Document:

PURCHASE AND SALE AGREEMENT

                                     Between

                             WELLSFORD SONTERRA LLC,
                      an Arizona limited liability company
                                    (Seller)

                                       and

                            THAYER RESIDENTIAL, INC.
                            a Washington Corporation
                                     (Buyer)

                             Dated as of May 31, 2000
                                     -------

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
1.       PURCHASE AND SALE....................................................1

2.       PURCHASE PRICE.......................................................2

3.       EARNEST MONEY........................................................2
         (a)      Deposit.....................................................2
         (b)      Treatment of the Deposit....................................2
         (c)      Disposition of Earnest Money................................2

4.       PAYMENT OF PURCHASE PRICE............................................2
         (a)      Delivery of Earnest Money...................................2
         (b)      Payment of Balance..........................................2

5.       TITLE MATTERS........................................................2
         (a)      Title Commitment............................................2
         (b)      Surveys.....................................................3

6.       INSPECTION PERIOD, DELIVERIES AND PROCEDURES.........................3
         (a)      Definition of Inspection Period.............................3
         (b)      Seller's Deliveries.........................................3
         (c)      Inspection of Property Files................................4
         (d)      Completeness of Seller's Deliveries and the Property Files..4
         (e)      Inspection Rights of Buyer..................................4
         (f)      Termination Right of Buyer..................................5
         (g)      Continuation Notice.........................................5
         (h)      Assigned Contracts..........................................5
         (i)      Indemnification.............................................5

7.       LOAN ASSUMPTION CONTINGENCY..........................................5

8.       CLOSING..............................................................6

9.       TRANSACTIONS AT CLOSING..............................................6
         (a)      Deliveries by Seller........................................6
         (b)      Deliveries by Buyer.........................................6
         (c)      Notice to Tenants...........................................7

10.      PRORATIONS; CLOSING ITEMS............................................7
         (a)      Rents.......................................................7
         (b)      Security Deposits...........................................7

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         (c)      Assigned Contracts..........................................7
         (d)      Real and Personal Property Taxes and Assessments............7
         (e)      Utility Expenses............................................8
         (f)      Recording Fees..............................................8
         (g)      Escrow and Title Fees.......................................8
         (h)      Attorney's Fees.............................................8
         (i)      Inspection Fees.............................................8
         (j)      Operating Expenses..........................................8
         (k)      Other Fees and Costs........................................8
         (l)      Expenses after Closing......................................8
         (m)      Re-proration................................................8

11.      REPRESENTATIONS AND WARRANTIES.......................................9
         (a)      Representations and Warranties by Seller....................9
         (b)      Buyer's Representations and Warranties.....................10

12.      "AS IS."............................................................10
         (a)      Buyer's Acknowledgment.....................................10
         (b)      "Hazardous Materials" Defined..............................11
         (c)      Hazardous Materials........................................11

13.      SELLER'S COVENANTS..................................................12
         (a)      Operations Prior to Closing................................12
         (b)      Contracts..................................................12
         (c)      Further Liens..............................................12
         (d)      Termite Certificates.......................................12
         (e)      Insurance..................................................12

14.      CONDITIONS TO CLOSING...............................................12
         (a)      Seller's Conditions........................................12
         (b)      Buyer's Conditions.........................................13

15.      DAMAGE OR DESTRUCTION OF THE PROPERTY; CONDEMNATION.................13
         (a)      Damage or Destruction of the Property......................13
         (b)      Condemnation...............................................14
         (c)      Repairs....................................................14

16.      COMMISSIONS, EXPENSES AND CREDITS...................................14

17.      REMEDIES............................................................15
         (a)      Seller's Remedies..........................................15
         (b)      Buyer's Remedies...........................................15
         (c)      Provisions Applicable to Buyer and Seller..................16

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18.      NOTICES.............................................................16

19.      MISCELLANEOUS.......................................................17
         (a)      No Waiver..................................................17
         (b)      Entire Agreement...........................................17
         (c)      Survival...................................................18
         (d)      Successors.................................................18
         (e)      Binding Effect; Assignment.................................18
         (f)      Relationship of the Parties................................18
         (g)      Governing Law..............................................18
         (h)      Severability...............................................18
         (i)      Possession; Risk of Loss...................................18
         (j)      Review by Counsel..........................................18
         (k)      Return of Documents........................................18
         (l)      Exhibits...................................................19
         (m)      No Recording...............................................19
         (n)      Counterparts...............................................19
         (o)      Time of Essence............................................19
         (p)      Confidentiality............................................19

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                              SCHEDULE OF EXHIBITS

Exhibit A - Legal Description
Exhibit B - Personal Property
Exhibit C - Rent Roll Certification
Exhibit D - Assigned Contracts
Exhibit E - Special Warranty Deed Form
Exhibit F - Special Warranty Bill of Sale Form
Exhibit G - Assignment and Assumption Agreement Form
Exhibit H - Tenant Notification Letter
Exhibit I - Buyer's Certificate

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                           PURCHASE AND SALE AGREEMENT
                           ---------------------------

     THIS  PURCHASE AND SALE  AGREEMENT  ("Agreement")  is made as of the day of
May, 2000 (the  "Effective  Date"),  by and between  WELLSFORD  SONTERRA LLC, an
Arizona limited liability  company  ("Seller"),  and THAYER  RESIDENTIAL INC., a
Washington corporation ("Buyer").

                                    RECITALS

     A. Seller is the owner of the land more particularly described on Exhibit A
attached hereto and  incorporated  herein by this reference (the "Land") and the
buildings,   parking   areas,   and  other  real  property   improvements   (the
"Improvements")  located thereon (the Land and the  Improvements are hereinafter
referred to as the "Real Property"),  comprising an apartment complex located in
Tucson,  Arizona,  containing  344 units  commonly known as Sonterra at Williams
Centre Apartments.

     B. Subject to the terms and conditions contained herein,  Seller desires to
sell and Buyer desires to purchase the Real Property and the other  Property (as
defined herein).

                                    AGREEMENT

     NOW, THEREFORE,  in consideration of the mutual covenants contained herein,
Seller and Buyer agree as follows:

     1. PURCHASE AND SALE.  Subject to the terms and conditions  hereof,  Seller
hereby  agrees to sell,  convey and assign to Buyer,  and Buyer hereby agrees to
purchase  and accept from Seller on the Closing  Date (as defined in Paragraph 8
hereof) the following (the "Property"):

          (a) The Real  Property,  including any and all rights,  privileges and
     easements appurtenant thereto which are owned by Seller.

          (b) All right,  title and interest of Seller in the following property
     (excluding without limitation any personal property owned by the tenants of
     the Property  and the  property  manager of the  Property)  (the  "Personal
     Property"):  (i) all fixtures,  equipment,  appliances,  and other items of
     personal  property  owned by Seller and  attached to or located on the Real
     Property  (except for any  computer  hardware and  software);  and (ii) all
     assignable or transferable  intangible property used in connection with the
     Real Property,  including (A) any  guaranties and warranties  pertaining to
     the Real Property,  (B) all rights to obtain utility  service in connection
     with the Real  Property,  (C)  assignable  licenses and other  governmental
     permits  and  permissions  relating  to the  Real  Property,  and  (D)  any
     assignable  interest  in the trade  name  "Sonterra  at  Williams  Centre."
     Attached  hereto as Exhibit B is a list of the tangible  personal  property
     for Sonterra at Williams Centre Apartments.

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          (c) All of  Seller's  right,  title and  interest  in all  leases  and
     occupancy agreements covering space in the Improvements (the "Leases").

          (d)  All of  Seller's  right,  title  and  interest  in the  "Assigned
     Contracts" (as defined in Paragraph 6(h) hereof).

     2.  PURCHASE  PRICE.  Buyer shall pay as the total  purchase  price for the
Property (the "Purchase Price") the sum of Twenty-Two Million Five Hundred Fifty
Thousand and No/100 Dollars  ($22,550,000.00).  The Purchase Price shall be paid
as follows: (i) Buyer shall assume the existing loan from NationsBank, N.A., its
successors  and  assigns,   to  Seller  in  the  original  principal  amount  of
$16,400,000.00  (the  "Existing  Loan"),  the  balance of which shall not exceed
Sixteen Million One Hundred Thousand and No/100 Dollars  ($16,100,000.00) at the
time of Closing  plus (ii) Buyer shall pay to Seller,  in good funds at Closing,
an amount  equal to the  Purchase  Price  minus the  outstanding  balance of the
Existing Loan as of the Closing Date.

     3. EARNEST MONEY.

          (a) Deposit.  Concurrently with the execution of this Agreement, Buyer
     has  caused  Three   Hundred  Fifty   Thousand  and  No/100  U.S.   Dollars
     ($350,000.00)  (the  "Deposit") to be delivered to Chicago Title of Arizona
     (Tucson Office),  Inc. (the "Title Company").  The Deposit,  along with any
     interest  earnings  thereon  are  referred  to herein  collectively  as the
     "Earnest Money."

          (b) Treatment of the Deposit.  Upon the  expiration of the  Inspection
     Period (as defined  below) and subject to the loan  assumption  contingency
     set forth in Paragraph 7 below, the Deposit shall become  non-refundable to
     Buyer in all events except for Seller's  default  hereunder or as otherwise
     expressly set forth herein.

          (c) Disposition of Earnest Money. The Title Company shall hold, invest
     and disburse the Earnest  Money  strictly in  accordance  with the terms of
     this Agreement and in accordance with any escrow instructions in connection
     herewith executed by all of Buyer, Seller and the Title Company. Buyer will
     provide the Title Company with its taxpayer  identification number and such
     additional  information  and  documents  as may be  required  by the  Title
     Company.

     4. PAYMENT OF PURCHASE  PRICE.  The Purchase Price shall be due and payable
on the Closing Date as follows:

          (a) Delivery of Earnest  Money.  At Closing,  the Title  Company shall
     deliver  the  Earnest  Money to  Seller  by wire  transfer  of  immediately
     available  funds  through  the U.S.  Federal  Reserve  System  to Seller in
     partial payment of the Purchase Price; and

          (b)  Payment of Balance.  Buyer shall pay the balance of the  Purchase
     Price, as adjusted in accordance with the terms of this Agreement,  by wire
     transfer of immediately  available  funds through the U.S.  Federal Reserve
     System to Seller, on or before the Closing Date.

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     5. TITLE MATTERS.

          (a) Title Commitment.  Seller shall cause the Title Company to deliver
     to Buyer within five (5) business days after the  Effective  Date a current
     title insurance  commitment  issued by the Title Company  covering the Real
     Property  in the  amount of the  Purchase  Price  (the  "Preliminary  Title
     Commitment")  accompanied by copies of the exceptions to title set forth in
     the Preliminary  Title  Commitment.  Buyer shall be solely  responsible for
     negotiating  with the Title  Company to obtain the deletion of or to obtain
     affirmative  coverage  over any such  exceptions,  and for  obtaining  such
     endorsements  as Buyer may  desire.  Buyer  shall have until  fifteen  (15)
     business days after delivery of the  Preliminary  Title  Commitment and the
     existing  survey  described  in Section  5(b) below (the  "Title and Survey
     Review  Period") to review title and survey and to obtain the  agreement of
     the Title Company with respect to the exceptions to title and  endorsements
     to be issued to Buyer by the Title  Company.  If Buyer has reached  such an
     agreement  with the Title  Company upon  expiration of the Title and Survey
     Review  Period,  the  Preliminary  Title  Commitment  in the form agreed to
     between  Buyer  and  the  Title  Company  shall  be  the  "Approved   Title
     Commitment."  If Buyer has not  reached  such an  agreement  with the Title
     Company at the end of the Title Survey Review Period or otherwise  approved
     the  condition of title,  Buyer may (i)  terminate  this  Agreement and the
     Earnest Money shall be promptly  returned to Buyer or (ii) proceed with the
     purchase of the Property as set forth in Paragraph  6(g) below  (subject to
     any other applicable  contingencies),  in which case the Preliminary  Title
     Commitment  as it exists at the  expiration  of the Title and Survey Review
     Period shall be the "Approved  Title  Commitment."  "Permitted  Exceptions"
     shall mean the following:  (x) the title exceptions  listed on the Approved
     Title Commitment, and (y) the standard printed exceptions,  except that the
     exception  for taxes  shall be modified  to read "real  property  taxes and
     assessments  for 2000 and subsequent  years." At the Closing,  Seller shall
     pay that  portion of the cost of issuance of a standard  owner's  policy of
     title  insurance to Buyer (the "Title  Policy")  attributable  to the Title
     Policy prior to any  negotiations  of Buyer for deletion of or  affirmative
     coverage over any such  exceptions or for Buyer's  endorsements,  and Buyer
     shall pay all costs  over and  above  the  basic  cost of the Title  Policy
     (including any costs attributable to Buyer's negotiations,  the cost of any
     endorsements  Buyer may request and any costs  associated with upgrading to
     an ALTA policy),  as well as the cost of any title  insurance  premiums and
     charges resulting from  requirements  imposed by Buyer's lender, if any. If
     on  the  Closing  Date,   the  Real  Property  is  subject  to  any  liens,
     encumbrances or title defects (other than the Permitted  Exceptions)  which
     did not arise because of a default by Seller  hereunder,  then Seller shall
     not be obligated to cure or attempt to cure such defect.

          (b) Surveys.  Within five (5) business days after the Effective  Date,
     Seller  shall  deliver  to Buyer a copy of the most  recent  as-built  ALTA
     survey of the Real Property  which is in Seller's  possession.  If Buyer so
     elects,  Buyer may obtain an update of such  survey and cause such  updated
     survey to be  certified  to Buyer and its  lender at  Buyer's  own cost and
     expense.

