Document:

<PAGE>

                                                                    EXHIBIT 10.7

                               FIRST AMENDMENT TO
                              EMPLOYMENT AGREEMENT

     THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "First Amendment") is
made to be effective as of January 1, 2003, by and between BRE Properties, Inc.
("Company") and Deirdre A. Kuring ("Executive") and amends that employment
agreement between Company and Executive dated as of October 25, 2001 (the
"Employment Agreement").

     The parties hereto agree to amend the Employment Agreement as follows:

     1. Annual Performance Bonus. Section 3.2 entitled "Annual Performance
        ------------------------
Bonus" is deleted in its entirety and replaced with the following:

          "3.2 Annual Performance Bonus. Effective for the calendar year 2003,
               ------------------------
     Executive shall be eligible to receive an annual incentive bonus (the
     "Annual Bonus") targeted at sixty percent (60%) of Base Salary for the
     achievement of the management by objective criteria established by the
     Board (the "MBO Criteria"). It is anticipated that, for any given year, the
     amount of the Annual Bonus could range from 0% of Base Salary (in the event
     of a failure to achieve the MBO Criteria), to sixty hundred percent (60%)
     of Base Salary (in the event of achievement of the MBO Criteria), to
     between sixty percent (60%) and ninety percent (90%) (in the event the
     Annual Criteria are exceeded). Except as otherwise specified in this
     Agreement, Executive shall earn the Annual Bonus only at the end of each of
     the Company's fiscal years during the Term. The Annual Bonus, if earned,
     shall be paid within 90 days after the end of each fiscal year."

     2. Future Long Term Incentive Awards. Section 3.4 entitled "Future
        ---------------------------------
Long-Term Incentive Awards" is deleted in its entirety and replaced with the
following:

          "3.4. Future Long Term Incentive Awards. Beginning with January 1 of
                ---------------------------------
     the first full calendar year of this Agreement and continuing with each
     subsequent fiscal year during the Term, Executive shall be eligible to
     receive additional long-term incentive awards at the discretion of the
     Board. It is contemplated that such awards will take into account
     financial, operating, and other results achieved during the preceding
     fiscal year as well as future long-term performance goals. Such awards may
     be in the form of options, restricted shares, SARs, stock grants, or any
     other form of long-term compensation, as determined by the Board."

     3. Effect of Amendment. Except as modified hereby, the Employment Agreement
        -------------------
shall continue in full force and effect. Any reference to the Employment
Agreement shall include this First Amendment.

<PAGE>

     IN WITNESS WHEREOF, this Agreement has been executed effective as of the
date specified in the first paragraph.

                                                COMPANY: BRE PROPERTIES, INC.

                                                By: /s/ Frank McDowell
                                                    ----------------------------

                                                Its: President and CEO
                                                    ----------------------------

                                                EXECUTIVE: DEIRDRE A. KURING

                                                /s/ Deirdre A. Kuring
                                                --------------------------------<PAGE>

                                                                    EXHIBIT 10.8

                        MASTER CREDIT FACILITY AGREEMENT

                                 BY AND BETWEEN

                         THE BORROWERS SIGNATORY HERETO

                                       AND

                      PRUDENTIAL MULTIFAMILY MORTGAGE, INC.

                                   DATED AS OF

                                   May 2, 2003

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                    Page
                                                                                                    ----
<S>                                                                                                   <C>
MASTER CREDIT FACILITY AGREEMENT.......................................................................1
ARTICLE 1 THE COMMITMENT...............................................................................2
   SECTION 1.01. The Commitment........................................................................2
   SECTION 1.02. Requests for Advances.................................................................2
   SECTION 1.03. Maturity Date of Advances.............................................................2
   SECTION 1.04. Interest on Advances..................................................................3
   SECTION 1.05. Coupon Rates for Advances.............................................................4
   SECTION 1.06. Notes.................................................................................4
   SECTION 1.07. Extension of Variable Facility Termination Date.......................................5
   SECTION 1.08. Conversion from Variable Facility Commitment to Fixed Facility Commitment.............5
   SECTION 1.09. Limitations on Right to Convert.......................................................6
   SECTION 1.10. Conditions to Conversion..............................................................6
   SECTION 1.11. Defeasance; Yield Maintenance.........................................................6
ARTICLE 2 THE ADVANCES.................................................................................7
   SECTION 2.01. Rate Setting for an Advance...........................................................7
   SECTION 2.02. Advance Confirmation Instrument for Variable Advances.................................7
   SECTION 2.03. Breakage and other Costs..............................................................7
   SECTION 2.04. Advances..............................................................................8
   SECTION 2.05. Determination of Allocable Facility Amount and Valuations.............................8
ARTICLE 3 COLLATERAL CHANGES...........................................................................9
   SECTION 3.01. Right to Add Collateral...............................................................9
   SECTION 3.02. Procedure for Adding Collateral.......................................................9
   SECTION 3.03. Right to Obtain Releases of Collateral...............................................10
   SECTION 3.04. Procedure for Obtaining Releases of Collateral.......................................10
   SECTION 3.05. Right to Substitute Collateral.......................................................11
ARTICLE 4 EXPANSION OF CREDIT FACILITY................................................................12
   SECTION 4.01. Right to Increase Commitment.........................................................12
   SECTION 4.02. Procedure for Obtaining Increases in Commitment......................................12
   SECTION 4.03. Closing..............................................................................13
ARTICLE 5 TERMINATION OF FACILITIES...................................................................13
   SECTION 5.01. Right to Complete or Partial Termination of Facilities...............................13
   SECTION 5.02. Procedure for Complete or Partial Termination of Facilities..........................13
   SECTION 5.03. Right to Terminate Credit Facility...................................................13
   SECTION 5.04. Procedure for Terminating Credit Facility............................................14
ARTICLE 6 CONDITIONS PRECEDENT TO ALL REQUESTS........................................................14
   SECTION 6.01. Conditions Applicable to All Requests................................................14
   SECTION 6.02. Conditions Precedent to Initial Advance..............................................16
   SECTION 6.03. Conditions Precedent to Future Advances..............................................16
   SECTION 6.04. Conditions Precedent to Addition of an Additional Mortgaged Property to the
                 Collateral Pool......................................................................17
   SECTION 6.05. Conditions Precedent to Release of Property from the Collateral Pool.................18
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                   <C>
   SECTION 6.06. Intentionally Omitted................................................................19
   SECTION 6.07. Conditions Precedent to Increase in Commitment.......................................19
   SECTION 6.08. Conditions Precedent to Conversion...................................................19
   SECTION 6.09. Conditions Precedent to Complete or Partial Termination of Facilities................20
   SECTION 6.10. Conditions Precedent to Termination of Credit Facility...............................20
   SECTION 6.11. Delivery of Closing Documents Relating to Advance Request, Addition Request
                 or Expansion Request.................................................................21
   SECTION 6.12. Delivery of Property-Related Documents...............................................21
ARTICLE 7 REPRESENTATIONS AND WARRANTIES..............................................................22
   SECTION 7.01. Representations and Warranties of Borrower...........................................22
   SECTION 7.02. Representations and Warranties of Lender.............................................22
ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER...........................................................22
   SECTION 8.01. Compliance with Agreements...........................................................23
   SECTION 8.02. Maintenance of Existence.............................................................23
   SECTION 8.03. Financial Statements; Accountants' Reports; Other Information........................23
   SECTION 8.04. Access to Records; Discussions With Officers and Accountants.........................25
   SECTION 8.05. Certificate of Compliance............................................................25
   SECTION 8.06. Maintain Licenses....................................................................25
   SECTION 8.07. Inform Lender of Material Events.....................................................25
   SECTION 8.08. Compliance with Applicable Laws......................................................26
   SECTION 8.09. Alterations to the Mortgaged Properties..............................................27
   SECTION 8.10. Loan Document Taxes..................................................................27
   SECTION 8.11. Further Assurances...................................................................28
   SECTION 8.12. Transfer of Ownership Interest of Borrower and Guarantor.............................28
   SECTION 8.13. Transfer of Ownership of Mortgaged Property..........................................29
   SECTION 8.14. Change in Senior Management..........................................................30
   SECTION 8.15. Date-Down Endorsements...............................................................30
   SECTION 8.16. Ownership of Mortgaged Properties....................................................30
   SECTION 8.17. Facility Balancing...................................................................30
   SECTION 8.18. Financial Covenants..................................................................31
ARTICLE 9 NEGATIVE COVENANTS OF BORROWER..............................................................40
   SECTION 9.01. Other Activities.....................................................................40
   SECTION 9.02. Liens................................................................................41
   SECTION 9.03. Indebtedness.........................................................................41
   SECTION 9.04. Principal Place of Business..........................................................41
   SECTION 9.05. Condominiums.........................................................................41
   SECTION 9.06. Restrictions on Distributions........................................................41
ARTICLE 10 FEES.......................................................................................41
   SECTION 10.01.Standby Fee..........................................................................41
   SECTION 10.02.Rate Preservation Fee................................................................41
   SECTION 10.03.Origination Fees.....................................................................42
   SECTION 10.04.Due Diligence Fees...................................................................42
   SECTION 10.05.Legal Fees and Expenses..............................................................42
   SECTION 10.06.Failure to Close any Request.........................................................43
ARTICLE 11 EVENTS OF DEFAULT..........................................................................43
   SECTION 11.01.Events of Default....................................................................43
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                   <C>
ARTICLE 12 REMEDIES...................................................................................45
   SECTION 12.01.Remedies; Waivers....................................................................45
   SECTION 12.02.Waivers; Rescission of Declaration...................................................45
   SECTION 12.03.Lender's Right to Protect Collateral and Perform Covenants and Other Obligations.....46
   SECTION 12.04.No Remedy Exclusive..................................................................46
   SECTION 12.05.No Waiver............................................................................46
   SECTION 12.06.No Notice............................................................................46
ARTICLE 13 RIGHTS OF FANNIE MAE.......................................................................46
   SECTION 13.01.Special Pool Purchase Contract.......................................................46
   SECTION 13.02.Assignment of Rights.................................................................47
   SECTION 13.03.Release of Collateral................................................................47
   SECTION 13.04.Replacement of Lender................................................................47
   SECTION 13.05.Fannie Mae and Lender Fees and Expenses..............................................47
   SECTION 13.06.Third-Party Beneficiary..............................................................48
ARTICLE 14 INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES......................................48
   SECTION 14.01.Insurance and Real Estate Taxes......................................................48
   SECTION 14.02.Replacement Reserves.................................................................48
ARTICLE 15 LIMITS ON PERSONAL LIABILITY...............................................................48
   SECTION 15.01.Personal Liability to Borrower.......................................................48
ARTICLE 16 [Intentionally Omitted.]...................................................................49
ARTICLE 17 MISCELLANEOUS PROVISIONS...................................................................49
   SECTION 17.01.Counterparts.........................................................................49
   SECTION 17.02.Amendments, Changes and Modifications................................................50
   SECTION 17.03.Payment of Costs, Fees and Expenses..................................................50
   SECTION 17.04.Payment Procedure....................................................................51
   SECTION 17.05.Payments on Business Days............................................................51
   SECTION 17.06.Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial.........................51
   SECTION 17.07.Severability.........................................................................52
   SECTION 17.08.Notices..............................................................................52
   SECTION 17.09.Further Assurances and Corrective Instruments........................................54
   SECTION 17.10.Term of this Agreement...............................................................55
   SECTION 17.11.Assignments; Third-Party Rights......................................................55
   SECTION 17.12.Headings.............................................................................55
   SECTION 17.13.General Interpretive Principles......................................................55
   SECTION 17.14.Interpretation.......................................................................55
   SECTION 17.15.Standards for Decisions, Etc.........................................................56
   SECTION 17.16.Decisions in Writing.................................................................56
   SECTION 17.17.Requests.............................................................................56
</TABLE>

                                      iii

<PAGE>

                                    EXHIBITS

EXHIBIT A        Schedule of Initial Mortgaged Properties and Initial Valuations
EXHIBIT B        Fixed Facility Note
EXHIBIT C        Variable Facility Note
EXHIBIT D        Intentionally Omitted
EXHIBIT E        Intentionally Omitted
EXHIBIT F        Compliance Certificate
EXHIBIT G-1      Borrower Organizational Certificate
EXHIBIT G-2      Guarantor Organizational Certificate
EXHIBIT H        Conversion Request
EXHIBIT I        Master Credit Facility Agreement Conversion Amendment
EXHIBIT J        Rate Form
EXHIBIT K        Advance Confirmation Instrument
EXHIBIT L        Advance Request
EXHIBIT M        Request (Addition/Release)
EXHIBIT N        Confirmation of Obligations
EXHIBIT O        Expansion Request
EXHIBIT P        Facility Termination Request
EXHIBIT Q        Amendment to Master Credit Facility Agreement
EXHIBIT R        Credit Facility Termination Request
EXHIBIT S        Guaranty
EXHIBIT T        Certificate of Borrower

APPENDIX I       Definitions

                                       iv

<PAGE>

                        MASTER CREDIT FACILITY AGREEMENT

       THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 2nd day of May,
2003 by and among (i) BRE-FMCF, LLC, a Delaware limited liability company
(together with any Additional Borrowers, individually and collectively,
"Borrower"), and (ii) PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware
corporation ("Lender").

                                    RECITALS

       A.     Borrower owns one or more Multifamily Residential Properties
(unless otherwise defined or the context clearly indicates otherwise,
capitalized terms shall have the meanings ascribed to such terms in Appendix I
of this Agreement) as more particularly described in Exhibit A to this
Agreement.

       B.     Borrower has requested that Lender establish a $100,000,000 Credit
Facility in favor of Borrower, comprised initially of a $100,000,000 Variable
Facility, all or part of which can be converted to a Fixed Facility in
accordance with, and subject to, the terms and conditions of this Agreement.

       C.     To secure the obligations of Borrower under this Agreement and the
other Loan Documents issued in connection with the Credit Facility, Borrower
shall create a Collateral Pool in favor of Lender. The Collateral Pool shall be
comprised of (i) the Multifamily Residential Properties listed on Exhibit A and
(ii) any other collateral pledged to Lender from time to time by Borrower
pursuant to this Agreement or any other Loan Documents.

       D.     Each Note and Security Document related to the Mortgaged
Properties comprising the Collateral Pool shall be cross-defaulted (i.e., a
default under any Note, Security Document relating to the Collateral Pool and
under this Agreement, shall constitute a default under each Note, Security
Document and this Agreement related to the Mortgaged Properties comprising the
Collateral Pool) and cross-collateralized (i.e., each Security Instrument
related to the Mortgaged Properties within the Collateral Pool shall secure all
of Borrower's obligations under this Agreement and the other Loan Documents) and
it is the intent of the parties to this Agreement that Lender may accelerate any
Note without needing to accelerate any other Note and that in the exercise of
its rights and remedies under the Loan Documents, Lender may, except as provided
in this Agreement, exercise and perfect any and all of its rights in and under
the Loan Documents with regard to any Mortgaged Property without needing to
exercise and perfect its rights and remedies with respect to any other Mortgaged
Property and that any such exercise shall be without regard to the Allocable
Facility Amount assigned to such Mortgaged Property and that Lender may recover
an amount equal to the full amount outstanding in respect of any of the Notes in
connection with such exercise and any such amount shall be applied as determined
by Lender in its sole and absolute discretion.

       E.     Subject to the terms, conditions and limitations of this
Agreement, Lender has agreed to establish the Credit Facility.

<PAGE>

       NOW, THEREFORE, Borrower and Lender, in consideration of the mutual
promises and agreements contained in this Agreement, hereby agree as follows:

                                    ARTICLE 1

                                 THE COMMITMENT

       SECTION 1.01.       The Commitment.

       Subject to the terms, conditions and limitations of this Agreement:

              (a)    Variable Facility Commitment. Lender agrees to make
Variable Advances to Borrower from time to time during the Variable Facility
Availability Period. The aggregate principal balance of the Variable Advances
Outstanding at any time shall not exceed the Variable Facility Commitment.
Borrower may re-borrow any part of the Variable Advances which it has previously
borrowed and repaid. Except as provided in Section 2.04(c) of this Agreement, no
Variable Advances shall be made as a result of increases in the Valuation of any
Mortgaged Property. Any portion of the Variable Facility Commitment not
available to be advanced due to the inability of Borrower to satisfy the
requirements for the Aggregate Loan to Value Ratio and the Aggregate Debt
Service Coverage Ratio for a period of two (2) years shall be deemed terminated
and the partial termination provisions (including payment of the Facility
Termination Fee) set forth in Article 5 and Article 6 shall apply to such
partial termination.

              (b)    Fixed Facility Commitment. Lender agrees to make Fixed
Advances to Borrower from time to time during the Fixed Facility Availability
Period. The aggregate original principal of the Fixed Advances shall not exceed
the Fixed Facility Commitment. The borrowing of a Fixed Advance shall
permanently reduce the Fixed Facility Commitment by the original principal
amount of such Fixed Advance. Borrower may not re-borrow any part of the Fixed
Advance which it has previously borrowed and repaid. Except as provided in
Section 2.04(c) of this Agreement, no Fixed Advances shall be made as a result
of increases in the Valuation of any Mortgaged Property. Any portion of the
Fixed Facility Commitment not available to be advanced due to the inability of
Borrower to satisfy the requirements for the Aggregate Loan to Value Ratio and
the Aggregate Debt Service Coverage Ratio for a period of two (2) years shall be
deemed terminated and the partial termination provisions (including payment of
the Facility Termination Fee) set forth in Article 5 and Article 6 shall apply
to such partial termination.

       SECTION 1.02.       Requests for Advances.

       Borrower shall request an Advance by giving Lender an Advance Request in
accordance with Section 2.04. The Advance Request shall indicate whether the
Request is for a Fixed Advance, a Variable Advance or both.

       SECTION 1.03.       Maturity Date of Advances.

                                        2

<PAGE>

              (a)    Variable Advances. The MBS Issue Date shall be the first
day of a month and the maturity date of the MBS funding each Variable Advance
shall be specified by Borrower in its Advance Request, which date shall be:

                     (i)    no earlier than the date which completes one full
month after the MBS Issue Date; and

                     (ii)   no later than the date which completes nine full
months after the MBS Issue Date.

       For these purposes, a year shall be deemed to consist of 12 30-day
months. For example, the date which completes three full months after September
1 shall be December 1; and the date which completes three full months after
January 1 shall be April 1.

              (b)    Fixed Advances; Amortization Period. The maturity date of
each Fixed Advance shall be the 10th anniversary of the Initial Closing Date.
The principal of each Fixed Advance shall be amortized on a 30-year schedule.

              (c)    Prepayment. Fixed Advances are not prepayable at any time,
provided that, notwithstanding the foregoing, Borrower (i) may prepay not less
than all of any Fixed Advance during the last ninety (90) days of the term of
such Fixed Advance, and (ii) may, if defeasance is elected pursuant to Section
1.11, defease not less than all of any Fixed Advance pursuant to the terms and
conditions of Section 1.11, or, if yield maintenance is selected pursuant to
Section 1.11, may prepay not less than all of any Fixed Advance pursuant to the
yield maintenance provisions of the Fixed Facility Note.

       SECTION 1.04.       Interest on Advances.

              (a)    Partial Month Interest. Notwithstanding anything to the
contrary in this Section, if an Advance is not made on the first day of a
calendar month, and the MBS Issue Date is the first day of the month following
the month in which the Advance is made, Borrower shall pay interest on the
original stated principal amount of the Advance for the partial month period
commencing on the Closing Date for the Advance and ending on the last day of the
calendar month in which the Closing Date occurs, (i) for a Variable Advance at a
rate per annum equal to the greater of (1) the Coupon Rate as determined in
accordance with Section 1.05(a) and (2) a rate determined by Lender, based on
Lender's cost of funds and approved in advance, in writing, by Borrower,
pursuant to the procedures mutually agreed upon by Borrower and Lender, and (ii)
for a Fixed Advance at a rate, per annum equal to the greater of (1) the
interest rate described in subsection (c)(i) of this Section and (2) a rate
determined by Lender, based on Lender's cost of funds, and approved in advance,
in writing, by Borrower, pursuant to procedures mutually agreed upon by Borrower
and Lender.

              (b)    Variable Advances.

                     (i)    Discount. Each Variable Advance shall be a discount
loan. The original stated principal amount of a Variable Advance shall be the
sum of the Price and the Discount. The Price and Discount of each Variable
Advance shall be determined in accordance

                                        3

<PAGE>

with the procedures set out in Section 2.01. The proceeds of any Variable
Advance made available by Lender to Borrower will equal the Price. Borrower
shall pay to Lender, in advance of each Rollover Variable Advance, the entire
Discount for such Rollover Variable Advance. The Discount for the initial
advance of each Variable Advance which is not a Rollover Variable Advance is
reflected in the original stated principal amount of such Variable Advance and
shall be paid by Borrower upon repayment of such Variable Advance.

                     (ii)   Variable Facility Fee. In addition to paying the
Discount and the partial month interest, if any, Borrower shall pay monthly
installments of the Variable Facility Fee to Lender for each Variable Advance
from the applicable MBS Issue Date to its maturity date. The Variable Facility
Fee shall be payable in advance, in accordance with the terms of the Variable
Facility Note. The first installment shall be payable on or prior to the Closing
Date for the Variable Advance and shall apply to the first full calendar month
of such MBS. Subsequent installments shall be payable on the first day of each
calendar month, commencing on the first day of the second full calendar month of
such MBS, to its maturity date. Each installment of the Variable Facility Fee
shall be in an amount equal to the product of (1) the Variable Facility Fee, (2)
the original stated principal amount of the Variable Advance, and (3) 1/12.

              (c)    Fixed Advances.

                     (i)    Annual Interest Rate. Each Fixed Advance shall bear
interest at a rate, per annum, equal to the sum of (1) the MBS Pass-Through Rate
for such Fixed Advance and (2) the Fixed Facility Fee.

                     (ii)   Fixed Facility Fee. In addition to paying the
partial month interest, if any, Borrower shall pay monthly installments of the
MBS Pass-Through Rate and the Fixed Facility Fee to Lender for each Fixed
Advance from the applicable MBS Issue Date to its maturity date. The MBS
Pass-Through Rate and the Fixed Facility Fee shall be payable in arrears, in
accordance with the terms of the Fixed Facility Note. The first installment
shall be payable on the first day of each calendar month, commencing on the
first day of the second full calendar month of such MBS, to its maturity date.
Each installment of the Fixed Facility Fee shall be in an amount equal to the
product of (1) the Fixed Facility Fee, (2) the amount of the Fixed Advance, and
(3) 1/12.

       SECTION 1.05.       Coupon Rates for Advances.

              (a)    Variable Advances. The Coupon Rate shall equal the sum of
(1) an interest rate as determined by Lender (rounded to three places) payable
for the MBS pursuant to the MBS Commitment ("MBS Imputed Interest Rate") and (2)
the Variable Facility Fee.

              (b)    Fixed Advances. The Coupon Rate shall be the rate of
interest applicable to such Fixed Advance pursuant to Section 1.04(c)(i).

       SECTION 1.06.       Notes.

              (a)    Variable Advances. The obligation of Borrower to repay the
Variable Advances shall be evidenced by the Variable Facility Note. The Variable
Facility Note shall be

                                        4

<PAGE>

payable to the order of Lender and shall be made in the amount of the Variable
Facility Commitment.

              (b)    Fixed Advances. The obligation of Borrower to repay the
Fixed Advances shall be evidenced by the Fixed Facility Notes. The Fixed
Facility Notes shall be payable to the order of Lender and shall be made in the
original principal amount of each Fixed Advance.

       SECTION 1.07.       Extension of Variable Facility Termination Date.

       Borrower shall have the right to extend the Variable Facility Termination
Date for one (1) five (5) year period ("Extension") upon satisfaction of each of
the following conditions:

              (a)    Borrower provides written notice requesting the Extension
("Extension Notice") to Lender not less than thirty (30) nor more than ninety
(90) days prior to the then effective Variable Facility Termination Date.

              (b)    No Event of Default or Potential Event of Default exists on
either the date the Extension Notice is given or on the then effective Variable
Facility Termination Date.

              (c)    All of the representations and warranties of Borrower
contained in Exhibit T to this Agreement and the other Loan Documents (other
than those which speak only as to an earlier date) are true and correct in all
material respects on the date the Extension Notice is given and on the then
effective Variable Facility Termination Date.

              (d)    Borrower is in compliance with all of the covenants
contained in Articles 8 and 9 on the date the Extension Notice is given and on
the then effective Variable Facility Termination Date.

       Upon receipt of the Extension Notice and upon compliance with conditions
set forth above, the Variable Facility Termination Date shall be extended for
one (1) five (5) year period on the terms and conditions contained in this
Agreement and the other Loan Documents, provided that the Fees applicable to the
Variable Facility during the Extension shall be as determined by Lender prior to
the Extension, provided that if Borrower does not wish to accept the Fees
determined by Lender for the Extension, Borrower may, prior to the then
effective Variable Facility Termination Date, withdraw (which withdrawal shall
be by written notice to Lender) the Extension Notice and repay all Variable
Amounts Outstanding and all other amounts then due under the Loan Documents not
later than the Variable Facility Termination Date.

       SECTION 1.08.       Conversion from Variable Facility Commitment to Fixed
Facility Commitment.

       Except as provided in Section 1.09, in connection with a Fixed Advance
only, Borrower shall have the right, from time to time during the Fixed Facility
Availability Period, to convert all or any portion of the Variable Facility
Commitment to the Fixed Facility Commitment. The Variable Facility Commitment
shall be reduced by, and the Fixed Facility Commitment shall be increased by,
the amount of each conversion.

                                        5

<PAGE>

              (a)    Request. To convert all or a portion of the Variable
Facility Commitment to the Fixed Facility Commitment, Borrower shall deliver a
Conversion Request to Lender. Each Conversion Request shall designate (1) the
amount of the conversion and (2) any Variable Advances Outstanding which will be
prepaid on or before the Closing Date for the conversion as required by Section
1.09(c).

              (b)    Closing. Subject to Section 1.09 and provided that all
conditions contained in Section 1.10 are satisfied, Lender shall permit the
requested conversion to close at offices designated by Lender on a Closing Date
selected by Lender, and occurring within 30 Business Days after Lender's receipt
of the Conversion Request (or on such other date as Borrower and Lender may
agree). At the closing, Lender and Borrower shall execute and deliver, at the
sole cost and expense of Borrower, in form and substance satisfactory to Lender,
the Conversion Documents.

       SECTION 1.09.       Limitations on Right to Convert.

       Borrower's right to convert all or any portion of the Variable Facility
Commitment to the Fixed Facility Commitment is subject to the following
limitations:

              (a)    Closing Date. The Closing Date shall occur during the Fixed
Facility Availability Period.

              (b)    Minimum Request. Each Conversion Request shall be in the
minimum amount of $10,000,000.

              (c)    Obligation to Prepay Variable Advances. Borrower shall
prepay any difference by which, after the conversion, the aggregate unpaid
principal balance of all Variable Advances Outstanding will exceed the Variable
Facility Commitment.

       SECTION 1.10.       Conditions to Conversion.

       The conversion of all or any portion of the Variable Facility Commitment
to the Fixed Facility Commitment is subject to the satisfaction, on or before
the Closing Date, of (a) the conditions precedent contained in Section 6.08 and
(b) all applicable General Conditions contained in Section 6.01.

       SECTION 1.11.       Defeasance; Yield Maintenance.

       At such time as Borrower requests the first Fixed Advance, or, if prior
in time, elects to convert all or a portion of the Variable Facility Commitment
to a Fixed Facility Commitment, Borrower shall select defeasance or yield
maintenance with respect to all prepayments of Fixed Advances. Borrower shall
notify Lender of such selection on the Advance Request for the first Fixed
Advance or on the first Conversion Request, as applicable. The terms and
conditions of defeasance and yield maintenance are contained in the Fixed
Facility Note. If the Borrower elects defeasance and any Fixed Facility Note is
defeased pursuant to the terms thereof, such defeasance shall satisfy Borrower's
obligations with respect to such Fixed Facility Note. The selection of Borrower
as to defeasance or yield maintenance made at the time of the first

                                        6

<PAGE>

Advance Request for a Fixed Advance or the first Conversion Request shall apply
to the prepayment of all Fixed Advances during the term of this Agreement.

                                    ARTICLE 2

                                  THE ADVANCES

       SECTION 2.01.       Rate Setting for an Advance.

       Rates for an Advance shall be set in accordance with the following
procedures:

              (a)    Preliminary, Nonbinding Quote. At Borrower's request Lender
shall quote an estimate of the MBS Pass-Through Rate (for a proposed Fixed
Advance) or MBS Imputed Interest Rate (for a proposed Variable Advance).
Lender's quote shall be based on (1) a solicitation of bids from institutional
investors selected by Lender and (2) the proposed terms and amount of the
Advance selected by Borrower. The quote shall not be binding upon Lender.

              (b)    Rate Setting. If Borrower satisfies all of the conditions
to Lender's obligation to make the Advance to be satisfied prior to the setting
of the MBS Pass-Through Rate, then Borrower may submit to Lender, by facsimile
transmission before 1:00 p.m. Washington, D.C. time on any Business Day ("Rate
Setting Date"), a completed and executed Rate Form. The Rate Form shall specify
the amount, term, MBS Issue Date, Facility Fee, any breakage fee deposit amount,
the proposed maximum Coupon Rate ("Maximum Annual Coupon Rate") and Closing Date
for the Advance.

              (c)    Rate Confirmation. Within one Business Day after receipt of
the Rate Form, Lender shall solicit bids from institutional investors selected
by Lender based on the information in the Rate Form and, provided the actual
Coupon Rate would be at or below the Maximum Annual Coupon Rate, shall obtain a
commitment ("MBS Commitment") for the purchase of an MBS having the bid terms
described in the related Rate Form. Lender shall then complete and countersign
the Rate Form thereby confirming the amount, term, MBS Issue Date, MBS Delivery
Date, MBS Imputed Interest Rate or MBS Pass-Through Rate, Facility Fee, Coupon
Rate, Discount, Price, and Closing Date for the Advance and shall immediately
deliver by facsimile transmission the Rate Form to Borrower.

       SECTION 2.02.       Advance Confirmation Instrument for Variable
Advances.

       On or before the Closing Date for a Variable Advance, Borrower shall
execute and deliver to Lender a fully executed Advance Confirmation Instrument,
confirming the amount, term, MBS Issue Date, MBS Delivery Date, MBS Imputed
Interest Rate, Variable Facility Fee, Coupon Rate, Discount, Price and Closing
Date for the Advance, and Borrower's obligation to repay the Variable Advance in
accordance with the terms of the Variable Facility Note and this Agreement. Upon
the funding of the Variable Advance, Lender shall insert the date of funding on
the Advance Confirmation Instrument and deliver a copy of the completed Advance
Confirmation Instrument to Borrower to evidence the date of funding and to
confirm that the Advance Confirmation Instrument is not effective until the date
of funding. Lender's failure to do so shall not invalidate the Advance
Confirmation Instrument or otherwise affect in any way

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<PAGE>

any obligation of Borrower to repay Variable Advances in accordance with the
Advance Confirmation Instrument, the Variable Facility Note or the other Loan
Documents.

       SECTION 2.03.       Breakage and other Costs.

         If Lender obtains, and then fails to fulfill, the MBS Commitment
because the Advance is not made (for a reason other than Lender's default),
Borrower shall pay all reasonable out-of-pocket costs payable to the potential
investor and other reasonable costs, fees and damages incurred by Lender in
connection with its failure to fulfill the MBS Commitment. Lender reserves the
right to require Borrower to post a deposit at the time the MBS Commitment is
obtained, provided that no such deposit shall be required in connection with a
Rollover Variable Advance. Such deposit shall be refundable to Borrower upon the
delivery of the related MBS.

       SECTION 2.04.       Advances.

       Borrower may deliver an Advance Request to Lender.

              (a)    If the Advance Request is to obtain the Initial Advance and
all conditions precedent contained in Section 6.02 and the General Conditions
contained in Section 6.01 are satisfied on or before the Closing Date for the
Initial Advance, Lender shall make the Initial Advance on the Initial Closing
Date or on such other date as Borrower and Lender may agree.

              (b)    If the Advance Request is to obtain a Future Advance, such
Advance Request shall be in the minimum amount of $3,000,000. If all conditions
precedent contained in Section 6.03 and the General Conditions contained in
Section 6.01 are satisfied, Lender shall make the requested Future Advance, at a
closing to be held at offices designated by Lender on a Closing Date selected by
Lender, which date shall be not more than three (3) Business Days after
Borrower's receipt from Lender of the confirmed Rate Form (or on such other date
as Borrower and Lender may agree).

              (c)    At any time prior to the date two (2) years before the
Variable Facility Termination Date, Borrower shall be entitled to Advances based
on decreases in the Aggregate Loan to Value Ratio and increases in the Aggregate
Debt Service Coverage Ratio as determined by Lender. The amount of such
additional Advance shall be equal to the amount which, when combined with
Advances already outstanding, equals the maximum amount of Advances that could
be outstanding and the Coverage and LTV Tests satisfied. No such Additional
Advance shall be permitted if the Recourse Termination Date has occurred or if
there are Outstanding Advances in the full amount of the Variable Facility
Commitment and the Fixed Facility Commitment.

       SECTION 2.05.       Determination of Allocable Facility Amount and
Valuations.

              (a)    Initial Determinations. On the Initial Closing Date, Lender
shall determine (i) the Allocable Facility Amount and Valuation for each
Mortgaged Property, (ii) the Aggregate Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio and (iii) the maximum Initial Advance Amount
available to Borrower. The aggregate of the Allocable Facility Amounts shall, at
all times, equal the aggregate of Advances Outstanding. The

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<PAGE>

determinations made as of the Initial Closing Date shall remain unchanged until
the First Anniversary, provided that Allocable Facility Amounts shall be
adjusted prior to the First Anniversary to reflect increases or decreases in
Advances Outstanding (which adjustments shall only be made to reflect changes in
Advances Outstanding and not changes in Valuations). Changes in Allocable
Facility Amount, Valuations, the Aggregate Debt Service Coverage Ratio and the
Aggregate Loan to Value Ratio shall be made pursuant to Section 2.05(b).

              (b)    Monitoring Determinations. Once each Calendar Quarter or,
if the Commitment consists only of a Fixed Facility Commitment, once each
Calendar Year, within 20 Business Days after Borrower has delivered to Lender
the reports required in Section 8.03, Lender shall determine the Aggregate Debt
Service Coverage Ratio and the Aggregate Loan to Value Ratio and whether
Borrower is in compliance with the other covenants set forth in the Loan
Documents. After the First Anniversary, on an annual basis, and if Lender
reasonably decides that changed market or property conditions warrant, Lender
shall determine Allocable Facility Amounts and Valuations. Lender shall also
redetermine Allocable Facility Amounts to take account of any addition or
release of Collateral or other event which invalidates the outstanding
determinations. In determining Valuations, Lender shall use Cap Rates based on
its internal survey and analysis of cap rates for comparable sales in the
vicinity of the Mortgaged Property, with such adjustments as Lender deems
appropriate and without any obligation to use any information provided by
Borrower. If Lender is unable to determine a Cap Rate for a Mortgaged Property,
Lender shall have the right, not more than once annually, to obtain a market
study in order to establish a Cap Rate. Lender shall promptly disclose its
determinations to Borrower. Until redetermined, the outstanding Allocable
Facility Amounts and Valuations shall remain in effect. Notwithstanding anything
in this Agreement to the contrary, no change in Allocable Facility Amounts,
Valuations, the Aggregate Loan to Value Ratio or the Aggregate Debt Service
Coverage Ratio shall, unless resulting from the removal of Collateral from the
Collateral Pool, (i) result in a Potential Event of Default or Event of Default
or (ii) preclude the making of a Rollover Variable Advance.

                                    ARTICLE 3

                               COLLATERAL CHANGES

       SECTION 3.01.       Right to Add Collateral.

       Subject to the terms and conditions of this Article, Borrower shall have
the right, from time to time during the Term of this Agreement, to add
Multifamily Residential Properties to the Collateral Pools.

       SECTION 3.02.       Procedure for Adding Collateral.

       The procedure for adding Collateral contained in this Section 3.02 shall
apply to all additions of Collateral.

              (a)    Request. Borrower may deliver to Lender an Addition Request
to add one or more Multifamily Residential Properties to a Collateral Pool. Each
Addition Request shall be accompanied by the following: (i) the information
required by the DUS Guide Underwriting

                                        9

<PAGE>

Requirements and any additional information Lender may reasonably request; and
(ii) the payment of all Additional Collateral Due Diligence Fees.

              (b)    Underwriting. Prior to the First Anniversary, Borrower may
add any Additional Mortgaged Property provided that, after such addition, the
Coverage and LTV Tests are satisfied. Thereafter, the proposed Additional
Mortgaged Property must itself have a Debt Service Coverage Ratio of not less
than 1.35 to 1.0 and a Loan to Value Ratio of not more than 65% and, after such
addition, the Coverage and LTV Tests must be satisfied. Lender shall evaluate
the proposed Additional Mortgaged Property in accordance with the DUS Guide
Underwriting Requirements, including then applicable underwriting interest rate
floors, and shall make underwriting determinations as to the Debt Service
Coverage Ratio and the Loan to Value Ratio of the proposed Additional Mortgaged
Property and the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to
Value Ratio applicable to the Collateral Pool on the basis of the lesser of (1)
the acquisition price of the proposed Additional Mortgaged Property if purchased
by Borrower within 12 months of the related Addition Request, and (2) a
Valuation made with respect to the proposed Additional Mortgaged Property.
Within 30 Business Days after receipt of (1) the Addition Request and (2) all
reports, certificates and documents required by the DUS Guide Underwriting
Requirements, including a zoning analysis undertaken in accordance with Section
206 of Part III of the DUS Guide, Lender shall notify Borrower whether it shall
consent to the Addition Request. If Lender consents it shall set forth the
Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio
which it estimates shall result from the addition of the proposed Additional
Mortgaged Property. Within five Business Days after receipt of Lender's consent
to the Addition Request, Borrower shall notify Lender whether it elects to add
the proposed Additional Mortgaged Property to a Collateral Pool. If Borrower
fails to respond within the period of five Business Days, it shall be
conclusively deemed to have elected not to add the proposed Additional Mortgaged
Property to a Collateral Pool.

              (c)    Closing. If Lender consents to the Addition Request,
Borrower timely elects to add the proposed Additional Mortgaged Property to a
Collateral Pool and all conditions precedent contained in Section 6.04 and all
General Conditions contained in Section 6.01 are satisfied, Lender shall permit
the addition of the proposed Additional Mortgaged Property to a Collateral Pool,
at a closing to be held at offices designated by Lender on a Closing Date
selected by Lender, occurring within 30 Business Days after Lender's receipt of
Borrower's election (or on such other date as Borrower and Lender may agree).

       SECTION 3.03.       Right to Obtain Releases of Collateral.

