Document:

WELLSFORD REAL PROPERTIES, INC.

  CODE OF BUSINESS CONDUCT AND ETHICS FOR DIRECTORS, SENIOR FINANCIAL OFFICERS,
                     OTHER OFFICERS AND ALL OTHER EMPLOYEES

INTRODUCTION

     It is the general policy of Wellsford Real Properties, Inc. (the "Company")
to conduct its business  activities and  transactions  with the highest level of
integrity and ethical  standards and in accordance  with all  applicable  local,
state and  federal  laws.  Obeying  the law both in letter  and in spirit is the
foundation on which this Company's  ethical standards are built. In carrying out
this policy, the Company has adopted the following Code of Business Conduct (the
"Code").

     This Code covers a wide range of business practices and procedures. It does
not cover every issue that may arise,  but it sets out basic principles to guide
all employees of the Company.  All of our  employees  must comply with this Code
and seek to avoid even the appearance of improper behavior. The Code should also
be  provided  to and  followed  by the  Company's  agents  and  representatives,
including consultants.

     If a law  conflicts  with a policy in this Code,  you must  comply with the
law;  however,  if a local custom or policy  conflicts  with this Code, you must
comply  with the Code.  If you have any  questions  about these  conflicts,  you
should ask your supervisor how to handle the situation.

     Those  who  violate  the   standards  in  this  Code  will  be  subject  to
disciplinary action. In addition,  some of the violations can subject either the
employee or the Company to civil and criminal penalties.

     If you are in a  situation  which  you  believe  may  violate  or lead to a
violation of this Code,  follow the  guidelines  described in Section 15 of this
Code.

1.   COMPLIANCE WITH LAWS, RULES AND REGULATIONS

     The  Company  complies  with all  applicable  laws and  regulations  in the
conduct  of its  activities  and  expects  the  employees  to do the  same.  All
employees must respect and obey the laws of the cities,  states and countries in
which we operate. Although not all employees are expected to know the details of
these laws, it is important to know enough to determine when to seek advice from
supervisors, managers or other appropriate personnel.

2.   CONFLICTS OF INTEREST

     It is the policy of the Company to avoid  situations  that create an actual
or potential conflict between an employee's personal interests and the interests
of the  Company.  A conflict of interest  exists  when a person's  loyalties  or
actions are divided  between the  interests of the Company and those of another,
such as a  competitor,  supplier,  customer  or  personal  business.  A conflict
situation can arise when an employee,  officer or director  takes actions or has
interests  that may make it difficult to perform his or her work for the Company
objectively  and  effectively.  Conflicts  of  interest  may also  arise when an
employee,  officer  or  director,  or  members  of his or her  family,  receives
improper  personal  benefits as a result of his or her  position in the Company.
Moreover,  the appearance of a conflict of interest  alone can adversely  affect
the Company and its relations with its customers,  suppliers and employees.  The
appearance of a conflict should also be avoided.

<PAGE>

     Employees  are  expected to use good  judgment,  to adhere to high  ethical
standards and to avoid situations that create an actual or potential conflict of
interest.  It is almost always a conflict of interest for a Company  employee to
work simultaneously for a competitor,  customer or supplier. You are not allowed
to  work  for a  competitor  as a  consultant  or  board  member  without  prior
disclosure to and approval from the Chief Executive Officer.  The best policy is
to avoid  any  direct  or  indirect  business  connection  with  our  customers,
suppliers or competitors, except on our behalf.

     Conflicts  of  interest  can also  arise  with  respect  to  employment  of
relatives and persons with close personal relationships. Further, if an employee
or someone with whom an employee has a close  relationship  (a family  member or
close companion) has a financial or employment  relationship  with a competitor,
supplier, or potential supplier, the employee must disclose this fact in writing
to the Chief Financial Officer.

     Federal law now prohibits most loans or extensions of credit from a company
whose stock is publicly  traded to its  directors  or  executive  officers.  The
Company  will not  directly  or  indirectly  extend  any loan or  credit  to any
director or executive  officer except as permitted by law and approved by a vote
of the disinterested members of the Board of Directors.

3.   CORPORATE OPPORTUNITIES

     Employees, officers and directors are prohibited from taking for themselves
opportunities  that  are  discovered  through  the  use of  corporate  property,
information  or  position  without  the  consent of the Board of  Directors.  No
employee, without prior approval from the Company's Chief Executive Officer, may
use  corporate  property,  information,  or position for personal  gain,  and no
employee  may  compete  with the  Company  directly  or  indirectly.  Employees,
officers  and  directors  owe a duty to the  Company to advance  its  legitimate
interests when the opportunity to do so arises.

4.   COMPETITION AND FAIR DEALING

     We seek  to  outperform  our  competition  fairly  and  honestly.  Stealing
proprietary  information,  possessing secret trade information that was obtained
without the owner's  consent,  or inducing such  disclosures  by past or present
employees of other  companies is prohibited.  Each employee  should  endeavor to
respect the rights of and deal fairly with the Company's  customers,  suppliers,
competitors and employees.  No employee  should take unfair  advantage of anyone
through   manipulation,    concealment,   abuse   of   privileged   information,
misrepresentation  of material  facts, or any other  intentional  unfair-dealing
practice.

<PAGE>

     Company personnel should not engage a competitor in discussions, agreements
or understandings concerning proprietary or specific information with regards to
tenant lease terms, investees,  interest rates, transaction structures,  similar
business related arrangements or any other business of the Company. In addition,
Company  personnel  should  avoid  discussing  with a  competitor  of any  other
agreements  inhibiting  free and open  competition or involving  tie-in sales or
reciprocal  transactions  without prior  authorization  from the Chief Financial
Officer.

     The purpose of business  entertainment and gifts in a commercial setting is
to  create  good  will and sound  working  relationships,  not to gain an unfair
advantage  with  customers.  No gift or  entertainment  should  ever be offered,
given,  provided  or  accepted  by any  Company  employee,  family  member of an
employee  or agent  unless it: (1) is not a cash gift,  (2) is  consistent  with
customary  business  practices,  (3) is not  excessive  in value,  (4) cannot be
construed as a bribe or payoff and (5) does not violate any laws or regulations.
Any proposed gift to an employee, family member of an employee or agent which is
other than of nominal value  (greater  than $50) should be discussed  first with
the Chief  Financial  Officer  for  appropriate  resolution,  in  advance of the
receipt of such proposed gift.

5.   EQUAL EMPLOYMENT AND WORKING CONDITIONS

     Each  of  us  has  a  fundamental   responsibility   to  show  respect  and
consideration  to our teammates.  The diversity of the Company's  employees is a
tremendous  asset. We are firmly committed to providing equal opportunity in all
aspects of  employment  and will not  tolerate  any  illegal  discrimination  or
harassment or any kind. All employment practices and decisions,  including those
involving recruiting,  hiring, transfers,  promotions,  compensation,  benefits,
discipline and  termination,  will be conducted  without regard to race,  creed,
color, religion, national origin, sexual orientation, sex or age and will comply
with all applicable laws.

6.   RELATIONSHIPS WITH CO-WORKERS

     The Company expects everyone to provide co-workers with information that is
accurate, complete, objective,  relevant, timely and understandable and to share
knowledge and maintain skills important and relevant to each co-workers' needs.

     The Company expects all supervisory  personnel to promote ethical  behavior
in the work environment.

7.   HEALTH AND SAFETY

     The Company  strives to provide each  employee with a safe and healthy work
environment.  Each employee has an individual  responsibility  for maintaining a
safe and healthy  workplace  for all  employees by  following  safety and health
rules and  practices  and reporting  accidents,  injuries and unsafe  equipment,
practices or conditions.

     Violence and  threatening  behavior  are not  permitted.  Employees  should
report to work in condition to perform their duties,  free from the influence of
illegal drugs or alcohol.  The use of illegal drugs in the workplace will not be
tolerated.

8.   DISCLOSURES IN PERIODIC REPORTS

     As a public  company,  the  Company is required  to file  various  periodic
reports with the  Securities  and Exchange  Commission.  It is Company policy to
make full, fair,  accurate,  timely and understandable  disclosure in compliance
with all applicable laws and regulations in all required periodic reports.

<PAGE>

9.   RECORD KEEPING

     The  Company  requires  honest and  accurate  recording  and  reporting  of
information  in  order  to  make  responsible  business  decisions.  All  of the
Company's books,  records,  accounts and financial statements must be maintained
in reasonable detail, must appropriately reflect the Company's  transactions and
must conform both to applicable  legal  requirements and to the Company's system
of internal  controls.  All company  business data,  records and reports must be
prepared truthfully and accurately.

     Business  records and  communications  often become  public,  and we should
avoid   exaggeration,    derogatory   remarks,   guesswork,   or   inappropriate
characterizations  of  people  and  companies  that can be  misunderstood.  This
applies equally to e-mail,  internal memos,  and formal reports.  Records should
always be retained or destroyed  according  to the  Company's  record  retention
policies.

10.  CONFIDENTIALITY OF COMPANY INFORMATION AND TRADE SECRETS OF OTHERS

     Persons who come into possession of Company  information must safeguard the
information from the public and not  intentionally or inadvertently  communicate
it to any person  (including family members and friends) unless the person has a
need to know the information for legitimate,  Company-related reasons. This duty
of  confidentiality is important both as to the Company's  competitive  position
and with respect to the  securities  laws  applicable to the Company as a public
Company.

     Consistent  with the foregoing,  all Company  personnel  should be discrete
with respect to inside  information  and not discuss it in public  places.  Such
information should be divulged only to persons having a need to know it in order
to carry  out  their  job  responsibilities.  To avoid  even the  appearance  of
impropriety,  Company  personnel  should refrain from providing advice or making
recommendations regarding the purchase or sale of the Company's securities.

     Confidential  information  related to the  Company can include a variety of
materials  and  information  regarding the ongoing  operations  and plans of the
Company. For example, confidential information can include information regarding
the  financial  health of the Company,  salary and  personnel  information,  and
marketing  and  sales  plans.  Confidential  information  will  be  held  in the
strictest confidence, and such confidential information will not be disclosed by
any   employee  to  any  third  party  unless  the  third  party  has  signed  a
nondisclosure  agreement  approved by the Company's Chief Financial  Officer and
the specific  disclosure also has been approved by the Chief Financial  Officer.
The  confidential  information  can only be disclosed by an employee for limited
purposes where the confidential information is needed.

     Company  personnel must maintain the  confidentiality  of  confidential  or
proprietary  information entrusted to them by the Company or others, except when
disclosure is authorized in writing by the Chief  Financial  Officer or required
by  laws  or  regulations.  Confidential  information  includes  all  non-public
information  that might be of use to  competitors,  or harmful to the Company or
its  customers  or  suppliers,   if  disclosed.   The   obligation  to  preserve
confidential  information  continues even after  employment  ends, in accordance
with the proprietary data agreement signed at the start of employment.

<PAGE>

     Company  personnel  must not  intentionally  or  inadvertently  breach  any
agreement  to  keep  knowledge  or data  in  confidence  or in  trust  prior  to
employment with the Company. During employment by the Company no confidential or
proprietary  information or material belonging to any previous employer or other
parties shall be improperly used or disclosed to the Company. Employees must not
bring onto the premises of the Company or use in the  performance  of his or her
responsibilities  any  unpublished  documents or any  property  belonging to any
previous  employer or any other person to whom the employee has an obligation of
confidentiality  unless  consented  to in writing by that  previous  employer or
person.

11.  PROTECTION AND PROPER USE OF COMPANY ASSETS

     No secret or unrecorded fund of Company assets or cash shall be established
or  maintained  for any purpose.  Anyone  spending or  obligating  Company funds
should be sure that the  transaction is properly and  appropriately  documented,
and that the Company receives the appropriate value in return.

     All employees  should  endeavor to protect the Company's  assets and ensure
their efficient use. Theft, carelessness,  and waste have a direct impact on the
Company's  profitability.  Any  suspected  incident of fraud or theft  should be
immediately reported for investigation. Company equipment should not be used for
non-Company business, though incidental personal use may be permitted.

     The  Company  licenses  the  use of much of its  computer  software  from a
variety of outside  companies.  The  Company  does not own this  software or its
related documentation and, unless authorized by the software developer, does not
have the right to reproduce it. With regard to the use of software on local area
networks  or on  multiple  machines,  employees  shall only use the  software in
accordance with the license agreement.

12.  POLITICAL CONTRIBUTIONS AND PAYMENTS TO GOVERNMENT PERSONNEL

     The U.S. Foreign Corrupt  Practices Act prohibits giving anything of value,
directly or indirectly, to officials of foreign governments or foreign political
candidates in order to obtain or retain business.  It is strictly  prohibited to
make illegal payments to government officials of any country.

     In  addition,  the U.S.  government  has a number  of laws and  regulations
regarding  business   gratuities  which  may  be  accepted  by  U.S.  government
personnel. The promise, offer or delivery to an official or employee of the U.S.
government of a gift,  favor or other gratuity in violation of these rules would
not only violate Company policy but could also be a criminal offense.  State and
local governments, as well as foreign governments, may have similar rules.

<PAGE>

13.  WAIVERS OF THE CODE OF BUSINESS CONDUCT AND ETHICS

     Any waiver of this Code for  executive  officers or  directors  may be made
only by the Board or the Board committee  responsible  for corporate  governance
matters and will be promptly disclosed as required by law or regulation.

14.  REPORTING  ANY ILLEGAL OR UNETHICAL  BEHAVIOR OR OTHER  VIOLATIONS  OF THIS
     CODE

     Employees  are  responsible  for  being  aware  of the  corporate  policies
applicable to their  activities  and to comply with them fully.  Employees  also
have a duty to report any apparent  misconduct  through  appropriate  management
channels,  or any special and  confidential  reporting  mechanisms  which may be
established  within the Company for such purposes,  and to assist the Company in
the prevention and correction of such problems. Employees are encouraged to talk
to supervisors,  managers or other appropriate  personnel about observed illegal
or  unethical  behavior  and when in doubt  about the best course of action in a
particular  situation.  Employees  who know or have good reason to believe  that
other employees are engaged in conduct  violating this policy should report this
to the Chief  Financial  Officer.  No  supervisor  shall  retaliate  against  an
employee,  either  directly or  indirectly,  who in good faith and in accordance
with Company  procedure,  reports an act of apparent  misconduct.  Employees are
also expected to cooperate fully with the Company or governmental authorities in
any  investigation  of an alleged  violation.  Failure of any employee to comply
with such  policies  will  result  in  disciplinary  action up to and  including
termination.  In the event an employee is not  satisfied  with the response they
receive  from their  supervisor,  the employee  should  speak to an  appropriate
senior officer within the Company.

15.  COMPLIANCE PROCEDURES

     We must all work to ensure prompt and consistent action against, violations
of this Code.  However,  in some  situations  it is difficult to know right from
wrong.  Since we  cannot  anticipate  every  situation  that will  arise,  it is
important  that we have a way to approach a new  question or problem.  These are
the steps to keep in mind:

o    Make sure you have all the facts. In order to reach the right solutions, we
     must be as fully informed as possible.

o    Ask  yourself:  What  specifically  am I being  asked  to do?  Does it seem
     unethical  or  improper?  This  will  enable  you to focus on the  specific
     question  you are faced  with,  and the  alternatives  you  have.  Use your
     judgment and common sense;  if something  seems  unethical or improper,  it
     probably is.

o    Clarify your  responsibility and role. In most situations,  there is shared
     responsibility.  Are your  colleagues  informed?  It may help to get others
     involved and discuss the problem.

<PAGE>

o    Discuss the problem with your  supervisor.  This is the basic  guidance for
     all situations.  In many cases, your supervisor will be more  knowledgeable
     about  the   question,   and  will   appreciate   being  brought  into  the
     decision-making   process.   Remember   that   it  is   your   supervisor's
     responsibility  to help solve  problems.  If you are not satisfied with the
     response you receive from your supervisor,  you should bring your grievance
     to an appropriate senior officer within the Company.

o    Seek  help  from  Company  resources.  In the  case  where  it  may  not be
     appropriate  to discuss an issue with your  supervisor  or where you do not
     feel comfortable approaching your supervisor with your question, discuss it
     with a responsible officer of the Company.

o    You may  report  ethical  violations  in  confidence  and  without  fear of
     retaliation.  If your situation requires that your identity be kept secret,
     your anonymity will be protected.  The Company does not permit  retaliation
     of any kind against employees for good faith reports of ethical violations.
     Further,   the  Company  has  adopted  a  policy  for  the   protection  of
     whistleblowers that prohibits any form of retaliation against an individual
     who reports violations.

o    Always  ask  first,  act  later.  If you  are  unsure  of what to do in any
     situation, seek guidance before you act.

<PAGE>

                          CERTIFICATION OF RECEIPT AND
                        ACKNOWLEDGMENT OF COMPLIANCE WITH

            CODE OF CONDUCT AND ETHICS POLICY FOR DIRECTORS, SENIOR
           FINANCIAL OFFICERS, OTHER OFFICERS AND ALL OTHER EMPLOYEES

     I hereby certify and acknowledge to Wellsford Real Properties, Inc. ("WRP")
the following:

     I HAVE  RECEIVED  A COPY OF WRP'S CODE OF  CONDUCT  AND  ETHICS  POLICY FOR
DIRECTORS,  SENIOR  FINANCIAL  OFFICERS,  OTHER OFFICERS AND ALL OTHER EMPLOYEES
("POLICY").

