Document:

<PAGE>

                                                                 EXHIBIT 10.65.1

THIS DOCUMENT PREPARED BY,
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

David J. McPherson, Esquire
Troutman Sanders LLP
P.O. Box 1122
Richmond, Virginia  23218-1122

APN:     137-0-030-355
    ---------------------------

                           MULTIFAMILY DEED OF TRUST,
                              ASSIGNMENT OF RENTS,
                      SECURITY AGREEMENT AND FIXTURE FILING
                                  (CALIFORNIA)

ATTENTION COUNTY RECORDER: THIS INSTRUMENT IS INTENDED TO BE EFFECTIVE AS A
FINANCING STATEMENT FILED AS A FIXTURE FILING PURSUANT TO SECTION 9402 OF THE
CALIFORNIA COMMERCIAL CODE. PORTIONS OF THE GOODS COMPRISING A PART OF THE
MORTGAGED PROPERTY ARE OR ARE TO BECOME FIXTURES RELATED TO THE LAND DESCRIBED
IN EXHIBIT A HERETO. THIS INSTRUMENT IS TO BE FILED FOR RECORD IN THE RECORDS OF
THE COUNTY WHERE DEEDS OF TRUST ON REAL PROPERTY ARE RECORDED AND SHOULD BE
INDEXED AS BOTH A DEED OF TRUST AND AS A FINANCING STATEMENT COVERING FIXTURES.
THE ADDRESSES OF BORROWER (DEBTOR) AND LENDER (SECURED PARTY) ARE SPECIFIED IN
THE FIRST PARAGRAPH ON PAGE 1 OF THIS INSTRUMENT.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -    FORM 4005                  11/01
CALIFORNIA (THE LEXINGTON)

                                                         (C)1997-2001 Fannie Mae

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  PAGE
                                                                                                                  ----
<S>                                                                                                               <C>
1.       DEFINITIONS.............................................................................................   1

2.       UNIFORM COMMERCIAL CODE SECURITY AGREEMENT..............................................................   5

3.       ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION......................................   6

4.       ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY...........................................   8

5.       PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM...........................   9

6.       EXCULPATION.............................................................................................   9

7.       DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.........................................................   9

8.       COLLATERAL AGREEMENTS...................................................................................  10

9.       APPLICATION OF PAYMENTS.................................................................................  10

10.      COMPLIANCE WITH LAWS....................................................................................  11

11.      USE OF PROPERTY.........................................................................................  11

12.      PROTECTION OF LENDER'S SECURITY.........................................................................  11

13.      INSPECTION..............................................................................................  12

14.      BOOKS AND RECORDS; FINANCIAL REPORTING..................................................................  12

15.      TAXES; OPERATING EXPENSES...............................................................................  13

16.      LIENS; ENCUMBRANCES.....................................................................................  14

17.      PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY..........................................  14

18.      ENVIRONMENTAL HAZARDS...................................................................................  15

19.      PROPERTY AND LIABILITY INSURANCE........................................................................  19

20.      CONDEMNATION............................................................................................  20

21.      TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER............................................  21

22.      EVENTS OF DEFAULT.......................................................................................  24

23.      REMEDIES CUMULATIVE.....................................................................................  24
</TABLE>

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -    FORM 4005   11/01         Page i
CALIFORNIA (THE LEXINGTON)

                                                         (C)1997-2001 Fannie Mae

<PAGE>

<TABLE>
<S>                                                                                                                <C>
24.      FORBEARANCE.............................................................................................  25

25.      LOAN CHARGES............................................................................................  25

26.      WAIVER OF STATUTE OF LIMITATIONS........................................................................  25

27.      WAIVER OF MARSHALLING...................................................................................  25

28.      FURTHER ASSURANCES......................................................................................  26

29       ESTOPPEL CERTIFICATE....................................................................................  26

30.      GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE........................................................  26

31.      NOTICE..................................................................................................  26

32.      SALE OF NOTE; CHANGE IN SERVICER........................................................................  27

33.      SINGLE ASSET BORROWER...................................................................................  27

34       SUCCESSORS AND ASSIGNS BOUND............................................................................  27

35.      JOINT AND SEVERAL LIABILITY.............................................................................  27

36.      RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.....................................................  27

37.      SEVERABILITY; AMENDMENTS................................................................................  27

38.      CONSTRUCTION............................................................................................  27

39.      LOAN SERVICING..........................................................................................  28

40.      DISCLOSURE OF INFORMATION...............................................................................  28

41.      NO CHANGE IN FACTS OR CIRCUMSTANCES.....................................................................  28

42.      SUBROGATION.............................................................................................  28

43.      ACCELERATION; REMEDIES..................................................................................  28

44.      RECONVEYANCE............................................................................................  29

45.      SUBSTITUTE TRUSTEE......................................................................................  29

46.      STATEMENT OF OBLIGATION.................................................................................  29

47.      SPOUSE'S SEPARATE PROPERTY..............................................................................  29

48.      FIXTURE FILING..........................................................................................  29

49.      ADDITIONAL PROVISION REGARDING APPLICATION OF PAYMENTS..................................................  29

50.      WAIVER OF MARSHALLING; OTHER WAIVERS....................................................................  29
</TABLE>

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -    FORM 4005   11/01        Page ii
CALIFORNIA (THE LEXINGTON)

                                                         (C)1997-2001 Fannie Mae

<PAGE>

<TABLE>
<S>                                                                                                                <C>
51       ADDITIONAL PROVISIONS CONCERNING ENVIRONMENTAL HAZARDS..................................................  30

52.      ADDITIONAL PROVISION REGARDING INSURANCE................................................................  31

53.      WAIVER OF TRIAL BY JURY.................................................................................  31
</TABLE>

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -    FORM 4005   11/01       Page iii
CALIFORNIA (THE LEXINGTON)

                                                         (C)1997-2001 Fannie Mae

<PAGE>

                                                                   The Lexington

                           MULTIFAMILY DEED OF TRUST,
                              ASSIGNMENT OF RENTS,
                             SECURITY AGREEMENT AND
                                 FIXTURE FILING

      THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (the "INSTRUMENT") is dated as of the 21st day of June, 2005,
by FIT REN THE LEXINGTON LP, a limited partnership organized and existing under
the laws of Delaware, whose address is c/o Fortress Investment Trust, 1251
Avenue of the Americas, 16th Floor, New York, New York 10020, Attn: Randal
Nardone, as trustor ("BORROWER"), to FIDELITY NATIONAL TITLE, as trustee
("TRUSTEE"), for the benefit of GMAC COMMERCIAL MORTGAGE BANK, a industrial bank
organized and existing under the laws of Utah, whose address is 6955 Union Park
Center, Suite 330, Midvale, Utah 84047, Attn: President, with a copy to GMAC
Commercial Mortgage Corporation, 200 Witmer Road, P. O. Box 809, Horsham,
Pennsylvania 19044, Attn: Servicing - Executive Vice President, as beneficiary
("LENDER").

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

      TO SECURE TO LENDER the repayment of the Indebtedness evidenced by
Borrower's Multifamily Note payable to Lender, dated as of the date of this
Instrument, and maturing on July 1, 2012, in the principal amount of
$10,867,974.00, and all renewals, extensions and modifications of the
Indebtedness, the payment of all sums advanced by or on behalf of Lender to
protect the security of this Instrument under Section 12, and the performance of
the covenants and agreements of Borrower contained in the Loan Documents.

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

COVENANTS. Borrower and Lender covenant and agree as follows:

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

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

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

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  1
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

or any other agreement or agreements between Borrower and Lender which provide
for the establishment of any other fund, reserve or account.

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

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

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

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

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

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

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

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  2
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

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

      (l)   [Intentionally omitted]

      (m)   "KEY PRINCIPAL" means the natural person(s) or entity identified as
such at the foot of this Instrument, and any person or entity who becomes a Key
Principal after the date of this Instrument and is identified as such in an
amendment or supplement to this Instrument.

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

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

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

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

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

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

            (1)   the Land;

            (2)   the Improvements;

            (3)   the Fixtures;

            (4)   the Personalty;

            (5)   all current and future rights, including air rights,
                  development rights, zoning rights and other similar rights or
                  interests, easements, tenements, rights-of-way, strips and
                  gores of land, streets, alleys, roads, sewer rights, waters,
                  watercourses, and appurtenances related to or benefitting the
                  Land

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  3
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

                  or the Improvements, or both, and all rights-of-way, streets,
                  alleys and roads which may have been or may in the future be
                  vacated;

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

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

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

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

            (10)  all Rents and Leases;

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

            (12)  all Imposition Deposits;

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

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

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

      (t)   "NOTE" means the Multifamily Note described on page 1 of this
Instrument, including the Acknowledgment and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability (if any), and all
schedules, riders, allonges and addenda, as such Multifamily Note may be amended
from time to time.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  4
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

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

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

      (x)   "RENTS" means all rents (whether from residential or non-residential
space), revenues and other income of the Land or the Improvements, including
subsidy payments received from any sources (including, but not limited to
payments under any Housing Assistance Payments Contract) parking fees, laundry
and vending machine income and fees and charges for food, health care and other
services provided at the Mortgaged Property, whether now due, past due, or to
become due, and deposits forfeited by tenants.

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

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

      2.    UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also
a security agreement under the Uniform Commercial Code for any of the Mortgaged
Property which, under applicable law, may be subject to a security interest
under the Uniform Commercial Code, whether acquired now or in the future, and
all products and cash and non-cash proceeds thereof (collectively, "UCC
COLLATERAL"), and Borrower hereby grants to Lender a security interest in the
UCC Collateral. Borrower hereby authorizes Lender to file financing statements,

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  5
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

continuation statements and financing statement amendments, in such form as
Lender may require to perfect or continue the perfection of this security
interest and Borrower agrees, if Lender so requests, to execute and deliver to
Lender such financing statements, continuation statements and amendments.
Borrower shall pay all filing costs and all costs and expenses of any record
searches for financing statements that Lender may require. Without the prior
written consent of Lender, Borrower shall not create or permit to exist any
other lien or security interest in any of the UCC Collateral. If an Event of
Default has occurred and is continuing, Lender shall have the remedies of a
secured party under the Uniform Commercial Code, in addition to all remedies
provided by this Instrument or existing under applicable law. In exercising any
remedies, Lender may exercise its remedies against the UCC Collateral separately
or together, and in any order, without in any way affecting the availability of
Lender's other remedies. This Instrument constitutes a financing statement with
respect to any part of the Mortgaged Property which is or may become a Fixture.

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

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

      (b)   After the occurrence of an Event of Default, Borrower authorizes
Lender to collect, sue for and compromise Rents and directs each tenant of the
Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower
shall, upon Borrower's receipt of any Rents from any sources (including, but not
limited to subsidy payments under any Housing Assistance Payments Contract), pay
the total amount of such receipts to the Lender. However, until the occurrence
of an Event of Default, Lender hereby grants to Borrower a revocable license to
collect and receive all Rents, to hold all Rents in trust for the benefit of
Lender and to apply all Rents to pay the installments of interest and principal
then due and payable under the Note and the other amounts then due and payable
under the other Loan Documents, including Imposition Deposits, and to pay the
current costs and expenses of managing, operating and maintaining the Mortgaged
Property, including utilities, Taxes and insurance premiums (to the extent not
included in Imposition Deposits), tenant improvements and other capital
expenditures. So long as no Event of Default has occurred and is continuing, the
Rents remaining after application pursuant to the preceding sentence may be
retained by Borrower free and clear of, and released from, Lender's rights with
respect to Rents under this Instrument. From and after the occurrence of an
Event of Default, and without the necessity of Lender entering upon and taking
and maintaining control of the Mortgaged Property directly, or by a receiver,
Borrower's license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid. Borrower shall pay to Lender upon demand
all Rents to which Lender is entitled. At any time after the occurrence of an
Event of Default, Lender may give, and Borrower hereby irrevocably authorizes
Lender to give, notice to all tenants of the Mortgaged Property instructing them
to pay all Rents to Lender; provided, however, that the giving of any such
notice by Lender shall not affect, in any way, Lender's entitlement to the Rents
as of the date on which the Event of Default occurs. No tenant

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page  6
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                                                         (C)1997-2001 Fannie Mae

<PAGE>

shall be obligated to inquire further as to the occurrence or continuance of an
Event of Default, and no tenant shall be obligated to pay to Borrower any
amounts which are actually paid to Lender in response to such a notice. Any such
notice by Lender shall be delivered to each tenant personally, by mail or by
delivering such demand to each rental unit. Borrower shall not interfere with
and shall cooperate with Lender's collection of such Rents.

