Document:

FHLMC Loan No. 981217192

                                MULTIFAMILY NOTE

                                   (COLORADO)

                    (Red Canyon Apartments at Palomino Park)

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US $27,000,000.00                                              November 20, 1998
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     FOR VALUE RECEIVED, the undersigned  ("BORROWER") jointly and severally (if
more  than  one)  promises  to pay to the  order  of  GMAC  COMMERCIAL  MORTGAGE
CORPORATION,  a a California  corporation,  the  principal  sum of  Twenty-Seven
Million and 00/100  Dollars  (US  $27,000,000.00),  with  interest on the unpaid
principal balance at the annual rate of Six and 68/100 percent (6.68%).

     1. DEFINED  TERMS.  As used in this Note,  (i) the term "LENDER"  means the
holder of this Note,  and (ii) the term  "INDEBTEDNESS"  means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument  or any other Loan  Document,  including  prepayment  premiums,  late
charges,  default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security  Instrument.  "Event of Default" and
other  capitalized  terms  used but not  defined  in this  Note  shall  have the
meanings given to such terms in the Security Instrument.

     2. ADDRESS FOR  PAYMENT.  All payments due under this Note shall be payable
at 650 Dresher Road, Horsham,  Pennsylvania 19044, or such other place as may be
designated by written notice to Borrower from or on behalf of Lender.

     3. PAYMENT OF PRINCIPAL AND INTEREST.  Principal and interest shall be paid
as follows:

     (a) Unless  disbursement  of principal is made by Lender to Borrower on the
first  day of the  month,  interest  for the  period  beginning  on the  date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable  simultaneously with the execution of this
Note.  Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.

<PAGE>

     (b) Consecutive monthly installments of principal and interest, each in the
amount of One Hundred  Seventy-Three  Thousand  Eight  Hundred  Sixty-Seven  and
01/100 Dollars (US $173,867.01), shall be payable on the first day of each month
beginning  on  January  1,  1999,  until the  entire  unpaid  principal  balance
evidenced by this Note is fully paid.  Any accrued  interest  remaining past due
for 30 days or more  shall be added to and become  part of the unpaid  principal
balance and shall bear interest at the rate or rates specified in this Note, and
any reference below to "accrued  interest" shall refer to accrued interest which
has not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on December 1, 2008, or on any earlier date on
which the unpaid  principal  balance of this Note  becomes due and  payable,  by
acceleration or otherwise (the "MATURITY  DATE").  The unpaid principal  balance
shall  continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.

     (c) Any regularly  scheduled monthly  installment of principal and interest
that is  received  by Lender  before  the date it is due shall be deemed to have
been  received on the due date solely for the  purpose of  calculating  interest
due.

     4. APPLICATION OF PAYMENTS.  If at any time Lender receives,  from Borrower
or otherwise,  any amount applicable to the Indebtedness  which is less than all
amounts due and payable at such time,  Lender may apply that  payment to amounts
then due and  payable in any manner and in any order  determined  by Lender,  in
Lender's  discretion.  Borrower  agrees that neither  Lender's  acceptance  of a
payment  from  Borrower in an amount that is less than all amounts  then due and
payable nor Lender's  application of such payment shall  constitute or be deemed
to  constitute  either  a  waiver  of  the  unpaid  amounts  or  an  accord  and
satisfaction.

     5.  SECURITY.  The  Indebtedness  is  secured,  among  other  things,  by a
multifamily mortgage,  deed to secure debt or deed of trust dated as of the date
of this Note (the "SECURITY INSTRUMENT"),  and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.

     6. ACCELERATION. If an Event of Default has occurred and is continuing, the
entire unpaid principal  balance,  any accrued interest,  the prepayment premium
payable under  Paragraph  10, if any, and all other  amounts  payable under this
Note and any other Loan  Document  shall at once become due and payable,  at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.

     7. LATE CHARGE.  If any monthly amount payable under this Note or under the
Security  Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without  demand by Lender,  a late charge equal to five percent (5%) of such
amount.  Borrower  acknowledges  that its failure to make timely  payments  will
cause Lender to incur  additional  expenses in servicing and processing the loan
evidenced  by this Note (the  "Loan"),  and that it is extremely  difficult  and
impractical to determine  those  additional  expenses.  Borrower agrees that the
late charge payable pursuant to this Paragraph  represents a fair and reasonable
estimate,  taking into  account all  circumstances  existing on the date of this
Note,  of the  additional  expenses  Lender  will  incur by  reason of such late
payment.  The late  charge is  payable in  addition  to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.

<PAGE>

     8. DEFAULT  RATE.  So long as (a) any monthly  installment  under this Note
remains  past due for 30 days or more,  or (b) any other  Event of  Default  has
occurred and is continuing,  interest under this Note shall accrue on the unpaid
principal  balance from the earlier of the due date of the first unpaid  monthly
installment or the occurrence of such other Event of Default, as applicable,  at
a rate (the "DEFAULT RATE") equal to the lesser of 4 percentage points above the
rate stated in the first  paragraph  of this Note or the maximum  interest  rate
which may be  collected  from  Borrower  under  applicable  law.  If the  unpaid
principal  balance and all accrued interest are not paid in full on the Maturity
Date, the unpaid principal  balance and all accrued interest shall bear interest
from the Maturity Date at the Default Rate.  Borrower also acknowledges that its
failure to make timely payments will cause Lender to incur  additional  expenses
in servicing and  processing  the Loan,  that,  during the time that any monthly
installment  under this Note is  delinquent  for more than 30 days,  Lender will
incur  additional  costs and  expenses  arising  from its loss of the use of the
money due and from the  adverse  impact on  Lender's  ability  to meet its other
obligations and to take advantage of other investment opportunities, and that it
is extremely  difficult and impractical to determine those  additional costs and
expenses.  Borrower  also  acknowledges  that,  during the time that any monthly
installment  under  this Note is  delinquent  for more than 30 days or any other
Event of Default has occurred and is continuing,  Lender's risk of nonpayment of
this Note will be materially  increased and Lender is entitled to be compensated
for such  increased  risk.  Borrower  agrees  that the  increase  in the rate of
interest  payable  under this Note to the  Default  Rate  represents  a fair and
reasonable estimate,  taking into account all circumstances existing on the date
of this Note, of the additional  costs and expenses  Lender will incur by reason
of the Borrower's  delinquent payment and the additional  compensation Lender is
entitled to receive for the  increased  risks of  nonpayment  associated  with a
delinquent loan.

     9. LIMITS ON PERSONAL LIABILITY.

     (a) Except as otherwise  provided in this  Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the  Indebtedness  or for the  performance  of any
other  obligations  of Borrower  under the Loan  Documents,  and  Lender's  only
recourse for the  satisfaction of the  Indebtedness  and the performance of such
obligations  shall be Lender's  exercise of its rights and remedies with respect
to the Mortgaged  Property and any other  collateral  held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair  Lender's  enforcement  of  its  rights  against  any  guarantor  of  the
Indebtedness or any guarantor of any obligations of Borrower.

     (b) Borrower  shall be  personally  liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the original principal
balance of this Note,  plus any other  amounts for which  Borrower  has personal
liability under this Paragraph 9.

<PAGE>

     (c) In addition to Borrower's  personal  liability  under  Paragraph  9(b),
Borrower  shall be  personally  liable to Lender for the  repayment of a further
portion of the Indebtedness  equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument  and the amount of all security  deposits  collected by Borrower from
tenants  then in  residence;  (2)  failure of  Borrower  to apply all  insurance
proceeds and condemnation  proceeds as required by the Security  Instrument;  or
(3)  failure of Borrower to comply  with  Section  14(d) or (e) of the  Security
Instrument relating to the delivery of books and records, statements,  schedules
and reports.

     (d)  For  purposes  of  determining  Borrower's  personal  liability  under
Paragraph  9(b)  and  Paragraph  9(c),  all  payments  made by  Borrower  or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the  Indebtedness  for which  Borrower has no
personal liability.

     (e) Borrower shall become  personally liable to Lender for the repayment of
all of the  Indebtedness  upon the occurrence of any of the following  Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not  permitted  by  Section  33 of  the  Security  Instrument;  (2)  a  Transfer
(including,  but not  limited  to,  a lien or  encumbrance)  that is an Event of
Default  under  Section  21 of the  Security  Instrument,  other than a Transfer
consisting  solely of the  involuntary  removal or  involuntary  withdrawal of a
general  partner in a limited  partnership  or a manager in a limited  liability
company; or (3) fraud or written material  misrepresentation  by Borrower or any
officer,  director,  partner,  member or employee of Borrower in connection with
the  application  for or  creation  of the  Indebtedness  or any request for any
action or consent by Lender.

     (f) In addition to any personal  liability for the  Indebtedness,  Borrower
shall  be  personally  liable  to  Lender  for  (1)  the  performance  of all of
Borrower's  obligations under Section 18 of the Security Instrument (relating to
environmental  matters);  (2) the costs of any audit under  Section 14(d) of the
Security  Instrument;  and (3) any  costs  and  expenses  incurred  by Lender in
connection  with the  collection of any amount for which  Borrower is personally
liable under this  Paragraph  9,  including  fees and out of pocket  expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's  books and records to determine the amount for which  Borrower has
personal liability.

     (g) To the extent that Borrower has personal liability under this Paragraph
9, Lender may exercise its rights against Borrower  personally without regard to
whether  Lender has exercised any rights  against the Mortgaged  Property or any
other  security,  or pursued any rights  against any  guarantor,  or pursued any
other rights available to Lender under this Note, the Security  Instrument,  any
other Loan  Document or  applicable  law. For purposes of this  Paragraph 9, the
term "MORTGAGED PROPERTY" shall not include any funds that (1) have been applied
by Borrower as required or  permitted by the  Security  Instrument  prior to the
occurrence  of an  Event of  Default  or (2)  Borrower  was  unable  to apply as
required  or  permitted  by the  Security  Instrument  because of a  bankruptcy,
receivership, or similar judicial proceeding.

<PAGE>

     10. VOLUNTARY AND INVOLUNTARY PREPAYMENTS.

     (a) A prepayment premium shall be payable in connection with any prepayment
made under this Note as provided below:

     (1) Borrower may voluntarily  prepay all of the unpaid principal balance of
this Note on the last  Business  Day of a calendar  month if Borrower  has given
Lender at least 30 days prior notice of its  intention to make such  prepayment.
Such  prepayment  shall be made by  paying  (A) the  amount of  principal  being
prepaid, (B) all accrued interest,  (C) all other sums due Lender at the time of
such prepayment,  and (D) the prepayment premium calculated pursuant to Schedule
A. For all purposes including the accrual of interest,  any prepayment  received
by Lender  on any day other  than the last  calendar  day of the month  shall be
deemed  to have  been  received  on the last  calendar  day of such  month.  For
purposes  of this Note,  a  "BUSINESS  DAY" means any day other than a Saturday,
Sunday or any other day on which Lender is not open for business. Borrower shall
not have the option to voluntarily  prepay less than all of the unpaid principal
balance.

     (2) Upon Lender's  exercise of any right of  acceleration  under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this  Note  outstanding  at the  time of the  acceleration,  (A) all  accrued
interest  and  all  other  sums  due  Lender,  and (B)  the  prepayment  premium
calculated pursuant to Schedule A.

     (3) Any  application  by Lender of any  collateral or other security to the
repayment of any portion of the unpaid  principal  balance of this Note prior to
the  Maturity  Date and in the absence of  acceleration  shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.  The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment  premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.

     (b)  Notwithstanding  the  provisions  of Paragraph  10(a),  no  prepayment
premium  shall be payable with respect to (A) any  prepayment  made no more than
ninety (90) days before the Maturity Date, or (B) any prepayment  occurring as a
result of the application of any insurance  proceeds or condemnation award under
the Security Instrument.

     (c) Schedule A is hereby incorporated by reference into this Note.

     (d) Any permitted or required  prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly  installments or change the amount of such  installments,  unless Lender
agrees otherwise in writing.

<PAGE>

     (e) Borrower recognizes that any prepayment of the unpaid principal balance
of this Note,  whether  voluntary or  involuntary or resulting from a default by
Borrower,  will result in Lender's incurring loss, including  reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments  to third  parties.  Borrower  agrees to pay to Lender  upon  demand
damages  for the  detriment  caused by any  prepayment,  and  agrees  that it is
extremely  difficult  and  impractical  to ascertain the extent of such damages.
Borrower  therefore  acknowledges  and agrees that the  formula for  calculating
prepayment  premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.

     (f) Borrower further acknowledges that the prepayment premium provisions of
this  Note  are  a  material  part  of  the  consideration  for  the  Loan,  and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the  Borrower's  voluntary  agreement to the  prepayment
premium provisions.

     11.  COSTS  AND  EXPENSES.  Borrower  shall  pay all  expenses  and  costs,
including fees and out-of-pocket  expenses of attorneys and expert witnesses and
costs of investigation, incurred by Lender as a result of any default under this
Note or in connection with efforts to collect any amount due under this Note, or
to enforce the provisions of any of the other Loan  Documents,  including  those
incurred in post-judgment  collection  efforts and in any bankruptcy  proceeding
(including  any action  for relief  from the  automatic  stay of any  bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.

     12.  FORBEARANCE.  Any  forbearance  by Lender in  exercising  any right or
remedy under this Note, the Security  Instrument,  or any other Loan Document or
otherwise  afforded by applicable  law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy.  The  acceptance by Lender of any
payment after the due date of such  payment,  or in an amount which is less than
the required payment,  shall not be a waiver of Lender's right to require prompt
payment  when due of all other  payments or to exercise any right or remedy with
respect to any  failure to make  prompt  payment.  Enforcement  by Lender of any
security for  Borrower's  obligations  under this Note shall not  constitute  an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

     13. WAIVERS.  Presentment,  demand, notice of dishonor,  protest, notice of
acceleration,  notice of intent to demand or  accelerate  payment  or  maturity,
presentment  for  payment,  notice  of  nonpayment,   grace,  and  diligence  in
collecting  the  Indebtedness  are  waived by  Borrower  and all  endorsers  and
guarantors of this Note and all other third party obligors.

