Document:

<PAGE>

                                                                    Exhibit 10.1

                               ADVISORY AGREEMENT

                                 BY AND BETWEEN

                          CORNERSTONE REALTY FUND, INC.

                                   ("COMPANY")

                                       AND

                        CORNERSTONE REALTY ADVISORS, LLC

                                   ("ADVISOR")

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>                                                                      <C>
Definitions......................................................          1
Appointment......................................................          8
Authority of the Advisor.........................................          8
Duties and Authority of the Advisor..............................          9
Records; Access..................................................         13
Limitations on Activities........................................         13
Relationship With Directors......................................         14
Fees.............................................................         14
Expenses.........................................................         15
Fidelity Bond....................................................         17
Other Activities of the Advisor..................................         17
Relationship of Advisor and Company..............................         18
Representations and Warranties...................................         18
Term; Termination of Agreement...................................         19
Termination......................................................         19
Payments to and Duties of Advisor upon Termination...............         19
Assignment to an Affiliate.......................................         20
Indemnification by the Company...................................         20
Indemnification by Advisor.......................................         21
Advisor's Liability..............................................         21
Notices..........................................................         21
Modification.....................................................         21
Severability.....................................................         22
Construction.....................................................         22
Entire Agreement.................................................         22
Indulgences, Not Waivers.........................................         22
Gender...........................................................         22
Titles Not to Affect Interpretation..............................         22
Execution in Counterparts........................................         22
Initial Investment...............................................         22
Name.............................................................         22
</TABLE>

                                       (i)

<PAGE>

                               ADVISORY AGREEMENT

      THIS ADVISORY AGREEMENT, dated as of __________, 2005, is entered into
between CORNERSTONE REALTY FUND, INC., a Maryland corporation (the "Company"),
and CORNERSTONE REALTY ADVISORS, LLC, a California limited liability company
(the "Advisor").

                               W I T N E S S E T H

      WHEREAS, the Company has filed with the Securities and Exchange Commission
a Registration Statement on Form S-11 (No. 333-_______) (the "Registration
Statement") covering the issuance of common stock, and the Company may
subsequently issue additional shares of common stock (collectively, the
"Stock");

      WHEREAS, the Company intends to qualify as a REIT (as defined below), and
to invest its funds in investments permitted by the terms of the Company's
charter and Sections 856 through 860 of the Code (as defined below);

      WHEREAS, the Company desires to avail itself of the experience, sources of
information, advice, assistance and certain facilities available to the Advisor
and to have the Advisor undertake the duties and responsibilities hereinafter
set forth, on behalf of, and subject to the supervision of the Board of
Directors of the Company all as provided herein; and

      WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

      1. Definitions. As used in this Advisory Agreement (the "Agreement"),
  the following terms have the definitions hereinafter indicated:

      Acquisition Expenses means expenses related to the Company's sourcing,
selection, evaluation and acquisition of, and investment in, Properties, whether
or not acquired or made, including but not limited to legal fees and expenses,
travel and communications expenses, costs of financial analysis, appraisals and
surveys, nonrefundable option payments on Property not acquired, accounting fees
and expenses, computer use-related expenses, architectural and engineering
reports, environmental reports, title insurance and escrow fees, and personnel
and other direct expenses related to the selection and acquisition of
Properties.

      Acquisition Fee means any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any Person to any other Person (including any fees
or commissions paid by or to any Affiliate of the Company or the Advisor) in
connection with the making or investing in mortgage loans or the purchase,
development or construction of a Property, including, without limitation, real
estate commissions, acquisition fees, finder's fees, selection fees, Development
Fees and Construction Fees (except as provided in the following sentence),
nonrecurring management fees, consulting fees, loan fees, points, or any other
fees or commissions of a similar nature. Excluded shall be any commissions or
fees incurred in connection with the leasing of any Property, and Development
Fees or Construction Fees paid to any Person or entity not affiliated with the
Advisor in connection with the actual development and construction of any
Property.

      Advisor means the Person responsible for directing or performing the
day-to-day business affairs of the Company, including a Person to which an
Advisor subcontracts substantially, all such functions. The Advisor is
Cornerstone Realty Advisors, LLC or any Person which succeeds it in such
capacity.

      Advisory Agreement means this agreement between the Company and the
Advisor pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the Company, as it may be amended or restated from time to
time.

<PAGE>

      Advisor Acquisition Fee means the fee paid to the Advisor for services
rendered in connection with the investigation, selection and acquisition (by
purchase, investment or exchange) of Properties in an amount equal to 2.0% of
Gross Proceeds other than Gross Proceeds from the Reinvestment Plan.

      Affiliate or Affiliated means, as to any individual, corporation,
partnership, trust, limited liability company or other legal entity (other than
the Company), (i) any Person or entity directly or indirectly through one or
more intermediaries controlling, controlled by, or under common control with
another Person or entity; (ii) any Person or entity, directly or indirectly
owning, controlling, or holding with power to vote ten percent (10%) or more of
the outstanding voting Securities of another Person or entity; (iii) any
officer, director, general partner or trustee of such Person or entity; (iv) any
Person ten percent (10%) or more of whose outstanding voting Securities are
directly or indirectly owned, controlled or held, with power to vote, by such
other Person; and (v) if such other Person or entity is an officer, director,
general partner, or trustee of a Person or entity, the Person or entity for
which such Person or entity acts in any such capacity.

      AMEX means the American Stock Exchange.

      Appraised Value means value according to an appraisal made by an
Independent Appraiser.

      Assets means any and all GAAP assets including but not limited to all real
estate investments (real, personal or otherwise), tangible or intangible, owned
or held by, or for the account of, the Company, whether directly or indirectly
through another entity or entities, including interests in any Person or in
Joint Ventures which directly or indirectly own real estate.

      Average Invested Assets means, for a specified period, the average of the
aggregate GAAP basis book carrying values of the assets of the Company invested,
directly or indirectly, in equity interests in and loans secured by real estate
before reserves for depreciation or bad debts or other similar non-cash
reserves, computed by taking the average of such values at the end of each month
during such period.

      Asset Management Fee means the fee paid to the Advisor for directing or
performing the day-to-day business affairs of the Company in the amount
established pursuant to Section 9(b).

      Board of Directors or Board means the individuals holding such office, as
of any particular time, under the Charter of the Company, whether they be the
Directors named therein or additional or successor Directors.

      Bylaws means the Bylaws of the Company, as the same may be amended from
time to time.

      Capped O&O Expenses means all Organizational and Offering Expenses (other
than the non-accountable due diligence allowance payable to the Dealer Manager
of up to 0.5% of the Gross Proceeds) in excess of 5.0% of the Gross Proceeds
raised in a completed Offering other than Gross Proceeds from Stock sold
pursuant to the Reinvestment Plan.

      Cash from Financings means the net cash proceeds realized by the Company
from the financing of Property or from the refinancing of any Company
indebtedness.

      Cash from Sales means the net cash proceeds realized by the Company from
the sale, exchange or other disposition of any of its Assets after deduction of
all expenses incurred in connection therewith. Cash from Sales shall not include
Cash from Financings.

      Cash from Sales and Financings means Cash from Sales plus Cash from
Financings.

      Charter means the charter of the Company, including the Articles of
Incorporation and all Articles of Amendment, Articles Supplementary and other
modifications thereto as filed with the State Department of Assessments and
Taxation of the State of Maryland (the "SDAT").

                                      -2-

<PAGE>

      Code means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto. Reference to any provision of the Code
shall mean such provision as in effect from time to time, as the same may be
amended, and any successor provision thereto, as interpreted by any applicable
regulations as in effect from time to time.

      Common Stock means shares of the Company's common stock, $.001 par value
per share, the terms and conditions of which are set forth in the Charter.

      Company means Cornerstone Realty Fund, Inc., a corporation organized under
the laws of the State of Maryland.

      Competitive Real Estate Commission. A real estate or brokerage commission
paid for the purchase or sale of a Property that is reasonable, customary and
competitive in light of the size, type and location of the Property.

      Construction Fee means a fee or other remuneration for acting as general
contractor and/or construction manager to construct, supervise or coordinate
leasehold or other improvements or projects, or to provide major repairs or
rehabilitation for a Property.

      Dealer Manager means Pacific Cornerstone Capital, Inc., an Affiliate of
the Advisor, or such other Person or entity selected by the Board of Directors
to act as the dealer manager for the offering of the Stock. Pacific Cornerstone
Capital, Inc. is a member of the National Association of Securities Dealers,
Inc.

      Development Fee means a fee for the packaging of a Property, including
negotiating and approving plans, and undertaking to assist in obtaining zoning
and necessary variances and financing for the specific Property, either
initially or at a later date.

      Director means an individual who is a member of the Board of Directors.

      Disposition Fee means the Disposition Fee as defined in Section 9(d) of
this Agreement.

      Dividends means any dividends or other distributions of money or other
property paid by the Company to the holders of Common Stock or Preferred Stock,
including dividends that may constitute a return of capital for federal income
tax purposes. For purposes of calculating the Subordinated Incentive Fee Due
Upon Listing, the Subordinated Performance Fee Due Upon Termination and the
Subordinated Share of Net Sale Proceeds, the 10% Stock Dividend paid to the
persons who purchase the first $125,000,000 of Stock in the Initial Public
Offering, or such lesser amount qualifying for the Special 10% Stock Dividend as
our Board determines, shall be disregarded.

      Excess Expense Guidelines is defined in Section 10(c)(iii) hereof.

      Excess Market Value means the amount by which (i) the market value of the
outstanding Stock, measured by taking the average closing price or average of
bid and asked price, as the case may be, during the consecutive 30-day period
commencing twelve (12) months following Listing and ending eighteen (18) months
following Listing during which the average closing price or average of bid and
asked price of the Stock is the highest (the "Market Value"), plus the total of
all Dividends (other than the Special 10% Stock Dividend) and other
distributions paid to Stockholders from the Company's inception until the date
that Market Value is determined, exceeds (ii) an amount equal to 100% of the
Invested Capital, plus an amount equal to a specified cumulative, non-compounded
per annum return on the Invested Capital from the date of investment through the
date Market Value is determined.

      Excess Value means the amount by which the Net Appraised Value exceeds the
sum of 100% of Invested Capital, plus an amount equal to a specified cumulative,
non-compounded per annum return on Invested Capital, calculated on a weighted
average daily basis, less all prior Dividends and other distributions.

      FFO means funds from operations which is Net Income, calculated in
accordance with GAAP, less gains (or losses) from dispositions of real estate
held for investment purposes and real estate-related depreciation, plus the
Company's pro rata share of funds from operations of consolidated and
unconsolidated joint ventures.

                                      -3-

<PAGE>

      GAAP means generally accepted accounting principles consistently applied
as used in the United States.

      Gross Proceeds means the aggregate purchase price of all Stock sold for
the account of the Company, including Stock sold pursuant to the Reinvestment
Plan, without deduction for Sales Commissions, volume discounts, fees paid to
the Dealer Manager or other Organization and Offering Expenses. Gross Proceeds
does not include Stock issued in exchange for OP Units.

      Independent Appraiser means a person or entity, who is not an Affiliate of
the Advisor or the Directors, who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of the type held by
the Company, and who is a qualified appraiser of real estate as determined by
the Board. Membership in a nationally recognized appraisal society such as the
American Institute of Real Estate Appraisers or the Society of Real Estate
Appraisers shall be conclusive evidence of such qualification.

      Independent Director means a Director who is not, and within the last two
(2) years has not been, directly or indirectly associated with the Advisor by
virtue of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) performance of services, other
than as a Director, for the Company, (v) service as a director or trustee of
more than three (3) real estate investment trusts advised by the Advisor, or
(vi) maintenance of a material business or professional relationship with the
Advisor or any of its Affiliates. An indirect relationship shall include
circumstances in which a Director's spouse, parents, children, siblings,
mothers- or fathers-in-law, sons- or daughters-in-law or brothers- or
sisters-in-law are or have been associated with the Advisor, any of its
Affiliates or the Company. A business or professional relationship is considered
material if the gross revenue derived by the Director from the Advisor and
Affiliates exceeds five percent (5%) of either the Director's annual gross
revenue during either of the last two (2) years or the Director's net worth on a
fair market value basis.

      Initial Public Offering means the offering and sale of Common Stock of the
Company pursuant to the Company's first effective registration statement
covering such Common Stock filed under the Securities Act of 1933, as amended.

      Invested Capital means the amount calculated by multiplying the total
number of shares of Stock purchased by Stockholders by (i) the Offering Price
for the Stock or (ii) for Stock not purchased in an Offering, the issue price
for the Stock; in each case reduced by any Dividends or distributions which
represent a return of capital and any amounts paid by the Company to repurchase
shares of Stock pursuant to a plan for repurchase of the Company's Stock. For
purposes of calculating the Invested Capital, the 10% Stock Dividend paid to the
persons who purchase the first $125,000,000 of Stock in the Initial Public
Offering, or such lesser amount qualifying for the Special 10% Stock Dividend as
our Board determines, shall be disregarded.

      Joint Venture or Joint Ventures means those joint venture or general
partnership arrangements in which the Company or the Operating Partnership is a
co-venturer or general partner which are established to acquire Properties.

      Leasing Agent means an entity that has been retained to perform and carry
out leasing activities for one or more of the Properties.

      Listed. Approved for trading on the NYSE, AMEX, Nasdaq/NMS or other
over-the-counter market, any successor to such entities or on any national
securities exchange that has listing standards that the Securities and Exchange
Commission determines by rule are substantially similar to the listing standards
of the NYSE, AMEX or Nasdaq/NMS. The term "Listing" shall have the correlative
meaning.

      Nasdaq/NMS. National Market System of the Nasdaq Stock Market.

      NASAA means the North American Securities Administrators Association, Inc.

      NASAA Net Income means for any period, the total revenues applicable to
such period, less the total expenses applicable to such period excluding
additions to reserves for depreciation, bad debts or other similar non-

                                      -4-

<PAGE>

cash reserves; provided, however, NASAA Net Income for purposes of calculating
total allowable Operating Expenses shall exclude the gain from the sale of the
Company's Assets.

      NASAA REIT Guidelines means the Statement of Policy Regarding Real Estate
Investment Trusts published by the North American Securities Administrators
Association.

      Net Appraised Value means the Appraised Value of the Company's Assets at
the Termination Date, less amounts of all indebtedness secured by the Company's
Properties.

      Net Asset Value means the total Assets including intangible assets
relating to SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and
Other Intangible Assets (but not including other GAAP intangibles) at cost
before deducting depreciation or other non-cash reserves less total liabilities,
calculated at least quarterly on a basis consistently applied.

      Net Income means net income as calculated in accordance with GAAP.

      Net Sale Proceeds means in the case of a transaction described in clause
(A) of the definition of Sale, the net proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Operating
Partnership. In the case of a transaction described in clause (B) of such
definition, Net Sale Proceeds means the net proceeds of any such transaction
less the amount of any legal and other selling expenses incurred by the
Operating Partnership in connection with such transaction. In the case of a
transaction described in clause (C) of such definition, Net Sale Proceeds means
the net proceeds of any such transaction actually distributed to the Operating
Partnership from the Joint Venture less any expenses incurred by the Operating
Partnership in connection with such transaction. In the case of a transaction or
series of transactions described in clause (D) of the definition of Sale, Net
Sale Proceeds means the net proceeds of any such transaction less the amount of
all commissions and closing costs paid by the Operating Partnership. In the case
of a transaction described in clause (E) of such definition, Net Sale Proceeds
means the net proceeds of any such transaction less the amount of all selling
costs and other expenses incurred by the Operating Partnership in connection
with such transaction. Net Sale Proceeds shall also include, in the case of any
lease of a Property consisting of a building only, any amounts from tenants,
borrowers or lessees that the Company, as general partner of the Operating
Partnership determines, in its discretion, to be economically equivalent to the
proceeds of a Sale. Net Sale Proceeds shall not include any amounts used to
repay outstanding indebtedness secured by the asset disposed of in the sale.

      NYSE means the New York Stock Exchange.

      Offering means an offering of Stock that is registered with the U.S.
Securities and Exchange Commission, excluding Stock offered under any employee
benefit plan.

      Offering Price means, with respect to each share of Stock, the highest
price at which such Stock was offered by the Company in the Offering pursuant to
which such Stock was issued, without regard to any price reductions for certain
types of purchasers or volume discounts.

      Operating Expenses means all direct and indirect costs and expenses
incurred by the Company, as determined under generally accepted accounting
principles, which in any way are related to the operation of the Company or to
Company business, including advisory fees, but excluding (i) the expenses of
raising capital such as Organizational and Offering Expenses, legal, audit,
accounting, underwriting, brokerage, listing, registration, and other fees,
printing and other such expenses and taxes incurred in connection with the
issuance, distribution, transfer, registration and Listing of the Stock, (ii)
interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad debt reserves, (v) Acquisition Fees and Acquisition
Expenses, (vi) real estate commissions on the Sale of property, and other
expenses connected with the acquisition and ownership of real estate interests,
mortgage loans, or other property (such as the costs of foreclosure, insurance
premiums, legal services, maintenance, repair, and improvement of property) and
(vii) any incentive fees which may be paid in compliance with the NASAA REIT
Guidelines. The definition of "Operating Expenses" set forth above is intended
to encompass only those expenses which are required to be treated as Operating
Expenses under the NASAA REIT guidelines. As a result, and notwithstanding the
definition set forth above, any expense of the Company which is

                                      -5-

<PAGE>

not an Operating Expense under the NASAA REIT Guidelines shall not be treated as
an Operating Expense for purposes hereof.

      Operating Partnership means Cornerstone Operating Partnership II, L.P.
which is the partnership through which the Company may own Properties.

      Operating Partnership Agreement means the Limited Partnership Agreement of
the Operating Partnership, as amended and restated from time to time.

      OP Unit means a unit of limited partnership interest in the Operating
Partnership.

      Organizational and Offering Expenses means any and all costs and expenses
incurred by the Company, the Advisor or any Affiliate of either in connection
with and in preparing the Company for registration of and subsequently offering
and distributing its Stock to the public, which may include but are not limited
to total underwriting and brokerage discounts and commissions (including fees of
the underwriters' attorneys), legal, accounting and escrow fees, expenses for
printing, engraving, amending, supplementing and mailing, distribution costs,
compensation to employees while engaged in registering, marketing and
wholesaling the Stock, telegraph and telephone costs, all advertising and
marketing expenses (including the costs related to investor and broker-dealer
sales meetings), charges of transfer agents, registrars, trustees, escrow
holders, depositories, experts, and fees, expenses and taxes related to the
filing, registration and qualification of the sale of the Securities under
Federal and State laws, including accountants' and attorneys' fees and other
accountable offering expenses. Organization and Offering Expenses may include,
but are not limited to: (i) amounts to reimburse the Advisor for all marketing
related costs and expenses such as compensation to and direct expenses of the
Advisor's employees or employees of the Advisor's Affiliates in connection with
registering and marketing the Stock; (ii) compensation to and direct expenses of
employees of the Dealer Manager while preparing for the offering and marketing
of the Stock and in connection with their wholesaling activities but not Sales
Commissions; (iii) travel and entertainment expenses related to the offering and
marketing of the Stock; (iv) facilities and technology costs and other costs and
expenses associated with the offering and to facilitate the marketing of the
Stock including Web site design and management; (v) costs and expenses of
conducting educational conferences and seminars; (vi) costs and expenses of
attending broker-dealer sponsored conferences; and (vii) payment or
reimbursement of bona fide due diligence expenses.

      Person shall mean any natural person, partnership, corporation,
association, trust, limited liability company or other legal entity.

      Property or Properties means the real properties or real estate
investments which are acquired by the Company either directly or through the
Operating Partnership, Joint Ventures, partnerships or other entities.

      Property Manager means any entity that has been retained to perform and
carry out at one or more of the Properties property management services.

      Prospectus means any document, notice, or other communication satisfying
the standards set forth in Section 10 of the Securities Act of 1933, as amended,
and contained in a currently effective registration statement filed by the
Company with, and declared effective by, the Securities and Exchange Commission,
or if no registration statement is currently effective, then the Prospectus
contained in the most recently effective registration statement.

      Reinvestment Plan shall have the meaning set forth in Section 8.8 of the
Charter.

      REIT means a corporation, trust or association which is engaged in
investing in equity interests in real estate (including fee ownership and
leasehold interests and interests in partnerships and Joint Ventures holding
real estate) or in loans secured by mortgages on real estate or both and that
qualifies as a real estate investment trust under the REIT Provisions of the
Code.

      REIT Provisions of the Code means Sections 856 through 860 of the Code and
any successor or other provisions of the Code relating to real estate investment
trusts (including provisions as to the attribution of ownership of beneficial
interests therein) and the regulations promulgated thereunder.

                                      -6-

<PAGE>

      REIT Stock Amount has the meaning set forth in the Operating Partnership
Agreement.