     6. INSPECTION PERIOD, DELIVERIES AND PROCEDURES.

          (a) Definition of Inspection  Period.  The  "Inspection  Period" shall
     mean the period of time from the mutual  execution of this Agreement  until
     5:00 p.m. Tucson Time on the date

<PAGE>

     which is ten (10) business  days after the later of (i) the Effective  Date
     and (ii) delivery of the Seller's Deliveries (as defined below).

          (b)  Seller's   Deliveries.   In  addition  to  the  delivery  of  the
     Preliminary  Title  Commitment  and the  existing  survey  as  required  by
     Paragraph 5 hereof,  Seller either has previously delivered or, immediately
     upon the  execution  hereof  by Buyer  and  Seller,  will  deliver,  at its
     expense, the following items which are in the possession of Seller to Buyer
     ("Seller's Deliveries"):

               (i) A current  rent roll  describing  all of the Leases as of the
          date of this  Agreement,  including a schedule  of  security  deposits
          certified  by  Seller  to the  best  of its  knowledge  and  based  on
          information  provided to it by its property  manager (the form of rent
          roll certification is attached hereto as Exhibit C);

               (ii)  Copies  of  the  most  recently   conducted   environmental
          assessments of the Property, which are in Seller's possession;

               (iii) Soils reports,  environmental studies, engineering reports,
          surveys and flood plain information concerning the Property, which are
          in Seller's possession;

               (iv)  Copies  of all  service  contracts,  equipment  leases  and
          maintenance contracts relating to the Property, which are in effect on
          the Effective Date;

               (v)  Operating  information  for the  period of time that  Seller
          owned the Property, including information regarding the following: (a)
          AD VALOREM taxes both real and personal, (b) annual insurance premiums
          for fire, extended coverage,  workmen's compensation,  vandalism,  and
          malicious  mischief,  general  liability,  rents,  and other  forms of
          insurance, (c) expenses incurred for water,  electricity,  natural gas
          and other utility charges, and (d) total rents collected from tenants,
          and (e) year-to-date operating information;

               (vi)  A full  list  of all  employees'  compensation,  management
          company  compensation,  including  employee  benefits,  utilities  and
          apartment compensation and bonuses and other commission  compensation;
          and

               (vii)  All  insurance   claims  during  the  period  of  seller's
          ownership of the Property.

          (c) Inspection of Property Files. During the Inspection Period, Seller
     shall make the "Property Files" (as defined below) available for inspection
     by Buyer or its authorized agents or representatives ("Buyer's Agents"), at
     the offices of Seller or in the offices of Seller's  property manager or on
     the Real Property,  as applicable,  during regular  business hours and upon
     reasonable  prior notice to Seller and the property  manager.  The Property
     Files  shall mean the  following,  to the  extent  that the same are in the
     possession  of Seller  or its  property  manager:  lease  files,  including
     originals and copies of leases, lease applications and credit information.

<PAGE>

          (d)  Completeness of Seller's  Deliveries and the Property Files.  The
     description of the Property Files above is not a  representation  that such
     items are in the possession of Seller or its property manager,  but is only
     intended to be a list of the items which  Buyer may  inspect,  if Seller or
     its property manager  possesses the same. Seller shall cooperate with Buyer
     by copying such  portions of the  Property  Files as Buyer may request upon
     reasonable  notice to  Seller.  Buyer  shall not  remove any items from the
     Property Files. At all times, a  representative  of Seller shall be present
     during any  inspection  of the Property  Files.  Except as provided in: (i)
     Paragraph 11(a) hereof,  or (ii) the rent roll to be delivered by Seller to
     Buyer at the Closing,  and (iii) any representations  contained in the Deed
     (the  foregoing  items (i), (ii) and (iii) being  hereinafter  collectively
     referred to as the "Property  Representations"),  Seller makes no warranty,
     representation  or  guarantee  of any  type or  kind  with  respect  to the
     accuracy or completeness  of the  information  contained in Property Files.
     Except  for  reliance  upon  the  representation  set  forth  in  Paragraph
     11(a)(viii) hereof, any reliance by Buyer on the Property Files shall be at
     its sole risk.

          (e) Inspection  Rights of Buyer.  Subject to the rights of the tenants
     under the Leases, during the Inspection Period Buyer and Buyer's Agents may
     during  regular  business  hours and on at least 72 hours'  prior notice to
     Seller,  have  access  to the  Real  Property  for the  purpose  of  making
     inspections   thereof  and  compiling  such   information  as  Buyer  deems
     appropriate.  Any requests to inspect the  Property or the  Property  Files
     shall be made to David Strong, or in his absence,  to Julie Banister,  both
     of whom are in the  Denver  office  of  Seller  referred  to in the  notice
     provisions of this Agreement.

          (f)  Termination  Right of Buyer.  If Buyer is  dissatisfied  with any
     aspect of this  transaction,  Buyer may terminate  this Agreement by giving
     written notice of termination  (a  "Termination  Notice") to Seller and the
     Title Company prior to the expiration of the Inspection Period.  Failure by
     Buyer to provide a Continuation Notice pursuant to Paragraph 6(g) hereof to
     Seller prior to the expiration of the Inspection Period shall constitute an
     election by Buyer to terminate  this  Agreement as if Buyer had delivered a
     Termination  Notice  in  accordance  with  this  Paragraph  6(f).  If  this
     Agreement is terminated in accordance  with this Paragraph  6(f), the Title
     Company shall deliver the Earnest Money to Buyer promptly after its receipt
     of a Termination Notice from Buyer.

          (g)  Continuation  Notice.  If Buyer  desires  not to  terminate  this
     Agreement at the  expiration  of the  Inspection  Period,  Buyer shall give
     written notice of such election (a "Continuation Notice") to Seller and the
     Title Company prior to the expiration of the Inspection Period.

          (h) Assigned Contracts.  Attached hereto as Exhibit D is a list of all
     service contracts and other contracts and agreements which affect or relate
     to the Property which Seller  requires that Buyer assume in connection with
     the closing of the  Property.  Assigned  Contracts  shall mean (i) all such
     contracts  and  agreements  set forth on such Exhibit D, (ii) all contracts
     and agreements which constitute Permitted  Exceptions,  and (iii) any other
     contracts  and  agreements  that  Buyer and Seller  agree in writing  shall
     constitute Assigned Contracts.

<PAGE>

          (i)  Indemnification.  Buyer shall pay when due all fees and  expenses
     incurred in conducting its inspections, tests or observations.  Buyer shall
     not unreasonably disturb or interfere with the operation, management or use
     of the Property by Seller,  Seller's agents, or any of the tenants or their
     invitees  or guests.  Buyer  shall not damage  any of the  Property.  Buyer
     hereby  indemnifies,  defends,  and holds Seller and the Property  harmless
     from any and all costs,  loss,  damages or expenses,  of any kind or nature
     (including  reasonable  attorneys'  fees and  expenses),  arising out of or
     resulting from Buyer's exercise of its inspection rights, including without
     limitation, any entry and/or activities upon the Property by Buyer, Buyer's
     Agents, contractors, and/or subcontractors. The indemnity set forth in this
     Paragraph  6(i) shall  survive any  termination  of this  Agreement and the
     Closing.

     7.  LOAN  ASSUMPTION   CONTINGENCY.   Buyer's   obligation  to  close  this
transaction is further  contingent  upon Buyer  obtaining  lender's  approval to
assume the Existing  Loan within sixty (60) days after the  Effective  Date (the
"Loan  Assumption  Period")  upon the current terms of the Existing Loan (unless
otherwise  approved by Buyer).  Within  three (3)  business  days after  Buyer's
receipt of the assumption  application from the current lender, Buyer shall make
a complete  application to the current lender for the assumption of the Existing
Loan. Buyer shall be responsible for the payment of any application  and/or loan
assumption  fees.  Buyer shall provide all information  reasonably  requested by
lender  and shall use good  faith  efforts to secure  lender's  approval  of the
assignment  of the  Existing  Loan  on or  before  the  expiration  of the  Loan
Assumption  Period.  Any approved  assumption of the Existing Loan shall provide
that Seller will be completely  released from all obligation  under the Existing
Loan.  In the event  Buyer  does not  obtain  such  approval  on or  before  the
expiration of the Loan Assumption Period, Buyer may terminate this Agreement and
the Earnest Money shall be promptly returned to Buyer.

     8. CLOSING.  The purchase and sale of the Property  ("Closing") shall occur
on or before ninety (90) days after Buyer's delivery of the Continuation  Notice
(the "Closing Date"),  and shall be effected through an escrow closing conducted
by the Title Company. Notwithstanding the foregoing, Buyer shall have a one-time
right to extend  the  Closing  Date by up an  additional  thirty  (30) days upon
delivery  of written  notice to Seller on or before  seven (7) days prior to the
anticipated  Closing Date of Buyer's exercise of its right to extend accompanied
by an additional  $100,000.00,  which amount shall be added to and become a part
of the Deposit,  provided,  however,  that in no event shall the actual  Closing
Date be later than September 30, 2000 and shall be applied to the Purchase Price
at  Closing  or  otherwise  disposed  of in  accordance  with the  terms of this
Agreement.

     9. TRANSACTIONS AT CLOSING. On the Closing Date:

          (a) Deliveries by Seller. Provided that Seller's conditions to Closing
     as  specified in  Paragraph  14(a) hereof have been  satisfied or have been
     waived in writing by Seller,  Seller shall deliver or cause to be delivered
     to Buyer the following documents (the "Conveyance Documents") duly executed
     by Seller and acknowledged where appropriate:

               (i)  A  Special   Warranty  Deed   conveying  the  Real  Property
          substantially in the form attached hereto as Exhibit E (the "Deed");

<PAGE>

               (ii) A Special  Warranty Bill of Sale  substantially  in the form
          attached hereto as Exhibit F (the "Bill of Sale")  conveying  Seller's
          interest in the Personal Property to Buyer;

               (iii) An Assignment and Assumption Agreement substantially in the
          form attached hereto as Exhibit G (the "Assignment") pursuant to which
          Seller  assigns the Leases and the Assigned  Contracts  to Buyer,  and
          Buyer  assumes  the  obligations  of Seller  under the  Leases and the
          Assigned Contracts;

               (iv) A Certificate of non-foreign status to confirm that Buyer is
          not  required  to  withhold  part of the  Purchase  Price  pursuant to
          Section 1445 of the Internal Revenue Code of 1986, as amended;

               (v) Seller's Settlement Statement;

               (vi) An update  of the rent  roll  provided  in  accordance  with
          Paragraph  6(b)(i),  certified by Seller to be accurate to the best of
          Seller's knowledge,  based solely on information  provided by Seller's
          property  manager  (the form of rent roll  certification  is  attached
          hereto as Exhibit C); and

               (vii) Such other  documents and  instruments as may be reasonably
          necessary  and  appropriate  to effect the Closing of the  transaction
          contemplated herein.

          (b) Deliveries by Buyer.  Provided that Buyer's  conditions to Closing
     as  specified in  Paragraph  14(b) hereof have been  satisfied or have been
     waived in writing by Buyer, Buyer shall deliver or cause to be delivered to
     Seller  the  following  items  and  documents  duly  executed  by Buyer and
     acknowledged where appropriate:

               (i) The balance of the Purchase  Price, as adjusted in accordance
          with the terms of this Agreement;

               (ii) The Bill of Sale;

               (iii) The Assignment;

               (iv) Buyer's Settlement Statement;

               (v) Buyer's Certificate  described in Paragraph 11(b)(iv) hereof;
          and

               (vi) Such other  documents  as may be  reasonably  necessary  and
          appropriate  to complete the Closing of the  transaction  contemplated
          herein.

          (c)  Notice  to  Tenants.  Seller  and  Buyer  shall  execute a tenant
     notification  letter  to the  Tenant  (the  "Tenant  Notification  Letter")
     substantially  in the form of Exhibit H  attached  hereto,  disclosing  the
     change of ownership of the Property  with the name and address of the Buyer

<PAGE>

     and the Closing  Date,  and Buyer shall,  within  three (3)  business  days
     following the Closing, cause the Tenant Notification Letter to be delivered
     to the tenants of the Property.

     10.  PRORATIONS;  CLOSING  ITEMS.  The  Purchase  Price is  subject  to the
following prorations and adjustments, to be determined as of the Closing Date:

          (a)  Rents.  Any  rents and other  income  attributable  to the use or
     occupancy  of the  Property  during  the  month  of  Closing  and  actually
     collected  on or prior to the Closing  shall be prorated to the date Seller
     receives  the  Purchase  Price  (the  "Settlement   Date")  in  immediately
     available funds. After the Closing,  if any such rents and other income are
     actually  received  by Buyer,  all such  amounts  shall first be applied by
     Buyer to  currently  due  rents,  then to past due rents in the order  such
     amounts became due.  Buyer shall promptly  deliver any such amounts owed to
     Seller after  receipt.  Buyer shall make a good faith effort to collect any
     such rents and other income not  apportioned at the Closing for the benefit
     of the Seller, however, Buyer shall not be required to institute litigation
     in its collection efforts.

          (b)  Security  Deposits.  Buyer  shall  receive a credit  against  the
     Purchase Price for the amount of any refundable  security deposits actually
     held by Seller under the Leases on the Closing Date.

          (c) Assigned Contracts.  Prepaid fees or accrued liabilities under the
     Assigned Contracts shall be prorated as of the Closing Date.

          (d) Real and Personal Property Taxes and Assessments.