<PAGE>

     14. LOAN CHARGES.  If any applicable law limiting the amount of interest or
other charges  permitted to be collected  from  Borrower in connection  with the
Loan is  interpreted  so that any interest or other  charge  provided for in any
Loan  Document,  whether  considered  separately  or together with other charges
provided  for in any other Loan  Document,  violates  that law,  and Borrower is
entitled to the benefit of that law, that  interest or charge is hereby  reduced
to the extent  necessary  to eliminate  that  violation.  The  amounts,  if any,
previously paid to Lender in excess of the permitted amounts shall be applied by
Lender to reduce the unpaid  principal  balance of this Note. For the purpose of
determining  whether any applicable law limiting the amount of interest or other
charges  permitted  to  be  collected  from  Borrower  has  been  violated,  all
Indebtedness  that  constitutes  interest,  as well as all other charges made in
connection with the Indebtedness that constitute interest, shall be deemed to be
allocated and spread ratably over the stated term of the Note.  Unless otherwise
required by applicable  law, such  allocation and spreading shall be effected in
such a manner that the rate of interest  so computed is uniform  throughout  the
stated term of the Note.

     15. COMMERCIAL PURPOSE.  Borrower represents that the Indebtedness is being
incurred  by  Borrower  solely for the  purpose  of  carrying  on a business  or
commercial enterprise, and not for personal, family or household purposes.

     16. COUNTING OF DAYS.  Except where otherwise  specifically  provided,  any
reference in this Note to a period of "days" means  calendar  days, not Business
Days.

     17.  GOVERNING  LAW.  This  Note  shall  be  governed  by  the  law  of the
jurisdiction in which the Land is located.

     18.  CAPTIONS.  The  captions  of the  paragraphs  of  this  Note  are  for
convenience only and shall be disregarded in construing this Note.

     19.  NOTICES.  All notices,  demands and other  communications  required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 31 of the Security Instrument.

     20. CONSENT TO JURISDICTION AND VENUE. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated  exclusively in the
jurisdiction  in which the Land is located (the  "PROPERTY  JURISDICTION").  The
state and federal  courts and  authorities  with  jurisdiction  in the  Property
Jurisdiction  shall have exclusive  jurisdiction  over all  controversies  which
shall arise under or in relation to this Note. Borrower  irrevocably consents to
service,  jurisdiction,  and venue of such  courts for any such  litigation  and
waives  any other  venue to which it might be  entitled  by virtue of  domicile,
habitual residence or otherwise.

     21.  WAIVER OF TRIAL BY JURY.  BORROWER  AND LENDER  EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE  ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER 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.

<PAGE>

     ATTACHED SCHEDULES. THE FOLLOWING SCHEDULES ARE ATTACHED TO THIS NOTE:

     |X| SCHEDULE A PREPAYMENT PREMIUM (REQUIRED)

     |_| SCHEDULE B MODIFICATIONS TO MULTIFAMILY NOTE

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS  WHEREOF,  Borrower  has signed and  delivered  this Note or has
caused  this  Note  to  be  signed  and   delivered   by  its  duly   authorized
representative.

               BORROWER:

               RED CANYON AT  PALOMINO  PARK LLC, a Colorado  limited  liability
               company

                 By: /s/ Al Feld    (SEAL)
                     -------------------------
                       Al Feld
                       Manager

                 Borrower's Social Security/Employer ID Number

                 PAY TO  THE  ORDER
                 OF  FEDERAL   HOME
                 LOAN      MORTGAGE
                 CORPORATION
                 WITHOUT   RECOURSE
                 AS OF THE 20th DAY
                 OF NOVEMBER, 1998.

                 GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation

                 By: /s/ J. Kevin McCormack (SEAL)
                     ---------------------------------
                      J. Kevin McCormack
                      Vice President

<PAGE>

                                   SCHEDULE A

                               PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:

     (a) If the  prepayment  is made  between the date of this Note and the date
that is 114 months after the first day of the first calendar month following the
date of this Note (the "YIELD MAINTENANCE PERIOD"), the prepayment premium shall
be the greater of:

     (i)  1.0% of the unpaid principal balance of this Note; or

     (ii) the product obtained by multiplying:

          (A)  the amount of principal being prepaid,

                                       BY

          (B)  the excess  (if any) of the  Monthly  Note Rate over the  Assumed
               Reinvestment Rate,

                                       BY

          (C)  the Present Value Factor.

     For purposes of subparagraph (ii), the following definitions shall apply:

     MONTHLY NOTE RATE:  one-twelfth  (1/12) of the annual  interest rate of the
     Note, expressed as a decimal calculated to five digits.

     PREPAYMENT DATE: in the case of a voluntary  prepayment,  the date on which
     the  prepayment  is made;  in any  other  case,  the  date on which  Lender
     accelerates the unpaid principal balance of the Note.

<PAGE>

     ASSUMED  REINVESTMENT RATE:  one-twelfth (1/12) of the yield rate as of the
     date 5  Business  Days  before the  Prepayment  Date,  on the  5.625%  U.S.
     Treasury  Security due  5/1/2008,  as reported in THE WALL STREET  JOURNAL,
     expressed  as a decimal  calculated  to five  digits.  In the event that no
     yield is published on the applicable date for the Treasury Security used to
     determine the Assumed  Reinvestment Rate, Lender, in its discretion,  shall
     select the non-callable  Treasury Security maturing in the same year as the
     Treasury  Security  specified  above with the lowest yield published in THE
     WALL STREET JOURNAL as of the applicable  date. If the  publication of such
     yield  rates in THE WALL  STREET  JOURNAL is  discontinued  for any reason,
     Lender  shall  select a  security  with a  comparable  rate and term to the
     Treasury  Security used to determine  the Assumed  Reinvestment  Rate.  The
     selection of an alternate security pursuant to this Paragraph shall be made
     in Lender's discretion.

     PRESENT VALUE FACTOR:  the factor that discounts to present value the costs
     resulting to Lender from the difference in interest rates during the months
     remaining in the Yield Maintenance Period,  using the Assumed  Reinvestment
     Rate as the discount rate, with monthly compounding,  expressed numerically
     as follows:

                                [OBJECT OMITTED]

     N = number of months remaining in Yield Maintenance Period

     ARR = Assumed Reinvestment Rate

     (b) If the prepayment is made after the expiration of the Yield Maintenance
Period but more than 90 days before the Maturity Date,  the  prepayment  premium
shall be 1.0% of the unpaid principal balance of this Note.

<PAGE>

                                   SCHEDULE B

                        MODIFICATIONS TO MULTIFAMILY NOTEPrepared by, and after recording return to:

Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C.  20036-5869
Attn:  Gary S. Smuckler, Esq.

                                                         FHLMC Loan No. 98121792

                           MULTIFAMILY DEED OF TRUST,
                           --------------------------
                               ASSIGNMENT OF RENTS
                               -------------------
                             AND SECURITY AGREEMENT
                             ----------------------

                                   (COLORADO)
                    (Red Canyon Apartments at Palomino Park)

<PAGE>

                           MULTIFAMILY DEED OF TRUST,
                             ASSIGNMENT OF RENTS AND
                               SECURITY AGREEMENT
                    (Red Canyon Apartments at Palomino Park)

     THIS MULTIFAMILY DEED OF TRUST,  ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(the  "INSTRUMENT")  is made this 20th day of November,  1998,  by RED CANYON AT
PALOMINO PARK LLC, a limited  liability company organized and existing under the
laws of  Colorado,  whose  address is 1623  Blake  Street,  Suite  270,  Denver,
Colorado  80202,  as  trustor  ("BORROWER"),  to the  Public  Trustee of Douglas
County,  Colorado as trustee  ("TRUSTEE"),  for the  benefit of GMAC  COMMERCIAL
MORTGAGE  CORPORATION,  a corporation  organized and existing  under the laws of
California,  whose address is 650 Dresher Road,  Horsham,  Pennsylvania 19044 as
beneficiary ("LENDER").

     Borrower,  in  consideration  of the  Indebtedness and the trust created by
this Instrument,  irrevocably grants,  conveys and assigns to Trustee, in trust,
with  power of sale,  the  Mortgaged  Property,  including  the Land  located in
Douglas  County,  State of Colorado and  described in Exhibit A attached to this
Instrument.

     TO  SECURE  TO  LENDER  the  repayment  of the  Indebtedness  evidenced  by
Borrower's  Multifamily  Note  payable to  Lender,  dated as of the date of this
Instrument,  and  maturing  on  December  1, 2008,  in the  principal  amount of
$27,000,000.00,   and  all  renewals,   extensions  and   modifications  of  the
Indebtedness,  and the  performance  of the covenants and agreements of Borrower
contained in the Loan Documents.

     Borrower  represents  and warrants that Borrower is lawfully  seized of the
Mortgaged Property and has the right,  power and authority to grant,  convey and
assign the Mortgaged Property,  and that the Mortgaged Property is unencumbered.
Borrower  covenants that Borrower will warrant and defend generally the title to
the Mortgaged Property against all claims and demands,  subject to any easements
and  restrictions  listed in a schedule of  exceptions  to coverage in any title
insurance  policy  issued to Lender  contemporaneously  with the  execution  and
recordation of this Instrument and insuring  Lender's  interest in the Mortgaged
Property.

COVENANTS. Borrower and Lender covenant and agree as follows:

     1.  DEFINITIONS.   The  following  terms,  when  used  in  this  Instrument
(including when used in the above recitals), shall have the following meanings:

<PAGE>

     (a)  "BORROWER"  means all persons or entities  identified as "Borrower" in
the first  paragraph of this  Instrument,  together  with their  successors  and
assigns.

     (b) "COLLATERAL  AGREEMENT" means any separate  agreement  between Borrower
and  Lender  for  the  purpose  of  establishing  replacement  reserves  for the
Mortgaged  Property,  establishing a fund to assure the completion of repairs or
improvements  specified  in  that  agreement,   or  assuring  reduction  of  the
outstanding  principal balance of the Indebtedness if the occupancy of or income
from the  Mortgaged  Property  does not  increase to a level  specified  in that
agreement,  or any other  agreement or  agreements  between  Borrower and Lender
which provide for the establishment of any other fund, reserve or account.

     (c) "CONTROLLING ENTITY" means an entity which owns, directly or indirectly
through one or more  intermediaries,  (A) a general partnership interest or more
than 50% of the limited  partnership  interests  in Borrower  (if  Borrower is a
partnership or joint venture), (B) a manager's interest in Borrower or more than
50% of the  ownership  or  membership  interests  in Borrower  (if Borrower is a
limited liability company), or (C) more than 50% of any class of voting stock of
Borrower (if Borrower is a corporation).

     (d)   "ENVIRONMENTAL   PERMIT"   means  any  permit,   license,   or  other
authorization  issued  under any  Hazardous  Materials  Law with  respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.

     (e) "EVENT OF DEFAULT"  means the occurrence of any event listed in Section
22.

     (f)  "FIXTURES"  means all property which is so attached to the Land or the
Improvements  as to  constitute  a  fixture  under  applicable  law,  including:
machinery,   equipment,  engines,  boilers,  incinerators,   installed  building
materials;  systems and equipment  for the purpose of supplying or  distributing
heating,  cooling,  electricity,  gas, water,  air, or light;  antennas,  cable,
wiring and conduits used in connection with radio,  television,  security,  fire
prevention,  or fire  detection or otherwise used to carry  electronic  signals;
telephone systems and equipment;  elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security and
access control systems and apparatus;  plumbing systems; water heaters,  ranges,
stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers,
dryers and other appliances;  light fixtures,  awnings,  storm windows and storm
doors; pictures,  screens,  blinds, shades,  curtains and curtain rods; mirrors;
cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants;
swimming pools; and exercise equipment.

     (g)  "GOVERNMENTAL  AUTHORITY" means any board,  commission,  department or
body of any  municipal,  county,  state or  federal  governmental  unit,  or any
subdivision of any of them, that has or acquires jurisdiction over the Mortgaged
Property or the use, operation or improvement of the Mortgaged Property.

<PAGE>

     (h)  "HAZARDOUS  MATERIALS"  means  petroleum  and  petroleum  products and
compounds containing them, including gasoline,  diesel fuel and oil; explosives;
flammable materials;  radioactive materials;  polychlorinated biphenyls ("PCBs")
and  compounds   containing  them;  lead  and  lead-based  paint;   asbestos  or
asbestos-containing  materials  in any  form  that is or could  become  friable;
underground  or  above-ground  storage  tanks,  whether empty or containing  any
substance;  any  substance  the presence of which on the  Mortgaged  Property is
prohibited by any federal, state or local authority; any substance that requires
special  handling;  and any other  material  or  substance  now or in the future
defined as a "hazardous  substance,"  "hazardous  material,"  "hazardous waste,"
"toxic substance,"  "toxic pollutant,"  "contaminant," or "pollutant" within the
meaning of any Hazardous Materials Law.

     (i) "HAZARDOUS  MATERIALS LAWS" means all federal,  state,  and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements,  administrative  rulings and court judgments and decrees in effect
now or in the future and  including  all  amendments,  that relate to  Hazardous
Materials  and  apply  to  Borrower  or to  the  Mortgaged  Property.  Hazardous
Materials Laws include, but are not limited to, the Comprehensive  Environmental
Response,  Compensation and Liability Act, 42 U.S.C.  Section 9601, ET SEQ., the
Resource  Conservation  and Recovery Act, 42 U.S.C.  Section 6901, ET SEQ.,  the
Toxic  Substance  Control Act, 15 U.S.C.  Section 2601, ET SEQ., the Clean Water
Act, 33 U.S.C. Section 1251, ET SEQ., and the Hazardous Materials Transportation
Act, 49 U.S.C. Section 5101, and their state analogs.

     (j) "IMPOSITIONS" and "IMPOSITION DEPOSITS" are defined in Section 7(a).

     (k)  "IMPROVEMENTS"  means the  buildings,  structures,  improvements,  and
alterations now  constructed or at any time in the future  constructed or placed
upon the Land, including any future replacements and additions.

     (l)  "INDEBTEDNESS"  means the  principal  of,  interest  on, and all other
amounts  due at any time  under,  the Note,  this  Instrument  or any other Loan
Document,  including prepayment premiums,  late charges,  default interest,  and
advances as provided in Section 12 to protect the security of this Instrument.

     (m) "INITIAL  OWNERS" means,  with respect to Borrower or any other entity,
the persons or entities who on the date of the Note own in the aggregate 100% of
the ownership interests in Borrower or that entity.

     (n) "LAND" means the land described in Exhibit A.

<PAGE>

     (o)  "LEASES"  means all present and future  leases,  subleases,  licenses,
concessions or grants or other  possessory  interests now or hereafter in force,
whether oral or written,  covering or affecting the Mortgaged  Property,  or any
portion of the Mortgaged  Property  (including  proprietary  leases or occupancy
agreements  if  Borrower  is  a  cooperative  housing   corporation),   and  all
modifications, extensions or renewals.

     (p) "LENDER" means the entity identified as "Lender" in the first paragraph
of this Instrument, or any subsequent holder of the Note.