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

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

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

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<PAGE>

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

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

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

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

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

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

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

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

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

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

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

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

      7.    DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

      (a)   Borrower shall deposit with Lender on the day monthly installments
of principal or interest, or both, are due under the Note (or on another day
designated in writing by Lender), until the Indebtedness is paid in full, an
additional amount sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which, if not paid, may result
in a lien on all or any part of the Mortgaged Property, (2) the premiums for
fire and

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

other hazard insurance, rent loss insurance and such other insurance as Lender
may require under Section 19, (3) Taxes, and (4) amounts for other charges and
expenses which Lender at any time reasonably deems necessary to protect the
Mortgaged Property, to prevent the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender's interests, all as reasonably
estimated from time to time by Lender. The amounts deposited under the preceding
sentence are collectively referred to in this Instrument as the "IMPOSITION
DEPOSITS". The obligations of Borrower for which the Imposition Deposits are
required are collectively referred to in this Instrument as "IMPOSITIONS". The
amount of the Imposition Deposits shall be sufficient to enable Lender to pay
each Imposition before the last date upon which such payment may be made without
any penalty or interest charge being added. Lender shall maintain records
indicating how much of the monthly Imposition Deposits and how much of the
aggregate Imposition Deposits held by Lender are held for the purpose of paying
Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required. Any waiver by Lender of the requirement that
Borrower remit Imposition Deposits to Lender may be revoked by Lender, in
Lender's discretion, at any time upon notice to Borrower.

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

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

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

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

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

      9.    APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

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

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

      12.   PROTECTION OF LENDER'S SECURITY.

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

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

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

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

      14.   BOOKS AND RECORDS; FINANCIAL REPORTING.

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

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

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

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

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

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

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

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

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<PAGE>

            (7)   if required by Lender, a statement of income and expense for
                  the Mortgaged Property for the prior month or quarter.

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

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

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

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

      (g)   If an Event of Default has occurred and Lender has not previously
required Borrower to furnish a quarterly statement of income and expense for the
Mortgaged Property, Lender may require Borrower to furnish such a statement
within 45 days after the end of each fiscal quarter of Borrower following such
Event of Default.

      15.   TAXES; OPERATING EXPENSES.

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

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

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

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

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

Imposition, if requested by Lender, and (4) Borrower furnishes whatever
additional security is required in the proceedings or is reasonably requested by
Lender, which may include the delivery to Lender of the reserves established by
Borrower to pay the contested Imposition.

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

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

      17.   PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

      (a)   Borrower (1) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged
Property, (3) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair, (4) shall keep the Mortgaged Property
in good repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (5) shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (6)
shall give notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to affect
the Mortgaged Property, Lender's security or Lender's rights under this
Instrument. Borrower shall not (and shall not permit any tenant or other person
to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible
Personalty.

      (b)   If, in connection with the making of the loan evidenced by the Note
or at any later date, Lender waives in writing the requirement of Section
17(a)(5) above that Borrower enter into a written contract for management of the
Mortgaged Property and if, after the date of this Instrument, Borrower intends
to change the management of the Mortgaged Property, Lender shall have the right
to approve such new property manager and the written contract for the management
of the Mortgaged Property and require that Borrower and such new property
manager enter into an Assignment of Management Agreement on a form approved by
Lender. If required by Lender (whether before or after an Event of Default),
Borrower will cause any Affiliate of Borrower to whom fees are payable for the
management of the Mortgaged Property to enter into an agreement with Lender, in
a form approved by Lender, providing for subordination of those fees and such
other provisions as Lender may require. "Affiliate of Borrower" means any
corporation, partnership, joint venture, limited liability company, limited
liability partnership, trust or individual controlled by, under common control
with, or which controls Borrower (the term "control" for these purposes shall
mean the ability, whether by the ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of a corporation,
to make management decisions on behalf of, or independently to select the
managing partner of, a partnership, or otherwise to have the power independently
to remove and then select a majority of those individuals exercising managerial
authority over an entity, and control shall be conclusively presumed in the case
of the ownership of 50% or more of the equity interests).

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

      18.   ENVIRONMENTAL HAZARDS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

            (2)   Borrower's receipt of or knowledge of any complaint, order,
                  notice of violation or other communication from any
                  Governmental Authority or other person with regard to present
                  or future alleged Prohibited Activities or Conditions or any
                  other environmental, health or safety matters

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                  affecting the Mortgaged Property or any other property of
                  Borrower that is adjacent to the Mortgaged Property; and

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

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

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

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

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

      (j)   Borrower shall indemnify, hold harmless and defend (i) Lender, (ii)
any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior
Loan Servicer, (v) the officers,

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directors, shareholders, partners, employees and trustees of any of the
foregoing, and (vi) the heirs, legal representatives, successors and assigns of
each of the foregoing (collectively, the "INDEMNITEES") from and against all
proceedings, claims, damages, penalties and costs (whether initiated or sought
by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees,
and remediation costs, whether incurred in connection with any judicial or
administrative process or otherwise, arising directly or indirectly from any of
the following:

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

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

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

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

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

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

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

      (m)   Lender agrees that the indemnity under this Section 18 shall be
limited to the assets of Borrower and Lender shall not seek to recover any
deficiency from any natural persons who are general partners of Borrower.

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

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

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

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

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

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

      19.   PROPERTY AND LIABILITY INSURANCE.

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

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

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

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

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

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

      (g)   Lender shall not exercise its option to apply insurance proceeds to
the payment of the Indebtedness if all of the following conditions are met: (1)
no Event of Default (or any event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default) has occurred and
is continuing; (2) Lender determines, in its discretion, that there will be
sufficient funds to complete the Restoration; (3) Lender determines, in its
discretion, that the rental income from the Mortgaged Property after completion
of the Restoration will be sufficient to meet all operating costs and other
expenses, Imposition Deposits, deposits to reserves and loan repayment
obligations relating to the Mortgaged Property; (4) Lender determines, in its
discretion, that the Restoration will be completed before the earlier of (A) one
year before the maturity date of the Note or (B) one year after the date of the
loss or casualty; and (5) upon Lender's request, Borrower provides Lender
evidence of the availability during and after the Restoration of the insurance
required to be maintained by Borrower pursuant to this Section 19.

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

      20.   CONDEMNATION.

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

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

      21.   TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

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

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

            (2)   a Transfer of a Controlling Interest in Borrower;

            (3)   a Transfer of a Controlling Interest in any entity which owns,
                  directly or indirectly through one or more intermediate
                  entities, a Controlling Interest in Borrower;

            (4)   a Transfer of all or any part of Key Principal's ownership
                  interests (other than limited partnership interests) in
                  Borrower, or in any other entity which owns, directly or
                  indirectly through one or more intermediate entities, an
                  ownership interest in Borrower;

            (5)   if Key Principal is an entity, (A) a Transfer of a Controlling
                  Interest in Key Principal, or (B) a Transfer of a Controlling
                  Interest in any entity which owns, directly or indirectly
                  through one or more intermediate entities, a Controlling
                  Interest in Key Principal;

            (6)   if Borrower or Key Principal is a trust, the termination or
                  revocation of such trust; and

            (7)   a conversion of Borrower from one type of legal entity into
                  another type of legal entity, whether or not there is a
                  Transfer.

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

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

            (1)   a Transfer to which Lender has consented;

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

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

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

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

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

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

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

            (2)   the absence of any Event of Default;

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

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

            (5)   in the case of a Transfer of all or any part of the Mortgaged
                  Property, or direct or indirect ownership interests in
                  Borrower or Key Principal (if an entity), if transferor or any
                  other person has obligations under any Loan Document, the
                  execution by the transferee or one or more individuals or
                  entities acceptable to Lender of an assumption agreement
                  (including, if applicable, an Acknowledgment and Agreement of
                  Key Principal to Personal Liability for Exceptions to
                  Non-Recourse Liability) that is acceptable to Lender and that,
                  among other things, requires the transferee or such individual
                  or entity to perform all obligations of transferor or such
                  person set forth in such Loan Document, and may require that
                  the transferee comply

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                  with any provisions of this Instrument or any other Loan
                  Document which previously may have been waived by Lender;

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

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

                  (A)   a non-refundable review fee in the amount of $3,000 and
                        a transfer fee equal to 1 percent of the outstanding
                        Indebtedness immediately prior to the Transfer.

                  (B)   In addition, Borrower shall be required to reimburse
                        Lender for all of Lender's out-of-pocket costs
                        (including reasonable attorneys' fees) incurred in
                        reviewing the Transfer request, to the extent such
                        expenses exceed $3,000.

      (d)   For purposes of this Section, the following terms shall have the
meanings set forth below:

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

            (2)   A Transfer of a "CONTROLLING INTEREST" shall mean, with
                  respect to any entity, the following:

                  (i)   if such entity is a general partnership or a joint
                        venture, a Transfer of any general partnership interest
                        or joint venture interest which would cause the Initial
                        Owners to own less than 51% of all general partnership
                        or joint venture interests in such entity;

                  (ii)  if such entity is a limited partnership, a Transfer of
                        any general partnership interest;

                  (iii) if such entity is a limited liability company or a
                        limited liability partnership, a Transfer of any
                        membership or other ownership interest which would cause
                        the Initial Owners to own less than 51% of all
                        membership or other ownership interests in such entity;

                  (iv)  if such entity is a corporation (other than a
                        Publicly-Held Corporation) with only one class of voting
                        stock, a Transfer of any voting stock which would cause
                        the Initial Owners to own less than 51% of voting stock
                        in such corporation;

                  (v)   if such entity is a corporation (other than a
                        Publicly-Held Corporation) with more than one class of
                        voting stock, a Transfer of any voting stock which would
                        cause the Initial Owners to own less than a sufficient
                        number of shares of voting stock having the power to
                        elect the majority of directors of such corporation; and

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                  (vi)  if such entity is a trust, the removal, appointment or
                        substitution of a trustee of such trust other than (A)
                        in the case of a land trust, or (B) if the trustee of
                        such trust after such removal, appointment or
                        substitution is a trustee identified in the trust
                        agreement approved by Lender.

            (3)   "PUBLICLY-HELD CORPORATION" shall mean a corporation the
                  outstanding voting stock of which is registered under Section
                  12(b) or 12(g) of the Securities and Exchange Act of 1934, as
                  amended.

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

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

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

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

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

      (e)   any Event of Default under Section 21;

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

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

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

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

      23.   REMEDIES CUMULATIVE. Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

Document or afforded by applicable law, and each shall be cumulative and may be
exercised concurrently, independently, or successively, in any order.

      24.   FORBEARANCE.

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

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

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

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

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

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                                                         (C)1997-2001 Fannie Mae

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require the marshalling of assets or to require that any of the Mortgaged
Property be sold in the inverse order of alienation or that any of the Mortgaged
Property be sold in parcels or as an entirety in connection with the exercise of
any of the remedies permitted by applicable law or provided in this Instrument.

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

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

      30.   GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

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

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

      31.   NOTICE.

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

      (b)   Any party to this Instrument may change the address to which notices
intended for it are to be directed by means of notice given to the other party
in accordance with this Section 31. Each party agrees that it will not refuse or
reject delivery of any notice given in

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

accordance with this Section 31, that it will acknowledge, in writing, the
receipt of any notice upon request by the other party and that any notice
rejected or refused by it shall be deemed for purposes of this Section 31 to
have been received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the
courier service.

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

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

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

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

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

      36.   RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

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

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

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

      38.   CONSTRUCTION. The captions and headings of the sections of this
Instrument are for convenience only and shall be disregarded in construing this
Instrument. Any reference in this Instrument to an "Exhibit" or a "Section"
shall, unless otherwise explicitly provided, be

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

construed as referring, respectively, to an Exhibit attached to this Instrument
or to a Section of this Instrument. All Exhibits attached to or referred to in
this Instrument are incorporated by reference into this Instrument. Any
reference in this Instrument to a statute or regulation shall be construed as
referring to that statute or regulation as amended from time to time. Use of the
singular in this Agreement includes the plural and use of the plural includes
the singular. As used in this Instrument, the term "including" means "including,
but not limited to."

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

      40.   DISCLOSURE OF INFORMATION. Lender may furnish information regarding
Borrower or the Mortgaged Property to third parties with an existing or
prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including trustees, master
servicers, special servicers, rating agencies, and organizations maintaining
databases on the underwriting and performance of multifamily mortgage loans.
Borrower irrevocably waives any and all rights it may have under applicable law
to prohibit such disclosure, including any right of privacy.

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

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

      43.   ACCELERATION; REMEDIES. If an Event of Default has occurred and is
continuing, Lender, at Lender's option, may declare the Indebtedness to be
immediately due and payable without further demand, and may invoke the power of
sale and any other remedies permitted by California law or provided in this
Instrument or in any other Loan Document. Borrower acknowledges that the power
of sale granted in this Instrument may be exercised by Lender without prior
judicial hearing. Lender shall be entitled to collect all costs and expenses
incurred in pursuing such remedies, including attorneys' fees, costs of
documentary evidence, abstracts and title reports.