     I HAVE READ, UNDERSTOOD AND AGREE TO COMPLY WITH ALL TERMS,  CONDITIONS AND
PROVISIONS OF THE POLICY.

     I HAVE NOT VIOLATED THE TERMS,  CONDITIONS  AND PROVISIONS OF THE POLICY AT
ANY TIME IN THE PAST WHILE SERVING AS AN EMPLOYEE, OFFICER OR DIRECTOR OF WRP.

     The undersigned  declares that he or she has examined this Certification of
Receipt  and  Acknowledgment  of  Compliance,  and,  to the  best  of his or her
knowledge and belief, it is true, correct and complete.

                     Signature:
                               -------------------------------------------------

                     Printed Name:
                                  ----------------------------------------------

                     Date:
                          ------------------------------------------------------Prepared by, and after recording return to:

Gary Whittington, Esq.
Assistant General Counsel
AEGON USA Realty Advisors, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499

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

ATTENTION:  CLERK AND  RECORDER--THIS  INSTRUMENT  COVERS GOODS THAT ARE OR WILL
BECOME FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD BE FILED FOR RECORD IN
THE REAL PROPERTY RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. THIS
INSTRUMENT  SHOULD  ALSO BE  INDEXED  AS A  UNIFORM  COMMERCIAL  CODE  FINANCING
STATEMENT  COVERING GOODS THAT ARE OR WILL BECOME FIXTURES ON THE DESCRIBED REAL
PROPERTY.  THE  MAILING  ADDRESSES,  TELEPHONE  NUMBERS,  AND FAX NUMBERS OF THE
SECURED PARTY AND THE DEBTOR ARE WITHIN.

              DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

                        GREEN RIVER AT PALOMINO PARK LLC,
                                    Grantor,

                               having an office at
                       c/o Wellsford Park Highlands Corp.,
                               6700 Palomino Pkwy,
                         Highlands Ranch, Colorado 80130
                              Attn: David M. Strong

                                       to

                      THE PUBLIC TRUSTEE OF DOUGLAS COUNTY,
                                     Trustee

                               for the benefit of

                       AUSA LIFE INSURANCE COMPANY, INC.,
                       a New York life insurance company,
                                  Beneficiary,

                                having an office
                       c/o AEGON USA Realty Advisors, Inc.
                            4333 Edgewood Road, N.E.
                          Cedar Rapids, Iowa 52499-5443

Loan Amount: $40,000,000.00

Premises:  Green  River at  Palomino  Park,  Douglas  County,  Highlands  Ranch,
           Colorado

<PAGE>

              DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (this "Deed of Trust")
is made and given as of February 6th 2003 by GREEN RIVER AT PALOMINO PARK LLC, a
Colorado  limited  liability  company,  whose  address  is  c/o  Wellsford  Park
Highlands  Corp.,  6700 Palomino Pkwy,  Highlands Ranch,  Colorado 80130,  Attn:
David M. Strong (the  "Grantor"),  to the Public Trustee of Douglas  County,  as
Trustee, (the "Trustee"),  for the benefit of AUSA LIFE INSURANCE COMPANY, INC.,
a New York  life  insurance  company  having an  office  c/o  AEGON  USA  Realty
Advisors,  Inc., 4333 Edgewood Road,  N.E.,  Cedar Rapids,  Iowa 52499-5443 (the
"Beneficiary").  The definitions of capitalized terms used in this Deed of Trust
may be found either in Section 3 below, or through the cross-references provided
in that Section.

1.   RECITALS

A.   Under the terms of that certain Third  Revised Loan  Application/Commitment
     dated November 8, 2002 (the "Commitment"),  AEGON USA Realty Advisors, Inc.
     ("AEGON"),  as  agent  for the  Beneficiary,  agreed  to fund a loan in the
     principal amount of $40,000,000 (the "Loan").

B.   The Beneficiary has funded the Loan in the principal  amount of $40,000,000
     in accordance  with the  Commitment,  and to evidence the Loan, the Grantor
     has executed and delivered to the Beneficiary a certain secured  promissory
     note, of even date, in the amount of $40,000,000.

C.   The  Commitment  requires  that the Loan be secured by all of the Grantor's
     existing  and  after-acquired  interest  in certain  real  property  and by
     certain tangible and intangible personal property.

2.   GRANTING CLAUSE

To secure the  repayment  of the  Indebtedness,  any  increases,  modifications,
renewals  or  extensions  of the  Indebtedness,  and any  substitutions  for the
Indebtedness, as well as the performance of the Grantor's other Obligations, and
in  consideration  of  the  sum of  ten  dollars  ($10.00)  and  other  valuable
consideration,  the  receipt  and  sufficiency  of which are  acknowledged,  the
Grantor grants, bargains, warrants, conveys, alienates,  releases, assigns, sets
over  and  confirms  to the  Trustee,  in trust  with the  power of sale for the
benefit of the Beneficiary and to his or her successors and assigns forever, all
of the Grantor's existing and after acquired interests in the Real Property.

3.   DEFINED TERMS

The  following  defined  terms  are  used in this  Deed of  Trust.  For  ease of
reference,  terms  relating  primarily to the Security  Agreement are defined in
Section 22.1.

"Absolute  Assignment of Leases and Rents" means the Loan Document  bearing this
heading.   "Appurtenances"  means  all  rights,  estates,   titles,   interests,
privileges, easements, tenements,

hereditaments,  titles, royalties,  reversions,  remainders and other interests,
whether  presently  held by the Grantor or  acquired in the future,  that may be
conveyed  as  interests  in the Land  under the law of  Colorado.  Appurtenances
include the Easements and the Assigned Rights.

"Assigned  Rights" means all of the  Grantor's  rights,  easements,  privileges,
tenements,  hereditaments,  contracts,  claims,  licenses  or  other  interests,
whether presently existing or arising in the future. The Assigned Rights include
all of the Grantor's rights in and to:

(a)  any greater estate in the Real Property;

(b)  insurance policies required to be carried hereunder, including the right to
     negotiate claims and to receive Insurance  Proceeds and unearned  insurance
     premiums (except as expressly provided in Section 8.1);

(c)  Condemnation Proceeds;

(d)  licenses and  agreements  permitting  the use of sources of  groundwater or
     water utilities,  septic leach fields, railroad sidings, sewer lines, means
     of ingress and egress;

(e)  drainage over other property;

(f)  air space above the Land;

(g)  mineral rights;

(h)  party walls;

(i)  vaults and their usage;

(j)  franchises;

(k)  commercial  tort  claims  that  arise  during  the Loan term in  respect of
     damages  to the Real  Property  or to its  operations,  in  respect  of any
     impairment  to the  value  of  the  Real  Property,  or in  respect  of the
     collection of any Rents;

(l)  construction contracts;

(m)  roof and equipment guarantees and warranties;

(n)  building and development licenses and permits;

(o)  tax credits or other governmental entitlements,  credits or rights, whether
     or not vested;

(p)  licenses and applications (whether or not yet approved or issued);

(q)  rights under management and service contracts;

(r)  leases of Fixtures;

(s)  trade names;  trademarks,  trade styles, service marks,  copyrights,  , and
     agreements  with  architects,   environmental  consultants,   property  tax
     consultants,  engineers,  and  any  other  third  party  contractors  whose
     services  benefit  the Real  Property.  "Bankruptcy  Code"  shall  mean the
     Bankruptcy Reform Act of 1978, as amended, 11 U.S.C.  Sections 101 et seq.,
     and the regulations promulgated pursuant to those statutes.

<PAGE>

"Business  Day" means any day when state and federal banks are open for business
in Cedar Rapids, Iowa.

"Carveout Obligations" means those obligations described in Section 21.

"Carveouts" means those matters from which Carveout Obligations may arise, which
are described in Section 21.

"Condemnation  Proceeds"  means all money or other property that has been, or is
in the  future,  awarded  or agreed to be paid or given in  connection  with any
taking by eminent  domain of all or any part of the Real  Property  (including a
taking  through  the  vacation of any street  dedication  or through a change of
grade of such a street),  either  permanent or temporary,  or in connection with
any purchase in lieu of such a taking,  or as a part of any related  settlement,
except  for the  right to  condemnation  proceeds  granted  to the  tenant  in a
separate  proceeding  including  in respect  of the lost  value of the  tenant's
leasehold interest.

"Default"  means any of the  acts,  omissions,  or  circumstances  specified  in
Section 10 below.  "Default  Rate" means the rate of interest  specified  as the
"Default  Rate" in the Note.  "Development  Agreements"  means all  development,
utility or similar agreements included in the Permitted Encumbrances.

"Distribution System" means all cable, wiring,  conduit,  fiber optics and other
similar medium whether installed above or underground or in the buildings on the
Real Property, but not including the Telecommunications Equipment.

"Easements"  means the  Grantor's  existing  and future  interests in and to the
declarations, easements, covenants, and restrictions appurtenant to the Land.

"Environmental  Indemnity  Agreement"  means  the  Loan  Document  bearing  that
heading.  "Environmental  Laws"  means all present  and future  laws,  statutes,
ordinances,  rules, regulations,  orders, guidelines,  rulings, decrees, notices
and determinations of any Governmental Authority to the extent that they pertain
to:  (A)  the  protection  of  health  against  environmental  hazards;  (B) the
protection of the environment,  including air, soils,  wetlands, and surface and
underground water, from contamination by any substance that may have any adverse
health effect on humans, livestock,  fish, wildlife, or plant life, or which may
disturb an ecosystem;  (C) underground  storage tank regulation or removal;  (D)
wildlife  conservation;  (E) protection or regulation of natural resources;  (F)
the protection of wetlands; (G) management, regulation and disposal of solid and
hazardous  wastes;  (H)  radioactive   materials;   (I)  biologically  hazardous
materials;  (J) indoor air quality; (K) the manufacture,  possession,  presence,
use,  generation,   storage,   transportation,   treatment,  release,  emission,
discharge, disposal, abatement, cleanup, removal, remediation or handling of any
Hazardous   Substances.   "Environmental   Laws"   include   the   Comprehensive
Environmental  Response,  Compensation,  and  Liability  Act,  as amended by the
Superfund  Amendments and Reauthorization Act of 1986, 42 U.S.C.ss.9601 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C.ss.6901 et seq., the -- ---
-- --- Federal Water  Pollution  Control Act, as amended by the Clean Water Act,
33  U.S.C.ss.1251  et seq., the -- --- Clean Air Act, 42  U.S.C.ss.7401 et seq.,
the Toxic  Substances  Control Act, 15  U.S.C.ss.2601 et seq., all -- --- -- ---
similar state statutes and local  ordinances,  and all  regulations  promulgated
under  any of  those  statutes,  and all  administrative  and  judicial  actions
respecting such  legislation,  all as amended from time to time. "ESA" means the
written  environmental  site assessment of the Real Property  obtained under the
terms of the Commitment.

<PAGE>

"Escrow Expenses" means those expenses in respect of Insurance Premiums and such
other lienable  Impositions as the  Beneficiary  pays from time to time directly
from the Escrow Fund using monies accumulated  through the collection of Monthly
Escrow Payments.

"Escrow Fund" means the funds deposited by Grantor with the Beneficiary pursuant
to Section 9 hereof,  as reflected in the  accounting  entry  maintained  on the
books of the  Beneficiary as funds  available for the payment of Escrow Expenses
under the terms of this Deed of Trust.

"Fixtures" means all materials,  supplies, equipment,  apparatus and other items
now or  hereafter  attached to or installed  on the Land and  Improvements  in a
manner that causes them to become fixtures under the law of Colorado,  including
all  built-in  or  attached  furniture  or  appliances,  elevators,  escalators,
heating,   ventilating  and  air  conditioning   system  components,   emergency
electrical  generators  and related  fuel  storage or delivery  systems,  septic
system components,  storm windows, doors, electrical equipment,  plumbing, water
conditioning,  lighting, cleaning, snow removal, lawn, landscaping,  irrigation,
security, incinerating, fire-fighting, sprinkler or other fire safety equipment,
bridge cranes or other installed materials handling equipment,  satellite dishes
or other  telecommunication  equipment,  built-in video conferencing  equipment,
sound systems or other audiovisual equipment,  and cable television distribution
systems.   Fixtures  do  not  include  the   Telecommunications   Equipment  and
Distribution  System,  trade fixtures,  furniture and equipment owned by tenants
and  vendors  who are  unrelated  to the  Grantor,  provided  such  items may be
detached and removed by the tenants  without damage to the Real Property,  other
than incidental  damage that the tenants are obligated to repair under the terms
of their  Leases.  Fixtures  expressly  include HVAC,  mechanical,  security and
similar  systems of general  utility for the  operation of the  Improvements  as
leasable commercial real property.

"Governmental  Authority" means any political entity with the legal authority to
impose any requirement on the Property,  including the governments of the United
States,  the  State of  Colorado,  Douglas  County,  and any other  entity  with
jurisdiction to decide,  regulate, or affect the ownership,  construction,  use,
occupancy, possession, operation, maintenance, alteration, repair, demolition or
reconstruction of any portion or element of the Real Property.

<PAGE>

"Hazardous  Substance"  means any  substance  the release of or the  exposure to
which is  prohibited,  limited or regulated by any  Environmental  Law, or which
poses a hazard to human  health,  including:  (A) any  "oil," as  defined by the
Federal  Water  Pollution  Control Act and  regulations  promulgated  thereunder
(including  crude  oil or any  fraction  of  crude  oil),  (B)  any  radioactive
substance  and (C)  STACCHYBOTRIS  CHARTARUM or other molds.  However,  the term
"Hazardous  Substance" includes neither (A) a substance used in the cleaning and
maintenance of the Real Property, if the quantity, storage and manner of its use
are customary,  prudent,  and do not violate  applicable  law, or (B) automotive
motor oil in  immaterial  quantities,  if leaked from  vehicles in the  ordinary
course of the operation of the Real  Property and cleaned up in accordance  with
reasonable  property  management  procedures  and in a manner  that  violates no
applicable law.

"Impositions"  means all real and personal  property  taxes  levied  against the
Property; general or special assessments; ground rent; water, gas, sewer, vault,
electric or other utility charges; common area charges; owners' association dues
or fees; fees for any easement,  license or agreement maintained for the benefit
of the Property; and any and all other taxes, levies, user fees, claims, charges
and assessments  whatsoever that at any time may be assessed,  levied or imposed
on the Property or upon its  ownership,  use,  occupancy or  enjoyment,  and any
related costs,  interest or penalties.  In addition,  "Impositions"  include all
documentary,  stamp or intangible personal property taxes that may become due in
connection  with the  Indebtedness,  including  Indebtedness  in  respect of any
future advance made by the  Beneficiary  to the Grantor,  or that are imposed on
any of the Loan Documents.

"Improvements"  means,  to the  extent  of the  Grantor's  existing  and  future
interest,  all buildings and  improvements  of any kind erected or placed on the
Land now or in the future,  including  the  Fixtures,  together  with  Grantor's
existing and future interest in all appurtenant rights,  privileges,  easements,
tenements, hereditaments, titles, reversions, remainders and other interests.

"Indebtedness"  means all sums that are owed or become due pursuant to the terms
of the Note, this Deed of Trust, or any of the other Loan Documents or any other
writing  executed  by the  Grantor  relating  to the Loan,  including  scheduled
principal payments, scheduled interest payments, default interest, late charges,
prepayment  premiums,  accelerated  or  matured  principal  balances,  advances,
collection costs (including reasonable  attorneys' fees),  reasonable attorneys'
fees and costs in enforcing or protecting the Note, the Deed of Trust, or any of
the  other  Loan  Documents  in any  probate,  bankruptcy  or other  proceeding,
receivership  costs,  fees and  costs of the  Trustee  and all  other  financial
obligations  of the Grantor  incurred in connection  with the Loan  transaction,
provided, however, that this Deed of Trust shall not secure any Loan Document or
any particular  person's  liabilities or obligations  under any Loan Document to
the extent that such Loan Document  expressly  states that it or such particular
person's  liabilities  or  obligations  are  unsecured  by this  Deed of  Trust.
Indebtedness   shall  also  include  any  obligations   under  agreements  which
specifically provide that such obligations are secured by this Deed of Trust.

"Insurance Premiums" means all premiums or other charges required to maintain in
force any and all insurance  policies that this Deed of Trust  requires that the
Grantor maintain.

"Insurance  Proceeds"  means (A) all proceeds of all  insurance now or hereafter
carried  by or  payable  to the  Grantor  with  respect  to the  Real  Property,
including with respect to the  interruption  of rents or income derived from the
Property, all unearned insurance premiums and all related claims or demands, and
(B) all Proceeds.

<PAGE>

"Land" means that certain  tract of land  located in Douglas  County,  Colorado,
which is described on the attached Exhibit A, together with the Appurtenances.

"Leases"  means  all  leases,  subleases,  licenses,  concessions,   extensions,
renewals and other agreements  (whether  written or oral, and whether  presently
effective or made in the future) through which the Grantor grants any possessory
interest  in and to, or any right to occupy or use,  all or any part of the Real
Property, and any related guaranties.

"Legal Control" means the power, either directly or indirectly,  to exercise the
authority of the owner of the Real Property,  either as the majority shareholder
of the common stock of a corporation,  as the sole general  partner of a limited
partnership, as the managing general partner of a general partnership, or as the
sole manager of a limited liability company, provided the entity exercising such
authority  cannot be divested of such  authority  without  its  consent,  either
directly or indirectly, except for cause.