       Subject to the terms and conditions of this Article, Borrower shall have
the right to obtain a release of Collateral from the Collateral Pool.

       SECTION 3.04.       Procedure for Obtaining Releases of Collateral.

              (a)    Request. To obtain a release of Collateral from the
Collateral Pool, Borrower may deliver a Release Request to Lender. The Release
Request shall not result in a termination of all or any part of the Credit
Facility. Borrower may terminate all or any part of the Credit Facility only by
delivering a Facility Termination Request or Credit Facility Termination Request
pursuant to Article 5.

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<PAGE>

              (b)    Closing. If all conditions precedent contained in Section
6.05 and all General Conditions contained in Section 6.01 are satisfied, Lender
shall cause the Release Property to be released, at a closing to be held at
offices designated by Lender on a Closing Date selected by Lender, and occurring
within 30 days after Lender's receipt of the Release Request (or on such other
date as Borrower and Lender may agree), by executing and delivering, and causing
all applicable parties to execute and deliver, all at the sole cost and expense
of Borrower, the Release Documents. Borrower shall prepare the Release Documents
and submit them to Lender for its review.

              (c)    Release Price. The "Release Price" for each Mortgaged
Property means (A) if the Recourse Termination Date has not occurred, the
amount, if any, of Advances Outstanding which are required to be repaid by the
Borrower to the Lender in connection with the proposed release of the Mortgaged
Property from the Collateral Pool so that, immediately after the release, the
Coverage and LTV Tests will be satisfied, and (B) if the Recourse Termination
Date has occurred, the greater of (i) the Allocable Facility Amount for the
Mortgaged Property to be released and (ii) the amount, if any, of Advances
Outstanding which are required to be repaid by the Borrower to the Lender in
connection with the proposed release of the Mortgaged Property from the
Collateral Pool so that, immediately after the release, the Coverage and LTV
Tests will be satisfied. In addition to the Release Price, the Borrower shall
pay to the Lender the Release Fee and all associated prepayment premiums and
other amounts due under the Notes and any Advance Confirmation Instruments
evidencing the Advances being repaid.

              (d)    Application of Release Price. The portion of the Release
Price equal to 100% of the Allocable Facility Amount for the Release Property
shall be applied first against the Variable Advances Outstanding until there are
no further Variable Advances Outstanding, then against the prepayment of Fixed
Advances Outstanding, so long as the prepayment is permitted under the
applicable Fixed Facility Note. The remainder of the Release Price shall be held
by Lender (or its appointed collateral agent) as substitute Collateral
("Substitute Cash Collateral"), in accordance with a security agreement and
other documents in form and substance acceptable to Lender. Substitute Cash
Collateral remaining will be returned to the Borrower on (A) if the Recourse
Termination Date has not occurred, in whole or in part, from time to time, upon
written request of the Borrower, provided that, immediately after such return,
the Coverage and LTV Tests will be satisfied (calculated using the definition of
"Facility Debt Service" set forth in paragraph (b) of such definition), and (B)
if the Recourse Termination Date has occurred, the Termination Date. If, on the
date Borrower pays the Release Price, Variable Advances are Outstanding but not
then due and payable, Lender shall hold the Release Price as additional
Collateral, until the next date on which Variable Advances are due and payable,
at which time Lender shall apply the appropriate portion of the Release Price to
such Variable Advances.

              (e)    Title Insurance. Notwithstanding the other provisions of
this Section 3.04, no release of any of the Mortgaged Properties shall be made
unless the Borrower has provided title insurance, taking into account tie-in
endorsements, to Lender in respect of each of the remaining Mortgaged Properties
in the Collateral Pool in an amount equal to 125% of the Initial Valuation of
each of such remaining Mortgaged Properties.

                                       11

<PAGE>

       SECTION 3.05.       Right to Substitute Collateral.

       Subject to the terms, conditions and limitations of Section 3.02 and
Section 3.04, Borrower shall have the right to add a Multifamily Residential
Property to the Collateral Pool simultaneously with the release of a Release
Property thereby effecting a substitution. In connection with a substitution,
Borrower shall pay all Substitution Fees and Release Fees, but shall not be
required to pay any Addition Fees or, to the extent of the Allocable Facility
Amount of the Mortgaged Property added to the Collateral Pool, any Release
Price.

                                    ARTICLE 4

                          EXPANSION OF CREDIT FACILITY

       SECTION 4.01.       Right to Increase Commitment.

       Subject to the terms, conditions and limitations of this Article,
Borrower shall have the right, during the Fixed Facility Availability Period, to
increase the Variable Facility Commitment (provided that no increase in the
Variable Facility Commitment shall occur after the Recourse Termination Date),
the Fixed Facility Commitment or both. Borrower's right to increase the
Commitment is subject to the following limitations:

              (a)    Maximum Amount of Increase in Commitment. The maximum
amount by which the Commitment may be increased is $150,000,000, for a maximum
total Commitment of $250,000,000.

              (b)    Minimum Request. Each Request for an increase in the
Commitment shall be in the minimum amount of $5,000,000.

              (c)    Terms and Conditions. Except with respect to any increase
in the Commitment made from the Reserved Amount, the terms and conditions of
this Agreement shall apply to any increase in the Commitment closed prior to the
First Anniversary. With respect to any increases in the Commitment made from the
Reserved Amount, regardless of when the increase occurs, the pricing of Advances
from such increase shall be the pricing for Advances set forth in this Agreement
on the date hereof and all other terms and conditions applicable to any increase
in the Commitment shall be mutually agreed upon by Lender and Borrower.
Thereafter, the terms and conditions (including pricing) applicable to any
increase in the Commitment shall be mutually agreed upon by Lender and Borrower.

       SECTION 4.02.       Procedure for Obtaining Increases in Commitment.

              (a)    Request. To obtain an increase in the Commitment, Borrower
       shall deliver an Expansion Request to Lender. Each Expansion Request
       shall include the following:

                     (i)    The total amount of the proposed increase;

                     (ii)   A designation of the increase as being part of the
              Variable Facility Commitment or the Fixed Facility Commitment; and

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<PAGE>

                     (iii)  If applicable, a request that Lender inform Borrower
              of the Variable Facility Fee and/or Fixed Facility Fee which will
              apply to Advances drawn from such increase in the Commitment.

       SECTION 4.03.       Closing.

       If all conditions precedent contained in Section 6.07 of this Agreement
and all applicable General Conditions contained in Section 6.01 of this
Agreement are satisfied, Lender shall permit the Expansion Request to occur, at
a closing to be held at offices designated by Lender on a Closing Date selected
by Lender, and occurring within fifteen (15) Business Days after Lender's
receipt of the Expansion Request (or on such other date as Borrower and Lender
may agree).

                                    ARTICLE 5

                            TERMINATION OF FACILITIES

       SECTION 5.01.       Right to Complete or Partial Termination of
Facilities.

       Subject to the terms and conditions of this Article, Borrower shall have
the right to permanently reduce the Variable Facility Commitment and/or the
Fixed Facility Commitment.

       SECTION 5.02.       Procedure for Complete or Partial Termination of
Facilities.

              (a)    Request. To permanently reduce the Variable Facility
Commitment (and, if desired by Borrower, to cause the Recourse Termination Date
to occur) or the Fixed Facility Commitment, Borrower shall deliver a Facility
Termination Request to Lender. A permanent reduction of the Variable Facility
Commitment to $0 shall be referred to as a "Complete Variable Facility
Termination." A permanent reduction of the Fixed Facility Commitment to $0 shall
be referred to as a "Complete Fixed Facility Termination." The Facility
Termination Request shall include the following:

                     (i)    The proposed amount of the reduction in the Variable
Facility Commitment and/or Fixed Facility Commitment; and

                     (ii)   Unless there is a Complete Variable Facility
Termination or a Complete Fixed Facility Termination, a designation by Borrower
of any Variable Advances which will be prepaid and/or any Fixed Advances which
will be prepaid or defeased.

Any release of Collateral, whether or not made in connection with a Facility
Termination Request, must comply with all conditions to a release which are
contained in Article 6.

              (b)    Closing. If all conditions precedent contained in Section
6.09 and all General Conditions contained in Section 6.01 are satisfied, Lender
shall reduce the Variable Facility Commitment or Fixed Facility Commitment, as
the case may be, to the amount designated by Borrower, at a closing to be held
at offices designated by Lender on a Closing Date selected by Lender, within
thirty (30) Business Days after Lender's receipt of the Facility Termination
Request (or on such other date as Borrower and Lender may agree), by executing

                                       13

<PAGE>

and delivering the Facility Termination Document evidencing the reduction in the
Facility Commitment.

       SECTION 5.03.       Right to Terminate Credit Facility.

         Subject to the terms and conditions of this Article, Borrower shall
have the right to terminate this Agreement and the Credit Facility and receive a
release of all of the Collateral.

       SECTION 5.04.       Procedure for Terminating Credit Facility.

              (a)    Request. To terminate this Agreement and the Credit
Facility, Borrower shall deliver a Credit Facility Termination Request to
Lender.

              (b)    Closing. If all conditions precedent contained in Section
6.10 are satisfied, this Agreement shall terminate, and Lender shall cause all
of the Collateral to be released, at a closing to be held at offices designated
by Lender on a Closing Date selected by Lender, within 30 Business Days after
Lender's receipt of the Credit Facility Termination Request (or on such other
date as Borrower and Lender may agree), by executing and delivering, and causing
all applicable parties to execute and deliver, all at the sole cost and expense
of Borrower, the Credit Facility Termination Documents.

                                    ARTICLE 6

                      CONDITIONS PRECEDENT TO ALL REQUESTS

       SECTION 6.01.       Conditions Applicable to All Requests.

       The obligation of Lender to close the transaction requested in a Request
shall be subject to the following general conditions precedent ("General
Conditions") in addition to any other conditions precedent contained in this
Agreement:

              (a)    Compliance with Coverage and LTV Tests. Except in
connection with a Credit Facility Termination Request, a Facility Termination
Request or an Addition Request, the Collateral Pool is in compliance with the
Coverage and LTV Test.

              (b)    Geographical Diversification; Compliance with Concentration
Test. Except in connection with a Credit Facility Termination Request, a
Facility Termination Request or an Addition Request:

                     (i)    The Collateral Pool is in compliance with the
Geographical Diversification Requirement.

                     (ii)   The aggregate Valuation of the Mortgaged Properties
located in a single SMSA shall not exceed 25% of the aggregate Valuations of all
Mortgaged Properties.

                     (iii)  The Valuation of any one Mortgaged Property shall
not exceed 25% of the aggregate Valuations of all Mortgaged Properties.

                                       14

<PAGE>

              (c)    Payment of Expenses. The payment by Borrower of Lender's
and Fannie Mae's reasonable fees and expenses payable in accordance with this
Agreement, including, but not limited to, the legal fees and expenses contained
in Section 10.05.

              (d)    No Material Adverse Change. Except in connection with a
Credit Facility Termination Request, a Facility Termination Request or an
Addition Request, there has been no material adverse change in the financial
condition, business or prospects of Borrower or Guarantor or in the physical
condition, operating performance or value of any of the Mortgaged Properties
since the date of the most recent Compliance Certificate (or, with respect to
the conditions precedent to the Initial Advance, from the condition, business or
prospects reflected in the financial statements, reports and other information
obtained by Lender during its review of Borrower and the Guarantor and the
Initial Mortgaged Properties).

              (e)    No Default. Except in connection with a Credit Facility
Termination Request, there shall exist no Event of Default or Potential Event of
Default on the Closing Date for the Request and, after giving effect to the
transaction requested in the Request, no Event of Default or Potential Event of
Default shall have occurred.

              (f)    No Insolvency. Neither Borrower nor Guarantor is insolvent
(within the meaning of any applicable federal or state laws relating to
bankruptcy or fraudulent transfers) or will be rendered insolvent by the
transactions contemplated by the Loan Documents, including the making of a
Future Advance, or, after giving effect to such transactions, will be left with
an unreasonably small capital with which to engage in its business or
undertakings, or will have intended to incur, or believe that it has incurred,
debts beyond its ability to pay such debts as they mature or will have intended
to hinder, delay or defraud any existing or future creditor.

              (g)    No Untrue Statements. The Loan Documents shall not contain
any untrue or misleading statement of a material fact and shall not fail to
state a material fact necessary to make the information contained therein not
misleading.

              (h)    Representations and Warranties. Except in connection with a
Credit Facility Termination Request, all representations and warranties made by
Borrower and the Guarantor in the Loan Documents (other than those which speak
only as to an earlier date) shall be true and correct in all material respects
on the Closing Date for the Request with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date for
the Request.

              (i)    No Condemnation or Casualty. Except in connection with a
Credit Facility Termination Request or a Release Request (with respect to the
Mortgaged Property sought to be released), there shall not be pending or
threatened any condemnation or other taking, whether direct or indirect, against
any Mortgaged Property and there shall not have occurred any casualty to any
improvements located on any Mortgaged Property, which casualty would have a
material adverse effect on the continued operations of such Mortgaged Property.

              (j)    Delivery of Closing Documents. The receipt by Lender of the
following, each dated as of the Closing Date for the Request, in form and
substance satisfactory to Lender in all respects:

                                       15

<PAGE>

                     (i)    The Loan Documents;

                     (ii)   A Compliance Certificate;

                     (iii)  An Organizational Certificate; and

                     (iv)   Such other documents, instruments, approvals (and,
if requested by Lender, certified duplicates of executed copies thereof) and
opinions as Lender may reasonably request.

              (k)    Covenants. Except in connection with a Credit Facility
Termination Request, Borrower is in full compliance with each of the covenants
contained in Articles 8 and 9 of this Agreement, without giving effect to any
notice and cure rights of Borrower.

       SECTION 6.02.       Conditions Precedent to Initial Advance.

       The obligation of Lender to make the Initial Advance is subject to the
following conditions precedent:

              (a)    Receipt by Lender of the fully executed Advance Request;

              (b)    [Intentionally Omitted];

              (c)    [Intentionally Omitted];

              (d)    Delivery to the Title Company, for filing and/or recording
in all applicable jurisdictions, of all applicable Loan Documents required by
Lender, including duly executed and delivered original copies of the Variable
Facility Note, the Guaranty, the Initial Security Instruments covering the
Initial Mortgaged Properties and UCC-1 Financing Statements covering the portion
of the Collateral comprised of personal property, and other appropriate
instruments, in form and substance satisfactory to Lender and in form proper for
recordation, as may be necessary in the opinion of Lender to perfect the Liens
created by the applicable Security Instruments and any other Loan Documents
creating a Lien in favor of Lender, and the payment of all taxes, fees and other
charges payable in connection with such execution, delivery, recording and
filing;

              (e)    The receipt by Lender of the first installment of Variable
Facility Fee and the entire Discount payable by Borrower pursuant to Section
1.04;

              (f)    Receipt by Lender of the Initial Origination Fee pursuant
to Section 10.03(a) and the Initial Due Diligence Fee pursuant to Section
10.04(a); and

              (g)    Receipt by Lender of a "non-consolidation" opinion stating
that the Borrower will not be substantially consolidated with the Guarantor in
the event of a bankruptcy of the Guarantor.

       SECTION 6.03.       Conditions Precedent to Future Advances.

                                       16

<PAGE>

       The obligation of Lender to make a requested Future Advance is subject to
the following conditions precedent:

              (a)    Except in connection with a Rollover Variable Advance,
receipt by Lender of the fully executed Advance Request;

              (b)    Except in connection with a Rollover Variable Advance,
delivery by Lender to Borrower of the Rate Form for the Future Advance;

              (c)    Except in connection with a Rollover Variable Advance,
after giving effect to the requested Future Advance, the Coverage and LTV Tests
will be satisfied;

              (d)    If the Advance is a Fixed Advance, delivery of a Fixed
Facility Note, duly executed by Borrower, in the amount and reflecting all of
the terms of the Fixed Advance;

              (e)    If the Advance is a Variable Advance, delivery of the
Advance Confirmation Instrument, duly executed by Borrower;

              (f)    For any Title Insurance Policy not containing a revolving
credit endorsement, the receipt by Lender of an endorsement to the Title
Insurance Policy, amending the effective date of the Title Insurance Policy to
the Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions approved by
Lender; and

              (g)    If the Advance is a Variable Advance, the receipt by Lender
of the first installment of Variable Facility Fee for the Variable Advance and
the entire Discount for the Variable Advance payable by Borrower pursuant to
Section 1.04.

       SECTION 6.04.       Conditions Precedent to Addition of an Additional
Mortgaged Property to the Collateral Pool.

       The addition of an Additional Mortgaged Property to the Collateral Pool
on the applicable Closing Date is subject to the satisfaction of the following
conditions precedent:

              (a)    If the Additional Mortgaged Property is being added to the
Collateral Pool prior to the First Anniversary of the Initial Closing Date, the
Coverage and LTV Tests will be satisfied;

              (b)    If the Additional Mortgaged Property is being added to the
Collateral Pool after the First Anniversary, the proposed Additional Mortgaged
Property has a Debt Service Coverage Ratio of not less than 1.35:1.0 and a Loan
to Value Ratio of not more than 65% and immediately after giving effect to the
requested addition, the Coverage and LTV Tests will be satisfied.

              (c)    Receipt by Lender of the Addition Fee, except in connection
with a substitution pursuant to Section 3.05 in which case Lender shall receive
the Substitution Fee;

                                       17

<PAGE>

              (d)    Delivery to the Title Company, with fully executed
instructions directing the Title Company to file and/or record in all applicable
jurisdictions, all applicable Addition Loan Documents required by Lender,
including duly executed and delivered original copies of any Security
Instruments and UCC-1 Financing Statements covering the portion of the
Additional Mortgaged Property comprised of personal property, and other
appropriate documents, in form and substance satisfactory to Lender and in form
proper for recordation, as may be necessary in the opinion of Lender to perfect
the Lien created by the applicable additional Security Instrument, and any other
addition Loan Document creating a Lien in favor of Lender, and the payment of
all taxes, fees and other charges payable in connection with such execution,
delivery, recording and filing;

              (e)    If required by Lender, amendments to the Notes and the
Security Instruments, reflecting the addition of the Additional Mortgaged
Property to the Collateral Pool and, as to any Security Instrument so amended,
the receipt by Lender of an endorsement to the Title Insurance Policy insuring
the Security Instrument, amending the effective date of the Title Insurance
Policy to the Closing Date and showing no additional exceptions to coverage
other than the exceptions shown on the Initial Closing Date and other exceptions
approved by Lender; and

              (f)    If the Title Insurance Policy for the Additional Mortgaged
Property contains a tie-in endorsement, an endorsement to each other Title
Insurance Policy containing a tie-in Endorsement, adding a reference to the
Additional Mortgaged Property.

       SECTION 6.05.       Conditions Precedent to Release of Property from the
Collateral Pool.

       The obligation of Lender to release a Property from the Collateral Pool
by executing and delivering the Release Documents on the Closing Date, are
subject to the satisfaction of the following conditions precedent on or before
the Closing Date:

              (a)    Immediately after giving effect to the requested release
the Coverage and LTV Tests will be satisfied;

              (b)    Receipt by Lender of the Release Price;

              (c)    Receipt by Lender of the Release Fee;

              (d)    Receipt by Lender on the Closing Date of one or more
counterparts of each Release Document, dated as of the Closing Date, signed by
each of the parties (other than Lender) who is a party to such Release Document;

              (e)    If required by Lender, amendments to the Notes and the
Security Instruments, reflecting the release of the Release Property from the
Collateral Pool and, as to any Security Instrument so amended, the receipt by
Lender of an endorsement to the Title Insurance Policy insuring the Security
Instrument, amending the effective date of the Title Insurance Policy to the
Closing Date and showing no additional exceptions to coverage other than the
exceptions shown on the Initial Closing Date and other exceptions approved by
Lender;

                                       18

<PAGE>

              (f)    If Lender determines the Release Property to be one phase
of a project, and one or more other phases of the project are Mortgaged
Properties which will remain in the Collateral Pool ("Remaining Mortgaged
Properties"), Lender must determine that the Remaining Mortgaged Properties can
be operated separately from the Release Property and any other phases of the
project which are not Mortgaged Properties and whether any cross use agreements
or easements are necessary. In making this determination, Lender shall evaluate
whether the Remaining Mortgaged Properties comply with the terms of Sections 203
and 208 of Part III of the DUS Guide;

              (g)    Receipt by Lender of endorsements to the tie-in
endorsements of the Title Insurance Policies, if deemed necessary by Lender, to
reflect the release;

              (h)    Receipt by Lender on the Closing Date of a Confirmation of
Obligations, dated as of the Closing Date, signed by Borrower and the Guarantor,
pursuant to which Borrower and the Guarantor confirm their obligations under the
Loan Documents; and

              (i)    The remaining Mortgaged Properties in the Collateral Pool
shall satisfy the Geographical Diversification Requirements.

       SECTION 6.06.       Intentionally Omitted.

       SECTION 6.07.       Conditions Precedent to Increase in Commitment.

       The right of Borrower to increase the Commitment is subject to the
satisfaction of the following conditions precedent on or before the Closing
Date:

              (a)    After giving effect to the requested increase the Coverage
and LTV Tests will be satisfied;

              (b)    Receipt by Lender of the Expansion Origination Fee;

              (c)    Receipt by Lender of an endorsement to each Title Insurance
Policy, amending the effective date of the Title Insurance Policy to the Closing
Date, increasing the limits of liability to the Commitment, as increased under
this Article, showing no additional exceptions to coverage other than the
exceptions shown on the applicable Title Insurance Policy and other exceptions
approved by Lender, together with any reinsurance agreements required by Lender;

              (d)    Receipt by Lender of fully executed original copies of all
Expansion Loan Documents, each of which shall be in full force and effect, and
in form and substance satisfactory to Lender in all respects; and

              (e)    If determined necessary by Lender, Borrower's agreement to
such Geographical Diversification Requirements as Lender may determine.

       SECTION 6.08.       Conditions Precedent to Conversion.

                                       19

<PAGE>

       The conversion of all or a portion of the Variable Facility Commitment to
the Fixed Facility Commitment is subject to the satisfaction of the following
conditions precedent on or before the Closing Date:

              (a)    After giving effect to the requested conversion, the
Coverage and LTV Tests will be satisfied;

              (b)    Prepayment by Borrower in full of any Variable Advances
Outstanding which Borrower has designated for payment, together with any
associated prepayment premiums and other amounts due with respect to the
prepayment of such Variable Advances;

              (c)    If requested by Lender, receipt by Lender of an endorsement
to each Title Insurance Policy, amending the effective date of the Title
Insurance Policy to the Closing Date and showing no additional exceptions to
coverage other than the exceptions shown on the Initial Closing Date and other
exceptions approved by Lender; and

              (d)    Receipt by Lender of one or more counterparts of each
Conversion Document, dated as of the Closing Date, signed by each of the parties
(other than Lender) to such Conversion Document.

       SECTION 6.09.       Conditions Precedent to Complete or Partial
Termination of Facilities.

       The right of Borrower to reduce the Facility Commitment and the
obligation of Lender to execute the Facility Termination Document, are subject
to the satisfaction of the following conditions precedent on or before the
Closing Date:

              (a)    Payment by Borrower in full of all of the Variable Advances
Outstanding and Fixed Advances Outstanding, as the case may be, required to
reduce the aggregate unpaid principal balance of all Variable Advances
Outstanding and Fixed Advances Outstanding, as the case may be, to not greater
than the Variable Facility Commitment and Fixed Facility Commitment, as the case
may be, including any associated prepayment premiums or other amounts due under
the Notes (but if Borrower is not required to prepay all of the Variable
Advances or Fixed Advances Outstanding, as the case may be, Borrower shall have
the right to select which of the Variable Advances or Fixed Advances, as the
case may be, shall be repaid);

              (b)    Receipt by Lender of the Facility Termination Fee; and

              (c)    Receipt by Lender on the Closing Date of one or more
counterparts of the Facility Termination Document, dated as of the Closing Date,
signed by each of the parties (other than Lender) who is a party to such
Facility Termination Document.

       SECTION 6.10.       Conditions  Precedent to Termination of Credit
Facility.

       The right of Borrower to terminate this Agreement and the Credit Facility
and to receive a release of all of the Collateral from the Collateral Pool and
Lender's obligation to execute and deliver the Credit Facility Termination
Documents on the Closing Date are subject to the following conditions precedent:

                                       20

<PAGE>

              (a)    Payment by Borrower in full of all of the Notes Outstanding
on the Closing Date, including any associated prepayment premiums or other
amounts due under the Notes and all other amounts owing by Borrower to Lender
under this Agreement;

              (b)    Defeasance by Borrower, if necessary, in accordance with
the provisions of this Agreement, with respect to all Fixed Facility Notes
Outstanding on the Closing Date; and

              (c)    Receipt by Lender of the Facility Termination Fee.

       SECTION 6.11.       Delivery of Closing Documents Relating to Advance
Request, Addition Request or Expansion Request.

       With respect to the closing of an Advance Request, an Addition Request or
an Expansion Request, it shall be a condition precedent that Lender receives
each of the following, each dated as of the Closing Date for the Request, in
form and substance satisfactory to Lender in all respects:

              (a)    Loan Documents. Fully executed original copies of each Loan
Document required to be executed in connection with the Request, duly executed
and delivered by the parties thereto (other than Lender), each of which shall be
in full force and effect.

              (b)    Opinion. If requested by Lender, favorable opinions of
counsel to Borrower and the Guarantor, as to the due organization and
qualification of Borrower and Guarantor, the due authorization, execution,
delivery and enforceability of each Loan Document executed in connection with
the Request and such other matters as Lender may reasonably require.

       SECTION 6.12.       Delivery of Property-Related Documents.

       With respect to each of the Initial Mortgaged Properties or an Additional
Mortgaged Property, it shall be a condition precedent to the inclusion of such
Mortgaged Properties in the Collateral Pool that Lender receive each of the
following, each dated as of the Closing Date for the Initial Advance or an
Addition Request, as the case may be, in form and substance satisfactory to
Lender in all respects:

              (a)    A favorable opinion of local counsel to Borrower or Lender
as to the enforceability of the Security Instrument, and any other Loan
Documents, executed in connection with the Initial Advance or Addition Request.

              (b)    A commitment for the Title Insurance Policy (the coverage
amount of which shall take into account any tie-in endorsements applicable to
the policy being issued) applicable to the Mortgaged Property and a pro forma
Title Insurance Policy based on the Commitment.

              (c)    The Insurance Policy (or a certified copy of the Insurance
Policy) applicable to the Mortgaged Property.

              (d)    The Survey applicable to the Mortgaged Property.

                                       21

<PAGE>

              (e)    Evidence satisfactory to Lender of compliance of the
Mortgaged Property with property laws as required by Sections 205 and 206 of
Part III of the DUS Guide.

              (f)    An Appraisal of the Mortgaged Property.

              (g)    A Replacement Reserve Agreement, providing for the
establishment of a replacement reserve account, to be pledged to Lender, in
which the owner shall (unless waived by Lender) periodically deposit amounts for
replacements for improvements at the Mortgaged Property and as additional
security for Borrower's obligations under the Loan Documents.

              (h)    A Completion/Repair and Security Agreement, together with
required escrows, on the standard form required by the DUS Guide.

              (i)    An Assignment of Management Agreement, on the standard form
required by the DUS Guide.

              (j)    An Assignment of Leases and Rents, if Lender determines one
to be necessary or desirable, provided that the provisions of any such
assignment shall be substantively identical to those in the Security Instrument
covering the Collateral, with such modifications as may be necessitated by
applicable state or local law.

                                    ARTICLE 7

                         REPRESENTATIONS AND WARRANTIES

       SECTION 7.01.       Representations and Warranties of Borrower.

       The representations and warranties of Borrower are contained in the
Certificate of Borrower, the form of which is attached to this Agreement as
Exhibit T.

       SECTION 7.02.       Representations and Warranties of Lender.

       Lender hereby represents and warrants to Borrower as follows:

              (a)    Due Organization. Lender is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

              (b)    Power and Authority. Lender has the requisite power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement.

              (c)    Due Authorization. The execution and delivery by Lender of
this Agreement, and the consummation by it of the transactions contemplated
thereby, and the performance by it of its obligations thereunder, have been duly
and validly authorized by all necessary action and proceedings by it or on its
behalf.

                                       22

<PAGE>

                                    ARTICLE 8

                        AFFIRMATIVE COVENANTS OF BORROWER

       Borrower agrees and covenants with Lender that, at all times during the
Term of this Agreement:

       SECTION 8.01.       Compliance with Agreements.

       Borrower shall comply with all the terms and conditions of each Loan
Document to which it is a party or by which it is bound; provided, however, that
Borrower's failure to comply with such terms and conditions shall not be an
Event of Default until the expiration of the applicable notice and cure periods,
if any, specified in the applicable Loan Document.

       SECTION 8.02.       Maintenance of Existence.

       Borrower shall maintain its existence and continue to be a limited
liability company organized under the laws of the state of its organization.
Borrower shall continue to be duly qualified to do business in each jurisdiction
in which such qualification is necessary to the conduct of its business and
where the failure to be so qualified would adversely affect the validity of, the
enforceability of, or the ability to perform, its obligations under this
Agreement or any other Loan Document.

       SECTION 8.03.       Financial Statements; Accountants' Reports; Other
Information.

       Borrower shall keep and maintain at all times complete and accurate books
of accounts and records in sufficient detail to correctly reflect (x) all of
Borrower's financial transactions and assets and (y) the results of the
operation of each Mortgaged Property and copies of all written contracts, Leases
and other instruments which affect each Mortgaged Property (including all bills,
invoices and contracts for electrical service, gas service, water and sewer
service, waste management service, telephone service and management services).
In addition, Borrower shall furnish, or cause to be furnished, to Lender:

              (a)    Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of its fiscal year during the Term of
this Agreement, the audited balance sheet of Borrower and the Guarantor as of
the end of such fiscal year, the audited statement of income, equity and
retained earnings of Borrower and the Guarantor for such fiscal year and the
audited statement of cash flows of Borrower and the Guarantor for such fiscal
year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year, prepared
in accordance with GAAP consistently applied and accompanied by a certificate of
Borrower's and Guarantor's independent certified public accountants to the
effect that such financial statements have been reviewed by such accountants,
and that such financial statements fairly present the results of its operations
and financial condition for the periods and dates indicated, with such
certification to be free of exceptions and qualifications as to the scope of the
audit or as to the going concern nature of the business.

                                       23

<PAGE>

              (b)    Quarterly Financial Statements. As soon as available, and
in any event within 45 days after each of the first three fiscal quarters of
each fiscal year during the Term of this Agreement, the unaudited balance sheet
of Borrower as of the end of such fiscal quarter, the unaudited statement of
income and retained earnings of Borrower and the unaudited statement of cash
flows of Borrower for the portion of the fiscal year ended with the last day of
such quarter, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the previous fiscal
year, accompanied by a certificate of the Chief Financial Officer of Guarantor
stating that such financial statements have been prepared in accordance with
GAAP, consistently applied, and fairly present the results of its operations and
financial condition for the periods and dates indicated, subject to year end
adjustments in accordance with GAAP.

              (c)    Quarterly Property Statements. As soon as available, and in
any event within 45 days after each Calendar Quarter, a statement of income and
expenses of each Mortgaged Property accompanied by a certificate of the Chief
Financial Officer of Guarantor to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property for the period indicated.

              (d)    Annual Property Statements. On an annual basis within 45
days after the close of its fiscal year, an annual statement of income and
expenses of each Mortgaged Property accompanied by a certificate of the Chief
Financial Officer of Guarantor to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of each
such Mortgaged Property for the period indicated.

              (e)    Updated Rent Rolls. Upon Lender's request (but not more
frequently than quarterly), a current Rent Roll for each Mortgaged Property,
showing the name of each tenant, and for each tenant, the space occupied, the
lease expiration date, the rent payable, the rent paid and any other information
requested by Lender and accompanied by a certificate of the Chief Financial
Officer of Guarantor to the effect that each such Rent Roll fairly, accurately
and completely presents the information required therein.

              (f)    Security Deposit Information. Upon Lender's request, an
accounting of all security deposits held in connection with any Lease of any
part of any Mortgaged Property, including the name and identification number of
the accounts in which such security deposits are held, the name and address of
the financial institutions in which such security deposits are held and the name
and telephone number of the person to contact at such financial institution,
along with any authority or release necessary for Lender to access information
regarding such accounts.

              (g)    Accountants' Reports; Other Reports. Promptly upon receipt
thereof: (i) copies of any reports or management letters submitted to Borrower
by its independent certified public accountants in connection with the
examination of its financial statements made by such accountants (except for
reports otherwise provided pursuant to subsection (a) above); provided, however,
that Borrower shall only be required to deliver such reports and management
letters to the extent that they relate to Borrower or any Mortgaged Property;
and (ii) all schedules, financial statements or other similar reports delivered
by Borrower pursuant to the Loan

                                       24

<PAGE>

Documents or requested by Lender with respect to Borrower's business affairs or
condition (financial or otherwise) or any of the Mortgaged Properties.

              (h)    Annual Budgets. Prior to the start of its fiscal year, an
annual budget for each Mortgaged Property for such fiscal year, setting forth an
estimate of all of the costs and expenses, including capital expenses, of
maintaining and operating each Mortgaged Property.

              (i)    Federal Tax Returns. Within 30 days of filing, the Federal
Tax Return of the Borrower (unless Borrower's income and other tax items are
appropriately reflected in the Federal Tax Return of the Guarantor).

       SECTION 8.04.       Access to Records; Discussions With Officers and
Accountants.

       To the extent permitted by law and in addition to the applicable
requirements of the Security Instruments, Borrower shall permit Lender to:

              (a)    inspect, make copies and abstracts of, and have reviewed or
audited, such of Borrower's books and records as may relate to the Obligations
or any Mortgaged Property;

              (b)    before an Event of Default discuss Borrower's affairs,
finances and accounts with Borrower's senior management or property managers and
independent public accountants; after an Event of Default, discuss Borrower's
affairs, finances and account with Guarantor's officers, partners and employees;

              (c)    discuss the Mortgaged Properties' conditions, operations or
maintenance with the managers of such Mortgaged Properties and the officers and
employees of Borrower and Guarantor; and

              (d)    receive any other information that Lender deems reasonably
necessary or relevant in connection with any Advance, any Loan Document or the
Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default and in the absence of an emergency, all inspections shall be
conducted at reasonable times during normal business hours upon reasonable
notice to Borrower.

       SECTION 8.05.       Certificate of Compliance.

       Borrower shall deliver to Lender concurrently with the delivery of the
financial statements and/or reports required by Section 8.03 (a) and (b) a
certificate signed by the Chief Financial Officer of Guarantor (i) setting forth
in reasonable detail the calculations required to establish whether Borrower and
the Guarantor were in compliance with the requirements of Article 8 of this
Agreement on the date of such financial statements, and (ii) stating that, to
the best knowledge of such individual following reasonable inquiry, no Event of
Default or Potential Event of Default has occurred, or if an Event of Default or
Potential Event of Default has occurred, specifying the nature thereof in
reasonable detail and the action Borrower is taking or proposes to take. Any
certificate required by this Section shall run directly to and be for the
benefit of Lender and Fannie Mae.

                                       25

<PAGE>

       SECTION 8.06.       Maintain Licenses.

       Borrower shall procure and maintain in full force and effect all
licenses, Permits, charters and registrations which are material to the conduct
of its business and shall abide by and satisfy all terms and conditions of all
such licenses, Permits, charters and registrations.

       SECTION 8.07.       Inform Lender of Material Events.

       Borrower shall promptly inform Lender in writing of any of the following
(and shall deliver to Lender copies of any related written communications,
complaints, orders, judgments and other documents relating to the following) of
which Borrower has actual knowledge:

              (a)    Defaults. The occurrence of any Event of Default or any
Potential Event of Default under this Agreement or any other Loan Document;

              (b)    Regulatory Proceedings. The commencement of any rulemaking
or disciplinary proceeding or the promulgation of any proposed or final rule
which would have, or may reasonably be expected to have, a Material Adverse
Effect; the receipt of notice from any Governmental Authority having
jurisdiction over Borrower that (A) Borrower is being placed under regulatory
supervision, (B) any license, Permit, charter, membership or registration
material to the conduct of Borrower's business or the Mortgaged Properties is to
be suspended or revoked or (C) Borrower is to cease and desist any practice,
procedure or policy employed by Borrower in the conduct of its business, and
such cessation would have, or may reasonably be expected to have, a Material
Adverse Effect;

              (c)    Bankruptcy Proceedings. The commencement of any proceedings
by or against Borrower or Guarantor under any applicable bankruptcy,
reorganization, liquidation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator, trustee or other
similar official is sought to be appointed for it;

              (d)    Environmental Claim. The receipt from any Governmental
Authority or other Person of any notice of violation, claim, demand, abatement,
order or other order or direction (conditional or otherwise) for any damage,
including personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, pollution, contamination or other adverse
effects on the environment, removal, cleanup or remedial action or for fines,
penalties or restrictions, resulting from or based upon (i) the existence or
occurrence, or the alleged existence or occurrence, of a Hazardous Substance
Activity or (ii) the violation, or alleged violation, of any Hazardous Materials
Laws in connection with any Mortgaged Property or any of the other assets of
Borrower;

              (e)    Material Adverse Effects. The occurrence of any act,
omission, change or event (including the commencement or written threat of any
proceedings by or against Borrower in any Federal, state or local court, or
before any Governmental Authority, or before any arbitrator), which has, or
would have, a Material Adverse Effect, subsequent to the date of the most recent
audited financial statements of Borrower delivered to Lender pursuant to Section
8.03;

                                       26

<PAGE>

              (f)    Accounting Changes. Any material change in Borrower's
accounting policies or financial reporting practices; and

              (g)    Legal and Regulatory Status. The occurrence of any act,
omission, change or event, including any Governmental Approval, the result of
which is to change or alter in any way the legal or regulatory status of
Borrower.

       SECTION 8.08.       Compliance with Applicable Laws.

       Borrower shall comply in all material respects with all Applicable Laws
now or hereafter affecting any Mortgaged Property or any part of any Mortgaged
Property or requiring any alterations, repairs or improvements to any Mortgaged
Property. Borrower shall procure and continuously maintain in full force and
effect, and shall abide by and satisfy all material terms and conditions of all
Permits.

       SECTION 8.09.       Alterations to the Mortgaged Properties.