      If the power of sale is invoked, Lender shall execute a written notice of
the occurrence of an Event of Default and of Lender's election to cause the
Mortgaged Property to be sold and shall cause the notice to be recorded in each
county in which the Mortgaged Property or some part of the Mortgaged Property is
located. Trustee shall give notice of default and notice of sale and shall sell
the Mortgaged Property according to California law. Trustee may sell the
Mortgaged Property at the time and place and under the terms designated in the
notice of sale in one or more parcels and in such order as Trustee may
determine. Trustee may postpone the sale of all or any part of the Mortgaged
Property by public announcement at the time and place of any

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

previously scheduled sale. Lender or Lender's designee may purchase the
Mortgaged Property at any sale.

      At the sale, Lender shall be entitled to credit bid, or to instruct
Trustee, on behalf of Lender to credit bid, up to and including the entire
amount of the Indebtedness plus Trustee's fees and expenses. Trustee shall
deliver to the purchaser at the sale, within a reasonable time, but in any event
within 10 calendar days, after the sale, a deed conveying the Mortgaged Property
so sold without any express or implied covenant or warranty. The recitals in
Trustee's deed shall be prima facie evidence of the truth of the statements made
in those recitals. Trustee shall apply the proceeds of the sale in the following
order: (a) to all costs and expenses of exercising the power of sale, including
the payment of Trustee's fees and attorneys' fees and costs of title evidence;
(b) to the Indebtedness in such order as Lender, in Lender's discretion,
directs; and (c) the excess, if any, to the person or persons legally entitled
to the excess.

      44.   RECONVEYANCE. Upon payment of the Indebtedness, Lender shall request
Trustee to reconvey the Mortgaged Property and shall surrender this Instrument
and the Note to Trustee. Trustee shall reconvey the Mortgaged Property without
warranty to the person or persons legally entitled to the Mortgaged Property.
Such person or persons shall pay Trustee's reasonable costs incurred in so
reconveying the Mortgaged Property.

      45.   SUBSTITUTE TRUSTEE. Lender, at Lender's option, may from time to
time, by a written instrument, appoint a successor trustee, which instrument,
when executed and acknowledged by Lender and recorded in the office of the
Recorder of the county or counties where the Mortgaged Property is situated,
shall be conclusive proof of proper substitution of the successor trustee. The
successor trustee shall, without conveyance of the Mortgaged Property, succeed
to all the title, power and duties conferred upon the Trustee in this Instrument
and by California law. The instrument of substitution shall contain the name of
the original Lender, Trustee and Borrower under this Instrument, the book and
page where this Instrument is recorded, and the name and address of the
successor trustee. If notice of default has been recorded, this power of
substitution cannot be exercised until after the costs, fees and expenses of the
then acting Trustee have been paid to such Trustee, who shall endorse receipt of
those costs, fees and expenses upon the instrument of substitution. The
procedure provided for substitution of trustee in this Instrument shall govern
to the exclusion of all other provisions for substitution, statutory or
otherwise.

      46.   STATEMENT OF OBLIGATION. Lender may collect a fee not to exceed the
maximum allowed by applicable law for furnishing the statement of obligation as
provided in Section 2943 of the Civil Code of California.

      47.   SPOUSE'S SEPARATE PROPERTY. Each Borrower who is a married person
expressly agrees that recourse may be had against his or her community property
and separate property.

      48.   FIXTURE FILING. This Instrument is also a fixture filing under the
Uniform Commercial Code of California.

      49.   ADDITIONAL PROVISION REGARDING APPLICATION OF PAYMENTS. In addition
to the provisions of Section 9, Borrower further agrees that, if Lender accepts
a guaranty of only a portion of the Indebtedness, Borrower waives its right
under California Civil Code Section 2822(a), to designate the portion of the
Indebtedness which shall be satisfied by a guarantor's partial payment.

      50.   WAIVER OF MARSHALLING; OTHER WAIVERS. To the extent permitted by
law, Borrower waives (i) the benefit of all present or future laws providing for
any

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

appraisement before sale of any portion of the Mortgaged Property, (ii) all
rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the Indebtedness and marshalling
in the event of foreclosure of the lien created by this Instrument, (iii) all
rights and remedies which Borrower may have or be able to assert by reason of
the laws of the State of California pertaining to the rights and remedies of
sureties, (iv) the right to assert any statute of limitations as a bar to the
enforcement of the lien of this Instrument or to any action brought to enforce
the Note or any other obligation secured by this Instrument, and (v) any rights,
legal or equitable, to require marshalling of assets or to require upon
foreclosure sales in a particular order, including any rights under California
Civil Code Sections 2899 and 3433. Lender shall have the right to determine the
order in which any or all of the Mortgaged Property shall be subjected to the
remedies provided by this Instrument. Lender shall have the right to determine
the order in which any or all portions of the Indebtedness are satisfied from
the proceeds realized upon the exercise of the remedies provided by this
Instrument. By signing this Instrument, Borrower does not waive its rights under
Section 2924c of the California Civil Code.

      51.   ADDITIONAL PROVISIONS CONCERNING ENVIRONMENTAL HAZARDS. In addition
to the provisions of Section 18:

      (a)   Except for matters covered by an O&M Program or matters described in
Section 18(b), Borrower shall not cause or permit any lien (whether or not such
lien has priority over the lien created by this Instrument) upon the Mortgaged
Property imposed pursuant to any Hazardous Materials Laws. Any such lien shall
be considered a Prohibited Activity or Condition.

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

            (1)   at the time of acquiring the Mortgaged Property, Borrower
                  undertook all appropriate inquiry into the previous ownership
                  and uses of the Mortgaged Property consistent with good
                  commercial or customary practice and no evidence or indication
                  came to light which would suggest that the Mortgaged Property
                  has been or is now being used for any Prohibited Activities or
                  Conditions; and

            (2)   the Mortgaged Property has not been designated as "hazardous
                  waste property" or "border zone property" pursuant to Section
                  25220, et seq., of the California Health and Safety Code.

      The representations and warranties in this Section 51(b) shall be
continuing representations and warranties that shall be deemed to be made by
Borrower throughout the term of the loan evidenced by the Note, until the
Indebtedness has been paid in full.

      (c)   Without limiting any of the remedies provided in this Instrument,
Borrower acknowledges and agrees that each of the provisions in Section 18 and
in this Section 51 is an environmental provision (as defined in Section
736(f)(2) of the California Code of Civil Procedure) made by Borrower relating
to the real property security (the "ENVIRONMENTAL PROVISIONS"), and that
Borrower's failure to comply with any of the Environmental Provisions will be a
breach of contract that will entitle Lender to pursue the remedies provided by
Section 736 of the California Code of Civil Procedure ("SECTION 736") for the
recovery of damages and for the enforcement of the Environmental Provisions.
Pursuant to Section 736, Lender's action for recovery of damages or enforcement
of the Environmental Provisions shall not constitute an action within the
meaning of Section 726(a) of the California Code of Civil Procedure or

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

constitute a money judgment for a deficiency or a deficiency judgment within the
meaning of Sections 580a, 580b, 580d, or 726(b) of the California Code of Civil
Procedure.

      (d)   Any reference in this Instrument or in any other Loan Document to
Section 18 of this Instrument shall be construed as referring together to
Section 18 and this Section 51.

      52.   ADDITIONAL PROVISION REGARDING INSURANCE. In addition to the
provisions of Section 19, Borrower further agrees that to the extent that
Borrower obtains any form of property damage insurance for the Mortgaged
Property or any portion thereof that insures perils not required to be insured
against by Lender, such policy of property damage insurance shall include a
standard mortgagee clause and shall name Lender as loss payee and, within 10
days following Borrower's purchase of such additional insurance, Borrower shall
cause to be delivered to Lender a duplicate original policy of insurance with
respect to such policy. Any insurance proceeds payable to Borrower under such
policy shall be additional security for the Indebtedness and Lender shall have
the same rights to such policy and proceeds as it has with respect to insurance
policies required by Lender pursuant to Section 19 (except that Lender shall not
require that the premium for such additional insurance be included among the
Imposition Deposits).

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

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

            [X]   Exhibit A    Description of the Land (required)

            [X]   Exhibit B    Modifications to Instrument (Cross Default and
                               Cross Collateralization)

            [X]   Exhibit B-1  Modifications to Instrument (Seniors Housing)

            [X]   Exhibit B-2  Modifications to Instrument

            [X]   Exhibit B-3  Modifications to Instrument (Request for Second
                               Lien)

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                                                         (C)1997-2001 Fannie Mae

<PAGE>

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

                               FIT REN THE LEXINGTON LP, a Delaware
                                  limited partnership

                                  By: FIT REN Holdings GP Inc., a Delaware
                                      corporation, its general partner

                                      By:/s/ William B. Doniger
                                         ---------------------------------------
                                         Name: William B. Doniger
                                         Title: VP

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page 32
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                                                         (C)1997-2001 Fannie Mae

<PAGE>

State of NY
         -----------------------------------

County of NY
          ----------------------------------

On 8th day of June 2005 before me, Frances A. Viserto, Notary Public
   --------------------            --------------------------------------------,
            DATE                       NAME, TITLE OF OFFICER - E.G., "JANE DOE,
                                       NOTARY PUBLIC
personally appeared William B. Doniger
                    -----------------------------------------------------------,
                                         NAME(S) OF SIGNER(S)

[X] personally known to me -OR- [ ] proved to me on the basis of satisfactory
                                     evidence to be the person(s) whose name(s)
                                     is/are subscribed to the within instrument
                                     and acknowledged to me that he/she/they
                                     executed the same in his/her/their
                                     authorized capacity(ies), and that by
                                     his/her/their signature(s) on the
                                     instrument the person(s), or the entity
                                     upon behalf of which the person(s) acted,
                                     executed the instrument.

                                     WITNESS my hand and official seal.

                                     /s/ Frances A. Viserto
                                     -------------------------------------------
                                     Signature of Notary

================================OPTIONAL========================================

Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.

      CAPACITY CLAIMED BY SIGNER                DESCRIPTION OF ATTACHED DOCUMENT

[ ]      INDIVIDUAL
[ ]      CORPORATE OFFICER:
         ___________________________________    ________________________________
                    TITLE(S)                        TITLE OR TYPE OF DOCUMENT

[ ]      PARTNER(S):           [ ]   LIMITED
                               [ ]   GENERAL
[ ]      ATTORNEY-IN-FACT                       ________________________________
[ ]      TRUSTEE(S)                                      NUMBER OF PAGES
[ ]      GUARDIAN/CONSERVATOR
[ ]      OTHER:_____________________________
         ___________________________________    ________________________________
         ___________________________________             DATE OF DOCUMENT

SIGNER IS REPRESENTING:
NAME OF PERSONS OR ENTITY(IES)
____________________________________________    ________________________________
____________________________________________    SIGNER(S) OTHER THAN NAMED ABOVE

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page 33
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

KEY PRINCIPAL

Fortress Investment Trust II
1251 Avenue of the Americas
16th Floor
New York, New York 10020

After the Transfer described in Section 21(b)(7), and subject to Section 21(e),
the Key Principal shall be:

Brookdale Senior Living, Inc.
330 North Wabash, Suite 1400
Chicago, Illinois  60611

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT -     FORM 4005    11/01      Page 34
CALIFORNIA (THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae

<PAGE>

                                    EXHIBIT A

                            [DESCRIPTION OF THE LAND]

GROUND LEASE MODIFICATIONS TO INSTRUMENT      FORM 4070     11/01       Page A-1
(THE LEXINGTON)
                                                         (C)1997-2001 Fannie Mae
<PAGE>

                                    EXHIBIT B

                           MODIFICATIONS TO INSTRUMENT
                   (CROSS-DEFAULT AND CROSS COLLATERALIZATION)

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

      1. The following new Sections are added to the Instrument after the last
numbered Section:

            "54. CROSS-DEFAULT AND CROSS COLLATERALIZATION.

                  (a) The entity that owns a Controlling Interest in Borrower
            also owns a Controlling Interest in the owner of each of the
            multifamily properties described on Exhibit C to this Instrument
            (each, an "OWNER"). All of the properties described on Exhibit C,
            together with the Mortgaged Property, are referred to herein
            collectively as the "OWNER'S PROJECTS". Contemporaneous with the
            closing and funding of the loan to the Borrower evidenced by the
            Note (the "LOAN"), the Lender has extended a loan to each Owner,
            each loan being secured by a Multifamily Mortgage or Deed of Trust,
            Assignment of Rents and Security Agreement (a "Security Instrument")
            against one of the other Owner's Projects.

                  (b) The Borrower acknowledges that the Lender is unwilling to
            extend the Loan unless all of the Owner's Projects will be treated
            as a single project through the imposition of
            cross-collateralization, cross-default and release provisions.

                  (c) The Borrower hereby agrees and consents that as additional
            security to the Lender, each of the Owner's Projects shall be
            subject to the lien of the Lender's Security Instrument for each of
            the other of the Owner's Projects, and that each of the respective
            Owner's Projects shall collateralize the other Owner's Projects as
            follows: all Mortgaged Property (as defined in the respective
            Security Instrument) for each of the Owner's Projects shall be
            considered part of the "Mortgaged Property" under this Instrument,
            and shall be collateral under this Instrument and the Loan
            Documents.