"Legal Requirements" means all laws, statutes, rules,  regulations,  ordinances,
judicial  decisions,  administrative  decisions,  building permits,  development
permits,  certificates of occupancy,  or other  requirements of any Governmental
Authority.

"Loan  Documents"  means  all  documents  evidencing  the Loan or  delivered  in
connection with the Loan,  whether entered into at the closing of the Loan or in
the future.

"Maximum Lawful Rate" means the maximum lawful rate of interest that may be paid
or collected under the laws of Colorado.

"Monthly  Escrow Payment" means the sum of the Monthly  Imposition  Requirement,
the Monthly Insurance Premium Requirement, and the Monthly Reserve Requirement.

"Monthly Imposition Requirement" means one-twelfth of the annual amount that the
Beneficiary  estimates  will be  required  to permit the  timely  payment by the
Beneficiary of those Impositions that the Beneficiary elects, from time to time,
to  include in the  calculation  of the  Monthly  Imposition  Requirement.  Such
Impositions shall include real and personal  property taxes and may include,  at
the Beneficiary's sole and absolute  discretion any Impositions that the Grantor
has failed to pay on a timely basis during the term of the Loan. The Beneficiary
shall base its estimate on the most recent  information  supplied by the Grantor
concerning future  Impositions.  If the Grantor fails to supply such information
or if it is  unavailable  at the  time  of  estimation,  the  Beneficiary  shall
estimate future Impositions using historical information and an annual inflation
factor equal to the lesser of 5% and the maximum  inflation  factor permitted by
law.

"Monthly  Insurance Premium  Requirement" means one-twelfth of the annual amount
that the Beneficiary estimates (based on available historical data and using, if
future Insurance Premiums are as yet undeterminable, a 5% inflation factor) will
be  required  to permit the  timely  payment of the  Insurance  Premiums  by the
Beneficiary.

"Monthly  Reserve  Requirement"  means  the  monthly  payment  amount  which the
Beneficiary  estimates  will, over the subsequent  twelve months,  result in the
accumulation  of a surplus  in the Escrow  Fund equal to the sum of the  Monthly
Imposition Requirement and the Monthly Insurance Premium Requirement.

<PAGE>

"Note"  means the  promissory  note dated of even date  herewith to evidence the
Indebtedness in the original principal amount of $40,000,000,  together with all
extensions, renewals and modifications.

"Notice"  means a notice given in accordance  with the  provisions of Subsection
26.12. "Obligations" means all of the obligations required to be performed under
the terms and conditions of any of the Loan Documents by any Obligor, except for
obligations that are expressly stated to be unsecured under the terms of another
Loan Document.

"Obligor"  means the Grantor,  or any other Person that is liable under the Loan
Documents for the payment of any portion of the Indebtedness, or the performance
of any other obligation  required to be performed under the terms and conditions
of any of the Loan Documents, under any circumstances.

"Participations" means participation  interests in the Loan Documents granted by
the  Beneficiary.  "Permitted  Control  Group Member" shall mean any member of a
group comprised of Wellsford Real Property, Inc. and EOP Limited Partnership.

"Permitted Encumbrances" means (A) the lien of taxes and assessments not yet due
and  payable  and  (B)  those  matters  listed  as  special  exceptions  in  the
Beneficiary's  title  insurance  policy  insuring  the  priority of this Deed of
Trust.

"Permitted  Transfer" means a transfer  specifically  described in Section 14 as
permitted.

"Person"  means  any  individual,   corporation,   limited  liability   company,
partnership,   trust,  unincorporated  association,   government,   governmental
authority or other entity.

"Prohibited  Structural Change" means (A) a change in the ownership structure of
Grantor,  if,  following  the change,  Legal  Control of the Real Property is no
longer exercised by one or more Permitted  Control Group Member, or (B) a change
in the  identity  or  capacity  of any  intermediate  entity  through  which any
Permitted Control Group Member exercises such Legal Control.

"Property" means the Real Property,  the Personal  Property,  the Leases and the
Rents.

"Rating Agencies" means one or more credit rating agencies approved by Lender.

"Real Property" means the Land, the Improvements, the Leases and the Rents.

<PAGE>

"Rents" means all rents, income, receipts, issues and profits and other benefits
paid or payable for using, leasing, licensing, possessing, operating from or in,
residing in, selling,  mining,  extracting  minerals from, or otherwise enjoying
the Real Property, whether presently existing or arising in the future, to which
the Grantor may now or hereafter become entitled or may demand or claim from the
commencement of the Loan term through the time of the satisfaction of all of the
Obligations,  including security deposits, amounts drawn under letters of credit
securing  tenant  obligations,  minimum  rents,  additional  rents,  common area
maintenance charges,  parking revenues,  deficiency rents, termination payments,
space contraction  payments,  damages following default under a Lease,  premiums
payable by tenants upon their exercise of cancellation privileges, proceeds from
lease guarantees,  proceeds payable under any policy of insurance  covering loss
of rents resulting from  untenantability  caused by destruction or damage to the
Real Property, all rights and claims of any kind which the Grantor has or may in
the future have against the tenants under the Leases,  lease guarantors,  or any
subtenants or other occupants of the Real Property,  all proceeds of any sale of
the Real Property in violation of the Loan  Documents,  any future award granted
the Grantor in any court proceeding involving any such tenant in any bankruptcy,
insolvency, or reorganization proceedings in any state or federal court, and any
and all payments made by any such tenant in lieu of rent.

"Restoration"  means (A) in the case of a casualty resulting in damage to or the
destruction of the Improvements, the repair or rebuilding of the Improvements to
their original condition, or (B) in the case of the condemnation of a portion of
the Real  Property,  the completion of such work as may be necessary in order to
remedy the effects of the  condemnation so that the value and  income-generating
characteristics of the Real Property are restored.

"Securities"  means  mortgage  pass-through  certificates  or  other  securities
evidencing  a  beneficial  interest  in the Loan,  issued in a rated or  unrated
public offering or private placement.

"Securitization" means the issuance of Securities.

"Telecommunications"   means  (i)  local   telephone   exchange   services   and
point-to-point  telephone  communications   (including  dedicated  long-distance
service),  call  waiting,  call  forwarding,  speed  dialing  and other  similar
services;  paging,  voice mail and message center service;  video communications
service; 800 or other toll-free-number  service;  telephone credit or debit card
service;  audio  conferencing;  (ii)  multichannel  video or audio  programming,
including,  without  limitation,  cable  television  services,  satellite master
antenna television,  wireless or microwave technology,  direct feed from a local
franchise  cable provider or video delivery  provider,  multichannel  multipoint
distribution  service,  direct  broadcast  satellite,  or other similar video or
audio  transmission  services;  and (iii) high speed  Internet  access and other
Internet-related  communication  services,  which may include all other services
such as voice, video, data,  facsimile or other  communication  services (or any
combination of the foregoing),  data  transmission  service;  access to computer
"Internet" or other networked computer-based communications and related content,
including access via Internet  "portal" service;  provision of telephone,  video
communication or other similar communications equipment or infrastructure.

"Telecommunications  Equipment"  means the  facilities  and  equipment  owned by
Palomino Park Telecom,  LLC or its licensees for the  transmission and reception
of Telecommunications  services,  including without limitation:  servers, racks,
cabinets,  cable,  risers,  junction  boxes,  hangers,  pull boxes,  innerducts,
connecting equipment,  termination blocks, intermediate distribution facilities,
a/k/a  customer  service  boxes,   electrical  wiring  and  related   equipment,
electronic devises, and hardware and software or any components thereof, but not
including the Distribution System.

<PAGE>

4.   TITLE

The  Grantor  represents  to and  covenants  with the  Beneficiary  and with its
successors  and  assigns  that,  at the  point in time of the  grant of the lien
created  by  this  Deed  of  Trust,  the  Grantor  is well  seized  of good  and
indefeasible title to the Real Property,  in fee simple absolute,  subject to no
lien or encumbrance except the Permitted Encumbrances. The Grantor warrants this
estate and title to the Beneficiary  and to its successors and assigns  forever,
against all lawful  claims and demands of all persons  subject to the  Permitted
Encumbrances.  The Grantor shall maintain  mortgagee title insurance issued by a
solvent  carrier,  covering the Real Property in an amount at least equal to the
amount of the Loan's original principal balance. This Deed of Trust is and shall
remain a valid and enforceable first lien on the Real Property,  subject only to
the Permitted Encumbrances,  and if the validity or enforceability of this first
lien is attacked by appropriate  proceedings,  the Grantor shall  diligently and
continuously defend it through appropriate proceedings.  Should the Grantor fail
to do so,  the  Beneficiary  may at the  Grantor's  expense  take all  necessary
action,  including  the  engagement  and  compensation  of  legal  counsel,  the
prosecution or defense of litigation, and the compromise or discharge of claims.
The Grantor shall defend,  indemnify  and hold the  Beneficiary  harmless in any
suit or proceeding  brought to challenge or attack the validity,  enforceability
or priority of the lien granted by this Deed of Trust. If a prior  construction,
mechanics' or  materialmen's  lien on the Real  Property  arises by operation of
statute during any construction or repair of the Improvements, the Grantor shall
either  cause the lien to be  discharged  by paying when due any amounts owed to
such persons, or shall comply with Section 12 of this Deed of Trust.
<PAGE>

5.   REPRESENTATIONS OF THE GRANTOR

The Grantor hereby represents to the Beneficiary as follows:

5.1  FORMATION, EXISTENCE, GOOD STANDING

The Grantor is a limited liability company duly organized,  validly existing and
in good  standing  under the laws of Colorado  and has obtained all licenses and
permits and filed all statements of fictitious name and registrations  necessary
for the lawful operation of its business in Colorado.

5.2  POWER AND AUTHORITY

The Grantor has full power and  authority  to carry on its business as presently
conducted,  to own the Property, to execute and deliver the Loan Documents,  and
to perform its Obligations.

5.3  ANTI-TERRORISM REGULATIONS

Neither the Grantor,  any  affiliate of the  Grantor,  nor any person  owning an
interest in either of the foregoing  (unless in either case, as a shareholder of
Wellsford Real  Properties,  Inc. or of any other publicly traded entity),  is a
"Specially Designated National" or a "Blocked Person" as those terms are defined
in the Office of Foreign Asset Control Regulations (31 CFR Section 500 ET SEQ.).

5.4  DUE AUTHORIZATION

The Loan  transaction  and the  performance of all of the Grantor's  Obligations
have been duly authorized by all requisite limited liability company action, and
each  individual  executing  any Loan Document on behalf of the Grantor has been
duly authorized to do so.

5.5  NO DEFAULT OR VIOLATIONS

The execution and  performance of the Grantor's  Obligations  will not result in
any breach of, or constitute a default under, any contract,  agreement, document
or other  instrument to which the Grantor is a party or by which the Grantor may
be bound or affected,  and do not and will not violate or contravene  any law to
which the  Grantor  is  subject;  nor do any such  other  instruments  impose or
contemplate  any  obligations  which are or will be  inconsistent  with the Loan
Documents.

5.6  NO FURTHER APPROVALS OR ACTIONS REQUIRED

No approval by, authorization of, or filing with any federal, state or municipal
or  other  governmental  commission,  board  or  agency  or  other  governmental
authority is necessary  in  connection  with the  authorization,  execution  and
delivery of the Loan Documents by the Grantor.

<PAGE>

5.7  DUE EXECUTION AND DELIVERY

Each of the Loan  Documents  to  which  the  Grantor  is a party  has been  duly
executed and delivered on behalf of the Grantor.

5.8  LEGAL, VALID, BINDING AND ENFORCEABLE

Each of the Loan  Documents  to which the  Grantor  is a party  constitutes  the
legal,  valid and binding  obligation  of the Grantor,  enforceable  against the
Grantor  in  accordance   with  its  terms,   except  to  the  extent  that  its
enforceability may be limited by bankruptcy,  insolvency, fraudulent conveyance,
reorganization,  moratorium  or similar laws  affecting  the  enforceability  of
creditors' rights generally,  or by equitable  principles of general application
(whether considered in an action at law or in equity).

5.9  ACCURATE FINANCIAL INFORMATION

All  financial  information  furnished  by the  Grantor  to the  Beneficiary  in
connection with the  application  for the Loan is true,  correct and complete in
all  material  respects  and does not  omit to  state  any fact or  circumstance
necessary to make the statements in them not  misleading,  and there has been no
material adverse change in the financial condition of the Grantor since the date
of such financial information.

5.10 COMPLIANCE WITH LEGAL REQUIREMENTS

All  governmental  approvals  and  licenses  required  for  the  conduct  of the
Grantor's business and for the maintenance and operation of the Real Property in
compliance  with  applicable  law are in full  force  and  effect,  and the Real
Property is currently being operated in compliance  with the Legal  Requirements
in all material respects.

5.11 CONTRACTS AND FRANCHISES

All contracts and franchises necessary for the conduct of the Grantor's business
and for the operation of the Real Property in  accordance  with good  commercial
practice are in force.

5.12 NO CONDEMNATION PROCEEDING

As of the date of this Deed of Trust and except as disclosed to  Beneficiary  in
writing,  the Grantor has no  knowledge of any  present,  pending or  threatened
condemnation proceeding or award affecting the Real Property.

5.13 NO CASUALTY

As of the date of this Deed of Trust, no damage to the Real Property by any fire
or other  casualty  has  occurred,  other than damage  that has been  completely
repaired in accordance  with good  commercial  practice and in  compliance  with
applicable law.

<PAGE>

5.14 INDEPENDENCE OF THE REAL PROPERTY

The Real Property may be operated independently from other land and improvements
not included  within or located on the Land,  and it is not  necessary to own or
control  any  property  other  than  the  Real  Property  in  order  to meet the
obligations  of the  landlord  under any Lease,  or in order to comply  with the
Legal Requirements.

5.15 COMPLETE LOTS AND TAX PARCELS

The Land is comprised  exclusively  of tax parcels  that are  entirely  included
within the Land,  and, if the Land is subdivided,  of subdivision  lots that are
entirely included within the Land.

5.16 OWNERSHIP OF FIXTURES

The Grantor owns the Fixtures  free of any  encumbrances  (except the  Permitted
Encumbrances  to the extent the Fixtures are deemed part of the Real  Property),
including purchase money security  interests,  rights of lessors,  and rights of
sellers under conditional sales contracts or other financing arrangements.

5.17 COMMERCIAL PROPERTY

The  Grantor  is not  using  the  Real  Property  for its  personal  residential
purposes,  and the Loan has not been  made for  personal,  family  or  household
purposes.

5.18 REAL PROPERTY IS NOT HOMESTEAD PROPERTY

The Real Property is NOT  HOMESTEAD  PROPERTY of the Grantor or of the spouse of
any person named as the Grantor.

5.19 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS

All  of the  obligations  of the  owner  of the  Real  Property  due  under  the
Development Agreements have been fully, timely and completely performed and such
performance  has been  accepted  by the related  governmental  agency or utility
company, and no Governmental Authority has alleged that any default exists under
any of the Development Agreements.

5.20 STATUS OF CERTAIN TITLE MATTERS

Each of the  Appurtenances (a) is valid and in full force and effect and may not
be amended or terminated,  except for cause, without the consent of the owner of
the Real  Property,  (b) has not been amended or  supplemented,  (c) requires no
approval of the Improvements that has not been obtained, (d) is free of defaults
or alleged  defaults,  (e) does not provide for any assessment  against the Real
Property that has not been paid in full or, if paid in installments,  which have
not been paid  current  through the date of this Deed of Trust,  and (f) has not
been violated by the owner of the Real Property or, to the best of the Grantor's
knowledge, by any tenant of the Real Property.

5.21 NO PROHIBITED TRANSACTIONS

The Grantor  represents to the Beneficiary that either (a) the Grantor is not an
"employee  benefit  plan" within the meaning of the Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA"), that is subject to Title I of ERISA,
a "plan"  within the meaning of Section  4975 of the  Internal  Revenue  Code of
1986, as amended (the "Code"), or an entity that is deemed to hold "plan assets"
within the meaning of 29 C.F.R.  ss.2510.3-101 of any such employee benefit plan
or (b) the enter into of the Loan  Documents,  the acceptance of the Loan by the
Grantor and the existence of the Loan will not result in a non-exempt prohibited
transaction  under  ss.406 of ERISA or  Section  4975 of the Code.  The  Grantor
further  warrants and covenants  that the foregoing  representation  will remain
true during the term of the Loan.

<PAGE>

6.   COVENANTS

6.1  GOOD STANDING

The Grantor shall remain in good standing as a limited  liability  company under
the laws of Colorado and shall  maintain in force all  statements  of fictitious
name and  registrations  necessary  for the lawful  operation of its business in
Colorado during the term of the Loan.

6.2  NO DEFAULT OR VIOLATIONS

The  Grantor  shall not enter into any  contract,  agreement,  document or other
instrument,  if the performance of the Grantor's Obligations would result in any
breach of, or constitute a default under, any such contract, agreement, document
or other instrument, or if the contract, agreement, document or other instrument
would impose or  contemplate  any  obligations  the  performance  of which would
result in a Default under the Loan Documents or would be  inconsistent  with the
performance of the Grantor's Obligations.

6.3 PAYMENT AND PERFORMANCE

The Grantor shall pay the Indebtedness and perform all of its other Obligations,
as and when the Loan Documents require such payment and performance.