     (q) "LOAN DOCUMENTS" means the Note, this Instrument,  all guaranties,  all
indemnity agreements,  all Collateral  Agreements,  O&M Programs,  and any other
documents now or in the future executed by Borrower,  any guarantor or any other
person in connection  with the loan evidenced by the Note, as such documents may
be amended from time to time.

     (r) "LOAN  SERVICER"  means the entity that from time to time is designated
by Lender to collect  payments and deposits and receive  notices under the Note,
this  Instrument and any other Loan Document,  and otherwise to service the loan
evidenced by the Note for the benefit of Lender. Unless Borrower receives notice
to the contrary,  the Loan Servicer is the entity  identified as "Lender" in the
first paragraph of this Instrument.

     (s) "MORTGAGED  PROPERTY" means all of Borrower's present and future right,
title and interest in and to all of the following:

     (1)  the Land;

     (2)  the Improvements;

     (3)  the Fixtures;

     (4)  the Personalty;

     (5)  all  current and future  rights,  including  air  rights,  development
          rights,   zoning  rights  and  other  similar   rights  or  interests,
          easements,  tenements,   rights-of-way,  strips  and  gores  of  land,
          streets,  alleys,  roads,  sewer  rights,  waters,  watercourses,  and
          appurtenances  related to or benefitting the Land or the Improvements,
          or both, and all  rights-of-way,  streets,  alleys and roads which may
          have been or may in the future be vacated;

     (6)  all  proceeds  paid or to be  paid by any  insurer  of the  Land,  the
          Improvements,  the Fixtures,  the  Personalty or any other part of the
          Mortgaged  Property,  whether or not Borrower  obtained the  insurance
          pursuant to Lender's requirement;

<PAGE>

     (7)  all awards,  payments and other compensation made or to be made by any
          municipal,  state or federal  authority  with respect to the Land, the
          Improvements,  the Fixtures,  the  Personalty or any other part of the
          Mortgaged Property, including any awards or settlements resulting from
          condemnation  proceedings  or the total or partial taking of the Land,
          the  Improvements,  the Fixtures,  the Personalty or any other part of
          the Mortgaged  Property under the power of eminent domain or otherwise
          and including any conveyance in lieu thereof;

     (8)  all contracts,  options and other agreements for the sale of the Land,
          the  Improvements,  the Fixtures,  the Personalty or any other part of
          the Mortgaged  Property entered into by Borrower now or in the future,
          including  cash or  securities  deposited  to  secure  performance  by
          parties of their obligations;

     (9)  all proceeds from the conversion,  voluntary or involuntary, of any of
          the above  into cash or  liquidated  claims,  and the right to collect
          such proceeds;

     (10) all Rents and Leases;

     (11) all earnings,  royalties, accounts receivable, issues and profits from
          the  Land,  the  Improvements  or any  other  part  of  the  Mortgaged
          Property,  and all  undisbursed  proceeds of the loan  secured by this
          Instrument  and,  if Borrower is a  cooperative  housing  corporation,
          maintenance   charges  or  assessments   payable  by  shareholders  or
          residents;

     (12) all Imposition Deposits;

     (13) all  refunds or  rebates of  Impositions  by any  municipal,  state or
          federal authority or insurance company (other than refunds  applicable
          to periods before the real property tax year in which this  Instrument
          is dated);

     (14) all tenant  security  deposits  which have not been  forfeited  by any
          tenant under any Lease; and

     (15) all names under or by which any of the above Mortgaged Property may be
          operated or known,  and all  trademarks,  trade  names,  and  goodwill
          relating to any of the Mortgaged Property.

     (t)  "NOTE"  means  the  Multifamily  Note  described  on  page  1 of  this
Instrument,  including  all  schedules,  riders,  allonges and addenda,  as such
Multifamily Note may be amended from time to time.

<PAGE>

     (u) "O&M PROGRAM" is defined in Section 18(a).

     (v) "PERSONALTY" means all furniture,  furnishings,  equipment,  machinery,
building materials,  appliances, goods, supplies, tools, books, records (whether
in written or electronic form),  computer equipment  (hardware and software) and
other tangible  personal property (other than Fixtures) which are used now or in
the future in connection with the ownership, management or operation of the Land
or the Improvements or are located on the Land or in the  Improvements,  and any
operating agreements relating to the Land or the Improvements,  and any surveys,
plans and  specifications  and  contracts  for  architectural,  engineering  and
construction  services  relating to the Land or the  Improvements  and all other
intangible  property  and  rights  relating  to the  operation  of,  or  used in
connection  with,  the  Land or the  Improvements,  including  all  governmental
permits relating to any activities on the Land.

     (w) "PROPERTY JURISDICTION" is defined in Section 30(a).

     (x) "RENTS" means all rents (whether from  residential  or  non-residential
space),  revenues  and other income of the Land or the  Improvements,  including
parking fees,  laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged  Property,  whether now
due, past due, or to become due, and deposits forfeited by tenants.

     (y) "TAXES" means all taxes, assessments,  vault rentals and other charges,
if any,  general,  special or otherwise,  including all assessments for schools,
public betterments and general or local improvements, which are levied, assessed
or imposed by any public authority or quasi-public authority,  and which, if not
paid, will become a lien, on the Land or the Improvements.

     (z) "TRANSFER" means (A) a sale, assignment,  transfer or other disposition
(whether  voluntary,  involuntary  or by  operation of law);  (B) the  granting,
creating or  attachment of a lien,  encumbrance  or security  interest  (whether
voluntary,  involuntary  or by  operation  of law);  (C) the  issuance  or other
creation of an ownership  interest in a legal  entity,  including a  partnership
interest,  interest in a limited  liability  company or corporate stock; (D) the
withdrawal,  retirement,  removal or  involuntary  resignation of a partner in a
partnership or a member or manager in a limited  liability  company;  or (E) the
merger,  dissolution,  liquidation,  or  consolidation  of a legal entity or the
reconstitution  of one type of legal entity into  another type of legal  entity.
"Transfer"  does not include (i) a  conveyance  of the  Mortgaged  Property at a
judicial or  non-judicial  foreclosure  sale under this  Instrument  or (ii) the
Mortgaged  Property  becoming  part of a  bankruptcy  estate by operation of law
under the United  States  Bankruptcy  Code.  For  purposes of defining  the term
"Transfer," the term "partnership" shall mean a general  partnership,  a limited
partnership,  a joint venture and a limited liability partnership,  and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.

<PAGE>

     2. UNIFORM  COMMERCIAL CODE SECURITY  AGREEMENT.  This Instrument is also a
security  agreement  under the Uniform  Commercial Code for any of the Mortgaged
Property  which,  under  applicable  law, may be subject to a security  interest
under the Uniform  Commercial Code,  whether acquired now or in the future,  and
all  products  and  cash  and  non-cash  proceeds  thereof  (collectively,  "UCC
COLLATERAL"),  and Borrower  hereby grants to Lender a security  interest in the
UCC  Collateral.  Borrower  shall  execute and deliver to Lender,  upon Lender's
request,  financing statements,  continuation statements and amendments, in such
form as Lender  may  require  to  perfect or  continue  the  perfection  of this
security  interest.  Borrower  shall  pay all  filing  costs  and all  costs and
expenses  of any  record  searches  for  financing  statements  that  Lender may
require.  Without the prior written consent of Lender, Borrower shall not create
or  permit  to exist  any  other  lien or  security  interest  in any of the UCC
Collateral. If an Event of Default has occurred and is continuing,  Lender shall
have the  remedies  of a secured  party under the Uniform  Commercial  Code,  in
addition  to  all  remedies  provided  by  this  Instrument  or  existing  under
applicable  law. In exercising  any  remedies,  Lender may exercise its remedies
against the UCC Collateral separately or together,  and in any order, without in
any way affecting the  availability of Lender's other remedies.  This Instrument
constitutes  a financing  statement  with  respect to any part of the  Mortgaged
Property which is or may become a Fixture.

     3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

     (a) As part of the consideration for the Indebtedness,  Borrower absolutely
and  unconditionally  assigns  and  transfers  to Lender  all  Rents.  It is the
intention of Borrower to establish a present,  absolute and irrevocable transfer
and  assignment  to Lender of all Rents and to authorize  and empower  Lender to
collect and receive all Rents  without the  necessity  of further  action on the
part of Borrower.  Promptly upon request by Lender,  Borrower  agrees to execute
and deliver such further  assignments  as Lender may from time to time  require.
Borrower and Lender intend this assignment of Rents to be immediately  effective
and to  constitute an absolute  present  assignment  and not an  assignment  for
additional  security  only.  For  purposes  of giving  effect  to this  absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the  "Mortgaged  Property"  as that term is  defined  in  Section  1(s).
However, if this present,  absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Rents  shall  be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on Rents in favor of Lender,  which lien shall be effective as of
the date of this Instrument.

<PAGE>

     (b) After the occurrence of an Event of Default, Borrower authorizes Lender
to  collect,  sue for and  compromise  Rents  and  directs  each  tenant  of the
Mortgaged  Property to pay all Rents to, or as  directed  by,  Lender.  However,
until the occurrence of an Event of Default,  Lender hereby grants to Borrower a
revocable  license to collect and receive all Rents,  to hold all Rents in trust
for the  benefit  of Lender  and to apply all Rents to pay the  installments  of
interest and principal then due and payable under the Note and the other amounts
then due and  payable  under  the other  Loan  Documents,  including  Imposition
Deposits,  and to pay the current costs and expenses of managing,  operating and
maintaining the Mortgaged  Property,  including  utilities,  Taxes and insurance
premiums  (to  the  extent  not  included  in   Imposition   Deposits),   tenant
improvements and other capital expenditures.  So long as no Event of Default has
occurred and is continuing,  the Rents remaining after  application  pursuant to
the  preceding  sentence  may be  retained  by  Borrower  free and clear of, and
released from, Lender's rights with respect to Rents under this Instrument. From
and after the  occurrence  of an Event of Default,  and without the necessity of
Lender  entering  upon and  taking  and  maintaining  control  of the  Mortgaged
Property directly,  or by a receiver,  Borrower's license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all Rents
as they become due and payable,  including  Rents then due and unpaid.  Borrower
shall pay to Lender upon demand all Rents to which  Lender is  entitled.  At any
time on or after the date of  Lender's  demand for Rents,  Lender may give,  and
Borrower hereby irrevocably  authorizes Lender to give, notice to all tenants of
the Mortgaged  Property  instructing them to pay all Rents to Lender,  no tenant
shall be obligated to inquire  further as to the occurrence or continuance of an
Event of  Default,  and no tenant  shall be  obligated  to pay to  Borrower  any
amounts which are actually paid to Lender in response to such a notice. Any such
notice by Lender  shall be delivered  to each tenant  personally,  by mail or by
delivering  such demand to each rental unit.  Borrower  shall not interfere with
and shall cooperate with Lender's collection of such Rents.

     (c)  Borrower  represents  and  warrants  to Lender that  Borrower  has not
executed  any prior  assignment  of Rents  (other  than an  assignment  of Rents
securing  indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note),  that Borrower has not performed,  and Borrower
covenants  and agrees that it will not perform,  any acts and has not  executed,
and shall not execute, any instrument which would prevent Lender from exercising
its rights  under  this  Section  3, and that at the time of  execution  of this
Instrument  there has been no  anticipation  or prepayment of any Rents for more
than two months prior to the due dates of such Rents. Borrower shall not collect
or accept  payment of any Rents  more than two months  prior to the due dates of
such Rents.

<PAGE>

     (d) If an Event of Default  has  occurred  and is  continuing,  Lender may,
regardless of the adequacy of Lender's  security or the solvency of Borrower and
even in the absence of waste,  enter upon and take and maintain  full control of
the  Mortgaged  Property  in  order  to  perform  all acts  that  Lender  in its
discretion  determines  to be  necessary  or  desirable  for the  operation  and
maintenance of the Mortgaged Property, including the execution,  cancellation or
modification  of Leases,  the collection of all Rents,  the making of repairs to
the Mortgaged  Property and the execution or termination of contracts  providing
for the management,  operation or maintenance of the Mortgaged Property, for the
purposes  of  enforcing  the  assignment  of Rents  pursuant  to  Section  3(a),
protecting  the Mortgaged  Property or the security of this  Instrument,  or for
such other purposes as Lender in its discretion may deem necessary or desirable.
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender's security,  without regard to Borrower's solvency and
without the  necessity  of giving  prior  notice  (oral or written) to Borrower,
Lender  may apply to any court  having  jurisdiction  for the  appointment  of a
receiver for the Mortgaged  Property to take any or all of the actions set forth
in the  preceding  sentence.  If  Lender  elects  to seek the  appointment  of a
receiver  for the  Mortgaged  Property at any time after an Event of Default has
occurred and is  continuing,  Borrower,  by its  execution  of this  Instrument,
expressly   consents  to  the  appointment  of  such  receiver,   including  the
appointment of a receiver EX PARTE if permitted by applicable law. Lender or the
receiver,  as the case may be, shall be entitled to receive a reasonable fee for
managing the Mortgaged  Property.  Immediately upon appointment of a receiver or
immediately upon the Lender's entering upon and taking possession and control of
the Mortgaged  Property,  Borrower shall  surrender  possession of the Mortgaged
Property  to Lender or the  receiver,  as the case may be, and shall  deliver to
Lender or the receiver,  as the case may be, all documents,  records  (including
records  on  electronic  or  magnetic  media),  accounts,  surveys,  plans,  and
specifications  relating to the Mortgaged Property and all security deposits and
prepaid Rents. In the event Lender takes possession and control of the Mortgaged
Property, Lender may exclude Borrower and its representatives from the Mortgaged
Property. Borrower acknowledges and agrees that the exercise by Lender of any of
the rights  conferred under this Section 3 shall not be construed to make Lender
a  mortgagee-in-possession  of the Mortgaged  Property so long as Lender has not
itself entered into actual possession of the Land and Improvements.

     (e) If Lender  enters the  Mortgaged  Property,  Lender  shall be liable to
account  only to Borrower  and only for those Rents  actually  received.  Lender
shall not be liable to Borrower,  anyone  claiming under or through  Borrower or
anyone  having an interest in the  Mortgaged  Property,  by reason of any act or
omission  of Lender  under this  Section 3, and  Borrower  hereby  releases  and
discharges  Lender from any such  liability to the fullest  extent  permitted by
law.

     (f) If the Rents are not  sufficient to meet the costs of taking control of
and managing the Mortgaged Property and collecting the Rents, any funds expended
by Lender for such purposes shall become an additional part of the  Indebtedness
as provided in Section 12.