                  (d) The Borrower hereby agrees and consents that upon the
            occurrence of an Event of Default under the Security Instrument
            securing one of the Owner's Projects, then an Event of Default shall
            exist under this Instrument with respect to

CROSS-DEFAULT AND CROSS-COLLATERALIZATION     FORM 4068     11/01       Page B-1
   MODIFICATIONS TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) (INN AT THE PARK)
                                                       (C) 1997-2001 Fannie Mae

<PAGE>

      the Mortgaged Property and the other Owner's Projects. No notice shall be
      required to be given to the Borrower in connection with such Event of
      Default. In the event of an Event of Default under the Security Instrument
      with respect to any one of the Owner's Projects, the Lender shall exercise
      and perfect any and all rights in and under the Loan Documents with regard
      to any or all of the other Owner's Projects, including, but not limited
      to, an acceleration of one or all of the Notes and the sale of one or all
      of the Owner's Projects in accordance with the terms of the respective
      Security Instrument. No notice, except as may be required by the
      respective Security Instrument, shall be required to be given to the
      Borrower in connection with the Lender's exercise of any and all of its
      rights after an Event of Default has occurred.

            (e) The Borrower may request that Lender make a determination
      whether the Mortgaged Property may be released from the cross-default and
      cross-collateral provisions of this Section if (i) the Borrower proposes
      to pay off the Loan, or (ii) the Borrower proposes to sell the Mortgaged
      Property and have the Loan assumed by a buyer acceptable to Lender. Upon
      such request from Borrower, Lender shall consent to the release of the
      Mortgaged Property from the cross-default and cross-collateral provisions
      of the Security Instrument for each of the other of the Owner's Projects,
      provided:

                  (1) The remaining loans to the Owners secured by each of the
            Owner's Projects that are not requested to be released have, in the
            aggregate, a minimum overall 1.45 debt service coverage, based on
            the remaining Owner's Projects' collective Net Operating Income for
            the 12 months of operation immediately prior to the Borrower's
            request for such release; and

                  (2) If the Loan is to be assumed by a buyer acceptable to and
            approved by Lender, the Loan must also have a minimum 1.45 debt
            service coverage, based on the Mortgaged Property's Net Operating
            Income for the 12 months of operation immediately prior to the
            Borrower's request for such release; and

      For purposes of (1) and (2) of this paragraph (e), "Net Operating Income"
      is defined as:

                  (i) the lesser of the actual rents collected for the 12 month
            period (net of any concession) or 95% of the gross potential rental
            income for the 12 month period; plus

CROSS-DEFAULT AND CROSS-COLLATERALIZATION     FORM 4068     11/01       Page B-2
   MODIFICATIONS TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) (INN AT THE PARK)
                                                       (C) 1997-2001 Fannie Mae

<PAGE>

                  (ii) the actual laundry income (coin operated machines), cable
            and alarm fees, application fees, late fees and forfeited deposits
            for the 12 month period; less

                  (iii) the greater of the actual operating expenses for the 12
            month period (including the required Replacement Reserves funding
            for the period) or the operating expenses used by Lender in its
            final underwriting (including Replacement Reserves), increased at
            the rate of 3% per annum.

            (f) Notwithstanding any provision of this Section to the contrary,
      the Borrower shall not be permitted to request a release of the Mortgaged
      Property from the cross-default and cross-collateral provisions of this
      Section if, at the time of such request, a default or Event of Default
      exists under any of the loans held by Lender on any of the Owner's
      Projects. No release of the Mortgaged Property from the cross-default and
      cross-collateral provisions of this Section shall be permitted by Lender
      unless Borrower has paid all costs and expenses of Lender incurred in
      connection with its processing of the requested release, including,
      without limitation, all title endorsement premiums, recording fees,
      inspection fees, and attorney fees."

            (g) Notwithstanding any provision of this Section to the contrary,
      Borrower and Lender acknowledge and agree that (i) as of the date of this
      Instrument, fee title to Ocean House, which is described in Exhibit C, has
      not been conveyed to the entity that will be the Owner of Ocean House;
      (ii) upon such conveyance of fee title to Ocean House, Lender shall extend
      a loan to the Owner of Ocean House; and (iii) upon the occurrence of (i)
      and (ii), Ocean House shall be deemed to be one of the Owner's Projects
      and the terms and conditions of this Section 54 shall apply to Ocean
      House.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

CROSS-DEFAULT AND CROSS-COLLATERALIZATION     FORM 4068     11/01       Page B-3
   MODIFICATIONS TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) (INN AT THE PARK)
                                                       (C) 1997-2001 Fannie Mae

<PAGE>

      55. EXHIBIT C. Exhibit C is attached to this Instrument.

                                             BORROWER'S INITIALS: ___________

CROSS-DEFAULT AND CROSS-COLLATERALIZATION     FORM 4068     11/01       Page B-4
   MODIFICATIONS TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) (INN AT THE PARK)
                                                       (C) 1997-2001 Fannie Mae

<PAGE>

                                    EXHIBIT C

                        ADDITIONAL MULTIFAMILY PROPERTIES

1  The Gables
   201 East Foothill Blvd.
   Monrovia, CA 91016

2  Inn at the Park
   10 Marquette
   Irvine, CA 92612

3  The Lodge at Paulin Creek
   2375 Range Avenue
   Santa Rosa, CA 95403

4  Mirage Inn
   72750 Country Club Drive
   Rancho Mirage, CA  92270

5  Nohl Ranch Inn
   380 South Anaheim Hills Road
   Anaheim Hills, CA 92807

6  Oak Tree Villa
   100 Lockewood Lane
   Scotts Valley, CA 95066

7  Pacific Inn
   5481 W. Torrance Blvd
   Torrance, CA 90503

8  Ocean House
   2107 Ocean Avenue
   Santa Monica, CA  90405

CROSS-DEFAULT AND CROSS-COLLATERALIZATION      FORM 4068   11/01       Page C-1
   MODIFICATIONS TO INSTRUMENT (MULTI-PROJECT/MULTI-NOTE) (THE LEXINGTON)
                                                       (C) 1997-2001 Fannie Mae
<PAGE>

                                  EXHIBIT B-1

                          MODIFICATIONS TO INSTRUMENT
                               (SENIORS HOUSING)

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

      1. Section 1 of the Instrument is hereby amended to add the following
paragraphs at the end thereof:

         "(aa) "ACCOUNTS" means all money, funds, investment property, accounts,
         general intangibles, deposit accounts, chattel paper, documents,
         instruments, judgments, claims, settlements of claims, causes of
         action, refunds, rebates, reimbursements, reserves, deposits,
         subsidies, proceeds, products, rents and profits, now or hereafter
         arising, received or receivable, from or on account of the Borrower's
         management and operation of the Mortgaged Property as a Seniors Housing
         Facility.

         (bb) "CONTRACT(S)" means any contract or other agreement for the
         provision of goods or services at or otherwise in connection with the
         operation, use or management of the Mortgaged Property, including cash
         deposited to secure performance by parties of their obligations.

         (cc) "DEPARTMENT" means the California Department of Social Services.

         (dd) "INVENTORY" means all right, title and interest of Borrower in and
         to inventory of every type and description, now owned and hereafter
         acquired, including, without limitation, raw materials, work in
         process, finished goods, goods returned or repossessed or stopped in
         transit, goods used for demonstration, promotion, marketing or similar
         purposes, property in, on or with which any of the foregoing may be
         stored or maintained, all materials and supplies usable or used or
         consumed at the Mortgaged Property, and all documents and documents of
         title relating to any of the foregoing, together with all present and
         future parts, additions, accessories, attachments, accessions,
         replacements, replacement parts and substitutions therefore or thereto
         in any form whatsoever.

         (ee) "LICENSE(S)" means any operating licenses, certificates of
         occupancy, health department licenses, food service licenses,
         certificates of need, business licenses, permits, registrations,
         certificates, authorizations, approvals, and similar documents required
         by applicable laws and regulations for the operation of the Mortgaged
         Property as a Seniors Housing Facility, including replacements and
         additions thereto.

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075           Page B-1
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         (ff) "OPERATING LEASE" means any master lease, operating agreement,
         operating lease or similar document, preapproved by Lender, under which
         control of the occupancy, use, operation, maintenance and
         administration of the Mortgaged Property as a Seniors Housing Facility
         has been granted to any individual or entity other than the Borrower.

         (gg) "OPERATOR" means any qualified and licensed (if so required by the
         applicable laws of the Property Jurisdiction) individual or entity
         obligated under the terms of an Operating Lease with the Borrower."

         (hh) "SENIORS HOUSING FACILITY" means a residential housing facility
         which qualifies as "housing for older persons" under the Fair Housing
         Amendments Act of 1988 and the Housing for Older Persons Act of 1995
         and is comprised of independent living units and assisted living units.

         (ii) "THIRD PARTY PAYMENTS" means all payments and the rights to
         receive such payments from Medicaid programs or similar federal, state
         or local programs, boards, bureaus or agencies, and from residents,
         private insurers or others."

      2. Section 1(g) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "The term "Hazardous Materials" shall also include any medical products
         or devices, including, but not limited to, those materials defined as
         "medical waste" or "biological waste" under relevant statutes or
         regulations pertaining to any Hazardous Materials Law."

      3. Section 1(o) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "The term "Leases" shall also include any residency, occupancy,
         admission and care agreements pertaining to residents of the Mortgaged
         Property and any Operating Lease."

      4. Section 1(s) of the Instrument is hereby amended:

         (A)   to revise subsection (14) to read as follows:

            "(14) all resident and tenant security deposits, entrance fees,
            application fees, processing fees, community fees and any other
            amounts or fees deposited by any resident or tenant upon execution
            of a Lease which have not been forfeited by the resident or tenant;
            and"

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-2
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

            and

      (B)   to add the following subsections (16), (17), (18) and (19) at the
            end thereof

            "(16) all payments due, or received, from residents, second party
            charges added to base rental income, base and/or additional meal
            sales, commercial operations located on the Mortgaged Property or
            provided as a service to the residents of the Mortgaged Property,
            rental from guest suites, seasonal lease charges, furniture leases,
            and laundry services, and any and all other services provided to
            residents in connection with the Mortgaged Property, and any and all
            other personal property on the Mortgaged Property, excluding
            personal property belonging to residents of the Mortgaged Property
            (other than Personalty belonging to Borrower);

            (17) subject to applicable law and regulations, all Licenses and
            Contracts relating to the operation and authority to operate the
            Mortgaged Property as a Seniors Housing Facility;

            (18) all Third Party Payments arising from the operation of the
            Mortgaged Property as a Seniors Housing Facility, utility deposits,
            unearned premiums, accrued, accruing or to accrue under insurance
            policies now or hereafter obtained by the Borrower and all proceeds
            of any conversion of the Mortgaged Property or any part thereof
            including, without limitation, proceeds of hazard, property, flood
            and title insurance and all awards and compensation for the taking
            by eminent domain, condemnation or otherwise, of all or any part of
            the Mortgaged Property or any easement therein; and

            (19) all of Borrower's Accounts and Inventory."

      5. Section 1(v) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "The term "Personalty" shall also include all personal property
         currently owned or acquired by Borrower after the date hereof used in
         connection with the ownership and operation of the Mortgaged Property
         as a Seniors Housing Facility, all kitchen or restaurant supplies and
         facilities, dining room supplies and facilities, medical supplies and
         facilities, leasehold improvements, or related furniture and equipment,
         together with all present and future parts, additions, accessories,
         replacements, attachments, accessions, replacement parts and
         substitutions therefor, and the proceeds thereof (cash and non-cash
         including insurance proceeds) and any other equipment, supplies or
         furniture owned by Borrower and leased to any third party service
         provider or any Operator under any Operating Lease, use, occupancy, or

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-3
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         lease agreements, as well as all Licenses, to the extent permitted by
         applicable law and regulations, including replacements and additions
         thereto."

      6. Section 1(x) of the Instrument is hereby amended to provide as follows:

         "Rents" means all rents (whether from residential or non-residential
         space), revenues and other income of the Land or the Improvements,
         including rent paid under any Operating Lease, subsidy payments
         received from any sources (including but not limited to payments under
         any Housing Assistance Payments Contract), parking fees, laundry and
         vending machine income and fees and charges for food, healthcare, and
         other services provided at the Mortgaged Property, whether now due,
         past due, or to become due, security deposits, entrance fees,
         application fees, processing fees, community fees and any other amounts
         or fees forfeited by any resident or tenant, together with and
         including all proceeds from any private insurance for residents to
         cover rental charges and charges for services at or in connection with
         the Mortgaged Property, and the right to Third Party Payments due for
         the rents or services of residents at the Mortgaged Property. Each of
         the foregoing shall be considered "Rents" for the purposes of the
         actions and rights set forth in Section 3 of this Instrument."