6.4 PAYMENT OF IMPOSITIONS

The Grantor  shall pay the  Impositions  on or before the last day on which they
may be paid without penalty or interest,  and shall, within thirty days, furnish
the Beneficiary with a paid receipt or a cancelled check as evidence of payment.
If the Beneficiary does not receive such evidence, the Beneficiary may obtain it
directly.   If  it  does  so,  the  Beneficiary   will  charge  the  Grantor  an
administrative fee of $250 for securing the evidence of payment.  The payment of
this fee shall be a demand  obligation of the Grantor.  The Grantor may meet the
Imposition payment  requirements of this Subsection 6.4 by remitting the Monthly
Escrow Payments when due, by immediately  providing Notice to the Beneficiary of
any new Imposition or increased  Imposition  unknown to the Beneficiary,  and by
paying to the  Beneficiary on demand any amount  required to increase the Escrow
Fund to an amount  sufficient to permit the  Beneficiary to pay all  Impositions
from the Escrow Fund on time.  If the Grantor  wishes to contest the validity or
amount of an  Imposition,  it may do so by complying with Section 12. If any new
Legal Requirement  (other than a general tax on income or on interest  payments)
taxes the Deed of Trust so that the yield on the Indebtedness  would be reduced,
and the Grantor may lawfully pay the tax or reimburse  the  Beneficiary  for its
payment, the Grantor shall do so.

<PAGE>

6.5 MAINTENANCE OF THE REAL PROPERTY

The  Grantor  shall not  commit or permit  any waste of the Real  Property  as a
physical  or  economic  asset,  and  agrees  to  maintain  in  good  repair  the
Improvements,  including structures,  roofs, mechanical systems, parking lots or
garages,  and  other  components  of the Real  Property  that are  necessary  or
desirable  for the use of the Real  Property,  or which the  Grantor as landlord
under any Lease is required to  maintain  for the benefit of any tenant.  In its
performance  of this  Obligation,  the Grantor shall  promptly and in a good and
workmanlike  manner repair or restore,  as required under  Subsection  6.17, any
elements of the  Improvements  that are damaged or destroyed.  The Grantor shall
also replace roofs, parking lots,  mechanical systems, and other elements of the
Improvements  requiring periodic  replacement.  The Grantor shall carry out such
replacements  no less  frequently  than would a  commercially  reasonable  owner
intending  to  maintain  the  maximum  income-generating  potential  of the Real
Property over its reasonable  economic life. The Grantor shall not,  without the
prior written consent of the Beneficiary,  demolish,  reconfigure, or materially
alter the structural elements of the Improvements,  unless such an action is the
obligation of the Grantor under a Lease approved by Beneficiary or for which the
Beneficiary's  approval is not required under the Absolute  Assignment of Leases
and Rents.  The  Beneficiary  agrees that any request for its consent to such an
action shall be deemed given if the Beneficiary  does not respond within fifteen
(15) Business Days to any written request for such a consent,  if the request is
accompanied by all materials  required to permit the  Beneficiary to analyze the
proposed action.

6.6 MANAGEMENT OF THE REAL PROPERTY

The Real Property shall be professionally leased and managed in a manner that is
consistent with good commercial practice for institutional owners of first-class
multifamily apartment projects.

6.7 USE OF THE REAL PROPERTY

The Grantor  agrees  that the Real  Property  may only be used as a  residential
apartment complex and for no other purpose.

6.8 LEGAL REQUIREMENTS

The Grantor shall maintain in full force and effect all  governmental  approvals
and  licenses  required  for the conduct of the  Grantor's  business and for the
maintenance  and operation of the Real Property in  compliance  with  applicable
law, and shall comply with all Legal Requirements  relating to the Real Property
at all times.

6.9 CONTRACTS AND FRANCHISES

The Grantor shall maintain in force all contracts and  franchises  necessary for
the conduct of the Grantor's business and for the operation of the Real Property
in accordance with good commercial practice.

6.10 COVENANTS REGARDING CERTAIN TITLE MATTERS

The Grantor shall promptly pay, perform and observe all of its obligations under
the Appurtenant  Easements or under reciprocal  easement  agreements,  operating
agreements,  declarations,  and restrictive  covenants included in the Permitted
Encumbrances,  shall not  modify or consent  to the  termination  of any of them
without the prior written consent of the Beneficiary, shall promptly furnish the
Beneficiary  with copies of all notices of default  under them,  and shall cause
all covenants and  conditions  under them and benefiting the Real Property to be
fully performed and observed.

<PAGE>

6.11 INDEPENDENCE OF THE REAL PROPERTY

The Grantor shall maintain the independence of the Real Property from other land
and  improvements not included within or located on the Land. In fulfilling this
covenant,  the  Grantor  shall  neither  take any  action  which  would  make it
necessary to own or control any property  other than the Real  Property in order
to meet the  obligations of the landlord under any Lease,  or in order to comply
with the Legal  Requirements,  nor take any action which would cause any land or
improvements  other than the Land and the  Improvements to rely upon the Land or
the Improvements for those purposes.

6.12 COMPLETE LOTS AND TAX PARCELS

The  Grantor  shall take no action  that would  result in the  inclusion  of any
portion  of the Land in a tax  parcel or  subdivision  lot that is not  entirely
included within the Land.

6.13 COMMERCIAL PROPERTY

The  Grantor  shall  not use the  Real  Property  for its  personal  residential
purposes,  and the Loan  shall not be used for  personal,  family  or  household
purposes.

6.14 REAL PROPERTY IS NOT HOMESTEAD PROPERTY

The Real Property shall NOT BECOME  HOMESTEAD  PROPERTY of the Grantor or of the
spouse of any person named as the Grantor.

6.15 PERFORMANCE UNDER DEVELOPMENT AGREEMENTS

The Grantor shall fully, timely and completely perform all of the obligations of
the owner of the Real Property due under the  Development  Agreements  and shall
cause no default under any of the Development Agreements.

6.16 STATUS OF CERTAIN TITLE MATTERS

The  Grantor  shall  not take or fail to take any  action  with  respect  to the
Easements   included  within  the  Appurtenances  or  the  reciprocal   easement
agreements,  operating  agreements,   declarations,  and  restrictive  covenants
included in the  Permitted  Encumbrances,  if as the result of such an action or
failure,  the  Subject  Easement  or other  title  matter  would (a) be rendered
invalid or without force, (b) be amended or supplemented  without the consent of
the Grantor, (c) be placed in default or alleged default, (d) result in any lien
against the Real Property,  or (e) give rise to any assessment  against the Real
Property,  unless immediately paid in full or, if payable in installments,  paid
prior to any delinquency.

6.17 RESTORATION UPON CASUALTY OR CONDEMNATION

If a casualty or condemnation  occurs,  the Grantor shall promptly  commence the
Restoration of the Real Property,  to the extent that the  Beneficiary  has made
Insurance  Proceeds or Condemnation  Proceeds  available to the Grantor for such
Restoration.

6.18 PERFORMANCE OF LANDLORD OBLIGATIONS

The Grantor  shall perform its  obligations  as landlord  under the Leases,  and
shall  neither  take any action,  nor fail to take any action,  if the action or
failure would be inconsistent with the commercially reasonable management of the
Real Property for the purpose of enhancing its long-term  performance and value.
Except as expressly permitted under the Absolute Assignment of Leases and Rents,
the  Grantor  shall not,  without the  Beneficiary's  written  consent,  extend,
modify, declare a default under,  terminate, or enter into any Lease of the Real
Property.

<PAGE>

6.19 FINANCIAL REPORTS AND OPERATING STATEMENTS

(A) MAINTENANCE OF BOOKS AND RECORDS

During the term of the Loan,  the Grantor shall  maintain  complete and accurate
accounting and  operational  records,  including  copies of all Leases and other
material  written  contracts  relating to the Real  Property,  copies of all tax
statements, and evidence to support the payment of all material property-related
expenses.

(B) DELIVERY OF FINANCIAL AND PROPERTY-RELATED INFORMATION

Within one hundred twenty (120) days of the end of each of its fiscal years, or,
if a Default exists, on demand by the Beneficiary,  the Grantor shall deliver to
the Beneficiary (A) copies of the financial statements of the Grantor, including
balance sheets and earnings  statements,  (B) a complete and accurate  operating
statement  for the Real  Property,  and (C) a complete  rent  roll,  all in form
satisfactory to the Beneficiary.  The rent roll must be certified by the Grantor
to be true and correct and must include each  tenant's  name,  premises,  square
footage,  rent (including any percentage rent and supporting  sales reports from
the related tenants),  lease expiration date, renewal options and related rental
rates,  delinquencies  and  vacancies,  and  the  existence  of any  unsatisfied
landlord  obligations in respect of tenant  improvements or other leasing costs.
If the Grantor  fails to deliver  the items  required  in this  Subsection,  the
Beneficiary  may engage an accounting  firm to prepare the required  items.  The
Grantor shall  cooperate fully with any  investigative  audit required to permit
the accounting firm to produce these items,  and the fees and expenses  incurred
in connection with their preparation shall be paid on demand by the Grantor.

If a decision is made to include the Loan in a Securitization  and the amount of
the Loan would exceed 20% of the amount  estimated in good faith to be raised in
the offering,  the Grantor agrees to provide, to the extent required by SEC Rule
3-14,  and to the extent  not  previously  supplied  to  Beneficiary,  financial
statements  for the Real  Property  in respect of the three  years  prior to the
Securitization.  If the amount of the Loan would exceed 10% (but not 20%) of the
amount estimated in good faith to be raised by the offering,  the Grantor agrees
to  provide  such  additional  property-related  financial  information  as  the
Beneficiary may request in order to meet then-applicable SEC rules in connection
with the contemplated manner of the offering.  The Grantor shall not be required
to  provide  audited  financial  statements  or  audited  property  and  related
financial  information  unless and to the extent required elsewhere in this Deed
of Trust;  provided,  however the financial  statements and the Property-related
financial  information  shall be certified as true and correct by Wellsford Park
Highlands Corp.

<PAGE>

(C) EFFECT OF FAILURE TO DELIVER FINANCIAL AND PROPERTY REPORTS

If no Default exists and the Grantor fails to provide the financial and property
reports  required under this Section within one hundred twenty (120) days of the
close of any fiscal year, the Beneficiary  will provide a Notice of this failure
and a thirty  (30)-day  opportunity  to cure before a Default  shall exist.  All
monthly  payments of principal and interest under the Note that become due after
this cure  period has  elapsed  but  before  the  reports  are  received  by the
Beneficiary must be accompanied by a fee of .000834 times the principal  balance
of the Loan at the  beginning of the previous  month,  regardless of whether the
Notice has asserted  that the failure  constitutes  a Default under this Deed of
Trust.  This fee is to compensate  the  Beneficiary  for (A) the increased  risk
resulting from the Beneficiary's inability to monitor and service the Loan using
up-to-date  information and (B) the reduced value and liquidity of the Loan as a
financial asset.

(D) CERTIFICATION OF INFORMATION

The financial and operating  statements provided under this Subsection need not,
as an initial matter, be certified by an independent certified public accountant
as having  been  prepared  in  accordance  with  generally  accepted  accounting
principles,  consistently  applied,  or,  in the  case of  financial  statements
prepared  on a cash or income  tax basis,  or of  operating  statements,  as not
materially  misleading  based on an audit conducted in accordance with generally
accepted  auditing  standards.  The Grantor  shall,  however  certify  that such
statements  are true and correct,  and the  Beneficiary  expressly  reserves the
right  to  require  such a  certification  by an  independent  certified  public
accountant if a Default exists or if the  Beneficiary has reason to believe that
any previously  provided  financial or operating  statement is misleading in any
material respect.

6.20 ESTOPPEL STATEMENTS

Upon request by the Beneficiary,  the Grantor shall, within ten Business Days of
Notice of the request,  furnish to the  Beneficiary or to whom it may direct,  a
written  statement  acknowledging  the amount of the Indebtedness and disclosing
whether any offsets or defenses exist against the Indebtedness.  Thereafter, the
Grantor shall be estopped from  asserting any other offsets or defenses  alleged
to have arisen as of the date of the statement.

6.21 PROHIBITION ON CERTAIN DISTRIBUTIONS

If Default exists under Subsection 10.2 or under any of Subparagraphs  (b), (c),
(d), (e) or (f) of  Subsection  10.4,  the Grantor shall not pay any dividend or
make any  partnership,  trust  or other  distribution,  and  shall  not make any
payment or  transfer  any  property in order to  purchase,  redeem or retire any
interest in its beneficial interests or ownership.

6.22 USE OF LOAN PROCEEDS

The Loan proceeds shall be used solely for commercial purposes.

6.23 PROHIBITION ON CUTOFF NOTICES

The  Grantor  shall not issue any Notice to the  Beneficiary  to the effect that
liens on the Real Property after the date of the Notice will enjoy priority over
the lien of the Deed of Trust.

<PAGE>

7. INSURANCE REQUIREMENTS

At all times until the  Indebtedness is paid in full, the Grantor shall maintain
insurance  coverage and  administer  insurance  claims in  compliance  with this
Section.

7.1 REQUIRED COVERAGES

(A) OPEN PERILS/SPECIAL FORM/SPECIAL PERILS PROPERTY

The Grantor shall maintain "Open Perils,"  "Special  Form," or "Special  Perils"
property  insurance  coverage  in an amount  not less than one  hundred  percent
(100%) of the  replacement  cost of all insurable  elements of the Real Property
and  of  all  tangible  Personal  Property,  with  coinsurance  waived,  or if a
coinsurance clause is in effect, with an agreed amount endorsement acceptable to
the Beneficiary.  Coverage shall extend to the Real Property and to all tangible
Personal Property.

(B) BROAD FORM BOILER AND MACHINERY

If any boiler or other  machinery is located on or about the Real Property,  the
Grantor shall  maintain  broad form boiler and machinery  coverage,  including a
form of business income coverage.

(C) FLOOD

If the Real Property is located in a special flood hazard area (that is, an area
within the 100-year  floodplain)  according to the most current flood  insurance
rate  map  issued  by the  Federal  Emergency  Management  Agency  and if  flood
insurance is available,  the Grantor shall maintain flood insurance  coverage on
all insurable elements of Real Property and of all tangible Personal Property.

(D) BUSINESS INTERRUPTION

The Grantor shall maintain a form of business  income  coverage in the amount of
eighty percent (80%) of one year's business income from the Property.

(E) COMPREHENSIVE/GENERAL LIABILITY

The Grantor shall maintain  commercial  general liability coverage (which may be
in the form of umbrella/excess  liability  insurance) with a $1,000,000 combined
single limit per occurrence and a minimum aggregate limit of $2,000,000.

(F) LIQUOR LIABILITY

The Grantor shall  maintain  liquor  liability  coverage,  if applicable law may
impose liability on those selling,  serving,  or giving  alcoholic  beverages to
others and if such beverages will be sold,  served or given on the Real Property
by the Grantor.

(G) ELECTIVE COVERAGES

The Beneficiary  may require  additional  coverages  appropriate to the property
type and site location. Additional coverages may include earthquake,  windstorm,
mine  subsidence,   sinkhole,  personal  property,  supplemental  liability,  or
coverages of other property-specific risks.

<PAGE>

7.2 PRIMARY COVERAGE

Each  coverage  required  under  this  Section  shall  be  primary  rather  than
contributing or secondary to the coverage Grantor may carry for other properties
or risks,  provided,  however,  that blanket coverage shall be acceptable if (a)
the  policy  includes  limits  by  property  location  and (b)  the  Beneficiary
determines, in the exercise of its sole and absolute discretion, that the amount
of such  coverage  is  sufficient  in light of the other  risks  and  properties
insured under the blanket policy.

7.3 HOW THE BENEFICIARY SHOULD BE NAMED

On all property  insurance  policies and coverages  required  under this Section
(including  coverage against loss of business  income),  the Beneficiary must be
named as "first  mortgagee" under a standard  mortgage clause.  On all liability
policies  and  coverages,  the  Beneficiary  must  be  named  as an  "additional
insured." The Beneficiary should be referred to verbatim as follows:  "AUSA Life
Insurance Company, Inc., and its successors,  assigns, and affiliates;  as their
interest may appear; c/o AEGON USA Realty Advisors,  Inc.;  Mortgage Loan Dept.;
4333 Edgewood Rd., NE; Cedar Rapids, Iowa 52499-5443." 7.4 RATING

Each  insurance  carrier  providing  insurance  required under this Section must
have,  independently  of its  parent's  or any  reinsurer's  rating,  a  General
Policyholder  Rating of A, and a Financial Rating of X or better, as reported in
the most current issue of Best's  Insurance Guide, or as reported by Best on its
internet web site.

7.5 DEDUCTIBLE

The maximum deductible on each required coverage or policy is $25,000.