     (g) Any entering  upon and taking of control of the  Mortgaged  Property by
Lender or the  receiver,  as the case may be,  and any  application  of Rents as
provided  in this  Instrument  shall not cure or waive any Event of  Default  or
invalidate any other right or remedy of Lender under  applicable law or provided
for in this Instrument.

     4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

<PAGE>

     (a) As part of the consideration for the Indebtedness,  Borrower absolutely
and  unconditionally  assigns and transfers to Lender all of  Borrower's  right,
title and  interest  in, to and under the Leases,  including  Borrower's  right,
power  and  authority  to  modify  the  terms of any such  Lease,  or  extend or
terminate  any such  Lease.  It is the  intention  of  Borrower  to  establish a
present,  absolute and  irrevocable  transfer and assignment to Lender of all of
Borrower's right,  title and interest in, to and under the Leases.  Borrower and
Lender intend this  assignment of the Leases to be immediately  effective and to
constitute an absolute  present  assignment and not an assignment for additional
security only. For purposes of giving effect to this absolute  assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part of
the "Mortgaged  Property" as that term is defined in Section 1(s).  However,  if
this  present,  absolute  and  unconditional  assignment  of the  Leases  is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Leases  shall be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on the Leases in favor of Lender,  which lien shall be  effective
as of the date of this Instrument.

     (b) Until  Lender  gives  notice to Borrower  of  Lender's  exercise of its
rights under this Section 4, Borrower shall have all rights, power and authority
granted to Borrower under any Lease (except as otherwise limited by this Section
or any other  provision  of this  Instrument),  including  the right,  power and
authority  to modify  the terms of any Lease or extend or  terminate  any Lease.
Upon the  occurrence of an Event of Default,  the  permission  given to Borrower
pursuant to the preceding  sentence to exercise all rights,  power and authority
under  Leases  shall  automatically  terminate.  Borrower  shall comply with and
observe   Borrower's   obligations  under  all  Leases,   including   Borrower's
obligations  pertaining to the  maintenance  and  disposition of tenant security
deposits.

     (c) Borrower  acknowledges  and agrees that the exercise by Lender,  either
directly or by a receiver,  of any of the rights  conferred under this Section 4
shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual  possession of the
Land and the  Improvements.  The  acceptance by Lender of the  assignment of the
Leases  pursuant to Section 4(a) shall not at any time or in any event  obligate
Lender to take any  action  under this  Instrument  or to expend any money or to
incur any  expenses.  Lender  shall  not be liable in any way for any  injury or
damage  to person or  property  sustained  by any  person  or  persons,  firm or
corporation in or about the Mortgaged  Property.  Prior to Lender's actual entry
into and taking  possession of the Mortgaged  Property,  Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in any
Lease (or  otherwise  have any  obligation  with respect to any Lease);  (ii) be
obligated to appear in or defend any action or proceeding  relating to the Lease
or the Mortgaged Property;  or (iii) be responsible for the operation,  control,
care,  management  or repair of the  Mortgaged  Property  or any  portion of the
Mortgaged  Property.   The  execution  of  this  Instrument  by  Borrower  shall
constitute  conclusive  evidence  that  all  responsibility  for the  operation,
control,  care,  management and repair of the Mortgaged Property is and shall be
that of Borrower, prior to such actual entry and taking of possession.

<PAGE>

     (d) Upon  delivery of notice by Lender to Borrower of Lender's  exercise of
Lender's  rights  under this  Section 4 at any time after the  occurrence  of an
Event of Default,  and without the necessity of Lender  entering upon and taking
and maintaining control of the Mortgaged Property directly, by a receiver, or by
any  other  manner  or  proceeding   permitted  by  the  laws  of  the  Property
Jurisdiction,  Lender  immediately  shall have all rights,  powers and authority
granted to Borrower under any Lease, including the right, power and authority to
modify the terms of any such Lease, or extend or terminate any such Lease.

     (e) Borrower shall,  promptly upon Lender's  request,  deliver to Lender an
executed  copy  of each  residential  Lease  then  in  effect.  All  Leases  for
residential  dwelling units shall be on forms  approved by Lender,  shall be for
initial terms of at least six months and not more than two years,  and shall not
include options to purchase.

     (f)  Borrower  shall not lease any portion of the  Mortgaged  Property  for
non-residential use except with the prior written consent of Lender and Lender's
prior written  approval of the Lease  agreement.  Borrower  shall not modify the
terms of, or extend or terminate,  any Lease for  non-residential use (including
any Lease in existence on the date of this Instrument) without the prior written
consent of  Lender.  Borrower  shall,  without  request  by  Lender,  deliver an
executed copy of each non-residential  Lease to Lender promptly after such Lease
is signed.  All  non-residential  Leases,  including  renewals or  extensions of
existing Leases, shall specifically provide that (1) such Leases are subordinate
to the lien of this  Instrument;  (2) the tenant  shall attorn to Lender and any
purchaser at a  foreclosure  sale,  such  attornment  to be  self-executing  and
effective upon  acquisition of title to the Mortgaged  Property by any purchaser
at a  foreclosure  sale or by Lender in any  manner;  (3) the  tenant  agrees to
execute such further  evidences of  attornment  as Lender or any  purchaser at a
foreclosure  sale may from  time to time  request;  (4) the  Lease  shall not be
terminated by foreclosure or any other transfer of the Mortgaged  Property;  (5)
after  a  foreclosure  sale  of the  Mortgaged  Property,  Lender  or any  other
purchaser at such foreclosure sale may, at Lender's or such purchaser's  option,
accept or terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence  of an Event of Default of a written  request  from  Lender,  pay all
Rents payable under the Lease to Lender.

     (g)  Borrower  shall not  receive or accept  Rent under any Lease  (whether
residential or non-residential) for more than two months in advance.

     5. PAYMENT OF INDEBTEDNESS;  PERFORMANCE  UNDER LOAN DOCUMENTS;  PREPAYMENT
PREMIUM.  Borrower shall pay the  Indebtedness  when due in accordance  with the
terms of the Note and the other Loan  Documents and shall  perform,  observe and
comply  with all  other  provisions  of the Note and the other  Loan  Documents.
Borrower shall pay a prepayment  premium in connection with certain  prepayments
of the  Indebtedness,  including a payment made after  Lender's  exercise of any
right of acceleration of the Indebtedness, as provided in the Note.

     6.  EXCULPATION.   Borrower's   personal   liability  for  payment  of  the
Indebtedness and for performance of the other  obligations to be performed by it
under this Instrument is limited in the manner,  and to the extent,  provided in
the Note.

<PAGE>

     7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

     (a) Borrower shall deposit with Lender on the day monthly  installments  of
principal  or  interest,  or both,  are due  under the Note (or on  another  day
designated  in writing by Lender),  until the  Indebtedness  is paid in full, an
additional  amount  sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which,  if not paid, may result
in a lien on all or any part of the  Mortgaged  Property,  (2) the  premiums for
fire and other hazard insurance, rent loss insurance and such other insurance as
Lender may  require  under  Section  19, (3) Taxes,  and (4)  amounts  for other
charges and expenses  which  Lender at any time  reasonably  deems  necessary to
protect  the  Mortgaged  Property,  to prevent  the  imposition  of liens on the
Mortgaged  Property,  or  otherwise  to  protect  Lender's  interests,   all  as
reasonably  estimated  from  time to  time by  Lender,  plus  one-sixth  of such
estimate.  The amounts  deposited under the preceding  sentence are collectively
referred to in this Instrument as the "IMPOSITION DEPOSITS".  The obligations of
Borrower  for  which the  Imposition  Deposits  are  required  are  collectively
referred to in this  Instrument as  "IMPOSITIONS".  The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition  before the
last date upon which such  payment  may be made  without any penalty or interest
charge being added.  Lender shall  maintain  records  indicating how much of the
monthly Imposition  Deposits and how much of the aggregate  Imposition  Deposits
held by Lender are held for the purpose of paying Taxes,  insurance premiums and
each other  obligation of Borrower for which  Imposition  Deposits are required.
Any waiver by Lender of the requirement that Borrower remit Imposition  Deposits
to Lender may be revoked by Lender,  in  Lender's  discretion,  at any time upon
notice to Borrower.

     (b)  Imposition  Deposits  shall be held in an  institution  (which  may be
Lender, if Lender is such an institution) whose deposits or accounts are insured
or  guaranteed  by a  federal  agency.  Lender  shall not be  obligated  to open
additional  accounts or deposit Imposition  Deposits in additional  institutions
when the amount of the  Imposition  Deposits  exceeds the maximum  amount of the
federal  deposit  insurance  or  guaranty.  Lender  shall  apply the  Imposition
Deposits to pay  Impositions  so long as no Event of Default has occurred and is
continuing.  Unless applicable law requires, Lender shall not be required to pay
Borrower any interest,  earnings or profits on the Imposition Deposits. Borrower
hereby  pledges  and  grants to Lender a  security  interest  in the  Imposition
Deposits as  additional  security for all of Borrower's  obligations  under this
Instrument and the other Loan Documents. Any amounts deposited with Lender under
this  Section 7 shall not be trust  funds,  nor shall they operate to reduce the
Indebtedness, unless applied by Lender for that purpose under Section 7(e).

<PAGE>

     (c) If Lender  receives a bill or invoice for an  Imposition,  Lender shall
pay the  Imposition  from the Imposition  Deposits held by Lender.  Lender shall
have no  obligation to pay any  Imposition  to the extent it exceeds  Imposition
Deposits  then held by Lender.  Lender may pay an  Imposition  according  to any
bill,  statement or estimate  from the  appropriate  public  office or insurance
company without  inquiring into the accuracy of the bill,  statement or estimate
or into the validity of the Imposition.

     (d) If at any time the amount of the Imposition Deposits held by Lender for
payment of a specific  Imposition exceeds the amount reasonably deemed necessary
by Lender plus one-sixth of such estimate,  the excess shall be credited against
future  installments  of Imposition  Deposits.  If at any time the amount of the
Imposition  Deposits held by Lender for payment of a specific Imposition is less
than the amount reasonably estimated by Lender to be necessary plus one-sixth of
such estimate,  Borrower shall pay to Lender the amount of the deficiency within
15 days after notice from Lender.

     (e) If an Event of Default has occurred and is continuing, Lender may apply
any Imposition  Deposits,  in any amounts and in any order as Lender determines,
in  Lender's  discretion,  to pay any  Impositions  or as a credit  against  the
Indebtedness.  Upon payment in full of the Indebtedness,  Lender shall refund to
Borrower any Imposition Deposits held by Lender.

     8. COLLATERAL  AGREEMENTS.  Borrower shall deposit with Lender such amounts
as may be  required  by any  Collateral  Agreement  and shall  perform all other
obligations of Borrower under each Collateral Agreement.

     9. APPLICATION OF PAYMENTS.  If at any time Lender receives,  from Borrower
or otherwise,  any amount applicable to the Indebtedness  which is less than all
amounts  due and  payable at such time,  then  Lender may apply that  payment to
amounts  then due and  payable  in any  manner  and in any order  determined  by
Lender, in Lender's  discretion.  Neither Lender's acceptance of an amount which
is less than all amounts then due and payable nor Lender's  application  of such
payment in the manner  authorized  shall  constitute  or be deemed to constitute
either  a  waiver  of  the  unpaid  amounts  or  an  accord  and   satisfaction.
Notwithstanding  the  application  of  any  such  amount  to  the  Indebtedness,
Borrower's   obligations  under  this  Instrument  and  the  Note  shall  remain
unchanged.

<PAGE>

     10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws,  ordinances,
regulations  and  requirements  of any  Governmental  Authority and all recorded
lawful covenants and agreements relating to or affecting the Mortgaged Property,
including  all  laws,  ordinances,   regulations,   requirements  and  covenants
pertaining to health and safety,  construction  of improvements on the Mortgaged
Property,  fair  housing,  zoning and land use, and Leases.  Borrower also shall
comply with all applicable  laws that pertain to the maintenance and disposition
of  tenant  security  deposits.  Borrower  shall at all times  maintain  records
sufficient to  demonstrate  compliance  with the  provisions of this Section 10.
Borrower shall take appropriate  measures to prevent, and shall not engage in or
knowingly permit,  any illegal  activities at the Mortgaged  Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this  Instrument  or  Lender's  interest in the  Mortgaged  Property.
Borrower  represents  and  warrants to Lender  that no portion of the  Mortgaged
Property  has  been  or will be  purchased  with  the  proceeds  of any  illegal
activity.

     11. USE OF PROPERTY.  Unless required by applicable law, Borrower shall not
(a) except for any change in use  approved by Lender,  allow  changes in the use
for which all or any part of the  Mortgaged  Property  is being used at the time
this  Instrument  was executed,  (b) convert any  individual  dwelling  units or
common  areas to  commercial  use,  (c) initiate or acquiesce in a change in the
zoning   classification  of  the  Mortgaged  Property,   or  (d)  establish  any
condominium or cooperative regime with respect to the Mortgaged Property.

     12. PROTECTION OF LENDER'S SECURITY.

     (a)  If  Borrower  fails  to  perform  any of its  obligations  under  this
Instrument  or any  other  Loan  Document,  or if any  action or  proceeding  is
commenced which purports to affect the Mortgaged Property,  Lender's security or
Lender's rights under this  Instrument,  including  eminent domain,  insolvency,
code  enforcement,  civil  or  criminal  forfeiture,  enforcement  of  Hazardous
Materials  Laws,   fraudulent   conveyance  or  reorganizations  or  proceedings
involving a bankrupt or decedent,  then Lender at Lender's  option may make such
appearances, disburse such sums and take such actions as Lender reasonably deems
necessary  to perform  such  obligations  of  Borrower  and to protect  Lender's
interest, including (1) payment of fees and out of pocket expenses of attorneys,
accountants,  inspectors and consultants,  (2) entry upon the Mortgaged Property
to make  repairs  or secure  the  Mortgaged  Property,  (3)  procurement  of the
insurance  required by Section 19, and (4) payment of amounts which Borrower has
failed to pay under Sections 15 and 17.

     (b) Any amounts  disbursed  by Lender  under this  Section 12, or under any
other provision of this  Instrument that treats such  disbursement as being made
under this  Section  12,  shall be added to, and become  part of, the  principal
component of the  Indebtedness,  shall be immediately  due and payable and shall
bear interest from the date of disbursement until paid at the "DEFAULT RATE", as
defined in the Note.

     (c) Nothing in this Section 12 shall require Lender to incur any expense or
take any action.

     13. INSPECTION. Lender, its agents, representatives, and designees may make
or cause to be made  entries  upon and  inspections  of the  Mortgaged  Property
(including environmental inspections and tests) during normal business hours, or
at any other reasonable time.