       Except as otherwise provided in the Loan Documents, Borrower shall have
the right to undertake any alteration, improvement, demolition, removal or
construction (collectively, "Alterations") to the Mortgaged Property which it
owns without the prior consent of Lender; provided, however, that in any case,
no such Alteration shall be made to any Mortgaged Property without the prior
written consent of Lender if (i) such Alteration could reasonably be expected to
adversely affect the value of such Mortgaged Property or its operation as a
multifamily housing facility in substantially the same manner in which it is
being operated on the date such property became Collateral, (ii) the
construction of such Alteration could reasonably be expected to result in
interference to the occupancy of tenants of such Mortgaged Property such that
tenants in occupancy with respect to five percent (5%) or more of the Leases
would be permitted to terminate their Leases or to abate the payment of all or
any portion of their rent, or (iii) such Alteration will be completed in more
than 12 months from the date of commencement or in the last year of the Term of
this Agreement. Notwithstanding the foregoing, Borrower must obtain Lender's
prior written consent to construct Alterations with respect to the Mortgaged
Property costing in excess of, with respect to any Mortgaged Property, the
number of units in such Mortgaged Property multiplied by $2,000, but in any
event, costs in excess of $250,000 and Borrower must give prior written notice
to Lender of its intent to construct Alterations with respect to such Mortgaged
Property costing in excess of $100,000; provided, however, that the preceding
requirements shall not be applicable to Alterations made, conducted or
undertaken by Borrower as part of Borrower's routine maintenance and repair of
the Mortgaged Properties as required by the Loan Documents.

       SECTION 8.10.       Loan Document Taxes.

       If any tax, assessment or Imposition (other than franchise taxes, excise
tax or other tax imposed on or measured by, the net income or capital (including
branch profits tax) of Lender (or any transferee or assignee thereof, including
a participation holder)) ("Loan Document Taxes") is levied, assessed or charged
by the United States, or any State in the United States, or any political
subdivision or taxing authority thereof or therein upon any of the Loan
Documents or the obligations secured thereby, the interest of Lender in the
Mortgaged Properties, or Lender

                                       27

<PAGE>

by reason of or as holder of the Loan Documents, Borrower shall pay all such
Loan Document Taxes to, for, or on account of Lender (or provide funds to Lender
for such payment, as the case may be) as they become due and payable and shall
promptly furnish proof of such payment to Lender, as applicable. In the event of
passage of any law or regulation permitting, authorizing or requiring such Loan
Document Taxes to be levied, assessed or charged, which law or regulation in the
opinion of counsel to Lender may prohibit Borrower from paying the Loan Document
Taxes to or for Lender, Borrower shall enter into such further instruments as
may be permitted by law to obligate Borrower to pay such Loan Document Taxes.
Notwithstanding the foregoing, Borrower shall not be required to make any
payment pursuant to this Section 8.10 with respect to (i) any Loan Document
Taxes that would not have been imposed but for the failure by a Lender, any
assignee or participant to provide timely Borrower with an applicable
certification or form (including, without limitation, the appropriate Internal
Revenue Service Form W-8) if providing such certification would have resulted in
an exemption from or reduction in such Loan Document Taxes or (ii) any Loan
Document Taxes that would apply to a payment made to any Lender (other than
Fannie Mae), its assignee or participant on the day such Lender, assignee or
participant becomes a party to this Agreement or otherwise acquires an interest
in any loan made pursuant to this Agreement.

       SECTION 8.11.       Further Assurances.

       Borrower, at the request of Lender, shall execute and deliver and, if
necessary, file or record such statements, documents, agreements, UCC financing
and continuation statements and such other instruments and take such further
action as Lender from time to time may request as reasonably necessary,
desirable or proper to carry out more effectively the purposes of this Agreement
or any of the other Loan Documents or to subject the Collateral to the lien and
security interests of the Loan Documents or to evidence, perfect or otherwise
implement, to assure the lien and security interests intended by the terms of
the Loan Documents or in order to exercise or enforce its rights under the Loan
Documents.

       SECTION 8.12.       Transfer of Ownership Interest of Borrower and
Guarantor.

              (a)    Prohibition on Transfers. Subject to paragraph (b) of this
Section, neither the Borrower nor Guarantor shall cause or permit a Transfer or
a Change of Control.

              (b)    Permitted Transfers. Notwithstanding the provisions of
paragraph (a) of this Section, the following Transfers by Borrower or Guarantor
are permitted without the consent of Lender:

                     (i)    A Transfer that occurs by inheritance, devise, or
bequest or by operation of law upon the death of a natural person who is the
owner of a direct or indirect ownership interest in Borrower or Guarantor .

                     (ii)   A Transfer to trusts or other entities established
for the benefit of the transferor and/or immediate family members for estate
planning purposes.

                                       28

<PAGE>

                     (iii)  A Transfer of limited liability company membership
interest or stock by the members or shareholders of Borrower or Guarantor;
provided, however, that no Change in Control occurs as the result of such
Transfer.

                     (iv)   The issuance by Borrower or Guarantor of additional
membership units or stock and the subsequent Transfer of such units; provided,
however, that no Change in Control occurs as the result of such Transfer.

                     (v)    A merger with or acquisition of another entity by
Borrower or Guarantor, provided that (A) Borrower or Guarantor, as the case may
be, is the surviving entity after such merger or acquisition, (B) no Change in
Control occurs, and (C) such merger or acquisition does not result in an Event
of Default, as such terms are defined in this Agreement.

              (c)    Consent to Prohibited Transfers. Lender may, in its sole
and absolute discretion, consent to a Transfer that would otherwise violate this
Section if, prior to the Transfer, Borrower or Guarantor, as the case may be,
has satisfied each of the following requirements:

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

                     (ii)   the absence of any Event of Default;

                     (iii)  the transferee meets all of the eligibility, credit,
management and other standards (including any standards with respect to previous
relationships between Lender and the transferee and the organization of the
transferee) customarily applied by Lender at the time of the proposed Transfer
to the approval of Borrower or Guarantor, as the case may be, in connection with
the origination or purchase of similar mortgages, deeds of trust or deeds to
secure debt on multifamily properties;

                     (iv)   in the case of a Transfer of direct or indirect
ownership interests in Borrower or Guarantor, as the case may be, if transferor
or any other person has obligations under any Loan Documents, the execution by
the transferee of one or more individuals or entities acceptable to Lender of an
assumption agreement that is acceptable to Lender and that, among other things,
requires the transferee to perform all obligations of transferor or such person
set forth in such Loan Document, and may require that the transferee comply with
any provisions of this Instrument or any other Loan Document which previously
may have been waived by Lender;

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

                            (A)    a transfer fee equal to 1 percent of the
              Commitment immediately prior to the transfer.

                            (B)    In addition, Borrower shall be required to
              reimburse Lender for all of Lender's reasonable out-of-pocket
              costs (including reasonable attorneys' fees) incurred in reviewing
              the Transfer request.

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       SECTION 8.13.       Transfer of Ownership of Mortgaged Property.

              (a)    Prohibition on Transfers. Subject to paragraph (b) of this
Section, neither Borrower nor Guarantor shall cause or permit a Transfer of a
Mortgaged Property.

              (b)    Permitted Transfers. Notwithstanding provision (a) of this
Section, the following Transfers of a Mortgaged Property by Borrower or
Guarantor are permitted without the consent of Lender:

                     (i)    The grant of a leasehold interest in individual
dwelling units or commercial spaces in accordance with the Security Instrument.

                     (ii)   A sale or other disposition of obsolete or worn out
personal property which is contemporaneously replaced by comparable personal
property of equal or greater value which is free and clear of Liens, other than
those created by the Loan Documents.

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

                     (iv)   The grant of an easement if, prior to the granting
of the easement, Borrower causes to be submitted to Lender all information
required by Lender to evaluate the easement, and if Lender consents to such
easement based upon Lender's determination that the easement will not materially
affect the operation of the Mortgaged Property or Lender's interest in the
Mortgaged Property and Borrower pays to Lender, on demand, all reasonable costs
and expenses incurred by Lender in connection with reviewing Borrower's request.
Lender shall not unreasonably withhold its consent to or withhold its agreement
to subordinate the lien of a Security Instrument to (A) the grant of a utility
easement serving a Mortgaged Property to a publicly operated utility, or (B) the
grant of an easement related to expansion or widening of roadways, provided that
any such easement is in form and substance reasonably acceptable to Lender and
does not materially and adversely affect the access, use or marketability of a
Mortgaged Property.

       SECTION 8.14.       Change in Senior Management.

       Borrower shall give Lender notice of any change in the identity of Senior
Management.

       SECTION 8.15.       Date-Down Endorsements.

       At any time and from time to time, a Lender may obtain an endorsement to
each Title Insurance Policy containing a revolving credit endorsement, amending
the effective date of the Title Insurance Policy to the date of the title search
performed in connection with the endorsement. Borrower shall pay for the cost
and expenses incurred by Lender to the Title Company in obtaining such
endorsement, provided that, for each Title Insurance Policy, it shall not be
liable to pay for more than one such endorsement in any consecutive 12 month
period.

       SECTION 8.16.       Ownership of Mortgaged Properties.

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       Borrower shall be the sole owner of each of the Mortgaged Properties free
and clear of any Liens other than Permitted Liens.

       SECTION 8.17.       Facility Balancing.

       Prior to the Recourse Termination Date, if the Borrower fails to meet the
Coverage and LTV Tests then, within 60 days of Lender's notice to Borrower of
such failure, the Borrower shall (i) add Additional Mortgaged Properties to the
Collateral Pool in accordance with Article 3 so that after such addition the
Coverage and LTV Tests are met, or (ii) prepay Advances Outstanding in an amount
sufficient to cause the Borrower to be in compliance with the Coverage and LTV
Tests. Any prepayments made pursuant to the preceding sentence shall be applied
first against the Variable Advances Outstanding in the sequence specified by
Borrower until there are no further Variable Advances Outstanding then against
the prepayment of Fixed Advances Outstanding so long as the prepayment is
permitted under the applicable Fixed Facility Note. If no prepayment is
permitted under the applicable Fixed Facility Note, such prepayment amount shall
be held by Lender (or its appointed collateral agent) as Substitute Cash
Collateral in accordance with a security agreement and other documents in form
and substance acceptable to Lender. Any Substitute Cash Collateral remaining
will be returned to the Borrower on the earlier of (a) the date when the
Coverage and LTV Tests are again met (calculated using the definition of
"Facility Debt Service" set forth in paragraph (b) of such definition), provided
that such test may be met either as a result of additions of Mortgaged
Properties to the Collateral Pool or the deposit of Substitute Cash Collateral,
or (b) the Termination Date. If on the date the Borrower pays any amounts
required by this Section, Variable Advances are Outstanding but are not then due
and payable, Lender shall hold such amounts (which amounts shall bear interest
at a rate determined by Lender) as additional collateral until the next date on
the Variable Advances are due and payable at which time Lender shall apply the
appropriate portion of such prepayment to such Variable Advances.

       SECTION 8.18.       Financial Covenants.

       Each of the following financial requirements shall be calculated as of
the last day of each fiscal quarter, but shall be satisfied at all times,
provided, however, that for the purposes of calculating the financial covenants
under this Section 8.18, the financial results of DRA Venture, and the
Guarantor's Investment in DRA Venture, will be excluded:

              (a)    Minimum Consolidated Tangible Net Worth. The Guarantor
shall not permit Consolidated Tangible Net Worth at any time to be less than the
sum of (i) $754,441,200; plus (ii) 85% of Net Offering Proceeds received after
April 4, 2003.

              (b)    Maximum Leverage. The Guarantor shall not permit the ratio
of Consolidated Total Liabilities to Total Asset Value as of the end of any
fiscal quarter of Guarantor to exceed 0.55:1.

              (c)    Maximum Secured Indebtedness. The Guarantor shall not
permit the ratio of (i) Secured Indebtedness to (ii) Total Asset Value as of the
end of any fiscal quarter of Guarantor to exceed 0.30:1.

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<PAGE>

              (d)    Maximum Unsecured Leverage. The Guarantor shall not permit
the ratio of (i) Unencumbered Real Property Value to (ii) total outstandings
under Unsecured Indebtedness as of the end of any fiscal quarter of Guarantor to
be less than 1.75:1.

              (e)    Minimum Unencumbered Interest Coverage. The Guarantor shall
not permit the ratio of (i) Unencumbered Real Property Adjusted NOI to (ii)
Consolidated Interest Expense on Unsecured Indebtedness as of the end of any
fiscal quarter of Guarantor to be less than 1.75:1.

              (f)    Minimum Fixed Charge Coverage. The Guarantor shall not
permit the ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges
as of the end of any fiscal quarter of Guarantor to be less than 1.75:1.

              (g)    Development. The Guarantor shall not permit the sum of (a)
the total acquisition and development costs incurred to date, plus the total
cost required to complete, all Real Property under Development by Guarantor and
its Subsidiaries, plus (b) the Guarantor's pro rata share of the total cost
incurred to date, plus the total cost required to complete, all Real Property
under Development by any Guarantor Entity, plus (c) the Guarantor's pro rata
share of the total acquisition and development costs incurred to date of all
unimproved (and not under Development) real property owned by Guarantor and its
Subsidiaries, to exceed 15% of Total Asset Value.

       If the financial covenants set forth in Guarantor's line of credit on
which the financial covenants set forth in this Section 8.18 are based are
amended, modified or supplemented, upon the request of Borrower, Lender will
review the financial covenants set forth in this Section 8.18 and consider
changing the financial covenants in a manner consistent with the changes in the
line of credit. Lender shall not charge a fee for review any request for
modification of the financial covenants pursuant to the preceding sentence.

       Solely for the purposes of this Section 8.18, the following terms shall
have the meaning set forth below:

       "Adjusted NOI" means, for any fiscal quarter with respect to any Real
Property, the gross rental income of such Real Property for such fiscal quarter
(determined in accordance with GAAP), adjusted by deducting (a) the aggregate
amount of all reasonable and customary property expenses, including operating
costs, maintenance and repair costs, leasing and administrative costs,
management fees, real estate taxes and insurance premiums attributable to such
Real Property for such fiscal quarter; and (b) in respect of capital
expenditures for such fiscal quarter, $62.50 per apartment unit including,
without double counting, any amounts for capital reserves included in operating
expense when calculating net income. Adjusted NOI will be adjusted for any
non-recurring items and the acquisitions and dispositions of Real Property
during any fiscal quarter.

       "Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified. A Person
shall be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the

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<PAGE>

management and policies of the other Person, whether through the ownership of
voting securities, membership interests, by contract, or otherwise.

       "Applicable Capitalization Rate" means, for any Real Property, 8.65%, or
such rate(s) as Lender, taking into consideration such factors as the location
or type of such Real Property, may establish on a prospective basis from time to
time (but no more often than once in any calendar year) as the applicable
capitalization rate for such Real Property.

       "Attributable Indebtedness" means, on any date, (a) in respect of any
capital lease of any Person, the capitalized amount thereof that would appear on
a balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a capital lease.

       "BRE Property Investors" means BRE Property Investors, LLC, a Delaware
limited liability company.

       "Completed" means, with respect to any item of Real Property, that the
construction of all apartment units (or discreet phase(s) thereof, if
applicable) has been completed, certificates of occupancy shall have been issued
with respect to such apartment units, and such apartment units shall be
available for immediate lease and occupancy in the normal course of business.

       "Completed and Stabilized Real Property" means each item of Real Property
for which either of the following is true: (a) such Real Property has been
Completed for a minimum of twelve months, or (b) such Real Property has been
Completed and at least 90% of the apartment units within such Real Property are
occupied by tenants, under written leases, who have commenced paying rent.

       "Consolidated" means, with respect to any Person, that such Person's
financial results are consolidated (or required to be consolidated) under GAAP
with the financial results of Guarantor.

       "Consolidated Adjusted EBITDA" means, for any fiscal quarter and without
double counting any item, Consolidated Net Income for such fiscal quarter plus
(a) the following to the extent deducted in calculating such Consolidated Net
Income: (i) interest expense (as it appears on the Guarantor's consolidated
income statement in accordance with GAAP) for such fiscal quarter, (ii) the
provision for federal, state, local and foreign income taxes payable by the
Guarantor and the Subsidiaries for such fiscal quarter, (iii) the amount of
depreciation and amortization expense deducted in determining such Consolidated
Net Income, and (iv) losses from extraordinary items or assets sales which were
deducted in determining such Consolidated Net Income; and minus (b) the sum of
(i) all non-cash items increasing Consolidated Net Income for such fiscal
quarter, (ii) a capital reserve equal to $62.50 per apartment unit in the case
of any Real Property asset owned by the Guarantor or the Subsidiaries (without
duplication to the extent that capital expenditures have already been included
in operating expenses in calculating Consolidated Net Income), (iii) gains from
extraordinary items or assets sales which are included in determining
Consolidated Net Income, and (iv) the portion of such Consolidated Net Income

                                       33

<PAGE>

attributable to the minority interests in any Subsidiary during such fiscal
quarter. Consolidated Adjusted EBITDA will include income and expenses relating
to continuing and discontinued operations and will be adjusted for any
non-recurring items and the acquisitions and Dispositions of property during any
fiscal quarter.

       "Consolidated Fixed Charges" means, for any fiscal quarter (a) the sum of
(i) Consolidated Interest Expense for such fiscal quarter, plus (ii) scheduled
or otherwise required principal amortization for such fiscal quarter on all
Indebtedness of Guarantor and the Subsidiaries, but excluding any balloon
payment due at maturity, plus (iv) all dividends accrued during such fiscal
quarter in respect of any and all outstanding preferred shares of Guarantor and
the Subsidiaries, whether or not declared or paid.

       "Consolidated Interest Expense" means, for any fiscal quarter, for the
Guarantor and the Subsidiaries, the sum of (a) all interest, premium payments,
debt discount, fees, charges and related expenses of the Guarantor and the
Subsidiaries in connection with borrowed money (including accrued or capitalized
interest) or in connection with the deferred purchase price of assets, in each
case to the extent treated as interest in accordance with GAAP, and (b) the
portion of rent expense of the Guarantor and the Subsidiaries with respect to
such fiscal quarter under capital leases that is treated as interest in
accordance with GAAP.

       "Consolidated Net Income" means, for any fiscal quarter, for the
Guarantor and the Subsidiaries, the net income of the Guarantor and the
Subsidiaries for that fiscal quarter.

       "Consolidated Tangible Net Worth" means, as of any date of determination,
for the Guarantor and the Subsidiaries, (a) the Shareholders' Equity of the
Guarantor and the Subsidiaries on that date, exclusive of minority interests,
minus (b) the Intangible Assets of the Guarantor and the Subsidiaries on that
date.

       "Consolidated Total Liabilities" means as of any date, and without double
counting any item, the sum of (a) the Total Liabilities of the Guarantor and the
Subsidiaries as of such date, plus (b) the Recourse Indebtedness of any
Guarantor Entity that is Guaranteed by the Guarantor or that is otherwise
recourse to the Guarantor, plus (c) to the extent not included in (b), the
Guarantor's pro rata share of the Indebtedness of any Guarantor Entity.

       "Debtor Relief Laws" means the Bankruptcy Code of the United States, and
all other liquidation, conservatorship, bankruptcy, assignment for the benefit
of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.

       "Development" means, with respect to any multifamily apartment project
under construction, that the real property has been acquired by the owner
thereof, and that construction contracts have been entered into and all
necessary building permits have been obtained, until the construction of all
units (or discreet phase(s) thereof, if applicable) of such apartment project
shall have been Completed.

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<PAGE>

       "Disposition" or "Dispose" means the sale, transfer, exclusive license or
other, similar disposition (including any sale and leaseback transaction) of any
property by any Person, including any sale, assignment, transfer or other
disposal with or without recourse of any notes or accounts receivable or any
rights and claims associated therewith.

       "Dollar" and "$" mean lawful money of the United States.

       "DRA Venture" means Guarantor's 15% ownership interest in G&I III
Residential One, LLC, an Affiliate of DRA Advisors, Inc., an Affiliate of
Guarantor.

       "ERISA" means the Employee Retirement Income Security Act of 1974.

       "Guarantee" means, as to any Person, any (a) any obligation, contingent
or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person. The amount of any Guarantee shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith. The term "Guarantee" as a verb has a corresponding meaning.

       "Guarantor Entity" means a Person (a) in which the Guarantor, directly or
indirectly, has made an Investment, but which is not a Subsidiary, and (b) in
which Person the Guarantor, directly or indirectly, has a capital investment of
no less than 10% of the aggregate capital investment of such Person.

       "Indebtedness" means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

              (a)    all obligations of such Person for borrowed money and all
       obligations of such Person evidenced by bonds, debentures, notes, loan
       agreements or other similar instruments;

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<PAGE>

              (b)    all direct or contingent obligations of such Person arising
       under letters of credit (including standby and commercial), bankers'
       acceptances, bank guaranties, surety bonds and similar instruments;

              (c)    net obligations of such Person under any Swap Contract;

              (d)    all obligations of such Person to pay the deferred purchase
       price of property or services;

              (e)    indebtedness (excluding prepaid interest thereon) secured
       by a Lien on property owned or being purchased by such Person (including
       indebtedness arising under conditional sales or other title retention
       agreements), whether or not such indebtedness shall have been assumed by
       such Person or is limited in recourse;

              (f)    capital leases and Synthetic Lease Obligations; and

              (g)    all Guarantees of such Person in respect of any of the
       foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any capital lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.

       "Intangible Assets" means assets that are considered to be intangible
assets under GAAP, including customer lists, goodwill, computer software,
copyrights, trade names, trademarks, patents, franchises, licenses, unamortized
deferred charges, unamortized debt discount and capitalized research and
development costs.

       "Investment" means any direct or indirect acquisition or investment by
the Guarantor or BRE Property Investors in any Person, whether by means of (a)
the purchase or other acquisition of capital stock, partnership interests or
other securities of or equity interests in such Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in, such
Person, including any partnership or joint venture interest in such Person, or
(c) the purchase or other acquisition (in one transaction or a series of
transactions) of assets of such Person that constitute a business unit. For
purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.

       "Laws" means, collectively, all international, foreign, Federal, state
and local statutes, treaties, rules, guidelines, regulations, ordinances, codes
and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and

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<PAGE>

permits of, and agreements with, any Governmental Authority, in each case
whether or not having the force of law.

       "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing).

       "Net Offering Proceeds" means all cash proceeds received by Guarantor as
a result of the sale of common, preferred or other classes of stock in Guarantor
(if and only to the extent reflected in stockholders' equity on the consolidated
balance sheet of Guarantor prepared in accordance with GAAP), minus (i)
attorneys' fees and disbursements, (ii) accountants' fees, (iii) underwriters'
or placement agents' fees, discounts or commissions, (iv) brokerage,
consultants' and other fees, and (v) printing, registration and related
expenses, in each case, actually incurred in connection with such sale.

       "Non-Recourse Indebtedness" means, with respect to any Person,
Indebtedness of that Person with respect to which recourse to such Person for
payment is contractually limited to specific assets encumbered by a Lien
securing such Indebtedness. Notwithstanding the foregoing, Indebtedness of any
Person shall not fail to constitute Non-Recourse Indebtedness by reason of the
inclusion in any document evidencing, governing, securing or otherwise relating
to such Indebtedness to the effect that such Person shall be liable, beyond the
assets securing such Indebtedness, for (i) misapplied moneys, including
insurance and condemnation proceeds and security deposits, (ii) liabilities
(including environmental liabilities) of the holders of such Indebtedness and
their affiliates to third parties, (iii) breaches of customary representations
and warranties given to the holders of such Indebtedness, (iv) commission of
waste with respect to any part of the collateral securing such Indebtedness, (v)
recovery of rents, profits or other income attributable to the collateral
securing such Indebtedness collected following a default, (vi) fraud, gross
negligence or willful misconduct, and (vii) breach of any covenants regarding
compliance with ERISA.

       "Off-Balance Sheet Liabilities" means, with respect to any Person as of
any date of determination thereof, without duplication and to the extent not
included as a liability on the consolidated balance sheet of such Person and the
Subsidiaries in accordance with GAAP: (a) with respect to any asset
securitization transaction (including any accounts receivable purchase facility)
(i) the unrecovered investment of purchasers or transferees of assets so
transferred, and (ii) any other payment, recourse, repurchase, hold harmless,
indemnity or similar obligation of such Person or any of its Subsidiaries in
respect of assets transferred or payments made in respect thereof, other than
limited recourse provisions that are customary for transactions of such type and
that neither (x) have the effect of limiting the loss or credit risk of such
purchasers or transferees with respect to payment or performance by the obligors
of the assets so transferred nor (y) impair the characterization of the
transaction as a true sale under applicable Laws (including Debtor Relief Laws);
(b) the monetary obligations under any financing lease or so-called "synthetic,"
tax retention or off-balance sheet lease transaction which, upon the application
of any Debtor Relief Law to such Person or any of its Subsidiaries, would be
characterized as indebtedness; (c) the monetary obligations under any sale and

                                       37

<PAGE>

leaseback transaction which does not create a liability on the consolidated
balance sheet of such Person and its Subsidiaries; or (d) any other monetary
obligation arising with respect to any other transaction which (i) upon the
application of any Debtor Relief Law to such Person or any of its Subsidiaries,
would be characterized as indebtedness or (ii) is the functional equivalent of
or takes the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person and its Subsidiaries (for purposes of
this clause (d), any transaction structured to provide tax deductibility as
interest expense of any dividend, coupon or other periodic payment will be
deemed to be the functional equivalent of a borrowing).

       "Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

       "Real Property" shall mean multi-family residential properties held for
rental.

       "Recourse Indebtedness" means any Indebtedness of a Person that is not
contractually limited to specific assets encumbered by a Lien securing such
Indebtedness.

       "Secured Indebtedness" means, without duplication, all recourse and
Non-Recourse Indebtedness of Guarantor or any Subsidiary that is secured by a
Lien on any property.

       "Shareholders' Equity" means, as of any date of determination,
consolidated shareholders' equity, determined in accordance with GAAP.

       "Subsidiary" of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
"Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of
the Guarantor or of BRE Property Investors.

       "Swap Contract" means (a) any and all rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement.

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       "Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

       "Synthetic Lease Obligation" means the monetary obligation of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

       "Total Asset Value" means, with respect to the Guarantor and the
Subsidiaries on a consolidated basis, and without double counting any item, the
sum of:

       (a)    the value of any Completed and Stabilized Real Property owned by
the Guarantor and the Subsidiaries for one or more fiscal quarters, determined
by calculating the annualized Adjusted NOI for such property for the most recent
fiscal quarter, capitalized at the Applicable Capitalization Rate; plus

       (b)    with respect to any Real Property that has been owned by the
Guarantor or a Subsidiary for less than one fiscal quarter or that is Completed,
but does not qualify as Completed and Stabilized Real Property, the value of
such property calculated as the acquisition cost of such property in accordance
with GAAP; plus

       (c)    the value of any other real property owned by the Guarantor or a
Subsidiary and that is under Development, calculated at the lower of the
acquisition cost or fair market value of such property; plus

       (d)    the book value (net of any applicable reserves) of all other
tangible assets of the Guarantor and the Subsidiaries as shown on its most
recent quarterly financial statements prepared on a consolidated basis in
accordance with GAAP; plus

       (e)    the Guarantor's pro rata share of all items referred to in the
foregoing clauses (a)-(c) owned by any Guarantor Entity that is not Consolidated
with Guarantor.

       "Total Liabilities" of a Person means the sum of (a) all Recourse
Indebtedness and Non-Recourse Indebtedness of such Person, whether or not such
Indebtedness should be included as a liability on the balance sheet of such
Person in accordance with GAAP, and (b) all other liabilities of every nature
and kind of such Person that should be included as liabilities on the balance
sheet of such Person in accordance with GAAP, and (c) all Off-Balance Sheet
Liabilities of such Person.

                                       39

<PAGE>

       "Unencumbered Real Property" means any Real Property as to which neither
such Real Property, nor any interest in the Person owning such Real Property, is
(a) subject to any Lien (other than Liens described in clauses (i) -(iii) of
Section 7.01(b)) or (b) subject to any agreement (other than this Agreement or
any other Loan Document, and including any provision of the Organizational
Documents of such Person) that prohibits or limits the creation of any Lien
thereon as security for Indebtedness of the owner of such Real Property.

       "Unencumbered Real Property Adjusted NOI" means for all Unencumbered Real
Property owned by the Guarantor or a Guarantor, the annualized Adjusted NOI for
the most recent fiscal quarter.

       "Unencumbered Real Property Value" means the value of any Unencumbered
Real Property owned by the Guarantor or any Guarantor, determined by calculating
the annualized Unencumbered Real Property Adjusted NOI for such Unencumbered
Real Property, capitalized at the Applicable Capitalization Rate.

       "United States" and "U.S." mean the United States of America.

       "Unsecured Indebtedness" means, without duplication, all Indebtedness of
Guarantor and the Subsidiaries that is not Secured Indebtedness.

                                   ARTICLE 9

                         NEGATIVE COVENANTS OF BORROWER

       Borrower agrees and covenants with Lender that, at all times during the
Term of this Agreement:

       SECTION 9.01.       Other Activities.

              (a)    The Borrower shall not amend its Organizational Documents
in any material respect without the prior written consent of Lender;

              (b)    Neither the Borrower nor Guarantor shall dissolve or
liquidate in whole or in part;

              (c)    The Borrower shall not, except as otherwise provided in
this Agreement, without the prior written consent of Lender, merge or
consolidate with any Person; or

              (d)    The Borrower shall not use, or permit to be used, any
Mortgaged Property for any uses or purposes other than as a Multifamily
Residential Property and ancillary uses consistent with Multifamily Residential
Properties.

       SECTION 9.02.       Liens.

       Borrower shall not create, incur, assume or suffer to exist any Lien on
any Mortgaged Property or any part of any Mortgaged Property, except the
Permitted Liens.

                                       40

<PAGE>

       SECTION 9.03.       Indebtedness.

       Borrower shall not incur or be obligated at any time with respect to any
Indebtedness (other than Advances) in connection with any of the Mortgaged
Properties.

       SECTION 9.04.       Principal Place of Business.

       Borrower shall not change its principal place of business or the location
of its books and records, each as set forth in Borrower's Certificate, without
first giving 30 days' prior written notice to Lender.

       SECTION 9.05.       Condominiums.

       Borrower shall not submit any Mortgaged Property to a condominium regime
during the Term of this Agreement.

       SECTION 9.06.       Restrictions on Distributions.

       The Borrower shall not make any distributions of any nature or kind
whatsoever to the owners of its Ownership Interests as such if, at the time of
such distribution, a Potential Event of Default or an Event of Default has
occurred and remains uncured.

                                   ARTICLE 10

                                      FEES

       SECTION 10.01.      Standby Fee.

       Borrower shall pay the Standby Fee to Lender for the period from the date
of this Agreement to the end of the Term of this Agreement. The Standby Fee
shall be payable monthly, in arrears, on the first Business Day following the
end of the month, except that the Standby Fee for the last month during the Term
of this Agreement shall be paid on the last day of the Term of this Agreement.

       SECTION 10.02.      Rate Preservation Fee.

       At Borrower's election, Borrower shall pay the Rate Preservation Fee to
Lender commencing on the first day after the First Anniversary. Borrower shall
notify Lender in writing not less than 30 days prior to the First Anniversary if
it elects to pay the Rate Preservation Fee. If Borrower fails to provide written
notice to Lender by the First Anniversary, Borrower shall be deemed to have
elected not to pay the Rate Preservation Fee. If Borrower elects (or is deemed
to have elected) not to pay the Rate Preservation Fee, such election shall be
final. If Borrower elects to pay the Rate Preservation Fee, such election may be
irrevocably terminated by at least 30 days' written notice of such termination
by Borrower to Lender. The Rate Preservation Fee shall be payable monthly, in
arrears, on the first Business Day following the end of the month, except that
the Rate Preservation Fee for the last month during the Term of this Agreement
shall be paid on the last day of the Term of this Agreement.

                                       41

<PAGE>

       SECTION 10.03.      Origination Fees.

              (a)    Initial Origination Fee. Borrower shall pay to Lender an
origination fee equal to $650,000 ("Origination Fee").

              (b)    Expansion Origination Fee. Upon the closing of a Expansion
Request under Article 4, Borrower shall pay to Lender an origination fee
("Expansion Origination Fee") equal to the product obtained by multiplying (i)
the increase in the Commitment made on the Closing Date for the Expansion
Request, by (ii) 0.65%. Any Expansion Origination Fee shall be reduced by the
amount of any Addition Fee paid by Borrower in respect of any Additional
Mortgaged Properties added to the Collateral Pool. Borrower shall pay the
Expansion Origination Fee on or before the Closing Date for the Expansion
Request.

       SECTION 10.04.      Due Diligence Fees.

              (a)    Initial Due Diligence Fees. Borrower shall pay to Lender
due diligence fees ("Initial Due Diligence Fees") with respect to the Initial
Mortgaged Properties in an amount equal to actual out-of-pocket expenses
incurred by Lender in connection with Lender's due diligence plus $1,500 per
Initial Mortgaged Property.

       Borrower has previously paid to Lender a portion of the Initial Due
Diligence Fees and shall pay the remainder of the Initial Due Diligence Fees to
Lender on the Initial Closing Date. Any portion of the Initial Due Diligence Fee
paid to Lender not actually used by Lender to cover reasonable due diligence
expenses shall be promptly refunded to Borrower.

              (b)    Additional Due Diligence Fees for Additional Collateral.
Borrower shall pay to Lender additional reasonable due diligence fees (the
"Additional Collateral Due Diligence Fees") with respect to each Additional
Mortgaged Property in an amount equal to actual out-of-pocket expenses incurred
by Lender in connection with Lender's due diligence plus $1,500 per Additional
Mortgaged Property in the Collateral Pool. Any portion of the Additional
Collateral Due Diligence Fee paid to Lender not actually used by Lender to cover
reasonable due diligence expenses shall be promptly refunded to Borrower.

       SECTION 10.05.      Legal Fees and Expenses.

              (a)    Initial Legal Fees. Borrower shall pay, or reimburse Lender
for, all out-of-pocket legal fees and expenses incurred by Lender and by Fannie
Mae in connection with the preparation, review and negotiation of this Agreement
and any other Loan Documents executed on the date of this Agreement.

              (b)    Fees and Expenses Associated with Requests. Borrower shall
pay, or reimburse Lender for, all reasonable costs and expenses incurred by
Lender, including the out-of-pocket legal fees and expenses incurred by Lender
in connection with the preparation, review and negotiation of all documents,
instruments and certificates to be executed and delivered in connection with
each Request, the performance by Lender of any of its obligations with respect
to the Request, the satisfaction of all conditions precedent to Borrower's
rights or Lender's

                                       42

<PAGE>

obligations with respect to the Request, and all transactions related to any of
the foregoing, including the cost of title insurance premiums and applicable
recordation and transfer taxes and charges and all other reasonable costs and
expenses in connection with a Request. The obligations of Borrower under this
subsection shall be absolute and unconditional, regardless of whether the
transaction requested in the Request actually occurs. Borrower shall pay such
costs and expenses to Lender on the Closing Date for the Request, or, as the
case may be, after demand by Lender when Lender determines that such Request
will not close.

       SECTION 10.06.      Failure to Close any Request.

       If Borrower makes a Request and fails to close on the Request for any
reason other than the default by Lender, then Borrower shall pay to Lender and
Fannie Mae all damages incurred by Lender and Fannie Mae in connection with the
failure to close.

                                   ARTICLE 11

                                EVENTS OF DEFAULT

       SECTION 11.01.      Events of Default.

       Each of the following events shall constitute an "Event of Default" under
this Agreement, whatever the reason for such event and whether it shall be
voluntary or involuntary, or within or without the control of Borrower or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority:

              (a)    the occurrence of a default under any Loan Document beyond
the cure period, if any, set forth therein; or

              (b)    (i) the failure by Borrower to pay when due any amount,
other than principal and interest, payable by Borrower under any Note, any
Security Instrument, this Agreement or any other Loan Document, including any
fees, costs or expenses for five (5) days after receipt of notice of such
failure by Borrower from Lender, or (ii) the failure by Borrower to pay any
principal or interest payable by Borrower under any Note or any other Loan
Document; or

              (c)    the failure by Borrower to perform or observe any covenant
contained in Article 8 or Article 9 for 30 days after receipt of notice of such
failure by Borrower from Lender, provided that such period shall be extended for
up to 30 additional days if Borrower, in the discretion of Lender, is diligently
pursuing a cure of such default within 30 days after receipt of notice from
Lender; or

              (d)    any warranty, representation or other written statement
made by or on behalf of Borrower or Guarantor contained in this Agreement, any
other Loan Document or in any instrument furnished in compliance with or in
reference to any of the foregoing, is false or misleading in any material
respect on any date when made or deemed made; or

                                       43

<PAGE>

              (e)    (i) Borrower or Guarantor shall (A) commence a voluntary
case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file
a petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up
or composition or adjustment of debts, (C) consent to or fail to contest in a
timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (D) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts as they
become due, (F) make a general assignment for the benefit of creditors, (G)
assert that Borrower or Guarantor (solely with respect to the Guaranty) has no
liability or obligations under this Agreement or any other Loan Document to
which it is a party; or (H) take any action for the purpose of effecting any of
the foregoing; or (ii) a case or other proceeding shall be commenced against
Borrower or Guarantor in any court of competent jurisdiction seeking (A) relief
under the Federal bankruptcy laws (as now or hereafter in effect) or under any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding upon or composition or adjustment of debts, or (B) the
appointment of a trustee, receiver, custodian, liquidator or the like of
Borrower or Guarantor , or of all or a substantial part of the property,
domestic or foreign, of Borrower or Guarantor and any such case or proceeding
shall continue undismissed or unstayed for a period of 60 consecutive calendar
days, or any order granting the relief requested in any such case or proceeding
against Borrower or Guarantor (including an order for relief under such Federal
bankruptcy laws) shall be entered; or

              (f)    if any provision of this Agreement or any other Loan
Document or the lien and security interest purported to be created hereunder or
under any Loan Document shall at any time for any reason cease to be valid and
binding in accordance with its terms on Borrower or Guarantor, or shall be
declared to be null and void, or the validity or enforceability hereof or
thereof or the validity or priority of the lien and security interest created
hereunder or under any other Loan Document shall be contested by Borrower or
Guarantor seeking to establish the invalidity or unenforceability hereof or
thereof, or Borrower or Guarantor (only with respect to the Guaranty) shall deny
that it has any further liability or obligation hereunder or thereunder; or

              (g)    (i) the execution by Borrower of a chattel mortgage or
other security agreement on any materials, fixtures or articles used in the
construction or operation of the improvements located on any Mortgaged Property
or on articles of personal property located therein, or (ii) if any such
materials, fixtures or articles are purchased pursuant to any conditional sales
contract or other security agreement or otherwise so that the Ownership thereof
will not vest unconditionally in Borrower free from encumbrances, or (iii) if
Borrower does not furnish to Lender upon request the contracts, bills of sale,
statements, receipted vouchers and agreements, or any of them, under which
Borrower claim title to such materials, fixtures, or articles; or

              (h)    the failure by Borrower to comply with any requirement of
any Governmental Authority within 30 days after written notice of such
requirement shall have been given to Borrower by such Governmental Authority;
provided that, if action is commenced and diligently pursued by Borrower within
such 30 days, then Borrower shall have an additional 30 days to comply with such
requirement; or

                                       44

<PAGE>

              (i)    a dissolution or liquidation for any reason (whether
                     voluntary or involuntary) of Borrower or Guarantor; or

              (j)    any judgment against Borrower or Guarantor, any attachment
or other levy against any portion of Borrower's or Guarantor's assets with
respect to a claim or claims in an amount in excess of $250,000 in the aggregate
remains unpaid, unstayed on appeal undischarged, unbonded, not fully insured or
undismissed for a period of 90 days; or

              (k)    the failure by Borrower or Guarantor to perform or observe
any material term, covenant, condition or agreement hereunder, other than as
contained in subsections (a) through (j) above, or in any other Loan Document,
within 30 days after receipt of notice from Lender identifying such failure,
provided such period shall be extended for up to 30 additional days if Borrower,
in the discretion of Lender, is diligently pursuing a cure of such default
within 30 days after receipt of notice from Lender.