7.6 NOTICES, CHANGES AND RENEWALS

All  policies  must  require the  insurance  carrier to give the  Beneficiary  a
minimum of ten (10) days' notice in the event of  modification,  cancellation or
termination  for non-payment of premium and a minimum of sixty (60) days' notice
of non-renewal.  The Grantor shall report to the Beneficiary  immediately any of
the  following to the extent they affect any  insurance  contract:  any vacancy;
change  of  title;   tenant  occupancy  or  use;  physical  damage;   additional
improvements;  or other  factors  affecting  any  insurance  contract.  Prior to
expiration of any policy required under this Section,  the Grantor shall provide
either  (a) an  original  or  certified  copy of the  renewed  policy,  or (b) a
"binder," an Acord 27 (property) or Acord 25 (liability) certificate, or another
document  satisfactory  to the  Beneficiary  conferring on the  Beneficiary  the
rights  and  privileges  of  mortgagee.  If  the  Grantor  meets  the  foregoing
requirement  under clause (b), the Grantor shall supply an original or certified
copy of the original policy within ninety (90) days. All binders,  certificates,
documents, and original or certified copies of policies must name the Grantor as
a named  insured or as an  additional  insured,  must  include the  complete and
accurate  property  address and must bear the original  signature of the issuing
insurance agent.

7.7 UNEARNED PREMIUMS

If this  Deed of Trust is  foreclosed,  the  Beneficiary  may at its  discretion
cancel any of the insurance  policies  required under this Section and apply any
unearned premiums to the Indebtedness.

7.8 FORCED PLACEMENT OF INSURANCE

If the  Grantor  fails to comply  with the  requirements  of this  Section,  the
Beneficiary may, at its discretion, procure any required insurance. Any premiums
paid for such  insurance,  or the  allocable  portion of any premium paid by the
Beneficiary  under a  blanket  policy  for  such  insurance,  shall  be a demand
obligation  under  this Deed of Trust,  and any  unearned  premiums  under  such
insurance  shall  comprise  Insurance  Proceeds  and  therefore a portion of the
Property.

8. INSURANCE AND CONDEMNATION PROCEEDS

8.1 ADJUSTMENT AND COMPROMISE OF CLAIMS AND AWARDS

The Grantor may settle any  insurance  claim or  condemnation  proceeding if the
effect of the casualty or the condemnation may be remedied for $100,000 or less.
If a greater  sum is  required,  the  Grantor  may not  settle any such claim or
proceeding without the advance written consent of the Beneficiary.  If a Default
exists,  the  Grantor  may  not  settle  any  insurance  claim  or  condemnation
proceeding without the advance written consent of the Beneficiary.

8.2 DIRECT PAYMENT TO THE BENEFICIARY OF PROCEEDS

If  the  Insurance  Proceeds  received  in  connection  with a  casualty  or the
Condemnation  Proceeds received in respect of a condemnation exceed $100,000, or
if there  is a  Default,  then  such  proceeds  shall  be paid  directly  to the
Beneficiary.  The Beneficiary shall have the right to endorse  instruments which
evidence proceeds that it is entitled to receive directly.

8.3 AVAILABILITY TO THE GRANTOR OF PROCEEDS

The  Grantor  shall  have  the  right  to  use  the  Insurance  Proceeds  or the
Condemnation  Proceeds to carry out the Restoration of the Real Property, if the
amount received is less than $1,200,000.

<PAGE>

If the  amount  received  in respect of a  casualty  or  condemnation  equals or
exceeds $1,200,000, and if the Loan-to-Value ratio of the Property on completion
will be seventy-five  percent (75%) or less, as determined by the Beneficiary in
its  discretion  based on its estimate of the market value of the Real Property,
the Beneficiary shall receive such Insurance  Proceeds or Condemnation  Proceeds
directly and hold them in a fund for Restoration.  If the Beneficiary's estimate
of the market value of the Real Property  implies a Loan-to-value  ratio of over
75%, and the Grantor disagrees with the Beneficiary's  estimate, the Grantor may
require  that  the  Beneficiary  engage  an  independent   appraiser  (the  "Fee
Appraiser")  to prepare and submit to AEGON a full  narrative  appraisal  report
estimating  the market value of the Real  Property.  The Fee Appraiser  shall be
certified in Colorado and shall be a member of a national appraisal organization
that has  adopted the  Uniform  Standards  of  Professional  Appraisal  Practice
(USPAP)   established  by  the  Appraisal   Standards  Board  of  the  Appraisal
Foundation.  The Fee Appraiser will be required to use  assumptions and limiting
conditions  established  by the  Beneficiary  and to prepare  the  appraisal  in
conformity with the  Beneficiary's  Appraisal  Guidelines.  For purposes of this
Section,  the independent  appraiser's value conclusion shall be binding on both
the  Beneficiary  and the  Grantor.  The Grantor  shall have the right to make a
prepayment   of  the  Loan,   without   premium,   sufficient  to  achieve  this
Loan-to-value  ratio.  The  independent  fee appraisal shall be at the Grantor's
expense,  and the Grantor shall pay to the Beneficiary an administrative  fee of
$2,500 in  connection  with its review.  The  Beneficiary  may require  that the
Grantor  deposit  $10,000 with the Beneficiary as security for these expenses or
may pay the fee  appraiser's  and  administrative  fees from the proceeds at its
sole discretion.

Unless  the  Grantor  has  the  right  to  use  the  Insurance  Proceeds  or the
Condemnation Proceeds under the foregoing paragraph, the Beneficiary may, in its
sole and absolute discretion,  either apply them to the Loan balance or disburse
them for the purposes of repair and reconstruction,  or to remedy the effects of
the  condemnation.  No prepayment  premium will be charged on amounts applied to
reduce the principal balance of the Loan.

8.4 CONDITIONS TO AVAILABILITY OF PROCEEDS

The  Beneficiary  shall have no  obligation  to release  Insurance  Proceeds  or
Condemnation  Proceeds to the Grantor,  and may hold such amounts as  additional
security  for the Loan,  if (i) the  Beneficiary  has  delivered  to the Grantor
Notice of any act,  omission or  circumstance  that will,  if uncured,  become a
Default,  (ii) a Default has occurred under Section 10.2(a) in the twelve months
prior to the casualty or  condemnation  event that  precipitates  the payment of
Insurance  Proceeds or Condemnation  Proceeds or (iii) if the Insurance Proceeds
or  Condemnation  Proceeds  received  by the  Beneficiary  and any  other  funds
deposited by the Grantor with the Beneficiary are insufficient, as determined by
the Beneficiary in its reasonable discretion, to complete the Restoration.  If a
Default exists,  the Beneficiary may at its sole and absolute  discretion  apply
such Insurance Proceeds and Condemnation Proceeds to the full or partial cure of
the Default.

8.5 PERMITTED MEZZANINE FINANCING FOR REBUILDING OR REMEDIATION OF THE EFFECT OF
TAKING BY EMINENT DOMAIN

If the  Beneficiary  reasonably  determines  that the
Insurance Proceeds or Condemnation Proceeds received in respect of a casualty or
condemnation, as the case may be, would be insufficient to permit the Grantor to
restore the  Improvements to their condition  before the casualty,  or to remedy
the effect on the Real Property of the condemnation,  then the Grantor shall use
its best efforts to secure such additional  funds as are necessary to effect the
restoration  or  remediation.  The Grantor's  obligation to use its best efforts
shall be limited to securing such funds on a non-recourse  basis,  pledging,  if
necessary, its equity interest in the Real Property as security to the extent of
any such financing.

<PAGE>

8.6 DRAW REQUIREMENTS

The Grantor's right to receive Insurance Proceeds and Condemnation Proceeds held
by the Beneficiary  under this Section shall be conditioned on the Beneficiary's
approval of plans and specifications for the Restoration.  Each draw shall be in
the minimum  amount of $50,000.  Draw requests shall be accompanied by customary
evidence of construction  completion,  and by endorsements to the  Beneficiary's
mortgagee  title  insurance  coverage  insuring  the  absence  of  construction,
mechanics'  or  materialmen's  liens.  Draws based on partial  completion of the
Restoration shall be subject to a ten percent (10%) holdback.  All transactional
expenses shall be paid by the Grantor.

9. ESCROW FUND

The Grantor shall pay the Monthly Escrow Payment on the first (1st) day of every
month, commencing with the month in which the first regular payment of principal
and interest is due. The  Beneficiary  shall hold Monthly  Escrow  Payments in a
non-interest-bearing  fund from which the Beneficiary will pay on a timely basis
those Escrow Expenses that the  Beneficiary has anticipated  will become payable
on a regular  basis during the Loan's  term,  and on which the  Beneficiary  has
based its  determination  of the  Monthly  Imposition  Requirement,  the Monthly
Insurance Premium  Requirement and the Monthly Reserve  Requirement.  The Escrow
Fund will be  maintained  as an accounting  entry in the  Beneficiary's  general
account,  where it may be commingled  with the  Beneficiary's  other funds.  The
Beneficiary  may reanalyze the projected  Escrow  Expenses from time to time and
shall  advise the  Grantor of any  change in the  amount of the  Monthly  Escrow
Payment.  Upon the foreclosure of this Deed of Trust,  the delivery of a deed in
lieu of  foreclosure,  or the payoff of the Loan,  the  Beneficiary  shall apply
amounts in the Escrow Fund, net of accrued Escrow Expenses, to the Indebtedness.
The  Beneficiary  shall remit any amounts in excess of the  Indebtedness  to the
Grantor.

10. DEFAULT

10.1 EXISTENCE OF DEFAULT

A  Default  shall  exist  immediately  upon the  occurrence  of any of the acts,
omissions or  circumstances  specified in Subsection 10.2 or in Subsection 10.4.
Upon the occurrence of any of the acts, omissions or circumstances  specified in
Subsection  10.3, the  Beneficiary  may deliver written Notice to the Grantor of
the existence of such an act,  omission or  circumstance,  and that such an act,
omission or  circumstance  shall  constitute a Default under the Loan  Documents
unless the Grantor promptly  initiates an effort to cure the potential  Default,
pursues the cure diligently and continuously, and succeeds in effecting the cure
within one hundred twenty (120) days of its receipt of Notice.  The  Beneficiary
shall afford the Grantor an additional  period of one hundred  twenty (120) days
in cases where  construction or repair is needed to cure the potential  Default,
and the cure cannot be completed  within the first one hundred twenty  (120)-day
cure period.  During the cure period,  the Grantor has the obligation to provide
on  demand  satisfactory   documentation  of  its  effort  to  cure,  and,  upon
completion,  evidence  that  the cure has been  achieved.  All  notice  and cure
periods provided in this Deed of Trust shall run concurrently with any notice or
cure periods provided by law.

10.2 MONETARY DEFAULTS

A Default shall exist upon any of the following:

<PAGE>

(A) MONTHLY PRINCIPAL AND INTEREST PAYMENTS

The  Grantor's  failure  to pay,  or to cause to be paid,  any  regular  monthly
payment of principal and interest under the Note or any required  Monthly Escrow
Payment on or before the tenth day of the month in which it is due.

(B) MATURED INDEBTEDNESS

The Grantor's  failure to pay, or to cause to be paid, the Indebtedness when the
Loan  matures by  acceleration  under  Section  16,  because  of a  transfer  or
encumbrance under Section 13, or by lapse of time.

(C) DEMAND OBLIGATIONS

The Grantor's  failure to pay, or to cause to be paid,  within five (5) Business
Days of the Beneficiary's  demand, any other amount due under this Deed of Trust
or any of the other Loan Documents.

10.3 CURABLE NONMONETARY DEFAULT

Following the giving of Notice and the  expiration of the cure period  specified
in Section 10.1, a Default shall exist if:

(A) ENTRY OF A MATERIAL JUDGMENT

Any  judgment  is entered  against  the  Grantor or any other  Obligor,  and the
judgment may materially and adversely  affect the value, use or operation of the
Real Property.

(B) OTHER DEFAULTS

The Grantor fails to observe any promise or covenant made in this Deed of Trust,
unless the failure results in a Default under Subsection 10.2,  subparagraph (a)
of this Section 10.3, or Subsection 10.4.

10.4 INCURABLE NONMONETARY DEFAULT

A Default shall exist upon any of the following:

(A) MATERIAL UNTRUTH OR MISREPRESENTATION

The Beneficiary's  discovery that any representation  made by the Grantor in any
Loan  Document  in  connection  with the Loan was  untrue or  misleading  in any
material respect at the time it was made.

(B) DUE ON SALE OR ENCUMBRANCE

The occurrence of any sale, conveyance, transfer or vesting that would result in
the Loan becoming  immediately due and payable at the Beneficiary's option under
Section 13.

(C) VOLUNTARY BANKRUPTCY FILING

The filing by the  Grantor  of a  petition  in  bankruptcy  or for  relief  from
creditors under any present or future law that affords  general  protection from
creditors.

<PAGE>

(D) INVOLUNTARY BANKRUPTCY OR SIMILAR FILING

The Grantor  becomes the subject of any petition or action seeking to adjudicate
it bankrupt or insolvent,  or seeking liquidation,  winding up,  reorganization,
arrangement,  adjustment,  protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief, or
that may result in a composition of its debts, provide for the marshaling of the
Grantor's  assets for the satisfaction of its debts, or result in the judicially
ordered  sale  of the  Grantor's  assets  for  the  purpose  of  satisfying  its
obligations  to creditors,  unless a motion for the dismissal of the petition or
other action is filed within ten (10) days and results in its  dismissal  within
sixty (60) days of the filing of the petition or other action.

(E) INSOLVENCY

The failure of the Grantor  generally  to pay its debts as they become due,  its
admission  in writing  to an  inability  so to pay its debts,  the making by the
Grantor of a general  assignment  for the  benefit of  creditors,  or a judicial
determination that the Grantor is insolvent.

(F) RECEIVERSHIP

The appointment of a receiver or trustee to take possession of any of the assets
of the Grantor.

(G) LEVY OR ATTACHMENT

The taking or  seizure of any  material  portion of the  Property  under levy of
execution or attachment.

(H) LIEN

The  filing  against  the  Real  Property  of any  lien or claim of lien for the
performance  of work or the supply of  materials,  or the filing of any federal,
state or local tax lien  against  the  Grantor,  or against  the Real  Property,
unless the Grantor promptly complies with Section 12 of this Deed of Trust.

(I) DEFAULTS UNDER OTHER LOAN DOCUMENTS

The  existence  of any  default  under any other  Loan  Document,  provided  any
required  Notice of such default has been given and any  applicable  cure period
has expired.

(J) DISSOLUTION OR LIQUIDATION

The Grantor shall  initiate or suffer the  commencement  of a proceeding for its
dissolution or liquidation,  and such proceeding  shall not be dismissed  within
thirty (30) days, or the Grantor shall cease to exist as a legal entity  (unless
resulting in or allowed pursuant to a Permitted Transfer).

11. RIGHT TO CURE

Upon Default or upon the failure of the Grantor,  following a Notice given under
Subsection  10.1,  to  diligently  pursue  the  cure  of any  act,  omission  or
circumstance  that may cause Default,  the  Beneficiary  shall have the right to
cure the Default or the act, omission or circumstance.  The expenses of doing so
shall  be part  of the  Indebtedness,  and the  Grantor  shall  pay  them to the
Beneficiary on demand.

<PAGE>

12. CONTEST RIGHTS

The  Grantor  may  secure  the right to contest  Impositions  and  construction,
mechanics' or materialmen's liens, through appropriate  proceedings conducted in
good faith, by either (A) depositing with the Beneficiary an amount equal to one
hundred  twenty five percent (125%) of the amount of the Imposition or the lien,
or (B) obtaining and maintaining in effect a bond issued by a surety  acceptable
to the  Beneficiary,  in an amount  equal to the  greater of (i) the amount of a
required  deposit  under  clause (A) above and (ii) the amount  required  by the
surety or by the court in order to obtain a court order staying the  foreclosure
of the lien pending resolution of the dispute, and releasing the lien of record.
The proceeds of such a bond must be payable  directly to the  Beneficiary  or to
the applicable court if required by Colorado law. The surety issuing such a bond
must be  acceptable  to the  Beneficiary  in its sole  discretion.  After such a
deposit is made or bond issued,  the Grantor shall promptly commence the contest
of the  lien  and  continuously  pursue  that  contest  in good  faith  and with
reasonable  diligence.  If the  contest  of the  related  Imposition  or lien is
unsuccessful,  any deposits or bond proceeds shall be used to pay the Imposition
or to satisfy the obligation  from which the lien has arisen.  Any surplus shall
be refunded to the Grantor. Grantor shall not be required to secure the right to
contest  Impositions,  construction,  mechanics' or  materialmen's  liens if the
amount of the Imposition or lien contested is less than $25,000.00.

13. DUE ON TRANSFER OR ENCUMBRANCE

Upon the sale of any  portion  of the Real  Property  or any  other  conveyance,
transfer  or vesting of any direct or  indirect  interest  in the Grantor or the
Property, including (i) the direct or indirect transfer of, or the granting of a
security interest in, the ownership of the Grantor,  (ii) any encumbrance (other
than a Permitted  Encumbrance) of the Real Property (unless the Grantor contests
the encumbrance in compliance with Section 12) and (iii) the lease,  license, or
granting of any security  interest in the Personal  Property,  the  Indebtedness
shall,  at the  Beneficiary's  option,  become  immediately due and payable upon
Notice to the  Grantor,  unless the sale,  conveyance,  transfer or vesting is a
Permitted Transfer.

14. DUE ON SALE EXCEPTIONS

14.1 TRANSFER TO AN APPROVED PURCHASER

The Grantor shall have the right, on five occasions during the term of the Loan,
to sell or transfer the Property in a transaction  approved by the  Beneficiary.
The  Beneficiary  agrees to approve a transfer if the following  conditions  are
satisfied:

(A) NO DEFAULT

No Default shall exist, and no act, omission or circumstance  shall exist which,
if uncured following Notice and the passage of time, would become a Default.