     14. BOOKS AND RECORDS; FINANCIAL REPORTING.

<PAGE>

     (a) Borrower shall keep and maintain at all times at the Mortgaged Property
or the  management  agent's  offices,  and  upon  Lender's  request  shall  make
available at the Mortgaged Property,  complete and accurate books of account and
records  (including copies of supporting bills and invoices) adequate to reflect
correctly  the operation of the  Mortgaged  Property,  and copies of all written
contracts,  Leases,  and other instruments which affect the Mortgaged  Property.
The books, records,  contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.

     (b) Borrower shall furnish to Lender all of the following:

     (1)  within  120 days  after the end of each  fiscal  year of  Borrower,  a
          statement  of income and  expenses  for  Borrower's  operation  of the
          Mortgaged  Property  for that fiscal  year,  a statement of changes in
          financial  position of Borrower relating to the Mortgaged Property for
          that  fiscal  year and,  when  requested  by Lender,  a balance  sheet
          showing  all  assets  and  liabilities  of  Borrower  relating  to the
          Mortgaged Property as of the end of that fiscal year;

     (2)  within 120 days after the end of each fiscal year of Borrower,  and at
          any  other  time  upon  Lender's  request,  a rent  schedule  for  the
          Mortgaged  Property  showing  the  name of each  tenant,  and for each
          tenant,  the space  occupied,  the  lease  expiration  date,  the rent
          payable for the current  month,  the date through  which rent has been
          paid, and any related information requested by Lender;

     (3)  within 120 days after the end of each fiscal year of Borrower,  and at
          any other time upon  Lender's  request,  an accounting of all security
          deposits  held  pursuant  to all  Leases,  including  the  name of the
          institution (if any) and the names and  identification  numbers of the
          accounts  (if any) in which such  security  deposits  are held and the
          name of the  person to contact at such  financial  institution,  along
          with  any  authority  or  release   necessary  for  Lender  to  access
          information regarding such accounts;

     (4)  within 120 days after the end of each fiscal year of Borrower,  and at
          any other time upon Lender's request,  a statement that identifies all
          owners of any interest in Borrower and any Controlling  Entity and the
          interest  held by each,  if  Borrower  or a  Controlling  Entity  is a
          corporation,   all  officers   and   directors  of  Borrower  and  the
          Controlling  Entity,  and if  Borrower  or a  Controlling  Entity is a
          limited liability company, all managers who are not members;

     (5)  upon Lender's request, quarterly income and expense statements for the
          Mortgaged Property;

     (6)  upon  Lender's  request  at any  time  when an Event  of  Default  has
          occurred and is continuing,  monthly income and expense statements for
          the Mortgaged Property;

<PAGE>

     (7)  upon Lender's  request,  a monthly property  management report for the
          Mortgaged  Property,  showing the number of inquiries  made and rental
          applications received from tenants or prospective tenants and deposits
          received from tenants and any other  information  requested by Lender;
          and

     (8)  upon  Lender's  request,  a balance  sheet,  a statement of income and
          expenses for Borrower and a statement of changes in financial position
          of Borrower for Borrower's most recent fiscal year.

     (c) Each of the statements, schedules and reports required by Section 14(b)
shall be certified to be complete and accurate by an individual having authority
to bind  Borrower,  and shall be in such form and contain  such detail as Lender
may reasonably require.  Lender also may require that any statements,  schedules
or reports be audited at  Borrower's  expense by  independent  certified  public
accountants acceptable to Lender.

     (d) If  Borrower  fails to  provide  in a  timely  manner  the  statements,
schedules and reports required by Section 14(b),  Lender shall have the right to
have Borrower's books and records audited, at Borrower's expense, by independent
certified  public  accountants  selected  by  Lender  in  order to  obtain  such
statements,  schedules and reports, and all related costs and expenses of Lender
shall become  immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.

     (e) If an Event of Default has occurred and is  continuing,  Borrower shall
deliver to Lender  upon  written  demand all books and  records  relating to the
Mortgaged Property or its operation.

     (f) Borrower authorizes Lender to obtain a credit report on Borrower at any
time.

     15. TAXES; OPERATING EXPENSES.

     (a) Subject to the provisions of Section 15(c) and Section 15(d),  Borrower
shall pay,  or cause to be paid,  all Taxes when due and before the  addition of
any interest, fine, penalty or cost for nonpayment.

     (b) Subject to the  provisions  of Section  15(c),  Borrower  shall pay the
expenses  of  operating,  managing,  maintaining  and  repairing  the  Mortgaged
Property  (including  insurance premiums,  utilities,  repairs and replacements)
before  the last date upon  which  each such  payment  may be made  without  any
penalty or interest charge being added.

<PAGE>

     (c) As long as no Event of Default exists and Borrower has timely delivered
to Lender any bills or premium notices that it has received,  Borrower shall not
be obligated to pay Taxes, insurance premiums or any other individual Imposition
to the extent that  sufficient  Imposition  Deposits  are held by Lender for the
purpose of paying  that  specific  Imposition.  If an Event of  Default  exists,
Lender may  exercise  any  rights  Lender  may have with  respect to  Imposition
Deposits without regard to whether Impositions are then due and payable.  Lender
shall have no liability to Borrower  for failing to pay any  Impositions  to the
extent that any Event of Default has  occurred and is  continuing,  insufficient
Imposition Deposits are held by Lender at the time an Imposition becomes due and
payable or Borrower has failed to provide Lender with bills and premium  notices
as provided above.

     (d)  Borrower,  at its  own  expense,  may  contest  by  appropriate  legal
proceedings,  conducted  diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender of
the commencement or expected commencement of such proceedings, (2) the Mortgaged
Property is not in danger of being sold or forfeited, (3) Borrower deposits with
Lender  reserves  sufficient  to pay the contested  Imposition,  if requested by
Lender, and (4) Borrower furnishes whatever  additional  security is required in
the  proceedings  or is  reasonably  requested by Lender,  which may include the
delivery to Lender of the reserves  established by Borrower to pay the contested
Imposition.

     (e) Borrower shall promptly deliver to Lender a copy of all notices of, and
invoices  for,  Impositions,  and if  Borrower  pays  any  Imposition  directly,
Borrower shall promptly furnish to Lender receipts evidencing such payments.

     16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent provided
in Section 21, the grant, creation or existence of any mortgage,  deed of trust,
deed to secure debt,  security  interest or other lien or encumbrance (a "LIEN")
on the Mortgaged Property (other than the lien of this Instrument) or on certain
ownership interests in Borrower, whether voluntary,  involuntary or by operation
of law,  and  whether  or not  such  Lien  has  priority  over  the lien of this
Instrument,  is a "TRANSFER" which  constitutes an Event of Default and subjects
Borrower to personal liability under the Note.

<PAGE>

     17.  PRESERVATION,   MANAGEMENT  AND  MAINTENANCE  OF  MORTGAGED  PROPERTY.
Borrower (a) shall not commit waste or permit impairment or deterioration of the
Mortgaged  Property,  (b) shall not abandon the  Mortgaged  Property,  (c) shall
restore or repair promptly,  in a good and workmanlike  manner, any damaged part
of the Mortgaged Property to the equivalent of its original  condition,  or such
other  condition  as Lender may  approve in  writing,  whether or not  insurance
proceeds  or  condemnation  awards  are  available  to cover  any  costs of such
restoration  or repair,  (d) shall keep the  Mortgaged  Property in good repair,
including  the  replacement  of  Personalty  and Fixtures with items of equal or
better function and quality,  (e) shall provide for  professional  management of
the Mortgaged Property by a residential rental property manager  satisfactory to
Lender under a contract approved by Lender in writing, and (f) shall give notice
to Lender of and, unless otherwise  directed in writing by Lender,  shall appear
in and defend  any  action or  proceeding  purporting  to affect  the  Mortgaged
Property,  Lender's security or Lender's rights under this Instrument.  Borrower
shall not (and shall not permit any tenant or other person to) remove,  demolish
or alter the Mortgaged  Property or any part of the Mortgaged Property except in
connection with the replacement of tangible Personalty.

     18. ENVIRONMENTAL HAZARDS.

     (a)  Except for  matters  covered by a written  program of  operations  and
maintenance  approved  in  writing  by  Lender  (an "O&M  PROGRAM")  or  matters
described  in  Section  18(b),  Borrower  shall not  cause or permit  any of the
following:

     (1)  the presence, use, generation, release, treatment, processing, storage
          (including  storage in above ground and  underground  storage  tanks),
          handling,  or  disposal  of any  Hazardous  Materials  on or under the
          Mortgaged  Property or any other property of Borrower that is adjacent
          to the Mortgaged Property;

     (2)  the transportation of any Hazardous  Materials to, from, or across the
          Mortgaged Property;

     (3)  any  occurrence  or condition on the  Mortgaged  Property or any other
          property of Borrower that is adjacent to the Mortgaged Property, which
          occurrence  or  condition  is or  may  be in  violation  of  Hazardous
          Materials Laws; or

     (4)  any violation of or noncompliance  with the terms of any Environmental
          Permit  with  respect to the  Mortgaged  Property  or any  property of
          Borrower that is adjacent to the Mortgaged Property.

The  matters  described  in  clauses  (1)  through  (4)  above are  referred  to
collectively in this Section 18 as "PROHIBITED ACTIVITIES OR CONDITIONS".

     (b) Prohibited  Activities  and  Conditions  shall not include the safe and
lawful use and storage of  quantities  of (1)  pre-packaged  supplies,  cleaning
materials  and  petroleum  products   customarily  used  in  the  operation  and
maintenance  of  comparable  multifamily  properties,  (2)  cleaning  materials,
personal  grooming  items and other items sold in  pre-packaged  containers  for
consumer use and used by tenants and occupants of residential  dwelling units in
the Mortgaged  Property;  and (3)  petroleum  products used in the operation and
maintenance  of  motor  vehicles  from  time to time  located  on the  Mortgaged
Property's  parking  areas,  so long as all of the foregoing  are used,  stored,
handled,  transported  and disposed of in compliance  with  Hazardous  Materials
Laws.

<PAGE>

     (c) Borrower shall take all commercially  reasonable actions (including the
inclusion of  appropriate  provisions in any Leases  executed  after the date of
this  Instrument) to prevent its employees,  agents,  and  contractors,  and all
tenants and other occupants from causing or permitting any Prohibited Activities
or  Conditions.  Borrower shall not lease or allow the sublease or use of all or
any  portion  of  the  Mortgaged   Property  to  any  tenant  or  subtenant  for
nonresidential  use by any user that,  in the ordinary  course of its  business,
would cause or permit any Prohibited Activity or Condition.

     (d) If an O&M  Program  has been  established  with  respect  to  Hazardous
Materials,  Borrower  shall  comply  in a timely  manner  with,  and  cause  all
employees,  agents, and contractors of Borrower and any other persons present on
the Mortgaged Property to comply with the O&M Program.  All costs of performance
of Borrower's  obligations under any O&M Program shall be paid by Borrower,  and
Lender's  out-of-pocket  costs  incurred in connection  with the  monitoring and
review of the O&M Program and Borrower's  performance  shall be paid by Borrower
upon demand by Lender.  Any such  out-of-pocket  costs of Lender which  Borrower
fails to pay promptly  shall become an additional  part of the  Indebtedness  as
provided in Section 12.

     (e) Borrower  represents and warrants to Lender that,  except as previously
disclosed by Borrower to Lender in writing:

     (1)  Borrower  has not at any time  engaged  in,  caused or  permitted  any
Prohibited Activities or Conditions;

     (2) to the best of  Borrower's  knowledge  after  reasonable  and  diligent
inquiry, no Prohibited Activities or Conditions exist or have existed;

     (3) except to the extent  previously  disclosed  by  Borrower  to Lender in
writing,  the Mortgaged  Property does not now contain any  underground  storage
tanks,  and, to the best of Borrower's  knowledge after  reasonable and diligent
inquiry,  the Mortgaged Property has not contained any underground storage tanks
in the past.  If there is an  underground  storage  tank located on the Property
which has been previously disclosed by Borrower to Lender in writing,  that tank
complies with all requirements of Hazardous Materials Laws;

     (4) Borrower has complied with all Hazardous Materials Laws,  including all
requirements for notification regarding releases of Hazardous Materials. Without
limiting  the   generality   of  the   foregoing,   Borrower  has  obtained  all
Environmental  Permits  required for the operation of the Mortgaged  Property in
accordance   with   Hazardous   Materials  Laws  now  in  effect  and  all  such
Environmental Permits are in full force and effect;

<PAGE>

     (5) no event has  occurred  with  respect to the  Mortgaged  Property  that
constitutes,  or with  the  passing  of  time  or the  giving  of  notice  would
constitute, noncompliance with the terms of any Environmental Permit;

     (6) there are no actions,  suits,  claims or proceedings pending or, to the
best of Borrower's  knowledge after reasonable and diligent inquiry,  threatened
that involve the Mortgaged  Property and allege,  arise out of, or relate to any
Prohibited Activity or Condition; and

     (7) Borrower has not received any complaint,  order, notice of violation or
other  communication  from  any  Governmental   Authority  with  regard  to  air
emissions,  water  discharges,  noise emissions or Hazardous  Materials,  or any
other  environmental,  health or safety matters affecting the Mortgaged Property
or any other property of Borrower that is adjacent to the Mortgaged Property.

The  representations  and  warranties  in this  Section  18 shall be  continuing
representations  and  warranties  that  shall be deemed  to be made by  Borrower
throughout  the term of the loan evidenced by the Note,  until the  Indebtedness
has been paid in full.

     (f) Borrower shall promptly notify Lender in writing upon the occurrence of
any of the following events:

     (1) Borrower's discovery of any Prohibited Activity or Condition;

     (2) Borrower's receipt of or knowledge of any complaint,  order,  notice of
violation or other communication from any Governmental Authority or other person
with regard to present or future alleged Prohibited  Activities or Conditions or
any other  environmental,  health  or safety  matters  affecting  the  Mortgaged
Property or any other  property of  Borrower  that is adjacent to the  Mortgaged
Property; and

     (3) any  representation or warranty in this Section 18 becomes untrue after
the date of this Agreement.

Any such notice given by Borrower shall not relieve  Borrower of, or result in a
waiver of, any  obligation  under this  Instrument,  the Note, or any other Loan
Document.