               (i) Real property taxes and assessments for the year during which
          the Closing  occurs  shall be  prorated  to the Closing  Date based on
          actual tax  figures,  if known,  or the  estimated  tax figures if the
          actual amount is not known.  If estimated  tax figures are used,  they
          shall be based on the  assumption  that  they will  equal  103% of the
          current year's taxes. The above proration shall be final.

               (ii) Buyer  shall be solely  responsible  for the  payment of all
          personal  property taxes,  sales and/or transfer taxes relating to the
          sale of the Personal Property.

               (iii)  Any AD  VALOREM  tax on the  Personal  Property  shall  be
          prorated between Buyer and Seller.

               (iv) Any homeowners'  association  dues and assessments  shall be
          prorated between Buyer and Seller.

          (e) Utility  Expenses.  At  Closing,  Seller and Buyer shall cause all
     existing  accounts  for  utilities  to be  transferred  to  Buyer as of the
     Closing Date. Buyer shall be obligated to pay all utility bills for service
     from and after the Closing  Date and Seller  shall be  responsible  for all
     utility  bills for service  prior to the Closing  Date.  Any transfer  fees
     shall be paid by Buyer.

<PAGE>

          (f) Recording Fees. To the extent such costs are customarily allocated
     to the seller of real  property,  Seller shall pay  recording  fees for the
     Deed (including  documentary stamp tax) and all costs of releasing existing
     liens to be released.

          (g) Escrow and Title Fees.  Escrow fees and title  insurance  premiums
     shall be allocated as elsewhere set forth herein.

          (h) Attorney's  Fees.  Each party shall bear its own fees and expenses
     of  counsel  in  connection  with the  negotiation  and  execution  of this
     Agreement and the Closing of the purchase of the Property.

          (i)  Inspection  Fees.  Buyer  shall  bear all its costs and  expenses
     incurred in connection with its due diligence  activities,  inspections and
     investigations in connection with this Agreement.

          (j) Operating Expenses.  Expenses of operating the Real Property which
     are not otherwise  accounted for herein shall be prorated as of the Closing
     Date,  regardless  of  whether  or not such  expenses  relate  to  Assigned
     Contracts.

          (k) Other Fees and Costs.  To the extent not  otherwise  provided  for
     herein,  Seller  shall  pay such  other  fees,  costs and  expenses  as are
     customarily  paid by sellers and Buyer shall pay such other fees, costs and
     expenses as are customarily  paid by buyers of real property in the Tucson,
     Arizona metropolitan area.

          (l)  Expenses  after  Closing.  Buyer shall be liable for all utility,
     insurance and other  ordinary  operating  expenses  related to the Property
     which are  attributable  to the  period on and after the  Closing  Date and
     shall  indemnify  Seller  against  its failure to pay such  amounts,  which
     indemnity  shall survive the Closing.  Except for those costs  specifically
     enumerated  herein  to be  paid by  Seller,  none of the  fees,  costs,  or
     expenses  arising from or related to this purchase and sale are to be borne
     by Seller.

          (m)  Re-proration.  If at any time  within one year after the  Closing
     Date the amount of any prorated  items shall prove to have been  incorrect,
     the party in whose  favor the error was made  shall pay to the other  party
     the sum  necessary to correct the error within ten (10) business days after
     receipt of proof of such error from the other party. Any valid bill that is
     received by Seller or Buyer  after the Closing  shall be prorated as of the
     Closing  in  accordance  with the  terms of the  indemnification  set forth
     herein,  and each party liable therefor shall pay its pro rata share within
     ten (10) days after receipt of notice and evidence of the validity thereof.
     This  Paragraph  shall  expressly   survive  the  Closing   hereunder.   No
     re-prorations  or  adjustments  shall be made more than one year  after the
     Closing  Date  absent  fraud,   deceit  or   intentional   misconduct;   no
     re-prorations or adjustments  shall be made for real property taxes (as set
     forth in Section  10(d)(i)  above) or matters  in the  aggregate  less than
     $5,000.

<PAGE>

          (n) Seller  shall pay all  accrued  employee  and  management  salary,
     bonuses, vacation and other compensation as of Closing.

     11. REPRESENTATIONS AND WARRANTIES.

          (a) Representations and Warranties by Seller. Seller hereby represents
     and  warrants  to Buyer that the  following  are true and correct as of the
     date hereof:

               (i) Seller has legal  power,  right and  authority  to enter into
          this  Agreement  and  the  instruments   referenced   herein,  and  to
          consummate the transactions  contemplated  hereby,  and this Agreement
          and the consummation of the transactions contemplated hereby have been
          duly authorized by all necessary partnership actions.

               (ii) The execution of this  Agreement and the documents  executed
          pursuant  hereto  will not  result  in a breach of or  constitute  any
          default, with or without notice or passage of time, or both, under any
          agreement,  contract,  note,  deed of trust or other document to which
          Seller is a party or by which  Seller or the  Property  is or might be
          bound.

               (iii) Seller is not a "foreign  person," as that term is used and
          defined in the Internal Revenue Code, Section 1445, as amended.

               (iv) To  Seller's  knowledge,  Seller  has not  received  written
          notice that any eminent domain,  condemnation or similar proceeding or
          conveyance  in lieu  thereof  of all or any  part of the  Property  is
          contemplated.

               (v) To Seller's knowledge, Seller has not received any notices of
          violation of any law,  rule,  regulation  or ordinance  affecting  the
          Property.

               (vi) To  Seller's  knowledge,  there  are no  actions,  suits  or
          proceedings pending or threatened against the Property.

               (vii) To Seller's  knowledge,  collectively  the actual  Seller's
          Deliveries  made by Seller and the Property Files to which Seller will
          provide  Buyer access  contains all material  information  in Seller's
          possession  which are  described in  Paragraphs  6(b) and 6(c) hereof.
          Seller has not caused any material portion of the Property Files to be
          removed  or  destroyed.  Seller  has  no  knowledge  of  any  material
          inaccuracies  in any  of the  information  contained  in the  Seller's
          Deliveries.

               (viii) Seller is not the subject of any bankruptcy proceedings.

               (ix) To Seller's  knowledge,  there are no physical or structural
          defects to the Improvements, except as disclosed to Buyer, in writing,
          or as set forth in any of the Seller's Deliveries.

<PAGE>

The  representations  and  warranties  made by  Seller in this  Agreement  shall
survive  the  Closing  Date for a period of one (1) year,  and any  action for a
breach of any representation, warranty or covenant must be made and filed within
said one (1)  year  period.  As used  herein,  "Seller's  knowledge"  means  the
current,   actual  knowledge  of  David  Strong,  Vice  President  of  Wellsford
Residential Property Trust and the only  officer/employee of Seller charged with
the day-to-day operation and ownership of the Property.

          (b)  Buyer's   Representations   and  Warranties.   Buyer  represents,
     warrants, and covenants to Seller that:

               (i) Buyer has legal power, right and authority to enter into this
          Agreement and the instruments referenced herein, and to consummate the
          transactions   contemplated   hereby,   and  this  Agreement  and  the
          consummation of the  transactions  contemplated  hereby have been duly
          authorized by all necessary actions.

               (ii) Buyer is a  corporation  duly  formed and  validly  existing
          under the laws of the State of Washington.

               (iii) Buyer has not relied on any representation or warranty made
          by Seller  or any agent or  representative  of Seller  other  than the
          Property  Representations  in  connection  with this  Agreement or the
          acquisition of the Property.

               (iv) At  Closing,  Buyer  shall  deliver to Seller a  certificate
          ("Buyer's  Certificate")  dated as of the Closing Date, executed by an
          officer of Buyer, in the form attached hereto as Exhibit I.

The representations and warranties made by Buyer in this Agreement shall survive
the Closing and shall not merge thereby.

     12 "AS IS."

<PAGE>

          (a) Buyer's  Acknowledgment.  Buyer acknowledges for Buyer and Buyer's
     successors,  heirs  and  assignees,  (i) that  Buyer is  being  afforded  a
     reasonable  opportunity  to  inspect  and  investigate  the  Property,  all
     improvements thereon and all aspects relating thereto, either independently
     or through  agents and experts of Buyer's  choosing  and (ii) that Buyer is
     acquiring  the Property  based solely upon  Buyer's own  investigation  and
     inspection  thereof  and  the  Property  Representations,   and  (iii)  the
     provisions  of this  Paragraph  12 shall  survive  Closing and shall not be
     merged therein.  SELLER AND BUYER AGREE THAT THE PROPERTY SHALL BE SOLD AND
     THAT BUYER SHALL ACCEPT  POSSESSION OF THE PROPERTY ON THE CLOSING DATE "AS
     IS, WHERE IS, WITH ALL FAULTS" WITH NO RIGHT OF SET-OFF OR REDUCTION IN THE
     PURCHASE  PRICE,  AND THAT EXCEPT AS EXPLICITLY SET FORTH IN THIS AGREEMENT
     SUCH SALE SHALL BE WITHOUT  REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS
     OR IMPLIED, INCLUDING,  WITHOUT LIMITATION,  WARRANTY OF INCOME, POTENTIAL,
     OPERATING  EXPENSES,  USES,  MERCHANTABILITY  OR FITNESS  FOR A  PARTICULAR
     PURPOSE (BUT  SPECIFICALLY  EXCLUDING  THE LIMITED  WARRANTY OF TITLE TO BE
     GIVEN IN THE DEED AND OTHER CONVEYANCE  DOCUMENTS),  AND SELLER DOES HEREBY
     DISCLAIM AND RENOUNCE ANY SUCH  REPRESENTATION  OR WARRANTY  EXCEPT FOR THE
     PROPERTY REPRESENTATIONS. BUYER SPECIFICALLY ACKNOWLEDGES THAT BUYER IS NOT
     RELYING  ON ANY  REPRESENTATIONS  OR  WARRANTIES  OF ANY  KIND  WHATSOEVER,
     EXPRESS OR IMPLIED,  FROM SELLER,  OTHER AGENTS OR BROKERS AS TO ANY MATTER
     CONCERNING  OR  RELATED TO THE  PROPERTY  (EXCEPT  FOR THE  REPRESENTATIONS
     EXPRESSLY  SET FORTH HEREIN AND THE LIMITED  WARRANTY OF TITLE SET FORTH IN
     THE DEED), INCLUDING WITHOUT LIMITATION: (1) THE CONDITION OR SAFETY OF THE
     PROPERTY  OR ANY  IMPROVEMENTS  THEREON,  INCLUDING,  BUT NOT  LIMITED  TO,
     PLUMBING, SEWER, HEATING AND ELECTRICAL SYSTEMS, ROOFING, AIR CONDITIONING,
     IF ANY,  FOUNDATIONS,  SOILS AND GEOLOGY INCLUDING  HAZARDOUS MATERIALS (AS
     HEREINAFTER  DEFINED),  LOT SIZE,  OR  SUITABILITY  OF THE  PROPERTY OR ITS
     IMPROVEMENTS FOR A PARTICULAR PURPOSE; (2) WHETHER THE APPLIANCES,  IF ANY,
     PLUMBING  OR  UTILITIES  ARE IN  WORKING  ORDER;  (3) THE  HABITABILITY  OR
     SUITABILITY  FOR  OCCUPANCY  OF  ANY  STRUCTURE  AND  THE  QUALITY  OF  ITS
     CONSTRUCTION;  (4) THE FITNESS OF ANY  PERSONAL  PROPERTY;  (5) WHETHER THE
     IMPROVEMENTS  ARE STRUCTURALLY  SOUND, IN GOOD CONDITION,  OR IN COMPLIANCE
     WITH  APPLICABLE  CITY,  COUNTY,  STATE  OR  FEDERAL  STATUTES,   CODES  OR
     ORDINANCES;  OR (6)  MATTERS  RELATED TO THE LEASES OR THE  TENANTS.  BUYER
     FURTHER  ACKNOWLEDGES  AND AGREES  THAT IT IS RELYING  SOLELY  UPON ITS OWN
     INSPECTION  OF THE  PROPERTY,  REVIEW  OF  THE  LEASES  AND  INVESTIGATIONS
     CONCERNING  THE  TENANTS  AND NOT  UPON ANY  REPRESENTATIONS  MADE TO IT BY
     SELLER,  ITS  PARTNERS,  OFFICERS,  DIRECTORS,   CONTRACTORS,  MANAGERS  OR
     EMPLOYEES NOR ANY PERSON WHOMSOEVER.  ANY REPORTS, REPAIRS OR WORK REQUIRED
     BY BUYER ARE TO BE THE SOLE  RESPONSIBILITY  OF BUYER AND BUYER AGREES THAT
     THERE  IS NO  OBLIGATION  ON THE  PART  OF  SELLER  TO  MAKE  ANY  CHANGES,
     ALTERATIONS, OR REPAIR TO THE PROPERTY.

<PAGE>

          (b) "Hazardous Materials" Defined. For purposes of this Agreement, the
     term  "Hazardous  Material"  shall mean any substance,  chemical,  waste or
     material  that is or  becomes  regulated  by any  federal,  state  or local
     governmental   authority   because   of   its   toxicity,   infectiousness,
     radioactivity,  explosiveness,  ignitability,  corrosiveness or reactivity,
     including,  without limitation, those substances regulated by the Hazardous
     Waste Laws.

          (c) Hazardous  Materials.  In addition to and not by way of limitation
     of the sale of the Property on an "AS IS" basis under this Agreement, Buyer
     acknowledges that Seller makes no representations or warranties  whatsoever
     to Buyer  regarding (i) the contents,  completeness  and/or accuracy or any
     environmental assessments or surveys contained in the Property Files or the
     ability of Buyer to rely  thereon,  or (ii) the  presence or absence of any
     Hazardous  Materials  in,  at, or under the  Property.  Buyer has made such
     studies and investigations,  conducted such tests and surveys,  and engaged
     such  specialists as Buyer has deemed  appropriate  to evaluate  fairly the
     Property  and its  risks  from an  environmental  and  Hazardous  Materials
     standpoint.