      7. Section 3(b) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "After an Event of Default, Lender is further authorized to give notice
         to all Third Party Payment payors (other than governmental entities) at
         Lender's option, instructing them to pay all Third Party Payments which
         would be otherwise paid to Borrower to Lender, to the extent permitted
         by law. If Third Party Payments from Third Party Payment payors which
         are governmental entities, including Medicaid, are made with respect to
         the Mortgaged Property, Lender and Borrower shall execute a Depositary
         Agreement in the then-current Fannie Mae form, as Lender may require,
         which establishes special procedures for the receipt and disposition of
         the Third Party Payments."

      8. Section 3(c) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "In order to induce Lender to lend funds hereunder, Borrower (together
         with any Operator or manager of the Mortgaged Property) hereby agrees
         upon the occurrence of an Event of Default and at the option of Lender,
         that it shall continue to provide, or shall cause Operator to continue
         to provide, all necessary services required under any Operating Lease
         or applicable licensing or regulatory requirements and shall fully
         cooperate with Lender and any receiver as may be appointed by a court,
         in performing these services and agrees to arrange for an orderly
         transition to a replacement operator, manager or provider of the
         necessary services, and to execute

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-4
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         promptly all applications, assignments, consents and documents
         requested by Lender to facilitate such transition, provided that it
         shall be paid for such services in accordance with the terms of the
         Operating Lease."

      9. The first sentence in Section 4(b) of the Instrument is hereby amended
to add the following at the end thereof:

         ", with the exception of any Operating Lease."

      10. The last sentence in Section 4(e) of the Instrument is hereby amended
to state as follows:

         "If customary in the applicable market, residential Leases with a
         month-to-month term or with terms of less than six months shall be
         permitted with Lender's prior written consent."

      11. The first sentence in Section 4(f) of the Instrument is hereby amended
to add the following at the end thereof:

         "with the exception of any Operating Lease which has previously been
         approved by Lender."

      12. Section 4 of the Instrument is hereby amended to add the following as
Section 4(h):

         "Any Operating Lease is and shall be subject and subordinate in all
         respects to the liens, terms, covenants and conditions of the
         Instrument and the other Loan Documents, and to all renewals,
         modifications, consolidations, replacements and extensions thereof, and
         to all advances heretofore made or which may hereafter be made pursuant
         to the Instrument (including all sums advanced for the purposes of (x)
         protecting or further securing the lien of the Instrument, curing
         defaults by Borrower under the Loan Documents or for any other purposes
         expressly permitted by the Instrument or (y) constructing, renovating,
         repairing, furnishing, fixturing or equipping the Mortgaged Property)."

      13. Section 11 of the Instrument is hereby amended to add the following
sentences at the end thereof:

         "Borrower acknowledges that as of the date of this Instrument,
         Borrower, the Operator and the Mortgaged Property are not certified to
         participate in the Medicaid assisted living waiver program administered
         by the Property Jurisdiction ("PROGRAM"). Borrower covenants and agrees
         that it will notify Lender in writing 30 days prior to Borrower's or
         Operator's submission of a request to participate in the Program, and
         will provide Lender with copies of all correspondence and documentation
         received from the Property Jurisdiction or any authorizing entity

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-5
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         concerning its submission. In the event the Mortgaged Property, the
         Operator or Borrower becomes eligible to participate in the Program,
         Borrower agrees to execute then-current Fannie Mae forms of Medicaid
         reserve agreement and depositary agreement as Lender may require.

         Borrower further covenants and agrees that it shall not permit, and
         shall cause the Operator to not permit, more than 20% of Borrower's or
         the Operator's effective gross income to be derived from units relying
         on Medicaid payments. If by reason of applicable law or regulation more
         than 20% of effective gross income becomes derived from units relying
         on Medicaid payments, the Borrower shall diligently and expeditiously
         take, and shall cause Operator to diligently and expeditiously take,
         all reasonable steps necessary or shall cause the Operator
         expeditiously to take all reasonable steps necessary, to bring the
         Mortgaged Property into compliance with the preceding sentence to the
         extent permissible by applicable law or regulation. Borrower further
         covenants and agrees that it shall limit, or shall cause the Operator
         to limit, the use and occupancy of the Mortgaged Property to residents
         that meet the standards for independent living or assisted living, and
         that it shall not accept, and shall cause Operator not to accept,
         residents that require skilled nursing care or permit residents
         requiring skilled nursing care to remain at the Mortgaged Property as a
         routine matter."

      14. Section 12(a) of the Instrument is hereby amended to add the following
at the end thereof:

         "and, (5) payments for any required licensing fees, permits, or other
         expenses related to the operation of the Mortgaged Property as a
         Seniors Housing Facility by or on behalf of the Lender, any fines or
         penalties that may be assessed against the Mortgaged Property, any
         costs incurred to bring the Mortgaged Property into full compliance
         with applicable codes and regulatory requirements, and any fees or
         costs related to Lender's employment of any operator or service
         provider for the Mortgaged Property."

      15. Section 14(b) of the Instrument is hereby deleted in its entirety and
replaced with the following:

         "(b) Subject to federal, state and local laws and regulations
         applicable to resident and tenant privacy, including but not limited to
         the Health Insurance Portability and Accountability Act ("HIPAA")
         (collectively the "PRIVACY LAWS"), Borrower shall furnish to Lender, or
         shall cause the Operator to furnish to Lender, all of the following:"

            "(1)  within 45 days after the end of each fiscal quarter, a
                  statement of income and expenses for Borrower's or any
                  Operator's operation of the Mortgaged Property for that
                  quarter, a statement of changes in

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-6
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

                  financial position of Borrower relating to the Mortgaged
                  Property for that quarter and a balance sheet showing all
                  assets and liabilities of Borrower relating to the Mortgaged
                  Property as of the end of that quarter;"

            "(2)  within 120 days after the end of each twelve consecutive month
                  fiscal year, a statement of income and expenses for Borrower's
                  or any Operator's operation of the Mortgaged Property for that
                  fiscal year, prepared in accordance with generally accepted
                  accounting principles ("GAAP"), a statement of changes in
                  financial position of Borrower relating to the Mortgaged
                  Property for that fiscal year, and a balance sheet showing all
                  assets and liabilities of Borrower relating to the Mortgaged
                  Property as of the end of that fiscal year;"

            "(3)  within 45 days after the end of each quarter of Borrower, and
                  at any other time upon Lender's request, a rent schedule for
                  the Mortgaged Property showing the name of each resident and
                  tenant, and for each resident and tenant, the space occupied,
                  the lease expiration date, the rent payable for the current
                  month, the date through which rent has been paid, any income
                  attributable to additional resident services, and any related
                  information requested by Lender;"

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

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

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

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-7
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

            "(7)  if required by Lender, a statement of income and expense for
                  the Mortgaged Property for the prior month or quarter;"

            "(8)  within 10 days of Borrower's receipt, copies of all inspection
                  reports, surveys, reviews, and certifications prepared by,
                  for, or on behalf of any licensing or regulatory authority
                  relating to the Mortgaged Property and any legal actions,
                  orders, notices, or reports relating to the Mortgaged Property
                  issued by the applicable regulatory or licensing authorities;"

            "(9)  upon the request of Lender, copies of all reports relating to
                  the services and operations of the Mortgaged Property,
                  including, if applicable, Medicaid cost reports and records
                  relating to account balances due to or from Medicaid or any
                  private insurer; "

            "(10) within 45 days after the end of each quarter of Borrower, and
                  at any other time upon Lender's request, with respect to any
                  incident reports made to any liability insurance carrier
                  during that quarter, notice of the nature and status of the
                  incident precipitating the report (excluding the name or names
                  of any tenants or residents); and

            "(11) within 45 days after the end of each quarter of Borrower, and
                  at any other time upon Lender's request, with respect to any
                  investigative or substantive report made to any public,
                  elderly affairs, regulatory or licensing authority, during
                  that quarter, a copy of the report."

      16. Section 17(a)(5) is hereby amended to state the following:

         "shall provide for professional management of the Mortgaged Property as
         a Seniors Housing Facility either by Borrower, an Operator under an
         Operating Lease approved by Lender in writing, or a management company
         engaged either by the Borrower or any Operator under a Contract
         approved by Lender in writing."

      17. Section 17(a) of the Instrument is hereby amended to add the following
sentence at the end thereof:

         "Borrower further covenants and agrees that it shall (i) maintain and
         operate, or cause the Operator to maintain and operate, the Mortgaged
         Property as a Seniors Housing Facility at all times in accordance with
         the standards required by any applicable Licenses and as required by
         any regulatory authority, (ii) maintain in good standing all Licenses,
         and that it shall cause to renew and extend all such required Licenses,
         and (iii) not fail to take any action necessary to keep all such

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-8
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         Licenses in good standing and full force and effect. Borrower will
         immediately provide, or cause the Operator immediately to provide,
         Lender with any notice or order of a violation which may otherwise have
         an adverse impact on the Mortgaged Property, its operations or its
         compliance with licensing and regulatory requirements."

      18. Section 17 of the Instrument is hereby amended to add the following as
subsection (c):

               "(c) Borrower has entered into the Contracts previously
         identified to Lender for the provision of goods or services, at or
         otherwise in connection with the operation, use or management of the
         Mortgaged Property. Borrower may in the future enter into Contracts for
         the provision of additional goods or services at or otherwise in
         connection with the operation, use or management of the Mortgaged
         Property. Until Lender gives notice to Borrower of Lender's exercise of
         its rights under this Instrument, Borrower shall have all rights, power
         and authority granted to Borrower under any Contract (except as
         otherwise limited by this subsection or any other provision of this
         Instrument), including the right, power and authority to modify the
         terms of any Contract or extend or terminate any Contract, with the
         exception of any Operating Lease. Upon the occurrence of an Event of
         Default and at the option of Lender, the permission given to Borrower
         pursuant to the preceding sentence to exercise all rights, power and
         authority under Contracts shall terminate. Upon Lender's delivery of
         notice to Borrower of an Event of Default, Lender shall immediately
         have all rights, powers and authority granted to Borrower under any
         Contract, including the right, power and authority to modify the terms
         of, extend or terminate any such Contract. Borrower hereby represents
         and warrants and agrees with Lender that: (1) the Contracts are
         assignable and no previous assignment of Borrower's interest in the
         Contracts has been made; (2) the Contracts are in full force and effect
         in accordance with their respective terms and there are no defaults
         thereunder; (3) Borrower shall fully perform all of its obligations
         under the Contracts, and Borrower agrees that it may amend or modify
         the Contracts without the approval of Lender, but that it shall not
         assign, sell, pledge, transfer, mortgage or otherwise encumber its
         interests in any of the Contracts so long as this Instrument is in
         effect, or consent to any transfer, assignment or other disposition
         thereof without the written approval of Lender; and (4) each Contract
         entered into by Borrower subsequent to the date hereof, the average
         annual consideration of which, directly or indirectly, is at least
         $50,000, shall provide: (i) that it shall be terminable for cause; and
         (ii) that it shall be terminable, at Lender's option, upon the
         occurrence of an Event of Default.

      19. Section 18(b) of the Instrument is hereby amended to add the following
sentence at the end thereof:

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-9
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         "Prohibited Activities and Conditions also shall not include the safe
         and lawful use and storage of medical products and devices customarily
         used in the operation of a Seniors Housing Facility."

      20. Section 19(c) is hereby amended to provide as follows:

         "Borrower shall maintain or cause any Operator to maintain at all times
         commercial professional liability and general liability insurance,
         workers' compensation insurance and such other liability, property,
         errors and omissions and fidelity insurance coverage as Lender may from
         time to time require."

      21. Section 21(a) of the Instrument is hereby amended to add the following
Sections (8) and (9) at the end thereof:

         "(8) a Transfer or change in the holder of the Licenses authorizing the
         Mortgaged Property to operate as a Seniors Housing Facility; and"

         "(9) a Transfer of the Borrower's or any Operator's respective
         interest(s) in any Operating Lease."