<PAGE>

     (g) Borrower shall pay promptly the costs of any environmental inspections,
tests or audits  ("ENVIRONMENTAL  INSPECTIONS") required by Lender in connection
with  any  foreclosure  or deed in lieu of  foreclosure,  or as a  condition  of
Lender's  consent  to any  Transfer  under  Section  21, or  required  by Lender
following a reasonable  determination  by Lender that  Prohibited  Activities or
Conditions may exist. Any such costs incurred by Lender  (including the fees and
out-of-pocket  costs of attorneys and technical  consultants whether incurred in
connection  with any  judicial or  administrative  process or  otherwise)  which
Borrower  fails  to  pay  promptly  shall  become  an  additional  part  of  the
Indebtedness  as  provided  in  Section  12. The  results  of all  Environmental
Inspections  made by Lender shall at all times remain the property of Lender and
Lender  shall have no  obligation  to disclose or  otherwise  make  available to
Borrower or any other party such  results or any other  information  obtained by
Lender in connection with its Environmental Inspections.  Lender hereby reserves
the right, and Borrower hereby expressly authorizes Lender, to make available to
any  party,  including  any  prospective  bidder  at a  foreclosure  sale of the
Mortgaged Property, the results of any Environmental  Inspections made by Lender
with respect to the Mortgaged  Property.  Borrower  consents to Lender notifying
any party  (either as part of a notice of sale or  otherwise)  of the results of
any of Lender's  Environmental  Inspections.  Borrower  acknowledges that Lender
cannot control or otherwise  assure the  truthfulness or accuracy of the results
of any of its Environmental  Inspections and that the release of such results to
prospective  bidders at a foreclosure sale of the Mortgaged  Property may have a
material and adverse  effect upon the amount which a party may bid at such sale.
Borrower  agrees that Lender shall have no liability  whatsoever  as a result of
delivering  the  results of any of its  Environmental  Inspections  to any third
party, and Borrower hereby releases and forever  discharges  Lender from any and
all claims,  damages,  or causes of action,  arising out of,  connected  with or
incidental  to the  results of, the  delivery  of any of Lender's  Environmental
Inspections.

     (h)  If  any  investigation,   site  monitoring,   containment,   clean-up,
restoration or other remedial work ("REMEDIAL Work") is necessary to comply with
any Hazardous  Materials Law or order of any Governmental  Authority that has or
acquires  jurisdiction  over the  Mortgaged  Property or the use,  operation  or
improvement  of the  Mortgaged  Property  under  any  Hazardous  Materials  Law,
Borrower  shall,  by the  earlier of (1) the  applicable  deadline  required  by
Hazardous  Materials Law or (2) 30 days after notice from Lender  demanding such
action, begin performing the Remedial Work, and thereafter  diligently prosecute
it to completion,  and shall in any event complete the work by the time required
by applicable  Hazardous  Materials  Law. If Borrower fails to begin on a timely
basis or diligently  prosecute any required  Remedial  Work,  Lender may, at its
option,  cause the Remedial Work to be completed,  in which case Borrower  shall
reimburse Lender on demand for the cost of doing so. Any  reimbursement due from
Borrower to Lender shall become part of the  Indebtedness as provided in Section
12.

     (i) Borrower shall cooperate with any inquiry by any Governmental Authority
and shall comply with any  governmental  or judicial order which arises from any
alleged Prohibited Activity or Condition.

<PAGE>

     (j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any
prior owner or holder of the Note, (iii) the Loan Servicer,  (iv) any prior Loan
Servicer, (v) the officers,  directors,  shareholders,  partners,  employees and
trustees of any of the  foregoing,  and (vi) the heirs,  legal  representatives,
successors   and   assigns  of  each  of  the   foregoing   (collectively,   the
"INDEMNITEES") from and against all proceedings,  claims, damages, penalties and
costs  (whether  initiated  or sought by  Governmental  Authorities  or  private
parties),  including  fees and out of pocket  expenses of  attorneys  and expert
witnesses,  investigatory  fees,  and  remediation  costs,  whether  incurred in
connection  with any judicial or  administrative  process or otherwise,  arising
directly or indirectly from any of the following:

     (1) any  breach of any  representation  or  warranty  of  Borrower  in this
Section 18;

     (2) any failure by Borrower  to perform any of its  obligations  under this
Section 18;

     (3) the  existence  or alleged  existence  of any  Prohibited  Activity  or
Condition;

     (4) the presence or alleged presence of Hazardous Materials on or under the
Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged
Property; and

     (5) the actual or alleged violation of any Hazardous Materials Law.

     (k) Counsel selected by Borrower to defend  Indemnitees shall be subject to
the approval of those Indemnitees.  However,  any Indemnitee may elect to defend
any claim or legal or administrative proceeding at the Borrower's expense.

     (l)  Borrower  shall  not,  without  the  prior  written  consent  of those
Indemnitees  who are  named as  parties  to a claim  or legal or  administrative
proceeding (a "CLAIM"),  settle or compromise  the Claim if the  settlement  (1)
results in the entry of any judgment  that does not include as an  unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those  Indemnitees,  satisfactory  in form and  substance to Lender;  or (2) may
materially  and  adversely  affect  Lender,  as  determined  by  Lender  in  its
discretion.

     (m) Borrower's obligation to indemnify the Indemnitees shall not be limited
or  impaired  by any of the  following,  or by any  failure of  Borrower  or any
guarantor to receive notice of or consideration for any of the following:

     (1) any amendment or modification of any Loan Document;

     (2) any extensions of time for performance required by any Loan Document;

<PAGE>

     (3) any provision in any of the Loan Documents  limiting  Lender's recourse
to property  securing the  Indebtedness,  or limiting the personal  liability of
Borrower or any other party for payment of all or any part of the Indebtedness;

     (4) the accuracy or inaccuracy of any  representations  and warranties made
by Borrower under this Instrument or any other Loan Document;

     (5) the release of Borrower or any other person,  by Lender or by operation
of law, from performance of any obligation under any Loan Document;

     (6) the release or substitution in whole or in part of any security for the
Indebtedness; and

     (7)  Lender's  failure to properly  perfect  any lien or security  interest
given as security for the Indebtedness.

     (n) Borrower shall, at its own cost and expense, do all of the following:

     (1) pay or satisfy any  judgment or decree that may be entered  against any
Indemnitee or Indemnitees in any legal or administrative  proceeding incident to
any matters against which  Indemnitees are entitled to be indemnified under this
Section 18;

     (2) reimburse  Indemnitees  for any expenses paid or incurred in connection
with any matters against which  Indemnitees are entitled to be indemnified under
this Section 18; and

     (3) reimburse Indemnitees for any and all expenses,  including fees and out
of pocket  expenses  of  attorneys  and expert  witnesses,  paid or  incurred in
connection  with the  enforcement  by  Indemnitees  of their  rights  under this
Section 18, or in monitoring and  participating  in any legal or  administrative
proceeding.

     (o) In any  circumstances  in which the  indemnity  under  this  Section 18
applies,  Lender may employ its own legal counsel and  consultants to prosecute,
defend or negotiate any claim or legal or administrative  proceeding and Lender,
with the prior  written  consent of Borrower  (which  shall not be  unreasonably
withheld,  delayed or conditioned)  may settle or compromise any action or legal
or  administrative  proceeding.  Borrower shall reimburse Lender upon demand for
all costs and expenses  incurred by Lender,  including all costs of  settlements
entered  into in good  faith,  and the fees and out of pocket  expenses  of such
attorneys and consultants.

<PAGE>

     (p) The  provisions  of this Section 18 shall be in addition to any and all
other obligations and liabilities that Borrower may have under applicable law or
under  other  Loan  Documents,   and  each  Indemnitee   shall  be  entitled  to
indemnification  under this Section 18 without  regard to whether Lender or that
Indemnitee has exercised any rights against the Mortgaged  Property or any other
security,  pursued any rights against any guarantor, or pursued any other rights
available  under the Loan Documents or applicable  law. If Borrower  consists of
more than one person or entity,  the  obligation of those persons or entities to
indemnify the Indemnitees under this Section 18 shall be joint and several.  The
obligation of Borrower to indemnify the Indemnitees  under this Section 18 shall
survive  any  repayment  or  discharge  of  the  Indebtedness,  any  foreclosure
proceeding,  any  foreclosure  sale,  any  delivery  of  any  deed  in  lieu  of
foreclosure, and any release of record of the lien of this Instrument.

     19. PROPERTY AND LIABILITY INSURANCE.

     (a) Borrower shall keep the Improvements  insured at all times against such
hazards as Lender may from time to time require,  which  insurance shall include
but not be limited to coverage  against loss by fire and allied perils,  general
boiler and machinery coverage, and business income coverage.  Lender's insurance
requirements   may  change  from  time  to  time  throughout  the  term  of  the
Indebtedness.  If Lender so requires, such insurance shall also include sinkhole
insurance,  mine  subsidence  insurance,   earthquake  insurance,  and,  if  the
Mortgaged  Property  does not  conform  to  applicable  zoning or land use laws,
building ordinance or law coverage.  If any of the Improvements is located in an
area identified by the Federal Emergency  Management Agency (or any successor to
that agency) as an area having special flood hazards,  and if flood insurance is
available in that area, Borrower shall insure such Improvements  against loss by
flood.

     (b) All premiums on insurance  policies  required under Section 19(a) shall
be paid in the manner  provided in Section 7, unless  Lender has  designated  in
writing  another  method of payment.  All such policies  shall also be in a form
approved by Lender.  All policies of property  damage  insurance shall include a
non-contributing,  non-reporting  mortgage  clause  in favor  of,  and in a form
approved by, Lender.  Lender shall have the right to hold the original  policies
or  duplicate  original  policies of all  insurance  required by Section  19(a).
Borrower  shall  promptly  deliver  to  Lender a copy of all  renewal  and other
notices  received by Borrower  with respect to the policies and all receipts for
paid  premiums.  At least  30 days  prior to the  expiration  date of a  policy,
Borrower  shall  deliver to Lender the original  (or a duplicate  original) of a
renewal policy in form satisfactory to Lender.

     (c)  Borrower  shall  maintain at all times  commercial  general  liability
insurance,  workers' compensation insurance and such other liability, errors and
omissions  and  fidelity  insurance  coverages  as Lender  may from time to time
require.

<PAGE>

     (d) All insurance  policies and renewals of insurance  policies required by
this Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.

     (e) Borrower  shall comply with all  insurance  requirements  and shall not
permit any  condition to exist on the Mortgaged  Property that would  invalidate
any part of any insurance  coverage that this  Instrument  requires  Borrower to
maintain.

     (f) In the event of loss,  Borrower shall give immediate  written notice to
the insurance  carrier and to Lender.  Borrower  hereby  authorizes and appoints
Lender as  attorney-in-fact  for  Borrower to make proof of loss,  to adjust and
compromise any claims under policies of property damage insurance,  to appear in
and prosecute any action arising from such property damage  insurance  policies,
to collect and receive the proceeds of property damage insurance,  and to deduct
from  such  proceeds  Lender's  expenses  incurred  in the  collection  of  such
proceeds.  This power of attorney is coupled with an interest  and  therefore is
irrevocable.  However, nothing contained in this Section 19 shall require Lender
to incur any expense or take any action.  Lender  may, at Lender's  option,  (1)
hold the balance of such proceeds to be used to reimburse  Borrower for the cost
of restoring  and  repairing  the  Mortgaged  Property to the  equivalent of its
original condition or to a condition approved by Lender (the "Restoration"),  or
(2) apply the  balance of such  proceeds  to the  payment  of the  Indebtedness,
whether or not then due.  To the extent  Lender  determines  to apply  insurance
proceeds  to  Restoration,  Lender  shall  do so  in  accordance  with  Lender's
then-current  policies relating to the restoration of casualty damage on similar
multifamily properties.

     (g) Lender shall not exercise its option to apply insurance proceeds to the
payment of the  Indebtedness if all of the following  conditions are met: (1) no
Event of Default (or any event  which,  with the giving of notice or the passage
of time,  or both,  would  constitute  an Event of Default)  has occurred and is
continuing;  (2)  Lender  determines,  in its  discretion,  that  there  will be
sufficient  funds to complete the  Restoration;  (3) Lender  determines,  in its
discretion,  that the rental income from the Mortgaged Property after completion
of the  Restoration  will be sufficient  to meet all  operating  costs and other
expenses,   Imposition  Deposits,   deposits  to  reserves  and  loan  repayment
obligations  relating to the Mortgaged Property;  and (4) Lender determines,  in
its discretion, that the Restoration will be completed before the earlier of (A)
one year before the maturity  date of the Note or (B) one year after the date of
the loss or casualty.

     (h) If the  Mortgaged  Property  is sold at a  foreclosure  sale or  Lender
acquires title to the Mortgaged Property,  Lender shall automatically succeed to
all rights of Borrower in and to any insurance  policies and unearned  insurance
premiums and in and to the proceeds  resulting  from any damage to the Mortgaged
Property prior to such sale or acquisition.

     20. CONDEMNATION.

<PAGE>

     (a)  Borrower  shall  promptly  notify  Lender of any action or  proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof,  of
all or any  part of the  Mortgaged  Property,  whether  direct  or  indirect  (a
"CONDEMNATION").  Borrower shall appear in and prosecute or defend any action or
proceeding  relating to any Condemnation  unless otherwise directed by Lender in
writing.  Borrower  authorizes  and  appoints  Lender  as  attorney-in-fact  for
Borrower to commence,  appear in and prosecute,  in Lender's or Borrower's name,
any  action  or  proceeding  relating  to  any  Condemnation  and to  settle  or
compromise any claim in connection with any Condemnation. This power of attorney
is coupled  with an interest  and  therefore is  irrevocable.  However,  nothing
contained in this Section 20 shall  require  Lender to incur any expense or take
any action. Borrower hereby transfers and assigns to Lender all right, title and
interest  of  Borrower  in and to any award or payment  with  respect to (i) any
Condemnation, or any conveyance in lieu of Condemnation,  and (ii) any damage to
the Mortgaged  Property caused by governmental  action that does not result in a
Condemnation.

     (b)  Lender may apply  such  awards or  proceeds,  after the  deduction  of
Lender's  expenses  incurred  in the  collection  of such  amounts,  at Lender's
option, to the restoration or repair of the Mortgaged Property or to the payment
of the  Indebtedness,  with the  balance,  if any, to  Borrower.  Unless  Lender
otherwise  agrees in writing,  any  application of any awards or proceeds to the
Indebtedness  shall  not  extend  or  postpone  the  due  date  of  any  monthly
installments  referred  to in the  Note,  Section  7 of this  Instrument  or any
Collateral Agreement, or change the amount of such installments. Borrower agrees
to execute  such  further  evidence of  assignment  of any awards or proceeds as
Lender may require.