(B) REQUEST AND SUPPORTING MATERIALS

The Beneficiary  shall receive a written request for its approval at least sixty
(60) days before the proposed  transfer.  The request shall specify the identity
of the  proposed  transferee  and the  purchase  price  and  other  terms of the
transaction, shall include a copy of the proposed contract of sale, and shall be
accompanied  by  the  financial  statements,  tax  returns,  and  organizational
documents of the proposed transferee and its principals.

<PAGE>

(C) CRITERIA TO BE CONSIDERED

The ownership  structure,  financial  strength,  credit history and demonstrated
property  management  expertise of the proposed  transferee  and its  principals
shall be satisfactory to the Beneficiary in its sole discretion. The Beneficiary
expressly  reserves the right to withhold its approval of the proposed  transfer
if the proposed  transferee or any of its  principals is or has been the subject
of any bankruptcy, insolvency, or similar proceeding.

(D) ASSUMPTION AGREEMENT

Under the terms of the proposed transfer,  the proposed  transferee shall assume
the Loan, without  modification,  under the terms of an assumption agreement and
additional documentation  satisfactory to the Beneficiary in form and substance.
Under the assumption agreement, the transferee shall provide a representation as
to the purchase price paid for the Real Property.

(E) TITLE INSURANCE ENDORSEMENT

The Grantor shall agree to provide an endorsement to the Beneficiary's mortgagee
title  insurance  policy,  insuring the continued  validity and priority of this
Deed of Trust following the assumption.

(F) ASSUMPTION FEE

The  Beneficiary  shall  receive an  assumption  fee of one percent  (1%) of the
outstanding  balance of the Loan,  and the Grantor  shall agree to reimburse the
Beneficiary's  out-of-pocket  expenses  incurred in connection with the proposed
transfer,  including title updates and endorsement charges,  recording fees, any
applicable  taxes and  attorneys'  fees,  regardless  of whether the transfer is
consummated.

(G) RELEASE OF GRANTOR

Upon a transfer  pursuant to this Section  14.1,  Grantor shall be released from
all liabilities  with respect to the Loan, to the extent that the party assuming
the Loan expressly assumes all such obligations,  including any accrued Carveout
Obligations.

14.2 PERMITTED TRANSFERS OF CERTAIN PASSIVE INTERESTS

The  Beneficiary  agrees  that it shall not  withhold  its  consent  to  certain
transfers  of direct or indirect  interests  in the Grantor  (each a  "Qualified
Passive Interest  Transfer").  A "Qualified  Passive  Interest  Transfer" is any
transfer of a direct or indirect  interest in the  Grantor,  if,  following  the
transfer (i) the Real  Property  remains  under the Legal Control of one or more
Permitted  Control  Group  Members;  (ii)  the  transfer  does not  result  in a
Prohibited  Structural Change and (iii) the transfer does not result in a change
in  assets  that  would be at risk with  respect  to the  Carveout  Obligations.
Borrower shall not be required to pay an assumption fee to Beneficiary  upon the
occurrence of a Qualified  Passive Interest  Transfer,  but shall be required to
pay the costs described in Section 14.4.

<PAGE>

14.3 TRANSFERS RESULTING IN PERMITTED CONTROL GROUP MEMBER OWNERSHIP

Beneficiary  shall not  unreasonably  withhold  its  consent to any  transfer of
direct or indirect  interests in the Borrower  if, after such  transfer,  one or
more Permitted  Control Group Members directly or indirectly owns at least a 20%
economic  interest  in  Borrower.  Beneficiary  shall  have the right of review,
approval and consent of such  transfer.  Upon the  occurrence of such  transfer,
Borrower shall pay to Beneficiary a $20,000  assumption  fee,  together with the
costs described in Section 14.4.

14.4 TRANSACTION COSTS

The Grantor shall pay all out-of-pocket  expenses incurred by the Beneficiary in
the review and processing of a Permitted Transfer.

15. NOTICE OF ABSOLUTE ASSIGNMENT OF LEASES AND RENTS

Under the Absolute  Assignment of Leases and Rents,  the Grantor has assigned to
the Beneficiary,  and to its successors and assigns,  all of the Grantor's right
and title to, and interest in, the Leases, including all rights under the Leases
and all  benefits  to be derived  from them.  The rights  assigned  include  all
authority  of the Grantor to modify or  terminate  Leases,  or to  exercise  any
remedies,  and the  benefits  assigned  include all Rents.  This  assignment  is
present and absolute,  but under the terms of the Absolute  Assignment of Leases
and Rents,  the  Beneficiary  has granted the Grantor a  conditional  license to
collect and use the Rents,  and to  exercise  the rights  assigned,  in a manner
consistent  with the  Obligations,  all as more  particularly  set  forth in the
Absolute Assignment of Leases and Rents. The Beneficiary may, however, terminate
the license by written Notice to the Grantor on certain  conditions set forth in
the Absolute Assignment of Leases and Rents.

16. ACCELERATION

Under the terms of the Note, if a Default exists,  the  Beneficiary  may, at its
option, by Notice to the Grantor, declare the Indebtedness to be immediately due
and payable, provided,  however, that if the Default arises solely as the result
of the failure of the Grantor to make a regular monthly payment of principal and
interest,  the  Beneficiary  shall not  accelerate the  Indebtedness  unless the
Beneficiary has given the Notice of the Default,  and a cure period of three (3)
Business Days,  prior to declaring the  Indebtedness  to be immediately  due and
payable.

17. RIGHTS OF ENTRY AND TO OPERATE

17.1 ENTRY ON REAL PROPERTY

If a Default exists,  the Beneficiary may, to the extent permitted by law, enter
upon the Real Property and take exclusive possession of the Real Property and of
all books, records and accounts,  all without Notice and without being guilty of
trespass,  but subject to the rights of tenants in possession  under the Leases.
If the Grantor  remains in possession  of all or any part of the Property  after
Default and without the  Beneficiary's  prior written  consent,  the Beneficiary
may,  without  Notice  to the  Grantor,  invoke  any and all legal  remedies  to
dispossess the Grantor.

<PAGE>

17.2 OPERATION OF REAL PROPERTY

Following Default, the Beneficiary may hold, lease, manage, operate or otherwise
use or permit the use of the Real  Property,  either itself or by other persons,
firms or entities,  in such  manner,  for such time and upon such other terms as
the  Beneficiary  may deem to be prudent  under the  circumstances  (making such
repairs, alterations,  additions and improvements thereto and taking any and all
other action with reference thereto, from time to time, as the Beneficiary deems
prudent),  and apply all Rents and other amounts collected by the Beneficiary in
accordance with the provisions of the Absolute Assignment of Leases and Rents.

18. RECEIVERSHIP

Following   Default,   the  Beneficiary  may  apply  to  a  court  of  competent
jurisdiction for the appointment of a receiver of the Property, ex parte without
Notice to the  Grantor,  whether or not the value of the  Property  exceeds  the
Indebtedness,  whether or not waste or  deterioration  of the Real  Property has
occurred,  and whether or not other  arguments based on equity would justify the
appointment.   The  Grantor   irrevocably,   with  knowledge  and  for  valuable
consideration, consents to such an appointment. Any such receiver shall have all
the rights and powers customarily given to receivers in Colorado,  including the
rights and powers granted to the Beneficiary by this Deed of Trust, the power to
maintain,  lease and operate the Real  Property on terms  approved by the court,
and the  power to  collect  the  Rents and  apply  them to the  Indebtedness  or
otherwise  as the  court may  direct.  Once  appointed,  a  receiver  may at the
Beneficiary's  option  remain in place until the  Indebtedness  has been paid in
full.

19. FORECLOSURE; POWER OF SALE

Upon Default,  the Beneficiary may immediately  proceed to foreclose the lien of
this Deed of Trust, against all or part of the Property, or to sell the Property
by judicial or nonjudicial  foreclosure in accordance  with the laws of Colorado
and may pursue any other remedy  available to commercial  mortgage lenders under
the laws of Colorado.

20. WAIVERS

To  the  maximum  extent   permitted  by  law,  the  Grantor   irrevocably   and
unconditionally  WAIVES  and  RELEASES  any  present  or  future  rights  (a) of
reinstatement  or  redemption  (b) that may exempt the  Property  from any civil
process, (c) to appraisal or valuation of the Property, (d) to extension of time
for payment, (e) that may subject the Beneficiary's  exercise of its remedies to
the  administration  of any decedent's estate or to any partition or liquidation
action,  (f) to any homestead and exemption  rights provided by the Constitution
and laws of the United States and of Colorado,  (g) to notice of acceleration or
notice of intent to accelerate (other than as expressly stated herein),  and (h)
that in any way would delay or defeat the right of the  Beneficiary to cause the
sale of the Real Property for the purpose of satisfying  the  Indebtedness.  The
Grantor agrees that the price paid at a lawful  foreclosure sale, whether by the
Beneficiary or by a third party, and whether paid through cancellation of all or
a portion of the Indebtedness or in cash, shall conclusively establish the value
of the Real Property.

<PAGE>

The foregoing waivers shall apply to and bind any party assuming the Obligations
of the Grantor under this Deed of Trust.

21. EXCULPATION CLAUSE AND CARVEOUT OBLIGATIONS

The Beneficiary  agrees that it shall not seek to enforce any monetary  judgment
with  respect to the  Indebtedness  evidenced  by the Note  against  the Grantor
except through  recourse to the Property,  unless the Obligation  from which the
judgment arises is a Carveout  Obligation.  The Carveout Obligations include (a)
the  obligation  to repay any  portion of the  Indebtedness  that  arises from a
Carveout,  (b)  the  obligation  to  repay  the  entire  Indebtedness,   if  the
Beneficiary's  exculpation  of the Grantor from  personal  liability  under this
Section has become void as set forth below,  (c) the obligation to indemnify the
Beneficiary  in respect of its actual  damages  suffered  in  connection  with a
Carveout,  and (d) the  obligation to defend and hold the  Beneficiary  harmless
from and against any claims, judgments,  causes of action or proceedings arising
from a Carveout. The Carveouts are:

(i) fraud or material written misrepresentation;

(ii) waste of the Property (which shall include damage, destruction or disrepair
of the Real Property  caused by a willful act or grossly  negligent  omission of
the Grantor,  but shall  exclude  ordinary wear and tear in the absence of gross
negligence);

(iii) misappropriation of tenant security deposits (including proceeds of tenant
letters of credit), Insurance Proceeds or Condemnation Proceeds;

(iv) failure to pay property taxes, assessments or other lienable Impositions;

(v) failure to pay to the  Beneficiary  all Rents,  income and  profits,  net of
reasonable  and customary  operating  expenses,  received in respect of a period
when the Loan is in Default  (including  the last month's  rent, if collected in
advance, under any lease in force at the time of Default);

(vi) removal  from the Real  Property of fixtures or Personal  Property,  unless
replaced in a commercially reasonable manner;

(vii) the  out-of-pocket  expenses of  enforcing  the Loan  Documents  following
Default, not including expenses incurred after the Grantor has agreed in writing
to transfer the Real Property to the Beneficiary by the Beneficiary's  choice of
either an uncontested foreclosure or delivery of a deed in lieu of foreclosure;

(viii)  terminating or amending a Lease in violation of the Loan Documents;  and

(ix) any liability of the Grantor under the Environmental Indemnity Agreement.

The  Beneficiary's  exculpation  of the Grantor from personal  liability for the
repayment of the  Indebtedness  shall be void without  Notice if the Grantor (A)
voluntarily  transfers or creates any material voluntary lien on the Property in
violation  of  this  Deed  of  Trust,  or (B)  files a  voluntary  petition  for
reorganization  under  Title 11 of the  United  States  Code (or under any other
present or future law, domestic or foreign, relating to bankruptcy,  insolvency,
reorganization  proceedings  or  otherwise  similarly  affecting  the  rights of
creditors),  and has not  offered,  prior  to the  filing,  to  enter  into  the
Beneficiary's   choice  of  either  an  agreement   to  permit  an   uncontested
foreclosure,  or an  agreement to deliver a deed in lieu of  foreclosure  within
sixty  (60)  days  of the  Beneficiary's  acceptance  of the  offer.  After  the
Beneficiary  accepts  such an offer,  default by the Grantor in  fulfilling  the
terms of the accepted  offer shall  trigger  personal  liability  for the entire
Indebtedness.  No  such  offer  shall  be  conditioned  on  any  payment  by the
Beneficiary,  on the release of any Obligor from any Obligation, or on any other
concession.

<PAGE>

22. SECURITY AGREEMENT AND FIXTURE FILING

22.1 DEFINITIONS

"Account" shall have the definition assigned to it in the UCC.

"Account  Collateral" means all Accounts that arise from the operations,  use or
enjoyment of the Property,  from the  commencement  of the Loan term through the
satisfaction of all of the Obligations.

"Bank" shall have the meaning assigned to that term in the UCC.

"Chattel Paper" shall have the definition assigned to it in the UCC.

"Chattel  Paper  Collateral"  means all Chattel  Paper  arising from the sale or
other disposition of all or part of the Property.

"Commercial Tort Claim" shall have the definition assigned to it in the UCC.

"Commercial Tort Claim  Collateral"  means all Commercial Tort Claims in respect
of damages to the Property or to its operations, in respect of any impairment of
the value of the Property, or in respect of the collection of any Accounts.

"Deposit Account" shall have the definition assigned to it in the UCC.

"Deposit Account  Collateral" means all the Deposit Accounts into which Rents or
Proceeds  are  deposited  at any time  from the  commencement  of the Loan  term
through the satisfaction of all of the Obligations.

"Document" shall have the definition assigned to it in the UCC.

"Document Collateral" means all Documents that evidence title to all or any part
of the Goods Collateral.

"Equipment" shall have the definition assigned to it in the UCC.

"Equipment Collateral" means all Equipment that relates to the Real Property and
is used in the operation of the Real Property as commercial real estate.

"Financing  Statements"  shall have the  definition  assigned  to it in the UCC.

"General  Intangibles"  shall  have the  definition  assigned  to it in the UCC.

"General  Intangible  Collateral" means all General Intangibles that have arisen
or that  arise  in the  future  in  connection  with  the  Grantor's  ownership,
operation or leasing of the Real Property,  at any time from the commencement of
the Loan term through the satisfaction of all of the Obligations.

"Goods" shall have the definition assigned to it in the UCC. "Goods" include all
detached Fixtures, items of Personal Property that may become Fixtures, property
management files, accounting books and records,  reports of consultants relating
to the Real Property,  site plans,  test borings,  environmental or geotechnical
surveys samples and test results,  blueprints,  construction  and shop drawings,
and plans and specifications.

<PAGE>

"Goods Collateral" means all Goods that relate to the Real Property and are used
in the operation of the Real Property as commercial real estate.

"Instrument" shall have the definition assigned to that term in the UCC.

"Instrument  Collateral" means all Instruments  received as Rents or Proceeds or
purchased by the Grantor with Rents or Proceeds.

"Investment  Property"  shall have the  definition  assigned to that term in the
UCC.

"Investment  Property  Collateral" means all the Investment  Property  purchased
using Rents or Proceeds, or received in respect of Account Collateral.

"Letter of Credit" shall have the definition assigned to it in the UCC.

"Letter of Credit  Collateral"  means all  Letters of Credit  that relate to the
use,  operation or enjoyment of the  Property,  including  those that secure the
payment of any Accounts  comprising  Account Collateral or arising from the sale
or other disposition of all or part of the Property.

"Letter of Credit Rights" shall have the  definition  assigned to it in the UCC.

"Letter of Credit  Rights  Collateral"  means all Letter of Credit  Rights  that
relate to the use,  operation or enjoyment of the Property,  including rights to
Letters of Credit  that secure the payment of any  Accounts  comprising  Account
Collateral or arising from the sale or other  disposition  of all or part of the
Property.

"Money Collateral" means all money received in respect of Rents.

"Personal  Property"  means  Account   Collateral,   Chattel  Paper  Collateral,
Commercial  Tort  Claim  Collateral,   Deposit  Account   Collateral,   Document
Collateral,  Goods  Collateral,   Instrument  Collateral,   General  Intangibles
Collateral, Investment Property Collateral,  Letter-of-Credit Rights Collateral,
Letters of Credit Collateral, and Money Collateral.

"Proceeds" shall have the meaning assigned to that term in the UCC.

"UCC" means the Uniform Commercial Code as adopted in Colorado.

22.1 CREATION OF SECURITY INTEREST

This Deed of Trust  shall be  self-operative  and shall  constitute  a  Security
Agreement  pursuant to the  provisions  of the UCC with  respect to the Personal
Property.  The Grantor,  as debtor,  hereby grants the  Beneficiary,  as secured
party, for the purpose of securing the Indebtedness,  a security interest in the
Account Collateral, Chattel Paper Collateral,  Commercial Tort Claim Collateral,
Deposit Account Collateral,  Document Collateral,  Goods Collateral,  Instrument
Collateral,  General  Intangible  Collateral,  Investment  Property  Collateral,
Letter-of-Credit  Rights  Collateral,  Letter  of Credit  Collateral,  and Money
Collateral,  in  the  accessions,  additions,  replacements,  substitutions  and
Proceeds  of any  of the  foregoing  items  of  collateral.  Upon  Default,  the
Beneficiary  shall have the rights and remedies of a secured party under the UCC
as well as all other rights and remedies available at law or in equity,  and, at
the Beneficiary's  option, the Beneficiary may also invoke the remedies provided
elsewhere  in this  Deed of  Trust  as to such  Property.  The  Grantor  and the
Beneficiary  agree that the rights  granted to the  Beneficiary as secured party
under this Section 22 are in addition to rather than a limitation  on any of the
Beneficiary's  other  rights  under  this  Deed of  Trust  with  respect  to the
Property.  The Grantor  and the  Beneficiary  agree that the  Telecommunications
Equipment  and the  Distribution  System  are  specifically  excluded  from  the
foregoing grant of security interest.