      Sale or Sales means any transaction or series of transactions whereby: (A)
the Operating Partnership sells, grants, transfers, conveys or relinquishes its
ownership of any Property or portion thereof, including the lease of any
Property consisting of the building only, and including any event with respect
to any Property which gives rise to a significant amount of insurance proceeds
or condemnation awards; (B) the Operating Partnership sells, grants, transfers,
conveys or relinquishes its ownership of all or substantially all of the
interest of the Operating Partnership in any Joint Venture in which it is a
co-venturer or partner; (C) any Joint Venture in which the Operating Partnership
is a co-venturer or partner sells, grants, transfers, conveys or relinquishes
its ownership of any Property or portion thereof, including any event with
respect to any Property which gives rise to insurance claims or condemnation
awards; (D) the Operating Partnership sells, grants, conveys, or relinquishes
its interest in any asset, or portion thereof, including any event with respect
to any asset which gives rise to a significant amount of insurance proceeds or
similar awards; or (E) the Operating Partnership sells or otherwise disposes of
or distributes all of its assets in liquidation of the Operating Partnership.

      Sales Commissions means any and all commissions payable to underwriters,
dealer managers or other broker-dealers in connection with the sale of Stock,
including, without limitation, commissions payable to the Dealer Manager.

      Securities means any class or series of units or shares of the Company or
the General Partner, including common shares or preferred units or shares and
any other evidences of equity or beneficial or other interests, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "Securities" or any certificates of interest,
shares or participations in, temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.

      Securities Act means the Securities Act of 1933, as amended.

      Special 10% Stock Dividend means the 10% stock dividend authorized by the
Board of Directors to be paid to the Stockholders of record on the date that the
Company raises the first $125,000,000 in the Initial Public Offering or such
lesser amount on such earlier date as determined by the Board of Directors.

      Sponsor. Any Person directly or indirectly instrumental in organizing,
wholly or in part, the Company or any Person who will control, manage or
participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is as that
of an independent leasing agent or property manager of the Company's assets and
whose only compensation is as such. Sponsor does not include wholly independent
third parties such as attorneys, accountants and underwriters whose only
compensation is for professional services. A Person may also be deemed a Sponsor
of the Company (as determined by a majority of the Directors, including a
majority of the Independent Directors) by:

            (a) taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either alone or in
conjunction with one or more other Persons;

            (b) receiving a material participation in the Company in connection
with the founding or organizing of the business of the Company, in consideration
of services or property, or both services and property;

            (c) having a substantial number of relationships and contacts with
the Company;

            (d) possessing significant rights to control the Company's
properties;

            (e) receiving fees for providing services to the Company which are
paid on a basis that is not customary in the industry; or

            (f) providing goods or services to the Company on a basis which was
not negotiated at arms length with the Company.

                                      -7-

<PAGE>

      Stock means shares of stock of the Company of any class or series,
including Common stock, Preferred Stock or Stock-in-Trust.

      Stock-in-Trust is defined in Section 9.1 of the Charter.

      Stockholders means the registered holders of the Company's Stock.

      Subordinated Incentive Fee Due Upon Listing means the fee payable to the
Advisor under certain circumstances if the Common Stock is listed on a national
securities exchange, or traded on the Nasdaq/NMS or other over-the-counter
market in an amount equal to the percentage below of the Excess Market Value.
The Subordinated Incentive Fee Due Upon Listing will be (i) 5% of the Excess
Market Value if Stockholders have received cumulative Dividends and
distributions equal to 100% of the Invested Capital plus a 6% cumulative,
non-compounded per annum return on the Invested Capital, calculated on an
aggregate weighted average daily basis, (ii) 10% of the Excess Market Value if
Stockholders have received cumulative Dividends and distributions equal to 100%
of the Invested Capital plus an 8% cumulative, non-compounded per annum return
on the Invested Capital, calculated on an aggregate weighted average daily
basis, or (iii) 15% of the Excess Market Value if Stockholders have received
cumulative Dividends and distributions equal to 100% of the Invested Capital
plus a 10% cumulative, non-compounded per annum return on the Invested Capital
calculated on an aggregate weighted average daily basis. The Company shall have
the option to pay such fee in the form of cash, Stock, a promissory note or any
combination of the foregoing. The form of payment shall be as approved by the
Board of Directors. In the event the Advisor Subordinated Incentive Fee Due Upon
Listing is paid to the Advisor, thereafter, the Advisor will not be entitled to
receive any payments of Subordinated Performance Fee Upon Termination or
Subordinated Share of Net Sale Proceeds.

      Subordinated Performance Fee Due Upon Termination means a fee equal to (i)
5% of the Excess Value if Stockholders have received cumulative Dividends and
distributions equal to 100% of the Invested Capital plus a 6% cumulative,
non-compounded per annum return on the Invested Capital, calculated on an
aggregate weighted average daily basis, (ii) 10% of the Excess Value if
Stockholders have received cumulative Dividends and distributions equal to 100%
of the Invested Capital plus an 8% cumulative, non-compounded per annum return
on the Invested Capital, calculated on an aggregate weighted average daily
basis, or (iii) 15% of the Excess Value if Stockholders have received cumulative
Dividends and distributions equal to 100% of the Invested Capital plus a 10%
cumulative, non-compounded per annum return on the Invested Capital calculated
on an aggregate weighted average daily basis.

      Subordinated Share of Net Sale Proceeds means a fee equal to the
percentage set forth below of the balance of Net Sale Proceeds, if any,
remaining after Stockholders have received cumulative Dividends and
distributions equal to 100% of the Invested Capital, plus an amount equal to a
cumulative, non-compounded per annum return on the Invested Capital, calculated
on an aggregate weighted average daily basis. The Subordinated Share of Net Sale
Proceeds will be (i) 5% of remaining Net Sale Proceeds if Stockholders have
received cumulative Dividends and distributions equal to 100% of the Invested
Capital plus a 6% cumulative, non-compounded per annum return on the Invested
Capital, (ii) 10% of remaining Net Sale Proceeds if Stockholders have received
cumulative Dividends and distributions equal to 100% of the Invested Capital
plus an 8% cumulative, non-compounded per annum return on the Invested Capital,
or (iii) 15% of remaining Net Sale Proceeds if Stockholders have received a
cumulative Dividends and distributions equal to 100% of the Invested Capital
plus a 10% cumulative, non-compounded per annum return on the Invested Capital.

      Termination Date means the date of termination of this Agreement.

          2. Appointment. The Company, through the powers vested in the Board of
    Directors including a majority of all Independent Directors, hereby appoints
    the Advisor to serve as its advisor and asset manager on the terms and
    conditions set forth in this Agreement, and the Advisor hereby accepts such
    appointment.

          3. Authority of the Advisor.

            (a) General. All rights and powers to manage and control the
day-to-day business and affairs of the Company shall be vested in the Advisor.
The Advisor shall have the power to delegate all or any part of its rights and
powers to manage and control the business and affairs of the Company to such
officers, employees, Affiliates, agents and representatives of the Advisor or
the Company as it may from time to time deem appropriate.

                                      -8-

<PAGE>

Any authority delegated by the Advisor to any other Person shall be subject to
the limitations on the rights and powers of the Advisor specifically set forth
in this Advisory Agreement or the Charter.

            (b) Powers of the Advisor. Subject to the express limitations set
forth in this Advisory Agreement and subject to the supervision of the Board,
the power to direct the management, operation and policies of the Company shall
be vested in the Advisor, which shall have the power by itself and shall be
authorized and empowered on behalf and in the name of the Company to carry out
any and all of the objectives and purposes of the Company and to perform all
acts and enter into and perform all contracts and other undertakings that it may
in its sole discretion deem necessary, advisable or incidental thereto to
perform its obligations under this Advisory Agreement.

            (c) Approval by Directors. Notwithstanding the foregoing, any
investment in Assets, including any acquisition of an Asset by the Company or
any investment by the Company in a joint venture, limited partnership or similar
entity owning real properties, will require the prior approval of the Board of
Directors and the Independent Directors. The Advisor will deliver to the Board
of Directors all documents required by it to properly evaluate the proposed
investment.

            (d) Modification or Revocation of Authority of Advisor. The Board
may, at any time upon the giving of notice to the Advisor, modify or revoke the
authority or approvals set forth in Sections 3 and 4, provided however, that
such modification or revocation shall be effective upon receipt by the Advisor
and shall not be applicable to investment transactions to which the Advisor has
committed the Company prior to the date of receipt by the Advisor of such
notification.

          4. Duties and Authority of the Advisor.

            (a) Organizational and Offering Services. The Advisor shall manage
and supervise:

                  (i) development of the product offering, including the
      determination of the specific terms of the Securities to be offered by the
      Company;

                  (ii) the organization of the Company, preparation of all
      offering and related documents, and obtaining of all required regulatory
      approvals of such documents;

                  (iii) along with the Dealer Manager, approval of the
      participating broker dealers and negotiation of the related selling
      agreements;

                  (iv) coordination of the due diligence process relating to
      participating broker dealers and their review of the Prospectus and other
      Offering and Company documents;

                  (v) preparation and approval of all marketing materials
      contemplated to be used by the Dealer Manager or others in the offering of
      the Company's Securities;

                  (vi) along with the Dealer Manager, negotiation and
      coordination with the transfer agent for the receipt, collection,
      processing and acceptance of subscription agreements, commissions, and
      other administrative support functions;

                  (vi) creation and implementation of various technology and
      electronic communications related to the offering of the Company's
      Securities; and

                  (vii) all other services related to organization of the
      Company or the Offering, whether performed and incurred by the Advisor or
      its Affiliates.

            (b) Property Acquisition and Disposition, Asset Management and
Operational Services. The Advisor undertakes to use commercially reasonable
efforts to:

                                      -9-

<PAGE>

                  (i) (1) present to the Company potential investment
      opportunities to provide a continuing and suitable investment program
      consistent with (a) the investment objectives and policies of the Company
      as determined and adopted in the Charter of the Company, as amended from
      time to time, and (b) the investment allocation method described at
      Section 12(b) of this Agreement and (2) to manage, administer, promote,
      maintain, and improve the Properties on an overall portfolio basis in a
      diligent manner. The services of the Advisor are to be of scope and
      quality not less than those generally performed by professional asset
      managers of other similar property portfolios. The Advisor shall make
      available the full benefit of the judgment, experience and advice of the
      members of the Advisor's organization and staff with respect to the duties
      it will perform under this Agreement. The Advisor shall also obtain the
      services of Property Managers and Leasing Agents, which may include the
      Advisor or its Affiliates, to manage, promote, and lease the Properties.
      To facilitate the Advisor's performance of these undertakings, but subject
      to the restrictions included in Sections 3 and 7 and to the continuing and
      exclusive authority of the Board over the management of the Company and
      the Operating Partnership, the Company hereby delegates to the Advisor the
      authority to, and the Advisor hereby agrees to, either directly or by
      engaging an Affiliate of the Advisor or an unrelated third party;

                  (ii) manage, and perform and supervise the various
      administrative functions reasonably necessary for the management of the
      day-to-day operations of the Company;

                  (iii) subject to the provisions of Section 3(c) and 4 hereof,
      (A) locate, analyze and select potential investments in Assets, (B)
      structure and negotiate the terms and conditions of transactions pursuant
      to which investment in Assets will be made; (C) perform due diligence on
      prospective investments and summarize the results of such work, (D) make
      investments in Assets on behalf of the Company or the Operating
      Partnership in compliance with the investment objectives and policies of
      the Company; (E) if necessary, arrange for financing and refinancing and
      make other changes in the asset or capital structure of Assets; (F)
      dispose of, reinvest or distribute the proceeds from the sale of, or
      otherwise deal with the investments in, Assets; (G) enter into leases and
      service contracts for Property, including oversight of Affiliated
      companies that perform property management services for the Company, if
      any; (H) oversee non-affiliated property managers and other non-affiliated
      Persons who perform services for the Company; and (I) to the extent
      necessary, perform all other operational functions for the maintenance and
      administration of Properties;

                  (iv) consult with the officers and the Board of Directors of
      the Company and assist the Board of Directors in the formulation and
      implementation of the Company's financial policies, and, as necessary,
      furnish the Board of Directors with advice and recommendations with
      respect to the making of investments consistent with the investment
      objectives and policies of the Company and in connection with borrowings
      proposed to be undertaken by the Company, if any;

                  (v) provide the Board of Directors with periodic reports
      regarding prospective investments which include recommendations and
      supporting documentation required by them to properly evaluate the
      proposed investment;

                  (vi) obtain the prior approval of the Board of Directors
      (including a majority of all Independent Directors) for any and all
      investments in Properties (as well as any financing acquired by the
      Company or the Operating Partnership in connection with such investment);

                  (vii) notify the Board of all proposed material transactions
      before they are completed;

                  (viii) serve as the Company's investment and financial advisor
      and provide the Board with relevant market research and economic and
      statistical data in connection with the Company's assets and investment
      objectives and policies;

                  (ix) obtain reports (which may be prepared by unrelated third
      parties, the Advisor, or its Affiliates), where appropriate, concerning
      the value of investments or contemplated investments of the Company in
      Assets;

                                      -10-

<PAGE>

                  (x) formulate and oversee the implementation of strategies for
      the administration, promotion, management, operation, maintenance,
      improvement, financing and refinancing, marketing, leasing, and
      disposition of Assets on an overall portfolio basis;

                  (xi) monitor applicable markets and obtain reports (which may
      be prepared by unrelated third parties, the Advisor or Affiliates) where
      appropriate, concerning the values of existing or prospective investments
      of the Company and monitor and evaluate the performance of the investments
      of the Company;

                  (xii) conduct periodic on-site property visits to some or all
      (as the Advisor deems reasonably necessary) of the Properties to inspect
      the physical condition of the Properties and to evaluate the performance
      of the related Property Managers and Leasing Agents of its duties;

                  (xiii) oversee the performance by the Property Managers of
      their duties, including collection and proper deposits of rental payments
      and payment of Property expenses and maintenance;

                  (xiv) review, analyze and comment upon the operating budgets,
      capital budgets and leasing plans prepared and submitted by each Property
      Manager and leasing agent and aggregate these property budgets into the
      Company's overall budget and financial reports;

                  (xv) review and analyze on-going financial information
      pertaining to each Property and the overall portfolio of Properties;

                  (xvi) deliver to the Board or maintain on behalf of the
      Company copies of all appraisals obtained in connection with the
      investments in Properties;

                  (xvii) obtain and maintain, with respect to any Property and
      to the extent available, title insurance or other assurance of title and
      customary fire, casualty and public liability insurance;

                  (xviii) consult with the officers and Directors and assist the
      Directors in evaluating and obtaining adequate insurance coverage based
      upon risk management determinations;

                  (xix) perform and supervise the various management and
      operational functions related to the Company's investments in Assets;

                  (xx) coordinate and manage relationships between the Company
      and any joint venture partners;

                  (xxi) undertake and perform all services or other activities
      necessary and proper to carry out the investment objectives of the
      Company;

                  (xxii) as reasonably necessary, act, or obtain the services of
      others to act, as attorney-in-fact or agent of the Company in making,
      acquiring and disposing of investments, disbursing, and collecting the
      funds, paying the debts and fulfilling the obligations of the Company and
      handling, prosecuting and settling any claims of the Company, including
      foreclosing and otherwise enforcing mortgage and other liens and security
      interests securing investments;

                  (xxiii) assist in negotiations on behalf of the Company with
      investment banking firms and other institutions or investors for public or
      private sales of Securities of the Company or for other financing on
      behalf of the Company, but in no event in such a way that the Advisor
      shall be acting as a broker, dealer, underwriter or investment advisor in
      Securities of or for the Company;

                  (xxiv) negotiate on behalf of the Company with banks or
      lenders for loans to be made to the Company if necessary, and negotiate on
      behalf of the Company with investment banking firms and broker-dealers or
      negotiate private sales of Securities or obtain loans for the Company if
      necessary, but in

                                      -11-

<PAGE>

      no event in such a way so that the Advisor shall be acting as
      broker-dealer or underwriter; and provided, further, that any fees and
      costs payable to third parties incurred by the Advisor in connection with
      the foregoing shall be the responsibility of the Company;

                  (xxv) provide the Company with all necessary cash management
      services;

                  (xxvi) upon request of the Board of Directors, invest and
      reinvest any money of the Company;

                  (xxvii) perform all reporting, record keeping, internal
      controls and similar matters in a manner to allow the Company to comply
      with applicable law including the Sarbanes-Oxley Act;

                  (xxviii) from time to time, or at any time reasonably
      requested by the Board, provide information or make reports to the Board
      related to its performance of services to the Company under this
      Agreement;

                  (xxix) coordinate with the Company's independent accountants
      and auditors the preparation and delivery to the Board of Directors of a
      report not less than annually concerning the Advisor's compliance with
      certain material aspects of this Agreement and as otherwise requested by
      the Board of Directors;

                  (xxx) from time to time, or at any time reasonably requested
      by the Board, make reports to the Board of the investment opportunities it
      has presented to other Advisor-sponsored programs or that it has pursued
      directly or through an Affiliate;

                  (xxxi) provide the officers and Directors with timely updates
      related to the overall regulatory environment affecting the Company, as
      well as managing compliance with such matters, including but not limited
      to compliance with the Sarbanes-Oxley Act of 2002;

                  (xxxii) consult with the Board of Directors relating to the
      corporate governance structure and appropriate policies and procedures
      related thereto;

                  (xxxiii) supervise the preparation on behalf of the Company of
      all reports and returns required by the Securities and Exchange
      Commission, Internal Revenue Service and other state or federal
      governmental agencies;

                  (xxxiv) maintain and preserve the books and records of the
      Company and maintaining the accounting and other record-keeping functions
      at the Property and Company levels;

                  (xxxv) undertake communications with Stockholders in
      accordance with applicable law and the Charter, provided, however, that
      Affiliates of the Advisor have no obligations to the Company other than as
      expressly stated herein, and the Advisor and its Affiliates have no
      obligations to present to the Company any specific investment opportunity
      except as set forth in the Charter and described in the Prospectus;

                  (xxxvi) manage communications with stockholders, including
      answering phone calls, preparing and sending written and electronic
      reports and other communications;

                  (xxxvii) establish technology infrastructure to assist in
      providing shareholder support and service;

                  (xxxviii) appoint and supervise the Company's transfer agent
      in the maintenance of a stock ledger reflecting a record of the
      Stockholders and their ownership of Stock;

                                      -12-

<PAGE>

                  (xxxix) manage and coordinate with the transfer agent the
      periodic dividend process and the payments to Stockholders;

                  (xl) investigate, select, and, on behalf of the Company,
      engage and conduct business with such Persons as the Advisor deems
      necessary to the proper performance of its obligations hereunder,
      including but not limited to consultants, accountants, lenders, technical
      advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow
      agents, depositaries, custodians, agents for collection, insurers,
      insurance agents, banks, builders, developers, construction companies,
      property owners, mortgagors, and any and all agents for any of the
      foregoing, including Affiliates of the Advisor, and Persons acting in any
      other capacity deemed by the Advisor necessary or desirable for the
      performance of any of the foregoing services, including but not limited to
      entering into contracts in the name of the Company with any of the
      foregoing; and

                  (xli) do all things necessary to assure its ability to render
      the services described in this Agreement.

The Advisor has a fiduciary responsibility to the Company and to the
Stockholders in carrying out its duties under this Agreement. In providing
advice and services hereunder, the Advisor shall not (i) engage in any activity
which would require it to be registered as an "Investment Advisor," as that term
is defined in the Investment Advisors Act of 1940 or in any state securities law
or (ii) cause the Company to make such investments as would cause the Company to
become an "Investment Company," as that term is defined in the Investment
Company Act of 1940.

          5. Bank Accounts. The Advisor may establish and maintain one or more
    bank accounts in its own name for the account of the Company or in the name
    of the Company and may collect and deposit into any such account or
    accounts, and disburse from any such account or accounts, any money on
    behalf of the Company, under such terms and conditions as the Board may
    approve, provided that no funds shall be commingled with the funds of the
    Advisor; and the Advisor shall from time to time render appropriate
    accountings of such collections and payments to the Board and to the
    auditors of the Company.

          6. Records; Access. The Advisor shall maintain appropriate records of
    all its activities hereunder and make such records available for inspection
    by the Board and by counsel, auditors and authorized agents of the Company,
    at any time or from time to time during normal business hours. The Advisor,
    in the conduct of its responsibilities to the Company, shall maintain
    adequate and separate books and records for the Company's operations in
    accordance with United States generally accepted accounting principles
    ("GAAP"), which shall be supported by sufficient documentation to ascertain
    that such books and records are properly and accurately recorded. Such books
    and records shall be the property of the Company. Such books and records
    shall include all information necessary to calculate and audit the fees or
    reimbursements paid under this Agreement. The Advisor shall utilize
    procedures to attempt to ensure such control over accounting and financial
    transactions as is reasonably required to protect the Company's assets from
    theft, error or fraudulent activity. All financial statements that the
    Advisor delivers to the Company shall be prepared on an accrual basis in
    accordance with GAAP, except for special financial reports which by their
    nature require a deviation from GAAP. The Advisor shall maintain necessary
    liaison with the Company's independent accountants and shall provide such
    accountants with such reports and other information as the Company shall
    request. The Advisor shall at all reasonable times have access to the books
    and records of the Company.