     13 SELLER'S  COVENANTS.  With respect to the period between the date hereof
and the Closing Date, Seller covenants as follows:

          (a)  Operations  Prior to Closing.  Between the Effective Date and the
     first to  occur of the  Closing  Date or the  date of  termination  of this
     Agreement,  Seller shall (i) operate and manage the Property in  accordance
     with  its  customary  operating  procedures,  (ii)  perform  all  regularly
     scheduled  maintenance  and  (iii) not  cancel  any  maintenance  contracts
     without Buyer's consent.

          (b) Contracts.  Without Buyer's prior written  consent,  which consent
     shall  not be  unreasonably  withheld,  Seller  shall  not  enter  into any
     contract  with respect to the  Property  which will survive the Closing and
     for which Buyer shall be liable.

          (c) Further Liens. Without Buyer's prior written consent, Seller shall
     not further  voluntarily  encumber the Property with any mortgage,  lien or
     deed of trust which will not be removed on or before the Closing Date.

          (d) Insurance. Seller will maintain property insurance coverage on the
     Property in accordance with Seller's customary operating procedures.

If  Buyer  fails  to close  as a  result  of a  breach  of any of the  foregoing
covenants,  then Buyer  shall have the  remedies  set forth in  Paragraph  17(b)
hereof. No obligations under this Paragraph 13 shall survive the Closing.

     14 CONDITIONS TO CLOSING.

          (a) Seller's  Conditions.  The obligation of Seller to sell and convey
     the Property  under this  Agreement is subject to the  satisfaction  of the
     following conditions  precedent or conditions  concurrent (the satisfaction
     of which may be waived only in writing by Seller):

<PAGE>

               (i) Delivery and  execution  by Buyer of all monies,  items,  and
          other instruments required to be delivered by Buyer to Seller;

               (ii)  Buyer's  warranties  and  representations  set forth herein
          shall be true and correct as of the Closing Date;

               (iii) All of the  actions  by Buyer  required  by this  Agreement
          shall have been completed; and

               (iv)  There  shall be no  uncured  default by Buyer of any of its
          obligations under this Agreement.

               (v) Seller shall have been completely  released from the Existing
          Loan.

Seller shall have no duty or obligation to cause the  satisfaction of any of its
conditions to Closing set forth in this Paragraph 14(a).

          (b)  Buyer's  Conditions.  The  obligation  of  Buyer to  acquire  the
     Property  under  this  Agreement  is  subject  to the  satisfaction  of the
     following conditions  precedent or conditions  concurrent (the satisfaction
     of which may be waived only in writing by Buyer):

               (i)  Delivery  and  execution  by  Seller  of all items and other
          instruments to be delivered by Seller;

               (ii) Seller's  warranties  and  representations  set forth herein
          shall be true and correct as of the Closing Date;

               (iii) The Title  Company  shall be  prepared to issuing the Title
          Policy subject only to the Permitted Exceptions;

               (iv) All of the  actions  by Seller  required  by this  Agreement
          shall have been taken; and

               (v) There  shall be no  uncured  default  by Seller of any of its
          obligations under this Agreement.

               (vi) Buyer shall have assumed the Existing Loan.

Notwithstanding  the  foregoing,  if a condition of Buyer is  unsatisfied on the
Closing Date because of a breach of this Agreement by Buyer, then such condition
shall be deemed  satisfied.  Buyer shall have no duty or obligation to cause the
satisfaction  of any of its  conditions  to Closing set forth in this  Paragraph
14(b).

     15 DAMAGE OR DESTRUCTION OF THE PROPERTY; CONDEMNATION.

<PAGE>

          (a) Damage or Destruction of the Property.

               (i) If,  between the  Effective  Date and the Closing  Date,  the
          Property  is  "materially  damaged or  destroyed,"  Buyer may elect in
          writing,  within fifteen (15) days after receipt of notice from Seller
          of such damage or  destruction,  accompanied by information  regarding
          the amount and payment of insurance, to terminate this Agreement or to
          purchase the Property without regard to such damage or destruction. If
          Buyer fails to notify Seller of Buyer's election, Buyer will be deemed
          to have elected to proceed with the purchase of the Property. If Buyer
          purchases the Property,  Seller shall have no obligation to repair any
          such damage or destruction,  nor shall the Purchase Price be adjusted.
          "Materially damaged or destroyed" shall mean damage or destruction the
          repair or replacement of which would exceed $100,000, as determined by
          a licensed general  contractor  approved by Buyer and Seller. If prior
          to the Closing Date, the Property sustains nonmaterial damage,  Seller
          shall  assign its rights to  insurance  proceeds  as  provided  for in
          Paragraph  15(a)(iii)  hereof.  In addition,  Seller shall  deliver to
          Buyer an amount equal to the deductible attributable to such casualty.

               (ii) If Buyer elects to terminate  this  Agreement in  accordance
          with Paragraph 15(a)(i), Buyer shall notify Seller of such election in
          writing,  this  Agreement  shall be of no  further  force and  effect,
          subject to Paragraph 17(c), and the Earnest Money shall be returned to
          Buyer.

               (iii) If Buyer  elects or is required to  purchase  the  Property
          despite such damage or destruction,  Seller shall assign its rights to
          and Buyer shall be entitled to receive any insurance proceeds to which
          Seller is entitled or shall  credit  against  the  Purchase  Price any
          insurance  proceeds  actually  received by Seller prior to the Closing
          with respect to such  casualty.  In addition,  Seller shall deliver to
          Buyer an amount equal to the deductible attributable to such casualty.

          (b)  Condemnation.  If prior to Closing all or a "material part of the
     Property" is subject to a proposed taking by any public  authority,  Seller
     shall promptly notify Buyer of such proposed taking and Buyer may terminate
     this  Agreement  by notice to Seller  within  five (5) days  after  written
     notice thereof.  If Buyer so elects,  this Agreement shall be of no further
     force and effect. If Buyer does not so terminate this Agreement,  or if the
     taking is not as to a material part of the Property, Buyer shall accept all
     of the Property  subject to the taking  without a reduction in the Purchase
     Price and shall receive at Closing an assignment of all of Seller's  rights
     to any  condemnation  award or if an award  was  previously  received,  the
     amount of such award.  For the  purposes of this  paragraph,  a taking of a
     "material  part of the Property"  would be a taking that reduces the market
     value of the Property by in excess of $500,000 or would  materially  impair
     the  ability  of the owner of the  project  to manage it as a  multi-family
     project.  If Buyer and  Seller  cannot  agree on  whether a taking was of a
     "material part of the Property,"  they shall jointly retain a disinterested
     MAI  appraiser  with  experience  in valuing  multi-family  projects in the
     Tucson,   Arizona   metropolitan  area  for  the  purpose  of  making  such
     determination. Such appraiser's determination shall be final and binding on
     Buyer and Seller.  If the  determination of whether a taking of a "material
     part of the Property"  has occurred is not  determined by the Closing Date,
     then Seller shall

<PAGE>

     have the right to extend the Closing Date for a period not to exceed thirty
     (30) days to enable such  determination  to be made by an  appraiser in the
     manner specified in this Paragraph.

          (c) Repairs.  If the Property is damaged prior to the Closing Date and
     such damage  creates in Seller's  judgment the need for  immediate  repair,
     Seller  shall  be  entitled  to  commence  such  repairs,  and  choose  the
     contractor and method of repair in a timely manner.  Casualty proceeds,  if
     any, paid as a result of damage requiring immediate repair shall be used in
     paying  the  cost of such  repairs,  and  notwithstanding  anything  to the
     contrary herein, shall not be credited against the Purchase Price.

     16  COMMISSIONS,  EXPENSES  AND  CREDITS.  Buyer and Seller  represent  and
warrant to each other that no real estate broker or agent has been authorized to
act on either party's behalf,  except that Buyer has engaged Thayer  Residential
("Buyer's  Broker") as its exclusive broker and Seller has engaged Hendricks and
Partners  ("Seller's  Broker") as its exclusive  Broker.  Seller shall be solely
responsible  for the  payment  of a fee of 1.00% of the gross  sales  price (the
"Commission")  to Buyer's  Broker  payable only if and when Seller  receives the
Purchase  Price at  Closing.  Seller  shall also be solely  responsible  for the
payment  of any fees due to  Seller's  Broker  pursuant  to  separate  agreement
between Seller and Seller's Broker.  Buyer hereby  indemnifies  Seller and holds
Seller harmless from any and all demands or claims which now or hereafter may be
asserted against Seller for any brokerage fees,  commissions or similar types of
compensation  which may be claimed by Buyer's  Broker or any other  broker which
was engaged or which  claims to have been  engaged by Buyer and all expenses and
costs in  handling  or  defending  any  such  demand  or  claim.  Seller  hereby
indemnifies  Buyer and holds Buyer  harmless  from any and all demands or claims
which now or hereafter may be asserted  against  Buyer for any  brokerage  fees,
commissions or similar types of compensation  which may be claimed by any broker
(excluding  Buyer's  Broker)  which  was  engaged  or which  claims to have been
engaged by Seller and all expenses  and costs in handling or defending  any such
demand or claim.

     17 REMEDIES.

          (a) Seller's Remedies.

               (i) If Buyer defaults in its obligation to purchase the Property,
          then Buyer shall  automatically  and  immediately  forfeit the Earnest
          Money,  and the Title  Company  shall  deliver  the  Earnest  Money to
          Seller,  and neither  party  shall be  obligated  to proceed  with the
          purchase and sale of the  Property.  The Earnest  Money is  liquidated
          damages  and  recourse  to the  Earnest  Money  is  Seller's  sole and
          exclusive  remedy for  Buyer's  failure to perform its  obligation  to
          purchase  the  Property.  Seller  expressly  waives  the  remedies  of
          specific performance and additional damages for such default by Buyer.
          SELLER AND BUYER  ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE DIFFICULT
          TO DETERMINE,  AND THAT THE EARNEST MONEY IS A REASONABLE  ESTIMATE OF
          SELLER'S  DAMAGES  RESULTING FROM A DEFAULT BY BUYER IN ITS OBLIGATION
          TO PURCHASE THE  PROPERTY.  SELLER AND BUYER  FURTHER  AGREE THAT THIS
          PARAGRAPH  17(a)i) IS  INTENDED  TO AND DOES  LIQUIDATE  THE AMOUNT OF
          DAMAGES DUE SELLER,  AND SHALL BE SELLER'S

<PAGE>

          EXCLUSIVE REMEDY AGAINST BUYER, BOTH AT LAW AND IN EQUITY ARISING FROM
          OR RELATED TO A BREACH BY BUYER OF ITS  OBLIGATION TO  CONSUMMATE  THE
          TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

               (ii) In the event of Buyer's  continuing default after Closing in
          any of its covenants in this  Agreement  which survive  Closing or any
          documents  delivered by Buyer at Closing,  and such default  continues
          for more than thirty (30) days after  written  notice of such  default
          from Seller, Seller shall be entitled to pursue any remedies available
          at law or in equity.

          (b) Buyer's Remedies.

                    (i)  If  Seller  defaults  in its  obligation  to  sell  the
               Property  as  required by this  Agreement,  at Buyer's  election,
               either (A) this Agreement shall  terminate,  and all payments and
               things of value,  including the Earnest Money,  provided by Buyer
               hereunder  shall be returned to Buyer and Buyer may  recover,  as
               its sole  recoverable  damages (but without limiting its right to
               receive a refund of the  Earnest  Money),  its  direct and actual
               out-of-pocket  expenses and costs in connection  with Buyer's due
               diligence activities related to the Property, together with legal
               and  accounting  fees  incurred  in  Buyer's  syndication,  which
               damages shall not exceed  $100,000.00 in any event,  or (B) Buyer
               may  seek  specific   performance  of  this  agreement  (but  not
               damages).  SELLER AND BUYER  FURTHER  AGREE  THAT THIS  PARAGRAPH
               17(b)(i)  IS INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE
               BUYER AND THE REMEDIES  AVAILABLE TO BUYER,  AND SHALL BE BUYER'S
               EXCLUSIVE  REMEDY  AGAINST  SELLER,  BOTH  AT LAW  AND IN  EQUITY
               ARISING  FROM OR RELATED TO A BREACH BY SELLER OF ITS  OBLIGATION
               TO CONSUMMATE THE  TRANSACTIONS  CONTEMPLATED  BY THIS AGREEMENT.
               UNDER NO  CIRCUMSTANCES  MAY BUYER SEEK OR BE ENTITLED TO RECOVER
               ANY SPECIAL,  CONSEQUENTIAL,  PUNITIVE,  SPECULATIVE  OR INDIRECT
               DAMAGES,  ALL OF WHICH BUYER SPECIFICALLY WAIVES, FROM SELLER FOR
               ANY BREACH BY SELLER OF ITS  OBLIGATIONS  UNDER  THIS  AGREEMENT.
               BUYER  SPECIFICALLY  WAIVES THE RIGHT TO FILE ANY LIS  PENDENS OR
               ANY LIEN AGAINST THE PROPERTY UNLESS AND UNTIL IT HAS IRREVOCABLY
               ELECTED TO SEEK SPECIFIC  PERFORMANCE  OF THIS  AGREEMENT AND HAS
               FILED AN ACTION SEEKING SUCH REMEDY.