      22. Section 22 of the Instrument is hereby amended to add the following as
Sections 22 (g), (h), (i) and (j):

         "(g) any failure by Borrower, Operator or any manager (as applicable)
         to comply with the use and licensing requirements set forth in Sections
         10 and 11";

         "(h) any loss by Borrower, Operator or any manager (as applicable) of
         any License or other legal authority necessary to operate the Mortgaged
         Property as a Seniors Housing Facility, or any failure by Borrower,
         Operator or any manager (as applicable) to comply strictly with any
         consent order or decree or to correct, within the time deadlines set by
         any federal, state or local licensing agency, any deficiency where such
         failure results, or under applicable laws and regulations, is
         reasonably likely to result, in an action by such agency with respect
         to the Mortgaged Property that may have a material adverse effect on
         the income and operations of the Mortgaged Property or Borrower's
         interest in the Mortgaged Property, including, without limitation, a
         termination, revocation or suspension of any applicable Licenses,
         necessary for the operation of the Mortgaged Property as a Seniors
         Housing Facility";

         "(i) if, without the consent of Lender, Borrower, Operator or any
         manager (as applicable):

            (i)   ceases to operate the Mortgaged Property as a Seniors Housing
                  Facility;

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-10
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

            (ii)  ceases to provide substantially the same kitchens, separate
                  bathrooms, and areas for eating, sitting and sleeping in each
                  independent living or assisted living unit or at a minimum,
                  central bathing facilities for Alzheimer's/dementia care, as
                  are provided as of the date of this Instrument;

            (iii) ceases to provide other facilities and services normally
                  associated with independent living or assisted living units,
                  including, without limitation, (A) central dining services
                  providing up to three meals per day, (B) periodic
                  housekeeping, (C) laundry services, (D) customary
                  transportation services, and (E) social activities;

            (iv)  provides or contracts for skilled nursing care for any of the
                  units;

            (v)   other than the Lease (Skilled Nursing Facility), dated
                  November 10, 1998, between MBK Senior Living Communities,
                  Ltd., as Landlord, and Beverly Enterprises -- California,
                  Inc., as Tenant, as the same may have been assigned or
                  amended, leases or holds available for lease to commercial
                  tenants non-residential space (i.e., space other than the
                  units, dining areas, activity rooms, lobby, parlors, kitchen,
                  mailroom, marketing/management offices) exceeding ten percent
                  (10%) of the net rental area; or

            (vi)  takes any action or permits to exist any condition that causes
                  the Mortgaged Property to be no longer classified as a Seniors
                  Housing Facility; and

         (j) a default under any Operating Lease or under the Subordination,
         Assignment and Security Agreement executed by Borrower, Operator and
         Lender in connection with this Loan which continues beyond any
         applicable cure period, or the termination of any Operating Lease
         without Lender's prior written approval."

      23. The former Sections 22(g), (h) and (i) are hereby amended to be
Sections 22 (k), (l) and (m), respectively and are amended to read as follows:

         "(k) any failure by Borrower to perform any of its obligations under
         this Instrument (other than those specified in Sections 22(a) through
         (j)), as and when required, which continues for a period of 30 days
         after notice of such failure by Lender to Borrower, but no such notice
         or grace period shall apply in the case of any

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-11
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

         such failure which could, in Lender's judgment, absent immediate
         exercise by Lender of a right or remedy under this Instrument, result
         in harm to Lender, impairment of the Note or this Instrument or any
         other security given under any other Loan Document;

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

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

      24. Section 43 of the Instrument is hereby amended to add the following
sentences at the end thereof:

         "In addition to the remedies set forth herein and elsewhere in this
         Instrument, upon an Event of Default Lender shall be entitled to
         mandate the use of a lockbox bank account or other depositary account,
         to be maintained under the control and supervision of Lender, for all
         income of the Mortgaged Property, including, but not limited to, Rents,
         service charges, insurance payments and Third Party Payments. Lender
         may, upon an Event of Default, cause the removal of Borrower, Operator
         or any manager (as applicable) from any Mortgaged Property operations.
         Until such time as Lender has located a replacement operator, Borrower,
         the acting Operator or manager shall continue to provide all required
         services to maintain the Mortgaged Property in full compliance with all
         licensing and regulatory requirements as a Seniors Housing Facility,
         provided that Borrower, the acting Operator or manager shall be paid
         for such services in accordance with the terms of any applicable
         Operating Lease. Borrower acknowledges that its failure to perform or
         to cause the performance of this service shall constitute a form of
         waste of the Mortgaged Property, causing irreparable harm to Lender and
         the Mortgaged Property, and shall constitute sufficient cause for the
         appointment of a receiver."

      25. The following new Sections are added to the Instrument after the last
numbered Section:

         "56. BORROWER'S REPRESENTATIONS AND WARRANTIES. In addition to any
      other representations and warranties contained in this Instrument,
      Borrower hereby represents and warrants to Lender as follows:

         (a) Subject to Section 57, the Mortgaged Property is duly licensed as a
         residential care facility for the elderly ("RCFE") and is in all
         respects otherwise legally authorized to operate as a Seniors Housing
         Facility, under the applicable laws of the Property Jurisdiction;

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-12
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

      (b) Borrower, the Operator and the Mortgaged Property (and the operation
      thereof), as applicable, are in compliance in all material respects with
      the applicable provisions of all laws, statutes, regulations, ordinances,
      orders, standards, restrictions and rules of any federal, state or local
      government or quasi-government body, agency, board or authority having
      jurisdiction over the operation of the Mortgaged Property, including,
      without limitation: (i) health care and fire safety codes; (ii) design and
      construction requirements, (iii) laws regulating the handling and disposal
      of medical or biological waste; (iv) the applicable provisions of Seniors
      Housing Facility laws, rules, regulations and published interpretations
      thereof to which the Borrower, the Operator or the Mortgaged Property is
      subject; (v) privacy, security and billing standards such as those set
      forth in HIPAA, and (vi) all criteria established to classify the
      Mortgaged Property as a Seniors Housing Facility;

      (c) If required, Borrower or the Operator has a current provider agreement
      under any and all applicable federal, state and local laws for
      reimbursement: (a) to a Seniors Housing Facility; or (b) for other types
      of care provided at such facility. There is no decision not to renew any
      provider agreement related to the Mortgaged Property, nor is there any
      action pending or threatened to impose alternative, interim or final
      sanctions with respect to the Mortgaged Property;

      (d) Neither Borrower, the Operator nor the Mortgaged Property is subject
      to any proceeding, suit or investigation by any federal, state or local
      government or quasi-government body, agency, board authority or any other
      administrative or investigative body which may result in the imposition of
      a fine or an alternative, interim or final sanction, or which would have a
      material adverse effect on Borrower or the operation of the Mortgaged
      Property, or which would result in the appointment of a receiver or
      manager or would result in the revocation, transfer, surrender, suspension
      or other impairment of the Licenses for the Mortgaged Property to operate
      as a Seniors Housing Facility;

      (e) Upon Lender's request and subject to Privacy Laws, copies of resident
      care agreements and resident occupancy agreements shall be provided to
      Lender. All resident records at the Mortgaged Property are true and
      correct in all material respects;

      (f) Neither the execution and delivery of the Note, the Instrument or the
      Loan Documents, Borrower's performance thereunder, nor the recordation of
      the Instrument will adversely affect the Licenses necessary for the
      operation of the Mortgaged Property as a Seniors Housing Facility in the
      Property Jurisdiction;

      (g) Borrower is not a participant in any federal program whereby any
      federal, state or local, government or quasi-governmental body, agency,
      board or other authority may have the right to recover funds by reason of
      the advance of federal

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-13
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

      funds. Borrower has received no notice, and is not aware of any violation
      of applicable antitrust laws of any federal, state or local, government or
      quasi-government body, agency, board or other authority; and

      (h) Except as otherwise specifically disclosed to the Lender in writing,
      in the event any existing Operating Lease or management agreement is
      terminated or Lender acquires the Mortgaged Property through foreclosure
      or otherwise, neither Borrower, Lender, any subsequent operator or
      manager, nor any subsequent purchaser (through foreclosure or otherwise)
      must obtain a certificate of need from any applicable state health care
      regulatory authority or agency (other than giving such notice required
      under the applicable state law or regulation) prior to applying for any
      applicable License necessary for the operation of the Mortgaged Property
      as a Seniors Housing Facility, provided that no service or unit complement
      is changed.

      57. PROVISIONAL LICENSING. As of the date of this Instrument, the
Mortgaged Property is operating as a RCFE pursuant to an emergency approval to
operate issued by the Community Care Licensing Division of the Department.
Borrower or the Operator shall obtain from the Department (a) within sixty (60)
days after the date of this Instrument a provisional license to operate the
Mortgaged Property as a RCFE (the "PROVISIONAL LICENSE") and (b) within six (6)
months after the date that the Department issues the Provisional License, a
permanent license to operate the Mortgaged Property as a RCFE (the "PERMANENT
LICENSE"); provided, however, that if the Department does not issue the
Permanent License within such six (6)-month period, Borrower or the Operator
shall cause the Department to extend the term of the Provisional License for an
additional six (6) months and Borrower shall obtain the Permanent License within
such additional six (6)-month period. Borrower shall furnish, or cause the
Operator to furnish, to Lender (i) within 30 days after the end of each fiscal
quarter a written report regarding the status of obtaining the Provisional
License and/or the Permanent License, as applicable, and (ii) immediately upon
receipt copies of the Provisional License and the Permanent License. Nothing in
this Section shall be construed to require Borrower or the Operator to obtain a
Provisional License if the Department issues the Permanent License without first
issuing a Provisional License, provided at all times the Mortgaged Property is
in all respects legally authorized to operate as a Seniors Housing Facility,
under the applicable laws of the Property Jurisdiction."

      58. EXERCISE OF RIGHTS AND REMEDIES. Lender acknowledges and agrees that
the obligations of Borrower and exercise of any rights or remedies by Lender
under this Instrument shall be subject to, and exercised to the extent permitted
by, applicable law.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-14
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

      26. All capitalized terms used in this Exhibit not specifically defined
herein shall have the meanings set forth in the text of the Instrument that
precedes this Exhibit.

                                             BORROWER'S INITIALS: /s/ WBD
                                                                  --------------

SENIORS HOUSING MODIFICATIONS TO INSTRUMENT     Form 4075              Page B-15
(THE LEXINGTON)
                                                05-05  (C) 2000-2005 Fannie Mae

<PAGE>

                                   EXHIBIT B-2

                           MODIFICATIONS TO INSTRUMENT

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

      1.    The first sentence of the fourth paragraph on Page 1, which begins
            "Borrower represents and warrants that Borrower", is amended to add
            after "and that the Mortgaged Property is unencumbered" the
            following:

            ", except as set forth in the schedule of exceptions to coverage in
            any title insurance policy issued to Lender contemporaneously with
            the execution and recordation of this Instrument and insuring
            Lender's interest in the Mortgaged Property (the "TITLE POLICY")."

      2.    The second sentence of the fourth paragraph on Page 1 is amended to
            read as follows:

            "Borrower covenants that Borrower will warrant and defend generally
            the title to the Mortgaged Property against all claims and demands,
            subject to any easements and restrictions listed in the Title
            Policy."

      3.    The parenthetical phrase appearing in Section 1(o) is amended to
            read as follows:

            "(including proprietary leases or occupancy agreements if Borrower
            is a cooperative housing corporation, and that certain Lease
            (Skilled Nursing Facility), dated November 10, 1998, between MBK
            Senior Living Communities, Ltd., as Landlord, and Beverly
            Enterprises - California, Inc. as Tenant)".

      4.    Section 13 is amended by deleting the period at the end thereof and
            adding the following: "and upon reasonable notice."

      5.    Section 14(a) is amended by deleting the period at the end thereof
            and adding the following: "during normal business hours and upon
            reasonable notice."

      6.    The second sentence of Section 14(c) is amended by adding to the
            beginning thereof the following: "If an Event of Default has
            occurred,"

      7.    Section 16 is amended by adding after the words "lien or
            encumbrance" and before "(a `LIEN')" the words ", except an inchoate
            mechanics lien".

      8.    Section 18(a) (1) is amended by deleting the semicolon at the end
            thereof and adding the following: "in violation of any Hazardous
            Material Laws;"

      9.    Section 18(a) (2) is amended by deleting the semicolon at the end
            thereof and adding the following: "in violation of Hazardous
            Material Laws;"

      10.   Section 18(a) (3) is amended by deleting from line 3 thereof, the
            following: "or may be".

MODIFICATIONS TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                Page B-1

<PAGE>

      11.   Section 18(b) is amended by adding to the third line thereof after
            the word "comparable" and before the words "multifamily properties,"
            the following: "senior housing or"

      12.   Section 18 is amended by adding at the end thereof, new paragraphs
            (q) and (r) as follows:

            "(q) Notwithstanding anything herein to the contrary, this Section
            shall not apply to the introduction and initial release of Hazardous
            Materials on the Mortgaged Property from and after the date that the
            Lender acquires title to the Mortgaged Property through foreclosure
            or deed in lieu of foreclosure (the "TRANSFER DATE"); provided,
            however, Borrower shall bear the burden of proof that the
            introduction and initial release of Hazardous Materials (i) occurred
            subsequent to the Transfer Date, and (ii) did not occur as a result
            of any action of Borrower, and (iii) did not occur as a result of
            any continuing migration or release of any Hazardous Materials
            introduced prior to the Transfer Date in, on, under, or near the
            Mortgaged Property.

            (r) Borrower agrees to cooperate with Lender, and to cause Operator
            to cooperate with Lender, at Borrower's expense, in connection with
            the testing for the presence of radon at the Mortgaged Property and
            the remediation of radon, if detected, including, without
            limitation, complying with, and causing Operator to comply with, any
            processes for the remediation of radon recommended by the
            environmental engineer firm enlisted by Lender."

      13.   The fourth sentence of Section 19(b) is amended to read as follows:

            "Lender shall have the right to hold copies of policies of all
            insurance required by Section 19(a), each certified by the insurance
            broker as being a copy of the original policy."