          7. Limitations on Activities. Anything else in this Agreement to the
    contrary notwithstanding, the Advisor shall refrain from taking any action
    which, in its sole judgment made in good faith, would (a) adversely affect
    the status of the Company as a REIT, (b) subject the Company to regulation
    under the Investment Company Act of 1940, as amended, (c) violate any law,
    rule, regulation or statement of policy of any governmental body or agency
    having jurisdiction over the Company, its Stock or its other Securities, or
    (d) violate the Charter or Bylaws, except if such action shall be ordered by
    the Board, in which case the Advisor shall notify promptly the Board of the
    Advisor's judgment of the potential impact of such action and shall refrain
    from taking such action until it receives further clarification or
    instructions from the Board. In such event the Advisor shall have no
    liability for acting in accordance with the specific instructions of the
    Board so given. Notwithstanding the foregoing, the Advisor, its directors,
    officers, employees and stockholders, and stockholders, directors and
    officers of the Advisor's Affiliates shall not be liable to the Company or
    to the Board or

                                      -13-

<PAGE>

    Stockholders for any act or omission by the Advisor, its directors,
    officers or employees, or stockholders, directors or officers of the
    Advisor's Affiliates except as provided in this Agreement.

          8. Relationship With Directors. Subject to Section 7 of this Agreement
    and to restrictions set forth in the Charter or deemed advisable with
    respect to the qualification of the Company as a REIT, directors, officers
    and employees of the Advisor or an Affiliate of the Advisor or any corporate
    parents of an Affiliate, or directors, officers or stockholders of any
    director, officer or corporate parent of an Affiliate may serve as a
    Director and as officers of the Company, except that no officer or employee
    of the Advisor or its Affiliates who also is a Director or officer of the
    Company shall receive any compensation from the Company for serving as a
    Director or officer other than reasonable reimbursement for travel and
    related expenses incurred in attending meetings of the Directors. Directors
    who are not Independent Directors will be individuals nominated by the
    Advisor, provided that such director nominees are either directors of the
    Advisor or have been elected by the board of directors of the Advisor as
    executive officers of the Advisor.

          9. Fees.

            (a) Advisor Acquisition Fees. The Company will pay the Advisor, as
compensation for services rendered in connection with the investigation,
selection and acquisition (by purchase, investment or exchange) of Properties,
Advisor Acquisition Fees in an amount equal to 2.0% of Gross Proceeds, other
than Gross Proceeds from Stock purchased under the Reinvestment Plan, payable by
the Company upon the Company's receipt of Gross Proceeds; provided that upon
termination of this Agreement, the Advisor will be obligated to reimburse the
Company for any Advisor Acquisition Fee that has not been allocated to the
purchase price of Company Properties as provided for in Section 5.2 of the
Charter.

            (b) Asset Management Fee. Subject to the overall limitations
contained below in this Section 9(c), commencing on the date hereof, the Company
shall pay the Advisor for the asset management services included in the services
described in Section 4 a monthly fee (the "Asset Management Fee") in an amount
equal to one-twelfth of 1.25% of the Average Invested Assets, calculated on a
monthly basis as of the last day of each month. The Asset Management Fee shall
be reduced if the Independent Directors determine that compensation to be paid
to the Advisor is not reasonable in relation to the nature and quality of
services performed and the investment performance of the Company and that the
provisions of the Advisory Agreement are being carried out in accordance with
Section 4.2 of the Charter.

            (c) Property Management and Leasing Fees. If the Company retains the
Advisor or its Affiliates to manage or lease any of its Properties, the Company
will pay the Advisor or its Affiliates a market-based fee which is what other
management or leasing companies generally charge for the management or leasing
of similar properties, which may include reimbursement for the costs and
expenses the Advisor or its Affiliates incurs in managing or leasing the
Properties.

            (d) Disposition Fees. If the Advisor or an Affiliate provides a
substantial amount of the services (as determined by a majority of the
Directors, including a majority of the Independent Directors) in connection with
the Sale of one or more Properties, the Advisor or such Affiliate shall receive
at closing a Disposition Fee equal to 3.0% of the sales price of such Property
or Properties. Any Disposition Fee payable under this section may be paid in
addition to real estate commissions paid to non-Affiliates, provided that the
total real estate commissions (including such Disposition Fee) paid to all
Persons by the Company for each Property shall not exceed an amount equal to the
lesser of (i) 6.0% of the aggregate Contract Sales Price of each Property or
(ii) the Competitive Real Estate Commission for each Property. The Company will
pay the Disposition Fees for a property at the time the property is sold.

            (e) Subordinated Share of Net Sale Proceeds. The Subordinated Share
of Net Sale Proceeds shall be payable to the Advisor at the time or times that
the Company determines that the Subordinated Share of Net Sale Proceeds has been
earned by the Advisor. In the case of multiple advisors, advisors and Affiliates
shall be allowed incentive fees in accordance with the foregoing limitation,
provided such fees are distributed by a proportional method reasonably designed
to reflect the value added to the Company's Assets by each respective advisor or
Affiliate.

                                      -14-

<PAGE>

            (f) Subordinated Incentive Fee Due Upon Listing. Upon Listing, the
Advisor shall be entitled to the Subordinated Incentive Fee Upon Listing. The
Subordinated Incentive Fee Due Upon Listing shall be payable to the Advisor
during the thirty (30) day period following eighteen (18) months after Listing.
The Company shall have the option to pay such fee in the form of cash, Stock, a
promissory note or any combination of the foregoing, as determined by the Board
of Directors. In the event the Subordinated Incentive Fee Due Upon Listing is
paid to the Advisor following Listing, the Advisor will not be entitled to
receive any payments of Subordinated Performance Fee Upon Termination or
Subordinated Share of Net Sale Proceeds following receipt of the Subordinated
Incentive Fee Due Upon Listing.

            (g) Changes to Fee Structure. In the event of Listing, the Company
and the Advisor shall negotiate in good faith to establish a fee structure
appropriate for a perpetual-life entity. A majority of the Independent Directors
must approve the new fee structure negotiated with the Advisor. In negotiating a
new fee structure, the Independent Directors shall consider all of the factors
they deem relevant, including, but not limited to: (i) the amount of the
advisory fee in relation to the asset value, composition and profitability of
the Company's portfolio; (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (iii) the
rates charged to other REITs and to investors other than REITs by advisors
performing the same or similar services; (iv) additional revenues realized by
the Advisor and its Affiliates through their relationship with the Company,
including loan administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by the REIT or by others
with whom the REIT does business; (v) the quality and extent of service and
advice furnished by the Advisor; (vi) the performance of the investment
portfolio of the REIT, including income, conversion or appreciation of capital,
and number and frequency of problem investments; and (vii) the quality of the
Property portfolio of the Company in relationship to the investments generated
by the Advisor for its own account. The new fee structure can be no more
favorable to the Advisor than the current fee structure.

          10. Expenses.

            (a) Reimbursable Expenses. In addition to the compensation paid to
the Advisor pursuant to Section 9 hereof, the Company shall pay directly or
reimburse the Advisor for all of the expenses paid or incurred by the Advisor
(to the extent not reimbursable by another party, such as the Dealer Manager) in
connection with the services it provides to the Company pursuant to this
Agreement, including, but not limited to:

                  (i) the Organization and Offering Expenses; provided, however,
      that within 60 days after the end of the month in which an Offering
      terminates, the Advisor shall reimburse the Company to the extent (i)
      Capped O&O Expenses borne by the Company exceed 5.0% of the Gross Proceeds
      raised in a completed Offering and (ii) Organization and Offering Expenses
      borne by the Company (including selling commissions, dealer manager fees
      and non-accountable due diligence expense allowance but not including
      Acquisition Fees or Acquisition Expenses) exceed 15% of the Gross Proceeds
      raised in a completed Offering;

                  (ii) Subject to the limitation set forth below, Acquisition
      Expenses incurred by the Advisor or its Affiliates;

                  (iii) Subject to the limitation set forth below, Acquisition
      Fees and Acquisition Expenses payable to unaffiliated Persons incurred in
      connection with the selection and acquisition of Properties;

                  (iv) the actual out-of-pocket cost of goods and services used
      by the Company and obtained from entities not affiliated with the Advisor
      including brokerage and other fees paid in connection with the purchase,
      operation and sale of Assets;

                  (v) interest and other costs for borrowed money, including
      discounts, points and other similar fees;

                  (vi) taxes and assessments on income or Property and taxes as
      an expense of doing business and any taxes otherwise imposed on the
      Company, its business or income;

                                      -15-

<PAGE>

                  (vii) costs associated with insurance required in connection
      with the business of the Company or by the Board;

                  (viii) expenses of managing and operating Properties owned by
      the Company, whether payable to an Affiliate of the Company or a
      non-affiliated Person;

                  (ix) all expenses in connection with payments to Directors and
      meetings of the Directors and Stockholders;

                  (x) expenses associated with Listing or with the issuance and
      distribution of Securities other than the Stock issued in the Initial
      Public Offering, such as selling commissions and fees, advertising
      expenses, taxes, legal and accounting fees, listing and registration fees;

                  (xi) expenses connected with payments of Distributions in cash
      or otherwise made or caused to be made by the Company to the Stockholders;

                  (xii) expenses of organizing, converting, modifying, merging,
      liquidating or dissolving the Company or of amending the Charter or the
      Bylaws;

                  (xiii) expenses of maintaining communications with
      Stockholders, including the cost of preparation, printing, and mailing
      annual reports and other Stockholder reports, proxy statements and other
      reports required by governmental entities;

                  (xiv) administrative service expenses, including all direct
      and indirect costs and expenses incurred by Advisor in fulfilling its
      duties hereunder and including personnel costs; provided, however, that no
      reimbursement shall be made for costs of personnel to the extent that such
      personnel perform services in transactions for which the Advisor receives
      the Acquisition Fee or Disposition Fee. Such direct and indirect costs and
      expenses may include reasonable wages and salaries and other
      employee-related expenses of all employees of Advisor who are engaged in
      the management, administration, operations, and marketing of the Company,
      including taxes, insurance and benefits relating to such employees, and
      legal, travel and other out-of-pocket expenses which are directly related
      to their services provided hereunder;

                  (xv) audit, accounting and legal fees, and other fees for
      professional services relating to the operations of the Company and all
      such fees incurred at the request, or on behalf of, the Independent
      Directors or any committee of the Board of Directors;

                  (xvi) out-of-pocket expenses of maintaining communications
      with Shareholders, including the cost of preparation, printing, and
      mailing annual reports and other Shareholder reports, proxy statements and
      other reports required by governmental entities;

                  (xvii) out-of-pocket costs for the Company to comply with all
      applicable laws, regulation and ordinances; and

                  (xviii) all other out-of-pocket costs necessary for the
      operation of the Company and its Assets incurred by the Advisor in
      performing its duties hereunder.

The Company shall also reimburse the Advisor or Affiliates of the Advisor for
all direct and indirect costs and expenses incurred on behalf of the Company
prior to the execution of this Agreement. In the event the Company does not
raise $1,000,000 in its Initial Public Offering, the Advisor will not be
reimbursed for Organizational and Offering Expenses.

      The total of all Acquisition Fees and Acquisition Expenses paid by the
Company in connection with the purchase of a Property by the Company shall be
reasonable, and shall in no event exceed an amount equal to 6% of the Contract
Purchase Price, or in the case of a mortgage loan, 6% of the funds advanced;
provided, however, that a

                                      -16-

<PAGE>

majority of the Directors (including the majority of the Independent Directors)
not otherwise interested in the transaction may approve fees and expenses in
excess of these limits if they determine the transaction to be commercially
competitive, fair and reasonable to the Company.

            (b) Other Services. Should the Directors request that the Advisor or
any director, officer or employee thereof render services for the Company other
than set forth in Section 4, such services shall be separately compensated at
such rates and in such amounts as are agreed by the Advisor and a majority of
the Independent Directors, subject to the limitations contained in the Charter,
and shall not be deemed to be services pursuant to the terms of this Agreement.

            (c) Timing of and Limitations on Reimbursements.

                  (i) Expenses incurred by the Advisor on behalf of the Company
      and payable pursuant to this Section 10 shall be reimbursed no less
      frequently than monthly to the Advisor. The Advisor shall prepare a
      statement documenting the expenses of the Company during each quarter, and
      shall deliver such statement to the Company within 45 days after the end
      of each quarter. Subject to the Excess Expense Guidelines, the Company may
      advance funds to the Advisor for expenses the Advisor anticipates will be
      incurred by the Advisor within the current month and any such advances
      shall be deducted from the amounts reimbursed by the Company to the
      Advisor.

                  (ii) Notwithstanding anything else in this Section 10 to the
      contrary, the expenses enumerated in this Section 10 shall not become
      reimbursable to the Advisor unless and until the Company has raised $1
      million in the Initial Public Offering.

                  (iii) The Company shall not reimburse the Advisor at the end
      of any fiscal quarter Operating Expenses that, in the four consecutive
      fiscal quarters then ended (the "Expense Year") exceed (the "Excess
      Amount") the greater of 2% of Average Invested Assets or 25% of NASAA Net
      Income (the "Excess Expense Guidelines") for such year unless a majority
      of the Independent Directors determines that such excess was justified,
      based on unusual and nonrecurring factors which they deem sufficient. If a
      majority of the Independent Directors does not approve such excess as
      being so justified, any Excess Amount paid to the Advisor during a fiscal
      quarter shall be repaid to the Company. If a majority of the Independent
      Directors determines such excess was justified, then within 60 days after
      the end of any fiscal quarter of the Company for which total reimbursed
      Operating Expenses for the Expense Year exceed the Excess Expense
      Guidelines, the Advisor, at the direction of the a majority of the
      Independent Directors, shall send to the stockholders a written disclosure
      of such fact, together with an explanation of the factors the a majority
      of the Independent Directors considered in determining that such excess
      expenses were justified. The Company will ensure that such determination
      will be reflected in the minutes of the meetings of the Board of
      Directors. All figures used in the foregoing computation shall be
      determined in accordance with generally accepted accounting principles
      applied on a consistent basis.

          11. Fidelity Bond. The Advisor shall endeavor to maintain a fidelity
    bond for the benefit of the Company which bond shall insure the Company from
    losses of up to $1,000,000 per occurrence and shall be of the type
    customarily purchased by entities performing services similar to those
    provided to the Company by the Advisor.

            12. Other Activities of the Advisor.

            (a) General. Nothing herein contained shall prevent the Advisor from
engaging in other activities, including, without limitation, the rendering of
advice to other Persons (including other REITs) and the management of other
programs advised, sponsored or organized by the Advisor or its Affiliates; nor
shall this Agreement limit or restrict the right of any director, officer,
employee, or stockholder of the Advisor or its Affiliates to engage in any other
business or to render services of any kind to any other partnership,
corporation, firm, individual, trust or association. The Advisor may, with
respect to any investment in which the Company is a participant, also render
advice and service to each and every other participant therein. The Advisor
shall report to the Board the existence of any condition or circumstance,
existing or anticipated, of which it has knowledge, which

                                      -17-

<PAGE>

creates or could create a conflict of interest between the Advisor's obligations
to the Company and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association.

            (b) Policy with Respect to Allocation of Investment Opportunities.
Before the Advisor presents an investment opportunity that would in its judgment
be suitable for the Company to another Advisor-sponsored program, the Advisor
shall determine in its sole discretion that the investment opportunity is more
suitable for such other program than for the Company based on factors such as
the following: as the investment objectives and criteria of each program, the
cash requirements and anticipated cash flow of each entity, the size of the
investment opportunity, the effect of the acquisition both on diversification of
each entity's investments, the income tax consequences of the purchase on each
entity, the policies of each program relating to leverage, the amount of funds
available to each program, and the length of time such funds have been available
for investment. In the event that an investment opportunity becomes available
that is, in the sole discretion of the Advisor, equally suitable for both the
Company and another Advisor-sponsored program, then the Advisor may offer the
other program the investment opportunity if it has had the longest period of
time elapse since it was offered an investment opportunity. The Advisor will use
its reasonable efforts to fairly allocate investment opportunities in accordance
with such allocation method and will promptly disclose any material deviation
from such policy or the establishment of a new policy, which shall be allowed
provided (1) the Board is provided with notice of such policy at least 60 days
prior to such policy becoming effective and (2) such policy provides for the
reasonable allocation of investment opportunities among such programs. The
Advisor shall provide the Independent Directors with any information reasonably
requested so that the Independent Directors can insure that the allocation of
investment opportunities is applied fairly. Nothing herein shall be deemed to
prevent the Advisor or an Affiliate from pursuing an investment opportunity
directly rather than offering it to the Company or another Advisor-sponsored
program so long as the Advisor is fulfilling its obligation to present a
continuing and suitable investment program to the Company which is consistent
with the investment policies and objectives of the Company. If a subsequent
development, such as a delay in the closing of a property or a delay in the
construction of a property, causes any such investment, in the opinion of the
Board of Directors and the Advisor, to be more appropriate for an entity other
than the entity which committed to make the investment, however, the Advisor has
the right to agree that the other entity affiliated with the Advisors or its
Affiliates may make the investment.

          13. Relationship of Advisor and Company. The Company and the Advisor
    are not partners or joint venturers with each other, and nothing in this
    Agreement shall be construed to make them such partners or joint venturers
    or impose any liability as such on either of them.

          14. Representations and Warranties.

            (a) Of the Company. To induce the Advisor to enter into this
Agreement, the Company hereby represents and warrants that:

                  (i) The Company is a corporation, duly organized, validly
      existing and in good standing under the laws of the State of Maryland with
      all requisite corporate power and authority and all material licenses,
      permits and authorizations necessary to carry out the transactions
      contemplated by this Agreement.

                  (ii) The Company's execution, delivery and performance of this
      Agreement has been duly authorized by the Board of Directors including a
      majority of all Independent Directors of the Company. This Agreement
      constitutes the valid and binding obligation of the Company, enforceable
      against the Company in accordance with its terms. The Company's execution
      and delivery of this Agreement and its fulfillment of and compliance with
      the respective terms hereof do not and will not (i) conflict with or
      result in a breach of the terms, conditions or provisions of, (ii)
      constitute a default under, (iii) result in the creation of any lien,
      security interest, charge or encumbrance upon the assets of the Company
      pursuant to, (iv) give any third party the right to modify, terminate or
      accelerate any obligation under, (v) result in a violation of or (vi)
      require any authorization, consent, approval, exception or other action by
      or notice to any court or administrative or governmental body pursuant to,
      the Charter or Bylaws or any law, statute, rule or regulation to which the
      Company is subject, or any agreement, instrument, order, judgment or
      decree by which the Company is bound, in any such case in a manner that

                                      -18-

<PAGE>

      would have a material adverse effect on the ability of the Company to
      perform any of its obligations under this Agreement.

            (b) Of the Advisor. To induce the Company to enter into this
Agreement, the Advisor represents and warrants that :

                  (i) The Advisor is a limited liability company, duly
      organized, validly existing and in good standing under the laws of the
      State of California with all requisite corporate power and authority and
      all material licenses, permits and authorizations necessary to carry out
      the transactions contemplated by this Agreement.

                  (ii) The Advisor's execution, delivery and performance of this
      Agreement has been duly authorized. This Agreement constitutes a valid and
      binding obligation of the Advisor, enforceable against the Advisor in
      accordance with its terms. The Advisor's execution and delivery of this
      Agreement and its fulfillment of and compliance with the respective terms
      hereof do not and will not (i) conflict with or result in a breach of the
      terms, conditions or provisions of, (ii) constitute a default under, (iii)
      result in the creation of any lien, security interest, charge or
      encumbrance upon the Advisor's assets pursuant to, (iv) give any third
      party the right to modify, terminate or accelerate any obligation under,
      (v) result in a violation of or (vi) require any authorization, consent,
      approval, exemption or other action by or notice to any court or
      administrative or governmental body pursuant to, the Advisor's articles of
      incorporation or bylaws, or any law, statute, rule or regulation to which
      the Advisor is subject, or any agreement, instrument, order, judgment or
      decree by which the Advisor is bound, in any such case in a manner that
      would have a material adverse effect on the ability of the Advisor to
      perform any of its obligations under this Agreement.

                  (iii) The Advisor has received copies of the Charter, the
      Bylaws, and the Registration Statement and of the Operating Partnership's
      limited partnership agreement and is familiar with the terms thereof,
      including without limitation the investment limitations included therein.
      The Advisor warrants that it will use reasonable care to avoid any act or
      omission that would conflict with the terms of the Charter, the Bylaws,
      the Registration Statement, or the Operating Partnership's limited
      partnership agreement in the absence of the express direction of a
      majority of the Independent Directors.