                    (ii) In the  event  of  Seller's  continuing  default  after
               Closing in any of its covenants in this  Agreement  which survive
               Closing or any documents delivered by Seller at Closing, and such
               default  continues  for more than thirty  (30) days after  either
               written  notice  of such  default  from  Buyer,  Buyer  shall  be
               entitled to pursue its actual and direct damages as limited above
               or to sue for specific  performance as Buyer's sole and exclusive
               remedy for such default.

          (c)  Provisions  Applicable  to  Buyer  and  Seller.   Notwithstanding
     anything to the contrary herein, in the event of any litigation arising out
     of this  Agreement,  the  court  shall  award to the  prevailing  party all
     reasonable  costs and expenses of litigation,  including  attorneys'  fees,
     courts  costs,  expert  witness fees and other  costs.  The  limitation  on
     remedies set forth elsewhere in this

<PAGE>

     Paragraph  17 shall  not apply to limit the  rights of a  prevailing  party
     under this  Paragraph  17(c).  The  provisions  of this  Paragraph 17 shall
     survive Closing or termination of this Agreement.

     18 NOTICES. All notices,  requests or demands to a party hereunder shall be
in  writing  and shall be  effective  (a) when  delivered  personally,  (b) when
received by overnight courier service or facsimile  telecommunication  (provided
that a copy of such  notice,  request  or demand is  deposited  into the  United
States mail within one (1) business day of the facsimile  transmission),  or (c)
three (3) days after being deposited into the United States mail (sent certified
or registered,  return receipt requested), in each case addressed as follows (or
to such other  address as Buyer or Seller may designate in writing in accordance
with this Paragraph 18):

                  If to Seller:
                  -------------

                  Wellsford Sonterra LLC
                  1623 Blake Street, Suite 270
                  Denver, Colorado  80202
                  Attention: David Strong
                  Telecopy No. (303) 534-4396
                  Confirmation No. (303) 534-4398

                  With a copy to:
                  ---------------

                  Howard J. Pollack, Esq.
                  Brownstein Hyatt & Farber, P.C.
                  410 17th Street, 22nd Floor
                  Denver, Colorado 80202
                  Telecopy No.: (303) 223-1111
                  Confirmation No.: (303) 223-1100

                  If to Buyer:
                  ------------

                  Thayer Residential
                  4550 177th Avenue, S.E.
                  Bellevue, Washington  98006
                  Attention:  Bruce Thayer
                  Telecopy No. (     )
                                -----  -----------------
                  Confirmation No. (      )
                                    ------  ---------------

                  With a copy to:

<PAGE>

                  Matthew Straight, Esq.
                  Oseran, Hahn, Spring & Watts, P.S.
                  850 Skyline Tower
                  10900 Northeast 4th Street
                  Bellevue, Washington 98004
                  Telecopy No.: (425) 462-7114
                  Confirmation No.: (425) 455-3900

     19 MISCELLANEOUS.

          (a)  No  Waiver.  No  waiver  by  any  party  of  the  performance  or
     satisfaction  of any covenant or condition shall be valid unless in writing
     and  shall  not be  considered  to be a waiver  by such  party of any other
     covenant or condition hereunder.

          (b) Entire  Agreement.  This Agreement  contains the entire  agreement
     between the parties regarding the Property and supersedes any and all prior
     agreements, whether written or oral, between the parties regarding the same
     subject. This Agreement may only be modified in writing.

          (c)  Survival.  Except  for  (i)  the  representations  and  indemnity
     obligations of Buyer and Seller under this Agreement, (ii) the post-closing
     obligations  of  Buyer  and  Seller  under  this  Agreement,  and  (iii) as
     otherwise specifically provided in this Agreement,  none of the agreements,
     warranties and representations contained herein shall survive Closing.

          (d)  Successors.  Subject to Paragraph  19(e) hereof,  this  Agreement
     shall  bind and inure to the  benefit  of the  parties  hereto and to their
     respective legal representatives, successors and permitted assigns.

          (e)  Binding  Effect;  Assignment.  Buyer  shall not have any right to
     assign,  transfer or encumber its rights under this  Agreement  without the
     prior written consent of Seller,  which Seller may withhold in its sole and
     absolute discretion,  except that Buyer shall have the right to assign this
     Agreement to an entity managed by a limited liability company  wholly-owned
     by Bruce  Thayer  and  created  for the  purpose of this  transaction.  Any
     assignment  permitted under this Agreement shall not relieve Buyer from any
     liability  it has under this  Agreement.  Buyer  represents,  warrants  and
     certifies to Seller that Buyer has not assigned,  transferred or encumbered
     or agreed to assign, transfer or encumber,  directly or indirectly,  all or
     any portion of its rights or obligations under this Agreement.

          (f) Relationship of the Parties.  The parties acknowledge that neither
     party is an agent for the other party,  and that neither party shall or can
     bind or enter into agreements for the other party.

          (g) Governing Law. This  Agreement  shall be governed by and construed
     in accordance  with the laws of the State of Arizona  without  reference to
     principles of conflicts of law.

<PAGE>

          (h)  Severability.  If any  provision of this  Agreement is held to be
     illegal,  invalid  or  unenforceable  under  present or future  laws,  such
     provision shall be fully  severable;  this Agreement shall be construed and
     enforced as if such illegal,  invalid or unenforceable  provision had never
     comprised a part of this  Agreement;  and the remaining  provisions of this
     Agreement  shall  remain in full force and effect and shall not be affected
     by the illegal, invalid or unenforceable provision or by its severance from
     this Agreement.

          (i) Possession; Risk of Loss. Seller shall deliver to Buyer possession
     of the Property on the Closing Date,  subject to the Leases and the matters
     set forth in the Approved Title Commitment. All risk of loss or damage with
     respect  to the  Property  shall pass from  Seller to Buyer on the  Closing
     Date.

          (j) Review by Counsel. The parties acknowledge that each party and its
     counsel have reviewed and approved this  Agreement,  and the parties hereby
     agree  that  the  normal  rule  of  construction  to the  effect  that  any
     ambiguities  are to be  resolved  against the  drafting  party shall not be
     employed in the  interpretation  of this  Agreement  or any  amendments  or
     exhibits hereto.

          (k) Return of Documents.  Upon  termination  of this Agreement for any
     reason by either party, Buyer shall have the obligation to return to Seller
     all documents and copies thereof and any other information or documentation
     prepared by any third party in conjunction  with the Buyer's  inspection of
     the Property.

          (l)  Exhibits.  The  Exhibits  attached  hereto  form a part  of  this
     Agreement and are incorporated herein by this reference.

          (m) No Recording. The provisions hereof shall not constitute a lien on
     the  Property  and this  Agreement  shall not be placed or  suffered  to be
     placed by Buyer for recording  with the office of the recorder  (clerk) for
     the county in which the Property is located.  Buyer hereby  appoints Seller
     as Buyer's true and lawful attorney-in-fact,  coupled with an interest, for
     the  purposes of the  execution  of such  documents  and doing such acts as
     shall be  necessary  to  effect  the  discharge  of the  recording  of this
     Agreement if such recording  shall have been  accomplished  in violation of
     this Paragraph.  Recordation of this Agreement or any memorandum  hereof by
     Buyer or its agents shall  constitute a breach of this  Agreement and shall
     entitle  Seller at its option to terminate this Agreement and to pursue its
     remedies resulting from such breach.

          (n)  Counterparts.  This  Agreement  may be  executed in any number of
     counterparts  each of which,  when taken  together,  shall  constitute  one
     agreement.  This  Agreement  shall only be  effective if a  counterpart  is
     signed by both Seller and Buyer.

          (o) Time of Essence.  Time is of the essence in the performance of all
     obligations under this Agreement.

          (p)  Confidentiality.  Subject to the last sentence of this Paragraph,
     the parties hereto agree that neither party shall make an  announcement  of
     the  transaction  contemplated  herein to third  parties  without the prior
     written consent of the other party hereto. Subject to the last sentence

<PAGE>

     of this  Paragraph and except as required by court order or by operation of
     law, the contents of this Agreement and of all  information in the Property
     Files shall remain  confidential and shall only be disclosed to those third
     parties  necessary  to  facilitate  the  consummation  of  the  transaction
     contemplated hereby.

                            [SIGNATURE PAGE FOLLOWS]

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.

 SELLER:

 WELLSFORD SONTERRA LLC,
 an Arizona limited liability company

 By:      WELLSFORD  REAL  PROPERTIES,  INC., a Maryland  corporation,
          Its Manager

 By:      /s/ David M. Strong
          -----------------------------------------------------
          Name: David M. Strong
          Title: Vice President

 BUYER:

 THAYER RESIDENTIAL, INC.
 a Washington Corporation

 By:      /s/ Bruce Thayer
          -----------------------------------------------------
          Name: Bruce Thayer
          Title: President

<PAGE>

                                    EXHIBIT A
                                LEGAL DESCRIPTION

Blocks 19, 21, 22, 23 of the  Resubdivision  of Williams  Centre,  Pima  County,
Arizona,  according  to the plat of  record  in the  office  of the Pima  County
Recorder in Book 39 of Maps at Page 28.

<PAGE>

                                    EXHIBIT B

                                PERSONAL PROPERTY

<PAGE>

                                    EXHIBIT C

                             RENT ROLL CERTIFICATION

     The  undersigned  hereby  certifies to  ___________________________________
that,  to the best of the  undersigned's  knowledge  and  based  on  information
provided to it by its property manager,  attached hereto and incorporated herein
by this  reference  is an accurate  current  rent roll for  Sonterra at Williams
Centre  Apartments,  which  describes  all of the  Leases as of the date of this
Certification, including a schedule of security deposits.

     This  Certification  shall  survive  for a period of one year from the date
hereof,  and any action for a breach  hereof must be made and filed  within said
one-year period.  As used herein,  "undersigned's  knowledge" means the current,
actual  knowledge of David Strong,  Vice President of Wellsford Real Properties,
Inc the only  employee/officer  of Seller charged with the day-to-day  operation
and ownership of the Property.

     EXECUTED this _______ day of _________________, 2000.

   WELLSFORD SONTERRA LLC,
   an Arizona limited liability company

   By:      WELLSFORD REAL PROPERTIES, INC.
             a Maryland corporation, Its Manager

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

<PAGE>

                                    EXHIBIT D

                               ASSIGNED CONTRACTS

1    The following  service  contracts and other contracts and agreements  which
     affect or relate to the Property which Seller requires that Buyer assume in
     connection with the closing of the Property:

                                [TO BE INSERTED]

2    All contracts and agreements which constitute Permitted Exceptions.

3    Any other contracts and agreements that Buyer and Seller agree in writing.

<PAGE>

WHEN RECORDED RETURN TO:
[Buyer's address]

                                    EXHIBIT E

                              SPECIAL WARRANTY DEED

     Wellsford Sonterra LLC, an Arizona limited liability company,  ("Grantor"),
for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other
good      and      valuable      consideration      in     hand      paid     by
____________________________________ (hereinafter _____ called _____ "Grantee"),
_____     whose     _____      mailing      _____      address      _____     is
________________________________________________                      Attention:
__________________________,  the  receipt  and  sufficiency  of which are hereby
acknowledged, does hereby GRANT, SELL, CONVEY, ASSIGN and DELIVER to Grantee the
real  property  situated  in Pima  County,  Arizona,  described  in Exhibit  "A"
attached hereto and made a part hereof  (hereinafter called the "Real Property")
together  with all  improvements,  fixtures and  appurtenances  affixed  thereto
(hereinafter called the "Improvements") (all of the foregoing hereinafter called
the  "Property"),  subject to general  real estate taxes on the Property for the
current  year and all  encumbrances  and all other  matters  of record  and such
additional  matters as would be disclosed by an accurate  survey of the Property
or a visual  inspection  thereof (all of the  foregoing  hereinafter  called the
"Permitted Encumbrances").

     TO HAVE AND TO HOLD the Property, together with all and singular the rights
and appurtenances  thereto in anyways belonging unto Grantee, its successors and
assigns  forever,  and Grantor  does hereby bind itself and its  successors  and
assigns  to warrant  and  forever  defend all and  singular  the  Property  unto
Grantee,  its successors and assigns  against every person  whomsoever  lawfully
claiming,  or to claim  the  same,  or any part  thereof  by,  through  or under
Grantor, but not otherwise, subject however, to the Permitted Encumbrances.

     Current ad valorem  taxes on the  Property  having been  prorated,  Grantee
hereby assumes the payment thereof.

<PAGE>

     IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor as of
the date set forth in the  acknowledgment  to be  effective  the  _______ day of
______________, 2000.

       GRANTOR:

       WELLSFORD SONTERRA LLC,
       an Arizona limited liability company

       By:      WELLSFORD REAL PROPERTIES, INC.,
                 a Maryland corporation, Its Manager

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

STATE OF                                    )
         ---------------------------
                                            )
COUNTY OF                           )
          -----------------

     This   instrument  was   acknowledged   before  me  on  this  ____  day  of
______________,  2000, by  _______________,  the _____________ of Wellsford Real
Properties,  Inc., as sole manager of Wellsford Sonterra LLC, an Arizona limited
liability company.

     WITNESS my hand and official seal.