      14.   The last sentence of Section 19(b) is amended to read as follows:

            "Borrower shall deliver to Lender (i) at least 10 days prior to the
            expiration date of a policy an Accord certificate with respect to a
            renewal policy and (ii) as soon as reasonably possible thereafter,
            such additional information with respect to such renewal policy
            reasonably requested by Lender, including a copy of such renewal
            policy certified by the insurance broker as being a copy of the
            original policy."

      15.   Section 19(f) is amended by deleting the first sentence and adding
            in its place the following: "In the event of loss of any of the
            Mortgaged Property, Borrower shall cause prompt written notice to be
            given to the insurance carrier and to Lender."

      16.   Section 19(f) is further amended by deleting the period at the end
            of the second sentence and adding at the end thereof the following:
            ", provided however, that Borrower may itself make proof of loss,
            adjust and compromise any claims under policies of property damage
            insurance, appear in and prosecute any action arising out of such
            property damage insurance policies and collect and receive the
            proceeds of property damage insurance for any losses arising out of
            a single occurrence aggregating not in excess of $100,000; and in
            the case of losses arising out of a single occurrence aggregating
            not in

MODIFICATION TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                 Page B-2

<PAGE>

            excess of $250,000 may make proof of loss, adjust and compromise any
            claims under policies of property damage insurance, appear in and
            prosecute any action arising from such property damage insurance
            policies but may not collect, and receive the proceeds of property
            damage insurance, the same having been assigned to Lender
            hereunder."

      17.   Section 20(a) is amended by deleting the period at the end of the
            third sentence and adding at the end thereof the following: ",
            provided however, that Borrower may itself appear in, prosecute any
            action or proceeding relating to any condemnation and settle or
            compromise any claim and collect and receive the proceeds of the
            award therefrom aggregating not in excess of $10,000, and may itself
            appear in, prosecute any action or proceeding relating to any
            condemnation and settle and compromise any claim aggregating not in
            excess of $50,000 but may not collect and receive the award
            therefrom, the same having been assigned to Lender hereunder."

      18.   Section 21(b)(3) is amended in its entirety to read as follows: "The
            grant of a leasehold interest in an individual dwelling unit for an
            initial term of two years or less not containing an option to
            purchase;"

      19.   Section 21(b)(4) is amended by adding in the second line thereof
            after the word "replaced" and before the word "by," the following:
            "to the extent necessary for operation of the Mortgaged Property".

      20.   Section 21(b)(5) is amended by adding in the second line thereof
            after the word "materially" and before the word "affect", the words
            "and adversely".

      21.   Section 21(b)(6) is amended by deleting the period at the end
            thereof and adding the following: "; provided, however, that
            Borrower shall not be required to release of record such lien as
            long as Borrower shall in good faith contest the same or the
            validity thereof by appropriate legal proceedings which shall
            operate to prevent the collection of the lien so contested and the
            sale of the Mortgaged Property or any part thereof, to satisfy the
            same, and provided that Borrower shall, prior to the date such lien
            is due and payable, have given such reasonable security as may be
            demanded by the Lender to insure such payments plus interest or
            penalties thereon and prevent any sale or forfeiture of the
            Mortgaged Property by reason of such non payment. Any such contest
            shall be prosecuted with due diligence and Borrower shall promptly
            after final determination thereof, pay the amount of any such lien
            so determined, together with all interest and penalties which may be
            payable in connection therewith. Notwithstanding these provisions
            Borrower shall pay any such lien notwithstanding such contest if in
            the opinion of Lender the Mortgaged Property shall be in jeopardy or
            in danger of being forfeited or foreclosed."

      22.   Section 21(b) is amended to (a) delete the word "and" at the end of
            Subsection 5, (b) delete the period at the end of Subsection (6) and
            replace it with a semi-colon and (c) add the following Subsections
            (7), (8), (9) and (10) as follows:

            "(7)  a one-time Transfer (i) by Fortress Investment Trust II, a
                  Delaware business trust ("FIT II") of all of its ownership
                  interest in FIT REN LLC, a Delaware limited liability company
                  ("FIT REN"), to Alterra Healthcare Corporation, a Delaware

MODIFICATION  TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                Page B-3

<PAGE>

                  corporation ("AHC") and (ii) of all of the direct and indirect
                  ownership interest in AHC to Brookdale Senior Living, Inc., a
                  Delaware corporation, or a to-be-named equivalent holding
                  company for AHC ("BSL"), provided that after such Transfer AHC
                  owns all of the direct and indirect ownership interest in FIT
                  REN;

            (8)   a Transfer of any ownership interest in BSL or in any entity
                  which owns, directly or indirectly through one or more
                  intermediate entities, an interest in BSL;

            (9)   a Transfer of any ownership interest in FIT II or in any
                  entity which owns, directly or indirectly through one or more
                  intermediate entities, an interest in FIT II; and

            (10)  a Transfer by BSL of any ownership interest in any other
                  entity which owns directly or indirectly through one or more
                  intermediate entities, an ownership interest in BSL or in
                  BSL's wholly owned subsidiaries to another entity which is
                  wholly owned, directly or indirectly, by BSL."

      23. Section 21 is amended to add the following Subsections (e) and (f):

            "(e)  Lender and Borrower acknowledge and agree that immediately
                  following the Transfer of ownership interests in FIT REN
                  described in Section 21(b)(7), BSL shall become the Key
                  Principal. Borrower and Lender agree that they shall execute
                  (and Borrower shall cause BSL to execute) an assumption
                  agreement in the then-current Fannie Mae form, as may be
                  required by Lender, that, among other things, requires BSL to
                  assume all obligations of Key Principal under the Loan
                  Documents and releases FIT II from its obligations as Key
                  Principal to the extent provided in such agreement.

            (f)   Borrower shall provide Lender with written notice (i) of the
                  occurrence of the Transfer described in Section 21(b)(7), (ii)
                  of the filing of the initial Form S-1 (or equivalent form)
                  with the United States Securities and Exchange Commission in
                  connection with the initial public offering of stock in BSL
                  and (iii) in the event Mark Schulte or John Rijos leave the
                  employment of BSL."

      24.   Section 21(c)(3) is amended by adding in the last line thereof after
            the words "deeds to secure debt on" or and before the word
            "multifamily" the words "senior housing".

      25.   Section 21(c)(4) is amended by adding in the last line thereof
            before the words "multifamily properties," the words "senior housing
            or".

      26.   Section 22(k) is deleted in its entirety and replaced with the
            following:

            "(k) any failure by Borrower to perform any of its obligations under
            this Instrument (other than those specified in Sections 22(a)
            through (j)), as and when required, which continues for a period of
            thirty (30) days after notice of such failure by Lender to Borrower
            or, if such failure cannot reasonably be cured within thirty (30)
            days, such reasonable additional time as is necessary to cure the
            same; provided Borrower (i) commenced to cure the failure within
            such thirty (30) day period, (ii) diligently and in

MODIFICATION  TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                Page B-4

<PAGE>

            good faith continues the same to completion, and (iii) provides
            Lender from time to time at Lender's written request, evidence
            satisfactory to Lender of Borrower's continuing good faith efforts
            to cure such failure; and provided, further, however, such notice or
            grace period, or time period for such reasonable additional time
            shall not apply in the case of any such failure which could, in
            Lender's reasonable judgment absent immediate exercise by Lender of
            a right or remedy under this Instrument, result in harm to Lender,
            impairment of the Note or the Indebtedness or this Instrument or any
            other security given under any other Loan Document."

      27.   Section 31 is amended to add the following Subsection (d):

                    "(d) Lender shall deliver a copy of each notice to Borrower
            to Brookdale Living Communities, Inc. at the following address:

                    c/o Brookdale Living Communities, Inc.
                    330 North Wabash, Suite 1400
                    Chicago, Illinois  60611
                    Attention:  General Counsel

[THE FOLLOWING NUMBERED PARAGRAPH IS PARAGRAPH 27 AND THE FOLLOWING PAGE TO THIS
EXHIBIT IS PAGE B-5, EVEN THOUGH THIS RESULTS IN TWO CONSECUTIVE PARAGRAPH 27
AND TWO CONSECUTIVE PAGE B-5.]

MODIFICATION  TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                Page B-5

<PAGE>

      27.   All capitalized terms used in this Exhibit not specifically defined
            herein shall have the meanings set forth in the text of the
            Instrument that precedes this Exhibit.

                                                         /s/ WBD
                                                         ______________________
                                                         BORROWER'S INITIALS

MODIFICATIONS TO MULTIFAMILY INSTRUMENT (THE LEXINGTON)                Page B-5

<PAGE>

                                  EXHIBIT B-3

                          MODIFICATIONS TO INSTRUMENT
                           (REQUEST FOR SECOND LIEN)

      1. The following new Section is added to the end of the Instrument after
the last numbered Section:

      "59. SUBORDINATE MORTGAGE. Notwithstanding the provisions of Section 21,
      Lender shall be deemed to have consented to the filing of a subordinate
      mortgage lien against the Property which secures a subordinate note held
      by Fannie Mae."

      2. All capitalized terms used in this Exhibit not specifically defined
herein shall have the meanings set forth in the text of the Instrument that
precedes this Exhibit.

                                           /s/ WBD
                                           ____________________________________
                                           INITIALS

SECOND LIEN MODIFICATIONS TO INSTRUMENT (THE LEXINGTON) FORM 4077 10/98 Page B-3

                                                       (C) 1997-1998 Fannie Mae<PAGE>

                                                                 EXHIBIT 10.65.2

                                                                   The Lexington

                                MULTIFAMILY NOTE

US $10,867,974.00                                             As of June 21 2005

      FOR VALUE RECEIVED, the undersigned ("BORROWER") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE BANK, a
Utah industrial bank, the principal sum of Ten Million Eight Hundred Sixty-Seven
Thousand Nine Hundred Seventy Four and 00/100 Dollars (US $10,867,974.00), with
interest accruing on the unpaid principal balance from the date of disbursement
until fully paid at the annual rate of Five and 37/100 percent (5.37%).

      1.    DEFINED TERMS. As used in this Note, (i) the term "LENDER" means the
holder of this Note, (ii) the term "INDEBTEDNESS" means the principal of,
interest on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument and (iii) a "BUSINESS
DAY" means any day other than a Saturday, Sunday or any other day on which
Lender is not open for business. Event of Default, Key Principal and other
capitalized terms used but not defined in this Note shall have the meanings
given to such terms in the Security Instrument (as defined in Paragraph 5).

      2.    ADDRESS FOR PAYMENT. All payments due under this Note shall be
payable at c/o GMAC Commercial Mortgage Corporation, 200 Witmer Road, Horsham,
Pennsylvania 19044, Attention: Servicing - Account Manager, 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.

      (b)   Interest under this Note shall be computed on the basis of (check
one only):

            [ ]   a 360-day year consisting of twelve 30-day months.

            [X]   a 360-day year. The amount of each monthly payment made by
                  Borrower pursuant to Paragraph 3(c) below that is allocated to
                  interest will be based on the actual number of calendar days
                  during such month and shall be

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                  calculated by multiplying the unpaid principal balance of this
                  Note by the per annum interest rate, dividing the product by
                  360 and multiplying the quotient by the actual number of days
                  elapsed during the month. Borrower understands that the amount
                  allocated to interest for each month will vary depending on
                  the actual number of calendar days during such month.

      (c)   Commencing on August 1, 2005, and continuing through and including
July 1, 2010, consecutive installments of interest only, each payable and in an
amount equal to one of the following:

                  (a)   Forty-Five Thousand Three Hundred Ninety-One and 92/100
                        Dollars (US $45,391.92), shall be payable on the first
                        day of each month during the term hereof which follows a
                        28-day month;

                  (b)   Forty-Seven Thousand Thirteen and 06/100 Dollars (US
                        $47,013.06), shall be payable on the first day of each
                        month during the term hereof which follows a 29-day
                        month;

                  (c)   Forty-Eight Thousand Six Hundred Thirty-Four and 20/100
                        Dollars (US $48,634.20), shall be payable on the first
                        day of each month during the term hereof which follows a
                        30-day month; or

                  (d)   Fifty Thousand Two Hundred Fifty-Five and 34/100 Dollars
                        (US $50,255.34), shall be payable on the first day of
                        each month during the term hereof which follows a 31-day
                        month;

Thereafter, consecutive monthly installments of principal and interest, each in
the amount of Sixty-Five Thousand Eight Hundred Ninety-Seven and 77/100 Dollars
(US $65,897.77), shall be payable on the first day of each month beginning on
August 1, 2010, 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 July 1, 2012, 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.

      (d)   Any regularly scheduled monthly installment of interest only (during
the interest-only period set forth in paragraph 3(c) above) or principal and
interest (during the period in which principal and interest is due also as set
forth in paragraph 3(c) above) 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.

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      4.    APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, Lender may apply that payment to
amounts then due and payable in any manner and in any order determined by
Lender, in Lender's discretion. Borrower agrees that neither Lender's acceptance
of a payment from Borrower in an amount that is less than all amounts then due
and payable nor Lender's application of such payment shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. If Lender accepts a guaranty of only a portion of the
Indebtedness, Borrower hereby waives its right under California Civil Code
Section 2822(a) to designate the portion of the Indebtedness which shall be
satisfied by any guarantor's partial payment.