          15. Term; Termination of Agreement. This Agreement shall continue in
    force until the first anniversary of the date hereof, subject to an
    unlimited number of successive one-year renewals upon mutual consent of the
    parties. The Company, acting through the Board, will evaluate the
    performance of the Advisor annually before renewing the Agreement, and each
    such renewal shall be for a term of no more than one year.

          16. Termination

            (a) Termination by Either Party. This Agreement may be terminated
upon 60 days written notice without cause or penalty, by either party (by a
majority of the Independent Directors or a majority of the board of directors of
the Advisor or its managing member, as the case may be).

            (b) Termination by the Advisor. This Agreement may be terminated
immediately by the Advisor in the event of (i) the bankruptcy of the Company or
commencement of any bankruptcy or similar insolvency proceedings of the Company,
or (ii) any material breach of this Agreement by the Company not cured by the
Company within 30 days after written notice thereof.

The provisions of Sections 1, 6, 7, and 17 through 32 survive termination of
this Agreement.

          17. Payments to and Duties of Advisor upon Termination. Payments to
    the Advisor pursuant to this Section 17 shall be subject to the Excess
    Expenses Guidelines to the extent applicable.

                                      -19-

<PAGE>

            (a) After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Company within 30 days after the effective date of such
termination the following:

                  (i) all unpaid reimbursable expenses and all earned but unpaid
      fees payable to the Advisor prior to termination of this Agreement; and

                  (ii) the Subordinated Performance Fee Due Upon Termination,
      provided that no Subordinated Performance Fee Due Upon Termination will be
      paid if the Company has paid or is obligated to pay the Subordinated
      Incentive Fee,

            (b) In the event this Agreement expires without the consent of the
Advisor, or is terminated for any reason other than by the Advisor pursuant to
Section 16(a) or Section 16(b), the Company shall, at the election of the
Advisor or any of its Affiliates and at any time (and from time to time) after
the effective date of such expiration or termination, purchase all or a portion
of the OP Units held by the Advisor and its Affiliates subject to Board approval
and applicable law. The purchase price shall be paid in cash or, at the election
of the seller, Stock, and shall be payable within 120 days after the Advisor or
its Affiliates (as applicable) gives the Company written notice of its desire to
sell all or a portion of the OP Units held by such Person to the Company. The
Company agrees to keep a sufficient number of authorized but unissued shares of
Stock available for issuance pursuant to this Section 17(b) and shall issue
shares of Stock as may be required hereunder. The purchase price of the OP Units
sold to the Company pursuant to this Section 17(b) shall be (i) in the event the
seller elects to receive cash, the Cash Amount the seller would receive under a
redemption of such interests under Section 9.7 of the Operating Partnership
Agreement assuming the Company paid cash for such redemption, or (ii) in the
event the seller elects to receive Stock, the REIT Stock Amount the seller would
receive under a redemption of such interests under Section 9.7 of the Operating
Partnership Agreement assuming the Company paid Stock for such redemption.

            (c) The Advisor shall promptly upon termination:

                  (i) pay over to the Company all money collected and held for
      the account of the Company pursuant to this Agreement, after deducting any
      accrued compensation and reimbursement for its expenses to which it is
      then entitled;

                  (ii) deliver to the Board a full accounting, including a
      statement showing all payments collected by it and a statement of all
      money held by it, covering the period following the date of the last
      accounting furnished to the Board;

                  (iii) deliver to the Board all assets, including Properties,
      and documents of the Company then in the custody of the Advisor; and

                  (iv) cooperate with the Company to provide an orderly
      management transition.

          18. Assignment to an Affiliate. This Agreement may be assigned by the
    Advisor to an Affiliate with the approval of a majority of the Independent
    Directors. The Advisor may assign any rights to receive fees or other
    payments under this Agreement without obtaining the approval of the
    Directors. This Agreement shall not be assigned by the Company without the
    consent of the Advisor, except in the case of an assignment by the Company
    to a corporation or other organization which is a successor to all of the
    assets, rights and obligations of the Company, in which case such successor
    organization shall be bound hereunder and by the terms of said assignment in
    the same manner as the Company is bound by this Agreement.

          19. Indemnification by the Company. The Company shall indemnify and
    hold harmless the Advisor and its Affiliates, including their respective
    officers, directors, partners and employees, from all liability, claims,
    damages or losses arising in the performance of their duties hereunder, and
    related expenses, including reasonable attorneys' fees, to the extent such
    liability, claims, damages or losses and related expenses are not fully
    reimbursed by insurance, subject to any limitations imposed by the laws of
    the State of Maryland or the Charter. Notwithstanding the foregoing, the
    Advisor shall not be entitled to indemnification or be held harmless

                                      -20-

<PAGE>

    pursuant to this Section 19 for any activity which the Advisor shall be
    required to indemnify or hold harmless the Company pursuant to Section 20.
    Any indemnification of the Advisor may be made only out of the net assets
    of the Company, including insurance proceeds, and not from Stockholders.

          20. Indemnification by Advisor. The Advisor shall indemnify and hold
    harmless the Company from contract or other liability, claims, damages,
    taxes or losses and related expenses including attorneys' fees, to the
    extent that such liability, claims, damages, taxes or losses and related
    expenses are not fully reimbursed by insurance and are incurred by reason of
    the Advisor's bad faith, fraud, willful misfeasance, misconduct, or reckless
    disregard of its duties, but Advisor shall not be held responsible for any
    action of the Directors in declining to follow any advice or recommendation
    given by the Advisor.

          21. Advisor's Liability.

            (a) Notwithstanding any other provisions of this Agreement, in no
event shall the Company make any claim against the Advisor, or its Affiliates,
on account of any good faith interpretation by Advisor of the provisions of this
Agreement (even if such interpretation is later determined to be a breach of
this Agreement) or any alleged errors in judgment made in good faith and in
accordance with this Agreement in connection with the operations of the Company
hereunder by the Advisor or the performance of any advisory or technical
services provided by or arranged by the Advisor. The provisions of this Section
21(a) shall not be deemed to release the Advisor from liability for its gross
negligence or reckless disregard of its duties.

            (b) The Company shall not object to any expenditures made by the
Advisor in good faith in the course of its performance of its obligations under
this Agreement or in settlement of any claim arising out of the operation of the
Company unless such expenditure is specifically prohibited by this Agreement or
the Charter. The provisions of this Section 21(b) shall not be deemed to release
the Advisor from liability for its gross negligence or reckless disregard of its
duties.

            (c) In no event will either party be liable for damages based on
loss of income, profit or savings or indirect, incidental, consequential,
exemplary, punitive or special damages of the other party or person, including
third parties, even if such party has been advised of the possibility of such
damages in advance, and all such damages are expressly disclaimed. In no event
will the Advisor's aggregate liability under this Agreement ever exceed the
total amount of fees it actually receives from the Company pursuant to Article
9.

          22. Notices. Any notice, report or other communication required or
    permitted to be given hereunder shall be in writing unless some other method
    of giving such notice, report or other communication is required by the
    Charter, the Bylaws, or accepted by the party to whom it is given, and shall
    be given by being delivered by hand or by overnight mail or other overnight
    delivery service to the addresses set forth herein:

To the Board and to the Company:            Cornerstone Realty Fund, Inc.
                                            4590 MacArthur Blvd. Suite 610
                                            Newport Beach, California 92660
                                            Attention: Chief Executive Officer

To the Advisor:                             Cornerstone Realty Advisors, LLC
                                            4590 MacArthur Blvd, Suite 610
                                            Newport Beach, California 92660
                                            Attention:  Managing Member

Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Section 22.

          23. Modification. This Agreement shall not be changed, modified,
    terminated, or discharged, in whole or in part, except by an instrument in
    writing signed by both parties hereto, or their respective successors or
    assignees.

                                      -21-

<PAGE>

          24. Severability. The provisions of this Agreement are independent of
    and severable from each other, and no provision shall be affected or
    rendered invalid or unenforceable by virtue of the fact that for any reason
    any other or others of them may be invalid or unenforceable in whole or in
    part.

          25. Construction. The provisions of this Agreement shall be construed
    and interpreted in accordance with the laws of the State of California.

          26. Entire Agreement. This Agreement contains the entire agreement and
    understanding among the parties hereto with respect to the subject matter
    hereof, and supersedes all prior and contemporaneous agreements,
    understandings, inducements and conditions, express or implied, oral or
    written, of any nature whatsoever with respect to the subject matter hereof.
    The express terms hereof control and supersede any course of performance
    and/or usage of the trade inconsistent with any of the terms hereof. This
    Agreement may not be modified or amended other than by an agreement in
    writing.

          27. Indulgences, Not Waivers. Neither the failure nor any delay on the
    part of a party to exercise any right, remedy, power or privilege under this
    Agreement shall operate as a waiver thereof, nor shall any single or partial
    exercise of any right, remedy, power or privilege preclude any other or
    further exercise of the same or of any other right, remedy, power or
    privilege, nor shall any waiver of any right, remedy, power or privilege
    with respect to any occurrence be construed as a waiver of such right,
    remedy, power or privilege with respect to any other occurrence. No waiver
    shall be effective unless it is in writing and is signed by the party
    asserted to have granted such waiver.

          28. Gender. Words used herein regardless of the number and gender
    specifically used, shall be deemed and construed to include any other
    number, singular or plural, and any other gender, masculine, feminine or
    neuter, as the context requires.

          29. Titles Not to Affect Interpretation. The titles of paragraphs and
    subparagraphs contained in this Agreement are for convenience only, and they
    neither form a part of this Agreement nor are they to be used in the
    construction or interpretation hereof.

          30. Execution in Counterparts. This Agreement may be executed in any
    number of counterparts, each of which shall be deemed to be an original as
    against any party whose signature appears thereon, and all of which shall
    together constitute one and the same instrument. This Agreement shall become
    binding when the counterparts hereof, taken together, bear the signatures of
    all of the parties reflected hereon as the signatories.

          31. Initial Investment. Terry G. Roussel, an Affiliate of the Advisor,
    has purchased 125 shares of Common Stock for $1,000. Prior to the effective
    date of the Initial Public Offering, the Advisor and its Affiliates will
    have purchased 27,778 shares of Common Stock for $200,000. The Advisor may
    not sell any of the Common Stock while the Advisor acts in such advisory
    capacity to the Company, provided, that such Common Stock may be transferred
    to Affiliates of the Advisor. Affiliates of the Advisor may not sell any of
    the Common Stock while the Advisor acts in such advisory capacity to the
    Company, provided, that such Common Stock may be transferred to the Advisor
    or other Affiliates of the Advisor. The restrictions included above shall
    not apply to any other Securities acquired by the Advisor or its Affiliates.
    With respect to Stock owned by the Advisor, the Directors, or any of their
    Affiliates, neither the Advisor, nor the Directors, nor any of their
    Affiliates may vote or consent on matters submitted to the Stockholders
    regarding the removal of the Advisor, Directors or any of their Affiliates
    or any transaction between the Company and any of them. In determining the
    requisite percentage in interest of Stock necessary to approve a matter on
    which the Advisor, Directors and any of their Affiliates may not vote or
    consent, any Stock owned by any of them shall not be included.

          32. Name. Cornerstone Ventures, Inc. has a proprietary interest in the
    name "Cornerstone." Cornerstone Ventures, Inc. is an Affiliate of the
    Advisor. Cornerstone Ventures, Inc. hereby grants to the Company a
    non-transferable, non-assignable, non-exclusive royalty-free right and
    license to use the name "Cornerstone " during the term of this Agreement.
    Accordingly, and in recognition of this right, if at any time the Company
    ceases to retain an Affiliate of Cornerstone Ventures, Inc. to perform the
    services of Advisor, the Company and the Operating Partnership will,
    promptly after receipt of written request from Cornerstone Ventures, Inc.,
    cease to conduct business under or use the name "Cornerstone" or any
    derivative thereof and the

                                      -22-

<PAGE>

    Company and the Operating Partnership shall change the name of the Company
    and the Operating Partnership to a name that does not contain the name
    "Cornerstone" or any other word or words that might, in the reasonable
    discretion of the Advisor, be susceptible of indication of some form of
    relationship between the Company and the Advisor or any Affiliate thereof.
    At such time, the Company will also make any changes to any trademarks,
    service marks or other marks necessary to remove any references to the word
    "Cornerstone." Consistent with the foregoing, it is specifically recognized
    that the Advisor or one or more of its Affiliates has in the past and may in
    the future organize, sponsor or otherwise permit to exist other investment
    vehicles (including vehicles for investment in real estate) and financial
    and service organizations having "Cornerstone" as a part of their name, all
    without the need for any consent (and without the right to object thereto)
    by the Company, the Board or the Operating Partnership.

      IN WITNESS WHEREOF, the parties hereto have executed this Advisory
Agreement as of the date and year first above written.

                              CORNERSTONE REALTY FUND, INC.

                                  By: _________________________________________
                                         Terry G. Roussel, President

                              CORNERSTONE REALTY ADVISORS, LLC

                                  By:  CORNERSTONE VENTURES, INC.,
                                       It's Managing Member

                                       By: ____________________________________
                                           Terry G. Roussel, President

For purposes of Section 32 of this Agreement:

CORNERSTONE VENTURES, INC.

By: _______________________________
    Terry G. Roussel, President

                                      -23-<PAGE>

                                                                    EXHIBIT 10.2

                          LIMITED PARTNERSHIP AGREEMENT
                                       OF
                     CORNERSTONE OPERATING PARTNERSHIP, L.P.

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   Page
                                                                                                                   ----
<S>                                                                                                                <C>
ARTICLE 1  DEFINED TERMS.........................................................................................    1
ARTICLE 2  PARTNERSHIP FORMATION AND IDENTIFICATION..............................................................    6
   2.1      Formation............................................................................................    6
   2.2      Name, Office and Registered Agent....................................................................    6
   2.3      Partners.............................................................................................    6
   2.4      Term and Dissolution.................................................................................    6
   2.5      Filing of Certificate and Perfection of Limited Partnership..........................................    7
   2.6      Certificates Describing Partnership Units............................................................    7
ARTICLE 3  BUSINESS OF THE PARTNERSHIP...........................................................................    7
ARTICLE 4  CAPITAL CONTRIBUTIONS AND ACCOUNTS....................................................................    7
   4.1      Capital Contributions................................................................................    7
   4.2      Additional Capital Contributions and Issuances of Additional Partnership Interests...................    8
   4.3      Additional Funding...................................................................................    9
   4.4      Capital Accounts.....................................................................................    9
   4.5      Percentage Interests.................................................................................    9
   4.6      No Interest On Contributions.........................................................................   10
   4.7      Return Of Capital Contributions......................................................................   10
   4.8      No Third Party Beneficiary...........................................................................   10
ARTICLE 5  PROFITS AND LOSSES; DISTRIBUTIONS.....................................................................   10
   5.1      Allocation Of Profit And Loss........................................................................   10
   5.2      Distribution Of Cash.................................................................................   11
   5.3      Reit Distribution Requirements.......................................................................   12
   5.4      No Right To Distributions In Kind....................................................................   12
   5.5      Limitations On Return Of Capital Contributions.......................................................   12
   5.6      Distributions Upon Liquidation.......................................................................   12
   5.7      Substantial Economic Effect..........................................................................   13
ARTICLE 6  RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER.................................................   13
   6.1      Management Of The Partnership........................................................................   13
   6.2      Delegation Of Authority..............................................................................   15
   6.3      Indemnification And Exculpation Of Indemnitees.......................................................   15
   6.4      Liability Of The General Partner.....................................................................   16
   6.5      Reimbursement Of General Partner.....................................................................   17
   6.6      Outside Activities...................................................................................   17
   6.7      Employment Or Retention Of Affiliates................................................................   17
   6.8      General Partner Participation........................................................................   17
   6.9      Title To Partnership Assets..........................................................................   17
   6.10     Miscellaneous........................................................................................   18
ARTICLE 7  CHANGES IN GENERAL PARTNER............................................................................   18
   7.1      Transfer Of The General Partner's Partnership Interest...............................................   18
   7.2      Admission Of A Substitute Or Additional General Partner..............................................   19
   7.3      Effect Of Bankruptcy, Withdrawal, Death Or Dissolution Of A General Partner..........................   20
   7.4      Removal Of A General Partner.........................................................................   20
ARTICLE 8  RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS........................................................   21
   8.1      Management Of The Partnership........................................................................   21
   8.2      Power Of Attorney....................................................................................   21
   8.3      Limitation On Liability Of Limited Partners..........................................................   21
   8.4      Ownership By Limited Partner Of Corporate General Partner Or Affiliate...............................   21
   8.5      Exchange Right.......................................................................................   21
ARTICLE 9  TRANSFERS OF LIMITED PARTNERSHIP INTERESTS............................................................   22
   9.1      Purchase For Investment..............................................................................   22
   9.2      Restrictions On Transfer Of Limited Partnership Interests............................................   23
   9.3      Admission Of Substitute Limited Partner..............................................................   24
</TABLE>

                                       (i)

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
   9.4      Rights Of Assignees Of Partnership Interests.........................................................   24
   9.5      Effect Of Bankruptcy, Death, Incompetence Or Termination Of A Limited Partner........................   25
   9.6      Joint Ownership Of Interests.........................................................................   25
   9.7      Redemption Of Partnership Units......................................................................   25
ARTICLE 10  BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS...........................................................   25
   10.1     Books And Records....................................................................................   25
   10.2     Custody Of Partnership Funds; Bank Accounts..........................................................   25
   10.3     Fiscal And Taxable Year..............................................................................   26
   10.4     Annual Tax Information And Report....................................................................   26
   10.5     Tax Matters Partner; Tax Elections; Special Basis Adjustments........................................   26
   10.6     Reports To Limited Partners..........................................................................   26
ARTICLE 11  AMENDMENT OF AGREEMENT; MERGER.......................................................................   26
ARTICLE 12  GENERAL PROVISIONS...................................................................................   27
   12.1     Notices..............................................................................................   27
   12.2     Survival Of Rights...................................................................................   27
   12.3     Additional Documents.................................................................................   27
   12.4     Severability.........................................................................................   27
   12.5     Entire Agreement.....................................................................................   27
   12.6     Pronouns And Plurals.................................................................................   27
   12.7     Headings.............................................................................................   27
   12.8     Counterparts.........................................................................................   27
   12.9     Governing Law........................................................................................   28

EXHIBITS:

EXHIBIT A -       General Partner and Original Limited Partner, Capital Contributions and Percentage Interests...   29

EXHIBIT B -       Notice of Exercise of Exchange Right...........................................................   30

EXHIBIT C -       Indemnification Guideline......................................................................   31
</TABLE>

                                      (ii)

<PAGE>

                          LIMITED PARTNERSHIP AGREEMENT
                                       OF
                     CORNERSTONE OPERATING PARTNERSHIP, L.P.

      Cornerstone Operating Partnership, L.P. (the "Partnership"), was formed as
a limited partnership under the law of the State of Delaware, pursuant to a
Certificate of Limited Partnership filed with the Office of the Secretary of
State of the State of Delaware on November 30, 2004. This Agreement of Limited
Partnership ("Agreement") is entered into effective as of November 30, 2004
between Cornerstone Realty Fund, Inc., a Maryland corporation (the "General
Partner") and the Limited Partners set forth on Exhibit A hereto. Capitalized
terms used herein but not otherwise defined shall have the meanings given them
in Article 1.

      NOW, THEREFORE, in consideration of the foregoing, of mutual covenants
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

                                    ARTICLE 1
                                  DEFINED TERMS

      The following defined terms used in this Agreement shall have the meanings
specified below:

      Act means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time.

      Additional Funds has the meaning set forth in Section 4.3.

      Additional Securities means any additional REIT Shares (other than REIT
Shares issued in connection with an exchange pursuant to Section 8.5 hereof or
REIT Shares issued pursuant to a dividend reinvestment plan of the General
Partner) or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares, as set forth in
Section 4.2(a)(ii).

      Administrative Expenses means (i) all administrative and operating costs
and expenses incurred by the Partnership, (ii) those administrative costs and
expenses of the General Partner, including any salaries or other payments to
directors, officers or employees of the General Partner, and any accounting and
legal expenses of the General Partner, which expenses, the Partners have agreed,
are expenses of the Partnership and not the General Partner, and (iii) to the
extent not included in clause (ii) above, REIT Expenses; provided, however, that
Administrative Expenses shall not include any administrative costs and expenses
incurred by the General Partner that are attributable to Properties or
partnership interests in a Subsidiary Partnership (other than this Partnership)
that are owned by the General Partner directly.

      Advisor or Advisors means the Person or Persons, if any, appointed,
employed or contracted with by the General Partner and responsible for directing
or performing the day-to-day business affairs of the General Partner, including
any Person to whom the Advisor subcontracts substantially all of such functions.