<PAGE>

22.2 FILING AUTHORIZATION

The Grantor  irrevocably  authorizes the Beneficiary to file, in the appropriate
locations for filings of UCC financing  statements in any  jurisdictions  as the
Beneficiary  in good faith deems  appropriate,  such  financing  statements  and
amendments as the  Beneficiary  may require in order to perfect or continue this
security  interest,  or in order to prevent any filed  financing  statement from
becoming misleading or from losing its perfected status.

22.3 ADDITIONAL SEARCHES AND DOCUMENTATION

Grantor  shall provide to  Beneficiary  upon  request,  certified  copies of any
searches of UCC records  deemed  necessary  or  appropriate  by  Beneficiary  to
confirm the first  priority  status of its  security  interest  in the  Personal
Property,  together with copies of all documents or records evidencing  security
interests disclosed by such searches.

22.4 COSTS

The  Grantor  shall pay all filing fees and costs and all  reasonable  costs and
expenses of any record searches (or their  continuations) as the Beneficiary may
require.

22.5 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE GRANTOR

(A) OWNERSHIP OF THE PERSONAL PROPERTY

All of the Personal  Property is, and shall during the term of the Loan continue
to be, owned by the Grantor, and is not the subject matter of any lease, control
agreement or other instrument,  agreement or transaction  whereby any ownership,
security or beneficial  interest in the Personal  Property is held by any person
or entity other than the Grantor, subject only to (1) the Beneficiary's security
interest,  (2) the rights of Tenants  occupying the Property  pursuant to Leases
approved by the Beneficiary, and (3) the Permitted Exceptions.

(B) NO OTHER IDENTITY

The Grantor  represents  and warrants  that the Grantor has not used or operated
under any other  name or  identity  for at least  five (5)  years.  The  Grantor
covenants  and agrees that Grantor will furnish  Beneficiary  with notice of any
change in its name, form of organization, or state of organization within thirty
(30) days prior to the effective date of any such change.

(C) LOCATION OF EQUIPMENT

All Equipment Collateral is located upon the Land.

(D) REMOVAL OF GOODS

The  Grantor  will not remove or permit to be removed  any item  included in the
Goods  Collateral from the Land,  unless the same is replaced  immediately  with
unencumbered  Goods  Collateral  (1) of a quality and value equal or superior to
that  which  it  replaces  and (2)  which  is  located  on the  Land.  All  such
replacements, renewals, and additions shall become and be immediately subject to
the security interest of this Deed of Trust.

<PAGE>

(E) PROCEEDS

The Grantor may, without the  Beneficiary's  prior written  consent,  dispose of
Goods  Collateral in the ordinary course of business,  provided that,  following
the disposition,  the perfection of the  Beneficiary's  security interest in the
Proceeds of the  disposition  will continue  under ss. 9-315 (d) of the UCC. The
Grantor shall not, without the Beneficiary's  prior written consent,  dispose of
any Personal  Property in any other manner,  except in compliance with Paragraph
(d)of this Section 22.5.

22.6 FIXTURE FILING

This Deed of Trust  constitutes a financing  statement filed as a fixture filing
in the Official  Records of the Clerk and Recorder of Douglas  County,  Colorado
with respect to any and all fixtures comprising Property.  The "debtor" is Green
River at Palomino Park LLC, a limited liability company organized under Colorado
law, the "secured party" is AUSA Life Insurance  Company,  Inc., a New York life
insurance company,  the collateral is as described in Section 22.1 above and the
granting  clause of this Deed of Trust,  and the  addresses  of the  debtor  and
secured party are the addresses stated in Subsection 26.12 of this Deed of Trust
for Notices to such parties. The federal  identification number of the debtor is
84-1498143.   The  Organizational   Identification   Number  of  the  debtor  is
19991212581. The owner of record of the Real Property is Green River at Palomino
Park LLC.

23. ENVIRONMENTAL MATTERS

23.1 REPRESENTATIONS

The Grantor represents as follows:

(A) NO HAZARDOUS SUBSTANCES

To the best of the Grantor's  knowledge as a duly diligent  property owner,  and
except as disclosed in the ESA or otherwise  disclosed to Beneficiary in writing
prior to the date of this Deed of Trust,  no release of any Hazardous  Substance
has occurred on or about the Real  Property in a quantity or at a  concentration
level that (i) violates any Environmental Law, or (ii) requires reporting to any
regulatory  authority or may result in any  obligation  to  remediate  under any
Environmental Law.

(B) COMPLIANCE WITH ENVIRONMENTAL LAWS

The Real Property and its current use and presently anticipated uses comply with
all   Environmental   Laws,   including  those  requiring   permits,   licenses,
authorizations, and other consents and approvals.

<PAGE>

(C) NO ACTIONS OR PROCEEDINGS

No  governmental  authority or agency has  commenced  any action,  proceeding or
investigation  based on any suspected or actual  violation of any  Environmental
Law on or about the Real Property.  To the best of the Grantor's  knowledge as a
duly diligent  property  owner,  no such  authority or agency has  threatened to
commence any such action, proceeding, or investigation.

23.2 ENVIRONMENTAL COVENANTS

The Grantor covenants as follows:

(A) COMPLIANCE WITH ENVIRONMENTAL LAWS

The  Grantor  shall,  and  the  Grantor  shall  cause  all  employees,   agents,
contractors,  and  tenants of the Grantor  and any other  persons  present on or
occupying  the  Real  Property  to,  keep and  maintain  the  Real  Property  in
compliance with all Environmental Laws.

(B) NOTICES, ACTIONS AND CLAIMS

The  Grantor  shall  immediately  advise the  Beneficiary  in writing of (i) any
notices  from any  governmental  or  quasi-governmental  agency or  authority of
violation  or  potential  violation  of any  Environmental  Law  received by the
Grantor, (ii) any and all enforcement, cleanup, removal or other governmental or
regulatory  actions   instituted,   completed  or  threatened  pursuant  to  any
Environmental  Law,  (iii) all  claims  made or  threatened  by any third  party
against the Grantor or the Real Property relating to damage, contribution,  cost
recovery,  compensation, loss or injury resulting from any Hazardous Substances,
and (iv)  discovery  by the Grantor of any  occurrence  or condition on any real
property  adjoining  or in the  vicinity  of the Real  Property  that  creates a
foreseeable  risk of  contamination  of the Real  Property by or with  Hazardous
Substances.

23.3 THE BENEFICIARY'S RIGHT TO CONTROL CLAIMS

The  Beneficiary  shall  have the  right  (but not the  obligation)  to join and
participate  in, as a party if it so elects,  any legal  proceedings  or actions
initiated in connection  with any Hazardous  Substances  and to have its related
and reasonable attorneys' and consultants' fees paid by the Grantor upon demand.

<PAGE>

23.4 INDEMNIFICATION

The Grantor shall be solely  responsible for, and shall indemnify,  defend,  and
hold harmless the  Beneficiary,  its  directors,  officers,  employees,  agents,
successors and assigns,  from and against,  any claim,  judgment,  loss, damage,
demand, cost, expense or liability of whatever kind or nature, known or unknown,
contingent or otherwise,  directly or indirectly  arising out of or attributable
to  the  use,  generation,  storage,  release,  threatened  release,  discharge,
disposal, or presence (whether prior to or after the date of this Deed of Trust)
of Hazardous Substances on, in, under or about the Real Property (whether by the
Grantor,  a  predecessor  in  title,  any  tenant,  or  any  employees,  agents,
contractor or subcontractors of any of the foregoing or any third persons at any
time occupying or present on the Real Property), including: (i) personal injury;
(ii) death; (iii) damage to property;  (iv) all consequential  damages;  (v) the
cost of any required or necessary repair,  cleanup or detoxification of the Real
Property,  including the soil and ground water thereof,  and the preparation and
implementation of any closure,  remedial or other required plans; (vi) damage to
any natural  resources;  and (vii) all reasonable costs and expenses incurred by
the  Beneficiary  or the Trustee in  connection  with clauses (i) through  (vi),
including reasonable  attorneys' and consultants' fees; provided,  however, that
nothing  contained in this Section  shall be deemed to preclude the Grantor from
seeking  indemnification  from, or otherwise proceeding against, any third party
including any tenant or predecessor  in title to the Real Property,  and further
provided  that this  indemnification  will not extend to  matters  caused by the
Beneficiary's gross negligence or willful misconduct,  or arising from a release
of Hazardous  Substances which occurs after the Beneficiary has taken possession
of the Real Property,  so long as the Grantor has not caused the release through
any act or omission.  The covenants,  agreements,  and  indemnities set forth in
this  Section  shall  be  binding  upon  the  Grantor  and its  heirs,  personal
representatives,  successors  and assigns,  and shall  survive  repayment of the
Indebtedness,  foreclosure of the Real Property, and the Grantor's granting of a
deed to the  Real  Property  in  lieu of  foreclosure.  Payment  shall  not be a
condition  precedent to this  indemnity.  Any costs or expenses  incurred by the
Beneficiary  for which the Grantor is  responsible  or for which the Grantor has
indemnified  the Beneficiary  shall be paid to the  Beneficiary on demand,  with
interest at the Default  Rate from the date  incurred by the  Beneficiary  until
paid in full,  and shall be  secured  by this Deed of Trust.  Without  the prior
written  consent  of the  Beneficiary,  the  Grantor  shall not  enter  into any
settlement  agreement,  consent  decree,  or other  compromise in respect to any
claims relating to Hazardous  Substances.  The Beneficiary  agrees that it shall
not unreasonably  delay its consideration of any written request for its consent
to any such settlement  agreement,  consent decree, or other compromise once all
information,  reports,  studies,  audits,  and  other  documentation  have  been
submitted to the Beneficiary.

<PAGE>

23.5 ENVIRONMENTAL AUDITS

If a Default exists, or at any time the Beneficiary has reason to believe that a
release of Hazardous Substances may have occurred or may be likely to occur, the
Beneficiary may require that the Grantor  retain,  or the Beneficiary may retain
directly,  at the sole cost and expense of the  Grantor,  a licensed  geologist,
industrial   hygienist  or  an  environmental   consultant   acceptable  to  the
Beneficiary  to  conduct  an  environmental  assessment  or  audit  of the  Real
Property. In the event that the Beneficiary makes a reasonable  determination of
the need for an environmental  assessment or audit, the Beneficiary shall inform
the Grantor in writing that such a determination has been made and, if requested
to do so by the  Grantor,  give  the  Grantor  a  written  explanation  of  that
determination  before the  assessment or audit is  conducted.  The Grantor shall
afford any person conducting an environmental  assessment or audit access to the
Real Property and all materials reasonably  requested.  The Grantor shall pay on
demand the cost and  expenses  of any  environmental  consultant  engaged by the
Beneficiary  under this  Subsection.  The Grantor  shall,  at the  Beneficiary's
request and at the Grantor's sole cost and expense,  take such investigative and
remedial  measures  determined by the  geologist,  hygienist or consultant to be
necessary to address any condition discovered by the assessment or audit so that
(i) the Real Property shall be in compliance with all  Environmental  Laws, (ii)
the condition of the Real Property shall not constitute any identifiable risk to
human  health or to the  environment,  and (iii) the value of the Real  Property
shall not be affected by the presence of Hazardous Substances.

<PAGE>

24. AGREEMENT CONCERNING INTEREST

The  provisions of the Note and of this Deed of Trust now or hereafter  existing
are hereby  expressly  limited so that in no  contingency  or event  whatsoever,
whether by  acceleration  of the  maturity of the Note or  otherwise,  shall the
amount paid or agreed to be paid to the Beneficiary for the use,  forbearance or
detention of the sums  evidenced by the Note exceed the Maximum Lawful Rate. If,
from  any  circumstances  whatsoever,  the  performance  or  fulfillment  of any
provision of the Note, or of this Deed of Trust, at the time performance of such
provision  shall be due,  shall exceed the limit of validity  prescribed by law,
then,  IPSO FACTO,  the obligation to be performed or fulfilled shall be reduced
to the  limit  of  such  validity,  and,  if from  any  such  circumstance,  the
Beneficiary  shall ever receive anything of value which is deemed to be interest
by Colorado law which would exceed the Maximum  Lawful Rate,  an amount equal to
any excessive interest shall be applied to the reduction of the principal amount
of the Note or on account of any other principal  indebtedness of the Grantor to
the  Beneficiary  and to the payment of interest  thereon or, if such  excessive
interest  exceeds  the unpaid  balance of  principal  of the Note and such other
indebtedness, such excess shall be refunded to the Grantor.

25. SECONDARY MARKET

25.1 TRANSFER OF THE LOAN

The Beneficiary  may, at any time,  grant  Participations,  and may transfer the
Loan Documents by sale or other assignment, either to be held by the transferee,
or for the purpose of the issuance of Securities.

25.2 SALE OR DELEGATION OF SERVICING

The Beneficiary  may, at any time,  transfer any and all of the servicing rights
with  respect to the Loan,  or delegate  any or all of its  responsibilities  as
Beneficiary under the Loan Documents.

25.3 DISSEMINATION OF INFORMATION

In connection  with any transfer of the Loan,  the  Beneficiary  may forward all
documents and  information  that the  Beneficiary  deems  necessary or desirable
concerning the Loan, including the financial statements of any Obligor, and such
other information as may be reasonably related to the Obligors,  the Property or
the Leases to any:

<PAGE>

(a) transferee or  prospective  transferee of the Loan; (b) Rating Agency rating
the Loan, a Participation, or Securities; or

(c) any organization  maintaining  databases on the underwriting and performance
of commercial  mortgage loans. The Grantor irrevocably waives any and all rights
it may have under applicable Legal

Requirements to prohibit such disclosure, including any right of privacy.

25.4 COOPERATION

The Grantor  agrees to cooperate  with the  Beneficiary  in connection  with any
transfer of the Loan or any  Participation or Securities.  The Grantor agrees to
provide to the Beneficiary or to any persons  described in Section 25.3 above to
whom the Beneficiary  may disseminate  such  information,  at the  Beneficiary's
request,  financial  statements of Obligors,  an estoppel  certificate  and such
other documents as may be reasonably related to the Obligors,  the Property,  or
the Leases.

25.5 RESERVES/ ESCROWS

If Participations  are granted or Securities issued in connection with the Loan,
all funds held by the  Beneficiary  in escrow or as reserves in accordance  with
the Loan  Documents  may,  at the  Beneficiary's  discretion,  be  deposited  in
"eligible  accounts"  at  "eligible  institutions"  and  invested in  "permitted
investments" as then defined and required by the Rating Agencies.

26. MISCELLANEOUS

26.1 SUCCESSORS AND ASSIGNS

All of the terms of the Loan Documents shall apply to, be binding upon and inure
to the benefit of the heirs, personal representatives, successors and assigns of
the Obligors, or to the holder of the Note, as the case may be.

26.2 SURVIVAL OF OBLIGATIONS

Each and all of the  Obligations  shall  continue in full force and effect until
the  latest  of (a) the date  the  Indebtedness  has  been  paid in full and the
Obligations  have  been  performed  and  satisfied  in full,  (b) the last  date
permitted  by law for  bringing  any claim or action  with  respect to which the
Beneficiary  may seek payment or  indemnification  in  connection  with the Loan
Documents,  and (c) the  date on  which  any  claim  or  action  for  which  the
Beneficiary seeks payment or  indemnification is fully and finally resolved and,
if applicable,  any  compromise  thereof of judgment or award thereon is paid in
full.

26.3 FURTHER ASSURANCES

The Grantor, upon the request of the Beneficiary or the Trustee, shall complete,
execute, acknowledge, deliver and record or file such further instruments and do
such further acts as may be necessary to carry out more effectively the purposes
of this Deed of Trust,  to subject any  property  intended to be covered by this
Deed of Trust to the liens and  security  interests  it creates,  to place third
parties on notice of those  liens and  security  interests,  or to  correct  any
defects which may be found in any Loan Document.

26.4 RIGHT OF INSPECTION

The Beneficiary shall have the right from time to time, upon reasonable  advance
notice to the  Grantor,  to enter  onto the Real  Property  for the  purpose  of
inspecting and reporting on its physical condition, tenancy and operations.