                                   ARTICLE 12

                                    REMEDIES

       SECTION 12.01.      Remedies; Waivers.

       Subject to Article 15 of this Agreement, upon the occurrence of an Event
of Default, Lender may do any one or more of the following (without presentment,
protest or notice of protest, all of which are expressly waived by Borrower):

              (a)    by written notice to Borrower, to be effective upon
dispatch, terminate the Commitment and declare the principal of, and interest
on, the Advances and all other sums owing by Borrower to Lender under any of the
Loan Documents forthwith due and payable, whereupon the Commitment will
terminate and the principal of, and interest on, the Advances and all other sums
owing by Borrower to Lender under any of the Loan Documents will become
forthwith due and payable.

              (b)    Lender shall have the right to pursue any other remedies
available to it under any of the Loan Documents.

              (c)    Lender shall have the right to pursue all remedies
available to it at law or in equity, including obtaining specific performance
and injunctive relief.

       SECTION 12.02.      Waivers; Rescission of Declaration.

       Lender shall have the right, to be exercised in its complete discretion,
to waive any breach hereunder (including the occurrence of an Event of Default),
by a writing setting forth the terms, conditions, and extent of such waiver
signed by Lender and delivered to Borrower. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the waiver and not to any other
similar event or occurrence which occurs subsequent to the date of such waiver.

                                       45

<PAGE>

       SECTION 12.03.      Lender's Right to Protect Collateral and Perform
                           Covenants and Other Obligations.

       If Borrower or Guarantor fails to perform the covenants and agreements
contained in this Agreement or any of the other Loan Documents, then Lender at
Lender's option may make such appearances, disburse such sums and take such
action as Lender deems necessary, in its sole discretion, to protect Lender's
interest, including (i) disbursement of reasonable attorneys' fees, (ii) entry
upon the Mortgaged Property to make repairs and replacements, (iii) procurement
of satisfactory insurance as provided in Section 5 of the Security Instrument
encumbering the Mortgaged Property, and (iv) if the Security Instrument is on a
leasehold, exercise of any option to renew or extend the ground lease on behalf
of Borrower and the curing of any default of Borrower in the terms and
conditions of the ground lease. Any amounts disbursed by Lender pursuant to this
Section, with interest thereon, shall become additional indebtedness of Borrower
secured by the Loan Documents. Unless Borrower and Lender agree to other terms
of payment, such amounts shall be immediately due and payable and shall bear
interest from the date of disbursement at the weighted average, as determined by
Lender, of the interest rates in effect from time to time for each Advance
unless collection from Borrower of interest at such rate would be contrary to
applicable law, in which event such amounts shall bear interest at the highest
rate which may be collected from Borrower under applicable law. Nothing
contained in this Section shall require Lender to incur any expense or take any
action hereunder.

       SECTION 12.04.      No Remedy Exclusive.

       Unless otherwise expressly provided, no remedy herein conferred upon or
reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under the Loan Documents or existing at law or in equity.

       SECTION 12.05.      No Waiver.

       No delay or omission to exercise any right or power accruing under any
Loan Document upon the happening of any Event of Default or Potential Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.

       SECTION 12.06.      No Notice.

       To entitle Lender to exercise any remedy reserved to Lender in this
Article, it shall not be necessary to give any notice, other than such notice as
may be required under the applicable provisions of this Agreement or any of the
other Loan Documents.

                                   ARTICLE 13

                              RIGHTS OF FANNIE MAE

       SECTION 13.01.      Special Pool Purchase Contract.

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<PAGE>

       Borrower acknowledges that Fannie Mae is entering into an agreement with
Lender ("Special Pool Purchase Contract"), pursuant to which, inter alia, (i)
Lender shall agree to assign all of its rights under this Agreement to Fannie
Mae, (ii) Fannie Mae shall accept the assignment of the rights, (iii) subject to
the terms, limitations and conditions contained in the Special Pool Purchase
Contract, Fannie Mae shall agree to purchase a 100% participation interest in
each Advance issued under this Agreement by issuing to Lender an MBS, in the
amount and for a term equal to the Advance purchased and backed by an interest
in the Fixed Facility Note or the Variable Facility Note, as the case may be,
and the Collateral Pool securing the Notes, (iv) Lender shall agree to assign to
Fannie Mae all of Lender's interest in the Notes and Collateral Pool securing
the Notes, and (v) Lender shall agree to service the loans evidenced by the
Notes.

       SECTION 13.02.      Assignment of Rights.

       Borrower acknowledges and consents to the assignment to Fannie Mae of all
of the rights of Lender under this Agreement and all other Loan Documents,
including the right and power to make all decisions on the part of Lender to be
made under this Agreement and the other Loan Documents, but Fannie Mae, by
virtue of this assignment, shall not be obligated to perform the obligations of
Lender under this Agreement or the other Loan Documents.

       SECTION 13.03.      Release of Collateral.

       Borrower hereby acknowledges that, after the assignment of Loan Documents
contemplated in Section 13.02, Lender shall not have the right or power to
effect a release of any Collateral pursuant to Article 6. Borrower acknowledges
that the Security Instruments provide for the release of the Collateral under
Article 3. Accordingly, Borrower shall not look to Lender for performance of any
obligations contained in Article 3, but shall look solely to the party secured
by the Collateral to be released for such performance. Lender represents and
warrants to Borrower that the party secured by the Collateral shall be subject
to the release provisions contained in Article 3 by virtue of the release
provisions in each Security Instrument.

       SECTION 13.04.      Replacement of Lender.

       At the request of Fannie Mae, Borrower and Lender shall agree to the
assumption by another lender designated by Fannie Mae (which lender shall meet
Fannie Mae's then current standards for lenders for credit facilities of the
type and size of the credit facility evidenced by this Agreement), of all of the
obligations of Lender under this Agreement and the other Loan Documents, and/or
any related servicing obligations, and, at Fannie Mae's option, the concurrent
release of Lender from its obligations under this Agreement and the other Loan
Documents, and/or any related servicing obligations, and shall execute all
releases, modifications and other documents which Fannie Mae determines are
necessary or desirable to effect such assumption.

       SECTION 13.05.      Fannie Mae and Lender Fees and Expenses.

       Borrower agrees that any provision providing for the payment of fees,
costs or expenses incurred or charged by Lender pursuant to this Agreement shall
be deemed to provide for Borrower's payment of all reasonable fees, costs and
expenses incurred or charged by Lender or Fannie Mae in connection with the
matter for which fees, costs or expenses are payable.

                                       47

<PAGE>

       SECTION 13.06.    Third-Party Beneficiary.

       Borrower hereby acknowledges and agrees that Fannie Mae is a third party
beneficiary of all of the representations, warranties and covenants made by
Borrower to, and all rights under this Agreement conferred upon, Lender, and, by
virtue of its status as third-party beneficiary and/or assignee of Lender's
rights under this Agreement, Fannie Mae shall have the right to enforce all of
the provisions of this Agreement against Borrower.

                                   ARTICLE 14

              INSURANCE, REAL ESTATE TAXES AND REPLACEMENT RESERVES

       SECTION 14.01.      Insurance and Real Estate Taxes.

       Borrower shall (unless waived by Lender by separate agreement) establish
funds for taxes, insurance premiums and certain other charges for each Mortgaged
Property in accordance with Section 7(a) of the Security Instrument for each
Mortgaged Property.

       SECTION 14.02.      Replacement Reserves.

       Borrower shall execute a Replacement Reserve Agreement for the Mortgaged
Property which they own and shall (unless waived by Lender by separate
agreement) make all deposits for replacement reserves in accordance with the
terms of the Replacement Reserve Agreement.

                                   ARTICLE 15

                          LIMITS ON PERSONAL LIABILITY

       SECTION 15.01.    Personal Liability to Borrower.

              (a)    Limits on Personal Liability. Prior to the Recourse
Termination Date, except as otherwise provided in this Article, the personal
liability of the Borrower under this Agreement or any other Loan Document for
the performance of any Obligations of the Borrower under the Loan Documents
shall be limited to an amount equal to 15% of the amount of Advances Outstanding
from time to time (the "Guaranteed Amount"), and the Lender's only recourse for
the payment and performance of the Obligations in excess of such Guaranteed
Amount shall be the Lender's exercise of its rights and remedies with respect to
the Mortgaged Properties and any other Collateral held by the Lender as security
for the Obligations. From and after the Recourse Termination Date, except as
provided in this Article, Borrower shall not be personally liable for the
Obligations. Except as otherwise set forth in the Guaranty, this limitation on
the Borrower's liability shall not limit or impair the Lender's enforcement of
its rights against any guarantor of all or part of the Obligations.

              (b)    Exceptions to Limits on Personal Liability. Borrower shall
be personally liable to Lender for the repayment of a portion of the Advances
and other amounts due under the Loan Documents equal to any loss or damage (but
not consequential loss or damage) suffered by Lender as a direct result of (1)
failure of Borrower to pay to Lender upon demand after an Event

                                       48

<PAGE>

of Default all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument encumbering the Mortgaged Property and the amount of all
security deposits collected by Borrower from tenants then in residence; (2)
failure of Borrower to apply all insurance proceeds, condemnation proceeds or
security deposits from tenants as required by the Security Instrument
encumbering the Mortgaged Property; (3) fraud or written material
misrepresentation by Borrower or Guarantor or any officer, director, partner,
member or employee of Borrower or Guarantor in connection with the application
for or creation of the Obligations or any request for any action or consent by
Lender; or (4) failure to apply Rents, first, to the payment of reasonable
operating expenses and then to amounts ("Debt Service Amounts") payable under
the Loan Documents (except that Borrower will not be personally liable (i) to
the extent that Borrower lacks the legal right to direct the disbursement of
such sums because of a bankruptcy, receivership or similar judicial proceeding,
or (ii) with respect to Rents of a Mortgaged Property that are distributed in
any Calendar Quarter if Borrower has paid all operating expenses and Debt
Service Amounts for that Calendar Quarter).

              (c)    Full Recourse. Borrower shall be personally liable to
Lender for the payment and performance of all Obligations upon the occurrence of
any of the following Events of Default: (1) Borrower's acquisition of any
property or operation of any business not permitted by Section 33 of any
Security Instrument; or (2) a Transfer that is an Event of Default under Section
21 of any Security Instrument; or (3) the failure to comply with any and all
indemnification obligations contained in Section 18 of any Security Instrument;
or (4) commencement of a voluntary case under the Federal Bankruptcy laws.

              (d)    Miscellaneous. To the extent that Borrower has personal
liability under this Section or the Guarantor has liability under the Guaranty,
such liability shall be joint and several and Lender may exercise its rights
against Borrower or Guarantor personally without regard to whether Lender has
exercised any rights against the Mortgaged Property or any other security, or
pursued any rights against any guarantor, or pursued any other rights available
to Lender under the Loan Documents or applicable law. For purposes of this
Article, the term "Mortgaged Property" shall not include any funds that (1) have
been applied by Borrower as required or permitted by the Loan Documents prior to
the occurrence of an Event of Default, or (2) are owned by Borrower or Guarantor
and which Borrower was unable to apply as required or permitted by the Loan
Documents because of a bankruptcy, receivership, or similar judicial proceeding.

                                   ARTICLE 16

                            [Intentionally Omitted.]

                                   ARTICLE 17

                            MISCELLANEOUS PROVISIONS

       SECTION 17.01.      Counterparts.

       To facilitate execution, this Agreement may be executed in any number of
counterparts. It shall not be necessary that the signatures of, or on behalf of,
each party, or that the signatures

                                       49

<PAGE>

of all persons required to bind any party, appear on each counterpart, but it
shall be sufficient that the signature of, or on behalf of, each party, appear
on one or more counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.

       SECTION 17.02.    Amendments, Changes and Modifications.

       This Agreement may be amended, changed, modified, altered or terminated
only by written instrument or written instruments signed by all of the parties
hereto.

       SECTION 17.03.      Payment of Costs, Fees and Expenses.

       Borrower shall pay, on demand, all reasonable fees, costs, charges or
expenses (including the fees and expenses of attorneys, accountants and other
experts) incurred by Lender in connection with:

              (a)    Any amendment, consent or waiver to this Agreement or any
of the Loan Documents (whether or not any such amendments, consents or waivers
are entered into).

              (b)    Defending or participating in any litigation arising from
actions by third parties and brought against or involving Lender with respect to
(i) any Mortgaged Property, (ii) any event, act, condition or circumstance in
connection with any Mortgaged Property or (iii) the relationship between Lender
and Borrower and the Guarantor in connection with this Agreement or any of the
transactions contemplated by this Agreement.

              (c)    The administration or enforcement of, or preservation of
rights or remedies under, this Agreement or any other Loan Documents or in
connection with the foreclosure upon, sale of or other disposition of any
Collateral granted pursuant to the Loan Documents.

              (d)    Any disclosure documents, including the reasonable fees and
expenses of Lender's attorneys and accountants.

Borrower shall also pay, on demand, any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution, delivery, filing, recordation, performance or enforcement of any of
the Loan Documents or the Advances. However, Borrower will not be obligated to
pay any franchise, excise, estate, inheritance, income, excess profits or
similar tax on Lender. Any attorneys' fees and expenses payable by Borrower
pursuant to this Section shall be recoverable separately from and in addition to
any other amount included in such judgment, and such obligation is intended to
be severable from the other provisions of this Agreement and to survive and not
be merged into any such judgment. Any amounts payable by Borrower pursuant to
this Section, with interest thereon if not paid when due, shall become
additional indebtedness of Borrower secured by the Loan Documents. Such amounts
shall bear interest from the date such amounts are due until paid in full at the
weighted average, as determined by Lender, of the interest rates in effect from
time to time for each Advance unless collection from Borrower of interest at
such rate would be contrary to

                                       50

<PAGE>

applicable law, in which event such amounts shall bear interest at the highest
rate which may be collected from Borrower under applicable law. The provisions
of this Section are cumulative with, and do not exclude the application and
benefit to Lender of, any provision of any other Loan Document relating to any
of the matters covered by this Section.

       SECTION 17.04.      Payment Procedure.

       All payments to be made to Lender pursuant to this Agreement or any of
the Loan Documents shall be made in lawful currency of the United States of
America and in immediately available funds by wire transfer to an account
designated by Lender before 1:00 p.m. (Washington, D.C. time) on the date when
due.

       SECTION 17.05.      Payments on Business Days.

       In any case in which the date of payment to Lender or the expiration of
any time period hereunder occurs on a day which is not a Business Day, then such
payment or expiration of such time period need not occur on such date but may be
made on the next succeeding Business Day with the same force and effect as if
made on the day of maturity or expiration of such period, except that interest
shall continue to accrue for the period after such date to the next Business
Day.

       SECTION 17.06.      Choice of Law; Consent to Jurisdiction; Waiver of
                           Jury

       NOTWITHSTANDING ANYTHING IN THE NOTES, THE SECURITY DOCUMENTS OR ANY OF
THE OTHER LOAN DOCUMENTS TO THE CONTRARY, EACH OF THE TERMS AND PROVISIONS, AND
RIGHTS AND OBLIGATIONS OF THE BORROWER UNDER THE NOTES, AND THE BORROWER AND THE
Guarantor UNDER THE OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY, INTERPRETED,
CONSTRUED AND ENFORCED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE
DISTRICT OF COLUMBIA (EXCLUDING THE LAW APPLICABLE TO CONFLICTS OR CHOICE OF
LAW) EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO
(1) THE CREATION, PERFECTION AND FORECLOSURE OF LIENS AND SECURITY INTERESTS,
AND ENFORCEMENT OF THE RIGHTS AND REMEDIES, AGAINST THE MORTGAGED PROPERTIES,
WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE
MORTGAGED PROPERTY IS LOCATED, (2) THE PERFECTION, THE EFFECT OF PERFECTION AND
NON-PERFECTION AND FORECLOSURE OF SECURITY INTERESTS ON PERSONAL PROPERTY (OTHER
THAN DEPOSIT ACCOUNTS), WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION DETERMINED BY THE CHOICE OF LAW PROVISIONS OF THE DISTRICT OF
COLUMBIA UNIFORM COMMERCIAL CODE AND (3) THE PERFECTION, THE EFFECT OF
PERFECTION AND NON-PERFECTION AND FORECLOSURE OF DEPOSIT ACCOUNTS, WHICH MATTERS
SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION IN WHICH THE DEPOSIT ACCOUNT
IS LOCATED. BORROWER AND THE Guarantor AGREE THAT ANY CONTROVERSY ARISING UNDER
OR IN RELATION TO THE NOTES, THE SECURITY DOCUMENTS OR ANY OTHER LOAN DOCUMENT
SHALL BE, EXCEPT AS OTHERWISE PROVIDED HEREIN, LITIGATED IN

                                       51

<PAGE>

DISTRICT OF COLUMBIA. THE LOCAL AND FEDERAL COURTS AND AUTHORITIES WITH
JURISDICTION IN DISTRICT OF COLUMBIA SHALL, EXCEPT AS OTHERWISE PROVIDED HEREIN,
HAVE JURISDICTION OVER ALL CONTROVERSIES WHICH MAY ARISE UNDER OR IN RELATION TO
THE LOAN DOCUMENTS, INCLUDING THOSE CONTROVERSIES RELATING TO THE EXECUTION,
JURISDICTION, BREACH, ENFORCEMENT OR COMPLIANCE WITH THE NOTES, THE SECURITY
DOCUMENTS OR ANY OTHER ISSUE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH
ANY OF THE LOAN DOCUMENTS. THE BORROWER AND THE Guarantor IRREVOCABLY CONSENT TO
SERVICE, JURISDICTION, AND VENUE OF SUCH COURTS FOR ANY LITIGATION ARISING FROM
THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, AND WAIVE
ANY OTHER VENUE TO WHICH THEY MIGHT BE ENTITLED BY VIRTUE OF DOMICILE, HABITUAL
RESIDENCE OR OTHERWISE. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER
FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST
BORROWER AND THE Guarantor AND AGAINST THE COLLATERAL IN ANY OTHER JURISDICTION.
INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY OTHER
JURISDICTION SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED
HEREIN THAT THE LAWS OF DISTRICT OF COLUMBIA SHALL GOVERN THE RIGHTS AND
OBLIGATIONS OF BORROWER AND THE Guarantor AND LENDER AS PROVIDED HEREIN OR THE
SUBMISSION HEREIN BY BORROWER AND THE Guarantor TO PERSONAL JURISDICTION WITHIN
DISTRICT OF COLUMBIA THE BORROWER AND THE Guarantor (I) COVENANT AND AGREE NOT
TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER ANY OF THE LOAN
DOCUMENTS TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, THE BORROWER AND THE Guarantor
HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING, BUT NOT
LIMITED TO, LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THE
BORROWER AND THE Guarantor THAT LENDER WILL NOT SEEK TO ENFORCE THE PROVISIONS
OF THIS SECTION. THE FOREGOING PROVISIONS WERE KNOWINGLY, WILLINGLY AND
VOLUNTARILY AGREED TO BY BORROWER AND THE Guarantor UPON CONSULTATION WITH
INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER'S AND THE Guarantor'S FREE WILL.

       SECTION 17.07.      Severability.

       In the event any provision of this Agreement or in any other Loan
Document shall be held invalid, illegal or unenforceable in any jurisdiction,
such provision will be severable from the remainder hereof as to such
jurisdiction and the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired in any jurisdiction.

       SECTION 17.08.    Notices.

                                       52

<PAGE>

              (a)    Manner of Giving Notice. Each notice, direction,
certificate or other communication hereunder (in this Section referred to
collectively as "notices" and singly as a "notice") which any party is required
or permitted to give to the other party pursuant to this Agreement shall be in
writing and shall be deemed to have been duly and sufficiently given if:

                     (i)    personally delivered with proof of delivery thereof
(any notice so delivered shall be deemed to have been received at the time so
delivered);

                     (ii)   sent by Federal Express (or other similar overnight
courier) designating morning delivery (any notice so delivered shall be deemed
to have been received on the Business Day it is delivered by the courier);

                     (iii)  sent by telecopier or facsimile machine which
automatically generates a transmission report that states the date and time of
the transmission, the length of the document transmitted, and the telephone
number of the recipient's telecopier or facsimile machine (to be confirmed with
a copy thereof sent in accordance with paragraphs (1) or (2) above within two
Business Days) (any notice so delivered shall be deemed to have been received
(i) on the date of transmission, if so transmitted before 5:00 p.m. (local time
of the recipient) on a Business Day, or (ii) on the next Business Day, if so
transmitted on or after 5:00 p.m. (local time of the recipient) on a Business
Day or if transmitted on a day other than a Business Day);

addressed to the parties as follows:

              As to Borrower:       BRE-FMCF, LLC
                                    44 Montgomery Street, 36th Floor
                                    San Francisco, California  94104
                                    Attention:  Edward F. Lange, Jr.
                                    Telecopy No.:  (415) 445-6534

              with a copy to:       Latham & Watkins LLP
                                    505 Montgomery Street, Suite 1900
                                    San Francisco, California  94111
                                    Attention:  Kenneth E. Blohm, Esq.
                                    Telecopy No.:  (415) 395-8095

              As to Lender:         Prudential Multifamily Mortgage, Inc.
                                    c/o Prudential Asset Resources
                                    2200 Ross Avenue
                                    Suite 4900 E
                                    Dallas, Texas 75201
                                    Attention: Asset Management Department
                                    Telecopy No.: (214) 777-4556

              with a copy to:       Prudential Multifamily Mortgage, Inc.
                                    8401 Greensboro Drive
                                    Suite 200
                                    McLean, Virginia 22102

                                       53

<PAGE>

                                    Attention:    Laura Eckhardt
                                    Telecopy No.: (703) 610-1422

                                    and

                                    Prudential Multifamily Mortgage, Inc.
                                    Four Embarcadero Center
                                    Suite 2700
                                    San Francisco, California 94111
                                    Attention:    Michael Jameson
                                    Telecopy No.: (415) 956-2197

              As to Fannie Mae:     Fannie Mae

                                    3939 Wisconsin Avenue, N.W.
                                    Washington, D.C.  20016-2899
                                    Attention:  Vice President for
                                                 Multifamily Asset Management
                                    Telecopy No.:  (202) 752-5016

                  with a copy to:   Venable LLP
                                    1201 New York Avenue, N.W.
                                    Suite 1000
                                    Washington, D.C.  20005
                                    Attention:  Lawrence H. Gesner, Esq.
                                    Telecopy No.:  (202) 962-8300

              (b)    Change of Notice Address. Any party may, by notice given
pursuant to this Section, change the person or persons and/or address or
addresses, or designate an additional person or persons or an additional address
or addresses, for its notices, but notice of a change of address shall only be
effective upon receipt. Each party agrees that it shall not refuse or reject
delivery of any notice given hereunder, that it shall acknowledge, in writing,
receipt of the same upon request by the other party and that any notice rejected
or refused by it shall be deemed for all purposes of this Agreement to have been
received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service, the courier
service or facsimile.

       SECTION 17.09.      Further Assurances and Corrective Instruments.

              (a)    Further Assurances. To the extent permitted by law, the
parties hereto agree that they shall, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as Lender or Borrower may
request and as may be required in the opinion of Lender or its counsel to
effectuate the intention of or facilitate the performance of this Agreement or
any Loan Document.

              (b)    Further Documentation. Without limiting the generality of
subsection (a), in the event any further documentation or information is
required by Lender to correct patent

                                       54

<PAGE>

mistakes in the Loan Documents, materials relating to the Title Insurance
Policies or the funding of the Advances, Borrower shall provide, or cause to be
provided to Lender, at their cost and expense, such documentation or
information. Borrower shall execute and deliver to Lender such documentation,
including any amendments, corrections, deletions or additions to the Notes, the
Security Instruments or the other Loan Documents as is reasonably required by
Lender.

              (c)    Compliance with Investor Requirements. Without limiting the
generality of subsection (a), Borrower shall do anything necessary to comply
with the reasonable requirements of Lender to enable Lender to sell the MBS
backed by an Advance.

       SECTION 17.10.      Term of this Agreement.

       This Agreement shall continue in effect until the Termination Date.

       SECTION 17.11.      Assignments; Third-Party Rights.

       No Borrower shall assign this Agreement, or delegate any of its
obligations hereunder, without the prior written consent of Lender. Lender may
assign its rights and obligations under this Agreement separately or together,
without Borrower's consent, only to Fannie Mae, but may not delegate its
obligations under this Agreement unless required to do so pursuant to Section
13.04.

       SECTION 17.12.      Headings.

       Article and Section headings used herein are for convenience of reference
only, are not part of this Agreement and are not to affect the construction of,
or to be taken into consideration in interpreting, this Agreement.

       SECTION 17.13.      General Interpretive Principles.

       For purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in Appendix I and
elsewhere in this Agreement have the meanings assigned to them in this Agreement
and include the plural as well as the singular, and the use of any gender herein
shall be deemed to include the other genders; (ii) accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP; (iii) references herein to "Articles," "Sections," "subsections,"
"paragraphs" and other subdivisions without reference to a document are to
designated Articles, Sections, subsections, paragraphs and other subdivisions of
this Agreement; (iv) a reference to a subsection without further reference to a
Section is a reference to such subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions; (v) a reference to an Exhibit or a Schedule without a
further reference to the document to which the Exhibit or Schedule is attached
is a reference to an Exhibit or Schedule to this Agreement; (vi) the words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular provision; and (vii) the word
"including" means "including, but not limited to."

       SECTION 17.14.      Interpretation.

                                       55

<PAGE>

       The parties hereto acknowledge that each party and their respective
counsel have participated in the drafting and revision of this Agreement and the
Loan Documents. Accordingly, the parties agree that any rule of construction
which disfavors the drafting party shall not apply in the interpretation of this
Agreement and the Loan Documents or any amendment or supplement or exhibit
hereto or thereto.

       SECTION 17.15.      Standards for Decisions, Etc.

       Unless otherwise provided herein, if Lender's approval is required for
any matter hereunder, such approval may be granted or withheld in Lender's sole
and absolute discretion. Unless otherwise provided herein, if Lender's
designation, determination, selection, estimate, action or decision is required,
permitted or contemplated hereunder, such designation, determination, selection,
estimate, action or decision shall be made in Lender's sole and absolute
discretion.

       SECTION 17.16.      Decisions in Writing.

       Any approval, designation, determination, selection, action or decision
of Lender or Borrower must be in writing to be effective.

       SECTION 17.17.      Requests.

       The Borrower may submit up to a total of ten (10) Requests per 12-month
period commencing on the Initial Closing Date.

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

                     (Signatures appear on following pages)

                                       56

<PAGE>

                                        Borrower

                                        BRE-FMCF, LLC, a Delaware limited
                                        liability company

                                        By:   BRE Properties, Inc., a Maryland
                                              corporation, its sole member

                                              By: /s/ Edward F. Lange, Jr.
                                                 -----------------------------
                                                    Edward F. Lange, Jr.
                                                    Executive Vice President,
                                                    Chief Financial Officer and
                                                    Secretary

                                       57

<PAGE>

                                        Lender

                                        PRUDENTIAL MULTIFAMILY MORTGAGE, INC.,
                                        a Delaware corporation

                                        By: /s/ Sharon D. Singleton
                                            ----------------------------------
                                                 Sharon D. Singleton
                                                 Vice President

                                       58

<PAGE>

                                   APPENDIX I

                                   DEFINITIONS

For all purposes of the Agreement, the following terms shall have the respective
meanings set forth below:

              "Acquiring Person" means a "person" or "group of persons" within
       the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of
       1934, as amended.

              "Addition Fee" means, with respect to a Multifamily Residential
       Property added to the Collateral Pool in accordance with Article 3,

                     (i)    65 basis points, multiplied by

                     (ii)   Allocable Facility Amount of the Multifamily
                            Residential Property, as determined by Lender.

              "Addition Loan Documents" means the Security Instrument covering
       an Additional Mortgaged Property, amendments to the Variable Facility
       Note or additional Fixed Facility Notes, as the case may be, increasing
       the amount of such Note to reflect the amount of any Future Advance, and
       amendments to the existing Security Instruments increasing the amount
       secured by such Security Instruments to take into account the amount of
       the Future Advance, and any other documents, instruments or certificates
       required by Lender in connection with the addition of the Additional
       Mortgaged Property to the Collateral Pool pursuant to Article 3.

              "Addition Request" means a written request, substantially in the
       form of Exhibit M to the Agreement, to add Additional Mortgaged
       Properties to the Collateral Pool as set forth in Section 3.02(a).

              "Additional Borrower" means the owner of an Additional Mortgaged
       Property, which entity has been approved by Lender and becomes a Borrower
       under the Agreement and the applicable Loan Documents.

              "Additional Collateral Due Diligence Fees" means the due diligence
       fees paid by Borrower to Lender with respect to each Additional Mortgaged
       Property.

              "Additional Mortgaged Property" means each Multifamily Residential
       Property owned by any Borrower (either in fee simple or as tenant under a
       ground lease meeting all of the requirements of the DUS Guide) and added
       to the Collateral Pool after the Initial Closing Date pursuant to Article
       3.

              "Advance" means a Variable Advance (including a Rollover Variable
       Advance) or a Fixed Advance.

              "Advance Confirmation Instrument" means the written instrument,
       substantially in the form of Exhibit K to the Agreement, issued by
       Borrower to Lender to confirming Borrower's obligation to repay Variable
       Advances pursuant to Section 2.02.

                                        1

<PAGE>

              "Advance Request" means a written request, substantially in the
       form of Exhibit L to the Agreement, for an Advance made pursuant to
       Section 2.04.

              "Affiliate" means, as applied to any Person, any other Person
       directly or indirectly controlling, controlled by, or under common
       control with, that Person. For the purposes of this definition, "control"
       (including with correlative meanings, the terms "controlling,"
       "controlled by" and "under common control with"), as applied to any
       Person, means the possession, directly or indirectly, of the power to
       direct or cause the direction of the management (other than property
       management) and policies of that Person, whether through the ownership of
       voting securities, partnership interests or by contract or otherwise.

              "Aggregate Debt Service Coverage Ratio" means, for any specified
       date, the ratio of--

              (a)    the aggregate of the Net Operating Income for the Mortgaged
                     Properties

                                       to

              (b)    the Facility Debt Service on the specified date.

              "Aggregate Loan to Value Ratio" means, for any specified date, the
       ratio (expressed as a percentage) of--

              (a)    the Advances Outstanding on the specified date,

                                       to

              (b)    the aggregate of the Valuations most recently obtained
                     prior to the specified date for all of the Mortgaged
                     Properties.

              "Agreement" means the Master Credit Facility Agreement, as it may
       be amended, supplemented or otherwise modified from time to time,
       including all Recitals and Exhibits to the Agreement, each of which is
       hereby incorporated into the Agreement by this reference.

              "Allocable Facility Amount" means the portion of the Credit
       Facility allocated to a particular Mortgaged Property by Lender in
       accordance with the Agreement.

              "Amortization Period" means the period of 30 years.

              "Applicable Law" means (a) all applicable provisions of all
       constitutions, statutes, rules, regulations and orders of all
       governmental bodies, all Governmental Approvals and all orders, judgments
       and decrees of all courts and arbitrators, (b) all zoning, building,
       environmental and other laws, ordinances, rules, regulations and
       restrictions of any Governmental Authority affecting the ownership,
       management, use, operation, maintenance or repair of any Mortgaged
       Property, including the Americans with Disabilities Act (if applicable),
       the Fair Housing Amendment Act of 1988 and Hazardous

                                        2

<PAGE>

       Materials Laws (as defined in the Security Instrument), (c) any building
       permits or any conditions, easements, rights-of-way, covenants,
       restrictions of record or any recorded or unrecorded agreement affecting
       or concerning any Mortgaged Property including planned development
       permits, condominium declarations, and reciprocal easement and regulatory
       agreements with any Governmental Authority, (d) all laws, ordinances,
       rules and regulations, whether in the form of rent control, rent
       stabilization or otherwise, that limit or impose conditions on the amount
       of rent that may be collected from the units of any Mortgaged Property,
       and (e) requirements of insurance companies or similar organizations,
       affecting the operation or use of any Mortgaged Property or the
       consummation of the transactions to be effected by the Agreement or any
       of the other Loan Documents.

              "Appraisal" means an appraisal of Multifamily Residential Property
       conforming to the requirements of Chapter 5 of Part III of the DUS Guide
       and accepted by Lender.

              "Appraised Value" means the value set forth in an Appraisal.

              "Assignment of Management Agreement" means an Assignment of
       Management Agreement in form and substance satisfactory to Lender.

              "Borrower" means individually and collectively, BRE-FMCF, LLC, a
       Delaware limited liability company, and any Additional Borrower becoming
       a party to this Agreement and any other Loan Documents.

              "Business Day" means a day on which Fannie Mae is open for
       business.

              "Calendar Quarter" means, with respect to any year, any of the
       following three month periods: (a) January-February-March; (b)
       April-May-June; (c) July-August-September; and (d)
       October-November-December.

              "Calendar Year" means the 12-month period from the first day of
       January to and including the last day of December, and each 12-month
       period thereafter.

              "Cap   Rate" means, for each Mortgaged Property, a capitalization
       rate reasonably selected by Lender for use in determining the Valuations,
       as disclosed to Borrower from time to time.

              "Change of Control" means the earliest to occur of: (a) the date
       on which an Acquiring Person becomes (by acquisition, consolidation,
       merger or otherwise), directly or indirectly, the beneficial owner of
       more than 35% of the total ownership interest of Borrower or Guarantor,
       as the case may be then outstanding, or (b) the replacement (other than
       solely by reason of retirement at age sixty or older, death or
       disability) of more than 50% (or such lesser percentage as is required
       for decision-making by the board of directors or an equivalent governing
       body) of the members of the board of directors (or an equivalent
       governing body) of Guarantor over a one-year period from the directors
       who constituted such board of directors at the beginning of such period
       and such replacement shall not have been approved by a vote of at least a
       majority of the board of

                                        3

<PAGE>

       directors of Guarantor then still in office who either were members of
       such board of directors at the beginning of such one-year period or whose
       election as members of the board of directors was previously so approved
       (it being understood and agreed that in the case of any entity governed
       by a trustee, board of managers, or other similar governing body, the
       foregoing clause (b) shall apply thereto by substituting such governing
       body and the members thereof for the board of directors and members
       thereof, respectively).

              "Chief Financial Officer" means the chief financial officer of
       Guarantor or any other person with responsibility for any of the
       functions typically performed in a corporation by the chief financial
       officer.

              "Closing Date" means the Initial Closing Date and each date after
       the Initial Closing Date on which the funding or other transaction
       requested in a Request is required to take place.

              "Collateral" means the Mortgaged Properties and other collateral
       from time to time or at any time encumbered by the Security Instruments,
       or any other property securing Borrower's obligations under the Loan
       Documents.

              "Collateral Pool" means all of the Collateral.

              "Commitment" means, at any time, the sum of the Fixed Facility
       Commitment and the Variable Facility Commitment.

              "Complete Fixed Facility Termination" shall have the meaning set
       forth in Section 5.02(a).

              "Complete Variable Facility Termination" shall have the meaning
       set forth in Section 5.02(a).

              "Compliance Certificate" means a certificate of Borrower
       substantially in the form of Exhibit F to the Agreement.

              "Conversion Amendment" means the Master Credit Facility Conversion
       Amendment, substantially in the form of Exhibit I to the Agreement,
       reflecting the conversion of all or any portion of the Variable Facility
       Commitment to the Fixed Facility Commitment as set forth in Section
       1.08(b).

              "Conversion Documents" means the Conversion Amendment, together
       with an amendment to each Security Document and other applicable Loan
       Documents, in form and substance satisfactory to Lender, reflecting the
       change in the Fixed Facility Commitment and the Variable Facility
       Commitment pursuant to Section 1.08.

              "Conversion Request" means a written request, substantially in the
       form of Exhibit H to the Agreement, to convert all or any portion of the
       Variable Facility Commitment to the Fixed Facility Commitment pursuant to
       Section 1.08.

                                        4

<PAGE>

              "Coupon Rate" means, with respect to a Variable Advance, the
       imputed interest rate determined by Lender pursuant to Section 1.05(a)
       and, with respect to a Fixed Advance, the interest rate determined by
       Lender pursuant to Section 1.05(b).

              "Coverage and LTV Tests" mean, for any specified date, each of the
       following financial tests:

                     (a)    The Aggregate Debt Service Coverage Ratio is not
       less than 1.35:1.0.

                     (b)    The Aggregate Loan to Value Ratio does not exceed
       65%.

              "Credit Facility" means the Fixed Facility and the Variable
       Facility.

              "Credit Facility Termination Documents" means the instruments
       releasing the Security Instruments as lien on the Mortgaged Properties,
       UCC-3 Termination Statements terminating the UCC-1 Financing Statements
       on the Mortgaged Properties, and such other documents and instruments
       necessary to evidence the release of the Collateral from any lien
       securing the Obligations, and the Notes, all in connection with the
       termination of the Agreement and the Credit Facility pursuant to Article
       5.

              "Credit Facility Termination Request" means a written request,
       substantially in the form of Exhibit R to the Agreement, to terminate the
       Agreement and the Credit Facility pursuant to Section 5.04(a).

              "Debt  Service Coverage Ratio" means, for any Mortgaged Property,
       for any specified date, the ratio (expressed as a percentage) of --

              (a)    the aggregate of the Net Operating Income for the preceding
              12 month period for the subject Mortgaged Property

                                       to

              (b)    the Facility Debt Service on the specified date, assuming,
              for the purpose of calculating the Facility Debt Service for this
              definition, that Advances Outstanding shall be the Allocable
              Facility Amount for the subject Mortgaged Property.

              "Discount" means, with respect to any Variable Advance, an amount
       equal to the excess of --

              (i)    the face amount of the MBS backed by the Variable Advance,
                     over

              (ii)   the Price of the MBS backed by the Variable Advance.