      Advisory Agreement means the agreement between the General Partner and the
Advisor pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the General Partner.

      Affiliate or Affiliated means, as to any individual, corporation,
partnership, trust, limited liability company or other legal entity (other than
this Partnership), (i) any Person or entity directly or indirectly through one
or more intermediaries controlling, controlled by, or under common control with
another Person or entity; (ii) any Person or entity, directly or indirectly
owning, controlling, or holding with power to vote ten percent (10%) or more of
the outstanding voting securities of another Person or entity; (iii) any
officer, director, general partner or trustee of such Person or entity; (iv) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with power to vote, by such
other Person; and (v) if such other Person or entity is an officer, director,
general partner, or trustee of a Person or entity, the Person or entity for
which such Person or entity acts in any such capacity.

                                      -1-

<PAGE>

      Agreed Value means the fair market value of a Partner's non-cash Capital
Contribution as of the date of contribution as agreed to by such Partner and the
General Partner. The names and addresses of the General Partner and Original
Limited Partner, number of Partnership Units issued to each of them, and their
respective Capital Contributions as of the date of contribution is set forth on
Exhibit A.

      Agreement means this Agreement of Limited Partnership, as amended,
modified supplemented or restated from time to time, as the context requires.

      Articles of Incorporation means the Articles of Incorporation of the
General Partner filed with the Maryland State Department of Assessments and
Taxation, as amended or restated from time to time.

      Capital Account has the meaning provided in Section 4.4 hereof.

      Capital Contribution means the total amount of cash, cash equivalents, and
the Agreed Value of any Property or other asset (other than cash) contributed or
agreed to be contributed, as the context requires, to the Partnership by each
Partner pursuant to the terms of this Agreement. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.

      Cash Amount means an amount of cash per Partnership Unit equal to the
Value of the REIT Shares Amount on the date of receipt by the General Partner of
a Notice of Exchange.

      Certificate means any instrument or document that is required under the
laws of the State of Delaware, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of the
Partnership (either by themselves or pursuant to the power-of-attorney granted
to the General Partner in Section 8.2 hereof) and filed for recording in the
appropriate public offices within the State of Delaware or such other
jurisdiction to perfect or maintain the Partnership as a limited partnership, to
effect the admission, withdrawal, or substitution of any Partner of the
Partnership, or to protect the limited liability of the Limited Partners as
limited partners under the laws of the State of Delaware or such other
jurisdiction.

      Code means the Internal Revenue Code of 1986, as amended, and as hereafter
amended from time to time. Reference to any particular provision of the Code
shall mean that provision in the Code at the date hereof and any successor
provision of the Code.

      Conversion Factor means 1.0, provided that in the event that the General
Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares other than the Special 10% Stock Dividend, (ii) subdivides its
outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a
smaller number of REIT Shares, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which shall be
the number of REIT Shares issued and outstanding on the record date for such
dividend, distribution, subdivision or combination (assuming for such purposes
that such dividend, distribution, subdivision or combination has occurred as of
such time), and the denominator of which shall be the actual number of REIT
Shares (determined without the above assumption) issued and outstanding on such
date and, provided further, that in the event that an entity other than an
Affiliate of the General Partner shall become General Partner pursuant to any
merger, consolidation or combination of the General Partner with or into another
entity (the "Successor Entity"), the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by the number of shares of the Successor
Entity into which one REIT Share is converted pursuant to such merger,
consolidation or combination, determined as of the date of such merger,
consolidation or combination. Any adjustment to the Conversion Factor shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event; provided, however, that if the
General Partner receives a Notice of Exchange after the record date, but prior
to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the General Partner
had received the Notice of Exchange immediately prior to the record date for
such dividend, distribution, subdivision or combination.

      Event of Bankruptcy as to any Person means the filing of a petition for
relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978
or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the

                                      -2-

<PAGE>

appointment of a receiver or a trustee for such Person or a substantial part of
his assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.

      Exchange Amount means either the Cash Amount or the REIT Shares Amount, as
selected by the General Partner in its sole and absolute discretion pursuant to
Section 8.5(b) hereof.

      Exchange Right has the meaning provided in Section 8.5(a) hereof.

      Exchanging Partner has the meaning provided in Section 8.5(a) hereof.

      General Partner means Cornerstone Realty Fund, Inc., a Maryland
corporation, and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.

      General Partnership Interest means a Partnership Interest held by the
General Partner that is a general partnership interest.

      Indemnitee means (i) the General Partner or a director, officer or
employee of the General Partner or Partnership, (ii) the Advisor or a director,
officer, employee of the Advisor or another agent of the Advisor if such agent
is an Affiliate of the Advisor and (iii) such other Persons (including
Affiliates of the General Partner, the Advisor or the Partnership) as the
General Partner may designate from time to time, in its sole and absolute
discretion.

      Independent Director means a director of the General Partner who is not an
officer or employee of the General Partner, any Affiliate of an officer or
employee or any Affiliate of (i) any lessee of any property of the General
Partner or any Subsidiary of the General Partner, (ii) any Subsidiary of the
General Partner, or (iii) any partnership that is an Affiliate of the General
Partner.

      Limited Partner means any Person named as a Limited Partner on Exhibit A
attached hereto, and any Person who becomes a Substitute Limited Partner, in
such Person's capacity as a Limited Partner in the Partnership.

      Limited Partnership Interest means the ownership interest of a Limited
Partner in the Partnership at any particular time, including the right of such
Limited Partner to any and all benefits to which such Limited Partner may be
entitled as provided in this Agreement and in the Act, together with the
obligations of such Limited Partner to comply with all the provisions of this
Agreement and of such Act.

      Listing means the listing of the shares of the General Partner's stock,
previously issued by the General Partner pursuant to an effective registration
statement and such shares currently registered with the SEC pursuant to an
effective registration statement, on a national securities exchange or
over-the-counter market.

      Loss has the meaning provided in Section 5.1(h) hereof.

      Notice of Exchange means the Notice of Exercise of Exchange Right
substantially in the form attached as Exhibit B hereto.

      NYSE means the New York Stock Exchange.

      Offer has the meaning set forth in Section 7.1(c) hereof.

      Offering means the initial offer and sale by the General Partner and the
purchase by the Dealer Manager (as defined in the Prospectus) of REIT Shares for
sale to the public.

      OP Unitholders means all holders of Partnership Interests.

                                      -3-

<PAGE>

      Original Limited Partner means the Limited Partners designated as
"Original Limited Partners" on Exhibit A hereto.

      Partner means any General Partner or Limited Partner.

      Partner Nonrecourse Debt Minimum Gain has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).

      Partnership means Cornerstone Operating Partnership, L.P., a Delaware
limited partnership.

      Partnership Interest means an ownership interest in the Partnership held
by either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.

      Partnership Minimum Gain has the meaning set forth in Regulations Section
1.704-2(d). In accordance with Regulations Section 1.704-2(d), the amount of
Partnership Minimum Gain is determined by first computing, for each Partnership
nonrecourse liability, any gain the Partnership would realize if it disposed of
the property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. A Partner's share of Partnership Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(g)(1).

      Partnership Record Date means the record date established by the General
Partner for the distribution of cash pursuant to Section 5.2 hereof, which
record date shall be the same as the record date established by the General
Partner for a distribution to its shareholders of some or all of its portion of
such distribution.

      Partnership Unit means a fractional, undivided share of the Partnership
Interests of all Partners issued hereunder. The allocation of Partnership Units
among the Partners shall be as set forth on Exhibit A, as such Exhibit may be
amended from time to time.

      Percentage Interest means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner by the total number of Partnership Units then outstanding.
The Percentage Interest of each Partner shall be as set forth on Exhibit A, as
such Exhibit may be amended from time to time.

      Person means any individual, partnership, limited liability company,
corporation, joint venture, trust or other entity.

      Profit has the meaning provided in Section 5.1(h) hereof.

      Property means any office or industrial property or other investment in
which the Partnership holds an ownership interest.

      Prospectus means the final prospectus delivered to purchasers of REIT
Shares in the Offering.

      Regulations means the Federal income tax regulations promulgated under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.

      Regulatory Allocations has the meaning set forth in Section 5.1(i) hereof.

      REIT means a real estate investment trust under Sections 856 through 860
of the Code.

      REIT Expenses means (i) costs and expenses relating to the formation and
continuity of existence and operation of the General Partner and any
Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included

                                      -4-

<PAGE>

within the definition of General Partner), including taxes, fees and assessments
associated therewith, any and all costs, expenses or fees payable to any
director, officer, or employee of the General Partner, (ii) costs and expenses
relating to any public offering and registration of securities by the General
Partner and all statements, reports, fees and expenses incidental thereto,
including, without limitation, underwriting discounts and selling commissions
applicable to any such offering of securities, and any costs and expenses
associated with any claims made by any holders of such securities or any
underwriters or placement agents thereof, (iii) costs and expenses associated
with any repurchase of any securities by the General Partner, (iv) costs and
expenses associated with the preparation and filing of any periodic or other
reports and communications by the General Partner under federal, state or local
laws or regulations, including filings with the SEC, (v) costs and expenses
associated with compliance by the General Partner with laws, rules and
regulations promulgated by any regulatory body, including the SEC and any
securities exchange, (vi) costs and expenses associated with any 401(k) plan,
incentive plan, bonus plan or other plan providing for compensation for the
employees of the General Partner, (vii) costs and expenses incurred by the
General Partner relating to any issuing or redemption of Partnership Interests,
and (viii) all other operating or administrative costs of the General Partner
incurred in the ordinary course of its business on behalf of or in connection
with the Partnership.

      REIT Share means a common share of beneficial interest in the General
Partner (or successor entity, as the case may be).

      REIT Shares Amount means a number of REIT Shares equal to the product of
the number of Partnership Units offered for exchange by an Exchanging Partner,
multiplied by the Conversion Factor as adjusted to and including the Specified
Exchange Date; provided that in the event the General Partner issues to all
holders of REIT Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase REIT Shares,
or any other securities or property (collectively, the "rights"), and the rights
have not expired at the Specified Exchange Date, then the REIT Shares Amount
shall also include the rights issuable to a holder of the REIT Shares Amount of
REIT Shares on the record date fixed for purposes of determining the holders of
REIT Shares entitled to rights.

      SEC means the U.S. Securities and Exchange Commission.

      Securities Act means the Securities Act of 1933, as amended.

      Service means the United States Internal Revenue Service.

      Special 10% Stock Dividend means the 10% stock dividend declared by the
General Partner to be paid to the stockholders of record of the General Partner
on the date that the General Partner raises the first $125,000,000 in its
initial public offering or such lesser amount on such earlier date as determined
by the General Partner.

      Specified Exchange Date means the first business day of the month that is
at least 60 business days after the receipt by the General Partner of the Notice
of Exchange.

      Subsidiary means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.

      Subsidiary Partnership means any partnership of which the partnership
interests therein are owned by the General Partner or a direct or indirect
subsidiary of the General Partner.

      Substitute Limited Partner means any Person admitted to the Partnership as
a Limited Partner pursuant to Section 9.3 hereof.

      Successor Entity has the meaning provided in the definition of "Conversion
Factor" contained herein.

      Surviving General Partner has the meaning set forth in Section 7.1(d)
hereof.

      Transaction has the meaning set forth in Section 7.1(c) hereof.

                                      -5-

<PAGE>

      Transfer has the meaning set forth in Section 9.2(a) hereof.

      Value means, with respect to any security, the average of the daily market
price of such security for the ten consecutive trading days immediately
preceding the date of such valuation. The market price for each such trading day
shall be: (i) if the security is listed or admitted to trading on any securities
exchange or the NYSE, the sale price, regular way, on such day, or if no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, on such day, (ii) if the security is not listed or admitted to
trading on any securities exchange or the NYSE, the last reported sale price on
such day or, if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or (iii) if the security is not listed or
admitted to trading on any securities exchange or the NYSE and no such last
reported sale price or closing bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported by a
reliable quotation source designated by the General Partner, or if there shall
be no bid and asked prices on such day, the average of the high bid and low
asked prices, as so reported, on the most recent day (not more than ten days
prior to the date in question) for which prices have been so reported; provided
that if there are no bid and asked prices reported during the ten days prior to
the date in question, the value of the security shall be determined by the
General Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the security includes any additional rights, then the value of such rights
shall be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate.

                                    ARTICLE 2
                    PARTNERSHIP FORMATION AND IDENTIFICATION

      2.1 Formation. The Partnership was formed as a limited partnership
pursuant to the Act for the purposes and upon the terms and conditions set forth
in this Agreement.

      2.2 Name, Office and Registered Agent. The name of the Partnership is
Cornerstone Operating Partnership, L.P.. The specified office and place of
business of the Partnership shall be 4590 McArthur Blvd., Suite 610, Newport
Beach, California 92660. The General Partner may at any time change the location
of such office, provided the General Partner gives notice to the Partners of any
such change. The name and address of the Partnership's registered agent is
Corporate Research Services, Inc., 32 Lockerman Square, Suite 109, Dover,
Delaware 19904. The sole duty of the registered agent as such is to forward to
the Partnership any notice that is served on him as registered agent.

      2.3 Partners.

            (a) The General Partner of the Partnership is Cornerstone Real
Estate Fund, Inc., a Maryland corporation. Its principal place of business is
the same as that of the Partnership.

            (b) The Limited Partners are those Persons identified as Limited
Partners on Exhibit A hereto, as amended from time to time.

      2.4 Term and Dissolution.

            (a) The Partnership shall have perpetual duration, except that the
Partnership shall be dissolved upon the first to occur of any of the following
events:

                  (i) The occurrence of an Event of Bankruptcy as to a General
Partner or the dissolution, death, removal or withdrawal of a General Partner
unless the business of the Partnership is continued pursuant to Section 7.3(b)
hereof; provided that if a General Partner is on the date of such occurrence a
partnership, the dissolution of such General Partner as a result of the
dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in
such partnership shall not be an event of dissolution of the Partnership if the
business of such General Partner is continued by the remaining partner or
partners, either alone or with additional partners, and such General Partner and
such partners comply with any other applicable requirements of this Agreement;

                                      -6-

<PAGE>

                  (ii) The passage of 90 days after the sale or other
disposition of all or substantially all of the assets of the Partnership
(provided that if the Partnership receives an installment obligation as
consideration for such sale or other disposition, the Partnership shall
continue, unless sooner dissolved under the provisions of this Agreement, until
such time as such note or notes are paid in full);

                  (iii) The exchange of all Limited Partnership Interests (other
than any of such interests held by the General Partner or Affiliates of the
General Partner) for REIT Shares or the securities of any other entity; or

                  (iv) The election by the General Partner that the Partnership
should be dissolved.

            (b) Upon dissolution of the Partnership (unless the business of the
Partnership is continued pursuant to Section 7.3(b) hereof), the General Partner
(or its trustee, receiver, successor or legal representative) shall amend or
cancel the Certificate and liquidate the Partnership's assets and apply and
distribute the proceeds thereof in accordance with Section 5.6 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i)
defer liquidation of, or withhold from distribution for a reasonable time, any
assets of the Partnership (including those necessary to satisfy the
Partnership's debts and obligations), or (ii) distribute the assets to the
Partners in kind.

      2.5 Filing of Certificate and Perfection of Limited Partnership. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, The Certificate any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.

      2.6 Certificates Describing Partnership Units. At the request of a Limited
Partner, the General Partner, at its option, may issue a certificate summarizing
the terms of such Limited Partner's interest in the Partnership, including the
number of Partnership Units owned and the Percentage Interest represented by
such Partnership Units as of the date of such certificate. Any such certificate
(i) shall be in form and substance as approved by the General Partner, (ii)
shall not be negotiable and (iii) shall bear a legend to the following effect:

      This certificate is not negotiable. The Partnership Units represented by
this certificate are governed by and transferable only in accordance with the
provisions of the Agreement of Limited Partnership of Cornerstone Operating
Partnership, L.P., as amended from time to time.

                                    ARTICLE 3
                           BUSINESS OF THE PARTNERSHIP

      The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act, provided, however, that such business
shall be limited to and conducted in such a manner as to permit the General
Partner at all times to qualify as a REIT, unless the General Partner otherwise
ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership
of interests in any entity engaged in any of the foregoing and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the General Partner's right in its sole and
absolute discretion to cease qualifying as a REIT, the Partners acknowledge that
the General Partner's current status as a REIT and the avoidance of income and
excise taxes on the General Partner inures to the benefit of all the Partners
and not solely to the General Partner. Notwithstanding the foregoing, the
Limited Partners agree that the General Partner may terminate its status as a
REIT under the Code at any time to the full extent permitted under the Articles
of Incorporation. The General Partner shall also be empowered to do any and all
acts and things necessary or prudent to ensure that the Partnership will not be
classified as a "publicly traded partnership" for purposes of Section 7704 of
the Code.

                                    ARTICLE 4
                       CAPITAL CONTRIBUTIONS AND ACCOUNTS

      4.1 Capital Contributions. The General Partner and the Limited Partners
have made capital contributions to the Partnership in exchange for the
Partnership Interests set forth opposite their names on Exhibit A, as amended
from time to time.

                                      -7-

<PAGE>

      4.2 Additional Capital Contributions and Issuances of Additional
Partnership Interests. Except as provided in this Section 4.2 or in Section 4.3,
the Partners shall have no right or obligation to make any additional Capital
Contributions or loans to the Partnership. The General Partner may contribute
additional capital to the Partnership, from time to time, and receive additional
Partnership Interests in respect thereof, in the manner contemplated in this
Section 4.2.

            (a) Issuances of Additional Partnership Interests.

                  (i) General. The General Partner is hereby authorized to cause
the Partnership to issue such additional Partnership Interests in the form of
Partnership Units for any Partnership purpose at any time or from time to time,
to the Partners (including the General Partner) or to other Persons for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole and absolute discretion, all without the approval of
any Limited Partners. Any additional Partnership Interests issued thereby may be
issued in one or more classes, or one or more series of any of such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and duties
senior to Limited Partnership Interests, all as shall be determined by the
General Partner in its sole and absolute discretion and without the approval of
any Limited Partner, subject to Delaware law, including, without limitation, (i)
the allocations of items of Partnership income, gain, loss, deduction and credit
to each such class or series of Partnership Interests; (ii) the right of each
such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided,
however, that no additional Partnership Interests shall be issued to the General
Partner unless:

                        (1) (A) the additional Partnership Interests are issued
in connection with an issuance of REIT Shares of or other interests in the
General Partner, which shares or interests have designations, preferences and
other rights, all such that the economic interests are substantially similar to
the designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner by the Partnership in accordance with
this Section 4.2 and (B) the General Partner shall make a Capital Contribution
to the Partnership in an amount equal to the proceeds raised in connection with
the issuance of such shares of stock of or other interests in the General
Partner;

                        (2) the additional Partnership Interests are issued in
exchange for property owned by the General Partner with a fair market value, as
determined by the General Partner, in good faith, equal to the value of the
Partnership Interests; or

                        (3) the additional Partnership Interests are issued to
all Partners holding Partnership Units in proportion to their respective
Percentage Interests.

      In addition, the General Partner may acquire Partnership Interests from
other Partners pursuant to this Agreement. In the event that the Partnership
issues Partnership Interests pursuant to this Section 4.2(a), the General
Partner shall make such revisions to this Agreement (without any requirement of
receiving approval of the Limited Partners) as it deems necessary to reflect the
issuance of such additional Partnership Interests and any special rights,
powers, and duties associated therewith.

      Without limiting the foregoing, the General Partner is expressly
authorized to cause the Partnership to issue Partnership Units for less than
fair market value, so long as the General Partner concludes in good faith that
such issuance is in the best interests of the General Partner and the
Partnership.

                  (ii) Upon Issuance of Additional Securities. The General
Partner shall not issue any additional REIT Stock (other then REIT Stock issued
in connection with an exchange pursuant to Section 8.5 hereof) or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase REIT Stock (collectively, "Additional Securities"
other than to all holders of REIT Stock, unless (A) the General Partner shall
cause the Partnership to issue to the General Partner, as the General Partner
may designate, Partnership Interests or rights, options, warrants or convertible
or exchangeable securities of the Partnership having designations, preferences
and other rights, all such that the economic interests are substantially similar
to those of the Additional Securities, and (B) the General Partner contributes
the net proceeds from the issuance of such Additional Securities and from any
exercise of rights contained in such Additional Securities, directly and through
the General Partner, to the Partnership;

                                      -8-

<PAGE>

provided, however, that the General Partner is allowed to issue Additional
Securities in connection with an acquisition of a property to be held directly
by the General Partner, but if and only if, such direct acquisition and issuance
of Additional Securities have been approved and determined to be in the best
interests of the General Partner and the Partnership by a majority of the
Independent Directors (as defined in the General Partner's Articles of
Incorporation). Without limiting the foregoing, the General Partner is expressly
authorized to issue Additional Securities for less than fair market value, and
to cause the Partnership to issue to the General Partner corresponding
Partnership Interests, so long as (x) the General Partner concludes in good
faith that such issuance is in the best interests of the General Partner and the
Partnership, including without limitation, the issuance of REIT Shares and
corresponding Partnership Units pursuant to an employee share purchase plan
providing for employee purchases of REIT Shares at a discount from fair market
value or employee stock options that have an exercise price that is less than
the fair market value of the REIT Shares, either at the time of issuance or at
the time of exercise, and (y) the General Partner contributes all proceeds from
such issuance to the Partnership. For example, in the event the General Partner
issues REIT Shares for a cash purchase price and contributes all of the proceeds
of such issuance to the Partnership as required hereunder, the General Partner
shall be issued a number of additional Partnership Units equal to the product of
(A) the number of such REIT Shares issued by the General Partner, the proceeds
of which were so contributed, multiplied by (B) a fraction, the numerator of
which is 100%, and the denominator of which is the Conversion Factor in effect
on the date of such contribution.