      5.    SECURITY. The Indebtedness is secured, among other things, by a
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (California) dated as of the date of this Note (the "SECURITY
INSTRUMENT"), and reference is made to the Security Instrument 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 installment due hereunder is not
received by Lender on or before the 10th day of each month or if any other
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 date such
amount is due, counting from and including the date such amount is due, Borrower
shall pay to Lender, immediately and without demand by Lender, a late charge
equal to 5 percent of such monthly installment or other amount due. 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.

      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

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<PAGE>

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 the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.

      9.    LIMITS ON PERSONAL LIABILITY.

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

      (b)   Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default, all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence; (2) failure of Borrower to apply all
insurance proceeds and condemnation proceeds as required by the Security
Instrument; (3) failure of Borrower to comply with Section 14(d) or (e) of the
Security Instrument relating to the delivery of books and records, statements,
schedules and reports; (4) fraud or written material misrepresentation by
Borrower, Key Principal or any officer, director, partner, member or employee of
Borrower in connection with the application for or creation of the Indebtedness
or any request for any action or consent by Lender; or (5) failure to apply
Rents, first, to the payment of reasonable operating expenses (other than
Property management fees that are not currently payable pursuant to the terms of
an Assignment of Management Agreement or any other agreement with Lender
executed in connection with the Loan) and then to amounts ("DEBT

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SERVICE AMOUNTS") payable under this Note, the Security Instrument or any other
Loan Document (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 that are distributed in any calendar year if Borrower
has paid all operating expenses and Debt Service Amounts for that calendar
year).

      (c)   Borrower shall become personally liable to Lender for the repayment
of all of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; or (2) a Transfer that
is an Event of Default under Section 21 of the Security Instrument.

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

      10.   VOLUNTARY AND INVOLUNTARY PREPAYMENTS.

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

            (1)   Borrower may voluntarily prepay all (but not less than all) of
      the unpaid principal balance of this Note only on the last calendar day of
      a calendar month and only if Borrower has complied with all of the
      following:

                  (i)   Borrower must give Lender at least 30 days, but not more
                        than 60 days, prior written notice of its intention to
                        make such prepayment (the "Prepayment Notice").

                  (ii)  The Prepayment Notice shall be addressed to Lender and
                        shall include, at a minimum, the date upon which
                        Borrower intends to make the prepayment (the "Intended
                        Prepayment Date"). Borrower acknowledges that the Lender
                        is not required to accept any voluntary prepayment of
                        this Note on any day other than the

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                        last calendar day of a calendar month. If the last
                        calendar day of a calendar month is not a Business Day,
                        then the Borrower must make the payment on the Business
                        Day immediately preceding the last calendar day of a
                        calendar month. For all purposes, including the accrual
                        of interest and the calculation of the prepayment
                        premium, any prepayment received by Lender on any day
                        other than the last calendar day of a calendar month
                        shall be deemed to have been received on the last
                        calendar day of the month in which such prepayment
                        occurs.

                  (iii) Any prepayment shall be made by paying (A) the amount of
                        principal being prepaid, (B) all accrued interest, (C)
                        all other sums due Lender at the time of such
                        prepayment, and (D) the prepayment premium calculated
                        pursuant to Schedule A.

                  (iv)  If, for any reason, Borrower fails to prepay this Note
                        within five (5) Business Days after the Intended
                        Prepayment Date, then Lender shall have the right, but
                        not the obligation, to recalculate the prepayment
                        premium based upon the Yield Rate as reported in The
                        Wall Street Journal on the twenty-fifth Business Day
                        preceding the delayed Intended Prepayment Date and to
                        make such calculation as described in Schedule A
                        attached hereto. Notwithstanding the foregoing, if the
                        delayed prepayment occurs in a month other than the
                        month stated in the original Prepayment Notice, then
                        Lender shall (a) have the right, but not the obligation,
                        to recalculate the prepayment premium based upon the
                        Yield Rate as reported in The Wall Street Journal on the
                        twenty-fifth Business Day preceding the delayed Intended
                        Prepayment Date and to make such calculation as
                        described in Schedule A attached hereto and (b)
                        recalculate the amount of interest payable. In either
                        instance, for purposes of recalculation, such new
                        prepayment date shall be deemed the "Intended Prepayment
                        Date."

            (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.

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      (b)   Notwithstanding the provisions of Paragraph 10(a), no prepayment
premium shall be payable with respect to any prepayment occurring as a result of
the application of any insurance proceeds or condemnation award under the
Security Instrument or as provided in subparagraph (c) of Schedule A.

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

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

      (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 the Borrower's voluntary agreement to
the prepayment premium provisions.

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

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

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

      14.   LOAN CHARGES. Borrower agrees to pay an effective rate of interest
equal to the sum of the interest rate provided for in this Note and any
additional rate of interest resulting from any other charges of interest or in
the nature of interest paid or to be paid in connection with the loan evidenced
by this Note and any other fees or amounts to be paid by Borrower pursuant to
any of the other Loan Documents. Neither this Note nor any of the other Loan
Documents shall be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate greater than the
maximum interest rate permitted to be charged under applicable law. If any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower in connection with the Loan is interpreted so that any
interest or other charge provided for in any Loan Document, whether considered
separately or together with other charges provided for in any other Loan
Document, violates that law, and Borrower is entitled to the benefit of that
law, that interest or charge is hereby reduced to the extent necessary to
eliminate that violation. The amounts, if any, previously paid to Lender in
excess of the permitted amounts shall be applied by Lender to reduce the unpaid
principal balance of this Note. For the purpose of determining whether any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all Indebtedness that constitutes
interest, as well as all other charges made in connection with the Indebtedness
that constitute interest, shall be deemed to be allocated and spread ratably
over the stated term of the Note. Unless otherwise required by applicable law,
such allocation and spreading shall be effected in such a manner that the rate
of interest so computed is uniform throughout the stated term of the Note.

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

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

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

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

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

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

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

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

      [X]   Schedule A   Prepayment Premium (required)

      [X]   Schedule B   Modifications to Multifamily Note (Seniors Housing)

      [X]   Schedule B-1 Modifications to Multifamily Note

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

                               FIT REN THE LEXINGTON LP, a Delaware
                                limited partnership

                                By:    FIT REN Holdings GP Inc., a Delaware
                                       corporation, its general partner

                                       By: /s/ William Doniger
                                          _______________________________
                                          Name: Bill Doniger
                                          Title: VP

                               20-2629391
                               _____________________________________________
                               Borrower's Social Security/Employer ID Number

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                               PAY TO THE ORDER OF GMAC
                               COMMERCIAL MORTGAGE CORPORATION,
                               A CALIFORNIA CORPORATION, WITHOUT
                               RECOURSE.

                               GMAC COMMERCIAL MORTGAGE BANK,
                                 a Utah industrial bank

                                 By: /s/ Max W. Foore
                                     --------------------------------
                                         Max W. Foore
                                         Limited Signer

Fannie Mae Commitment Number: 940990
                             ___________________

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                               PAY TO THE ORDER OF
                               FANNIE MAE, WITHOUT RECOURSE.

                               GMAC COMMERCIAL MORTGAGE CORPORATION,
                                 a California corporation

                                 By: /s/ Max W. Foore
                                     ---------------------------
                                         Max W. Foore
                                         Vice President

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                                   SCHEDULE A

                               PREPAYMENT PREMIUM

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

      (a)   If the prepayment is made at any time before the last calendar day
            of December, 2011 ("YIELD MAINTENANCE PERIOD END DATE"), the
            prepayment premium shall be the greater of:

                  (i)   1% of the amount of principal being prepaid; 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 (the
                              "YIELD RATE") on the 4.875% U.S. Treasury Security
                              due February 2012 (the "SPECIFIED U.S. TREASURY
                              SECURITY"), as the Yield Rate is reported in The
                              Wall Street Journal on the twenty-fifth Business
                              Day preceding (x) the Intended Prepayment Date, or
                              (y) the date Lender accelerates the Loan or
                              otherwise accepts a prepayment pursuant to
                              Paragraph 10(a)(3) of this Note,

                        by

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

                               1 - (1 + r)(-n/12)
                               -----------------
                                       r

                               [r=    Yield Rate

                               n =    the number of months remaining between (1)
                                      either of the following: (x) in the case
                                      of a voluntary prepayment, the last
                                      calendar day of the calendar month during
                                      which the prepayment is made, or (y) in
                                      any other case, the date on which Lender
                                      accelerates

FANNIE MAE MULTIFAMILY NOTE - CALIFORNIA   FORM 4105-PIO                Page A-1
PARTIAL INTEREST ONLY (THE LEXINGTON)           03-05         (C)2005 Fannie Mae

<PAGE>

                                      the unpaid principal balance of this Note
                                      and (2) the Yield Maintenance Period End
                                      Date]

                        In the event that no Yield Rate is published for the
                        Specified U.S. Treasury Security, then the nearest
                        equivalent U.S. Treasury Security shall be selected at
                        Lender's discretion. If the publication of such Yield
                        Rates in The Wall Street Journal is discontinued, Lender
                        shall determine such Yield Rates from another source
                        selected by Lender.

      (b)   If the prepayment is made on or after the Yield Maintenance Period
            End Date but before the last calendar day of the 4th month prior to
            the month in which the Maturity Date occurs, the prepayment premium
            shall be 1% of the amount of principal being prepaid.

      (c)   Notwithstanding the provisions of Paragraph 10(a) of this Note, no
            prepayment premium shall be payable with respect to any prepayment
            made on or after the last calendar day of the 4th month prior to the
            month in which the Maturity Date occurs.

                                                  /s/ WBD
                                                  ______________________________
                                                  INITIAL(S)

FANNIE MAE MULTIFAMILY NOTE - CALIFORNIA   FORM 4105-PIO                Page A-2
PARTIAL INTEREST ONLY (THE LEXINGTON)           03-05         (C)2005 Fannie Mae

<PAGE>

                                   SCHEDULE B

                        MODIFICATIONS TO MULTIFAMILY NOTE
                               (SENIORS HOUSING)

The following modifications are made to the text of the Note that precedes this
Schedule:

1.    Section 9(b)(3) of the Note is hereby amended to read as follows:

      "Failure of Borrower to comply with Sections 14(d), 14(e), or 14(g) of the
      Security Instrument relating to the delivery of books and records,
      statements, schedules, and reports."

2.    Section 9(b) of the Note is hereby amended to delete the word "or"
      immediately preceding paragraph (5) thereof and to insert a semi-colon in
      lieu of the period and the word "or", and add the following paragraphs (6)
      and (7) at the end thereof:

      "(6) Borrower's failure to comply with, or to cause the Operator (as
      defined in the Security Instrument) to comply with, the requirements of
      all applicable laws, rules and regulations with respect to the renewal,
      continuation, extension or maintenance of all Licenses required to legally
      operate the Mortgaged Property as a Seniors Housing Facility, as defined
      in the Instrument, or (7) failure of Borrower to comply with Section 57 of
      the Instrument as a result of Borrower's act or omission."

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

SENIORS HOUSING MODIFICATIONS TO NOTE    FORM 4186                      Page B-1
(THE LEXINGTON)                               10-04      (C)2000-2004 Fannie Mae

<PAGE>

3.    All capitalized terms used in this Schedule not specifically defined
      herein shall have the meanings set forth in the text of the Note that
      precedes this Schedule.

                                              BORROWER'S INITIALS: /s/ WBD
                                                                   _____________

SENIORS HOUSING MODIFICATIONS TO NOTE    FORM 4186                      Page B-2
(THE LEXINGTON)                               10-04      (C)2000-2004 Fannie Mae

<PAGE>

                                  SCHEDULE B-1

                        MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this
Schedule:

1.    Section 10(a)(1) of the Note is amended to read as follows:

            "(1) Borrower may voluntarily prepay all (but not less than all) of
      the unpaid principal balance of this Note on the last calendar day of a
      calendar month (or on any other calendar day of a calendar month, provided
      that the prepayment includes an amount equal to the interest that would
      accrue under this Note through and including the last calendar day of such
      calendar month) and only if Borrower has complied with all of the
      following:"

2.    The second sentence of Section 10(a)(1)(ii) is deleted in its entirety.

3.    Section 10(d) is amended by adding the following at the end thereof:

      "; provided, however, that the amount of any interest only installments
      due after the prepayment of less than the entire unpaid principal balance
      of this Note shall be adjusted to the extent of such prepayment."

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

MODIFICATIONS TO MULTIFAMILY NOTE (THE LEXINGTON)                       Page B-1

<PAGE>

2.    All capitalized terms used in this Schedule not specifically defined
      herein shall have the meanings set forth in the text of the Note that
      precedes this Schedule.

                                              BORROWER'S INITIALS: /s/ WBD
                                                                   _____________

MODIFICATIONS TO MULTIFAMILY NOTE (THE LEXINGTON)                       Page B-2

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