              "DUS   Guide" means the Fannie Mae Multifamily Delegated
       Underwriting and Servicing (DUS) Guide, as such Guide may be amended from
       time to time, including exhibits to the DUS Guide and amendments in the
       form of Lender Memos, Guide

                                        5

<PAGE>

       Updates and Guide Announcements (as each such term is defined in the DUS
       Guide) (and, if such Guide is no longer used by Fannie Mae, the term "DUS
       Guide" as used in the Agreement means the Fannie Mae Multifamily
       Negotiated Transactions (NT) Guide, as such Guide may be amended from
       time to time, including amendments in the form of Lender Memos, Guide
       Updates and Guide Announcements). All references to definitions in,
       specific articles and sections of, and exhibits to, the DUS Guide shall
       be deemed references to such definitions, articles, sections and exhibits
       as they may be amended, modified, updated, superseded, supplemented or
       replaced from time to time.

              "DUS Guide Underwriting Requirements" means the overall
       underwriting requirements for Multifamily Residential Properties as set
       forth in the DUS Guide.

              "ERISA" means the Employee Retirement Income Security Act of 1974,
       as amended from time to time and the regulations promulgated thereunder.

              "Event of Default" means any event defined to be an "Event of
       Default" under Article XI.

              "Expansion" means an increase in the Commitment made in accordance
       with Article 4.

              "Expansion Loan Documents" means amendments to the Variable
       Facility Note or additional Fixed Facility Notes, as the case may be,
       increasing the amount of such Note to the amount of the Commitment, as
       expanded in accordance with Article 4 and amendments to the Security
       Instruments, increasing the amount secured by such Security Instruments
       to the amount of the Commitment.

              "Expansion Request" means a written request, substantially in the
       form of Exhibit O to the Agreement, to obtain an Expansion pursuant to
       Section 4.02.

              "Facility Debt Service" means --

              (a)    For use in determining the Initial Commitment Amount, the
                     sum of the amount of interest and principal amortization
                     that would be payable during the 12 month period
                     immediately succeeding the Initial Closing Date, with
                     respect to the full amount of the initial Commitment,
                     except that, for these purposes:

                     (ii)   the initial amount of the Variable Facility
                            Commitment shall be deemed to require level monthly
                            payments of principal and interest (at an interest
                            rate equal to (A) the Three Month LIBOR rate plus
                            (B) the Variable Facility Fee plus (C) 300 basis
                            points) in an amount necessary to fully amortize the
                            original principal amount of the Variable Facility
                            Commitment over the Amortization Period, with such
                            amortization deemed to commence on the first day of
                            the 12 month period; and

                                        6

<PAGE>

                     (iii)  the initial amount of the Fixed Facility Commitment
                            shall be deemed to require level monthly payments of
                            principal and interest (at an interest rate equal to
                            (A) the base United States Treasury Index Rate for
                            securities having a maturity substantially similar
                            to the maturity of the Fixed Advance plus (B) the
                            anticipated investor spread (as determined by the
                            Lender) for MBS having similar characteristics as
                            the MBS to be issued in connection with the Fixed
                            Facility Commitment plus (C) the Fixed Facility Fee)
                            in an amount necessary to fully amortize the
                            original principal amount of the Fixed Facility
                            Commitment over the Amortization Period, with such
                            amortization to commence on the first day of the 12
                            month period.

                            The interest rates described in this clause (a) are
                            hereinafter referred to as the "Underwriting Rates."

              (b)    For use in determining the additional borrowing capacity
                     available pursuant to Section 2.04(c) of the Agreement and
                     created by the addition of Additional Mortgaged Properties,
                     the sum of:

                     (i)    the amount of interest and principal amortization,
                            during the 12 month period immediately succeeding
                            the specified date, with respect to the Advances
                            Outstanding on the specified date and Advances to be
                            obtained as a result of the addition of Additional
                            Mortgaged Properties to the Collateral Pool, except
                            that, for these purposes:

                            (A)    each Variable Advance Outstanding shall be
                                   deemed to require level monthly payments of
                                   principal and interest (at a rate equal to
                                   (A) the Three Month LIBOR rate plus (B) the
                                   Variable Facility Fee plus (C) 300 basis
                                   points) in an amount necessary to fully
                                   amortize the original principal amount of the
                                   Variable Advance over the Amortization
                                   Period, with such amortization deemed to
                                   commence on the first day of the 12 month
                                   period; and

                            (B)    each Fixed Advance Outstanding shall require
                                   level monthly payments of principal and
                                   interest (at the Coupon Rate for the Fixed
                                   Advance) in an amount necessary to fully
                                   amortize the original principal amount of the
                                   Fixed Advance over the Amortization Period,
                                   with such amortization to commence on the
                                   first day of the 12 month period; and

                            (C)    each Fixed Advance to be obtained shall be
                                   deemed to require level monthly payments of
                                   principal and interest at a rate equal to the
                                   estimated Coupon Rate for such Fixed

                                        7

<PAGE>

                                   Advance in an amount necessary to fully
                                   amortize the original principal amount of
                                   such Fixed Advance over the Amortization
                                   Period, with such amortization deemed to
                                   commence on the first day of the 12 month
                                   period; and

                     (ii)   the amount of the Standby Fees payable to Lender
                            pursuant to Section 10.01 during such 12 month
                            period (assuming, for these purposes, that the
                            Advances Outstanding throughout the 12 month period
                            are always equal to the amount of Advances
                            Outstanding on the specified date).

              (c)    For use in determining the Aggregate Debt Service Coverage
                     Ratio, for purposes of determining compliance with the
                     Coverage and LTV Tests, and for other ongoing monitoring
                     purposes, and for purposes of determining Release Prices
                     pursuant to Section 3.04(c) of the Agreement as of any
                     specified date, the sum of:

                     (i)    the amount of interest and principal amortization,
                            during the 12 month period immediately succeeding
                            the specified date, with respect to the Advances
                            Outstanding on the specified date, except that, for
                            these purposes:

                            (A)    each Variable Advance shall be deemed to
                                   require level monthly payments of principal
                                   and interest (at the Coupon Rate for such
                                   Variable Advance) in an amount necessary to
                                   fully amortize the original principal amount
                                   of the Variable Advance over the Amortization
                                   Period, with such amortization deemed to
                                   commence on the first day of the 12 month
                                   period; and

                            (B)    each Fixed Advance shall require level
                                   monthly payments of principal and interest
                                   (at the Coupon Rate for such Fixed Advance)
                                   in an amount necessary to fully amortize the
                                   original principal amount of the Fixed
                                   Advance over the Amortization Period, with
                                   such amortization to commence on the first
                                   day of the 12 month period; and

                     (ii)   the amount of the Standby Fees payable to Lender
                            pursuant to Section 10.01 during such 12 month
                            period (assuming, for these purposes, that the
                            Advances Outstanding throughout the 12 month period
                            are always equal to the amount of Advances
                            Outstanding on the specified date).

              "Facility Termination Document" means the Amendment of the Master
       Credit Facility Agreement, substantially in the form of Exhibit Q to the
       Agreement, evidencing the permanent reduction in the Facility Commitment
       pursuant to Section 5.02.

                                        8

<PAGE>

              "Facility Termination Fee" means, with respect to a reduction in
       either the Variable Facility Commitment or the Fixed Facility Commitment
       pursuant to Article V, the sum of

              (A)    an amount equal to the product obtained by multiplying

              (1)    the reduction in the Variable Facility Commitment, by

              (2)    the Variable Facility Fee that would have been payable in
                     respect of the portion of the Variable Facility Commitment
                     to be terminated, by

              (3)    the present value factor calculated using the following
                     formula:

                                  1 - (1 + r)[POWER OF -n]
                                   -----------
                                             r

              [r = Yield Rate

              n =    the number of years (counting any partial year as a full
                     year) remaining between the Closing Date for the reduction
                     in the Commitment and the Variable Facility Termination
                     Date.

       The "Yield Rate" means the rate, determined as of the Initial Closing
       Date, on the U.S. Treasury security having a maturity closest to the
       Variable Facility Termination Date; and

              (B)    an amount equal to the product obtained by multiplying

              (1)    the reduction in the Fixed Facility Commitment, by

              (2)    the Fixed Facility Fee that would have been payable in
                     respect of the portion of the Fixed Facility Commitment to
                     be terminated, by

              (3)    the present value factor calculated using the following
                     formula:

                                  1 - (1 + r)[POWER OF -n]
                                   -----------
                                              r

              [r = Yield Rate

              n =    the number of years (counting any partial year as a full
                     year) remaining between the Closing Date for the reduction
                     in the Commitment and the Fixed Facility Termination Date.

       The "Yield Rate" means the rate, determined as of the Initial Closing
       Date, on the U.S. Treasury security having a maturity closest to the
       Fixed Facility Termination Date.

              "Facility Termination Request" means a written request,
       substantially in the form of Exhibit P to the Agreement, for a permanent
       reduction in the Variable Facility Commitment or the Fixed Facility
       Commitment pursuant to Section 5.02.

                                        9

<PAGE>

              "Fannie Mae" means the federally-chartered and stockholder-owned
       corporation organized and existing under the Federal National Mortgage
       Association Charter Act, 12 U.S.C. Section 1716 et seq.

              "Fees" means Addition Fee, Additional Collateral Due Diligence
       Fee, Facility Termination Fee, Fixed Facility Fee, Origination Fee,
       Release Fee, Standby Fee, Substitution Fee, Rate Preservation Fee,
       Variable Facility Fee any and all other fees specified in the Agreement.

              "First Anniversary" means the date that is one year after the
       Initial Closing Date.

              "Fixed Advance" means a loan made by Lender to Borrower under the
       Fixed Facility Commitment.

              "Fixed Facility" means the agreement of Lender to make Fixed
       Advances to Borrower pursuant to Section 1.01.

              "Fixed Facility Availability Period" means the period beginning on
       the Initial Closing Date and ending on the date five years after the
       Initial Closing Date.

              "Fixed Facility Commitment" means $0 plus such amount as Borrower
       may elect to add to the Fixed Facility Commitment in accordance with
       Section 1.08 and Article 4 and less such amount by which Borrower may
       elect to reduce the Fixed Facility Commitment in accordance with Article
       5.

              "Fixed Facility Fee" means (i) 50 basis points per annum (0.50%)
       for a Fixed Advance drawn from the Fixed Facility Commitment or converted
       from the Variable Facility Commitment in effect on or prior to the First
       Anniversary (whether or not drawn by such date) or for any Fixed Advance
       drawn from the Reserved Amount, and (ii) (a) for any Fixed Advance drawn
       from any portion of the Fixed Facility Commitment (excluding the Reserved
       Amount increased pursuant to Article 4, after the period ending on the
       First Anniversary, or (b) for any Fixed Advance that maturity extends
       beyond the Variable Facility Termination Date, the number of basis points
       determined at the time of such increase or conversion by Lender as the
       Fixed Facility Fee for such Fixed Advances.

              "Fixed Facility Note" means a promissory note, in the form
       attached as Exhibit B to the Agreement, which will be issued by Borrower
       to Lender, concurrently with the funding of each Fixed Advance, to
       evidence Borrower's obligation to repay the Fixed Advance.

              "Future Advance" means an Advance made after the Initial Closing
       Date.

              "GAAP" means generally accepted accounting principles in the
       United States set forth in the opinions and pronouncements of the
       Accounting Principles Board and the American Institute of Certified
       Public Accountants and statements and pronouncements of the Financial
       Accounting Standards Board or such other principles as may be approved by
       a significant segment of the accounting profession in the United States,
       that are applicable to the circumstances as of the date of determination,
       consistently applied.

                                       10

<PAGE>

              "General Conditions" shall have the meaning set forth in Article
       6.

              "Geographical Diversification Requirements" means a requirement
       that (i) at all times that Advances Outstanding are less than
       $150,000,000, the Collateral Pool consist of at least five (5) Mortgaged
       Properties located in at least three (3) SMSA's; (ii) at all times that
       Advances Outstanding are equal to or greater than $150,000,000 and less
       than $200,000,000, the Collateral Pool consist of at least seven (7)
       Mortgaged Properties located in at least four (4) SMSA's; and (iii) at
       all times that Advances Outstanding are equal to or greater than
       $200,000,000, the Collateral Pool consist of at least ten (10) Mortgaged
       Properties located in at least five (5) SMSA's.

              "Governmental Approval" means an authorization, permit, consent,
       approval, license, registration or exemption from registration or filing
       with, or report to, any Governmental Authority.

              "Governmental Authority" means any nation or government, any state
       or other political subdivision thereof, any agency, authority,
       instrumentality, regulatory body, court, administrative tribunal, central
       bank or other entity exercising executive, legislative, judicial, taxing,
       regulatory or administrative powers or functions of or pertaining to
       government.

              "Gross Revenues" means, for any specified period, with respect to
       any Multifamily Residential Property, all income in respect of such
       Multifamily Residential Property as reflected on the certified operating
       statement for such specified period as adjusted to exclude unusual income
       (e.g. temporary or nonrecurring income), income not allowed under the DUS
       Guide as shown in Section 403.02 of Part III (e.g. interest income,
       furniture income, etc.), and the value of any unreflected concessions.

              "Guarantor" means BRE Properties, Inc., a Maryland corporation.

              "Guaranty" means that certain Guaranty to be executed by the
       Guarantor in the form of Exhibit S to this Agreement.

              "Hazardous Substance Activity" means, with respect to any
       Mortgaged Property, any storage, holding, existence, release, spill,
       leaking, pumping, pouring, injection, escaping, deposit, disposal,
       dispersal, leaching, migration, use, treatment, emission, discharge,
       generation, processing, abatement, removal, disposition, handling or
       transportation of any Hazardous Materials (as defined in the Security
       Instrument) from, under, into or on such Mortgaged Property in violation
       of Hazardous Materials Laws (as defined in the Security Instrument),
       including the discharge of any Hazardous Materials emanating from such
       Mortgaged Property in violation of Hazardous Materials Laws through the
       air, soil, surface water, groundwater or property and also including the
       abandonment or disposal of any barrels, containers and other receptacles
       containing any Hazardous Materials from or on such Mortgaged Property in
       violation of Hazardous Materials Laws, in each case whether sudden or
       nonsudden, accidental or nonaccidental.

                                       11

<PAGE>

              "Impositions" means, with respect to any Mortgaged Property, all
       (1) water and sewer charges which, if not paid, may result in a lien on
       all or any part of the Mortgaged Property, (2) premiums for fire and
       other hazard insurance, rent loss insurance and such other insurance as
       Lender may require under any Security Instrument, (3) Taxes, and (4)
       amounts for other charges and expenses which Lender at any time
       reasonably deems necessary to protect the Mortgaged Property, to prevent
       the imposition of liens on the Mortgaged Property, or otherwise to
       protect Lender's interests.

              "Indebtedness" means, with respect to any Person, as of any
       specified date, without duplication, all:

              (a) indebtedness of such Person for borrowed money or for the
       deferred purchase price of property or services (other than (i) current
       trade liabilities incurred in the ordinary course of business and payable
       in accordance with customary practices, and (ii) for construction of
       improvements to property, if such person has a non-contingent contract to
       purchase such property);

              (b) other indebtedness of such Person which is evidenced by a
       note, bond, debenture or similar instrument;

              (c) obligations of such Person under any lease of property, real
       or personal, the obligations of the lessee in respect of which are
       required by GAAP to be capitalized on a balance sheet of the lessee or to
       be otherwise disclosed as such in a note to such balance sheet;

              (d) obligations of such Person in respect of acceptances (as
       defined in Article 3 of the Uniform Commercial Code of the District of
       Columbia) issued or created for the account of such Person;

              (e) liabilities secured by any Lien on any property owned by such
       Person even though such Person has not assumed or otherwise become liable
       for the payment of such liabilities; and

              (f) as to any Person ("guaranteeing person"), any obligation of
       (a) the guaranteeing person or (b) another Person (including any bank
       under any letter of credit) to induce the creation of a primary
       obligation (as defined below) with respect to which the guaranteeing
       person has issued a reimbursement, counterindemnity or similar
       obligation, in either case guaranteeing, or in effect guaranteeing, any
       indebtedness, lease, dividend or other obligation ("primary obligations")
       of any third person ("primary obligor") in any manner, whether directly
       or indirectly, including any obligation of the guaranteeing person,
       whether or not contingent, to (1) purchase any such primary obligation or
       any property constituting direct or indirect security therefor, (2)
       advance or supply funds for the purchase or payment of any such primary
       obligation or to maintain working capital or equity capital of the
       primary obligor or otherwise to maintain the net worth or solvency of the
       primary obligor, (3) purchase property, securities or services primarily
       for the purpose of assuring the owner of any such primary obligation of
       the ability of the primary obligor to make payment of such primary
       obligation, or (4)

                                       12

<PAGE>

       otherwise assure or hold harmless the owner of any such primary
       obligation against loss in respect of the primary obligation, provided,
       however, that the term "Contingent Obligation" shall not include
       endorsements of instruments for deposit or collection in the ordinary
       course of business. The amount of any Contingent Obligation of any
       guaranteeing person shall be deemed to be the lesser of (i) an amount
       equal to the stated or determinable amount of the primary obligation in
       respect of which such Contingent Obligation is made and (ii) the maximum
       amount for which such guaranteeing person may be liable pursuant to the
       terms of the instrument embodying such Contingent Obligation, unless such
       primary obligation and the maximum amount for which such guaranteeing
       person may be liable are not stated or determinable, in which case the
       amount of such Contingent Obligation shall be such guaranteeing person's
       maximum reasonably anticipated liability in respect thereof as determined
       by Owner in good faith.

              "Initial Advance" means the Variable Advance made on the Initial
       Closing Date in the amount of $100,000,000.

              "Initial Advance Amount" means the lesser of (a) the amount that
       would result in an Aggregate Loan to Value Ratio of 65%, or (b) the
       amount that would result in (i) an Aggregate Debt Service Coverage Ratio
       of 1.10 for the portion of the Commitment that will be the Variable
       Facility Commitment (using a prorated portion of the Net Operating Income
       and using the Facility Debt Service for only the Variable Facility
       Commitment in making such determination of Aggregate Debt Service
       Coverage Ratio), provided that such amount shall not exceed 103% of the
       amount that would result using the calculation set forth in (ii) below,
       and (ii) an Aggregate Debt Service Coverage Ratio of 1.35:1.0 for the
       portion of the Commitment that will be the Fixed Facility Commitment
       (using a prorated portion of the Net Operating Income and using the
       Facility Debt Service for only the Fixed Facility Commitment in making
       such determination of Debt Service Coverage Ratio).

              "Initial Closing Date" means the date of the Agreement.

              "Initial Mortgaged Properties" means the Multifamily Residential
       Properties described on Exhibit A to the Agreement and which represent
       the Multifamily Residential Properties which are made part of the
       Collateral Pool on the Initial Closing Date.

              "Initial Security Instruments" means the Security Instruments
       covering the Initial Mortgaged Properties.

              "Initial Valuation" means, when used with reference to specified
       Collateral, the Valuation initially performed for the Collateral as of
       the date on which the Collateral was added to the Collateral Pool. The
       Initial Valuation for each of the Initial Mortgaged Properties is as
       determined by Lender, which determination has been provided to Borrower.

                                       13

<PAGE>

              "Insurance Policy" means, with respect to a Mortgaged Property,
       the insurance coverage and insurance certificates evidencing such
       insurance required to be maintained pursuant to the Security Instrument
       encumbering the Mortgaged Property.

              "Internal Revenue Code" means the Internal Revenue Code of 1986,
       as amended. Each reference to the Internal Revenue Code shall be deemed
       to include (a) any successor internal revenue law and (b) the applicable
       regulations whether final, temporary or proposed.

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

              "Lender" shall have the meaning set forth in the first paragraph
       of the Agreement, but shall refer to any replacement Lender if the
       initial Lender is replaced pursuant to the terms of Section 13.04.

              "Lien" means any mortgage, deed of trust, deed to secure debt,
       security interest or other lien or encumbrance (including both consensual
       and non-consensual liens and encumbrances).

              "Loan Documents" means the Agreement, the Notes, the Guaranty, the
       Advance Confirmation Instruments, the Security Documents, all documents
       executed by the Borrower or Guarantor pursuant to the General Conditions
       set forth in Article 6 of the Agreement and any other documents executed
       by the Borrower or Guarantor from time to time in connection with the
       Agreement or the transactions contemplated by the Agreement.

              "Loan to Value Ratio " means, for a Mortgaged Property, for any
       specified date, the ratio (expressed as a percentage) of --

              (a)    the Allocable Facility Amount of the subject Mortgaged
              Property on the specified date,

                                       to

              (b)    the Valuation most recently obtained prior to the specified
              date for the subject Mortgaged Property.

              "Loan Year" means the 12-month period from the first day of the
       first calendar month after the Initial Closing Date to and including the
       last day before the first anniversary of the Initial Closing Date, and
       each 12-month period thereafter.

                                       14

<PAGE>

              "Material Adverse Effect" means, with respect to any circumstance,
       act, condition or event of whatever nature (including any adverse
       determination in any litigation, arbitration, or governmental
       investigation or proceeding), whether singly or in conjunction with any
       other event or events, act or acts, condition or conditions, or
       circumstance or circumstances, whether or not related, a material adverse
       change in or a materially adverse effect upon any of (a) the business,
       operations, property or condition (financial or otherwise) of the
       Borrower or Guarantor, to the extent specifically referred to in the
       applicable provision of the Loan Document, (b) the present or future
       ability of the Borrower or Guarantor, to the extent specifically referred
       to in the applicable provision of the Loan Document, to perform the
       Obligations for which it is liable, (c) the validity, priority,
       perfection or enforceability of the Agreement or any other Loan Document
       or the rights or remedies of Lender under any Loan Document, or (d) the
       value of, or Lender's ability to have recourse against, any Mortgaged
       Property.

              "MBS" means a mortgage-backed security issued by Fannie Mae which
       is "backed" by an Advance and has an interest in the Notes and the
       Collateral Pool securing the Notes, which interest permits the holder of
       the MBS to participate in the Notes and the Collateral Pool to the extent
       of such Advance.

              "MBS Delivery Date" means the date on which an MBS is delivered by
       Fannie Mae.

              "MBS Imputed Interest Rate" shall have the meaning set forth in
       Section 1.05(a).

              "MBS Issue Date" means the date on which an MBS is issued by
       Fannie Mae.

              "MBS Pass-Through Rate" means the interest rate for a Fixed
       Advance as determined by Lender (rounded to three places) payable in
       respect of the Fannie Mae MBS issued pursuant to the MBS Commitment
       backed by the Fixed Advance as determined in accordance with Section
       2.01.

              "Mortgaged Properties" means, collectively, the Additional
       Mortgaged Properties, the Substitute Mortgaged Properties and the Initial
       Mortgaged Properties, but excluding each Release Property from and after
       the date of its release from the Collateral Pool.

              "Multifamily Residential Property" means a residential property,
       located in the United States, containing five or more dwelling units in
       which not more than twenty percent (20%) of the net rentable area is or
       will be rented to non-residential tenants, and conforming to the
       requirements of Chapter 2 of Part III of the DUS Guide (Property
       Requirements).

              "Net Operating Income" means, for any specified period, with
       respect to any Multifamily Residential Property, the aggregate net income
       during such period equal to Gross Revenues during such period less the
       aggregate Operating Expenses during such period. If a Mortgaged Property
       is not owned by a Borrower or an Affiliate of a Borrower for the entire
       specified period, the Net Operating Income for the Mortgaged Property for
       the time within the specified period during which the Mortgaged Property

                                       15

<PAGE>

       was owned by a Borrower or an Affiliate of a Borrower shall be the
       Mortgaged Property's pro forma net operating income determined by Lender
       in accordance with the underwriting procedures set forth in Chapter 4 of
       Part III of the DUS Guide (Determination of Loan Amount).

              "Note" means any Fixed Facility Note or the Variable Facility
       Note.

              "Obligations" means the aggregate of the obligations of Borrower
       and Guarantor under the Agreement and the other Loan Documents.

              "Operating Expenses" means, for any period, with respect to any
       Multifamily Residential Property, all expenses in respect of the
       Multifamily Residential Property, as determined by Lender based on the
       certified operating statement for such specified period as adjusted to
       provide for the following: (i) all appropriate types of expenses,
       including a management fee and deposits to the replacement reserves, as
       provided in the Replacement Reserve Agreement (whether funded or not),
       are included in the total operating expense figure; (ii) upward
       adjustments to individual line item expenses to reflect market norms or
       actual costs and correct any unusually low expense items, which could not
       be replicated by a different owner or manager (e.g., a market rate
       management fee will be included regardless of whether or not a management
       fee is charged, market rate payroll will be included regardless of
       whether shared payroll provides for economies, etc.); and (iii) downward
       adjustments to individual line item expenses to reflect unique or
       aberrant costs (e.g., non-recurring capital costs, non-operating borrower
       expenses, etc.).

              "Organizational Certificate" means, collectively, certificates
       from Borrower and Guarantor to Lender, in the form of Exhibits G-1 and
       G-2 to the Agreement, certifying as to certain organizational matters
       with respect to each Borrower and Guarantor .

              "Organizational Documents" means all certificates, instruments and
       other documents pursuant to which an organization is organized or
       operates, including but not limited to, (i) with respect to a
       corporation, its articles of incorporation and bylaws, (ii) with respect
       to a limited partnership, its limited partnership certificate and
       partnership agreement, (iii) with respect to a general partnership or
       joint venture, its partnership or joint venture agreement and (iv) with
       respect to a limited liability company, its articles of organization and
       operating agreement.

              "Outstanding" means, when used in connection with promissory
       notes, other debt instruments or Advances, for a specified date,
       promissory notes or other debt instruments which have been issued, or
       Advances which have been made, but have not been repaid in full as of the
       specified date.

              "Ownership Interests" means, with respect to any entity, any
       ownership interests in the entity and any economic rights (such as a
       right to distributions, net cash flow or net income) to which the owner
       of such ownership interests is entitled.

              "PBGC" means the Pension Benefit Guaranty Corporation or any
       entity succeeding to any or all of its functions under ERISA.

                                       16

<PAGE>

              "Permits" means all permits, or similar licenses or approvals
       issued and/or required by an applicable Governmental Authority or any
       Applicable Law in connection with the ownership, use, occupancy, leasing,
       management, operation, repair, maintenance or rehabilitation of any
       Mortgaged Property or any Borrower's business.

              "Permitted Liens" means, with respect to a Mortgaged Property, (i)
       the exceptions to title to the Mortgaged Property set forth in the Title
       Insurance Policy for the Mortgaged Property which are approved by Lender,
       (ii) the Security Instrument encumbering the Mortgaged Property, (iii)
       Liens in respect of real estate taxes, assessments or governmental
       charges, which taxes, assessments or charges are not yet due and payable
       or which are being contested in good faith by Borrower and for which
       adequate security, in the reasonable judgment of Lender, has been posted
       with Lender or other entity reasonably acceptable to Lender, (iv) Liens
       arising in the ordinary course of business in respect of work performed
       on any of the Mortgaged Properties, which Liens are securing amounts not
       yet due and payable or are being contested in good faith by Borrower and
       for which adequate security, in the reasonable judgment of Lender, has
       been posted with Lender or other entity reasonably acceptable to Lender,
       and (v) any other Liens approved by Lender.

              "Person" means an individual, an estate, a trust, a corporation, a
       partnership, a limited liability company or any other organization or
       entity (whether governmental or private).

              "Potential Event of Default" means any event which, with the
       giving of notice or the passage of time, or both, would constitute an
       Event of Default.

              "Price" means, with respect to an Advance, the proceeds of the
       sale of the MBS backed by the Advance.

              "Property" means any estate or interest in any kind of property or
       asset, whether real, personal or mixed, and whether tangible or
       intangible.

              "Rate Form" means the completed and executed document from
       Borrower to Lender pursuant to Section 2.01(b), substantially in the form
       of Exhibit J to the Agreement, specifying the terms and conditions of the
       MBS to be issued for the requested Advance.

              "Rate Preservation Fee" means for any month, an amount equal to
       the product obtained by multiplying: (i) 1/12, by (ii) 12 basis points,
       by (iii) the Reserved Amount. The Rate Preservation Fee shall be paid
       monthly in arrears for so long as Borrower wishes to have a Reserved
       Amount.

              "Rate Setting Date" shall have the meaning set forth in Section
       2.01(b).

              "Recourse Termination Date" means the date on which (i) all
       Variable Advances have been repaid or converted to Fixed Advances, (ii) a
       Complete Variable Facility Termination has occurred, and (iii) Borrower
       has agreed in writing, as set forth in a

                                       17

<PAGE>

       Facility Termination Request, not to seek or accept any increase in the
       Variable Facility Commitment.

              "Release Documents" mean instruments releasing the applicable
       Security Instrument as a Lien on the Release Property, and UCC-3
       Termination Statements terminating the UCC-1 Financing Statements, and
       such other documents and instruments to evidence the release of the
       Release Property from the Collateral Pool.

              "Release Fee" means $5,000.

              "Release Property" means the Mortgaged Property to be released
       pursuant to Article 3.

              "Release Price" shall have the meaning set forth in Section
       3.04(c).

              "Release Request" means a written request, substantially in the
       form of Exhibit M to the Agreement, to obtain a release of Collateral
       from the Collateral Pool pursuant to Section 3.04(a).

              "Rent Roll" means, with respect to any Multifamily Residential
       Property, a rent roll prepared and certified by the owner of the
       Multifamily Residential Property, on Fannie Mae Form 4243, as set forth
       in Exhibit III-3 of the DUS Guide, or on another form approved by Lender
       and containing substantially the same information as Form 4243 requires.

              "Replacement Reserve Agreement" means a Replacement Reserve and
       Security Agreement, reasonably required by Lender, and completed in
       accordance with the requirements of the DUS Guide.

              "Request" means an Advance Request, an Addition Request, an
       Expansion Request, a Release Request, a Conversion Request, a Credit
       Facility Termination Request, or a Facility Termination Request.

              "Reserved Amount" means all or a portion of the amount by which
       Borrower may increase the Commitment pursuant to Article 4, in an amount
       designated in writing from time to time by the Borrower as the amount on
       which the Fixed Facility Fee and the Variable Facility Fee shall not
       increase in the event of an Expansion for so long as the Borrower timely
       pays the Rate Preservation Fee on such amount.

                  "Rollover Variable Advance" means a Variable Advance made
         solely to refinance an existing Variable Advance on the maturity date
         of such Variable Advance.

              "Security" means a "security" as set forth in Section 2(1) of the
       Securities Act of 1933, as amended.

              "Security Documents" means the Security Instruments, the
       Replacement Reserve Agreements and any other documents executed by
       Borrower and the Guarantor from time

                                       18

<PAGE>

       to time to secure any of Borrower's and the Guarantor's obligations under
       the Loan Documents.

              "Security Instrument" means, for each Mortgaged Property, a
       separate Multifamily Mortgage, Deed of Trust or Deed to Secure Debt,
       Assignment of Leases and Rents and Security Agreement given by a Borrower
       to or for the benefit of Lender to secure the obligations of Borrower
       under the Loan Documents. With respect to each Mortgaged Property owned
       by a Borrower, the Security Instrument shall be substantially in the form
       published by Fannie Mae for use in the state in which the Mortgaged
       Property is located. The amount secured by the Security Instrument shall
       be equal to the Commitment in effect from time to time.

              "Senior Management" means (i) the Chief Executive Officer,
       Chairman of the Board, President, Chief Financial Officer and Chief
       Operating Officer of Guarantor, and (ii) any other individuals with
       responsibility for any of the functions typically performed in a
       corporation by the officers described in clause (i).

              "Single-Purpose" means, with respect to a Person which is any form
       of partnership or corporation or limited liability company, that such
       Person at all times since its formation:

              (i)    has been a duly formed and existing partnership,
                     corporation or limited liability company, as the case may
                     be;

              (ii)   has been duly qualified in each jurisdiction in which such
                     qualification was at such time necessary for the conduct of
                     its business;

              (iii)  has complied with the provisions of its organizational
                     documents and the laws of its jurisdiction of formation in
                     all respects;

              (iv)   has observed all customary formalities regarding its
                     partnership or corporate existence, as the case may be;

              (v)    has accurately maintained its financial statements,
                     accounting records and other partnership or corporate
                     documents separate from those of any other Person (except
                     to the extent Borrower's income and other tax information
                     is reflected in the Federal Tax Return of the Guarantor);

              (vi)   has not commingled its assets or funds with those of any
                     other Person (except that the LLC may deposit rental
                     receipts collected from the Properties and Additional
                     Properties, if any, in the Member's regional depository
                     bank accounts established with Bank of America or other
                     national bank ("Member's Bank") and disbursements may be
                     made from the member's central disbursement account so long
                     as such deposits are accompanied by unique deposit slips
                     clearly identifying the Mortgaged Property from which such
                     rental receipts originated and Member's Bank provides to
                     the Member monthly bank statements separately identifying

                                       19

<PAGE>

                     the Mortgaged Property from which such deposits originated
                     and for which such disbursements were made);

              (vii)  has identified itself in all dealings with creditors (other
                     than trade creditors in the ordinary course of business and
                     creditors for the construction of improvements to property
                     on which such Person has a non-contingent contract to
                     purchase such property) under its own name and as a
                     separate and distinct entity;

              (viii) has been adequately capitalized in light of its
                     contemplated business operations;

              (ix)   has not assumed, guaranteed or become obligated for the
                     liabilities of any other Person (except in connection with
                     the Credit Facility or the endorsement of negotiable
                     instruments in the ordinary course of business) or held out
                     its credit as being available to satisfy the obligations of
                     any other Person;

              (x)    has not acquired obligations or securities of any other
                     Person;

              (xi)   in relation to a Borrower, except for loans made in the
                     ordinary course of business to Affiliates, has not made
                     loans or advances to any other Person;

              (xii)  has not entered into and was not a party to any transaction
                     with any Affiliate of such Person, except in the ordinary
                     course of business and on terms which are no less favorable
                     to such Person than would be obtained in a comparable
                     arm's-length transaction with an unrelated third Party;

              (xiii) has paid the salaries of its own employees, if any, and
                     maintained a sufficient number of employees in light of its
                     contemplated business operations; and

              (xiv)  has allocated fairly and reasonably any overhead for shared
                     office space.

              "SMSA" means a "standard metropolitan statistical area," as
       defined from time to time by the United States Office of Management and
       Budget.

              "Standby Fee" means, for any month, an amount equal to the product
       obtained by multiplying: (i) 1/12, by (ii) 12 basis points, by (iii) the
       Unused Capacity for such month.

              "Subsidiary" means, when used with reference to a specified
       Person, (i) any Person that, directly or indirectly, through one or more
       intermediaries, is controlled by the specified Person, (ii) any Person of
       which the specified Person is, directly or indirectly, the owner of more
       than 50% of any voting class of Ownership Interests or (iii) any Person
       (A) which is a partnership and (B) of which the specified Person is a
       general partner and owns more than 50% of the partnership interests.

                                       20

<PAGE>

              "Substitution Fee" means, with respect to any substitution
       effected in accordance with Section 3.05, the amount equal to the product
       obtained by multiplying (i) 45 basis points by (ii) 65% of the Initial
       Valuation of the Additional Mortgaged Property.

              "Surveys" means the as-built surveys of the Mortgaged Properties
       prepared in accordance with the requirements of Part III, Section 113 of
       the DUS Guide, or otherwise approved by Lender.

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

              "Term of this Agreement" shall be determined as provided in
       Section 17.10.

              "Termination Date" means, at any time during which Fixed Advances
       are Outstanding, the latest maturity date for any Fixed Advance
       Outstanding, and, at any time during which Fixed Advances are not
       Outstanding, the Variable Facility Termination Date.

              "Three-Month LIBOR" means the London interbank offered rate for
       three-month U.S. dollar deposits, as such rate is reported in The Wall
       Street Journal. In the event that a rate is not published for Three-Month
       LIBOR, then the nearest equivalent duration London interbank offered rate
       for U.S. Dollar deposits shall be selected at Lender's reasonable
       discretion. If the publication of Three-Month LIBOR is discontinued,
       Lender shall determine such rate from another equivalent source selected
       by Lender in its reasonable discretion.

              "Title Company" means First American Title Insurance Company.

              "Title Insurance Policies" means the mortgagee's policies of title
       insurance issued by the Title Company from time to time relating to each
       of the Security Instruments, conforming to the requirements of Part III,
       Section 111 of the DUS Guide, together with such endorsements,
       coinsurance, reinsurance and direct access agreements with respect to
       such policies as Lender may, from time to time, consider necessary or
       appropriate, whether or not required by the DUS Guide, including variable
       credit endorsements, if available, and tie-in Endorsements, if available,
       and with a limit of liability under the policy (subject to the
       limitations contained in sections of the Stipulations and Conditions of
       the policy relating to a Determination and Extent of Liability) equal to
       the Commitment.

              "Transfer" means

              (1) as used with respect to ownership interests in Borrower means
       (i) a sale, assignment, pledge, transfer or other disposition of any
       ownership interest in Borrower or Guarantor, or (ii) the issuance or
       other creation of new ownership interests in Borrower

                                       21

<PAGE>

       or Guarantor or in any entity that has a direct or indirect ownership
       interest in Borrower or Guarantor, or (iii) a merger or consolidation of
       Borrower, as the case may be, into another entity or of another entity
       into Borrower as the case may be, or (iv) the reconstitution of Borrower
       from one type of entity to another type of entity, or (v) the amendment,
       modification or any other change in the governing instrument or
       instruments of a Person which has the effect of changing the relative
       powers, rights, privileges, voting rights or economic interests of the
       ownership interests in such Person.

              (2) as used with respect to ownership interests in a Mortgaged
       Property means (i) a sale, assignment, lease, pledge, transfer or other
       disposition (whether voluntary or by operation of law) of, or the
       granting or creating of a lien, encumbrance or security interest in, any
       estate, rights, title or interest in a Mortgaged Property, or any portion
       thereof. Transfer does not include a conveyance of a Mortgaged Property
       at a judicial or non-judicial foreclosure sale under any security
       instrument or the Mortgaged Property becoming part of a bankruptcy estate
       by operation of law under the United States Bankruptcy Code.

              "Unused Capacity" means, for any month, the sum of the daily
       average during such month of the undrawn amount of the Commitment
       available under Article 1 of the Agreement for the making of Advances,
       without regard to any unclosed Requests or to the fact that a Request
       must satisfy conditions precedent.

              "Valuation" means, for any specified date, with respect to a
       Multifamily Residential Property, (a) if an Appraisal of the Multifamily
       Residential Property was more recently obtained than a Cap Rate for the
       Multifamily Residential Property, the Appraised Value of such Multifamily
       Residential Property, or (b) if a Cap Rate for the Multifamily
       Residential Property was more recently obtained than an Appraisal of the
       Multifamily Residential Property, the value derived by dividing--

              (i)    the Net Operating Income of such Multifamily Residential
                     Property, by

              (ii)   the most recent Cap Rate determined by Lender.

       Notwithstanding the foregoing, any Valuation for a Multifamily
       Residential Property calculated for a date occurring before the first
       anniversary of the date on which the Multifamily Residential Property
       becomes a part of the Collateral Pool shall equal the Appraised Value of
       such Multifamily Residential Property, unless Lender determines that
       changed market or property conditions warrant that the value be
       determined as set forth in the preceding sentence.

