nevertheless,  upon the written
request of Beneficiary or of the substitute trustee,  the Trustee ceasing to act
shall  execute  and  deliver  any  instrument  transferring  to such  substitute
trustee, upon the trusts herein expressed, all the estates, properties,  rights,
powers,  and trusts of the  Trustee so  ceasing to act,  and shall duly  assign,
transfer  and deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in such Trustee's place.

         5.6 No  Representation  by  Trustee or  Beneficiary.  By  accepting  or
approving  anything  required to be observed,  performed,  or fulfilled or to be
given to Trustee  or  Beneficiary  pursuant  to the Loan  Documents,  including,
without  limitation,  any officer's  certificate,  balance  sheet,  statement of
profit and loss or other  financial  statement,  survey,  appraisal or insurance
policy,  neither  Trustee  nor  Beneficiary  shall be deemed to have  warranted,
consented  to, or affirmed the  sufficiency,  legality,  effectiveness  or legal
effect of the same, or of any term,  provision,  or condition thereof,  and such
acceptance  or  approval  thereof  shall not be or  constitute  any  warranty or
affirmation with respect thereto by Trustee or Beneficiary.

             [THE BALANCE OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

                                       68
<PAGE>

         IN WITNESS WHEREOF,  Grantor has executed this Deed of Trust on the day
and year first written above.

                                         GRANTOR:

                                         CRIT-VA II, INC.,
                                         a Virginia corporation

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

<PAGE>

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF Richmond

The foregoing instrument was acknowledged before me this 20th day of March, 2001
by STANLEY J. OLANDER,  JR., the Vice  President of CRIT-VA II, INC., a Virginia
corporation, on behalf of said corporation.

[SEAL]

 /s/ Valerie J. Naquin
-------------------------------
Notary Public

My Commission expires: 11/30/02

<PAGE>

                                    EXHIBIT A

                                Legal Description

                                    [Omitted]

<PAGE>

                                    EXHIBIT B

                                 Trust Property

1.   Greenbrier  Apartments at Fredericksburg,  Virginia - One Greenbrier Drive,
     Fredericksburg, Virginia 22401

                           Other Mortgaged Properties

1.   Park Village at Bedford, Texas - 2401 L. Don Dodson, Bedford, Texas 76021

2.   Summertree at Dallas, Texas - 13250 Emily Road, Dallas, Texas 75240

3.   The Courts on Pear Ridge at Dallas,  Texas - 5050 Pear Ridge Drive, Dallas,
     Texas 75287

4.   Canyon Hills at Austin,  Texas - 6307 Bluff  Springs  Road,  Austin,  Texas
     78744

5.   Harbour Club Apartments at Virginia Beach,  Virginia - 226 Birch Lake Road,
     Virginia Beach, Virginia 23451

     6. Highland Hills Apartments at Carrboro,  North Carolina - 180 B.P.W. Club
Road, Carrboro, North Carolina 27510

                         Contemporaneous Notes

1.   $8,500,000.00  Promissory Note from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,   secured  by  Park  Village  at  Bedford,  Texas  (Loan  No.:
     26-5950518).

2.   $7,750,000.00  Promissory Note from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association, secured by Summertree at Dallas, Texas (Loan No.: 26-5950519).

3.   $10,575,000.00 Promissory Note from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,  secured by The Courts on Pear  Ridge at Dallas,  Texas  (Loan
     No.: 26-5950520).

4.   $12,675,000.00 Promissory Note from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,   secured  by  Canyon  Hills  at  Austin,   Texas  (Loan  No.:
     26-5950517).

5.   $8,475,000.00   Promissory   Note  from   CRIT-VA  II,   Inc.,  a  Virginia
     corporation,  to First Union National Bank, a national banking association,
     secured by Harbour Club Apartments at Virginia  Beach,  Virginia (Loan No.:
     26-5950522).

<PAGE>

6.   $14,775,000.00  Promissory  Note from CRIT-NC III, LLC, a Delaware  limited
     liability  company,  to First  Union  National  Bank,  a  national  banking
     association,  secured by  Highland  Hills  Apartments  at  Carrboro,  North
     Carolina (Loan No.: 26-5950523).

                            Contemporaneous Mortgages

1.   Deed of Trust and Security  Agreement  from CAC II Limited  Partnership,  a
     Virginia  limited  partnership,  to First Union  National  Bank, a national
     banking association,  secured by Park Village at Bedford,  Texas (Loan No.:
     26-5950518).

2.   Deed of Trust and Security  Agreement  from CAC II Limited  Partnership,  a
     Virginia  limited  partnership,  to First Union  National  Bank, a national
     banking  association,  secured by  Summertree  at Dallas,  Texas (Loan No.:
     26-5950519).

3.   Deed of Trust and Security  Agreement  from CAC II Limited  Partnership,  a
     Virginia  limited  partnership,  to First Union  National  Bank, a national
     banking  association,  secured by The Courts on Pear Ridge at Dallas, Texas
     (Loan No.: 26-5950520).