     21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER. [RIGHT TO
UNLIMITED TRANSFERS -- WITH LENDER APPROVAL]

     (a) The occurrence of any of the following events shall constitute an Event
of Default under this Instrument:

(1)  a Transfer of all or any part of the Mortgaged  Property or any interest in
     the Mortgaged Property;

(2)  if  Borrower  is a  limited  partnership,  a  Transfer  of (A) any  general
     partnership interest, or (B) limited partnership interests in Borrower that
     would  cause the  Initial  Owners of  Borrower  to own less than 51% of all
     limited partnership interests in Borrower;

(3)  if Borrower is a general  partnership or a joint venture, a Transfer of any
     general partnership or joint venture interest in Borrower;

<PAGE>

(4)  if  Borrower  is a  limited  liability  company,  a  Transfer  of  (A)  any
     membership interest in Borrower which would cause the Initial Owners to own
     less  than 51% of all the  membership  interests  in  Borrower,  or (B) any
     membership or other interest of a manager in Borrower;

(5)  if  Borrower is a  corporation,  (A) the  Transfer  of any voting  stock in
     Borrower  which would cause the Initial  Owners to own less than 51% of any
     class of voting stock in Borrower or (B) if the outstanding voting stock in
     Borrower is held by 100 or more  shareholders,  one or more  transfers by a
     single  transferor within a 12-month period affecting an aggregate of 5% or
     more of that stock;

(6)  if  Borrower  is a trust,  (A) a Transfer  of any  beneficial  interest  in
     Borrower  which would cause the Initial  Owners to own less than 51% of all
     the beneficial interests in Borrower,  or (B) the termination or revocation
     of the trust, or (C) the removal,  appointment or substitution of a trustee
     of Borrower; and

(7)  a  Transfer  of  any  interest  in a  Controlling  Entity  which,  if  such
     Controlling Entity were Borrower, would result in an Event of Default under
     any of Sections 21(a)(1) through (6) above.

Lender  shall not be  required  to  demonstrate  any  actual  impairment  of its
security  or any  increased  risk of  default  in order to  exercise  any of its
remedies with respect to an Event of Default under this Section 21.

     (b) The  occurrence of any of the following  events shall not constitute an
Event of Default under this Instrument, notwithstanding any provision of Section
21(a) to the contrary:

(1)  a Transfer to which Lender has consented;

(2)  a Transfer that occurs by devise,  descent, or by operation of law upon the
     death of a natural person;

(3)  the grant of a leasehold interest in an individual dwelling unit for a term
     of two years or less not containing an option to purchase;

(4)  a  Transfer  of  obsolete  or worn  out  Personalty  or  Fixtures  that are
     contemporaneously  replaced  by  items  of equal  or  better  function  and
     quality, which are free of liens, encumbrances and security interests other
     than those created by the Loan Documents or consented to by Lender;

<PAGE>

(5)  the grant of an easement,  if before the grant Lender  determines  that the
     easement will not materially affect the operation or value of the Mortgaged
     Property or Lender's interest in the Mortgaged Property,  and Borrower pays
     to  Lender,  upon  demand,  all costs and  expenses  incurred  by Lender in
     connection with reviewing Borrower's request; and

(6)  the creation of a mechanic's,  materialman's,  or judgment lien against the
     Mortgaged  Property  which is released of record or  otherwise  remedied to
     Lender's satisfaction within 30 days of the date of creation.

     (c) Lender shall  consent,  without any adjustment to the rate at which the
Indebtedness  secured by this Instrument bears interest or to any other economic
terms of the  Indebtedness,  to a Transfer  that would  otherwise  violate  this
Section  21 if,  prior  to the  Transfer,  Borrower  has  satisfied  each of the
following requirements:

(1)  the submission to Lender of all information  required by Lender to make the
     determination required by this Section 21(c);

(2)  the absence of any Event of Default;

(3)  the transferee meets all of the eligibility,  credit,  management and other
     standards  (including  but not  limited to any  standards  with  respect to
     previous   relationships   between   Lender  and  the  transferee  and  the
     organization of the transferee)  customarily  applied by Lender at the time
     of the proposed  Transfer to the approval of borrowers in  connection  with
     the origination or purchase of similar mortgages on multifamily properties;

(4)  the Mortgaged  Property,  at the time of the proposed  Transfer,  meets all
     standards  as to its physical  condition  that are  customarily  applied by
     Lender at the time of the proposed  Transfer to the approval of  properties
     in  connection  with the  origination  or purchase of similar  mortgages on
     multifamily properties;

<PAGE>

(5)  in the case of a Transfer of all or any part of the Mortgaged Property, (A)
     the  execution  by  the  transferee  of an  assumption  agreement  that  is
     acceptable to Lender and that, among other things,  requires the transferee
     to  perform  all  obligations  of  Borrower  set  forth in the  Note,  this
     Instrument  and  any  other  Loan  Documents,  and  may  require  that  the
     transferee  comply with any provisions of this Instrument or any other Loan
     Document  which  previously  may have been  waived by Lender,  and (B) if a
     guaranty has been executed and delivered in connection  with the Note, this
     Instrument or any of the other Loan Documents, the transferee causes one or
     more individuals or entities acceptable to Lender to execute and deliver to
     Lender a guaranty in a form acceptable to Lender;

(6)  in the case of a Transfer of any  interest in a  Controlling  Entity,  if a
     guaranty has been executed and delivered in connection  with the Note, this
     Instrument or any of the other Loan  Documents,  the Borrower causes one or
     more individuals or entities acceptable to Lender to execute and deliver to
     Lender a guaranty in a form acceptable to Lender; and

(7)  Lender's receipt of all of the following:

(A)  a review fee in the amount of $2,000.00;

(B)  a transfer fee in an amount equal to 1.0% of the unpaid  principal  balance
     of the Indebtedness immediately before the applicable Transfer; and

(C)  the amount of Lender's out-of-pocket costs (including reasonable attorneys'
     fees) incurred in reviewing the Transfer request.

     22. EVENTS OF DEFAULT.  The  occurrence of any one or more of the following
shall constitute an Event of Default under this Instrument:

     (a) any failure by Borrower to pay or deposit when due any amount  required
by the Note, this Instrument or any other Loan Document;

     (b) any failure by Borrower to maintain the insurance  coverage required by
Section 19;

     (c) any failure by Borrower to comply with the provisions of Section 33;

     (d) fraud or material  misrepresentation  or material omission by Borrower,
any of its officers,  directors,  trustees,  general partners or managers or any
guarantor  in  connection  with  (A)  the  application  for or  creation  of the
Indebtedness,  (B) any  financial  statement,  rent  roll,  or other  report  or
information  provided to Lender during the term of the Indebtedness,  or (C) any
request for  Lender's  consent to any proposed  action,  including a request for
disbursement of funds under any Collateral Agreement;

     (e) any Event of Default under Section 21;

<PAGE>

     (f) the commencement of a forfeiture action or proceeding, whether civil or
criminal,  which, in Lender's reasonable judgment,  could result in a forfeiture
of the  Mortgaged  Property or otherwise  materially  impair the lien created by
this Instrument or Lender's interest in the Mortgaged Property;

     (g) any failure by Borrower  to perform any of its  obligations  under this
Instrument  (other than those  specified in Sections  22(a) through (f)), as and
when  required,  which  continues  for a period of 30 days after  notice of such
failure by Lender to  Borrower.  However,  no such notice or grace  period shall
apply in the case of any such failure which could, in Lender's judgment,  absent
immediate exercise by Lender of a right or remedy under this Instrument,  result
in harm to  Lender,  impairment  of the  Note or this  Instrument  or any  other
security given under any other Loan Document;

     (h) any failure by Borrower to perform any of its  obligations  as and when
required  under any Loan Document  other than this  Instrument  which  continues
beyond the applicable cure period, if any, specified in that Loan Document;

     (i)  any  exercise  by the  holder  of any  debt  instrument  secured  by a
mortgage,  deed of trust or deed to secure debt on the  Mortgaged  Property of a
right to declare all amounts due under that debt instrument  immediately due and
payable; and

     (j) Borrower  voluntarily files for bankruptcy  protection under the United
States  Bankruptcy Code or voluntarily  becomes  subject to any  reorganization,
receivership,  insolvency proceeding or other similar proceeding pursuant to any
other  federal  or  state  law  affecting  debtor  and  creditor  rights,  or an
involuntary  case is  commenced  against  Borrower by any  creditor  (other than
Lender) of  Borrower  pursuant  to the United  States  Bankruptcy  Code or other
federal or state law affecting  debtor and creditor  rights and is not dismissed
or discharged within 60 days after filing.

     23. REMEDIES CUMULATIVE.  Each right and remedy provided in this Instrument
is distinct from all other rights or remedies under this Instrument or any other
Loan  Document or afforded by applicable  law, and each shall be cumulative  and
may be exercised concurrently, independently, or successively, in any order.

     24. FORBEARANCE.

<PAGE>

     (a) Lender may (but shall not be obligated  to) agree with  Borrower,  from
time to time,  and without  giving  notice to, or  obtaining  the consent of, or
having any effect upon the  obligations  of, any  guarantor or other third party
obligor,  to take any of the following  actions:  extend the time for payment of
all or any  part  of the  Indebtedness;  reduce  the  payments  due  under  this
Instrument,  the Note, or any other Loan Document; release anyone liable for the
payment  of any  amounts  under  this  Instrument,  the Note,  or any other Loan
Document;  accept a renewal of the Note; modify the terms and time of payment of
the Indebtedness;  join in any extension or subordination agreement; release any
Mortgaged  Property;  take or release other or additional  security;  modify the
rate of interest or period of  amortization  of the Note or change the amount of
the monthly  installments  payable  under the Note;  and  otherwise  modify this
Instrument, the Note, or any other Loan Document.

     (b) Any  forbearance  by Lender in exercising any right or remedy under the
Note,  this  Instrument,  or any other Loan  Document or  otherwise  afforded by
applicable  law,  shall not be a waiver of or preclude the exercise of any right
or  remedy.  The  acceptance  by  Lender  of  payment  of all or any part of the
Indebtedness  after the due date of such payment,  or in an amount which is less
than the required  payment,  shall not be a waiver of Lender's  right to require
prompt payment when due of all other payments on account of the  Indebtedness or
to exercise any remedies for any failure to make prompt payment.  Enforcement by
Lender of any security for the Indebtedness  shall not constitute an election by
Lender of remedies so as to preclude the  exercise of any other right  available
to Lender.  Lender's  receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

     25. LOAN CHARGES.  If any applicable law limiting the amount of interest or
other charges permitted to be collected from Borrower is interpreted so that any
charge  provided for in any Loan  Document,  whether  considered  separately  or
together with other charges  levied in connection  with any other Loan Document,
violates  that law,  and  Borrower is entitled to the benefit of that law,  that
charge is hereby reduced to the extent  necessary to eliminate  that  violation.
The  amounts,  if any,  previously  paid to Lender  in  excess of the  permitted
amounts shall be applied by Lender to reduce the principal of the  Indebtedness.
For the purpose of determining whether any applicable law limiting the amount of
interest or other  charges  permitted  to be  collected  from  Borrower has been
violated,  all Indebtedness  which  constitutes  interest,  as well as all other
charges levied in connection with the Indebtedness  which  constitute  interest,
shall be deemed to be  allocated  and spread  over the stated  term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be  effected  in such a manner  that the rate of interest so computed is uniform
throughout the stated term of the Note.

     26. WAIVER OF STATUTE OF  LIMITATIONS.  Borrower hereby waives the right to
assert any statute of  limitations  as a bar to the  enforcement  of the lien of
this Instrument or to any action brought to enforce any Loan Document.

<PAGE>

     27.  WAIVER OF  MARSHALLING.  Notwithstanding  the  existence  of any other
security  interests  in the  Mortgaged  Property  held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all of
the  Mortgaged  Property  shall be subjected  to the  remedies  provided in this
Instrument,  the Note, any other Loan Document or applicable  law.  Lender shall
have the  right to  determine  the  order in which  any or all  portions  of the
Indebtedness are satisfied from the proceeds  realized upon the exercise of such
remedies.  Borrower  and any party who now or in the future  acquires a security
interest in the Mortgaged Property and who has actual or constructive  notice of
this Instrument waives any and all right to require the marshalling of assets or
to require that any of the  Mortgaged  Property be sold in the inverse  order of
alienation  or that any of the  Mortgaged  Property  be sold in parcels or as an
entirety in  connection  with the exercise of any of the  remedies  permitted by
applicable law or provided in this Instrument.

     28. FURTHER ASSURANCES.  Borrower shall execute,  acknowledge, and deliver,
at its sole cost and expense, all further acts, deeds, conveyances, assignments,
estoppel certificates,  financing statements, transfers and assurances as Lender
may require from time to time in order to better  assure,  grant,  and convey to
Lender the rights intended to be granted,  now or in the future, to Lender under
this Instrument and the Loan Documents.

     29.  ESTOPPEL  CERTIFICATE.  Within 10 days  after a request  from  Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged by
Borrower,  certifying to Lender or any person  designated  by Lender,  as of the
date of such  statement,  (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications,  that the Loan Documents
are in full force and effect as modified and setting forth such  modifications);
(ii) the unpaid principal  balance of the Note; (iii) the date to which interest
under the Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness  or in  performing  or observing any of the covenants or agreements
contained  in this  Instrument  or any of the other Loan  Documents  (or, if the
Borrower is in default,  describing  such  default in  reasonable  detail);  (v)
whether or not there are then existing any setoffs or defenses known to Borrower
against  the  enforcement  of any  right or  remedy  of  Lender  under  the Loan
Documents; and (vi) any additional facts requested by Lender.

     30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

     (a) This Instrument,  and any Loan Document which does not itself expressly
identify  the law that is to apply to it,  shall be  governed by the laws of the
jurisdiction in which the Land is located (the "PROPERTY JURISDICTION").

     (b) Borrower  agrees that any  controversy  arising under or in relation to
the  Note,  this  Instrument,  or any other  Loan  Document  shall be  litigated
exclusively  in the  Property  Jurisdiction.  The state and  federal  courts and
authorities with jurisdiction in the Property  Jurisdiction shall have exclusive
jurisdiction  over all  controversies  which shall arise under or in relation to
the  Note,  any  security  for the  Indebtedness,  or any other  Loan  Document.
Borrower irrevocably consents to service, jurisdiction, and venue of such courts
for any such litigation and waives any other venue to which it might be entitled
by virtue of domicile, habitual residence or otherwise.