              "Variable Advance" means a loan made by Lender to Borrower under
       the Variable Facility Commitment.

              "Variable Facility" means the agreement of Lender to make Variable
       Advances to Borrower pursuant to Section 1.01.

                                       22

<PAGE>

              "Variable Facility Availability Period" means the period beginning
       on the Initial Closing Date and ending on the earlier of (i) the 90th day
       before the Variable Facility Termination Date and (ii) the Recourse
       Termination Date.

              "Variable Facility Commitment" means an aggregate amount of
       $100,000,000 which shall be evidenced by the Variable Facility Note in
       the form attached hereto as Exhibit C, plus such amount as Borrower may
       elect to add to the Variable Facility Commitment in accordance with
       Article 4, less such amount as Borrower may elect to convert from the
       Variable Facility Commitment to the Fixed Facility Commitment in
       accordance with Section 1.08, and less such amount by which Borrower may
       elect to reduce the Variable Facility Commitment in accordance with
       Article 5.

              "Variable Facility Fee" means (i) 65 basis points per annum
       (0.65%) for a Variable Advance drawn from the Variable Facility
       Commitment in effect on or prior to the First Anniversary (whether or not
       drawn by such date) or for any Variable Advance drawn from any portion of
       the Variable Facility Commitment excluding the Reserved Amount increased
       pursuant to Article 4 after the period ending on the First Anniversary,
       the number of basis points per annum determined at the time of such
       increase by Lender as the Variable Facility Fee for such Variable
       Advance.

              "Variable Facility Note" means the promissory note, in the form
       attached as Exhibit C to the Agreement, which has been issued by Borrower
       to Lender to evidence Borrower's obligation to repay Variable Advances.

              "Variable Facility Termination Date" means the date five years
       after the Initial Closing Date unless extended pursuant to Section 1.07.

                                       23

<PAGE>

                  EXHIBIT A TO MASTER CREDIT FACILITY AGREEMENT

                    SCHEDULE OF INITIAL MORTGAGED PROPERTIES

           Property Name              Property Address
       ---------------------       ------------------------------
       Pinnacle Sonata             23940 40th Drive, S.E.
                                   Bothell, Washington 98021
       Pinnacle at Blue Ravine     1005 Blue Ravine Road
                                   Folsom, California 95630
       Pinnacle at the Creek       6107 South Parker
                                   Aurora, Colorado 80016
       Sun Pointe Village          39451 Gallaudet Drive
                                   Fremont, California 94538
       The Summit                  2400 Ridge View Drive
                                   Chino Hills, California 91709

                                       A-1

<PAGE>

                  EXHIBIT B TO MASTER CREDIT FACILITY AGREEMENT

                               FIXED FACILITY NOTE

US $____________                                                __________, 20__

       FOR VALUE RECEIVED, the undersigned (the "Borrower") promises to pay to
the order of PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation
("Lender") the principal sum of _______________________________ AND NO/100
DOLLARS (US $____________), with interest on the unpaid principal balance at the
annual rate of percent ( %).

       This Note is executed and delivered by Borrower pursuant to that certain
Master Credit Facility Agreement, dated as of May 2, 2003 by and between
Borrower and Lender (as amended from time to time, the "Master Agreement"), to
evidence the obligation of Borrower to repay a Fixed Advance made by Lender to
Borrower in accordance with the terms of the Master Agreement. This Note is
entitled to the benefit and security of the Loan Documents provided for in the
Master Agreement, to which reference is hereby made for a statement of all of
the terms and conditions under which the Fixed Advance evidenced hereby is made.

       1.     Defined Terms. As used in this Note, (i) the term "Lender" means
the holder of this Note, and (ii) the term "Indebtedness" means the principal
of, interest on, or, to the extent in respect hereof, any other amounts due at
any time under, this Note, the Security Instruments or any other Loan Document,
including prepayment premiums, late charges, default interest, and advances to
protect the security of the Security Instruments under Section 12 of the
Security Instruments. Event of Default and other capitalized terms used but not
defined in this Note shall have the meanings given to such terms in the Master
Agreement or, if not defined in the Master Agreement, as defined in the Security
Instruments (as defined in Paragraph 5).

       2.     Address for Payment. All payments due under this Note shall be
payable at Prudential Multifamily Mortgage, Inc., a Delaware corporation, c/o
Prudential Asset Resources, 2200 Ross Avenue, Suite 4200E, Dallas, Texas 75201,
or such other place as may be designated by written notice to Borrower from or
on behalf of Lender.

       3.     Payment of Principal and Interest. Principal and interest shall be
paid as follows:

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

                                                                             B-1

<PAGE>

       (b)    Consecutive monthly installments of principal and interest, each
in the amount of ______________________________________ Dollars (US $ ), shall
be payable on the first day of each month beginning on _________________, until
the entire unpaid principal balance evidenced by this Note is fully paid. Any
accrued interest remaining past due for 30 days or more shall be added to and
become part of the unpaid principal balance and shall bear interest at the rate
or rates specified in this Note, and any reference below to "accrued interest"
shall refer to accrued interest which has not become part of the unpaid
principal balance. Any remaining principal and interest shall be due and payable
on _______________, 20__ or on any earlier date on which the unpaid principal
balance of this Note becomes due and payable, by acceleration or otherwise (the
"Maturity Date"). The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.

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

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

       5.     Intentionally Omitted.

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

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

                                                                             B-2

<PAGE>

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

       9.     Limits on Personal Liability.

       The provisions of Article 15 of the Master Agreement (entitled "Limits on
Personal Liability") are hereby incorporated into this Note by this reference to
the fullest extent as if the text of such Article were set forth in its entirety
herein.

       10.    Voluntary and Involuntary Prepayments.

       [USE IF YIELD MAINTENANCE IS SELECTED]

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

              (1)    Borrower may voluntarily prepay all (but not less than all)
       of the unpaid principal balance of this Note on the last Business Day of
       a calendar month if Borrower has given Lender at least 30 days prior
       notice of its intention to make such prepayment. Such prepayment shall be
       made by paying (A) the amount of principal being prepaid, (B) all accrued
       interest, (C) all other sums due Lender under this Note and otherwise due
       and payable in connection with such prepayment under the other Loan
       Documents at the time of such prepayment, and (D) the prepayment premium
       calculated pursuant to Schedule A. For all purposes, including the
       accrual of interest, any prepayment received by Lender on any day other
       than the last calendar day of the month shall be deemed to have been

                                                                             B-3

<PAGE>

       received on the last calendar day of such month. For purposes of this
       Note, a "Business Day" means any day other than a Saturday, Sunday or any
       other day on which Lender is not open for business.

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

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

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

              (c)    Schedules A and B are hereby incorporated by reference into
this Note.

              (d)    Any required prepayment of less than the unpaid principal
balance of this Note shall be applied to the final payment due in respect of
this Note and shall not extend or postpone the due date of any other monthly
installments or change the amount of such installments, unless Lender agrees
otherwise in writing.

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

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

                                                                             B-4

<PAGE>

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

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

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

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

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

                                                                             B-5

<PAGE>

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

       17.    Governing Law; Consent to Jurisdiction and Venue; WAIVER OF TRIAL
BY JURY. The provisions of Section 17.06 of the Master Agreement (entitled
"Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial") are hereby
incorporated into this Note by this reference to the fullest extent as if the
text of such Section were set forth in its entirety herein.

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

       19.    Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 17.08 of the Master Agreement.

       20.    Security for this Note. The indebtedness evidenced by this Note is
secured by the Security Documents executed by Borrower or its Affiliates.
Reference is made hereby to the Master Agreement and the Security Documents for
additional rights and remedies of Lender relating to the indebtedness evidenced
by this Note. Each Security Document shall be released in accordance with the
provisions of the Master Agreement and the Security Documents.

       21.    Fixed Facility. This Note is issued as part of the Fixed Facility
established in accordance with the terms of the Master Agreement. Borrower may
not re-borrow any amounts under this Note which it has previously borrowed and
repaid under this Note.

       22.    Cross-Default with Master Agreement. The occurrence of an Event of
Default under the Master Agreement shall constitute an "Event of Default" under
this Note, and, accordingly, upon the occurrence of an Event of Default under
the Master Agreement, the entire principal amount outstanding hereunder and
accrued interest thereon shall at once become due and payable, at the option of
the holder hereof.

                  [Remainder of page intentionally left blank]

                                                                             B-6

<PAGE>

       IN WITNESS WHEREOF, Borrower has signed and delivered this Note under
seal or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                                                             B-7

<PAGE>

       Pay to the order of ________________________________________, without
recourse.

                                     PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a
                                     Delaware corporation

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

                                                                             B-8

<PAGE>

       ATTACHED SCHEDULES. The following Schedules are attached to this Note:

       [ X ]         Schedule A     Prepayment Premium (required)

       [ X ]         Schedule B     Modifications to Multifamily Note

                                                                             B-9

<PAGE>

                         [USE IF DEFEASANCE IS SELECTED]

                                   SCHEDULE A

                               PREPAYMENT PREMIUM

       No prepayment premium shall be payable in connection with a prepayment of
this Note after the end of the Lockout Period (as defined in Schedule B to this
Note).

                                                                            B-10

<PAGE>

                     [USE IF YIELD MAINTENANCE IS SELECTED]

                                   SCHEDULE A

                               PREPAYMENT PREMIUM

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

       If the prepayment is made during the period ending on the first day of
       the last three months of the term of the Note (the "Fixed Loan Yield
       Maintenance Period"), the prepayment premium shall be the greater of (i)
       1% of the unpaid principal balance of this Note; or (ii) the product
       obtained by multiplying:

              (A)    the amount of principal being prepaid,

              by

              (B)    the difference obtained by subtracting from the interest
                     rate on this Note the yield rate on the ____% U.S. Treasury
                     Security due ________________(the "Yield Rate"), as the
                     Yield Rate is reported in The Wall Street Journal on the
                     thirtieth (30th) day (or, if such day is not a day on which
                     The Wall Street Journal is published, then on the next
                     succeeding day on which The Wall Street Journal is
                     published) preceding (x) the date notice of prepayment is
                     given to Lender where prepayment is voluntary, or (y) the
                     date Lender accelerates the Loan,

              by

              (C)    the present value factor calculated using the following
                     formula:

                                  1 - (1 + r)[POWER OF -n]
                                  -------------
                                         r

                                  [r =    Yield Rate

                                   n =    the number of years, and any fraction
                                          thereof, remaining between the
                                          Prepayment Date and the expiration of
                                          the Yield Maintenance Period]

                     For purposes of subparagraph (ii)(C), the "Prepayment Date"
                     shall be (x) in the case of a voluntary prepayment, the
                     date on which the prepayment is made, and (y) in any other
                     case, the date on which Lender accelerates the unpaid
                     principal balance of this Note.

                                                  INITIAL(S)

                                                  ----------

                                                                            B-11

<PAGE>

                         [USE IF DEFEASANCE IS SELECTED]

                                   SCHEDULE B

                      MODIFICATIONS TO FIXED FACILITY NOTE

       The Fixed Facility Note dated ___________, 20___, in the original
principal amount of $____________ (the "Note") issued by
_____________________________, a _____________________________ ("Borrower"), and
payable to the order of PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware
corporation ("Lender") is hereby amended as follows:

       1.     Defeasance. Notwithstanding Paragraph 10 of this Note, Advances
are not prepayable at any time, provided that, notwithstanding the foregoing,
the Borrower may prepay the amount Outstanding with respect to the Facility
during the period ending on the date ninety (90) days preceding the Facility
Termination Date (the "Lockout Period") and the Borrower may provide for the
Defeasance of all (but not less than all) of the Advances Outstanding pursuant
to the terms and conditions of this Section 1 in connection with the release of
Mortgaged Properties in conformance with Section 6.05 of the Master Agreement.

              (a)    Conditions. Subject to Section 1(d), the Borrower shall
       have the right to obtain the release of all the Mortgaged Properties from
       the lien of the related Security Instruments upon the satisfaction of all
       of the following conditions:

                     (1)    Defeasance Notice. At the request of the Borrower,
              the Lender shall deliver to Borrower a notice (the "Defeasance
              Notice"), specifying: (i) a Business Day, not more than 45
              calendar days nor less than 30 calendar days after the date on
              which the Defeasance Notice is delivered by Lender (the
              "Defeasance Closing Date"), on which the Defeasance shall be
              consummated; (ii) the Mortgaged Property or Properties proposed to
              be released and the related Allocable Facility Amount (the
              "Defeased Amount");(iii) whether the Borrower will use U.S.
              Treasury Securities to effect the Defeasance or that the Lender
              will on the Borrower's behalf seek to obtain a commitment for a
              Fannie Mae Investment Security to effect the Defeasance; and (iv)
              whether, if Treasury Securities are to be used to effect the
              Defeasance, the Successor Borrower will be designated by the
              Borrower or Lender. Within five (5) Business Days of receipt after
              Defeasance Notice, the Borrower shall, if it wishes to proceed
              with the transaction described in the Defeasance Notice, sign the
              Defeasance Notice and return it to the Lender.

                     (2)    Lender Confirmation. With reasonable promptness, the
              Lender shall determine whether Defeasance is then permitted as
              provided in Section 1(d), whether the terms of the Defeasance
              Notice are reasonably acceptable to it and, if requested to do so
              by the Defeasance Notice, shall obtain from Fannie Mae a
              commitment to issue a Fannie Mae Investment Security to effect the
              Defeasance.

                                                                            B-12

<PAGE>

              Lender shall, thereupon, notify the Borrower of its determination
              and, if it is able to obtain a commitment from Fannie Mae to issue
              a Fannie Mae Investment Security to effect the Defeasance, the
              price of such Fannie Mae Investment Security. After Lender
              notifies the Borrower of the availability of a Fannie Mae
              Investment Security in accordance with the foregoing, the Borrower
              will have one (1) Business Day to accept such commitment and to
              pay the related Defeasance Commitment Fee.

                     (3)    Closing Documents. The Borrower shall deliver to
              Lender on or before the Defeasance Closing Date the documents
              described in Section 1(b).

                     (4)    U.S. Treasury Securities; Defeasance Deposit. If
              U.S. Treasury Securities will be used to effect the Defeasance,
              then, on the Defeasance Closing Date, the Borrower shall cause the
              applicable U.S. Treasury Securities to be delivered pursuant to
              the Pledge Agreement referred to below. If a Fannie Mae Investment
              Security will be used to effect the Defeasance, then, on or before
              3:00 p.m., Washington, D.C. time, on the Defeasance Closing Date,
              the Borrower shall pay the Defeasance Deposit (reduced by the
              Defeasance Commitment Fee) to, or as directed by, Lender to be
              used by Lender to purchase the Fannie Mae Investment Security as
              the Borrower's agent.

                     (5)    Additional Amounts Payable by the Borrower. On or
              before the Defeasance Closing Date, the Borrower shall pay to
              Lender, in addition to the U.S. Treasury Securities or the
              Defeasance Deposit (reduced by the Defeasance Commitment Fee), an
              amount equal to the sum of:

                            (A)    The Next Scheduled P&I Payment; and

                            (B)    all reasonable costs and expenses incurred by
                     Lender in connection with the Defeasance, including the
                     fees and disbursements of Lender's legal counsel.

                     (6)    Covenants, Representations and Warranties. On the
              Defeasance Closing Date, the Borrower shall be in compliance with
              all the covenants of the Borrower set forth in Articles 14, 15, 16
              and 20 of the Master Agreement and all the representations and
              warranties of the Borrower set forth in Articles 12 and 13 (solely
              with respect to Mortgaged Properties that continue to be security
              for the balance of the Facility) of the Master Agreement shall be
              true and correct in all material respects as if made on such
              Defeasance Closing Date.

              (b)    Closing Documents. The documents required to be delivered
       to Lender on or before the Defeasance Closing Date pursuant to Section
       1(a)(3) are:

              (1)    A pledge and security agreement, in form and substance
       satisfactory to Lender in its sole discretion (the "Pledge Agreement"),
       creating a first priority perfected security interest in favor of Lender
       in the U.S. Treasury Securities or Fannie Mae Investment Security to be
       used to effect the Defeasance and authorizing and directing that

                                                                            B-13

<PAGE>

       all amounts paid with respect to the U.S. Treasury Securities be applied
       to make Defeased Payments due with respect to the Defeased Amount.

              (2)    An assignment and assumption agreement (the "Assignment and
       Assumption Agreement"), in form and substance satisfactory to Lender,
       executed by the Borrower and a successor entity (the "Successor
       Borrower"), designated by Lender or Borrower as provided in the
       Defeasance Notice and acceptable to Lender in its sole discretion,
       providing for (i) the transfer and assignment by the Borrower to
       Successor Borrower of the U.S. Treasury Securities, subject to the lien
       and security interest in favor of Lender, (ii) the assumption by
       Successor Borrower of all liabilities and obligations of the Borrower
       with respect to the Defeased Amount and (iii) the release by Lender of
       the Borrower from all liabilities and obligations with respect to the
       Defeased Amount. The Lender shall execute the Assignment and Assumption
       Agreement for the purpose of acknowledging the release of the Borrower's
       obligations with respect to the Defeased Amount and return a counterpart
       to the Borrower and Successor Borrower; provided, however, that such
       acknowledgement shall not be a condition to the Defeasance

              (3)    An opinion of counsel for the Borrower, in form and
       substance satisfactory to Lender, to the effect that (i) Lender has a
       valid and perfected lien and security interest of first priority in the
       U.S. Treasury Securities or Fannie Mae Investment Security and the
       proceeds thereof; (ii) the Pledge Agreement and the Assignment and
       Assumption Agreement have been duly authorized and validly executed and
       delivered by the Borrower and the Successor Borrower; and (iii) the
       Defeasance, including the granting to Lender by both the Borrower and the
       Substitute Borrower of a lien and security interest in the U.S. Treasury
       Securities or Fannie Mae Investment Security used to effect the
       Defeasance, is not subject to avoidance under any applicable federal or
       state laws, including Sections 547 and 548 of the U.S. Bankruptcy Code.

              (4)    Unless waived by Lender:

                     (A)    a certificate in form and substance satisfactory to
              Lender, issued by an independent certified public accountant, or
              financial consultant or other person approved by Lender, to the
              effect that the payments on U.S. Treasury Securities or Fannie Mae
              Investment Security used to effect the Defeasance due, on or
              before each date on which a Defeased Payment is due, are not less
              than such Defeased Payment;

                     (B)    an opinion of counsel for the Borrower in form and
              substance satisfactory to Lender, that the Defeasance will not
              result in a "sale or exchange" within the meaning of Section
              1001(c) of the Internal Revenue Code and the temporary and final
              regulations promulgated thereunder; and

                     (C)    such other opinions, certificates, documents or
              instruments as Lender may reasonably request.

       (c)    Release. Upon the Borrower's compliance with the requirements of
Sections 1(a) and (b), the Mortgaged Properties shall be released from the lien
of the Security Instruments.

                                                                            B-14

<PAGE>

Lender shall, with reasonable promptness, execute and deliver to the Borrower,
at the Borrower's cost and expense, any additional documents reasonably
requested by the Borrower in order to evidence or confirm the release of the
Security Instruments.

       (d)    Defeasance Not Allowed. The Borrower shall not have the right to
obtain a Defeasance at any of the following times:

              (1)    before the third anniversary of the Initial Closing Date;
       or

              (2)    after Lender has accelerated the maturity of the unpaid
       principal balance of, accrued interest on, and other amounts payable with
       respect to the Advances.

       (e)    Agent. If a Fannie Mae Investment Security is to be used to effect
the Defeasance, the Borrower authorizes Lender to use, and appoints Lender as
its agent and attorney-in-fact for the purpose of using, the Defeasance Deposit
(including any portion thereof that constitutes the Defeasance Commitment Fee)
to purchase a Fannie Mae Investment Security and to deliver such Fannie Mae
Investment Security to itself in satisfaction of the Allocable Facility Amount
to be defeased.

       (f)    Administrative Provisions.

              (1)    Fannie Mae Investment Security Liquidated Damages. If,
       after accepting a commitment from the Lender to provide a Fannie Mae
       Investment Security, the Borrower fails to perform its obligations under
       Sections 1(a) and 1(b), Lender shall have the right to retain any
       Defeasance Commitment Fee as liquidated damages for the Borrower's
       default, as Lender's sole and exclusive remedy with respect to its
       expenses in obtaining from Fannie Mae a commitment to issue the Fannie
       Mae Investment Security, and, except as provided in Section 1(f)(2), the
       Borrower shall be released from all further obligations under this
       Section 1 with respect to such Defeasance Notice. The Borrower
       acknowledges that, from and after the date on which Lender has delivered
       the Defeasance Commitment Fee, Lender will incur financing costs in
       obtaining a commitment for the issuance of the Fannie Mae Investment
       Security and agrees that the Defeasance Commitment Fee represents a fair
       and reasonable estimate, taking into account all circumstances existing
       on the date of the Master Agreement, of the damages (other than third
       party costs referred to in Section 1(f)(2)) Lender will incur by reason
       of the Borrower's default.

              (2)    Third Party Costs. The Borrower agrees to reimburse Lender
       for all reasonable third party costs and expenses, including attorneys'
       fees and expenses, incurred by Lender in reliance on the Defeasance
       Notice, within ten (10) Business Days after the Borrower receives a
       written demand for payment, accompanied by a statement, in reasonable
       detail, of Lender's third party costs and expenses.

              (3)    Payments. All payments required to be made by the Borrower
       to Lender pursuant to this Section 1 shall be made by wire transfer of
       immediately available finds to the account(s) designated by Lender.

                                                                            B-15

<PAGE>

       (g)    Definitions. For purposes of this Section 1, the following terms
shall have the following meanings:

              (1)    "Defeasance" means a transaction in which a Mortgaged
       Property or Mortgaged Properties designated by the Borrower in a
       Defeasance Notice are released from the lien of the related Security
       Instruments and Lender receives either (i) a Fannie Mae Investment
       Security or (ii) a valid and perfected lien and security interest of
       first priority in the U.S. Treasury Securities the payments on which, in
       either case, are sufficient, without reinvestment, to make, on a timely
       basis, the Defeased Payments with respect to the Allocable Facility
       Amount for the designated Mortgaged Properties.

              (2)    "Defeasance Commitment Fee" means, if the Borrower elects
       to accept a commitment to issue a Fannie Mae Investment Security, two
       percent (2%) of the Allocable Facility Amount to be defeased. No
       Defeasance Commitment Fee will be applicable if U.S. Treasury Securities
       are specified in the Defeasance Notice as the applicable Investment
       Security.

              (3)    "Defeasance Deposit" means an amount sufficient to provide
       for the purchase of the Fannie Mae Investment Security.

              (4)    "Defeased Payment" means the amount of each regularly
       scheduled monthly payment due and payable with respect to the Allocable
       Facility Amount for a Mortgaged Property or Mortgaged Properties to be
       released pursuant to this Section 1 during the period beginning on the
       first day of the second calendar month after the Defeasance Closing Date
       and ending on the Facility Termination Date, including the amount that
       would constitute the aggregate unpaid principal balance of such Allocable
       Facility on the Facility Termination Date if all prior Defeased Payments
       were paid on their due dates.

              (5)    "Fannie Mae Investment Security" means any bond, debenture,
       note, participation certificate or other similar obligation issued by
       Fannie Mae for the purpose of providing for the Defeasance of any
       Allocable Facility Amount..

              (6)    "Next Scheduled P&I Payment" means an amount equal to the
       monthly installment of principle and interest due under the Note subject
       to Defeasance on the first calendar month after the Defeasance Closing
       Date.

              (7)    "U.S. Treasury Securities" means direct, non-callable and
       non-redeemable obligations of the United States of America.

       2.     Upon Lender's exercise, at any time during the Lockout Period, of
any right of acceleration of this Note, Borrower shall pay the following amounts
to Lender:

       (A)    all sums due Lender under this Note and the other Loan Documents
              (other than the unpaid principal balance of the Note which is
              included as a part of 2(B) below; and

       (B)    an amount equal to the greater of:

                                                                            B-16

<PAGE>

                     (i)    the Defeasance Deposit that would be payable by
              Borrower to Lender if the Defeasance Deposit were calculated on
              the Business Day before the date on which Lender accelerates this
              Note (and assuming that the "Defeasance Closing Date" defined in
              the Master Agreement is the date Lender accelerates the Note),
              plus the next scheduled payment of principal and interest due in
              the month following the month Lender accelerates this Note, or

                     (ii)   all accrued interest and the unpaid principal
              balance of this Note as of the Business Day before the date on
              which Lender accelerates this Note.

       3.     Paragraph 5 of this Note is amended by adding a paragraph at the
end thereof to read as follows:

              "If Borrower obtains a release of the Mortgaged Property from the
       lien of the Security Instrument pursuant to Section 1 of this Schedule B,
       the Indebtedness shall be secured by the Pledge Agreement, and reference
       shall be made to the Pledge Agreement for other rights of Lender
       concerning the collateral for the Indebtedness."

                                                  INITIALS

                                                  --------

                                                                            B-17

<PAGE>

                  EXHIBIT C TO MASTER CREDIT FACILITY AGREEMENT

                             VARIABLE FACILITY NOTE

US $__________________                                           _________, 20__

       FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation, the
principal sum of _________________________ Dollars and 00/100 Dollars (US
$________________________), or so much as shall be Outstanding from time to
time, with interest thereon at an annual rate as calculated in Section 3 hereof.

       This Note is executed and delivered by Borrower pursuant to that certain
Master Credit Facility Agreement, dated as of May 2, 2003, by and between
Borrower and Lender (as amended from time to time, the "Master Agreement"), to
evidence the obligation of Borrower to repay Variable Advances made by Lender to
Borrower in accordance with the terms of the Master Agreement. This Note is
entitled to the benefit and security of the Loan Documents provided for in the
Master Agreement, to which reference is hereby made for a statement of all of
the terms and conditions under which the Variable Advances evidenced hereby is
made. The Master Agreement requires certain of the terms of each Variable
Advance to be evidenced by an Advance Confirmation Instrument, and reference is
hereby made to each such Advance Confirmation Instrument for such terms.

       This Note is issued as part of a Variable Facility established in
accordance with the terms of the Master Agreement. Subject to the terms,
conditions and limitations of Article 1 of the Master Agreement, Borrower may
re-borrow any amounts under this Note which they have previously borrowed and
repaid under this Note.

       1.     Defined Terms. As used in this Note, (i) the term "Lender" means
the holder of this Note, and (ii) the term "Indebtedness" means the principal
of, interest on, or any other amounts due at any time under, this Note, and, to
the extent in respect hereof, the Security Instruments or any other Loan
Document, including prepayment premiums, late charges, default interest, and
advances to protect the security of the Security Instruments under Section 12 of
the Security Instruments. Event of Default and other capitalized terms used but
not defined in this Note shall have the meanings given to such terms in the
Master Agreement or, if not defined in the Master Agreement, as defined in the
Security Instruments (as defined in Paragraph 5).

       2.     Address for Payment. All payments due under this Note shall be
payable at Prudential Multifamily Mortgage, Inc., a Delaware corporation, c/o
Prudential Asset Resources, 2200 Ross Avenue, Suite 4200E, Dallas, Texas 75201,
or such other place as may be designated by written notice to Borrower from or
on behalf of Lender.

                                                                             C-1

<PAGE>

       3.     Payment of Principal and Interest. Principal and interest shall be
paid as follows:

       (a)    This Note shall evidence Variable Advances made from time to time
under the Master Agreement. Each Variable Advance shall bear interest at a rate
determined in accordance with Section 2.01 of the Master Agreement.

       (b)    Except as otherwise provided in Section 1.04(b) of the Master
Agreement, Borrower shall pay imputed interest on each Variable Advance in
advance in the form of a Discount in accordance with Section 1.04(b) of the
Master Agreement (except that Borrower shall pay actual interest on the Variable
Advance for the partial month period, if any, in accordance with Section 1.04(a)
of the Master Agreement). If not sooner paid, the entire principal amount (which
amount shall not include the Discount, which Discount is paid in advance) of
each Variable Advance shall be due and payable on the maturity date of the
applicable Variable Advance (the "Maturity Date") in accordance with Section
1.03 of the Master Agreement. In addition to payment of principal and the
Discount, Borrower shall pay the Variable Facility Fee due on each Variable
Advance in accordance with Section 1.04(b)(ii) of the Master Agreement. No
Variable Advance may have a Maturity Date later than, and any then outstanding
Variable Advance shall be due and payable in full on, the related Variable
Facility Termination Date.

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

       5.     Security. The Indebtedness is secured, among other things, by the
Security Instruments described in the Master Agreement and reference is made to
the Security Instruments for other rights of Lender concerning the collateral
for the Indebtedness.

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

       7.     Late Charge. If any monthly amount payable under this Note or
under the Security Instrument or any other Loan Document is not received by
Lender within 10 days after the amount is due, Borrower shall pay to Lender,
immediately and without demand by Lender, a late charge equal to 5 percent of
such amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to

                                                                             C-2

<PAGE>

determine those additional expenses. Borrower agrees that the late charge
payable pursuant to this Paragraph represents a fair and reasonable estimate,
taking into account all circumstances existing on the date of this Note, of the
additional expenses Lender will incur by reason of such late payment. The late
charge is payable in addition to, and not in lieu of, any interest payable at
the Default Rate pursuant to Paragraph 8.

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

       9.     Limits on Personal Liability.

       The provisions of Article 15 of the Master Agreement (entitled "Limits on
Personal Liability") are hereby incorporated into this Note by this reference to
the fullest extent as if the text of such Article were set forth in its entirety
herein.

       10.    Voluntary and Involuntary Prepayments.

              Pursuant to the terms of the Master Agreement, Borrower shall pay
the entire amount of the Discount on any Variable Advance in advance.
Accordingly, any Variable Advance may be prepaid in whole or in part and at any
time without penalty. Borrower shall give Lender five Business Days advance
notice of any prepayment.

       11.    Costs and Expenses. Borrower shall pay on demand all reasonable
expenses and costs, including reasonable fees and out-of-pocket expenses of
attorneys and expert witnesses and costs of investigation, incurred by Lender as
a result of any default under this Note or in

                                                                             C-3

<PAGE>

connection with efforts to collect any amount due under this Note, or to enforce
the provisions of any of the other Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including any
action for relief from the automatic stay of any bankruptcy proceeding) or
judicial or non-judicial foreclosure proceeding.

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

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

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

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

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

                                                                             C-4

<PAGE>

       17.    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. The
provisions of Section 17.06 of the Master Agreement (entitled "Choice of Law;
Consent to Jurisdiction; Waiver of Jury Trial") are hereby incorporated into
this Note by this reference to the fullest extent as if the text of such Section
were set forth in its entirety herein.

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

       19.    Notices. All notices, demands and other communications required or
permitted to be given by Lender to Borrower pursuant to this Note shall be given
in accordance with Section 17.08 of the Master Agreement.

       20.    Cross-Default with Master Agreement. The occurrence of an Event of
Default under the Master Agreement shall constitute an "Event of Default" under
this Note, and, accordingly, upon the occurrence of an Event of Default under
the Master Agreement, the entire principal amount outstanding hereunder and
accrued interest thereon shall at once become due and payable, at the option of
the holder hereof.

       21.    Advance Confirmation Instruments; Accounting for Variable
Advances. The terms of the Master Agreement and this Note govern the repayment,
and all other terms relating to each Variable Advance. However, Borrower shall
execute an Advance Confirmation Instrument to create a physical instrument
evidencing the Variable Advance. The Advance Confirmation Instrument for a
Variable Advance executed by Borrower in accordance with Section 2.02 of the
Master Agreement shall set forth the amount, term, Discount, Closing Date and
certain other terms of the Variable Advance. The Advance Confirmation Instrument
shall conclusively establish each of the terms described in the preceding
sentence, absent manifest error. The Variable Advance evidenced by the Advance
Confirmation Instrument does not represent a separate indebtedness from that
evidenced by this Note. In making proof of this Note, no other documents other
than this Note shall be required. In making proof of the amount and terms of the
outstanding Variable Advances under this Note, this Note, the Advance
Confirmation Instruments for the Variable Advances, and Lender's records
concerning payments made by Borrower under this Note, shall be conclusive
evidence of the terms and outstanding amounts of each Variable Advance, absent
manifest error.

       23.    Priority of Advances. Each Variable Advance under this Note shall
be evidenced by an Advance Confirmation Instrument, and the lien of each
Security Document executed by Borrower from time to time to secure this Note,
shall secure each separate Advance (and the lien of each Security Instrument and
other Security Document executed by Borrower to secure its obligations under the
Loan Documents) to the same extent and with the same effect as if the Advance
had been made (and any guaranty obligation had been incurred) on the date on
which (i) with respect to each other Security Instrument, the Security
Instrument is recorded in the land records of the jurisdiction in which the real
property covered by the Security Instrument is located, or (ii) with respect to
each other Security Document, the date on which the Security Document is
executed and delivered to Lender.

                                                                             C-5

<PAGE>

       IN WITNESS WHEREOF, Borrower has signed and delivered this Note under
seal or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                                                             C-6

<PAGE>

       Pay to the order of ________________________________________, without
recourse.

                                     PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a
                                     Delaware corporation

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

                                                                             C-7

<PAGE>

                  EXHIBIT D TO MASTER CREDIT FACILITY AGREEMENT

                             [INTENTIONALLY OMITTED]

                                                                             D-1

<PAGE>

                 EXHIBIT E TO MASTER CREDIT FACILITY AGREEMENT

                             [INTENTIONALLY OMITTED]

                                                                             E-1

<PAGE>

                  EXHIBIT F TO MASTER CREDIT FACILITY AGREEMENT

                             COMPLIANCE CERTIFICATE

       The undersigned ("Borrower") hereby certify to PRUDENTIAL MULTIFAMILY
MORTGAGE, INC., a Delaware corporation ("Lender") and Fannie Mae as follows:

       Section 1. Master Agreement. Borrower is a party to that certain Master
Credit Facility Agreement, dated as of May 2, 2003 by and between Borrower and
Lender (as amended from time to time, the "Master Agreement"). The rights of
Lender under the Master Agreement have been assigned to Fannie Mae. This
Certificate is issued pursuant to the terms of the Master Agreement.

       Section 2. Satisfaction of Conditions. Borrower hereby represents,
warrants and covenants to Lender that all conditions to the Request with respect
to which this Certificate is issued have been satisfied.

       Section 3. Capitalized Terms. All capitalized terms used but not defined
in this Certificate shall have the meanings ascribed to such terms in the Master
Agreement.

Dated:
       --------------

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                                                             F-1

<PAGE>

                 EXHIBIT G-1 TO MASTER CREDIT FACILITY AGREEMENT

                           ORGANIZATIONAL CERTIFICATE
                                    (FOR LLC)

       I, the undersigned, _______________, hereby certify as follows:

       Section 1. Position. I am the __________________ of BRE PROPERTIES, INC.,
a Maryland corporation, the sole member of BRE-FMCF, LLC, a Delaware limited
liability company ("Borrower"), and I am authorized to deliver this Certificate
on behalf of Borrower.

       Section 2. Master Agreement. Borrower entered into that certain Master
Credit Facility Agreement, dated as of May 2, 2003, by and between Borrower and
PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation ("Lender"), and
others (as amended from time to time, the "Master Agreement"). The rights of
Lender under the Master Agreement have been assigned to Fannie Mae. This
Certificate is issued pursuant to the terms of the Master Agreement.

       Section 3. Due Authorization of Request. I hereby certify that no action
by the members of Borrower is necessary to duly authorize the execution and
delivery of, and the consummation of the transaction contemplated by the Request
with respect to which this Certificate is delivered, or, if necessary, that
attached as Exhibit A to this Certificate is a true copy of resolutions duly
adopted at a meeting of the board of directors, partners or members, as the case
may be, or written consent in lieu thereof, that authorize the action. Any such
resolutions are in full force and effect and are unmodified as of the date of
this Certificate.

       Section 4. No Changes. Since the date of the most recent Organizational
Certificate delivered to Lender, or, if there are none, since the date of the
Master Agreement, there have been no changes in any of the Organizational
Documents of Borrower, except as set forth in Exhibit B to this Certificate, and
Borrower remains in good standing or are duly qualified in the jurisdictions in
which it is required to be in good standing or duly qualified under the terms of
the Master Agreement.

      [Section 5. Incumbency Certificate. One or more of the persons authorized
to execute and deliver any documents required to be delivered in connection with
the Request are set forth on the attached Schedule. USE ONLY FOR INITIAL ADVANCE
AND REQUESTS INVOLVING NEW BORROWER OR IF BORROWER NEEDS TO CHANGE AUTHORIZED
PERSONS.]

       Section 6. Capitalized Terms. All capitalized terms used but not defined
in this Certificate shall have the meanings ascribed to such terms in the Master
Agreement.

Dated:
       --------------

            [The rest of this page has been intentionally left blank.]

                                                                           G-1-1

<PAGE>

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                                                            G-12

<PAGE>

                 EXHIBIT G-2 TO MASTER CREDIT FACILITY AGREEMENT

                           ORGANIZATIONAL CERTIFICATE
                                   (Guarantor)

       I, the undersigned, _______________, hereby certify as follows:

       Section 1.    Position. I am the ____________________ of BRE PROPERTIES,
INC., a Maryland corporation ("Guarantor"), and I am authorized to deliver this
Certificate on behalf of Guarantor.

       Section 2.    Guaranty. Guarantor entered into that certain Guaranty,
dated as of May 2, 2003, by and between Guarantor and PRUDENTIAL MULTIFAMILY
MORTGAGE, INC., a Delaware corporation ("Lender") (as amended from time to time,
the "Guaranty"). The rights of Lender under the Guaranty have been assigned to
Fannie Mae. This Certificate is issued pursuant to the terms of the Guaranty.

       Section 3.    Due Authorization of Request. I hereby certify that no
action by the shareholders of Guarantor is necessary to duly authorize the
execution and delivery of, and the consummation of the transaction contemplated
by the Request with respect to which this Certificate is delivered, or, if
necessary, that attached as Exhibit A to this Certificate is a true copy of
resolutions duly adopted at a meeting of the board of directors, partners or
members, as the case may be, or written consent in lieu thereof, that authorize
the action. Any such resolutions are in full force and effect and are unmodified
as of the date of this Certificate.

       Section 4.    No Changes. Since the date of the most recent
Organizational Certificate delivered to Lender, or, if there are none, since the
date of the Guaranty, there have been no changes in any of the Organizational
Documents of Guarantor, except as set forth in Exhibit B to this Certificate,
and Guarantor remains in good standing or are duly qualified in the
jurisdictions in which it is required to be in good standing or duly qualified
under the terms of the Guaranty.

      [Section 5.    Incumbency Certificate. One or more of the persons
authorized to execute and deliver any documents required to be delivered in
connection with the Request are set forth on the attached Schedule. USE ONLY FOR
INITIAL ADVANCE AND IF GUARANTOR NEEDS TO CHANGE AUTHORIZED PERSONS.]