     My commission expires:

                 -----------------------------------
                 Notary Public

<PAGE>

                                    EXHIBIT A
                            TO SPECIAL WARRANTY DEED

                                LEGAL DESCRIPTION

<PAGE>

                                    EXHIBIT B
                            TO SPECIAL WARRANTY DEED

                             PERMITTED ENCUMBRANCES

<PAGE>

                                    EXHIBIT F

                          SPECIAL WARRANTY BILL OF SALE

     Wellsford  Sonterra LLC, an Arizona limited liability company  ("Grantor"),
for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other
good      an      valuable      consideration      in      hand      paid     by
__________________________________  ("Grantee")  the receipt and  sufficiency of
which are hereby  acknowledged,  does hereby  GRANT,  SELL,  CONVEY,  ASSIGN and
DELIVER to Grantee all right,  title and  interest of Assignor in the  following
property,  excluding  without  limitation  any  personal  property  owned by the
tenants of the real property more  particularly  described on Exhibit A attached
hereto and  incorporated  herein by this reference (the "Real Property") and the
property  manager  of the  Property  (all  of the  following  being  hereinafter
collectively referred to as the "Personal Property"):

          (a) All fixtures,  equipment,  appliances, and other items of personal
     property owned by Assignor and attached to or located on the Real Property;
     and

          (b)  All  assignable  or  transferable  intangible  property  used  in
     connection  with  the  Real  Property,  including  (A) any  guaranties  and
     warranties  pertaining  to the Real  Property,  (B) all  rights  to  obtain
     utility  service  in  connection  with the Real  Property,  (C)  assignable
     licenses and other  governmental  permits and  permissions  relating to the
     Real Property,  and (D) any assignable interest in the trade name "Sonterra
     at Williams Centre Apartments."

     Attached hereto as Exhibit B and incorporated herein by this reference is a
list  of  the  tangible  personal  property  for  Sonterra  at  Williams  Centre
Apartments.

     TO HAVE AND TO HOLD the Personal  Property,  together with all and singular
the rights and  appurtenances  thereto in anywise  belonging  unto Grantee,  its
successors  and assigns  forever,  and  Grantor  does hereby bind itself and its
successors  and  assigns to warrant  and  forever  defend all and  singular  the
Personal Property unto Grantee,  its successors and assigns against every person
whomsoever  lawfully  claiming,  or to claim the same,  or any part  thereof by,
through or under Grantor,  but not otherwise,  subject however, to the permitted
encumbrances  described in Exhibit C attached  hereto and made a part hereof and
any other matters of record.

     GRANTOR  HAS NOT  MADE,  AND  DOES NOT  HEREBY  MAKE,  ANY  REPRESENTATION,
WARRANTY OR  COVENANT,  EXPRESS OR IMPLIED,  WITH  RESPECT TO THE  HABITABILITY,
MERCHANTABILITY,  SUITABILITY  OR FITNESS  FOR  PARTICULAR  USE OF THE  PERSONAL
PROPERTY OR ANY COMPONENT  THEREOF,  IN ANY RESPECT  WHATSOEVER OR IN CONNECTION
WITH OR FOR THE  PURPOSES  AND USES OF GRANTEE,  OR,  EXCEPT FOR THE  WARRANTIES
EXPRESSLY  CONTAINED HEREIN, ANY OTHER  REPRESENTATION,  WARRANTY OR COVENANT OF
ANY KIND AND  CHARACTER,  EXPRESS OR  IMPLIED,  WITH  RESPECT  THERETO;  AND THE

<PAGE>

PERSONAL  PROPERTY  IS SOLD,  TRANSFERRED  AND  ASSIGNED  TO GRANTEE "AS IS" AND
"WHERE IS."

     IN WITNESS WHEREOF, this Bill of Sale and Assignment is executed by Grantor
the ___ day of ___________, 2000.

      GRANTOR:

      WELLSFORD SONTERRA LLC,
      an Arizona limited liability company

      By:      WELLSFORD REAL PROPERTIES, INC.,
               a Maryland corporation, Its Manager

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

STATE OF                                    )
         ---------------------------
                                            )
COUNTY OF                           )
          -----------------

     This   instrument  was   acknowledged   before  me  on  this  ____  day  of
______________,  2000, by  _______________________  as ____________ of Wellsford
Real  Properties,  Inc., the sole manager of Wellsford  Sonterra LLC, an Arizona
limited liability company.

         WITNESS my hand and official seal.

         My commission expires:

                                -----------------------------------
                                Notary Public

<PAGE>

                                    EXHIBIT A
                        TO SPECIAL WARRANTY BILL OF SALE

                                LEGAL DESCRIPTION

<PAGE>

                                    EXHIBIT B
                        TO SPECIAL WARRANTY BILL OF SALE

                                PERSONAL PROPERTY

<PAGE>

                                    EXHIBIT C
                        TO SPECIAL WARRANTY BILL OF SALE

                             PERMITTED ENCUMBRANCES

<PAGE>

                                    EXHIBIT G

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

     Wellsford Sonterra LLC, an Arizona limited liability company, ("Assignor"),
for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other
good      and      valuable      consideration      in     hand      paid     by
__________________________________  ("Assignee"), the receipt and sufficiency of
which are hereby acknowledged, does hereby assign to Assignee, all of Assignor's
right, title and interest in and to the following:

          1 All tenant leases (the "Tenant Leases")  affecting or related to the
     real property more particularly  described on Exhibit A attached hereto and
     made a part hereof (the "Property"),  including,  but not limited to, those
     Tenant  Leases  described  on Exhibit "B"  attached  hereto and made a part
     hereof; and

          2 Those service contracts and other contracts affecting or relating to
     the Property more  particularly  described on Exhibit B attached hereto and
     made a part hereof (the "Assigned Contracts").

     Assignee  hereby  accepts the foregoing  assignment  and hereby assumes the
obligations, liabilities and responsibilities of Assignor under and agrees to be
bound  by the  terms  and  provisions  of the  Tenant  Leases  and the  Assigned
Contracts,  including, without limitation, all obligations of the landlord under
the Tenant Leases  relating to security  deposits.  Assignor shall remain liable
for the  payment of any amounts  due with  respect to the Tenant  Leases and the
Assigned Contracts relating to the period prior to the date hereof.

     If  any  litigation  between  Assignor  and  Assignee  arises  out  of  the
obligations  of the parties under this  Assignment or concerning  the meaning or
interpretation of any provision contained herein, the losing party shall pay the
prevailing   party's  costs  and  expenses  of  such   litigation  or  mandatory
arbitration including, without limitation, reasonable attorneys' fees.

     This Assignment shall be binding on and inure to the benefit of the parties
hereto, their successors and assigns.

<PAGE>

     IN WITNESS WHEREOF,  Assignor and Assignee have executed this Assignment on
the dates set forth below.

           ASSIGNOR:

           WELLSFORD SONTERRA LLC,
           an Arizona limited liability company

           By:      WELLSFORD REAL PROPERTIES, INC.,
                    a Maryland corporation, Its Manager

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

           ASSIGNEE:

           a
             ---------------------------------------------------

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

<PAGE>

                                    EXHIBIT A
                     TO ASSIGNMENT AND ASSUMPTION AGREEMENT

                                LEGAL DESCRIPTION

<PAGE>

                                    EXHIBIT B
                     TO ASSIGNMENT AND ASSUMPTION AGREEMENT

                       TENANT LEASES AND SECURITY DEPOSITS

<PAGE>

                                    EXHIBIT C
                     TO ASSIGNMENT AND ASSUMPTION AGREEMENT

                               ASSIGNED CONTRACTS

<PAGE>

                                    EXHIBIT H

                               ------------------
                                     (Date)

To Tenants of Sonterra at Williams Centre Apartments

Ladies and Gentlemen:

     This is to advise you that,  effective  this  date,  Sonterra  at  Williams
Centre Apartments has been sold to ___________________________ ("Buyer").

     Effective   immediately,   please   make  all  rent   checks   payable   to
_________________ and make all rental payments to _______________.  Any security
deposit you made at the time of signing your lease has also been  transferred to
Buyer,  and Buyer is solely  responsible  for returning any security  deposit to
which you are entitled at the termination of your lease.

     Please contact _________________ at _____________ if you have any questions
regarding this transfer.

              Very truly yours,

              WELLSFORD SONTERRA LLC,
              an Arizona limited liability company

              By:      WELLSFORD REAL PROPERTIES, INC.,
                       a Maryland corporation, Its Manager

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

                                                                   ,
              a
                ---------------------------------------------------

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

<PAGE>

                                    EXHIBIT I

                               BUYER'S CERTIFICATE

     In  connection  with the  closing  of the  purchase  and  sale  transaction
contemplated by that certain Purchase and Sale Agreement dated  _______________,
2000 (the  "Agreement"),  executed by and  between  Wellsford  Sonterra  LLC and
______________________________  ("Buyer"), hereby represents and warrants to and
for the benefit of Seller,  its successors and assigns,  that Buyer has had full
and complete  access to the Property and the Property  Files in order to inspect
same and has  satisfied  itself as to all  aspects of the  Property,  including,
without limitation, its physical, environmental and financial condition.

     Terms not otherwise  defined herein shall have the meanings ascribed in the
Agreement.

     EXECUTED this ______ day of ___________, 2000.

                a
                  ---------------------------------------------------

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

STATE OF __________________         )
                                            )  ss.
County of _________________         )

     The  foregoing  instrument  was  acknowledged  before  me this  ____ day of
______________,     2000,     by      __________________________________      as
_______________________________      of     ____________________________,      a
__________________________________ .

     WITNESS my hand and official seal.

     My commission expires:

                              -----------------------------------
                              Notary Public

<PAGE>LOAN AGREEMENT
                           for a loan in the amount of
                                 $32,000,000.00

                               MADE BY AND BETWEEN

                      SILVER MESA AT PALOMINO PARK LLC 4600
                         South Ulster Street, Suite 350
                             Denver, Colorado 80237

                                       AND

                          KEYBANK NATIONAL ASSOCIATION,
                         a national banking association
                            1675 Broadway, Suite 400
                             Denver, Colorado 80202

                          Dated as of December 20, 2000

<PAGE>

                                TABLE OF CONTENTS

ARTICLE 1 INCORPORATION OF RECITALS AND EXHIBITS...............................1
1.1      Incorporation of Recitals.............................................1
1.2      Incorporation of Exhibits.............................................1
ARTICLE 2 DEFINITIONS..........................................................2
2.1      Defined Terms.........................................................2
2.2      Other Definitional Provisions.........................................7
ARTICLE 3 BORROWER'S REPRESENTATIONS AND WARRANTIES............................7
3.1      Representations and Warranties........................................7
3.2      Survival of Representations and Warranties...........................10
ARTICLE 4 LOAN AND LOAN DOCUMENTS.............................................11
4.1      Agreement to Borrow and Lend; Lender's Obligation to Disburse........11
4.2      Loan Documents.......................................................11
4.3      Term of the Loan.....................................................13
4.4      Prepayments..........................................................13
4.5      Required Principal Payments..........................................14
ARTICLE 5 INTEREST............................................................14
5.1      Interest Rate........................................................14
ARTICLE 6 COSTS OF MAINTAINING LOAN...........................................16
6.1      Increased Costs and Capital Adequacy.................................16
6.2      Borrower Withholding.................................................17
ARTICLE 7 LOAN EXPENSE AND ADVANCES...........................................17
7.1      Loan and Administration Expenses.....................................17
7.2      Commitment Fee.......................................................18
7.3      Lender's Attorneys' Fees and Disbursements...........................18
7.4      Time of Payment of Fees and Expenses.................................18
7.5      Expenses and Advances Secured by Loan Documents......................18
7.6      Right of Lender to Make Advances to Cure Borrower's Defaults.........18
ARTICLE 8 REQUIREMENTS PRECEDENT TO THE OPENING OF THE LOAN...................19
8.1      Conditions Precedent.................................................19
ARTICLE 9 BORROWER'S AGREEMENTS...............................................22
9.1      Borrower further covenants and agrees as follows:....................22
ARTICLE 10 CASUALTIES AND CONDEMNATION........................................26
10.1     Lender's Election to Apply Proceeds on Indebtedness..................26
10.2     Borrower's Obligation to Rebuild and Use of Proceeds Therefor........27
ARTICLE 11 ASSIGNMENTS BY LENDER AND BORROWER.................................28
11.1     Assignments and Participations.......................................28
11.2     Prohibition of Assignments and Transfers by Borrower.................28
11.3     Prohibition of Transfers in Violation of ERISA.......................28
11.4     Successors and Assigns...............................................29
ARTICLE 12 TIME OF THE ESSENCE................................................29
12.1     Time is of the Essence...............................................29
ARTICLE 13 EVENTS OF DEFAULT..................................................29
13.1     Events of Default....................................................29

<PAGE>

ARTICLE 14 LENDER'S REMEDIES IN EVENT OF DEFAULT..............................31
14.1     Remedies Conferred Upon Lender.......................................31
ARTICLE 15 EVENTS OF DEFAULT..................................................32
15.1     Full Payment.........................................................32
15.2     Partial Releases.....................................................32
ARTICLE 16 GENERAL PROVISIONS.................................................32
16.1     Captions.............................................................32
16.2     .Modification; Waiver................................................33
16.3     Governing Law........................................................33
16.4     Acquiescence Not to Constitute Waiver of Lender's Requirements.......33
16.5     Disclaimer by Lender.................................................33
16.6     Partial Invalidity; Severability.....................................33
16.7     Definitions Include Amendments.......................................33
16.8     Entire Agreement.....................................................34
16.9     Waiver of Damages....................................................34
16.10    Claims Against Lender................................................34
16.11    Jurisdiction.........................................................34
16.12    Set-Offs.............................................................35
ARTICLE 17 NOTICES............................................................35
ARTICLE 18 WAIVER OF JURY TRIAL...............................................37

Exhibit A         Legal Description of Land
Exhibit B         Permitted Exceptions
Exhibit C         Title Requirements
Exhibit D         Form of Survey Certification
Exhibit E         Insurance Requirements
Exhibit F         Budget
Exhibit G         LIBOR Notice

<PAGE>

                                 LOAN AGREEMENT

                            Project Commonly Known as
                         "Silver Mesa at Palomino Park"

     THIS LOAN AGREEMENT  ("Agreement")  is made as of December 20, 2000, by and
between SILVER MESA AT PALOMINO PARK LLC, a Colorado limited  liability  company
("Borrower"),  and KEYBANK NATIONAL ASSOCIATION, a national banking association,
its successors and assigns ("Lender").