4.   Deed of Trust and Security  Agreement  from CAC II Limited  Partnership,  a
     Virginia  limited  partnership,  to First Union  National  Bank, a national
     banking  association,  secured by Canyon Hills at Austin,  Texas (Loan No.:
     26-5950517).

5.   Deed of Trust and  Security  Agreement  from  CRIT-VA II,  Inc., a Virginia
     corporation,  to First Union National Bank, a national banking association,
     secured by Harbour Club Apartments at Virginia  Beach,  Virginia (Loan No.:
     26-5950522).

6.   Deed of Trust and Security  Agreement  from  CRIT-NC  III,  LLC, a Delaware
     limited liability company, to First Union National Bank, a national banking
     association,  secured by  Highland  Hills  Apartments  at  Carrboro,  North
     Carolina (Loan No.: 26-5950523).

                           Contemporaneous Assignments

1.   Assignment of Leases and Rents from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,   secured  by  Park  Village  at  Bedford,  Texas  (Loan  No.:
     26-5950518).

2.   Assignment of Leases and Rents from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association, secured by Summertree at Dallas, Texas (Loan No.: 26-5950519).

3.   Assignment of Leases and Rents from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,  secured by The Courts on Pear  Ridge at Dallas,  Texas  (Loan
     No.: 26-5950520).

<PAGE>

4.   Assignment of Leases and Rents from CAC II Limited Partnership,  a Virginia
     limited  partnership,  to First Union  National  Bank,  a national  banking
     association,   secured  by  Canyon  Hills  at  Austin,   Texas  (Loan  No.:
     26-5950517).

5.   Assignment   of  Leases  and  Rents  from  CRIT-VA  II,  Inc.,  a  Virginia
     corporation,  to First Union National Bank, a national banking association,
     secured by Harbour Club Apartments at Virginia  Beach,  Virginia (Loan No.:
     26-5950522).

6.   Assignment  of Leases and Rents from CRIT-NC III,  LLC, a Delaware  limited
     liability  company,  to First  Union  National  Bank,  a  national  banking
     association,  secured by  Highland  Hills  Apartments  at  Carrboro,  North
     Carolina (Loan No.: 26-5950523).

<PAGE>

                                    EXHIBIT C

                                 Loan Documents

1.   $12,750,000.00  Promissory  Note  from  CRIT-VA  II,  INC.  to First  Union
     National Bank

2.   Deed of Trust and Security  Agreement  from CRIT-VA II, INC. to First Union
     National Bank

3.   Indemnity and Guaranty Agreement from Cornerstone Realty Income Trust, Inc.
     to First Union National Bank

4.   Environmental  Indemnity  Agreement  from CRIT-VA II, INC. and  Cornerstone
     Realty Income Trust, Inc. to First Union National Bank

5.   Assignment  of Leases  and Rents  from  CRIT-VA  II,  INC.  to First  Union
     National Bank

6.   Assignment of Warranties and Other Contract Rights from CRIT-VA II, INC. to
     First Union National Bank

7.   Consent and Agreement of Manager by Cornerstone  Realty Income Trust,  Inc.
     to First Union National Bank

8.   Disbursement Authorization by CRIT-VA II, INC.

9.   Receipt and Closing  Certificate by CRIT-VA II, INC. and Cornerstone Realty
     Income Trust, Inc.

10.  Form W-9 by CRIT-VA II, INC.

11.  Residential Lease Certificate by CRIT-VA II, INC.

12.  Personal Property Certificate by CRIT-VA II, INC.

13.  Rent Roll Certificate by CRIT-VA II, INC.

14.  Service Contract Certificate by CRIT-VA II, INC.

15.  UCC-1  Financing  Statement  by CRIT-VA II, INC.  (City of  Fredericksburg,
     Virginia)

16.  UCC-1 Financing Statement by CRIT-VA II, INC. (City of Richmond, Virginia)

17.  UCC-1 Financing  Statement by CRIT-VA II, INC.  (Virginia State Corporation
     Commission and City of Richmond)

<PAGE>

                                    EXHIBIT D

                              FORM OF TENANT NOTICE

                            [Letterhead of Landlord]

[Name and Address of Tenant]

Re:  [Name of Property, Unit No. __________]

Dear Tenant:
         You are hereby  directed to make all future  payments of rent and other
sums due to the landlord under the Lease payable as follows:

Payable To:                First Union National Bank
                           --------------------------------------
                           c/o [Servicer]
                           --------------------------------------
                           --------------------------------------
                           --------------------------------------
Address:

         Please take  particular  care in making the check  payable  only to the
above-mentioned  name because only checks made  payable to the  referenced  name
will be credited against sums due by you to landlord. Until otherwise advised in
writing by landlord and the above  mentioned  bank (or its successor or assign),
you should continue to make your payments for rent and other sums as directed by
the terms of this letter.

         Thank you in advance for your  cooperation  with this change in payment
procedures.

By:  _________________________

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