       Section 6.    Capitalized Terms. All capitalized terms used but not
defined in this Certificate shall have the meanings ascribed to such terms in
the Master Credit Facility Agreement between ______________________ and
Prudential Multifamily Mortgage, Inc. dated as of May 2, 2003.

Dated:
       --------------

                                                                           G-2-1

<PAGE>

                                          GUARANTOR:

                                          BRE PROPERTIES, INC., a Maryland
                                          corporation

                                          By:
                                             -----------------------------------

                                          Name:
                                               ---------------------------------

                                          Title:
                                                --------------------------------

                                                                           G-2-2

<PAGE>

                  EXHIBIT H TO MASTER CREDIT FACILITY AGREEMENT

                               CONVERSION REQUEST

       THE MASTER AGREEMENT REQUIRES THERE TO OCCUR AT A CLOSING TO BE HELD AT
OFFICES DESIGNATED BY YOU ON A CLOSING DATE SELECTED BY YOU, AND OCCURRING
WITHIN 30 BUSINESS DAYS AFTER YOUR RECEIPT OF THE CONVERSION REQUEST (OR ON SUCH
OTHER DATE TO WHICH WE MAY AGREE), AS LONG AS NONE OF THE LIMITATIONS CONTAINED
IN SECTION 1.09 OF THE MASTER AGREEMENT IS VIOLATED, AND ALL CONDITIONS
CONTAINED IN SECTION 1.10 OF THE MASTER AGREEMENT ARE SATISFIED.

--------------------, ------

VIA: _______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing

[Note: Subject to change in the event Lender or its address changes]

Re:    CONVERSION REQUEST issued pursuant to Master Credit Facility Agreement,
       dated as of May 2, 2003, by and between the undersigned ("Borrower")
       and Lender (as amended from time to time, the "Master Agreement").

Ladies and Gentlemen:

This constitutes a Conversion Request pursuant to the terms of the
above-referenced Master Agreement.

       Section 1.    Request. Borrower hereby requests that there occur a
conversion of all or a portion of the Variable Facility Commitment to the Fixed
Facility Commitment in accordance with the terms of the Master Agreement.
Following is the information required by the Master Agreement with respect to
this Request:

              (a)    Designation of Amount of Conversion. The amount of the
       conversion shall be $_________________________.

              (b)    Prepayment of Variable Advances. (If necessary) The
       Variable Advances Outstanding which will be prepaid on the Closing Date
       for the conversion are as follows:

       Closing Date of Variable Advance: ________________________________

                                                                             H-1

<PAGE>

       Maturity Date of Variable Advance:_________________________________

       Amount of Advance:________________________________

       (Note: Any Fixed Advances made in conjunction with a conversion of all or
       a portion of the Variable Facility Commitment to the Fixed Facility
       Commitment must be accompanied by an Advance Request and shall be
       reviewed in accordance with the terms of the Master Agreement.)

              (c)    Accompanying Documents. All documents, instruments and
       certificates required to be delivered pursuant to the conditions
       contained in Section 1.10 of the Master Agreement, including (i) the
       Conversion Documents, as well as (ii) a Compliance Certificate and (iii)
       an Organizational Certificate will be delivered on or before the Closing
       Date.

              (d)    Defeasance or Yield Maintenance. [For Fixed Advance only]
       Borrower requests the following with respect to prepayments of Fixed
       Advances, if applicable:

              [ ] Defeasance or

              [ ] Yield Maintenance.

       Section 2.    Capitalized Terms. All capitalized terms used but not
defined in this Request shall have the meanings ascribed to such terms in the
Master Agreement.

Sincerely,

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                                                             H-2

<PAGE>

                  EXHIBIT I TO MASTER CREDIT FACILITY AGREEMENT

              MASTER CREDIT FACILITY AGREEMENT CONVERSION AMENDMENT

       THIS ____ AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT (the
"Amendment") is made as of the ____ day of _______________, _____, by and among
(i) BRE-FMCF, LLC, a Delaware limited liability company ("Borrower") and (ii)
PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation ("Lender").

                                    RECITALS

       A.     Borrower and Lender are parties to that certain Master Credit
Facility Agreement, dated as of May 2, 2003 (as amended from time to time, the
"Master Agreement").

       B.     All of Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
Other Loan Documents, dated as of the same date as the Master Agreement (the
"Assignment"). Fannie Mae has not assumed any of the obligations of Lender under
the Master Agreement or the Loan Documents as a result of the Assignment. Fannie
Mae has designated Lender as the servicer of the Advances contemplated by the
Master Agreement.

       C.     The parties are executing this Amendment pursuant to the Master
Agreement to reflect a conversion of all or a portion of the Variable Facility
Commitment to the Fixed Facility Commitment.

       NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements contained in this Amendment and the Master Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, hereby agree as follows:

       Section 1.    Conversion. The Variable Facility Commitment shall be
reduced by, and the Fixed Facility Commitment shall be increased by,
$____________________, and the definitions of "Variable Facility Commitment" and
"Fixed Facility Commitment" are hereby replaced in their entirety by the
following new definitions:

              "Fixed Facility Commitment" means $_______________, plus such
       amount as Borrower may elect to add to the Fixed Facility Commitment in
       accordance with Article 4 and Section 1.09 and less such amount by which
       Borrower may elect to reduce the Fixed Facility Commitment in accordance
       with Article 5.

              "Variable Facility Commitment" means an aggregate amount of
       $____________________, which shall be evidenced by the Variable Facility
       Note in the form attached hereto as Exhibit C, plus such amount as
       Borrower may elect to add to the Variable Facility Commitment in
       accordance with Article 4, and less such amount as

                                                                             I-1

<PAGE>

       Borrower may elect to convert from the Variable Facility Commitment to
       the Fixed Facility Commitment in accordance with Section 1.08 and less
       such amount by which Borrower may elect to reduce the Variable Facility
       Commitment in accordance with Article 5.

       Section 2.    Capitalized Terms. All capitalized terms used in this
Amendment which are not specifically defined herein shall have the respective
meanings set forth in the Master Agreement.

       Section 3.    Full Force and Effect. Except as expressly modified by this
Amendment, all terms and conditions of the Master Agreement shall continue in
full force and effect.

       Section 4.    Counterparts. This Amendment may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

       Section 5.    Governing Law; Consent to Jurisdiction and Venue; WAIVER OF
TRIAL BY JURY. The provisions of Section 17.06 of the Master Agreement (entitled
"Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial") are hereby
incorporated into this Amendment by this reference to the fullest extent as if
the text of such Section were set forth in its entirety herein.

                  [Remainder of page intentionally left blank]

                                                                             I-2

<PAGE>

       IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
an instrument under seal as of the day and year first above written.

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                     PRUDENTIAL MULTIFAMILY MORTGAGE,
                                     INC., a Delaware corporation

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

                                                                             I-3

<PAGE>

                  EXHIBIT J TO MASTER CREDIT FACILITY AGREEMENT

                                    RATE FORM

       Pursuant to Section 2.01(b) of that certain Master Credit Facility
Agreement dated as of May 2, 2003 (as amended from time to time, the "Master
Agreement") by and among PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware
corporation ("Lender"), the undersigned (the "Borrower"), Borrower hereby
requests that Lender issue to it an advance with the following terms:

       Designation of Advance             _____ Fixed Advance

       (Check One)                        _____ Variable Advance

       FOR VARIABLE ADVANCE ONLY:

            Proposed MBS Imputed Interest Rate  ________ %

            Advance Amount                      $______________________

            Term                                _______ months

            MBS Issue Date                      _______________, _______

            Variable Facility Fee               _______________________ bps

            Maximum Annual Coupon Rate          ________ %

            Discount                            ________ %

            Price                               $______________________

            Breakage Fee Deposit                $______________________

            Closing Date no later than          _______________, _______

                                                                             J-1

<PAGE>

       FOR FIXED ADVANCE ONLY:

            Proposed Pass-Through Rate          ________ %

            Advance Amount                      $______________________

            Term                                _______ months

            MBS Issue Date                      _______________, _______

            Fixed Facility Fee                  _______________________bps

            Maximum Annual Coupon Rate          ________ %

            Amortization Period                 _______________________

            Closing Date no later than          _______________, _______

       Lender will provide Borrower with written confirmation when and if it has
obtained a commitment for the purchase of a Fannie Mae MBS having the
characteristics described above at a price between 99-1/2 and 100-1/2 or better.
In the event that the lowest available Coupon Rate is greater than that
specified above, Lender will not proceed without the prior written authorization
of Borrower.

       Borrower certifies that all conditions contained in Article 2 of the
Master Agreement that are required to be satisfied will be satisfied on or
before the Closing Date.

       Defined terms used herein shall have the same meaning as set forth in the
Master Agreement.

Dated: ____________________, ____

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                                                             J-2

<PAGE>

       Pursuant to Section 2.01(c) of the Master Agreement, Lender hereby
       confirms that it has obtained a commitment for the purchase of a Fannie
       Mae MBS in conformance with the terms noted above except for the
       following: .

Dated:  ________________________

                                     PRUDENTIAL MULTIFAMILY MORTGAGE,
                                     INC., a Delaware corporation

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

Rate Setting Date: ____________________, ______, ___:___ AM/PM Eastern Time

                                                                             J-3

<PAGE>

                  EXHIBIT K TO MASTER CREDIT FACILITY AGREEMENT

                         ADVANCE CONFIRMATION INSTRUMENT

       THIS ADVANCE CONFIRMATION INSTRUMENT (the "Advance Confirmation
Instrument") is made as of the ____ day of _______________, _____, by BRE-FMCF,
LLC, a Delaware limited liability company ("Borrower") for the benefit of
PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation ("Lender").

                                    RECITALS

       A.     Borrower and Lender are parties to that certain Master Credit
Facility Agreement, dated as of May 2, 2003 (as amended from time to time, the
"Master Agreement").

       B.     All of Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
Other Loan Documents, dated as of the same date as the Master Agreement (the
"Assignment"). Fannie Mae has not assumed any of the obligations of Lender under
the Master Agreement or the Loan Documents as a result of the Assignment. Fannie
Mae has designated Lender as the servicer of the Advances contemplated by the
Master Agreement.

       C.     In accordance with this Advance Confirmation Instrument and the
Master Agreement, Lender is making a Variable Advance to Borrower.

       D.     Borrower is executing this Advance Confirmation Instrument
pursuant to the Master Agreement to confirm certain terms of the Master
Agreement and that certain Multifamily Variable Facility Note dated the same
date as the Master Agreement in the original principal amount of
$_________________ (as amended from time to time, the "Variable Facility Note")
relating to the Variable Advance, and Borrower's obligation to repay the Advance
in accordance with the terms of the Variable Facility Note and this Advance
Confirmation Instrument.

       NOW, THEREFORE, Borrower, in consideration of Lender's making of the
Variable Advance, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, hereby agree as follows:

       Section 1.    Confirmation of Advance and Terms of Advance. Borrower
hereby confirms the following terms of the Variable Advance, and confirms and
agrees that it shall repay the Advance to Lender in accordance with the terms of
the Variable Facility Note and the Master Agreement:

       Advance Amount                           $_______________________

       Term                                     _______ months

                                       K-1

<PAGE>

       MBS Issue Date                           _________________, ______

       MBS Imputed Interest Rate                _______ %

       Variable Facility Fee                    $_______________________

       Coupon Rate                              _______ %

       Discount                                 _______ %

       Price                                    $_______________________

       Closing Date                             _______________, ________

       Section 2.    Beneficiaries. This Advance Confirmation Instrument is made
for the express benefit of Lender.

       Section 3.    Purpose. The terms of the Master Agreement and the Variable
Facility Note govern the repayment, and all other terms relating to the Variable
Advance. However, this Advance Confirmation Instrument has been executed to
create a physical instrument evidencing the above-described Advance under the
Variable Facility Note. The Variable Advance evidenced by this Advance
Confirmation Instrument does not represent a separate indebtedness from that
evidenced by the Variable Facility Note.

       Section 4.    Effectiveness of Advance Confirmation Instrument. This
Advance Confirmation Instrument will not be effective until Lender funds the
Variable Advance, at which time Lender shall note the date of such funding by
completing the date block at the foot of this Advance Confirmation Instrument,
and executing this Advance Confirmation Instrument below such date block, and
such completion shall be binding on Borrower, absent manifest error.

       Section 5.    Capitalized Terms. All capitalized terms used in this
Advance Confirmation Instrument which are not specifically defined herein shall
have the respective meanings set forth in the Master Agreement.

       Section 6.    Counterparts. This Advance Confirmation Instrument may be
executed in counterparts by the parties hereto, and each such counterpart shall
be considered an original and all such counterparts shall constitute one and the
same instrument.

       Section 7.    Governing Law; Consent to Jurisdiction and Venue; WAIVER OF
TRIAL BY JURY. The provisions of Section 17.06 of the Master Agreement (entitled
"Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial") are hereby
incorporated into this Advance Confirmation Agreement by this reference to the
fullest extent as if the text of such Section were set forth in its entirety
herein.

                                       K-2

<PAGE>

       IN WITNESS WHEREOF, Borrower has executed this Advance Confirmation
Instrument as an instrument under seal as of the day and year first above
written.

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability
                                     company

                                     By:    BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

Date of Funding:  _______________________, _______

                                     PRUDENTIAL MULTIFAMILY MORTGAGE,
                                     INC., a Delaware corporation

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

                                       K-3

<PAGE>

                  EXHIBIT L TO MASTER CREDIT FACILITY AGREEMENT

                                 ADVANCE REQUEST

[SELECT THE APPROPRIATE LANGUAGE:]

[INITIAL ADVANCE:

THE MASTER AGREEMENT REQUIRES YOU TO MAKE THE REQUESTED INITIAL ADVANCE, IF ALL
CONDITIONS CONTAINED IN SECTION 2.04(a) OF THE MASTER AGREEMENT ARE SATISFIED,
AT A CLOSING TO BE HELD ON THE INITIAL CLOSING DATE.]

[FUTURE ADVANCE:

THE MASTER AGREEMENT REQUIRES YOU TO MAKE THE REQUESTED FUTURE ADVANCE, IF ALL
CONDITIONS CONTAINED IN SECTION 2.04(b) OF THE MASTER AGREEMENT ARE SATISFIED,
AT A CLOSING TO BE HELD AT OFFICES DESIGNATED BY YOU ON A CLOSING DATE SELECTED
BY YOU, WHICH DATE SHALL BE NOT MORE THAN THREE (3) BUSINESS DAYS AFTER OUR
RECEIPT OF THE CONFIRMED RATE FORM (OR ON SUCH OTHER DATE AS WE MAY AGREE).
LENDER RESERVES THE RIGHT TO REQUIRE THAT WE POST A DEPOSIT AT THE TIME THE MBS
COMMITMENT IS OBTAINED AS AN ADDITIONAL CONDITION TO YOUR OBLIGATION TO MAKE THE
FUTURE ADVANCE.]

--------------------, ------

VIA: _______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing

[Note: Subject to change in the event Lender or its address changes]

Re:    ADVANCE REQUEST issued pursuant to Master Credit Facility Agreement,
       dated as of May 2, 2003 by and between the undersigned ("Borrower"), and
       Lender (as amended from time to time, the "Master Agreement")

Ladies and Gentlemen:

                                       L-1

<PAGE>

This constitutes an Advance Request pursuant to the terms of the
above-referenced Master Agreement.

       Section 1.    Request. Borrower hereby requests that Lender make an
Advance in accordance with the terms of the Master Agreement. Following is the
information required by the Master Agreement with respect to this Request:

       (a)    Amount. The amount of the [Initial] [Future] Advance shall be
              $_____________.

       (b)    Designation of Facility. The [Initial] [Future] Advance is a:
              [Check one]
              _____ Fixed Advance
              _____ Variable Advance

       (c)    Maturity Date. The Maturity Date of the Advance is as follows:
              _____________.

       (d)    Amortization Period. [For Fixed Advance only] The principal of
              this Fixed Advance shall be amortized over a period of 30 years.

       (e)    Accompanying Documents. All documents, instruments and
              certificates required to be delivered pursuant to the conditions
              contained in Section 2.04 of the Master Agreement, including (i) a
              confirmed Rate Form, (ii) an Advance Confirmation Instrument (for
              Variable Advances only), (iii) a Fixed Facility Note (for Fixed
              Advances only), (iv) a Compliance Certificate, and (v) an
              Organizational Certificate, will be delivered on or before the
              Closing Date.

       (e)    Wiring Information. Please wire the Future Advance on or before
              the Closing Date into our account in accordance with the following
              wiring information:

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

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

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

       Section 2.    Available Commitment. The information contained in the
following table is true, correct and complete, to the undersigned's knowledge.
The undersigned acknowledges and agrees that the final determination of the
information shall be made by Lender, in accordance with the terms of the Master
Agreement.

Currently Available Fixed
Facility Commitment             ------------------------------------------------

Currently Available Variable
Facility Commitment             ------------------------------------------------

Proposed Amount Drawn on Fixed
Facility Commitment             ------------------------------------------------

Remaining Fixed Facility
Commitment after Proposed Draw  ------------------------------------------------

Proposed Amount Drawn on
Variable Facility Commitment    ------------------------------------------------

Remaining Variable Facility
Commitment after Proposed Draw  ------------------------------------------------

                                       L-2

<PAGE>

       For these purposes, the terms

       (a)    "Available Fixed Facility Commitment" means, at any time, the
              maximum amount of Fixed Facility Advances which could be issued
              and outstanding without causing: (i) the Aggregate Debt Service
              Coverage Ratio to be less than 1.35:1.0, or (ii) the Aggregate
              Loan to Value Ratio to be greater than 65%; and

       (b)    "Available Variable Facility Commitment" means, at any time, the
              maximum amount of Variable Advances which could be issued and
              outstanding without causing: (i) the Aggregate Debt Service
              Coverage Ratio to be less than 1.35:1.0, or (ii) the Aggregate
              Loan to Value Ratio to be greater than 65%.

       Section 3.    Capitalized Terms. All capitalized terms used but not
defined in this Request shall have the meanings ascribed to such terms in the
Master Agreement.

                  (Remainder of page intentionally left blank)

                                       L-3

<PAGE>

Sincerely,

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability

                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                       L-4

<PAGE>

                  EXHIBIT M TO MASTER CREDIT FACILITY AGREEMENT

                                     REQUEST
                               (Addition/Release)

--------------------, ------

VIA: _______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing
[Note: Subject to change in the event Lender or its address changes]

Re:    REQUEST issued pursuant to Master Credit Facility Agreement, dated as of
       May 2, 2003, by and between the undersigned ("Borrower") and others (as
       amended from time to time, the "Master Agreement")

Ladies and Gentlemen:

This constitutes [an Addition] [a Release] Request pursuant to the terms of the
above-referenced Master Agreement.

[SELECT APPROPRIATE SECTIONS]

       [Section 1.   Addition Request. Borrower hereby requests that the
Multifamily Residential Property described in this Request be added to the
Collateral Pool in accordance with the terms of the Master Agreement. Following
is the information required by the Master Agreement with respect to this
Request:

              (a)    Property Description Package. Attached to this Request is
       the information and documents relating to the proposed Additional
       Mortgaged Property required by the DUS Guide;

              (b)    Due Diligence Fees. Enclosed with this Request is a check
       in payment of all Additional Collateral Due Diligence Fees required to be
       submitted with this Request pursuant to Section 10.04(b) of the Master
       Agreement; and

              (c)    Accompanying Documents. All reports, certificates and
       documents required to be delivered pursuant to the conditions contained
       in Section 3.02(c) of the Master Agreement will be delivered on or before
       the Closing Date.

                                       M-1

<PAGE>

       Section 2.    Addition Fee. If Lender consents to the addition of the
proposed Additional Mortgaged Property to the Collateral Pool, and Borrower
elects to add the Additional Mortgaged Property to the Collateral Pool, Borrower
shall pay the Addition Fee or Substitution Fee, as applicable, to Lender as one
of the conditions to the closing of the Additional Mortgaged Property.]

       [Section 1.   Release Request. Borrower hereby requests that the Release
Property described in this Request be released from the Collateral Pool in
accordance with the terms of the Master Agreement. Following is the information
required by the Master Agreement with respect to this Request:

              (a)    Description of Release Property. The name, address and
       location (county and state) of the Mortgaged Property, or other
       designation of the proposed Release Property is as follows:

              Name:    _____________________________________________

              Address: _____________________________________________

              Location:_____________________________________________

              (b)    Accompanying Documents. All documents, instruments and
       certificates required to be delivered pursuant to the conditions
       contained in Section 3.04(b) of the Master Agreement will be delivered on
       or before the Closing Date.

       Section 2.    Release Price and Release Fee. Borrower shall pay the
Release Price and Release Fee as a condition to the closing of the release of
the Release Property from the Collateral Pool.]

Sincerely,

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability
                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

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

                                       M-2

<PAGE>

                  EXHIBIT N TO MASTER CREDIT FACILITY AGREEMENT

                           CONFIRMATION OF OBLIGATIONS

       THIS CONFIRMATION OF OBLIGATIONS (the "Confirmation of Obligations") is
made as of the ____ day of __________, ____, by and among BRE-FMCF, LLC, a
Delaware limited liability company ("Borrower"), for the benefit of PRUDENTIAL
MULTIFAMILY MORTGAGE, INC., a Delaware corporation ("Lender").

                                    RECITALS

       A.     Borrower and Lender are parties to that certain Master Credit
Facility Agreement, dated as of May 2, 2003 (as amended from time to time, the
"Master Agreement").

       B.     All of Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
other Loan Documents, dated as of the same date as the Master Agreement (the
"Assignment"). Fannie Mae has not assumed any of the obligations of Lender under
the Master Agreement or the Loan Documents as a result of the Assignment. Fannie
Mae has designated Lender as the servicer of the Advances contemplated by the
Master Agreement.

       C.     Borrower has delivered to Lender a Release Request pursuant to the
Master Agreement to release a Release Property from the Collateral Pool.

       D.     Lender has consented to the Release Request.

       E.     The parties are executing this Confirmation of Obligations
pursuant to the Master Agreement to confirm that each remains liable for all of
its obligations under the Master Agreement and the other Loan Documents
notwithstanding the release of the Release Property from the Collateral Pool.

       NOW, THEREFORE, Borrower, in consideration of Lender's consent to the
release of the Release Property from the Collateral Pool and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, hereby agree as follows:

       Section 1.    Confirmation of Obligations. Borrower confirms that, except
with respect to the Release Property, none of its respective obligations under
the Master Agreement and the Loan Documents is affected by the release of the
Release Property from the Collateral Pool, and each of its respective
obligations under the Master Agreement and the Loan Documents shall remain in
full force and effect, and it shall be fully liable for the observance of all
such obligations, notwithstanding the release of the Release Property from the
Collateral Pool.

       Section 2.    Beneficiaries.  This  Confirmation  of Obligations is made
for the express benefit of both Lender and Fannie Mae.

                                       N-1

<PAGE>

       Section 3.    Capitalized Terms. All capitalized terms used in this
Confirmation of Obligations which are not specifically defined herein shall have
the respective meanings set forth in the Master Agreement.

       Section 4.    Counterparts. This Confirmation of Obligations may be
executed in counterparts by the parties hereto, and each such counterpart shall
be considered an original and all such counterparts shall constitute one and the
same instrument.

                  [Remainder of page intentionally left blank]

                                       N-2

<PAGE>

       IN WITNESS WHEREOF, the parties hereto have executed this Confirmation
of Obligations as an instrument under seal as of the day and year first above
written.

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability

                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

                                           By:
                                              -------------------------------

                                           Name:
                                                -----------------------------

                                           Title:
                                                 ----------------------------

                                  PRUDENTIAL MULTIFAMILY MORTGAGE,
                                  INC., a Delaware corporation

                                  By:
                                      ---------------------------------------

                                  Name:
                                       --------------------------------------

                                  Title:
                                         ------------------------------------

                                       N-3

<PAGE>

                  EXHIBIT O TO MASTER CREDIT FACILITY AGREEMENT

                                EXPANSION REQUEST

       THE MASTER AGREEMENT REQUIRES YOU TO PERMIT THE REQUESTED INCREASE IN THE
COMMITMENT, AT A CLOSING TO BE HELD AT OFFICES DESIGNATED BY YOU ON A CLOSING
DATE SELECTED BY YOU, AND OCCURRING WITHIN FIFTEEN (15) BUSINESS DAYS AFTER YOUR
RECEIPT OF THE EXPANSION REQUEST (OR ON SUCH OTHER DATE AS WE AGREE), AS LONG AS
ALL CONDITIONS CONTAINED IN SECTION 4.03 OF THE MASTER AGREEMENT ARE SATISFIED.
REFERENCE IS MADE TO THE MASTER AGREEMENT FOR THE SCOPE OF LENDER'S OBLIGATIONS
WITH RESPECT TO THIS REQUEST.

--------------------, ------

VIA: _______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing

[Note: Subject to change in the event Lender or its address changes]

Re:    EXPANSION REQUEST issued pursuant to Master Credit Facility Agreement,
       dated as of May 2, 2003, by and between the undersigned ("Borrower") and
       Lender (as amended from time to time, the "Master Agreement")

Ladies and Gentlemen:

This constitutes an Expansion Request pursuant to the terms of the
above-referenced Master Agreement.

       Section 1.    Request. Borrower hereby requests an increase in the
maximum credit commitment in accordance with the terms of the Master Agreement.
Following is the information required by the Master Agreement with respect to
this Request:

              (a)    Amount of Increase. The amount of the increase in the
       maximum credit commitment and the amount of the increases in the Fixed
       Facility Commitment or the Variable Facility Commitment are as follows:

                                       O-1

<PAGE>

<TABLE>
<CAPTION>
                                                                                       RESULTING AMOUNT OF
                 NAME                                  INCREASE                             COMMITMENT
---------------------------------------- ------------------------------------- -------------------------------------
<S>                                      <C>                                   <C>
MAXIMUM CREDIT
COMMITMENT:
---------------------------------------- ------------------------------------- -------------------------------------
FIXED FACILITY
COMMITMENT:
---------------------------------------- ------------------------------------- -------------------------------------
VARIABLE FACILITY
COMMITMENT:
---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>

[Note: Section 4.01 of the Master Agreement limits the maximum amount of
increase in the Commitment to $250,000,000 and the increase in the Commitment
must be in the minimum amount of $10,000,000.00.]

              (b)    Geographical Diversification Requirements. Borrower hereby
       requests that Lender inform Borrower of any change in the Geographical
       Diversification Requirements.

              (c)    Accompanying Documents. All documents, instruments and
       certificates required to be delivered pursuant to the conditions
       contained in Section 4.03 of the Master Agreement will be delivered on or
       before the Closing Date.

              (d)    Defeasance or Yield Maintenance. [For Fixed Advance only]
       Borrower requests the following with respect to prepayments of Fixed
       Advances, if applicable:

              [  ]   Defeasance or

              [  ]   Yield Maintenance.

       Section 2.    Capitalized Terms. All capitalized terms used but not
defined in this Request shall have the meanings ascribed to such terms in the
Master Agreement.

Sincerely,

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability
                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

                                           By:
                                              -------------------------------

                                           Name:
                                                -----------------------------

                                           Title:
                                                 ----------------------------

                                       O-2

<PAGE>

                  EXHIBIT P TO MASTER CREDIT FACILITY AGREEMENT

                          FACILITY TERMINATION REQUEST

       THE MASTER AGREEMENT REQUIRES YOU TO PERMIT THE [VARIABLE] [FIXED]
FACILITY COMMITMENT TO BE REDUCED TO THE AMOUNT DESIGNATED BY US, AT A CLOSING
TO BE HELD AT OFFICES DESIGNATED BY YOU ON A CLOSING DATE SELECTED BY YOU,
WITHIN FIFTEEN (15) BUSINESS DAYS AFTER THE YOUR RECEIPT OF THE FACILITY
TERMINATION REQUEST (OR ON SUCH OTHER DATE AS WE MAY AGREE), IF ALL CONDITIONS
CONTAINED IN SECTION 5.02(b) ARE SATISFIED. REFERENCE IS MADE TO THE MASTER
AGREEMENT FOR THE SCOPE OF LENDER'S OBLIGATIONS WITH RESPECT TO THIS REQUEST.

--------------------, ------

VIA: _______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing

[Note: Subject to change in the event Lender or its address changes]

Re:    FACILITY TERMINATION REQUEST issued pursuant to Master Credit Facility
       Agreement, dated as of May 2, 2003, by and between the undersigned
       ("Borrower") and Lender (as amended from time to time, the "Master
       Agreement")

Ladies and Gentlemen:

This constitutes a Facility Termination Request pursuant to the terms of the
above-referenced Master Agreement.

       Section 1.    Request. Borrower hereby requests a permanent reduction in
the amount of the [Variable] [Fixed] Facility Commitment in accordance with the
terms of the Master Agreement. Following is the information required by the
Master Agreement with respect to this Request:

              (a)    Amount of Reduction. The amount of the permanent reduction
       in the [Variable] [Fixed] Facility Commitment is as follows:

       Amount of Reduction:               $
                                             -----------------------------------

                                       P-1

<PAGE>

       Resulting Amount of
       [Variable] [Fixed] Facility:       $
                                             -----------------------------------

       [If in connection with a reduction of the Variable Facility Commitment
       to $0 - Borrower elects to permanently relinquish its right to increase
       the amount of the Variable Facility Commitment during the Term of the
       Commitment, thereby causing the Recourse Termination Date to occur]
       Yes ___ No ___

              (b)    Required Prepayments. Following are any [Variable] [Fixed]
       Advances that shall be prepaid in connection with the permanent reduction
       in the [Variable] [Fixed] Facility:

       Closing Date of Advance:   _____________________________________

       Maturity Date of Advance:  _____________________________________

       Amount of Advance:         _____________________________________

              (c)    Accompanying Documents. All documents, instruments and
       certificates required to be delivered pursuant to the conditions
       contained in Section 5.02(b) of the Master Agreement will be delivered
       on or before the Closing Date.

       Section 2.    Prepayments and Termination Fee. Borrower shall pay the
required amount of the prepayment for any [Variable] [Fixed] Advances required
to be prepaid, and the required amount of the Facility Termination Fee, pursuant
to the terms of Section 6.09 of the Master Agreement, as conditions to the
permanent reduction in the [Variable] [Fixed] Facility Commitment.

       Section 3.    Capitalized Terms. All capitalized terms used but not
defined in this Request shall have the meanings ascribed to such terms in the
Master Agreement.

Sincerely,
                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability
                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

                                           By:
                                              -------------------------------

                                           Name:
                                                -----------------------------

                                           Title:
                                                 ----------------------------

                                       P-2

<PAGE>

                  EXHIBIT Q TO MASTER CREDIT FACILITY AGREEMENT

                  AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT

       THIS ____ AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT (the "Amendment")
is made as of the ____ day of _______________, _____, by and between (i)
BRE-FMCF, LLC, a Delaware limited liability company ("Borrower") and (ii)
PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a Delaware corporation ("Lender").

                                    RECITALS

       A.     Borrower and Lender are parties to that certain Master Credit
Facility Agreement, dated as of May 2, 2003 (as amended from time to time, the
"Master Agreement").

       B.     All of Lender's right, title and interest in the Master Agreement
and the Loan Documents executed in connection with the Master Agreement or the
transactions contemplated by the Master Agreement have been assigned to Fannie
Mae pursuant to that certain Assignment of Master Credit Facility Agreement and
other Loan Documents, dated as of the same date as the Master Agreement (the
"Assignment"). Fannie Mae has not assumed any of the obligations of Lender under
the Master Agreement or the Loan Documents as a result of the Assignment. Fannie
Mae has designated Lender as the servicer of the Advances contemplated by the
Master Agreement.

       C.     The parties are executing this Amendment pursuant to the Master
Agreement to reflect a permanent reduction of all or a portion of the [Variable]
[Fixed] Facility Commitment.

       NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements contained in this Amendment and the Master Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, hereby agree as follows:

       Section 1.    Reduction of [Variable] [Fixed] Facility Commitment. The
[Variable] [Fixed] Facility Commitment shall be reduced by
$____________________, and the definition of "[Variable] [Fixed] Facility
Commitment" is hereby replaced in its entirety by the following new definition:

              ["Variable Facility Commitment" means an aggregate amount of
       $____________________, which shall be evidenced by the Variable Facility
       Note in the form attached hereto as Exhibit C, plus such amount as
       Borrower may elect to add to the Variable Facility Commitment in
       accordance with Article 4, and less such amount as Borrower may elect to
       convert from the Variable Facility Commitment to the Fixed Facility
       Commitment in accordance with Section 1.08 and less such amount by which
       Borrower may elect to reduce the Variable Facility Commitment in
       accordance with Article 5.]

                                       Q-1

<PAGE>

              ["Fixed Facility Commitment" means $_______________, plus such
       amount as Borrower may elect to add to the Fixed Facility Commitment in
       accordance with Article 4 and Section 1.08 and less such amount by which
       Borrower may elect to reduce the Fixed Facility Commitment in accordance
       with Article 5.]

       Section 2.    Capitalized Terms. All capitalized terms used in this
Amendment which are not specifically defined herein shall have the respective
meanings set forth in the Master Agreement.

       Section 3.    Full Force and Effect. Except as expressly modified by this
Amendment, all terms and conditions of the Master Agreement shall continue in
full force and effect.

       Section 4.    Counterparts. This Amendment may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

                  [Remainder of page intentionally left blank]

                                       Q-2

<PAGE>

       IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
instrument under seal as of the day and year first above written.

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability

                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

                                           By:
                                              -------------------------------

                                           Name:
                                                -----------------------------

                                           Title:
                                                 ----------------------------

                                  PRUDENTIAL MULTIFAMILY MORTGAGE,
                                  INC., a Delaware corporation

                                  By:
                                      ---------------------------------------

                                  Name:
                                       --------------------------------------

                                  Title:
                                           ----------------------------------

                                       Q-3

<PAGE>

                  EXHIBIT R TO MASTER CREDIT FACILITY AGREEMENT

                       CREDIT FACILITY TERMINATION REQUEST

       THE MASTER AGREEMENT THAT THIS AGREEMENT SHALL TERMINATE, AND YOU SHALL
CAUSE ALL OF THE COLLATERAL TO BE RELEASED FROM THE COLLATERAL POOL, AT A
CLOSING TO BE HELD AT OFFICES DESIGNATED BY YOU ON A CLOSING DATE SELECTED BY
YOU, WITHIN 30 BUSINESS DAYS AFTER THE YOUR RECEIPT OF THE CREDIT FACILITY
TERMINATION REQUEST (OR ON SUCH OTHER DATE AS WE MAY AGREE), AS LONG AS ALL
CONDITIONS CONTAINED IN SECTION 5.04(b) OF THE MASTER AGREEMENT ARE SATISFIED.
REFERENCE IS MADE TO THE MASTER AGREEMENT FOR THE SCOPE OF LENDER'S OBLIGATIONS
WITH RESPECT TO THIS REQUEST.

--------------------, ---

VIA: ______________________

Prudential Multifamily Mortgage, Inc.
c/o Prudential Asset Resources
2200 Ross Avenue
Suite 4200E
Dallas, Texas 75201
Attn:    Director of Servicing

[Note: Subject to change in the event Lender or its address changes]

Re:    CREDIT FACILITY TERMINATION REQUEST issued pursuant to Master Credit
       Facility Agreement, dated as of May 2, 2003, by and among the undersigned
       ("Borrower") and Lender (as amended from time to time, the "Master
       Agreement")

Ladies and Gentlemen:

This constitutes a Credit Facility Termination Request pursuant to the terms of
the above-referenced Master Agreement.

       Section 1.    Request. Borrower hereby requests a termination of the
Master Agreement and the Credit Facility in accordance with the terms of the
Master Agreement. All documents, instruments and certificates required to be
delivered pursuant to the conditions contained in Section 5.04(b) of the Master
Agreement will be delivered on or before the Closing Date.

       Section 2.    Prepayments, Release Fees and Termination Fee. Borrower
shall pay in full all Notes Outstanding, and the required amount of the Release
Fees and the required

                                       R-1

<PAGE>

Credit Facility Termination Fee as a condition to the termination of the
Master Agreement and the Credit Facility.

       Section 3.    Capitalized Terms. All capitalized terms used but not
defined in this Request shall have the meanings ascribed to such terms in the
Master Agreement.

Sincerely,

                                  BORROWER:

                                  BRE-FMCF, LLC, a Delaware limited liability

                                  company

                                  By:       BRE Properties, Inc., a Maryland
                                            corporation, its sole member

                                           By:
                                              -------------------------------

                                           Name:
                                                -----------------------------

                                           Title:
                                                 ----------------------------

                                       R-2

<PAGE>

                  EXHIBIT S TO MASTER CREDIT FACILITY AGREEMENT

                                    GUARANTY

              This Guaranty (the "Guaranty") is made and entered into as of the
2nd day of May, 2003 by BRE PROPERTIES, INC., a Maryland corporation (the
"Guarantor"), for the benefit of PRUDENTIAL MULTIFAMILY MORTGAGE, INC., a
Delaware corporation ("Lender").

                                    RECITALS

       A.     Lender has agreed to execute that certain Master Credit Facility
Agreement, dated as of May 2, 2003 (as amended from time to time, the "Master
Agreement"), pursuant to which, inter alia, Lender has agreed, subject to the
terms, conditions and limitations of the Master Agreement, to loan to the
borrower signatory thereto (the "Borrower") from time to time Advances (each, an
"Advance" and, collectively, the "Advances") to be evidenced by the Note.

       B.     The repayment of the Advances and all of the other obligations of
the Borrower under the Master Agreement or the other Loan Documents are
guaranteed by this Guaranty to the extent of the Borrower's personal liability
as provided in Article 15 of the Master Agreement.

       C.     Guarantor owns, directly or indirectly, an ownership interest in
the Borrower and will receive a direct and material benefit from the Advances to
the Borrower.

       D.     Lender is willing to make the Advances to the Borrower only if
Guarantor agrees to enter into this Guaranty.

       NOW, THEREFORE, in order to induce Lender to make the Advances to
Borrower, and in consideration thereof, Guarantor hereby agrees as follows:

       Section 1.    Definitions. All capitalized terms used but not defined in
this Guaranty shall have the meanings ascribed to such terms in the Master
Agreement.

       Section 2.    Guaranty of Payment. Guarantor irrevocably, absolutely and
unconditionally guarantees to Lender the due and punctual payment of all amounts
for which Borrower is personally liable under Article 15 of the Master Agreement
(the "Guaranteed Obligations").

This Guaranty shall be an unconditional guaranty of payment and performance and
not of collection, and is in no way conditioned upon any attempt by Lender to
pursue or exhaust any remedy against Borrower. This Guaranty is a continuing
guaranty which shall remain in full force and effect until all of the Guaranteed
Obligations have been paid and performed in full; and Guarantor shall not be
released from any obligations to Lender under this Guaranty as long as any
amount payable by the Borrower to Lender, or any obligation by the Borrower,
under the Loan Documents is not performed, satisfied, settled or paid in full.