            (b) Certain Deemed Contributions of Proceeds of Issuance of REIT
Shares. In connection with any and all issuances of REIT Shares, the General
Partner shall make Capital Contributions to the Partnership of the proceeds
therefrom, provided that if the proceeds actually received and contributed by
the General Partner are less than the gross proceeds of such issuance as a
result of any underwriter's discount or other expenses paid or incurred in
connection with such issuance, then the General Partner shall be deemed to have
made Capital Contributions to the Partnership in the aggregate amount of the
gross proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid such offering expenses in accordance with Section
6.5 hereof and in connection with the required issuance of additional
Partnership Units to the General Partner for such Capital Contributions pursuant
to Section 4.2(a) hereof.

      4.3 Additional Funding. If the General Partner determines that it is in
the best interests of the Partnership to provide for additional Partnership
funds ("Additional Funds") for any Partnership purpose, the General Partner may
(i) cause the Partnership to obtain such funds from outside borrowings, or (ii)
elect to have the General Partner or any of its Affiliates provide such
Additional Funds to the Partnership through loans or otherwise.

      4.4 Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Partner in accordance with
Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires
an additional Partnership Interest in exchange for more than a de minimis
Capital Contribution, (ii) the Partnership distributes to a Partner more than a
de minimis amount of Partnership property as consideration for a Partnership
Interest, or (iii) the Partnership is liquidated within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the
property of the Partnership to its fair market value (as determined by the
General Partner, in its sole and absolute discretion, and taking into account
Section 7701(g) of the Code) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the General
Partner, the Capital Accounts of the Partners shall be adjusted in accordance
with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require
such Capital Accounts to be adjusted to reflect the manner in which the
unrealized gain or loss inherent in such property (that has not been reflected
in the Capital Accounts previously) would be allocated among the Partners
pursuant to Section 5.1 if there were a taxable disposition of such property for
its fair market value (as determined by the General Partner, in its sole and
absolute discretion, and taking into account Section 7701(g) of the Code) on the
date of the revaluation.

      4.5 Percentage Interests. If the number of outstanding Partnership Units
increases or decreases during a taxable year, each Partner's Percentage Interest
shall be adjusted by the General Partner effective as of the effective date of
each such increase or decrease to a percentage equal to the number of
Partnership Units held by such Partner divided by the aggregate number of
Partnership Units outstanding after giving effect to such increase or decrease.
If the Partners' Percentage Interests are adjusted pursuant to this Section 4.5,
the Profits and Losses for the taxable year in which the adjustment occurs shall
be allocated between the part of the year ending on the day when the
Partnership's property is revalued by the General Partner and the part of the
year beginning on the following day either (i) as if the taxable year had ended
on the date of the adjustment or (ii) based on the number of days in each part.
The General Partner, in its sole and absolute discretion, shall determine which
method shall be used to allocate Profits and Losses for

                                      -9-

<PAGE>

the taxable year in which the adjustment occurs. The allocation of Profits and
Losses for the earlier part of the year shall be based on the Percentage
Interests before adjustment, and the allocation of Profits and Losses for the
later part shall be based on the adjusted Percentage Interests.

      4.6 No Interest on Contributions. No Partner shall be entitled to interest
on its Capital Contribution.

      4.7 Return of Capital Contributions. No Partner shall be entitled to
withdraw any part of its Capital Contribution or its Capital Account or to
receive any distribution from the Partnership, except as specifically provided
in this Agreement. Except as otherwise provided herein, there shall be no
obligation to return to any Partner or withdrawn Partner any part of such
Partner's Capital Contribution for so long as the Partnership continues in
existence.

      4.8 No Third Party Beneficiary. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Partners herein
set forth to make Capital Contributions or loans to the Partnership shall be
deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners. In
addition, it is the intent of the parties hereto that no distribution to any
Limited Partner shall be deemed a return of money or other property in violation
of the Act. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is
obligated to return such money or property, such obligation shall be the
obligation of such Limited Partner and not of the General Partner. Without
limiting the generality of the foregoing, a deficit Capital Account of a Partner
shall not be deemed to be a liability of such Partner nor an asset or property
of the Partnership.

                                    ARTICLE 5
                        PROFITS AND LOSSES; DISTRIBUTIONS

      5.1 Allocation of Profit And Loss.

            (a) General. Profit and Loss of the Partnership for each fiscal year
or other applicable period of the Partnership shall be allocated among the
Partners in accordance with their respective Percentage Interests.

            (b) Minimum Gain Chargeback. Notwithstanding any provision to the
contrary, (i) any expense of the Partnership that is a "nonrecourse deduction"
within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in
accordance with the Partners' respective Percentage Interests, (ii) any expense
of the Partnership that is a "partner nonrecourse deduction" within the meaning
of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that
bears the "economic risk of loss" of such deductions in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership taxable year, then, subject to the exceptions set forth in
Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income
shall be allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j),
and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership
taxable year, then, subject to the exceptions set forth in Regulations Section
1.704-(2)(g), items of gain and income shall be allocated among the Partners in
accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). A Partner's "interest in
partnership profits" for purposes of determining its share of the nonrecourse
liabilities of the Partnership within the meaning of Regulations Section
1.752-3(a)(3) shall be such Partner's Percentage Interest.

            (c) Qualified Income Offset. If a Partner unexpectedly receives in
any taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that
causes or increases a deficit balance in such Partner's Capital Account that
exceeds the sum of such Partner's shares of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially
for such taxable year (and, if necessary, later taxable years) items of income
and gain in an amount and manner sufficient to

                                      -10-

<PAGE>

eliminate such deficit Capital Account balance as quickly as possible as
provided in Regulations Section 1.704-1(b)(2)(ii)(d). This Section 5.1(e) is
intended to constitute a "qualified income offset" under Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith. After the occurrence of an allocation of income or gain to a Partner
in accordance with this Section 5.1(e), to the extent permitted by Regulations
Section 1.704-1(b), items of expense or loss shall be allocated to such Partner
in an amount necessary to offset the income or gain previously allocated to such
Partner under this Section 5.1(e).

            (d) Capital Account Deficits. Loss shall not be allocated to a
Limited Partner to the extent that such allocation would cause or increase a
deficit in such Partner's Capital Account at the end of any fiscal year (after
reduction to reflect the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner's shares
of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as
determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i).
Any Loss in excess of that limitation shall be allocated to the General Partner.
After the occurrence of an allocation of Loss to the General Partner in
accordance with this Section 5.1(d), to the extent permitted by Regulations
Section 1.704-1(b), Profit shall be allocated to such Partner in an amount
necessary to offset the Loss previously allocated to each Partner under this
Section 5.1(d).

            (e) Allocations Between Transferor and Transferee. If a Partner
transfers any part or all of its Partnership Interest, the distributive shares
of the various items of Profit and Loss allocable among the Partners during such
fiscal year of the Partnership shall be allocated between the transferor and the
transferee Partner either (i) as if the Partnership's fiscal year had ended on
the date of the transfer, or (ii) based on the number of days of such fiscal
year that each was a Partner without regard to the results of Partnership
activities in the respective portions of such fiscal year in which the
transferor and the transferee were Partners. The General Partner, in its sole
and absolute discretion, shall determine which method shall be used to allocate
the distributive shares of the various items of Profit and Loss between the
transferor and the transferee Partner.

            (f) Definition of Profit and Loss. "Profit" and "Loss" and any items
of income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss
shall not include items of income, gain and expense that are specially allocated
pursuant to Sections 5.1(b), 5.1(c) or 5.1(d). All allocations of income,
Profit, gain, Loss and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 5.1, except as otherwise required by Section 704(c) of the
Code and Regulations Section 1.704-1(b)(4). The General Partner shall have the
authority to elect the method to be used by the Partnership for allocating items
of income, gain, and expense as required by Section 704(c) of the Code including
a method that may result in a Partner receiving a disproportionately larger
share of the Partnership tax depreciation deductions, and such election shall be
binding on all Partners.

            (g) Curative Allocations. The allocations set forth in Section
5.1(c), (d) and (e) of this Agreement (the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. The General
Partner is authorized to offset all Regulatory Allocations either with other
Regulatory Allocations or with special allocations of other items of Partnership
income, gain, loss or deduction pursuant to this Section 5.1(g). Therefore,
notwithstanding any other provision of this Section 5.1 (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner it
deems appropriate so that, after such offsetting allocations are made, each
Partner's Capital Account is, to the extent possible, equal to the Capital
Account balance such Partner would have had if the Regulatory Allocations were
not part of this Agreement and all Partnership items were allocated pursuant to
Section 5.1(a) and (e).

      5.2 Distribution of Cash.

            (a) The Partnership shall distribute cash on a quarterly (or, at the
election of the General Partner, more frequent) basis, in an amount determined
by the General Partner in its sole and absolute discretion, to the Partners who
are Partners on the Partnership Record Date with respect to such quarter (or
other distribution period) in accordance with their respective Percentage
Interests on the Partnership Record Date; provided, however, that if a new or
existing Partner acquires an additional Partnership Interest in exchange for a
Capital Contribution on any date other than the next day after a Partnership
Record Date, the cash distribution attributable to such additional Partnership
Interest relating to the Partnership Record Date next following the issuance of
such additional Partnership Interest (or relating to the Partnership Record Date
if such Partnership Interest was acquired on the Partnership Record Date) shall

                                      -11-

<PAGE>

be reduced in the proportion to (i) the number of days that such additional
Partnership Interest is held by such Partner bears to (ii) the number of days
between such Partnership Record Date (including such Partnership Record Date)
and the immediately preceding Partnership Record Date.

            (b) Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or assignee (including by reason of
Section 1446 of the Code), either (i) if the actual amount to be distributed to
the Partner equals or exceeds the amount required to be withheld by the
Partnership, the amount withheld shall be treated as a distribution of cash in
the amount of such withholding to such Partner, or (ii) if the actual amount to
be distributed to the Partner is less than the amount required to be withheld by
the Partnership, the amount required to be withheld shall be treated as a loan
(a "Partnership Loan") from the Partnership to the Partner on the day the
Partnership pays over such amount to a taxing authority. A Partnership Loan
shall be repaid through withholding by the Partnership with respect to
subsequent distributions to the applicable Partner or assignee. In the event
that a Limited Partner (a "Defaulting Limited Partner") fails to pay any amount
owed to the Partnership with respect to the Partnership Loan within 15 days
after demand for payment thereof is made by the Partnership on the Limited
Partner, the General Partner, in its sole and absolute discretion, may elect to
make the payment to the Partnership on behalf of such Defaulting Limited
Partner. In such event, on the date of payment, the General Partner shall be
deemed to have extended a loan (a "General Partner Loan") to the Defaulting
Limited Partner in the amount of the payment made by the General Partner and
shall succeed to all rights and remedies of the Partnership against the
Defaulting Limited Partner as to that amount. Without limitation, the General
Partner shall have the right to receive any distributions that otherwise would
be made by the Partnership to the Defaulting Limited Partner until such time as
the General Partner Loan has been paid in full, and any such distributions so
received by the General Partner shall be treated as having been received by the
Defaulting Limited Partner and immediately paid to the General Partner.

      Any amounts treated as a Partnership Loan or a General Partner Loan
pursuant to this Section 5.2(c) shall bear interest at the lesser of (i) the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in The Wall Street Journal, or (ii) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date the Partnership or the General Partner, as applicable, is deemed to
extend the loan until such loan is repaid in full.

            (c) In no event may a Partner receive a distribution of cash with
respect to a Partnership Unit if such Partner is entitled to receive a cash
distribution as the holder of record of a REIT Share for which all or part of
such Partnership Unit has been or will be exchanged.

      5.3 REIT Distribution Requirements. The General Partner shall use its
commercially reasonable efforts to cause the Partnership to distribute amounts
sufficient to enable the General Partner to pay shareholder dividends that will
allow the General Partner to (i) meet its distribution requirement for
qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid
any federal income or excise tax liability imposed by the Code.

      5.4 No Right to Distributions In Kind. No Partner shall be entitled to
demand property other than cash in connection with any distributions by the
Partnership.

      5.5 Limitations on Return of Capital Contributions. Notwithstanding any of
the provisions of this Article 5, no Partner shall have the right to receive and
the General Partner shall not have the right to make, a distribution that
includes a return of all or part of a Partner's Capital Contributions, unless
after giving effect to the return of a Capital Contribution, the sum of all
Partnership liabilities, other than the liabilities to a Partner for the return
of his Capital Contribution, does not exceed the fair market value of the
Partnership's assets.

      5.6 Distributions Upon Liquidation. Upon liquidation of the Partnership,
after payment of, or adequate provision for, debts and obligations of the
Partnership, including any Partner loans, any remaining assets of the
Partnership shall be distributed to all Partners with positive Capital Accounts
in accordance with their respective positive Capital Account balances. For
purposes of the preceding sentence, the Capital Account of each Partner shall be
determined after all adjustments have been made in accordance with Sections 4.4,
5.1 and 5.2 resulting from Partnership

                                      -12-

<PAGE>

operations and from all sales and dispositions of all or any part of the
Partnership's assets.. To the extent deemed advisable by the General Partner,
appropriate arrangements (including the use of a liquidating trust) may be made
to assure that adequate funds are available to pay any contingent debts or
obligations.

      5.7 Substantial Economic Effect. It is the intent of the Partners that the
allocations of Profit and Loss under this Agreement have substantial economic
effect (or be consistent with the Partners' interests in the Partnership in the
case of the allocation of losses attributable to nonrecourse debt) within the
meaning of Section 704(b) of the Code as interpreted by the Regulations
promulgated pursuant thereto. Article 5 and other relevant provisions of this
Agreement shall be interpreted in a manner consistent with such intent.

                                    ARTICLE 6
                             RIGHTS, OBLIGATIONS AND
                          POWERS OF THE GENERAL PARTNER

      6.1 Management of the Partnership.

            (a) Except as otherwise expressly provided in this Agreement, the
General Partner shall have full, complete and exclusive discretion to manage and
control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Partnership.
Subject to the restrictions specifically contained in this Agreement, the powers
of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership:

                  (i) to acquire, purchase, own, operate, lease and dispose of
any real property and any other property or assets including, but not limited to
notes and mortgages, that the General Partner determines are necessary or
appropriate or in the best interests of the business of the Partnership;

                  (ii) to construct buildings and make other improvements on the
properties owned or leased by the Partnership;

                  (iii) to authorize, issue, sell, redeem or otherwise purchase
any Partnership Interests or any securities (including secured and unsecured
debt obligations of the Partnership, debt obligations of the Partnership
convertible into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any Partnership Interests)
of the Partnership;

                  (iv) to borrow or lend money for the Partnership, issue or
receive evidences of indebtedness in connection therewith, refinance, increase
the amount of, modify, amend or change the terms of, or extend the time for the
payment of, any such indebtedness, and secure such indebtedness by mortgage,
deed of trust, pledge or other lien on the Partnership's assets;

                  (v) to pay, either directly or by reimbursement, for all
operating costs and general administrative expenses of the Partnership to third
parties or to the General Partner or its Affiliates as set forth in this
Agreement;

                  (vi) to guarantee or become a co-maker of indebtedness of the
General Partner or any Subsidiary thereof, refinance, increase the amount of,
modify, amend or change the terms of, or extend the time for the payment of, any
such guarantee or indebtedness, and secure such guarantee or indebtedness by
mortgage, deed of trust, pledge or other lien on the Partnership's assets;

                  (vii) to use assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with this Agreement,
including, without limitation, payment, either directly or by reimbursement, of
all operating costs and general administrative expenses of the General Partner,
the Partnership or any Subsidiary of either, to third parties or to the General
Partner as set forth in this Agreement;

                  (viii) to lease all or any portion of any of the Partnership's
assets, whether or not the terms of such leases extend beyond the termination
date of the Partnership and whether or not any portion of the Partnership's

                                      -13-

<PAGE>

assets so leased are to be occupied by the lessee, or, in turn, subleased in
whole or in part to others, for such consideration and on such terms as the
General Partner may determine;

                  (ix) to prosecute, defend, arbitrate, or compromise any and
all claims or liabilities in favor of or against the Partnership, on such terms
and in such manner as the General Partner may reasonably determine, and
similarly to prosecute, settle or defend litigation with respect to the
Partners, the Partnership, or the Partnership's assets;

                  (x) to file applications, communicate, and otherwise deal with
any and all governmental agencies having jurisdiction over, or in any way
affecting, the Partnership's assets or any other aspect of the Partnership
business;

                  (xi) to make or revoke any election permitted or required of
the Partnership by any taxing authority;

                  (xii) to maintain such insurance coverage for public
liability, fire and casualty, and any and all other insurance for the protection
of the Partnership, for the conservation of Partnership assets, or for any other
purpose convenient or beneficial to the Partnership, in such amounts and such
types, as it shall determine from time to time;

                  (xiii) to determine whether or not to apply any insurance
proceeds for any property to the restoration of such property or to distribute
the same;

                  (xiv) to establish one or more divisions of the Partnership,
to hire and dismiss employees of the Partnership or any division of the
Partnership, and to retain legal counsel, accountants, consultants, real estate
brokers, and such other persons, as the General Partner may deem necessary or
appropriate in connection with the Partnership business and to pay therefor such
reasonable remuneration as the General Partner may deem reasonable and proper;

                  (xv) to retain other services of any kind or nature in
connection with the Partnership business, and to pay therefor such remuneration
as the General Partner may deem reasonable and proper;

                  (xvi) to negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and authority conferred
upon the General Partner;

                  (xvii) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of the
Partnership;

                  (xviii) to distribute Partnership cash or other Partnership
assets in accordance with this Agreement;

                  (xix) to form or acquire an interest in, and contribute
property to, any further limited or general partnerships, joint ventures or
other relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to, its
Subsidiaries and any other Person in which it has an equity interest from time
to time);

                  (xx) to establish Partnership reserves for working capital,
capital expenditures, contingent liabilities, or any other valid Partnership
purpose;

                  (xxi) to merge, consolidate or combine the Partnership with or
into another Person;

                  (xxii) to do any and all acts and things necessary or prudent
to ensure that the Partnership will not be classified as a "publicly traded
partnership" for purposes of Section 7704 of the Code; and

                  (xxiii) to take such other action, execute, acknowledge, swear
to or deliver such other documents and instruments, and perform any and all
other acts that the General Partner deems necessary or appropriate

                                      -14-

<PAGE>

for the formation, continuation and conduct of the business and affairs of the
Partnership (including, without limitation, all actions consistent with allowing
the General Partner at all times to qualify as a REIT unless the General Partner
voluntarily terminates its REIT status) and to possess and enjoy all of the
rights and powers of a general partner as provided by the Act.

            (b) Except as otherwise provided herein, to the extent the duties of
the General Partner require expenditures of funds to be paid to third parties,
the General Partner shall not have any obligations hereunder except to the
extent that partnership funds are reasonably available to it for the performance
of such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.

      6.2 Delegation of Authority. The General Partner may delegate any or all
of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform any acts or services for the Partnership as the General Partner may
approve.

      6.3 Indemnification and Exculpation of Indemnitees.

            (a) The Partnership shall indemnify an Indemnitee from and against
any and all losses, claims, damages, liabilities, joint or several, expenses
(including reasonable legal fees and expenses), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate to
the operations of the Partnership as set forth in this Agreement in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 6.3(a). The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent, or
an entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to that specified in
this Section 6.3(a). Any indemnification pursuant to this Section 6.3 shall be
made only out of the assets of the Partnership.

            (b) The Partnership shall reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.3 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.

            (c) The indemnification provided by this Section 6.3 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity.

            (d) The Partnership may purchase and maintain insurance, on behalf
of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.

            (e) For purposes of this Section 6.3, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 6.3; and actions taken
or omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the

                                      -15-

<PAGE>

participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.

            (f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.

            (g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.