     31. NOTICE.

<PAGE>

     (a) All  notices,  demands  and other  communications  ("NOTICE")  under or
concerning this Instrument  shall be in writing.  Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and shall
be deemed  given on the  earliest  to occur of (1) the date  when the  notice is
received  by the  addressee;  (2) the first  Business  Day  after the  notice is
delivered to a recognized overnight courier service,  with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business Day
after the notice is  deposited in the United  States mail with postage  prepaid,
certified mail, return receipt  requested.  As used in this Section 31, the term
"Business Day" means any day other than a Saturday, a Sunday or any other day on
which Lender is not open for business.

     (b) Any party to this  Instrument  may change the address to which  notices
intended  for it are to be directed by means of notice  given to the other party
in accordance with this Section 31. Each party agrees that it will not refuse or
reject  delivery of any notice given in accordance with this Section 31, that it
will  acknowledge,  in writing,  the  receipt of any notice upon  request by the
other  party and that any notice  rejected  or refused by it shall be deemed for
purposes of this Section 31 to have been received by the rejecting  party on the
date so refused or rejected,  as conclusively  established by the records of the
U.S. Postal Service or the courier service.

     (c) Any notice  under the Note and any other Loan  Document  which does not
specify  how  notices  are to be given  shall be given in  accordance  with this
Section 31.

     32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial interest in the
Note  (together with this  Instrument and the other Loan  Documents) may be sold
one or more  times  without  prior  notice to  Borrower.  A sale may result in a
change of the Loan  Servicer.  There also may be one or more changes of the Loan
Servicer  unrelated  to a sale of the  Note.  If there  is a change  of the Loan
Servicer, Borrower will be given notice of the change.

     33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full, Borrower
(a) shall not  acquire any real or personal  property  other than the  Mortgaged
Property and personal  property  related to the operation and maintenance of the
Mortgaged Property; (b) shall not operate any business other than the management
and operation of the Mortgaged  Property;  and (c) shall not maintain its assets
in a way difficult to segregate and identify.

     34.  SUCCESSORS  AND ASSIGNS  BOUND.  This  Instrument  shall bind, and the
rights granted by this Instrument shall inure to, the respective  successors and
assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21
shall be an Event of Default.

     35.  JOINT AND SEVERAL  LIABILITY.  If more than one person or entity signs
this Instrument as Borrower,  the obligations of such persons and entities shall
be joint and several.

     36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

<PAGE>

     (a) The  relationship  between  Lender and Borrower shall be solely that of
creditor and debtor,  respectively,  and nothing  contained  in this  Instrument
shall create any other relationship between Lender and Borrower.

     (b) No creditor of any party to this  Instrument  and no other person shall
be a third party  beneficiary  of this  Instrument  or any other Loan  Document.
Without limiting the generality of the preceding  sentence,  (1) any arrangement
(a  "SERVICING  ARRANGEMENT")  between the Lender and any Loan Servicer for loss
sharing  or  interim   advancement  of  funds  shall  constitute  a  contractual
obligation  of such Loan  Servicer  that is  independent  of the  obligation  of
Borrower for the payment of the Indebtedness,  (2) Borrower shall not be a third
party beneficiary of any Servicing  Arrangement,  and (3) no payment by the Loan
Servicer  under  any  Servicing  Arrangement  will  reduce  the  amount  of  the
Indebtedness.

     37.  SEVERABILITY;  AMENDMENTS.  The invalidity or  unenforceability of any
provision of this Instrument shall not affect the validity or  enforceability of
any other  provision,  and all other  provisions  shall remain in full force and
effect.  This Instrument  contains the entire  agreement among the parties as to
the  rights  granted  and  the  obligations  assumed  in this  Instrument.  This
Instrument  may not be amended  or  modified  except by a writing  signed by the
party against whom enforcement is sought.

     38.  CONSTRUCTION.  The  captions  and  headings  of the  sections  of this
Instrument are for convenience  only and shall be disregarded in construing this
Instrument.  Any  reference  in this  Instrument  to an "Exhibit" or a "Section"
shall,  unless  otherwise  explicitly  provided,   be  construed  as  referring,
respectively,  to an Exhibit attached to this Instrument or to a Section of this
Instrument.  All  Exhibits  attached to or referred  to in this  Instrument  are
incorporated by reference into this Instrument. Any reference in this Instrument
to a statute or  regulation  shall be  construed as referring to that statute or
regulation as amended from time to time.  Use of the singular in this  Agreement
includes the plural and use of the plural includes the singular. As used in this
Instrument, the term "including" means "including, but not limited to."

     39.  LOAN  SERVICING.  All  actions  regarding  the  servicing  of the loan
evidenced by the Note,  including  the  collection  of payments,  the giving and
receipt  of  notice,  inspections  of the  Property,  inspections  of books  and
records,  and the granting of consents and  approvals,  may be taken by the Loan
Servicer unless Borrower  receives notice to the contrary.  If Borrower receives
conflicting  notices  regarding  the identity of the Loan  Servicer or any other
subject, any such notice from Lender shall govern.

<PAGE>

     40.  DISCLOSURE OF INFORMATION.  Lender may furnish  information  regarding
Borrower  or the  Mortgaged  Property  to  third  parties  with an  existing  or
prospective  interest in the servicing,  enforcement,  evaluation,  performance,
purchase or  securitization  of the  Indebtedness,  including but not limited to
trustees,   master   servicers,   special   servicers,   rating  agencies,   and
organizations  maintaining  databases on the  underwriting  and  performance  of
multifamily  mortgage loans.  Borrower  irrevocably waives any and all rights it
may have under  applicable  law to prohibit such  disclosure,  including but not
limited to any right of privacy.

     41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the application
for the loan submitted to Lender (the "LOAN  APPLICATION")  and in all financial
statements,  rent rolls, reports,  certificates and other documents submitted in
connection  with the Loan  Application are complete and accurate in all material
respects.  There has been no material adverse change in any fact or circumstance
that would make any such information incomplete or inaccurate.

     42.  SUBROGATION.  If, and to the extent  that,  the  proceeds  of the loan
evidenced by the Note are used to pay,  satisfy or discharge  any  obligation of
Borrower  for the payment of money that is secured by a  pre-existing  mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "PRIOR LIEN"),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower's
request, and Lender shall automatically, and without further action on its part,
be subrogated to the rights,  including lien priority, of the owner or holder of
the  obligation  secured  by the Prior  Lien,  whether  or not the Prior Lien is
released.

     43. ACCELERATION; REMEDIES. At any time during the existence of an Event of
Default,  Lender,  at  Lender's  option,  may  declare  the  Indebtedness  to be
immediately due and payable without further demand,  and may invoke the power of
sale and any other  remedies  permitted  by  Colorado  law or  provided  in this
Instrument  or in any other Loan  Document.  Lender 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 Lender  invokes the power of sale,  Trustee shall give notice of sale in
the manner required by Colorado law to Borrower and to all other persons who are
entitled to receive such notice under Colorado law, and shall sell the Mortgaged
Property  according to Colorado law. Trustee may sell the Mortgaged  Property 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 Mortgaged Property by public  announcement at
the time and place of any previously scheduled sale. Lender or Lender's designee
may purchase the  Mortgaged  Property at any sale.  Trustee shall deliver to the
purchaser at the sale Trustee's  certificate  describing the Mortgaged  Property
and the time  when the  purchaser  will be  entitled  to  Trustee's  deed to the
Mortgaged Property. The recitals in Trustee's deed shall be prima facie evidence
of the truth of the statements made in those recitals.

<PAGE>

     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 not to exceed 5% of
the gross sales price,  attorneys' fees and costs of title evidence;  (b) to the
Indebtedness in such order as Lender, in Lender's  discretion,  directs; and (c)
the excess, if any, to the person or persons legally entitled to the excess.

     44. RELEASE. Upon payment of the Indebtedness, Lender shall request Trustee
to release  this  Instrument  and shall  deliver to Trustee the  canceled  Note.
Trustee  shall release this  Instrument  without  further  inquiry or liability.
Borrower  shall pay all costs of  recordation,  if any, of the release and shall
pay the statutory Trustee's fee.

     45. WAIVER OF HOMESTEAD.  Borrower waives all right of homestead  exemption
in the Mortgaged Property.

     46.  WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A)  COVENANTS  AND
AGREES  NOT TO ELECT A TRIAL BY JURY WITH  RESPECT TO ANY ISSUE  ARISING  OUT OF
THIS INSTRUMENT 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.

     ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument:

|X|  Exhibit A Description of the Land (required). -

|X|  Exhibit B Modifications to Instrument -

<PAGE>

     IN WITNESS  WHEREOF,  Borrower has signed and delivered this  Instrument or
has caused this  Instrument  to be signed and  delivered by its duly  authorized
representative.

          BORROWER:

          RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company

          By:   /s/ Al Feld     (SEAL)
                -----------
                Al Feld
                Manager

STATE OF COLORADO, Denver County ss:

The foregoing was acknowledged before me this 20th day of November,  1998, by Al
Feld,  Manager of RED CANYON AT PALOMINO PARK LLC, a Colorado limited  liability
company, on behalf of the organization.

                            /s/ Susan M. Messenger
                            -------------------------------
                            Notary Public

                            My Commission expires: September 6,2002

<PAGE>

                                    EXHIBIT A

                            [DESCRIPTION OF THE LAND]

<PAGE>

                                    EXHIBIT B

                           MODIFICATIONS TO INSTRUMENT

The following modifications are made to the text of the Instrument that precedes
this Exhibit:

1    In the fourth paragraph of page one:

     * at the end of the  first  sentence,  add the  phrase  "except  for  those
matters  listed in a Schedule of Exceptions  to Coverage in any title  insurance
policy  to  be  issued  to  Lender  contemporaneously  with  the  execution  and
recordation of this Instrument and insuring  Lender's  interest in the Mortgaged
Property".

     * in the second sentence,  replace the phrase  "easements and restrictions"
with the word "matters".

2    In paragraph  1(f),  insert the phrase  "owned by Borrower"  after the word
     "property".

3    At the end of paragraph  1(z)(C) insert after "stock":  "(other than shares
     in a  corporation  having more than 100  shareholders)".  Also in paragraph
     1(z) after the phrase "Bankruptcy Code" insert "or the execution,  delivery
     and recording at any time after  recording of this Instrument of the "Right
     of  First/Last  Offer  Agreement"  as such term is defined in that  certain
     Restrictive  Covenant  Agreement dated May 30, 1997 between  Wellsford Park
     Highlands Corp. and ERP Operating Limited Partnership."

4    In paragraph 4(e), add the following sentence:

     Notwithstanding the foregoing,  not more than 5% of the Leases may be for a
     term of less than 6 months  but not less  than 3 months,  and not more than
     10% of the Leases may be corporate leases of not less than one month.

5    In paragraph 10, add the following sentence:

     Notwithstanding the foregoing,  so long as there does not otherwise exist a
     default  under this  Instrument  or the  Multifamily  Note secured  hereby,
     Borrower may, upon providing  Lender with security  satisfactory to Lender,
     proceed   diligently   and  in  good  faith  to  contest  the  validity  or
     applicability of any laws, ordinances,  regulations and requirements of any
     Governmental  Authority and all recorded covenants and agreements  relating
     to or affecting the Mortgaged Property.

<PAGE>

6    On the second line of paragraph  14(c),  insert the phrase "in all material
     respects" after the word "accurate".

7    In the next to the last line of paragraph 17, replace the word "alter" with
     the phrase "materially alter as to appearance".

8    In  paragraph  18(a)(2),  insert the phrase  "(except for the gas lines and
     sanitary sewer lines now in place)" after the word "Property".

9    In the tenth line of paragraph  18(g),  replace the phrase "Borrower or any
     other"  with  the  phrase  "any  party  (other  than  Borrower,  upon  such
     Borrower's written request)".

10   In paragraph 18(j):

     * "and" is deleted from the end of subparagraph (4)

     * the period at the end of subparagraph  (5) is replaced with the phrase ";
and"

     * a new subparagraph (6) is added, as follows:

     (6)  Notwithstanding  anything in the above  subparagraphs (1) through (5),
          Borrower  is not  obligated  to  indemnify,  hold  harmless  or defend
          against Indemnitees' own gross negligence and willful misconduct.

11   In the  fifth  and  sixth  lines of  paragraph  19(a),  strike  the  phrase
     "sinkhole  insurance,  mine  subsidence  insurance,  earthquake  insurance,
     and,".

12   At the end of paragraph 19(f), add the following sentence:

     "Lender shall exercise the power described in this paragraph only if it has
     determined,  in its  discretion,  that  Borrower  is not timely  taking the
     actions described above".

13   At the end of paragraph  19(g)(2),  add the phrase "  (including  any funds
     that Borrower may elect to contribute to the Restoration)".

14.  Paragraph  21(b) is  supplemented  and  modified  by adding  the  following
     provisions:

<PAGE>

     (7)  Any  transfer  or series of  transfers  by one or more of the  Initial
          Owners (each a "Transferor")  of all or a portion of the  Transferor's
          interests  in the  Borrower  to any  one or  more  of  Wellsford  Park
          Highlands  Corp.  or  Wellsford  Real  Properties,  Inc.,  a  Maryland
          corporation  ("WRP"), or ERP Operating Limited Partnership ("ERP"), or
          an entity owned and controlled by Wellsford Park Highlands  Corp., WRP
          or  ERP  (collectively,   the   "Transferees")   under  the  following
          conditions:

          (a)  Lender has  received  and  approved  the  documents  transferring
               Transferor's interest in the Borrower to the Transferee; and

          (b)  Lender has  reviewed  and  approved  the  documents  creating and
               governing  the  Transferee  if the  Transferee is an entity other
               than Wellsford Park Highlands Corp., WRP or ERP; and

          (c)  The  Initial  Owners  or WRP or ERP or any  combination  of  them
               retain directly or indirectly at least 51% ownership  interest in
               Borrower; and

          (d)  There  exists  no  breach  by the  Borrower  of any  covenant  or
               agreement in this Instrument,  the Note or any other  instruments
               or documents executed and delivered in connection therewith; and

          (e)  Borrower  pays to  Lender  (1) at the time it  requests  Lender's
               consent,  a review fee in the  amount of $2,000  (which fee shall
               not be refundable); and (2) upon demand by Lender, all reasonable
               fees and out of pocket costs of Lender's legal counsel related to
               the transfer; and

     (8)  The  transfer  by Al Feld  of all  his  interest  in the  Borrower  to
          Wellsford Park  Highlands  Corp. as  contemplated  under the Operating
          Agreement of the Borrower,  and the resignation of Al Feld as a Member
          and Manager of the Borrower in connection with such transfer.

15.  At the  end of  paragraph  22(f),  add  the  phrase  "(If  such  action  or
     proceeding is not dismissed within 30 days thereof)".

16.  In the 3rd line of paragraph  28, insert the word  "reasonably"  before the
     word "require".

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