                                       S-1

<PAGE>

       Section 3.    Form of Payment. All payments under this Guaranty shall be
made to Lender in immediately available funds, without reduction by any
recoupment, set-off, counterclaim or cross-claim against Lender.

       Section 4.    Guarantor's Obligations are Absolute. The obligations of
Guarantor under this Guaranty shall be absolute and unconditional, shall not be
subject to any counterclaim, set-off, recoupment, deduction, or defense (other
than the defense of payment) based upon any claim Guarantor may have against
Lender or Borrower and shall remain in full force and effect without regard to,
and shall not be released, discharged or terminated or in any other way affected
by, any circumstance or condition (whether or not Guarantor shall have any
knowledge or notice thereof), including, without limitation:

       (a)    any amendment or modification of, or extension of time for payment
of any of the principal of, interest on or other amounts payable under the Loan
Documents;

       (b)    any exercise or non-exercise by Lender of any right, power or
remedy under or in respect of the Loan Documents, or any waiver, consent,
forbearance, indulgence or other action, inaction or omission by Lender under or
in respect of the Loan Documents;

       (c)    any assignment, sale or other transfer of Borrower's interest in
all or any part of the real or personal property which at any time constitutes
collateral for the payment of the Guaranteed Obligations, including, without
limitation, a conveyance of such property by Borrower to Lender by deed in lieu
of foreclosure;

       (d)    any bankruptcy, insolvency, reorganization, adjustment,
dissolution, liquidation or other like proceeding involving or affecting
Borrower or Lender or their respective properties or creditors, or any action
taken with respect to the Loan Documents by any trustee or receiver of Borrower
or Lender, or by any court, in any such proceeding;

       (e)    any invalidity or unenforceability, in whole or in part, of any
term or provision of the Loan Documents or Borrower's incapacity or lack of
authority to enter into the Loan Documents;

       (f)    any release, compromise, settlement or discharge with respect to
all or any portion of Borrower's obligations under the Loan Documents;

       (g)    any acceptance of additional or substituted collateral for payment
of the Guaranteed Obligations or any release or subordination of any collateral
held at any time by Lender as security for the payment of the Guaranteed
Obligations; or

       (h)    any resort to Guarantor for payment of all or any portion of the
Guaranteed Obligations, whether or not Lender shall have resorted to any
collateral securing the Guaranteed Obligations, if any, or shall have proceeded
to pursue or exhaust its remedies against Borrower (or any other Person)
primarily or secondarily liable for the Guaranteed Obligations.

No exercise, delay in exercise or non-exercise by Lender of any right hereby
given it, no dealing by Lender with Borrower, Guarantor or any other Person, no
change, impairment or suspension

                                       S-2

<PAGE>

of any right or remedy of Lender, and no act or thing which, but for this
provision, could act as a release or exoneration of the liabilities of Guarantor
hereunder, shall in any way affect, decrease, diminish or impair any of the
obligations of Guarantor hereunder or give Guarantor or any other Person any
recourse or defense against Lender.

       Section 5.    Waiver. Guarantor unconditionally waives the following:

       (a)    notice of acceptance of this Guaranty and notice of any of the
matters referred to in Section 4 hereof;

       (b)    all notices which may be required by statute, rule of law or
otherwise to preserve intact any rights which Lender may have against Guarantor
under this Guaranty, including, without limitation, any demand, proof or notice
of non-payment of any of the principal of, interest on or other amounts payable
under the Loan Documents, and notice of any failure on the part of Borrower to
perform and comply with any covenant, agreement, term or condition of the Loan
Documents;

       (c)    any right to the enforcement, assertion or exercise of any right,
power or remedy conferred upon Lender in the Loan Documents or otherwise;

       (d)    any requirement that Lender act with diligence in enforcing its
rights under the Loan Documents or this Guaranty;

       (e)    any right to require Lender to proceed against or exhaust its
recourse against Borrower or any security or collateral held by Lender, if any,
at any time for the payment of the Guaranteed Obligations or to pursue any other
remedy in its power before being entitled to payment from Guarantor under this
Guaranty or before proceeding against Guarantor;

       (f)    any failure by Lender to file or enforce a claim against the
estate (either in administration, bankruptcy or any other proceeding) of
Borrower or any other Person;

       (g)    any defense based upon an election of remedies by Lender which
destroys or otherwise impairs the subrogation rights of Guarantor or the right
of Guarantor (after payment of the Guaranteed Obligations) to proceed against
Borrower for reimbursement, or both;

       (h)    any defense based upon any taking, modification or release of any
collateral for the Guaranteed Obligations, if any, or any failure to perfect any
security interest in, or the taking of, or failure to take any other action with
respect to, any collateral securing payment of the Guaranteed Obligations, if
any;

       (i)    any defense based upon the addition, substitution or release, in
whole or in part, of any Person(s), including, without limitation, another
guarantor, primarily or secondarily liable for or in respect of the Guaranteed
Obligations;

       (j)    any rights or defenses based upon an offset by Guarantor against
any obligation now or hereafter owed to Guarantor by Borrower; and

                                       S-3

<PAGE>

       (k)    all other notices which may or might be lawfully waived by
Guarantor;

it being the intention hereof that Guarantor shall remain liable as principal,
to the extent set forth in this Guaranty, until the payment and performance in
full of the Guaranteed Obligations, notwithstanding any act, omission or thing
which might otherwise operate as a legal or equitable discharge of Guarantor
other than the payment and performance in full of the Guaranteed Obligations. No
delay by Lender in exercising any rights and/or powers hereunder or in taking
any action to enforce Borrower's obligations under the Loan Documents shall
operate as a waiver as to such rights or powers or in any manner prejudice any
and all of Lender's rights and powers hereunder against Guarantor. The intention
of Guarantor under this Guaranty is that, so long as any of the Guaranteed
Obligations remains unsatisfied, the obligations of Guarantor hereunder shall
not be discharged except by performance and then only to the extent of such
performance. Guarantor agrees that Guarantor's obligations hereunder shall not
be affected by any circumstances, whether or not referred to in this Guaranty,
which might constitute a legal or equitable discharge of a surety or guarantor.

       Section 6.    Election of Remedies. This Guaranty may be enforced from
time to time, as often as occasion therefor may arise, and without any
requirement that Lender must first pursue or exhaust any remedies available to
it against Borrower under the Loan Documents or against any other Person or
resort to any collateral at any time held by it for performance of the
Guaranteed Obligations, if any, or any other source or means of obtaining
payment of any of the Guaranteed Obligations.

       Section 7.    Representations and Warranties of Guarantor. Guarantor
hereby represents and warrants to the Lender as follows:

       (a)    Due Organization; Qualification. Guarantor is qualified to
transact business and is in good standing in the State in which it is organized
and in each other jurisdiction in which such qualification and/or standing is
necessary to the conduct of its business and where the failure to be so
qualified would adversely affect the validity of, the enforceability of, or the
ability of Guarantor to perform the Guaranteed Obligations.

       (b)    Power and Authority. Guarantor has the requisite power and
authority (i) to own its properties and to carry on its business as now
conducted and as contemplated to be conducted in connection with the performance
of the Guaranteed Obligations, and (ii) to execute and deliver this Guaranty and
to carry out the transactions contemplated by this Guaranty.

       (c)    Due Authorization. The execution, delivery and performance of this
Guaranty has been duly authorized by all necessary action and proceedings by or
on behalf of Guarantor, and no further approvals or filings of any kind,
including any approval of or filing with any Governmental Authority, are
required by or on behalf of Guarantor as a condition to the valid execution,
delivery and performance by Guarantor of this Guaranty.

       (d)    Valid and Binding Obligations. This Guaranty has been duly
authorized, executed and delivered by Guarantor and constitutes the legal, valid
and binding obligations of Guarantor, enforceable against Guarantor in
accordance with its terms, except as such

                                       S-4

<PAGE>

enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles affecting the
enforcement of creditors' rights generally or by equitable principles or by the
exercise of discretion by any court.

       (e)    Non-contravention: No Liens. Neither the execution and delivery of
this Guaranty, nor the fulfillment of or compliance with the terms and
conditions of this Guaranty nor the payment or performance of the Guaranteed
Obligations:

       (i)    does or will conflict with or result in any breach or violation of
       any Applicable Law enacted or issued by any Governmental Authority or
       other agency having jurisdiction over Guarantor, any of the Mortgaged
       Properties or any other portion of the Collateral or assets of Guarantor,
       or any judgment or order applicable to Guarantor or to which Guarantor is
       subject;

       (ii)   does or will conflict with or result in any material breach or
       violation of, or constitute a default under, any of the terms, conditions
       or provisions of Guarantor's Organizational Documents, any indenture,
       existing agreement or other instrument to which Guarantor is a party or
       to which Guarantor, any of the Mortgaged Properties or any other portion
       of the Collateral or other assets of Guarantor is subject; or

       (iii)  does or will require the consent or approval of any creditor of
       Guarantor, any Governmental Authority or any other Person except such
       consents or approvals which have already been obtained.

       (f)    Pending Litigation or Other Proceedings. Except as otherwise
disclosed in writing, there is no pending or, to the best knowledge of
Guarantor, written threat of any action, suit, proceeding or investigation, at
law or in equity, before any court, board, body or official of any Governmental
Authority or arbitrator which, if decided adversely to Guarantor, would have, or
may reasonably be expected to materially interfere with Guarantor's ability to
perform its obligations under this Guaranty.

       (g)    Solvency. Guarantor is not insolvent and will not be rendered
insolvent by the transaction contemplated by this Guaranty and after giving
effect to such transaction, Guarantor will not be left with an unreasonably
small amount of capital with which to engage in its business or undertakings,
nor will Guarantor have incurred, have intended to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. Guarantor
did not receive less than a reasonably equivalent value in exchange for
incurrence of the Guaranteed Obligations. There (i) is no contemplated, pending
or, to the best of Guarantor's knowledge, threatened bankruptcy, reorganization,
receivership, insolvency or like proceeding, whether voluntary or involuntary,
affecting Guarantor and (ii) has been no assertion or exercise of jurisdiction
over Guarantor by any court empowered to exercise bankruptcy powers.

       (h)    No Contractual Defaults. There are no material defaults by
Guarantor or, to the knowledge of Guarantor, by any other Person under any
contract to which Guarantor is a party other than defaults which do not permit
the non-defaulting party to terminate the contract and which do not have, and
are not reasonably be expected to have, a Material Adverse Effect on

                                       S-5

<PAGE>

Guarantor. Neither Guarantor nor, to the knowledge of Guarantor, any other
Person, has received notice or has any knowledge of any existing circumstances
in respect of which it could receive any notice of default or breach in respect
of any contracts.

       (i)    Representations True and Correct. The representations and
warranties made by Guarantor in this Guaranty are true, complete and correct as
of the Initial Closing Date and do not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.

       (j)    ERISA. Guarantor is in compliance in all material respects with
all applicable provisions of ERISA and has not incurred any liability to the
PBGC under Title IV of ERISA. None of the assets of Guarantor constitute plan
assets (within the meaning of Department of Labor Regulation Section 2510.3-101)
of any employee benefit plan subject to Title I of ERISA.

       (k)    Financial Information. The financial projections relating to
Guarantor and delivered to the Lender on or prior to the date hereof, if any,
were prepared on the basis of assumptions believed by Guarantor, in good faith
at the time of preparation, to be reasonable and Guarantor is not aware of any
fact or information that would lead it to believe that such assumptions are
incorrect or misleading in any material respect; provided, however, that no
representation or warranty is made that any result set forth in such financial
projections shall be achieved. The financial statements of Guarantor which have
been furnished to the Lender are complete and accurate in all material respects
and present fairly the financial condition of Guarantor, as of its date, applied
on a consistent basis, and since the date of the most recent of such financial
statements no event has occurred which would have, or may reasonably be expected
to have a Material Adverse Effect on Guarantor, and there has not been any
material transaction entered into by Guarantor other than transactions related
to the business of owning, managing and operating real estate. Guarantor has no
material contingent obligations which are not otherwise disclosed in its most
recent financial statements.

       (1)    Accuracy of Information. No information, statement or report
furnished in writing to the Lender by Guarantor in connection with this Guaranty
or any other Loan Document or in connection with the consummation of the
transactions contemplated hereby and thereby contains any material misstatement
of fact or omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.

       (m)    No Conflicts of Interest. To the best knowledge of Guarantor, no
member, officer, agent or employee of the Lender has been or is in any manner
interested, directly or indirectly, in that Person's own name, or in the name of
any other Person, in the Guaranty, the Loan Documents, or any Mortgaged
Property, in any contract for property or materials to be furnished or used in
connection with such Mortgaged Property or in any aspect of the transactions
contemplated by the Loan Documents.

                                       S-6

<PAGE>

       (n)    Governmental Approvals. To the best of Guarantor's knowledge, no
Governmental Approval not already obtained or made is required for the execution
and delivery of this Guaranty or the performance of the terms and provisions
hereof by Guarantor.

       (o)    Governmental Orders. Guarantor is not presently under any cease or
desist order or other orders of a similar nature, temporary or permanent, of any
Governmental Authority which would have the effect of preventing or hindering
performance of its duties hereunder, nor are there any proceedings presently in
progress or to its knowledge contemplated which would, if successful, lead to
the issuance of any such order.

       (p)    No Reliance. Guarantor acknowledges, represents and warrants that
it understands the nature and structure of the transactions contemplated by this
Guaranty and the other Loan Documents; that it is familiar with the provisions
of all of the documents and instruments relating to such transactions; that it
understands the risks inherent in such transactions, including the risk of loss
of all or any of the Mortgaged Properties; and that it has not relied on the
Lender or Fannie Mae for any guidance or expertise in analyzing the financial or
other consequences of the transactions contemplated by this Guaranty or any
other Loan Document or otherwise relied on the Lender or Fannie Mae in any
manner in connection with interpreting, entering into or otherwise in connection
with this Guaranty, any other Loan Document or any of the matters contemplated
hereby or thereby.

       (q)    Compliance with Applicable Law. Guarantor is in compliance with
Applicable Law, including all Governmental Approvals, if any, except for such
items of noncompliance that, singly or in the aggregate, have not had and are
not reasonably expected to cause, a Material Adverse Effect on Guarantor.

       (r)    Contracts with Affiliates. Except as set forth on Schedule 1
hereto, Guarantor has not entered into and is not a party to any contract, lease
or other agreement with any Affiliate of Guarantor for the provision of any
service, materials or supplies relating to any Mortgaged Property.

       Section 8.    Affirmative Covenants of Guarantor. Guarantor agrees and
covenants with the Lender that, at all times during the Term of this Guaranty:

       (a)    Maintenance of Existence. Guarantor shall maintain its existence
and continue to be a corporation organized under the laws of the state of its
organization. Guarantor shall continue to be duly qualified to do business in
each jurisdiction in which such qualification is necessary to the conduct of its
business and where the failure to be so qualified would adversely affect the
validity of, the enforceability of, or the ability to perform, its obligations
under this Guaranty.

       (b)    Financial Statements; Accountants' Reports: Other Information. The
Guarantor shall keep and maintain at all times complete and accurate books of
accounts and records in sufficient detail to correctly reflect all of the
Guarantor's financial transactions and assets. In addition, the Guarantor shall
furnish, or cause to be furnished, to the Lender the financial

                                       S-7

<PAGE>

statements required of Guarantor by Section 8.03(a) of the Master Agreement. In
addition, the Guarantor shall provide Lender with the following:

       (i)    Accountants' Reports. Promptly upon receipt thereof, copies of any
       reports or management letters submitted to the Guarantor by its
       independent certified public accountants in connection with the
       examination of its financial statements made by such accountants (except
       for reports otherwise provided pursuant to subsection (a) above).

       (ii)   Other Reports. Promptly upon receipt thereof, all schedules,
       financial statements or other similar reports delivered by the Guarantor
       pursuant to the Loan Documents or reasonably requested by the Lender with
       respect to the Guarantor's business affairs or condition (financial or
       otherwise).

       (c)    Maintain Licenses. Guarantor shall procure and maintain in full
force and effect all licenses, Permits, charters and registrations which are
material to the conduct of its business and shall abide by and satisfy all terms
and conditions of all such licenses, Permits, charters and registrations.

       (d)    Access to Records; Discussions With Officers and Accountants. To
the extent permitted by law, Guarantor shall permit the Lender:

       (i)    to inspect, make copies and abstracts of, and have reviewed or
       audited, such of Guarantor's books and records;

       (ii)   to discuss Guarantor's affairs, finances and accounts with any of
       Guarantor's officers, partners and employees;

       (iii)  to discuss Guarantor's affairs, finances and accounts with its
       independent public accountants; and

       (iv)   to receive any other information that the Lender deems reasonably
       necessary or relevant in connection with the Guaranty, any Loan
       Document or the Guaranteed Obligations.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event
of Default, all inspections shall be conducted at reasonable times during normal
business hours and upon reasonable notice to the Guarantors.

       (e)    Inform the Lender of Material Events. Guarantor shall promptly,
but in any event within five (5) Business Days, inform the Lender in writing of
any of the following (and shall deliver to the Lender copies of any related
written communications, complaints, orders, judgments and other documents
relating to the following) of which Guarantor has actual knowledge:

       (i)    Defaults. The occurrence of any Event of Default or any Potential
       Event of Default under any Loan Document;

                                       S-8

<PAGE>

       (ii)   Bankruptcy Proceedings. The commencement of any proceedings by or
       against Guarantor under any applicable bankruptcy, reorganization,
       liquidation, insolvency or other similar law now or hereafter in effect
       or of any proceeding in which a receiver, liquidator, trustee or other
       similar official is sought to be appointed for it;

       (iii)  Material Adverse Effect. The occurrence of any act, omission,
       change or event which has a Material Adverse Effect on Guarantor
       subsequent to the date of the most recent audited financial statements
       delivered to the Lender pursuant to Section 8.03 of the Master Agreement;

       (iv)   Restructuring of Guarantor. Any restructuring or reorganization of
       any Guarantor.

       (f)    ERISA. Guarantor shall at all times remain in compliance in all
material respects with all applicable provisions of ERISA.

       (g)    Further Assurances. Guarantor, at the request of the Lender, but
without incurring any liability beyond the Guaranteed Obligations, shall execute
and deliver and, if necessary, file or record such statements, documents,
agreements, UCC financing and continuation statements and such other instruments
and take such further action as the Lender from time to time may request as
reasonably necessary, desirable or proper to carry out more effectively the
purposes of this Guaranty or any of the other Loan Documents or to subject the
Collateral to the lien and security interests of the Loan Documents or to
evidence, perfect or otherwise implement, to assure the lien and security
interests intended by the terms of the Loan Documents or in order to exercise or
enforce its rights under the Loan Documents.

       (h)    Monitoring Compliance. Upon the request of the Lender, but without
incurring any liability beyond the Guaranteed Obligations, from time to time,
Guarantor shall promptly provide to the Lender such documents, certificates and
other information as may be deemed reasonably necessary to enable the Lender to
perform its functions under the Special Pool Purchase Contract as the same
relates to the Guarantor.

       Section 9.    Negative Covenants of Guarantor.

       (a)    Other Activities. Guarantor shall not dissolve or liquidate in
whole or in part.

       (b)    Material Adverse Effect. Guarantor shall not knowingly take any
action which could reasonably be expected to have any Material Adverse Effect on
Guarantor.

       (c)    Principal Place of Business. Guarantor shall not change its
principal place of business or the location of its books and records, each as
set forth in Section 21, without first giving 30 days' prior written notice to
the Lender.

       Section 10.   Expenses. Guarantor agrees to pay all reasonable costs and
out-of-pocket expenses, including court costs and expenses and the reasonable
fees and disbursements of legal counsel, incurred by or on behalf of Lender in
connection with the enforcement of Guarantor's

                                       S-9

<PAGE>

obligations under this Guaranty or the protection of Lender's rights under this
Guaranty. The covenants contained in this Section shall survive the payment of
the Guaranteed Obligations.

       Section 11.   Condition of Borrower. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty
based solely upon Guarantor's own independent investigation of all matters
pertinent hereto and is not relying in any manner upon any representation or
statement made by Lender. Guarantor represents and warrants that Guarantor is in
a position to obtain, and Guarantor hereby assumes full responsibility for
obtaining, any additional information concerning Borrower's financial condition
and any other matters pertinent hereto as Guarantor may desire and Guarantor is
not relying upon or expecting Lender to furnish to Guarantor any information now
or hereafter in Lender's possession concerning the same or any other matter. By
executing this Guaranty, Guarantor knowingly accepts the full range of risks
encompassed within a contract of this type, which risks Guarantor acknowledges.

       Section 12.   Further Assurances. Guarantor agrees at any time and from
time to time upon request by Lender to take, or cause to be taken, any action
and to execute and deliver any additional documents which, in the reasonable
opinion of Lender, may be necessary in order to assure to Lender the full
benefits of this Guaranty.

       Section 13.   Subordination. Guarantor hereby irrevocably and
unconditionally agrees that any claims, direct or indirect, Guarantor may have
by subrogation or other form of reimbursement, against Borrower or to any
security or any interest therein, by virtue of this Guaranty or as a consequence
of any payment made by Guarantor pursuant to this Guaranty, shall be fully
subordinated in time and right of payment to the payment in full of the
Guaranteed Obligations and all other obligations of Guarantor to Lender under
this Guaranty.

       Section 14.   No Subrogation. Guarantor shall not have any right of
subrogation against Borrower by reason of any payment by Guarantor under this
Guaranty until such time as all of the Guaranteed Obligations have been
satisfied in full. Nothing in the foregoing shall affect any claim which any
Guarantor has against Borrower under the terms of the Organizational Documents
of the Borrower.

       Section 15.   Insolvency and Liability of Borrower. So long as any of the
Guaranteed Obligations is unpaid and this Guaranty is in effect, and to the
extent not prohibited by the applicable bankruptcy court, Guarantor agrees to
file all claims against Borrower in any bankruptcy or other proceeding in which
the filing of claims is required by law in connection with indebtedness owed by
Borrower to Guarantor and to assign to Lender all rights of Guarantor thereunder
up to the lesser of (i) the amount of such indebtedness or (ii) the amount of
the Guaranteed Obligations. In all such cases the Person or Persons authorized
to pay such claims shall pay to Lender the full amount thereof to the full
extent necessary to pay the Guaranteed Obligations, and Guarantor hereby assigns
to Lender all of Guarantor's rights to all such payments to which Guarantor
would otherwise be entitled. Notwithstanding the foregoing, and except to the
extent that any sums owed by Borrower to Lender under the Loan Documents shall
have been fully satisfied thereby, the liability of Guarantor hereunder shall in
no way be affected by

                                      S-10

<PAGE>

       (a)    the release or discharge of Borrower in any creditors',
receivership, bankruptcy or other proceedings; or

       (b)    the impairment, limitation or modification of the liability of
Borrower or the estate of Borrower in bankruptcy resulting from the operation of
any present or future provisions of the Bankruptcy Code or other statute or from
the decision in any court.

       Section 16.   Preferences, Fraudulent Conveyances, Etc. If Lender is
required to refund, or voluntarily refunds, any payment received from Borrower
because such payment is or may be avoided, invalidated, declared fraudulent, set
aside or determined to be void or voidable as a preference, fraudulent
conveyance, impermissible setoff or a diversion of trust funds under the
bankruptcy laws or for any similar reason, including, without limitation, any
judgment, order or decree of any court or administrative body having
jurisdiction over Lender or any of its property, or any settlement or compromise
of any claim effected by Lender with Borrower or other claimant (a "Rescinded
Payment"), then Guarantor's liability to Lender shall continue in full force and
effect, or Guarantor's liability to Lender shall be reinstated, as the case may
be, with the same effect and to the same extent as if the Rescinded Payment had
not been received by Lender, notwithstanding the cancellation or termination of
any Note or any of the other Loan Documents. In addition, Guarantor shall pay,
or reimburse Lender for, all expenses (including all reasonable attorneys' fees,
court costs and related disbursements) incurred by Lender in the defense of any
claim that a payment received by Lender in respect of all or any part of the
Guaranteed Obligations from Guarantor must be refunded. The provisions of this
Section shall survive the termination of this Guaranty and any satisfaction and
discharge of Borrower by virtue of any payment, court order or any federal or
state law.

       Section 17.   Waiver. Neither this Guaranty nor any term hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by Lender and Guarantor expressly referring to this Guaranty and to the
provisions so changed or limited. No such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of Lender in exercising any
right under this Guaranty shall operate as a waiver thereof or otherwise by
prejudice thereto.

       Section 18.   Notices. All notices or other communications hereunder
shall be sufficiently given and shall be deemed given when sent in the manner
prescribed by the Master Agreement addressed to the parties as follows:

                  As to Guarantor:          c/o BRE Properties, Inc.
                                            44 Montgomery Street, 36th floor
                                            San Francisco, CA 94104
                                            Fax:     415-445-6534

                  with a copy to:           Latham & Watkins LLP
                                            505 Montgomery Street, Suite 1900
                                            San Francisco, CA 94111-2562
                                            Fax:     415-395-8095

                                      S-11

<PAGE>

If to Lender or Fannie Mae:

       As provided in the Master Agreement.

       Section 19.   Assignability by Lender. Lender may, without notice to
Guarantor, assign or transfer the Advances and the Loan Documents, in whole or
in part. In such event, each and every immediate and successive assignee,
transferee or holder of all or any part of the Advances and the Loan Documents
shall have the right to enforce this Guaranty, by legal action or otherwise, as
fully as if such assignee, transferee, or holder were by name specifically given
such right and power in this Guaranty. Lender shall have an unimpaired right to
enforce this Guaranty for its benefit as to so much of the Advances and the Loan
Documents as Lender has not sold, assigned or transferred.

       Section 20.   Guarantor Bound by Judgment Against Borrower. Guarantor
shall be conclusively bound, in any jurisdiction, by the judgment in any action
by Lender against Borrower in connection with the Loan Documents (wherever
instituted) as if Guarantor were a party to such action even if not so joined as
a party.

       Section 21.   Governing Law. The provisions of Section 17.06 of the
Master Agreement (entitled Choice of Law; Consent to Jurisdiction; Waiver of
Jury Trial) are hereby incorporated into this Agreement by this reference to the
fullest extent as if the text of such Section were set forth in its entirety
herein.

       Section 22.   Invalid Provisions. If any provision of this Guaranty or
the application thereof to Guarantor or any circumstance in any jurisdiction
whose laws govern this Guaranty shall, to any extent, be invalid or
unenforceable under any applicable statute, regulation or rule of law, then such
provision shall be deemed inoperative to the extent of such invalidity or
unenforceability and shall be deemed modified to conform to such statute,
regulation or rule or law. The remainder of this Guaranty and the application of
any such invalid or unenforceable provision to parties, jurisdictions or
circumstances other than those to whom or to which it is held invalid or
unenforceable, shall not be affected by such invalidity or unenforceability nor
shall such invalidity or unenforceability affect the validity or enforceability
of any other provision of this Guaranty.

       Section 23.   General Provisions. This Guaranty shall be binding upon the
respective successors and assigns of Guarantor, and shall inure to the benefit
of Lender and its successors and assigns, including, without limitation, each
successive holder of the Notes. The descriptive headings of the Sections of the
Guaranty have been inserted herein for convenience of reference only and shall
not define or limit the provisions hereof.

       Section 24.   Obligations Joint and Several. The obligations of Guarantor
hereunder shall be joint and several with the obligations of any other
guarantors under this and any other guaranty and the obligations of the Borrower
under the Loan Documents.

                  (Remainder of page intentionally left blank)

                                      S-12

<PAGE>

       IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal as of
the day and year first above written.

                                    BRE PROPERTIES, INC., a Maryland corporation

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

                                      S-13

<PAGE>

                                   SCHEDULE 1

       List of Contracts with Affiliates Relating to Mortgaged Properties

1.     Asset Management Agreement dated as of May 2, 2003 by and between BRE
       Properties, Inc. and BRE-FMCF, LLC.

                                      S-14

<PAGE>

                  EXHIBIT T TO MASTER CREDIT FACILITY AGREEMENT

                             CERTIFICATE OF BORROWER

       All Capitalized Terms used in this Certificate of Borrower have the
meanings given to those terms in the Master Credit Facility Agreement
("Agreement") or elsewhere in this Certificate of Borrower unless the context or
use clearly indicates a different meaning.

       In addition to all other representations, warranties and covenants made
by BRE-FMCF, LLC, a Delaware limited liability company ("Borrower") in
connection with:

              (a)    the establishment by Lender of the Credit Facility in the
amount of $100,000,000 pursuant to the Agreement;

              (b)    the securing of the obligations of Borrower under the
Agreement and the other Loan Documents by the Security Instruments and any other
Security Documents; and

              (c)    the issuance by Fannie Mae of mortgaged-backed securities
which are secured by an interest in the Notes and the Collateral Pool securing
the Notes;

       Borrower does hereby represent, warrant and covenant to Lender and
Fannie Mae, as of the _____ day of ____________________, 200_, with respect to
itself, as follows:

       1.     Review of Documents. Borrower has reviewed the Loan Documents.

       2.     Purpose of Certificate. This Certificate is delivered to Lender
and Fannie Mae, in order to induce (a) Lender to enter into the Agreement and to
establish the Credit Facility in favor of Borrower; and (b) Fannie Mae to agree
to issue mortgage-backed securities which are secured by an interest in the
Notes and the Collateral Pool securing the Notes.

       3.     Due Organization; Qualification.

              (a)    Borrower is qualified to transact business and is
in good standing in the State in which it is organized and in each other
jurisdiction in which such qualification and/or standing is necessary to the
conduct of its business and where the failure to be so qualified would adversely
affect the validity of, the enforceability of, or the ability of the Borrower to
perform the Obligations under the Agreement and the other Loan Documents.
Borrower is qualified to transact business and is in good standing in each State
in which it owns a Mortgaged Property.

              (b)    Borrower's principal place of business, principal
office and office where it keeps its books and records as to the Collateral is
located at the address set out in Section 17.08 of the Agreement.

       4.     Power and Authority. Borrower has the requisite power and
authority (a) to own its properties and to carry on their business as now
conducted and as contemplated to be conducted in connection with the performance
of the Obligations under the Agreement and under the other Loan Documents to
which it is a party and (b) to execute and deliver the Agreement

                                       T-1

<PAGE>

and the other Loan Documents and to carry out the transactions contemplated by
the Agreement and the other Loan Documents to which it is a party.

       5.     Due Authorization. The execution, delivery and performance of the
Agreement and the other Loan Documents to which it is a party have been duly
authorized by all necessary action and proceedings by or on behalf of Borrower,
and no further approvals or filings of any kind, including any approval of or
filing with any Governmental Authority, are required by or on behalf of Borrower
as a condition to the valid execution, delivery and performance by Borrower of
the Agreement or any of the other Loan Documents to which it is a party.

       6.     Valid and Binding Obligations. The Agreement and the other Loan
Documents to which it is a party have been duly executed and delivered by
Borrower and constitute the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles affecting the
enforcement of creditors' rights generally or by equitable principles or by the
exercise of discretion by any court.

       7.     Single-Purpose Status. Except as otherwise expressly approved by
Fannie Mae in writing, the Borrower is a Single-Purpose entity and does not own
any real property or assets other than the Mortgaged Properties and does not
operate any business other than the management and operation of the Mortgaged
Properties.

       8.     No Default. The execution, delivery and performance of the
obligations imposed on Borrower under the Loan Documents to which it is a party
and the Security Documents will not cause Borrower to be in default under the
provisions of any agreement, judgment or order to which Borrower is a party or
by which Borrower is bound.

       9.     Financial Statements. The financial statements of Borrower and any
managing member of Borrower furnished to Lender, are, in each case, complete and
accurate in all material respects and present fairly the financial condition of
such entities or persons, as of its date in accordance with GAAP, applied on a
consistent basis.

       10.    Financial Condition. No material adverse change in the financial
condition of Borrower or any managing member of Borrower has occurred between
the respective dates of the financial statements which were furnished to Lender
relating to such entities or persons and the date hereof.

       11.    No Insolvency or Judgment. Neither Borrower, nor any managing
member of Borrower is currently (a) the subject of or a party to any completed
or pending bankruptcy, reorganization or insolvency proceeding; or (b) the
subject of any judgment unsatisfied of record or docketed in any court of the
state in which any Mortgaged Property is located or in any court located in the
United States.

       12.    Taxes Paid. Borrower has filed all federal, state, county and
municipal tax returns required to have been filed by Borrower, and has paid all
taxes which have become due pursuant to such returns or to any notice of
assessment received by Borrower, and Borrower has no

                                       T-2

<PAGE>

knowledge of any basis for additional assessment with respect to such taxes. To
the best of Borrower's knowledge, there are not presently pending any special
assessments against any Mortgaged Property or any part thereof.

       13.    ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA and has not incurred any liability to the PBGC
under Title IV of ERISA. None of the assets of Borrower constitute plan assets
(within the meaning of Department of Labor Regulation Section 2510.3-101) of any
employee benefit plan subject to Title I of ERISA.

       14.    Governmental Approvals; Governmental Orders. No Governmental
Approval not already obtained or made is required for the execution and delivery
of the Agreement or any other Loan Document or the performance of the terms and
provisions thereof by the Borrower. Borrower is not presently under any cease or
desist order or other orders of a similar nature, temporary or permanent, of any
Governmental Authority which would have the effect of preventing or hindering
performance of the terms and provisions of the Agreement or any other Loan
Document, nor are there any proceedings presently in progress or to its
knowledge contemplated which would, if successful, lead to the issuance of any
such order.

       15.    Impositions. Borrower has paid all of the following items which
have become due and payable regarding any Mortgaged Property: taxes, government
assessments; insurance premiums; water, sewer and municipal charges; leasehold
payments; ground rents; all parties furnishing labor and materials and, except
for such liens or claims insured against by the policy of title insurance to be
issued in connection with the Credit Facility, there are no mechanics',
laborers' or materialmen's liens or claims outstanding for work, labor or
materials affecting any Mortgaged Property, whether prior to, equal with or
subordinate to the lien of any Security Instrument; and any other charges
affecting any Mortgaged Property.

       16.    Compliance with Applicable Laws. Each Mortgaged Property complies
in all material respects with all Applicable Laws affecting such Mortgaged
Property. Without limiting the foregoing, all material Permits, including
certificates of occupancy, to the extent issued by the relevant jurisdiction,
have been issued and are in full force and effect. Neither Borrower nor, to the
knowledge of Borrower, any former owner of any Mortgaged Property, has received
any written notification or threat of any actions or proceedings regarding the
noncompliance or nonconformity of any Mortgaged Property with any Applicable
Laws or Permits, which noncompliance or nonconformity would have a material
adverse effect on the relevant Mortgaged Property, nor is Borrower otherwise
aware of any such pending actions or proceedings.

       17.    Leases.

              (a)    Borrower has delivered to Lender a true and correct copy
of the form apartment lease for each Mortgaged Property (and, with respect to
leases executed prior to the date on which Borrower first owned the Mortgaged
Property, the form apartment lease used for such leases). Except as set forth in
a Rent Roll, no Lease for any unit in any Mortgaged Property (i) is for a term
in excess of one year, including any renewal or extension period unless such
renewal or extension period is subject to termination by the Borrower Parties
upon not more than

                                       T-3

<PAGE>

30 days' written notice, (ii) provides for prepayment of more than one month's
rent, or (iii) was entered into in other than the ordinary course of business.

              (b)    Except for any assignment of leases and rents which is a
Permitted Lien or which is to be released in connection with the consummation of
the transactions contemplated by the Agreement, Borrower is the owner and holder
of the landlord's interest under each of the Leases and there are no prior
outstanding assignments of any such Lease, or any portion of the rents,
additional rents, charges, issues or profits due and payable or to become due
and payable thereunder.

              (c)    Each Lease constitutes the legal, valid and binding
obligation of Borrower and, to the knowledge of Borrower, of each of the other
parties thereto, enforceable in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization or other similar laws relating to
creditors' rights generally, and equitable principles, and except as disclosed
in writing to the Lender, no notice of any default by Borrower which remains
uncured has been sent by any tenant under any such Lease, other than defaults
which do not have, and are not reasonably expected to have, a Material Adverse
Effect on the Mortgaged Property subject to the Lease.

              (d)    All premises demised to tenants under Leases are occupied
by such tenants as tenants only. No Lease contains any option or right to
purchase, right of first refusal or any other similar provisions.

       18.    Condition of the Mortgaged Properties. Except as disclosed in any
third party report delivered to Lender prior to the date on which any Mortgaged
Property is added to the Collateral Pool, or otherwise disclosed in writing by
Borrower to Lender prior to such date, each Mortgaged Property is in good
condition, order and repair, there exist no structural or other material defects
in such Mortgaged Property (whether patent or, to the best knowledge of
Borrower, latent or otherwise) and Borrower has not received notice from any
insurance company or bonding company of any defects or inadequacies in such
Mortgaged Property, or any part of it, which would adversely affect the
insurability of such Mortgaged Property or cause the imposition of extraordinary
premiums or charges for insurance or of any termination or threatened
termination of any policy of insurance or bond. No claims have been made against
any contractor, architect or other party with respect to the condition of any
Mortgaged Property or the existence of any structural or other material defect
therein. No Mortgaged Property has been materially damaged by casualty which has
not been fully repaired or for which insurance proceeds have not been received
or are not expected to be received except as previously disclosed in writing to
Lender. There are no proceedings pending for partial or total condemnation of
any Mortgaged Property except as disclosed in writing to Lender.

       19.    Representations and Warranties True. Each and every representation
and warranty contained herein will remain true and correct at all times from the
date hereof until all Obligations have been performed in full in accordance with
the terms of the Loan Documents and the Security Documents. In the event that
any representation or warranty contained herein becomes untrue, in whole or in
part, after the date hereof, Borrower will so advise Lender and Fannie Mae in
writing immediately.

                                       T-4

<PAGE>

       20.    Ratification. Borrower covenants that it shall, promptly upon the
request of Lender or Fannie Mae ratify and affirm this Certificate of Borrower
in writing, as of such date or dates as such Person shall specify.

       21.    Survival. The representations, warranties and covenants set forth
in this Certificate of Borrower shall survive the execution and delivery of the
Loan Documents, regardless of any investigation made by Lender or Fannie Mae.

               The remainder of this page is intentionally blank.

                                       T-5

<PAGE>

       IN WITNESS WHEREOF, Borrower has executed this Certificate of Borrower
as of the day and year first above written.

                                     BORROWER:

                                     BRE-FMCF, LLC, a Delaware limited liability

                                     company

                                     By:       BRE Properties, Inc., a Maryland
                                               corporation, its sole member

                                              By:
                                                 -------------------------------

                                              Name:
                                                   -----------------------------

                                              Title:
                                                    ----------------------------

                                       T-6

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