            (h) The provisions of this Section 6.3 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.

            (i) Neither the amendment nor repeal of this Section 6.03, nor the
adoption or amendment of any other provision of the Agreement inconsistent with
Section 6.03, shall apply to or affect in any respect the applicability with
respect to any act or failure to act which occurred prior to such amendment,
repeal or adoption.

      6.4 Liability of the General Partner.

            (a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith. The General Partner shall not be in breach of any duty that
the General Partner may owe to the Limited Partners or the Partnership or any
other Persons under this Agreement or of any duty stated or implied by law or
equity provided the General Partner, acting in good faith, abides by the terms
of this Agreement.

            (b) The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership, itself and its shareholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or the tax consequences of some, but not
all, of the Limited Partners) in deciding whether to cause the Partnership to
take (or decline to take) any actions. In the event of a conflict between the
interests of its shareholders on one hand and the Limited Partners on the other,
the General Partner shall endeavor in good faith to resolve the conflict in a
manner not adverse to either its shareholders or the Limited Partners; provided,
however, that for so long as the General Partner directly owns a controlling
interest in the Partnership, any such conflict that the General Partner, in its
sole and absolute discretion, determines cannot be resolved in a manner not
adverse to either its shareholders or the Limited Partner shall be resolved in
favor of the shareholders. The General Partner shall not be liable for monetary
damages for losses sustained, liabilities incurred, or benefits not derived by
Limited Partners in connection with such decisions, provided that the General
Partner has acted in good faith.

            (c) Subject to its obligations and duties as General Partner set
forth in Section 6.1 hereof, the General Partner may exercise any of the powers
granted to it under this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The General Partner shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.

            (d) Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the General
Partner to continue to qualify as a REIT or (ii) to prevent the General Partner
from incurring any taxes under Section 857, Section 4981, or any other provision
of the Code, is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.

            (e) Any amendment, modification or repeal of this Section 6.4 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 6.4 as in effect immediately prior to such
amendment, modification or repeal with respect to matters occurring, in whole or
in part, prior to such amendment, modification or repeal, regardless of when
claims relating to such matters may arise or be asserted.

                                      -16-

<PAGE>

      6.5 Reimbursement of General Partner.

            (a) Except as provided in this Section 6.5 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.

            (b) The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole and absolute
discretion, for all Administrative Expenses.

      6.6 Outside Activities. The Articles of Incorporation and any agreements
entered into by the General Partner or its Affiliates with the Partnership or a
Subsidiary, any officer, director, employee, agent, trustee, Affiliate or
shareholder of the General Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities substantially similar
or identical to those of the Partnership. Neither the Partnership nor any of the
Limited Partners shall have any rights by virtue of this Agreement in any such
business ventures, interest or activities. None of the Limited Partners nor any
other Person shall have any rights by virtue of this Agreement or the
partnership relationship established hereby in any such business ventures,
interests or activities, and the General Partner shall have no obligation
pursuant to this Agreement to offer any interest in any such business ventures,
interests and activities to the Partnership or any Limited Partner, even if such
opportunity is of a character which, if presented to the Partnership or any
Limited Partner, could be taken by such Person.

      6.7 Employment or Retention of Affiliates.

            (a) Any Affiliate of the General Partner may be employed or retained
by the Partnership and may otherwise deal with the Partnership (whether as a
buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent,
lender or otherwise) and may receive from the Partnership any compensation,
price, or other payment therefor which the General Partner determines to be fair
and reasonable.

            (b) The Partnership may lend or contribute to its Subsidiaries or
other Persons in which it has an equity investment, and such Persons may borrow
funds from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.

            (c) The Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions as the
General Partner deems are consistent with this Agreement, applicable law.

            (d) Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair and
reasonable to the Partnership.

      6.8 General Partner Participation. The General Partner agrees that all
business activities of the General Partner, including activities pertaining to
the acquisition, development or ownership of office or industrial property or
other property, shall be conducted through the Partnership or one or more
Subsidiary Partnerships; provided, however, that the General Partner is allowed
to make a direct acquisition, but if and only if, such acquisition is made in
connection with the issuance of Additional Securities, which direct acquisition
and issuance have been approved and determined to be in the best interests of
the General Partner and the Partnership by a majority of the Independent
Directors.

      6.9 Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or

                                      -17-

<PAGE>

Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.

      6.10 Miscellaneous. In the event the General Partner redeems any REIT
Shares (other than REIT Shares redeemed in accordance with the share redemption
program of the General Partner through proceeds received from the General
Partner's dividend reinvestment plan), then the General Partner shall cause the
Partnership to purchase from the General Partner a number of Partnership Units
as determined based on the application of the Conversion Factor on the same
terms that the General Partner exchanged such REIT Shares. Moreover, if the
General Partner makes a cash tender offer or other offer to acquire REIT Shares,
then the General Partner shall cause the Partnership to make a corresponding
offer to the General Partner to acquire an equal number of Partnership Units
held by the General Partner. In the event any REIT Shares are exchanged by the
General Partner pursuant to such offer, the Partnership shall redeem an
equivalent number of the General Partner's Partnership Units for an equivalent
purchase price based on the application of the Conversion Factor.

                                    ARTICLE 7
                           CHANGES IN GENERAL PARTNER

      7.1 Transfer of the General Partner's Partnership Interest.

            (a) The General Partner shall not transfer all or any portion of its
General Partnership Interest or withdraw as General Partner except as provided
in or in connection with a transaction contemplated by Section 7.1(c), (d) or
(e).

            (b) The General Partner agrees that the Percentage Interest for it
will at all times be in the aggregate, at least 1%.

            (c) Except as otherwise provided in Section 6.4(b) or Section 7.1(d)
or (e) hereof, the General Partner shall not engage in any merger, consolidation
or other combination with or into another Person or sale of all or substantially
all of its assets, (other than in connection with a change in the General
Partner's state of incorporation or organizational form) in each case which
results in a change of control of the General Partner (a "Transaction"), unless:

                  (i) the holders of a majority of the Partnership Units
(including the Partnership Units held by the General partner or an Affiliate
thereof) is obtained;

                  (ii) as a result of such Transaction all Limited Partners will
receive for each Partnership Unit an amount of cash, securities, or other
property equal to the product of the Conversion Factor and the greatest amount
of cash, securities or other property paid in the Transaction to a holder of one
REIT Share in consideration of one REIT Share, provided that if, in connection
with the Transaction, a purchase, tender or exchange offer ("Offer") shall have
been made to and accepted by the holders of more than 50% of the outstanding
REIT Shares, each holder of Partnership Units shall be given the option to
exchange its Partnership Units for the greatest amount of cash, securities, or
other property which a Limited Partner would have received had it (A) exercised
its Exchange Right and (B) sold, tendered or exchanged pursuant to the Offer the
REIT Shares received upon exercise of the Exchange Right immediately prior to
the expiration of the Offer; or

                  (iii) the General Partner is the surviving entity in the
Transaction and either (A) the holders of REIT Shares do not receive cash,
securities, or other property in the Transaction or (B) all Limited Partners
(other than the General Partner or any Subsidiary) receive an amount of cash,
securities, or other property (expressed as an amount per REIT Share) that is no
less than the product of the Conversion Factor and the greatest amount of cash,
securities, or other property (expressed as an amount per REIT Share) received
in the Transaction by any holder of REIT Shares.

            (d) Notwithstanding Section 7.1(c), the General Partner may merge
with or into or consolidate with another entity if immediately after such merger
or consolidation (i) substantially all of the assets of the successor or

                                      -18-

<PAGE>

surviving entity (the "Surviving General Partner"), other than Partnership Units
held by the General Partner, are contributed, directly or indirectly, to the
Partnership as a Capital Contribution in exchange for Partnership Units with a
fair market value equal to the value of the assets so contributed as determined
by the Surviving General Partner in good faith and (ii) the Surviving General
Partner expressly agrees to assume all obligations of the General Partner, as
appropriate, hereunder. Upon such contribution and assumption, the Surviving
General Partner shall have the right and duty to amend this Agreement as set
forth in this Section 7.1(d). The Surviving General Partner shall in good faith
arrive at a new method for the calculation of the Cash Amount, the REIT Shares
Amount and Conversion Factor for a Partnership Unit after any such merger or
consolidation so as to approximate the existing method for such calculation as
closely as reasonably possible. Such calculation shall take into account, among
other things, the kind and amount of securities, cash and other property that
was receivable upon such merger or consolidation by a holder of REIT Shares or
options, warrants or other rights relating thereto, and to which a holder of
Partnership Units could have acquired had such Partnership Units been exchanged
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for with respect to the Conversion Factor. The Surviving General Partner also
shall in good faith modify the definition of REIT Shares and make such
amendments to Sections 8.5 and 8.7 hereof so as to approximate the existing
rights and obligations set forth in Sections 8.5 and 8.7 as closely as
reasonably possible. The above provisions of this Section 7.1(d) shall similarly
apply to successive mergers or consolidations permitted hereunder.

      In respect of any transaction described in the preceding paragraph, the
General Partner is required to use its commercially reasonable efforts to
structure such transaction to avoid causing the Limited Partners to recognize a
gain for federal income tax purposes by virtue of the occurrence of or their
participation in such transaction, provided such efforts are consistent with the
exercise of the Board of Directors' fiduciary duties to the shareholders of the
General Partner under applicable law.

            (e) Notwithstanding Section 7.1(c),

                  (i) a General Partner may transfer all or any portion of its
General Partnership Interest to (A) a wholly-owned Subsidiary of such General
Partner or (B) the owner of all of the ownership interests of such General
Partner, and following a transfer of all of its General Partnership Interest,
may withdraw as General Partner; and

                  (ii) the General Partner may engage in Transactions not\
required by law or by the rules of any national securities exchange on which the
REIT Shares are listed to be submitted to the vote of the holders of the REIT
Shares.

      7.2 Admission of a Substitute or Additional General Partner. A Person
shall be admitted as a substitute or additional General Partner of the
Partnership only if the following terms and conditions are satisfied:

            (a) the Person to be admitted as a substitute or additional General
Partner shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.5 hereof in connection
with such admission shall have been performed;

            (b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and

            (c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any other
jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the
Act, that none of the actions taken in connection with the admission of such
Person as a substitute or additional General Partner will cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability.

                                      -19-

<PAGE>

      7.3 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General
Partner.

            (a) Upon the occurrence of an Event of Bankruptcy as to a General
Partner (and its removal pursuant to Section 7.4(a) hereof) or the death,
withdrawal, removal or dissolution of a General Partner (except that, if a
General Partner is on the date of such occurrence a partnership, the withdrawal,
death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such
partnership shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining partner or
partners), the Partnership shall be dissolved and terminated unless the
Partnership is continued pursuant to Section 7.3(b) hereof. The merger of the
General Partner with or into any entity that is admitted as a substitute or
successor General Partner pursuant to Section 7.2 hereof shall not be deemed to
be the withdrawal, dissolution or removal of the General Partner.

            (b) Following the occurrence of an Event of Bankruptcy as to a
General Partner (and its removal pursuant to Section 7.4(a) hereof) or the
death, withdrawal, removal or dissolution of a General Partner (except that, if
a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such
General Partner if the business of such General Partner is continued by the
remaining partner or partners), the Limited Partners, within 90 days after such
occurrence, may elect to continue the business of the Partnership for the
balance of the term specified in Section 2.4 hereof by selecting, subject to
Section 7.2 hereof and any other provisions of this Agreement, a substitute
General Partner by consent of a majority in interest of the Limited Partners. If
the Limited Partners elect to continue the business of the Partnership and admit
a substitute General Partner, the relationship with the Partners and of any
Person who has acquired an interest of a Partner in the Partnership shall be
governed by this Agreement.

      7.4 Removal of a General Partner.

            (a) Upon the occurrence of an Event of Bankruptcy as to, or the
dissolution of, a General Partner, such General Partner shall be deemed to be
removed automatically; provided, however, that if a General Partner is on the
date of such occurrence a partnership, the withdrawal, death, dissolution, Event
of Bankruptcy as to or removal of a partner in such partnership shall be deemed
not to be a dissolution of the General Partner if the business of such General
Partner is continued by the remaining partner or partners. The Limited Partners
may not remove the General Partner, with or without cause.

            (b) If a General Partner has been removed pursuant to this Section
7.4 and the Partnership is continued pursuant to Section 7.3 hereof, such
General Partner shall promptly transfer and assign its General Partnership
Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners in accordance with Section 7.3(b)
hereof and otherwise admitted to the Partnership in accordance with Section 7.2
hereof. At the time of assignment, the removed General Partner shall be entitled
to receive from the substitute General Partner the fair market value of the
General Partnership Interest of such removed General Partner as reduced by any
damages caused to the Partnership by such General Partner. Such fair market
value shall be determined by an appraiser mutually agreed upon by the General
Partner and a majority in interest of the Limited Partners within 10 days
following the removal of the General Partner. In the event that the parties are
unable to agree upon an appraiser, the removed General Partner and a majority in
interest of the Limited Partners each shall select an appraiser. Each such
appraiser shall complete an appraisal of the fair market value of the removed
General Partner's General Partnership Interest within 30 days of the General
Partner's removal, and the fair market value of the removed General Partner's
General Partnership Interest shall be the average of the two appraisals;
provided, however, that if the higher appraisal exceeds the lower appraisal by
more than 20% of the amount of the lower appraisal, the two appraisers, no later
than 40 days after the removal of the General Partner, shall select a third
appraiser who shall complete an appraisal of the fair market value of the
removed General Partner's General Partnership Interest no later than 60 days
after the removal of the General Partner. In such case, the fair market value of
the removed General Partner's General Partnership Interest shall be the average
of the two appraisals closest in value.

            (c) The General Partnership Interest of a removed General Partner,
during the time after default until transfer under Section 7.4(b), shall be
converted to that of a special Limited Partner; provided, however, such removed
General Partner shall not have any rights to participate in the management and
affairs of the Partnership, and shall not be entitled to any portion of the
income, expense, profit, gain or loss allocations or cash distributions
allocable or payable, as the case may be, to the Limited Partners. Instead, such
removed General Partner shall receive and be

                                      -20-
<PAGE>
entitled only to retain distributions or allocations of such items that it would
have been entitled to receive in its capacity as General Partner, until the
transfer is effective pursuant to Section 7.4(b).

            (d) All Partners shall have given and hereby do give such consents,
shall take such actions and shall execute such documents as shall be legally
necessary and sufficient to effect all the foregoing provisions of this Section.

                                    ARTICLE 8
                 RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

      8.1 Management of the Partnership. The Limited Partners shall not
participate in the management or control of Partnership business nor shall they
transact any business for the Partnership, nor shall they have the power to sign
for or bind the Partnership, such powers being vested solely and exclusively in
the General Partner.

      8.2 Power of Attorney. Each Limited Partner hereby irrevocably appoints
the General Partner its true and lawful attorney-in-fact, who may act for each
Limited Partner and in its name, place and stead, and for its use and benefit,
to sign, acknowledge, swear to, deliver, file or record, at the appropriate
public offices, any and all documents, certificates, and instruments as may be
deemed necessary or desirable by the General Partner to carry out fully the
provisions of this Agreement and the Act in accordance with their terms, which
power of attorney is coupled with an interest and shall survive the death,
dissolution or legal incapacity of the Limited Partner, or the transfer by the
Limited Partner of any part or all of its Partnership Interest.

      8.3 Limitation on Liability of Limited Partners. No Limited Partner shall
be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make
payments of its Capital Contribution, if any, as and when due hereunder. After
its Capital Contribution is fully paid, no Limited Partner shall, except as
otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.

      8.4 Ownership by Limited Partner of Corporate General Partner or
Affiliate. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof, if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal tax purposes. The General Partner shall be entitled to
make such reasonable inquiry of the Limited Partners as is required to establish
compliance by the Limited Partners with the provisions of this Section.

      8.5 Exchange Right.

            (a) Subject to Sections 8.5(b), 8.5(c), 8.5(d) and 8.5(e) and the
provisions of any agreements between the Partnership and one or more Limited
Partners with respect to Partnership Units held by them, each Limited Partner,
other than the General Partner, shall have the right (the "Exchange Right") to
require the Partnership to redeem on a Specified Exchange Date all or a portion
of the Partnership Units held by such Limited Partner at an exchange price equal
to and in the form of the Cash Amount to be paid by the Partnership, provided
that such Partnership Units shall have been outstanding for at least one year.
The Exchange Right shall be exercised pursuant to a Notice of Exchange delivered
to the Partnership (with a copy to the General Partner) by the Limited Partner
who is exercising the Exchange Right (the "Exchanging Partner"); provided,
however, that the Partnership shall not be obligated to satisfy such Exchange
Right if the General Partner elects to purchase the Partnership Units subject to
the Notice of Exchange pursuant to Section 8.5(b); and provided, further, that
no Limited Partner may deliver more than two Notices of Exchange during each
calendar year. A Limited Partner may not exercise the Exchange Right for less
than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000
Partnership Units, all of the Partnership Units held by such Partner. The
Exchanging Partner shall have no right, with respect to any Partnership Units so
exchanged, to receive any distribution paid with respect to Partnership Units if
the record date for such distribution is on or after the Specified Exchange
Date.

            (b) Notwithstanding the provisions of Section 8.5(a), a Limited
Partner that exercises the Exchange Right shall be deemed to have offered to
sell the Partnership Units described in the Notice of Exchange to the General
Partner, and the General Partner may, in its sole and absolute discretion, elect
to purchase directly and acquire

                                      -21-
<PAGE>

such Partnership Units by paying to the Exchanging Partner either the Cash
Amount or the REIT Shares Amount, as elected by the General Partner (in its sole
and absolute discretion), on the Specified Exchange Date, whereupon the General
Partner shall acquire the Partnership Units offered for exchange by the
Exchanging Partner and shall be treated for all purposes of this Agreement as
the owner of such Partnership Units. If the General Partner shall elect to
exercise its right to purchase Partnership Units under this Section 8.5(b) with
respect to a Notice of Exchange, it shall so notify the Exchanging Partner
within five Business Days after the receipt by the General Partner of such
Notice of Exchange. Unless the General Partner (in its sole and absolute
discretion) shall exercise its right to purchase Partnership Units from the
Exchanging Partner pursuant to this Section 8.5(b), the General Partner shall
have no obligation to the Exchanging Partner or the Partnership with respect to
the Exchanging Partner's exercise of the Exchange Right. In the event the
General Partner shall exercise its right to purchase Partnership Units with
respect to the exercise of a Exchange Right in the manner described in the first
sentence of this Section 8.5(b), the Partnership shall have no obligation to pay
any amount to the Exchanging Partner with respect to such Exchanging Partner's
exercise of such Exchange Right, and each of the Exchanging Partner, the
Partnership, and the General Partner, as the case may be, shall treat the
transaction between the General Partner, as the case may be, and the Exchanging
Partner for federal income tax purposes as a sale of the Exchanging Partner's
Partnership Units to the General Partner, as the case may be. Each Exchanging
Partner agrees to execute such documents as the General Partner may reasonably
require in connection with the issuance of REIT Shares upon exercise of the
Exchange Right.

            (c) Notwithstanding the provisions of Section 8.5(a) and 8.5(b), a
Limited Partner shall not be entitled to exercise the Exchange Right if the
delivery of REIT Shares to such Partner on the Specified Exchange Date by the
General Partner pursuant to Section 8.5(b) (regardless of whether or not the
General Partner would in fact exercise its rights under Section 8.5(b)) would
(i) result in such Partner or any other person owning, directly or indirectly,
REIT Stock in excess of the Ownership Limit (as defined in the Articles of
Incorporation and calculated in accordance therewith), except as provided in the
Articles of Incorporation, (ii) result in REIT Stock being owned by fewer than
100 persons (determined without reference to any rules of attribution), except
as provided in the Articles of Incorporation, (iii) result in the General
Partner being "closely held" within the meaning of Section 856(h) of the Code,
or (iv) cause the General Partner to own, directly or constructively, 10% or
more of the ownership interests in a tenant within the meaning of Section
856(d)(2)(B) of the Code. The General Partner, in its sole and absolute
discretion, may waive the restriction on exchange set forth in this Section
8.5(c).

            (d) Any Cash Amount to be paid to an Exchanging Partner pursuant to
this Section 8.5 shall be paid on the Specified Exchange Date; provided,
however, that the General Partner may elect to cause the Specified Exchange Date
to be delayed for up to an additional 180 days to the extent required for the
General Partner to cause additional REIT Shares to be issued to provide
financing to be used to make such payment of the Cash Amount. Notwithstanding
the foregoing, the General Partner agrees to use its best efforts to cause the
closing of the acquisition of exchanged Partnership Units hereunder to occur as
quickly as reasonably possible.