<PAGE>

26.5 EXPENSE INDEMNIFICATION

The  Grantor  shall pay all  filing  and  recording  fees,  documentary  stamps,
intangible taxes, and all expenses incident to the execution and  acknowledgment
of  this  Deed of  Trust,  the  Note or any of the  other  Loan  Documents,  any
supplements,  amendments,  renewals  or  extensions  of  any  of  them,  or  any
instrument  entered  into  under  Subsection  26.3.  The  Grantor  shall  pay or
reimburse the Beneficiary,  upon demand,  for all costs and expenses,  including
appraisal and  reappraisal  costs of the Property and reasonable  attorneys' and
legal  assistants'  fees,  which the  Beneficiary  may incur in connection  with
enforcement  proceedings under the Note, this Deed of Trust, or any of the other
Loan Documents (including all fees and costs incurred in enforcing or protecting
the  Note,  this  Deed of  Trust,  or any of the  other  Loan  Documents  in any
bankruptcy  proceeding),  and attorneys' and legal  assistants' fees incurred by
the Beneficiary in any other suit,  action,  legal  proceeding or dispute of any
kind in which the  Beneficiary is made a party or appears as party  plaintiff or
defendant,  affecting the Indebtedness, the Note, this Deed of Trust, any of the
other Loan  Documents,  or the  Property,  or required to protect or sustain the
lien of this  Deed of  Trust.  The  Grantor  shall  be  obligated  to pay (or to
reimburse the Beneficiary) for such fees, costs and expenses and shall indemnify
and hold the  Beneficiary  harmless  from and  against  any and all loss,  cost,
expense, liability, damage and claims and causes of action, including attorneys'
fees,  incurred or accruing by reason of the Grantor's failure to promptly repay
any such fees,  costs and expenses.  If any suit or action is brought to enforce
or  interpret  any of the terms of this Deed of Trust  (including  any effort to
modify or vacate any automatic stay or injunction,  any trial,  any appeal,  any
petition for review or any  bankruptcy  proceeding),  the  Beneficiary  shall be
entitled to recover all  expenses  reasonably  incurred  in  preparation  for or
during  the suit or  action or in  connection  with any  appeal  of the  related
decision,  whether or not taxable as costs.  Such  expenses  include  reasonable
attorneys' fees, witness fees (expert or otherwise),  deposition costs,  copying
charges and other  expenses.  Whether or not any court action is  involved,  all
reasonable expenses,  including the costs of searching records,  obtaining title
reports, appraisals, environmental assessments, surveying costs, title insurance
premiums,  trustee fees, and other reasonable  attorneys' fees,  incurred by the
Beneficiary that are necessary at any time in the Beneficiary's  opinion for the
protection of its interest or  enforcement  of its rights shall become a part of
the  Indebtedness  payable on demand and shall  bear  interest  from the date of
expenditure until repaid at the interest rate as provided in the Note.

26.6 GENERAL INDEMNIFICATION

The Grantor shall indemnify,  defend and hold the Beneficiary  harmless against:
(i) any and all claims for  brokerage,  leasing,  finder's or similar fees which
may be made relating to the Real Property or the Indebtedness,  (ii) any and all
liability, obligations, losses, damages, penalties, claims, actions, suits costs
and expenses (including the Beneficiary's  reasonable  attorneys' fees, together
with reasonable appellate counsel fees, if any) of whatever kind or nature which
may be asserted against, imposed on or incurred by the Beneficiary in connection
with  the  Indebtedness,  this  Deed of  Trust,  the Real  Property  or any part
thereof,  or the operation,  maintenance and/or use thereof,  or the exercise by
the Beneficiary of any rights or remedies granted to it under this Deed of Trust
or pursuant to applicable law; provided,  however,  that nothing herein shall be
construed to obligate  the Grantor to  indemnify,  defend and hold  harmless the
Beneficiary  from  and  against  any of the  foregoing  which is  imposed  on or
incurred by the Beneficiary by reason of the Beneficiary's willful misconduct or
gross negligence.

<PAGE>

26.7 RECORDING AND FILING

The Grantor shall cause this Deed of Trust and all amendments,  supplements, and
substitutions to be recorded,  filed, re-recorded and refiled in such manner and
in such places as the Beneficiary may reasonably  request.  The Grantor will pay
all recording filing, re-recording and refiling taxes, fees and other charges.

26.8 NO WAIVER

No deliberate or  unintentional  failure by the  Beneficiary  to require  strict
performance by the Grantor of any Obligation  shall be deemed a waiver,  and the
Beneficiary  shall have the right at any time to require  strict  performance by
the Grantor of any Obligation.

26.9 COVENANTS RUNNING WITH THE LAND

All  Obligations  are  intended by the parties to be and shall be  construed  as
covenants running with the Land.

26.10 SEVERABILITY

The Loan Documents are intended to be performed in accordance  with, and only to
the extent permitted by, all applicable Legal Requirements. Any provision of the
Loan Documents that is prohibited or  unenforceable  in any  jurisdiction  shall
nevertheless  be  construed  and  given  effect  to  the  extent  possible.  The
invalidity or  unenforceability  of any  provision in a particular  jurisdiction
shall neither  invalidate nor render  unenforceable  any other  provision of the
Loan  Documents  in that  jurisdiction,  and shall not  affect the  validity  or
enforceability  of that provision in any other  jurisdiction.  If a provision is
held to be  invalid  or  unenforceable  as to a  particular  person  or  under a
particular circumstance, it shall nevertheless be presumed valid and enforceable
as to others, or under other circumstances.

26.11 ENTIRE AGREEMENT

The Loan Documents contain the entire agreements between the parties relating to
the  financing  of the Real  Property,  and all prior  agreements  which are not
contained in the Loan Documents are terminated. The Loan Documents represent the
final  agreement  between the parties and may not be contradicted by evidence of
prior, contemporaneous,  or subsequent oral agreements of the parties. There are
no unwritten  oral  agreements  between the parties.  The Loan  Documents may be
amended, revised, waived,  discharged,  released or terminated only by a written
instrument or instruments  executed by the party against whom enforcement of the
amendment,  revision, waiver, discharge, release or termination is asserted. Any
alleged amendment,  revision, waiver, discharge,  release or termination that is
not so documented shall be null and void.

<PAGE>

26.12 NOTICES

In  order  for any  demand,  consent,  approval  or  other  communication  to be
effective under the terms of this Deed of Trust, "Notice" must be provided under
the terms of this Subsection. All Notices must be in writing. Notices may be (a)
delivered by hand,  (b)  transmitted by fax (with a duplicate copy sent by first
class mail, postage prepaid),  (c) sent by certified or registered mail, postage
prepaid,  return receipt requested,  or (d) sent by reputable  overnight courier
service,  delivery  charges  prepaid.  Notices  shall be  addressed as set forth
below:

       If to the Beneficiary:

       AUSA Life Insurance Company, Inc.

       c/o AEGON USA Realty Advisors, Inc.
       4333 Edgewood Road, N.E.
       Cedar Rapids, Iowa 52499-5443
       Attn:  Mortgage Loan Department
       Reference:  Loan #88766
       Fax Number: (319) 369-2277

       If to the Grantor:

       Green River at Palomino Park LLC
       c/o Wellsford Park Highlands Corp.
       6700 Palomino Pkwy
       Highlands Ranch, Colorado 80130
       Fax Number:  303-534-4398
       Attn:  David M. Strong

Notices  delivered  by hand or by overnight  courier  shall be deemed given when
actually  received or when refused by their  intended  recipient.  Faxed Notices
will be deemed delivered when a legible copy has been received (provided receipt
has been verified by telephone  confirmation or one of the other permitted means
of giving Notices under this  Subsection).  Mailed Notices shall be deemed given
on the date of the first attempted delivery (whether or not actually  received).
Either the  Beneficiary  or the  Grantor  may change its  address  for Notice by
giving at least fifteen (15)  Business  Days' prior Notice of such change to the
other party.

26.13 COUNTERPARTS

This Deed of Trust may be executed in any number of counterparts,  each of which
shall  be an  original,  but all of  which  together  shall  constitute  but one
instrument.

26.14 CHOICE OF LAW

This  Deed of Trust  shall be  interpreted,  construed,  applied,  and  enforced
according to, and will be governed by, the laws of Colorado,  without  regard to
any choice of law principle  which,  but for this  provision,  would require the
application of the law of another  jurisdiction and regardless of where executed
or  delivered,  where  payable  or paid,  where any cause of action  accrues  in
connection with this transaction, where any action or other proceeding involving
the Loan is instituted,  or whether the laws of Colorado  otherwise  would apply
the laws of another jurisdiction.

<PAGE>

26.15 FORUM SELECTION

The Grantor agrees that the sole and exclusive  forum for the  determination  of
any action relating to the validity and enforceability of the Note, this Deed of
Trust and the other Loan Documents,  and any other instruments securing the Note
shall be  either  in an  appropriate  court  of the  State  of  Colorado  or the
applicable United States District Court.

26.16 SOLE BENEFIT

This Deed of Trust and the other Loan  Documents have been executed for the sole
benefit of the Grantor and the Beneficiary and the successors and assigns of the
Beneficiary.  No other  party  shall have  rights  thereunder  or be entitled to
assume that the parties  thereto  will insist upon strict  performance  of their
mutual obligations hereunder,  any of which may be waived from time to time. The
Grantor shall have no right to assign any of its rights under the Loan Documents
to any party whatsoever.

26.17 RELEASE OF CLAIMS

The Grantor hereby RELEASES,  DISCHARGES and ACQUITS forever the Beneficiary and
its officers, directors,  trustees, agents, employees and counsel (in each case,
past,  present or future) from any and all Claims existing as of the date hereof
(or the date of actual  execution  hereof by the  Grantor,  if  later).  As used
herein, the term "Claim" shall mean any and all liabilities,  claims,  defenses,
demands,  actions, causes of action, judgments,  deficiencies,  interest, liens,
costs  or  expenses  (including  court  costs,  penalties,  attorneys'  fees and
disbursements,  and  amounts  paid in  settlement)  of any  kind  and  character
whatsoever,   including  claims  for  usury,  breach  of  contract,   breach  of
commitment, negligent misrepresentation or failure to act in good faith, in each
case  whether  now known or  unknown,  suspected  or  unsuspected,  asserted  or
unasserted  or  primary  or  contingent,  and  whether  arising  out of  written
documents,  unwritten undertakings,  course of conduct, tort, violations of laws
or regulations or otherwise.

26.18 NO PARTNERSHIP

Nothing  contained in the Loan Documents is intended to create any  partnership,
joint venture or association between the Grantor and the Beneficiary,  or in any
way make the  Beneficiary a co-principal  with the Grantor with reference to the
Property.

26.19 PAYOFF PROCEDURES

If  the  Grantor  pays  or  causes  to be  paid  to the  Beneficiary  all of the
Indebtedness,  then the Trustee's interest in the Real Property shall cease, and
upon receipt by the Beneficiary of such payment,  the  Beneficiary  shall either
(a)  direct the  Trustee  to  release  this Deed of Trust or (b) assign the Loan
Documents  and endorse the Note (in either case without  recourse or warranty of
any  kind)  to a  takeout  lender,  upon  payment  (in the  latter  case)  of an
administrative fee of $750.

<PAGE>

26.20 SURVIVAL OF COMMITMENT TERMS

The  Commitment  shall survive the execution of this Deed of Trust and the other
Loan Documents.  Any term of the Commitment that has been inadvertently  omitted
from  the  Loan  Documents  is  hereby  incorporated  in this  Deed of  Trust by
reference. If any term of the Commitment conflicts with a provision of this Deed
of Trust that addresses the same subject,  the terms of this Deed of Trust shall
prevail. Any provision of the Commitment which specifically states that it shall
survive the closing of the Loan shall so survive,  and is hereby incorporated in
this Deed of Trust by reference.

26.21 FUTURE ADVANCES

Under this Deed of Trust,  "Indebtedness" is defined to include certain advances
made by the  Beneficiary  in the future.  Such advances  include any  additional
disbursements  to the Grantor  (unless in connection  with another,  independent
mortgage  financing) and any obligations  under  agreements  which  specifically
provide that such  obligations  are secured by this Deed of Trust.  In addition,
Indebtedness is defined to include any amounts advanced to pay  Impositions,  to
cure Defaults, or to pay the costs of collection and receivership.  Accordingly,
all such advances and obligations  shall be equally secured with, and shall have
the same priority as, the Indebtedness, and shall be subject to all of the terms
and  provisions of this Deed of Trust.  The Grantor shall pay any taxes that may
be due in connection with any such future advance.

26.22 INTERPRETATION

(A) HEADINGS AND GENERAL APPLICATION

The section,  subsection,  paragraph and  subparagraph  headings of this Deed of
Trust are provided for convenience of reference only and shall in no way affect,
modify  or  define,  or be  used  in  construing,  the  text  of  the  sections,
subsections,  paragraphs or subparagraphs.  If the text requires,  words used in
the singular  shall be read as including the plural,  and pronouns of any gender
shall include all genders.

(B) SOLE DISCRETION

The Beneficiary may take any action or decide any matter under the terms of this
Deed of Trust or of any other Loan Document  (including  any consent,  approval,
acceptance,  option,  election  or  authorization)  in  its  sole  and  absolute
discretion,  for any reason or for no reason,  unless the related Loan  Document
contains  specific  language to the  contrary.  Any approval or consent that the
Beneficiary might withhold may be conditioned in any way.

(C) RESULT OF NEGOTIATIONS

This  Deed of Trust  results  from  negotiations  between  the  Grantor  and the
Beneficiary and from their mutual efforts.  Therefore, it shall be so construed,
and not as though it had been prepared solely by the Beneficiary.

<PAGE>

(D) REFERENCE TO PARTICULARS

The scope of a general statement made in this Deed of Trust or in any other Loan
Document shall not be construed as having been reduced  through the inclusion of
references to  particular  items that would be included  within the  statement's
scope.  Therefore,  unless the relevant  provision of a Loan  Document  contains
specific language to the contrary,  the term "include" shall mean "include,  but
shall not be limited to" and the term "including" shall mean "including, without
limitation."

26.23 INDEBTEDNESS MAY EXCEED NOTE'S FACE AMOUNT

The  Grantor's  successors  or assigns are hereby placed on Notice that the Note
contains late charge,  prepayment and other  provisions  which may result in the
outstanding principal balance exceeding the face amount of the Note.

26.24 JOINT AND SEVERAL LIABILITY

If there is more than one  individual or entity  executing this Deed of Trust as
the Grantor, liability of such individuals and entities under this Deed of Trust
shall be joint and several.

26.25 TIME OF ESSENCE

Time is of the essence of each and every  covenant,  condition  and provision of
this Deed of Trust to be performed by the Grantor.

26.26 JURY WAIVER

THE GRANTOR AND BY ITS  ACCEPTANCE  HEREOF,  THE  BENEFICIARY,  HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY  ACTION OR  PROCEEDING  TO ENFORCE OR DEFEND ANY
RIGHTS (I) UNDER THIS DEED OF TRUST OR ANY OTHER LOAN  DOCUMENT OR (II)  ARISING
FROM ANY LENDING RELATIONSHIP  EXISTING IN CONNECTION WITH THIS DEED OF TRUST OR
ANY OTHER LOAN  DOCUMENT,  AND THE GRANTOR  AND BY ITS  ACCEPTANCE  HEREOF,  THE
BENEFICIARY,  AGREE THAT ANY SUCH ACTION OR  PROCEEDING  SHALL BE TRIED BEFORE A
JUDGE AND NOT BEFORE A JURY.

26.27 RENEWAL, EXTENSION, MODIFICATION AND WAIVER

The  Beneficiary,  at its  option,  may at any time renew or extend this Deed of
Trust,  the Note or any other Loan Document.  The  Beneficiary  may enter into a
modification of any Loan Document  without the consent of any person not a party
to the  document  being  modified.  The  Beneficiary  may waive any  covenant or
condition  of any Loan  Document,  in whole or in part,  at the  request  of any
person then having an interest in the Property or in any way liable for any part
of the  Indebtedness.  The  Beneficiary  may  take,  release,  or  resort to any
security for the Note and the Obligations and may release any party primarily or
secondarily liable on any Loan Document, all without affecting any liability not
expressly released in writing by the Beneficiary.

26.28 CUMULATIVE REMEDIES

Every right and remedy  provided in this Deed of Trust  shall be  cumulative  of
every other right or remedy of the Beneficiary,  whether  conferred by law or by
grant or  contract,  and may be  enforced  concurrently  with any such  right or
remedy.  The acceptance of the performance of any obligation to cure any Default
shall not be construed as a waiver of any rights with respect to any other past,
present or future Default. No waiver in a particular instance of the requirement
that any Obligation be performed  shall be construed as a waiver with respect to
any other Obligation or instance.

<PAGE>

26.29 NO OBLIGATION TO MARSHAL ASSETS

No holder of any deed of trust, security interest or other encumbrance affecting
all or any portion of the Real  Property,  which  encumbrance is inferior to the
lien and security  title of this Deed of Trust,  shall have any right to require
the Beneficiary to marshal assets.

26.30 TRANSFER OF OWNERSHIP

The Beneficiary may, without notice to the Grantor, deal with any person in whom
ownership  of any part of the  Real  Property  has  vested,  without  in any way
vitiating or discharging the Grantor from liability for any of the Obligations.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the Grantor has caused this Deed of Trust to be effective as
of the date first above written.

              BORROWER:

              GREEN RIVER AT PALOMINO PARK LLC, a Colorado limited
              liability company

              By:   Wellsford Park Highlands Corp.,
                    a Colorado corporation, its manager

              By /s/ David M. Strong
                 ---------------------------------------------
                  David M. Strong
                  Vice President

<PAGE>

                                 ACKNOWLEDGEMENT

STATE OF COLORADO)
                 )
COUNTY OF DENVER )

The foregoing  instrument was acknowledged  before me by David M. Strong as Vice
President of Wellsford Park Highlands Corp., a Colorado corporation,  manager of
Green River at Palomino Park LLC, a Colorado limited  liability  company on this
30th day of January, 2003.

Witness my hand and official seal

/s/  Evonne C. Wiseman
----------------------
Notary Public

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