                              W I T N E S S E T H:

                                    RECITALS

     A.  Borrower  is the  owner  in fee  simple  of a parcel  of real  property
situated  in the County of  Douglas,  State of  Colorado,  which land is legally
described  in  Exhibit A  attached  hereto  (the  "Land"),  upon  which has been
constructed a residential townhouse project consisting of two hundred sixty-four
(264)  residential  units located in fifty-four  (54) two story  buildings  with
attached garages and surface parking for six hundred seventy-nine (679) cars and
an amenity  package  which  includes a  clubhouse,  pool and laundry  facilities
commonly known as "Silver Mesa at Palomino Park." All  improvements  now located
or  hereinafter  constructed  on the Land  are  hereinafter  referred  to as the
"Improvements,"  together  with the Land being  hereinafter  referred  to as the
"Project."

     B.  Borrower  intends  to submit  the  Project  in  phases  to  condominium
ownership  pursuant to the provisions of the Colorado Common Interest  Ownership
Act.

     C. Borrower has requested and applied to Lender for a loan in the amount of
Thirty-Two  Million  Dollars  ($32,000,000.00)  (the  "Loan") to  refinance  the
Project,  and  Lender is  willing  to make the Loan on the terms and  conditions
hereinafter set forth.

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

                                    ARTICLE 1

                     INCORPORATION OF RECITALS AND EXHIBITS

     1.1 INCORPORATION OF RECITALS.

     The foregoing  preambles and all other recitals set forth herein are made a
part hereof by this reference.

     1.2 INCORPORATION OF EXHIBITS.

     Exhibits A through G, inclusive,  attached hereto are  incorporated  herein
and expressly made a part hereof by this reference.

<PAGE>

                                    ARTICLE 2
                                   DEFINITIONS

     2.1 DEFINED TERMS.

     The following terms as used herein shall have the following meanings:

     Act: The Colorado Common Interest Ownership Act.  C.R.S.ss.38-33.3-101,  et
seq., as amended from time to time.

     Adjusted LIBOR Rate: For any LIBOR Rate Interest  Period,  an interest rate
per annum equal to the sum of (A) the rate  obtained  by dividing  (x) the LIBOR
Rate for such  LIBOR  Rate  Interest  Period  by (y) a  percentage  equal to one
hundred percent (100%) minus the Reserve  Percentage for the LIBOR Rate Interest
Period and (B) the LIBOR Rate Added Percentage.

     Affiliate:  With respect to a specified  person or entity,  any individual,
partnership,  corporation,  limited  liability  company,  trust,  unincorporated
organization, association or other entity which, directly or indirectly, through
one or more  intermediaries,  controls or is  controlled  by or is under  common
control with such person or entity, including,  without limitation,  any general
or limited partnership in which such person or entity is a partner.

     Agreement: This Loan Agreement.

     Adjusted  Prime  Rate:  A rate per annum  equal to the sum of (a) the Prime
Rate Margin and (b) the  greater of (i) the Prime Rate or (ii) one percent  (1%)
in excess of the Federal Funds  Effective Rate. Any change in the Adjusted Prime
Rate shall be effective  immediately  from and after such change in the Adjusted
Prime Rate.

     Apartment Unit: Each of the two hundred  sixty-four (264) residential units
contained within the Project.

     Applicable Rate: As such term is defined in Section 5.1(a).

     Appraisal:   An  MAI  certified  appraisal  of  the  Project  performed  in
accordance  with FIRREA and  Lender's  appraisal  requirements  by an  appraiser
selected and retained by Lender.

     Association: As said term is defined in the Act.

     Bankruptcy Code: As such term is defined in Section 13.1(d).

<PAGE>

     Breakage  Costs:  (a) The cost to  Lender  of  re-employing  funds  bearing
interest at an Adjusted  LIBOR Rate,  incurred  (or  expected to be incurred) in
connection  with (i) any payment of any portion of the Loan bearing  interest at
an Adjusted LIBOR Rate prior to the  termination  of any  applicable  LIBOR Rate
Interest  Period;  (ii) the  conversion  of an Adjusted  LIBOR Rate to any other
applicable  interest  rate on a date  other  than the  last day of the  relevant
interest period; or (iii) the failure of Borrower to draw down, on the first day
of the applicable  LIBOR Rate Interest  Period,  any amount as to which Borrower
has  elected a LIBOR Rate  Option,  which  Breakage  Costs  shall be computed in
accordance with the formula set forth in Section 4.4 hereof.

     Budget: As such term is defined in Section 8.1(v).

     Business  Day:  A day of the  year  on  which  banks  are not  required  or
authorized to close in Denver, Colorado, or in New York, New York.

     Common Elements: As said term is defined in the Act.

     Condominium: As said term is defined in the Act.

     Condominium  Unit:  Upon  conversion of the Project or portion thereof to a
Condominium  pursuant to the  requirements  of the Act, an individual  Apartment
Unit,  together  with the  undivided  interest  in Common  Elements  appurtenant
thereto and the right to use any Limited Common Element.

     Control:  As such  term is used  with  respect  to any  person  or  entity,
including  the  correlative  meanings  of the terms  "controlled  by" and "under
common control with", shall mean the possession,  directly or indirectly, of the
power to direct or cause the direction of the management policies of such person
or entity,  whether through the ownership of voting  securities,  by contract or
otherwise.

     Declarant: As said term is defined in the Act.

     Declaration: As said term is defined in the Act.

     Default or default: Any event which, if it were to continue uncured, would,
with notice or lapse of time or both, constitute an Event of Default hereunder.

     Default Rate: A rate per annum equal to three percentage  points (300 basis
points) over the Adjusted Prime Rate.

     Development  Rights and Special Declarant Rights: As said terms are defined
in the Act.

     Discounted  Bulk Sales Value:  The present value of all future net proceeds
from individual sales of Condominium  Units,  discounted for the passage of time
and assumption of risk, after an appropriate allowance for expenses necessary to
achieve these sales;  i.e.,  marketing  costs,  sales expense,  property holding
costs (non-financial) and entrepreneurial remuneration.

     Environmental Proceedings: As such term is defined in Section 3.1(b).

     Environmental Report: As such term is defined in Section 8.1(r).

<PAGE>

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

     Event of Default: As such term is defined in Article 13.

     Federal Funds Effective  Rate:  Shall mean, for any day, the rate per annum
(rounded  upward to the nearest on  one-hundredth  of one percent (1/100 of 1%))
announced  by the Federal  Reserve  Bank of  Cleveland  on such day as being the
weighted average of the rates on overnight federal funds  transactions  arranged
by federal funds brokers on the previous  trading day, as computed and announced
by such Federal  Reserve Bank in  substantially  the same manner as such Federal
Reserve Bank  computes and  announces  the weighted  average it refers to as the
"Federal Funds Effective Rate."

     Governmental Authority: Any federal, state, county or municipal government,
or political subdivision thereof, any governmental or quasi-governmental agency,
authority,  board, bureau, commission,  department,  instrumentality,  or public
body, or any court, administrative tribunal, or public utility.

     Guarantor: Wellsford Capital, a Maryland real estate investment trust.

     Guaranty: As such term is defined in Section 4.2(j).

     Hazardous  Material:  Means  and  includes  gasoline,  petroleum,  asbestos
containing  materials,  explosives,  radioactive  materials or any  hazardous or
toxic material, substance or waste which is defined by those or similar terms or
is  regulated  as  such  under  any  Law of any  Governmental  Authority  having
jurisdiction over the Project or any portion thereof or its use, including:  (i)
any  "hazardous  substance"  defined  as  such  in  (or  for  purposes  of)  the
Comprehensive  Environmental  Response,   Compensation  and  Liability  Act,  42
U.S.C.A.  ss.  9601(14) as may be amended  from time to time,  or any  so-called
"superfund" or "superlien" Law, including the judicial  interpretation  thereof;
(ii) any  "pollutant or  contaminant"  as defined in 42 U.S.C.A.  ss.  9601(33);
(iii) any material now defined as "hazardous  waste" pursuant to 40 C.F.R.  Part
260; (iv) any petroleum,  including crude oil or any fraction  thereof;  (v) any
"hazardous  chemical" as defined  pursuant to 29 C.F.R.  Part 1910; and (vi) any
other toxic  substance or contaminant  that is subject to any other Law or other
past or present requirement of any Governmental Authority.

     Improvements: The improvements described in Recital A hereto.

     Including or including: Including but not limited to.

     Indemnity: As such term is defined in Section 4.2(k).

     Interest Reserve:  The sum of One Million Nine Hundred Sixty Thousand Seven
Hundred Fifty-Two Dollars ($1,960,752.00).

     Land: As such term is defined in Recital A.

<PAGE>

     Laws:  Collectively,  all federal,  state and local laws, statutes,  codes,
ordinances,  orders,  rules and  regulations,  including  judicial  opinions  or
precedential authority in the applicable jurisdiction.

     Leases:  The  collective  reference to all leases,  subleases and occupancy
agreements  affecting  the Project or any part thereof now existing or hereafter
executed and all amendments, modifications or supplements thereto.

     LIBOR  Business Day: A Business Day on which  dealings in U.S.  dollars are
carried on in the London Interbank Market.

     LIBOR Rate: For any LIBOR Rate Interest  Period,  the average rate as shown
in Dow Jones Markets  (formerly  Telerate) (Page 3750) at which deposits in U.S.
dollars  are  offered by first  class  banks in the London  Interbank  Market at
approximately  11:00 a.m. (London time) two (2) LIBOR Business Days prior to the
first day of such LIBOR Rate Interest Period with a maturity approximately equal
to such LIBOR Rate Interest Period and in an amount  approximately  equal to the
amount to which such LIBOR Rate Interest Period  relates,  adjusted for reserves
and taxes if  required  by future  regulations.  If Dow Jones  Markets no longer
reports such rate or Lender  determines  in good faith that the rate so reported
no longer  accurately  reflects  the rate  available  to  Lender  in the  London
Interbank Market, Lender may select a replacement index.

     LIBOR Rate Added Percentage: Two percent (200 basis points) per annum.

     LIBOR Rate Interest Period: With respect to each amount bearing interest at
a LIBOR  based rate,  a period of one month,  to the extent  deposits  with such
maturity  are  available  to Lender,  commencing  on a LIBOR  Business  Day,  as
selected by Borrower provided,  however, that (i) any LIBOR Rate Interest Period
which  would  otherwise  end on a day  which is not a LIBOR  Business  Day shall
continue to and end on the next succeeding LIBOR Business Day, unless the result
would be that such LIBOR Rate  Interest  Period  would be  extended  to the next
succeeding  calendar  month, in which case such LIBOR Rate Interest Period shall
end on the next  preceding  LIBOR Business Day; and (ii) any LIBOR Rate Interest
Period  which  begins on a day for which there is no  numerically  corresponding
date in the  calendar  month in which  such  LIBOR Rate  Interest  Period  would
otherwise end shall instead end on the last LIBOR  Business Day of such calendar
month.

     LIBOR Rate Option: As defined in Section 5.1(b).

     Limited Common Elements: As said term is defined in the Act.

     Loan: As defined in Recital B.

     Loan Amount:  The maximum amount of the Loan as set forth in Section 4.1(a)
as  reduced  by  principal   payments  made  from  time  to  time.

<PAGE>

     Loan Documents:  The collective reference to this Agreement,  the documents
and  instruments  listed  in  Section  4.2,  and all  the  other  documents  and
instruments  entered into from time to time,  evidencing or securing the Loan or
any obligation of payment  thereof or  performance of Borrower's  obligations in
connection with the transaction contemplated hereunder, each as amended.

     Loan Opening Date: December 20, 2000.

     Map: As said term is defined in the Act.

     Master  Association:  The  Palomino  Park  Owners  Association,  a Colorado
non-profit corporation.

     Master  Declaration:  The Master  Declaration of Covenants,  Conditions and
Restrictions  of  Palomino  Park to be  recorded  in the office of the Clerk and
Recorder of the County of Douglas, State of Colorado.

     Material  Adverse  Change or  material  adverse  change:  If,  in  Lender's
reasonable discretion, the business prospects, operations or financial condition
of a person,  entity or property  has changed in a manner which could impair the
value of Lender's security for the Loan, prevent timely repayment of the Loan or
otherwise  prevent the applicable person or entity from timely performing any of
its material obligations under the Loan Documents.

     Maturity Date: As such term is defined in Section 4.3.

     Mortgage: As such term is defined in Section 4.2(b).

     Note: As such term is defined in Section 4.2(a).

     Opening  of the  Loan or  Loan  Opening:  The  first  disbursement  of Loan
proceeds.

     Operating  Expenses:  For any monthly period, the actual costs and expenses
of owning,  operating,  managing and  maintaining the Project during such period
incurred by Borrower,  determined  on a cash basis (except for real and personal
property taxes and insurance  premiums,  which shall be determined on an accrual
basis); excepting, however, interest or principal due on the Loan.

     Permitted  Exceptions:  Those  matters  listed on Exhibit B hereto to which
title to the Project  may be subject at the Loan  Opening  and  thereafter  such
other title exceptions as Lender may reasonably approve in writing.