            (e) Notwithstanding any other provision of this Agreement, the
General Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Exchange Rights as and if deemed necessary to
ensure that the Partnership does not constitute a "publicly traded partnership"
under section 7704 of the Code. If and when the General Partner determines that
imposing such restrictions is necessary, the General Partner shall give prompt
written notice thereof (a "Restriction Notice") to each of the Limited Partners,
which notice shall be accompanied by a copy of an opinion of counsel to the
Partnership which states that, in the opinion of such counsel, restrictions are
necessary in order to avoid the Partnership being treated as a "publicly traded
partnership" under section 7704 of the Code.

                                    ARTICLE 9
                   TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

      9.1 Purchase for Investment.

            (a) Each Limited Partner hereby represents and warrants to the
General Partner and to the Partnership that the acquisition of his Partnership
Interests is made as a principal for his account for investment purposes only
and not with a view to the resale or distribution of such Partnership Interest.

                                      -22-
<PAGE>

            (b) Each Limited Partner agrees that he will not sell, assign or
otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and warranties to the General
Partner set forth in Section 9.1(a) above and similarly agree not to sell,
assign or transfer such Partnership Interest or fraction thereof to any Person
who does not similarly represent, warrant and agree.

      9.2 Restrictions on Transfer of Limited Partnership Interests.

            (a) Subject to the provisions of 9.2(b), (c) and (d), no Limited
Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all
or any portion of his Limited Partnership Interest, or any of such Limited
Partner's economic rights as a Limited Partner, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a "Transfer")
without the consent of the General Partner, which consent may be granted or
withheld in its sole and absolute discretion. Any such purported transfer
undertaken without such consent shall be considered to be null and void ab
initio and shall not be given effect. The General Partner may require, as a
condition of any Transfer to which it consents, that the transferor assume all
costs incurred by the Partnership in connection therewith.

            (b) No Limited Partner may withdraw from the Partnership other than
as a result of a permitted Transfer (i.e., a Transfer consented to as
contemplated by clause (a) above or clause (c) below or a Transfer pursuant to
Section 9.5 below) of all of its Partnership Interest pursuant to this Article 9
or pursuant to an exchange of all of its Partnership Units pursuant to Section
8.5. Upon the permitted Transfer or redemption of all of a Limited Partner's
Partnership Interest, such Limited Partner shall cease to be a Limited Partner.

            (c) Subject to 9.2(d), (e) and (f) below, a Limited Partner may
Transfer, with the consent of the General Partner, all or a portion of its
Partnership Units to (i) a parent or parent's spouse, natural or adopted
descendant or descendants, spouse of such descendant, or brother or sister, or a
trust created by such Limited Partner for the benefit of such Limited Partner
and/or any such person(s), of which trust such Limited Partner or any such
person(s) is a trustee, (ii) a corporation controlled by a Person or Persons
named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial
owners.

            (d) No Limited Partner may effect a Transfer of its Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would otherwise violate any
applicable federal or state securities or blue sky law (including investment
suitability standards).

            (e) No Transfer by a Limited Partner of its Partnership Units, in
whole or in part, may be made to any Person if (i) in the opinion of legal
counsel for the Partnership, the transfer would result in the Partnership's
being treated as an association taxable as a corporation (other than a qualified
REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the
opinion of legal counsel for the Partnership, it would adversely affect the
ability of the General Partner to continue to qualify as a REIT or subject the
General Partner to any additional taxes under Section 857 or Section 4981 of the
Code, or (iii) such transfer is effectuated through an "established securities
market" or a "secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code.

            (f) No transfer of any Partnership Units may be made to a lender to
the Partnership or any Person who is related (within the meaning of Regulations
Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a
nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)),
without the consent of the General Partner, which may be withheld in its sole
and absolute discretion, provided that as a condition to such consent the lender
will be required to enter into an arrangement with the Partnership and the
General Partner to exchange or redeem for the Cash Amount any Partnership Units
in which a security interest is held simultaneously with the time at which such
lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.

            (g) Any Transfer in contravention of any of the provisions of this
Article 9 shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.

                                      -23-
<PAGE>

            (h) Prior to the consummation of any Transfer under this Article 9,
the transferor and/or the transferee shall deliver to the General Partner such
opinions, certificates and other documents as the General Partner shall request
in connection with such Transfer.

      9.3 Admission of Substitute Limited Partner.

            (a) Subject to the other provisions of this Article 9, an assignee
of the Limited Partnership Interest of a Limited Partner (which shall be
understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Limited Partnership Interest) shall be deemed admitted
as a Limited Partner of the Partnership only with the consent of the General
Partner and upon the satisfactory completion of the following:

                  (i) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart or an
amendment thereof, including a revised Exhibit A, and such other documents or
instruments as the General Partner may require in order to effect the admission
of such Person as a Limited Partner.

                  (ii) To the extent required, an amended Certificate evidencing
the admission of such Person as a Limited Partner shall have been signed,
acknowledged and filed for record in accordance with the Act.

                  (iii) The assignee shall have delivered a letter containing
the representation set forth in Section 9.1(a) hereof and the agreement set
forth in Section 9.1(b) hereof.

                  (iv) If the assignee is a corporation, partnership or trust,
the assignee shall have provided the General Partner with evidence satisfactory
to counsel for the Partnership of the assignee's authority to become a Limited
Partner under the terms and provisions of this Agreement.

                  (v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.2 hereof.

                  (vi) The assignee shall have paid all legal fees and other
expenses of the Partnership and the General Partner and filing and publication
costs in connection with its substitution as a Limited Partner.

                  (vii) The assignee has obtained the prior written consent of
the General Partner to its admission as a Substitute Limited Partner, which
consent may be given or denied in the exercise of the General Partner's sole and
absolute discretion.

            (b) For the purpose of allocating Profits and Losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the
date specified in the transfer documents or the date on which the General
Partner has received all necessary instruments of transfer and substitution.

            (c) The General Partner shall cooperate with the Person seeking to
become a Substitute Limited Partner by preparing the documentation required by
this Section and making all official filings and publications. The Partnership
shall take all such action as promptly as practicable after the satisfaction of
the conditions in this Article 9 to the admission of such Person as a Limited
Partner of the Partnership.

      9.4 Rights of Assignees of Partnership Interests.

            (a) Subject to the provisions of Sections 9.1 and 9.2 hereof, except
as required by operation of law, the Partnership shall not be obligated for any
purposes whatsoever to recognize the assignment by any Limited Partner of its
Partnership Interest until the Partnership has received notice thereof.

            (b) Any Person who is the assignee of all or any portion of a
Limited Partner's Limited Partnership Interest, but does not become a Substitute
Limited Partner and desires to make a further assignment of such

                                      -24-
<PAGE>

Limited Partnership Interest, shall be subject to all the provisions of this
Article 9 to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of its Limited Partnership Interest.

      9.5 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited
Partner. The occurrence of an Event of Bankruptcy as to a Limited Partner, the
death of a Limited Partner or a final adjudication that a Limited Partner is
incompetent (which term shall include, but not be limited to, insanity) shall
not cause the termination or dissolution of the Partnership, and the business of
the Partnership shall continue if an order for relief in a bankruptcy proceeding
is entered against a Limited Partner, the trustee or receiver of his estate or,
if he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Limited Partner for the purpose of settling or managing his
estate property and such power as the bankrupt, deceased or incompetent Limited
Partner possessed to assign all or any part of his Partnership Interest and to
join with the assignee in satisfying conditions precedent to the admission of
the assignee as a Substitute Limited Partner.

      9.6 Joint Ownership of Interests. A Partnership Interest may be acquired
by two individuals as joint tenants with right of survivorship, provided that
such individuals either are married or are related and share the same home as
tenants in common. The written consent or vote of both owners of any such
jointly held Partnership Interest shall be required to constitute the action of
the owners of such Partnership Interest; provided, however, that the written
consent of only one joint owner will be required if the Partnership has been
provided with evidence satisfactory to the counsel for the Partnership that the
actions of a single joint owner can bind both owners under the applicable laws
of the state of residence of such joint owners. Upon the death of one owner of a
Partnership Interest held in a joint tenancy with a right of survivorship, the
Partnership Interest shall become owned solely by the survivor as a Limited
Partner and not as an assignee. The Partnership need not recognize the death of
one of the owners of a jointly-held Partnership Interest until it shall have
received notice of such death. Upon notice to the General Partner from either
owner, the General Partner shall cause the Partnership Interest to be divided
into two equal Partnership Interests, which shall thereafter be owned separately
by each of the former owners.

      9.7 Redemption of Partnership Units. The General Partner will cause the
Partnership to redeem Partnership Units, to the extent it shall have legally
available funds therefor, at any time the General Partner redeems shares of
beneficial interest in itself. The number and class or series of Partnership
Units redeemed and the redemption price shall equal the number (multiplied by
the Conversion Factor) of shares of beneficial interest the General Partner
redeems and the redemption price at which the General Partner redeems such
shares, respectively.

                                   ARTICLE 10
                   BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

      10.1 Books and Records. At all times during the continuance of the
Partnership, the Partners shall keep or cause to be kept at the Partnership's
specified office true and complete books of account in accordance with generally
accepted accounting principles, including: (a) a current list of the full name
and last known business address of each Partner, (b) a copy of the Certificate
of Limited Partnership and all certificates of amendment thereto, (c) copies of
the Partnership's federal, state and local income tax returns and reports, (d)
copies of this Agreement and amendments thereto and any financial statements of
the Partnership for the three most recent years and (e) all documents and
information required under the Act. Any Partner or its duly authorized
representative, upon paying the costs of collection, duplication and mailing,
shall be entitled to inspect or copy such records during ordinary business
hours.

      10.2 Custody of Partnership Funds; Bank Accounts.

            (a) All funds of the Partnership not otherwise invested shall be
deposited in one or more accounts maintained in such banking or brokerage
institutions as the General Partner shall determine, and withdrawals shall be
made only on such signature or signatures as the General Partner may, from time
to time, determine.

            (b) All deposits and other funds not needed in the operation of the
business of the Partnership may be invested by the General Partner in investment
grade instruments (or investment companies whose portfolio consists primarily
thereof), government obligations, certificates of deposit, bankers' acceptances
and municipal notes and bonds. The funds of the Partnership shall not be
commingled with the funds of any other Person except for such

                                      -25-
<PAGE>

commingling as may necessarily result from an investment in those investment
companies permitted by this Section 10.2(b).

      10.3 Fiscal and Taxable Year. The fiscal and taxable year of the
Partnership shall be the calendar year.

      10.4 Annual Tax Information and Report. Within 75 days after the end of
each fiscal year of the Partnership, the General Partner shall furnish to each
person who was a Limited Partner at any time during such year the tax
information necessary to file such Limited Partner's individual tax returns as
shall be reasonably required by law.

      10.5 Tax Matters Partner; Tax Elections; Special Basis Adjustments.

            (a) The General Partner shall be the Tax Matters Partner of the
Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax Matters
Partner, the General Partner shall have the right and obligation to take all
actions authorized and required, respectively, by the Code for the Tax Matters
Partner. The General Partner shall have the right to retain professional
assistance in respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on behalf of the
Partnership as Tax Matters Partner shall constitute Partnership expenses. In the
event the General Partner receives notice of a final Partnership adjustment
under Section 6223(a)(2) of the Code, the General Partner shall either (i) file
a court petition for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of which petition shall be
mailed to all Limited Partners on the date such petition is filed, or (ii) mail
a written notice to all Limited Partners, within such period, that describes the
General Partner's reasons for determining not to file such a petition.

            (b) All elections required or permitted to be made by the
Partnership under the Code or any applicable state or local tax law shall be
made by the General Partner in its sole and absolute discretion.

            (c) In the event of a transfer of all or any part of the Partnership
Interest of any Partner, the Partnership, at the option of the General Partner,
may elect pursuant to Section 754 of the Code to adjust the basis of the
Partnership's assets. Notwithstanding anything contained in Article 5 of this
Agreement, any adjustments made pursuant to Section 754 of the Code shall affect
only the successor in interest to the transferring Partner and in no event shall
be taken into account in establishing, maintaining or computing Capital Accounts
for the other Partners for any purpose under this Agreement. Each Partner will
furnish the Partnership with all information necessary to give effect to such
election.

      10.6 Reports to Limited Partners.

            (a) As soon as practicable after the close of each fiscal quarter
(other than the last quarter of the fiscal year), the General Partner shall
cause to be mailed to each Limited Partner a quarterly report containing
financial statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the General Partner,
for such fiscal quarter, presented in accordance with generally accepted
accounting principles. As soon as practicable after the close of each fiscal
year, the General Partner shall cause to be mailed to each Limited Partner an
annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis
with the General Partner, for such fiscal year, presented in accordance with
generally accepted accounting principles. The annual financial statements shall
be audited by accountants selected by the General Partner.

            (b) Any Partner shall further have the right to a private audit of
the books and records of the Partnership at the expense of such Partner,
provided such audit is made for Partnership purposes and is made during normal
business hours.

                                   ARTICLE 11
                         AMENDMENT OF AGREEMENT; MERGER

      The General Partner's consent shall be required for any amendment to this
Agreement. The General Partner, without the consent of the Limited Partners, may
amend this Agreement in any respect or merge or consolidate the Partnership with
or into any other partnership or business entity (as defined in Section 17-211
of the Act) in a transaction pursuant to Section 7.1(c), (d) or (e) hereof;
provided, however, that the following amendments and any

                                      -26-
<PAGE>

other merger or consolidation of the Partnership shall require (i) the consent
of Limited Partners holding more than 50% of the Percentage Interests of the
Limited Partners and (ii) in the case of any of the following (b), (c) or (d),
the consent of Limited Partners holding more than 50% of the Special Percentage
Interests of the Limited Partners:

            (a) any amendment affecting the operation of the Conversion Factor
or the Exchange Right (except as provided in Section 8.5(d) or 7.1(d) hereof) in
a manner adverse to the Limited Partners;

            (b) any amendment that would adversely affect the rights of the
Limited Partners to receive the distributions payable to them hereunder, other
than with respect to the issuance of additional Partnership Units pursuant to
Section 4.2 hereof;

            (c) any amendment that would alter the Partnership's allocations of
Profit and Loss to the Limited Partners, other than with respect to the issuance
of additional Partnership Units pursuant to Section 4.2 hereof; or

            (d) any amendment that would impose on the Limited Partners any
obligation to make additional Capital Contributions to the Partnership.

                                   ARTICLE 12
                               GENERAL PROVISIONS

      12.1 Notices. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses set
forth in Exhibit A attached hereto; provided, however, that any Partner may
specify a different address by notifying the General Partner in writing of such
different address. Notices to the Partnership shall be delivered at or mailed to
its specified office.

      12.2 Survival of Rights. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of the
Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.

      12.3 Additional Documents. Each Partner agrees to perform all further acts
and execute, swear to, acknowledge and deliver all further documents which may
be reasonable, necessary, appropriate or desirable to carry out the provisions
of this Agreement or the Act.

      12.4 Severability. If any provision of this Agreement shall be declared
illegal, invalid, or unenforceable in any jurisdiction, then such provision
shall be deemed to be severable from this Agreement (to the extent permitted by
law) and in any event such illegality, invalidity or unenforceability shall not
affect the remainder hereof.

      12.5 Entire Agreement. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior written
agreements and prior and contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.

      12.6 Pronouns and Plurals. When the context in which words are used in the
Agreement indicates that such is the intent, words in the singular number shall
include the plural and the masculine gender shall include the neuter or female
gender as the context may require.

      12.7 Headings. The Article headings or sections in this Agreement are for
convenience only and shall not be used in construing the scope of this Agreement
or any particular Article.

      12.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original copy and all of which together
shall constitute one and the same instrument binding on all parties hereto,
notwithstanding that all parties shall not have signed the same counterpart.

                                      -27-
<PAGE>

      12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware; provided, however, that
causes of action for violations of federal or state securities laws shall not be
governed by this Section 12.9.

      IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Agreement of Limited Partnership, all as of the ____ day of
November, 2004.

                                    GENERAL PARTNER:

                                    CORNERSTONE REALTY FUND, INC.

                                    By: ___________________________________
                                        Terry G. Roussel, President

                                    LIMITED PARTNERS:

                                    CORNERSTONE ADVISORS, LLC

                                    By: CORNERSTONE VENTURES, INC.
                                        Managing Member

                                        By: _____________________________
                                            Terry G. Roussel, President

                                      -28-
<PAGE>

                                    EXHIBIT A

<TABLE>
<CAPTION>
                                                                          AGREED
         PERCENTAGE                                                      VALUE OF
          PARTNER                                      CASH               CAPITAL                  PARTNERSHIP
          INTEREST                                 CONTRIBUTION        CONTRIBUTION                   UNITS
         ----------                                ------------        ------------                -----------
<S>                                                <C>                 <C>                         <C>
GENERAL PARTNER:
Cornerstone Realty Fund, Inc.
4590 MacArthur Blvd.
Suite 610
Newport Beach, California 92660                      $2,000                  0                       250

ORIGINAL LIMITED PARTNER:
Cornerstone Advisors, LLC
4590 MacArthur Blvd.
Suite 610
Newport Beach, California 92660                      $1,000              1,000                       125

           Totals                                    $2,000               1000                       375
</TABLE>

                                      -29-
<PAGE>

                                    EXHIBIT B

                      NOTICE OF EXERCISE OF EXCHANGE RIGHT

      In accordance with Section 8.5 of the Agreement of Limited Partnership
(the "Agreement") of Cornerstone Operating Partnership, L.P., the undersigned
hereby irrevocably (i) presents for exchange ________ Partnership Units in
Cornerstone Operating Partnership, L.P. in accordance with the terms of the
Agreement and the Exchange Right referred to in Section 8.5 thereof, (ii)
surrenders such Partnership Units and all right, title and interest therein, and
(iii) directs that the Cash Amount or REIT Stock Amount (as defined in the
Agreement) as determined by the General Partner deliverable upon exercise of the
Exchange Right be delivered to the address specified below, and if REIT Stock
(as defined in the Agreement) are to be delivered, such REIT Shares be
registered or placed in the name(s) and at the address(es) specified below.

Dated:  ____________, ____

                            ___________________________________
                            (Name of Limited Partner)

                            ___________________________________
                            (Signature of Limited Partner)

                            ___________________________________
                                     (Mailing Address)

                            ___________________________________
                            (City)        (State) (Zip Code)

                            Signature Guaranteed by:

                            ___________________________________

If REIT Stock is to be issued, issue to:

Name:

________________________________________

Social Security or Tax I.D. Number:

________________________________________

                                      -30-
<PAGE>

                                    EXHIBIT C

                            INDEMNIFICATION GUIDELINE

      1. The REIT shall not provide for indemnification of the TRUSTEES,
ADVISORS or AFFILIATES for any liability or loss suffered by the TRUSTEES,
ADVISORS or AFFILIATES, nor shall it provide that the TRUSTEES, ADVISORS or
AFFILIATES be held harmless for any loss or liability suffered by the REIT,
unless all of the following conditions are met:

            (a) The TRUSTEES, ADVISORS or AFFILIATES have determined, in good
faith, that the course of conduct which caused the loss or liability was in the
best interests of the REIT.

            (b) The TRUSTEES, ADVISORS or AFFILIATES were acting on behalf of or
performing services for the REIT.

            (c) Such liability or loss was not the result of:

                  (i) negligence or misconduct by the TRUSTEES, excluding the
INDEPENDENT TRUSTEES, ADVISORS or AFFILIATES; OR

                  (ii) gross negligence or willful misconduct by the INDEPENDENT
TRUSTEES.

            (d) Such indemnification or agreement to hold harmless is
recoverable only out of REIT net assets and not from SHAREHOLDERS.

      2. Notwithstanding anything to the contrary contained in Section II.G.1,
the TRUSTEES, ADVISORS or AFFILIATES and any persons acting as a broker-dealer
shall not be indemnified by the REIT for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
by such party unless one or more of the following conditions are met:

            (a) There has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the particular
indemnitee.

            (b) Such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the particular Indemnitee.

            (c) A court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court considering the
request for indemnification has been advised of the position of the Securities
and Exchange SEC and of the published position of any state securities
regulatory authority in which securities of the REIT were offered or sold as to
indemnification for violations of securities laws.

      3. The advancement of REIT funds to the TRUSTEES, ADVISORS or AFFILIATES
for legal expenses and other costs incurred as a result of any legal action for
which indemnification is being sought is permissible only if all of the
following conditions are satisfied:

            (a) The legal action relates to acts or omissions with respect to
the performance of duties or services on behalf of the REIT.

            (b) The legal action is initiated by a third party who is not a
SHAREHOLDER or the legal action is initiated by a SHAREHOLDER acting in his or
her capacity as such and a court of competent jurisdiction specifically approves
such advancement.

            (c) The TRUSTEES, ADVISORS and AFFILIATES undertake to repay the
advanced funds to the REIT, together with the applicable legal rate of interest
thereon, in cases in which such TRUSTEES, ADVISORS or AFFILIATES are found not
to be entitled to indemnification.

                                      -31-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]