     Prime Rate: That interest rate  established  from time to time by Lender as
Lender's Prime Rate, whether or not such rate is publicly  announced;  the Prime
Rate may not be the lowest  interest  rate charged by Lender for  commercial  or
other extensions of credit.

     Prime Rate Margin: Zero percent (0%) (0 basis points) per annum.

<PAGE>

     Project:  The  collective  reference  to (i) the  Land,  together  with all
buildings,  structures  and  improvements  located  or  to be  located  thereon,
including  the  Improvements,  as  described in the  Recitals;  (ii) all rights,
privileges,  easements and hereditaments  relating or appertaining  thereto; and
(iii) all personal  property,  fixtures and equipment required or beneficial for
the operation thereof.

     Release Consideration: As said term is defined in Section 15.2.

     Reserve  Percentage:  For any LIBOR Rate Interest  Period,  that percentage
which is specified  three (3)  Business  Days before the first day of such LIBOR
Rate Interest Period by the Board of Governors of the Federal Reserve System (or
any successor) or any other  governmental or  quasi-governmental  authority with
jurisdiction  over  Lender  for  determining  the  maximum  reserve  requirement
(including,  but not limited to, any marginal  reserve  requirement)  for Lender
with  respect  to  liabilities   constituting  of  or  including   (among  other
liabilities)  Eurocurrency liabilities in an amount equal to that portion of the
Loan  affected by such LIBOR Rate Interest  Period and with a maturity  equal to
such LIBOR Rate Interest Period.

     Sales and Marketing Report: As said term is defined in Section 9.1(l).

     State: The State of Colorado.

     Tenant: The tenant under a Lease.

     Title Insurer:  Land Title  Guarantee  Company,  as agent for Chicago Title
Insurance  Company,  or such other title insurance company licensed in the State
as may be approved in writing by Lender.

     Title Policy: As such term is defined in Section 8.1(a).

     Transfer: As such term is defined in Section 11.2.

     2.2 OTHER DEFINITIONAL PROVISIONS.

     All terms defined in this Agreement  shall have the same meanings when used
in the Note,  Mortgage,  any other Loan  Documents or any  certificate  or other
document made or delivered  pursuant  hereto.  The words "hereof",  "herein" and
"hereunder"  and words of similar import when used in this Agreement shall refer
to this Agreement.

                                    ARTICLE 3

                    BORROWER'S REPRESENTATIONS AND WARRANTIES

     3.1 REPRESENTATIONS AND WARRANTIES.

     To induce  Lender to execute  this  Agreement  and perform its  obligations
hereunder, Borrower hereby represents and warrants to Lender as follows:

<PAGE>

     (a) On the Loan  Opening  and  thereafter,  Borrower  shall  have  good and
marketable  fee  simple  title to the  Project,  subject  only to the  Permitted
Exceptions.

     (b) No  litigation or  proceedings  are pending,  or to  Borrower's  actual
knowledge threatened,  against Borrower or Guarantor,  which could, if adversely
determined,  cause a Material Adverse Change with respect to Borrower, Guarantor
or the Project.  There are no pending environmental  proceedings,  whether civil
(including actions by private parties), criminal, or administrative proceedings,
relating  to  the  Project  (collectively,   "Environmental  Proceedings"),  and
Borrower has no actual knowledge of any threatened Environmental  Proceedings or
any  facts or  circumstances  which may give  rise to any  future  Environmental
Proceedings.

     (c) Borrower is a duly  organized and validly  existing  limited  liability
company under the laws of the State of Colorado and has full power and authority
to execute, deliver and perform all Loan Documents to which Borrower is a party,
and such execution,  delivery and  performance  have been duly authorized by all
requisite action on the part of Borrower.

     (d) No consent,  approval or authorization of or declaration,  registration
or filing with any Governmental Authority or non-governmental  person or entity,
including  any  creditor  or partner of Borrower  or  Guarantor,  is required in
connection with the execution, delivery and performance of this Agreement or any
of the Loan Documents other than the recordation of the Mortgage,  Assignment of
Leases  and  Rents  and UCC  Financing  Statements,  except  for such  consents,
approvals or  authorizations of or declarations or filings with any Governmental
Authority  or  non-governmental  person or entity where the failure to so obtain
would not have an adverse  effect on  Borrower or such  Guarantor  or which have
been obtained as of any date on which this representation is made or remade.

     (e)  The  execution,  delivery  and  performance  of  this  Agreement,  the
execution  and payment of the Note and the  granting of the  Mortgage  and other
security  interests under the other Loan Documents have not constituted and will
not constitute,  upon the giving of notice or lapse of time or both, a breach or
default under any other  agreement to which  Borrower or Guarantor is a party or
may be bound or  affected,  or a  violation  of any law or court order which may
affect the Project, any part thereof, any interest therein, or the use thereof.

     (f) There is no default under this  Agreement or the other Loan  Documents,
nor any  condition  which,  given  notice or the passage of time or both,  would
constitute a default or an Event of Default under said documents.

     (g) (i) No condemnation of any portion of the Project; (ii) no condemnation
or relocation of any roadways  abutting the Project;  and (iii) no proceeding to
deny  access to the  Project  from any point or  planned  point of access to the
Project,  has commenced or, to Borrower's actual  knowledge,  is contemplated by
any Governmental Authority.

<PAGE>

     (h) The  amounts set forth in the Budget are all costs,  expenses  and fees
which  Borrower  reasonably  expects to pay or reasonably  anticipates  becoming
obligated to pay in connection with the conversion of the Project to Condominium
ownership,  the marketing and sale of the Condominium Units,  retrofit cost with
respect to each  Apartment Unit  comprising a portion of a Condominium  Unit and
cost to operate the Project  during the sellout of the Project as a  Condominium
(until the Project achieves  breakeven  operations) and anticipated  income from
the  collection  of rents with respect to Apartment  Units during the sellout of
the Project. Borrower is unaware of any other such costs, expenses or fees which
are material and are not covered by the Budget.

     (i) To the best of  Borrower's  knowledge,  neither the  conversion  of the
Project to a  Condominium  nor the use of the Project as a  Condominium  and the
contemplated  accessory uses will violate (i) any Laws  (including  subdivision,
zoning, building, environmental protection and wetland protection Laws); or (ii)
any  building  permits,  certificates  of  occupancy,  subdivision  regulations,
restrictions of record or agreements  affecting the Project or any part thereof.
Neither the zoning authorizations, approvals or variances nor any other right to
convert  the  Project to a  Condominium  or to use the  Project is to any extent
dependent  upon or related to any real estate other than the Land. All consents,
licenses and permits and all other  authorizations  or approvals  (collectively,
"Governmental   Approvals")   required  for  conversion  of  the  Project  to  a
Condominium  and the sale of  Condominium  Units have been  obtained  or will be
obtained  prior to the Loan Opening,  and all Laws relating to the conversion of
the Project to a Condominium and the sale of Condominium  Units and operation of
the Improvements  have been complied with and all permits and licenses  required
for the operation of the Project have been obtained.

     (j) The Project has adequate water,  gas and electrical  supply,  storm and
sanitary sewerage facilities,  other required public utilities,  fire and police
protection, and means of access between the Project and public highways; none of
the  foregoing  will  be  foreseeably  delayed  or  impeded  by  virtue  of  any
requirements under any applicable Laws.

     (k) Except as  otherwise  disclosed to Lender in writing or as shown on the
Budget,  no  brokerage  fees or  commissions  are payable by or to any person in
connection with this Agreement or the Loan to be disbursed hereunder.

     (l) All financial statements and other information  previously furnished by
Borrower or Guarantor to Lender in connection  with the Loan are true,  complete
and correct and fairly present the financial  conditions of the subjects thereof
as of the  respective  dates  thereof and do not fail to state any material fact
necessary to make such statements or information not misleading, and no Material
Adverse  Change with  respect to Borrower or Guarantor  has  occurred  since the
respective  dates of such  statements  and  information.  Neither  Borrower  nor
Guarantor has any material liability,  contingent or otherwise, not disclosed in
such financial statements.

<PAGE>

     (m) Except as disclosed by Borrower to Lender in writing  prior to the Loan
Opening Date or as disclosed by the Environmental  Report, (i) the Project is in
a clean,  safe and healthful  condition,  and,  except for materials used in the
ordinary  course of  maintenance  and  operation of the Project,  is free of all
Hazardous  Material;  (ii)  neither  Borrower  nor,  to the  best  knowledge  of
Borrower, any other person or entity, has ever caused or permitted any Hazardous
Material to be placed, held, located or disposed of on, under, at or in a manner
to affect the Project, or any part thereof,  and the Project has never been used
(whether by Borrower or, to the best knowledge of Borrower,  by any other person
or entity)  for any  activities  involving,  directly  or  indirectly,  the use,
generation,  treatment,  storage,  transportation,  or disposal of any Hazardous
Material;  (iii)  neither the Project nor  Borrower is subject to any  existing,
pending, or, to Borrower's actual knowledge, threatened investigation or inquiry
by any  Governmental  Authority,  and the Project is not subject to any remedial
obligations  under any applicable Laws pertaining to health or the  environment;
and (iv) there are no underground tanks,  vessels, or similar facilities for the
storage,  containment or accumulation  of Hazardous  Materials of any sort on or
affecting the Project.

     (n) The Project is taxed  separately  without  regard to any other property
and for all purposes the Project may be mortgaged,  conveyed and otherwise dealt
with as an independent parcel.

     (o) Borrower and its agents have not entered into any Leases,  subleases or
other  arrangements  for  occupancy  of space  within  the  Project,  other than
reflected on the rent roll which has been provided by Borrower to Lender.  True,
correct and complete  copies of all Leases,  as amended,  if requested by Lender
will be  delivered  to  Lender.  All Leases  are in full  force and  effect.  To
Borrower's  actual  knowledge,  Borrower  is not in default  under any Lease and
Borrower has  disclosed to Lender in writing any material  default by the tenant
under any Lease.

     (p) The Improvements do not encroach upon any property line, building line,
setback  line,  side yard line or any  recorded  or visible  easement  (or other
easement  of which  Borrower  is aware or has reason to believe  may exist) with
respect to the Project.

     (q) The Loan is not being made for the  purpose of  purchasing  or carrying
"margin stock" within the meaning of Regulation G, T, U or X issued by the Board
of Governors of the Federal Reserve  System,  and Borrower agrees to execute all
instruments necessary to comply with all the requirements of Regulation U of the
Federal Reserve System.

     (r)  Borrower is not a party in interest to any plan  defined or  regulated
under ERISA,  and the assets of Borrower  are not "plan  assets" of any employee
benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

     (s) Borrower is not a "foreign  person"  within the meaning of Section 1445
or 7701 of the Internal Revenue Code.

     (t)  Borrower  uses no trade  name  other  than its  actual  name set forth
herein. The principal place of business of Borrower is as stated in Article 17.

     (u) All statements set forth in the Recitals are true and correct.

     3.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

<PAGE>

     Borrower agrees that all of the representations and warranties set forth in
Section 3.1 and elsewhere in this Agreement are true as of the date hereof, will
be true at the Loan Opening and, except for matters which have been disclosed by
Borrower  and  approved  by Lender in  writing,  at all times  thereafter.  Each
request  for  a  disbursement  under  the  Loan  Documents  shall  constitute  a
reaffirmation  of such  representations  and  warranties,  as deemed modified in
accordance with the disclosures  made and approved as aforesaid,  as of the date
of such request.  It shall be a condition precedent to the Loan Opening and each
subsequent disbursement that each of said representations and warranties is true
and correct as of the date of such requested disbursement.  At Lender's request,
Borrower shall reaffirm such  representations and warranties in writing prior to
any disbursement hereunder.

                                    ARTICLE 4

                             LOAN AND LOAN DOCUMENTS

     4.1 AGREEMENT TO BORROW AND LEND; LENDER'S OBLIGATION TO DISBURSE.

     Subject to the terms,  provisions  and conditions of this Agreement and the
other Loan Documents, Borrower agrees to borrow from Lender and Lender agrees to
lend to Borrower  the Loan,  for the  purposes  and subject to all of the terms,
provisions and conditions contained in this Agreement.

     (a) The maximum  aggregate  amount of the Loan shall not exceed  Thirty-Two
Million Dollars ($32,000,000.00).

     (b) Lender agrees, upon Borrower's  compliance with and satisfaction of all
conditions precedent to the Loan Opening and provided no Material Adverse Change
has occurred  with respect to Borrower,  Guarantor or the Project and no default
or Event of Default has occurred and is continuing  hereunder,  to open the Loan
to initially fund Thirty Million  Thirty-Nine  Thousand Two Hundred  Forty-Eight
($30,039,248.00)  and to fund to Borrower monthly such portion of the balance of
the Loan Proceeds,  to the extent requested by Borrower, to fund interest due on
the Loan.

     (c) To the extent that Lender may have acquiesced in noncompliance with any
requirements precedent to the Opening of the Loan or precedent to any subsequent
disbursement of Loan proceeds,  such acquiescence  shall not constitute a waiver
by Lender,  and Lender may at any time after such acquiescence  require Borrower
to comply with all such requirements.

     4.2 LOAN DOCUMENTS.

     Borrower  agrees that it will, on or before the Loan Opening Date,  execute
and  deliver or cause to be  executed  and  delivered  to Lender  the  following
documents in form and substance acceptable to Lender:

     (a) A promissory note ("Note"), in the maximum amount of the Loan, executed
by Borrower and payable to the order of Lender, evidencing the Loan.

<PAGE>

     (b) A deed of  trust,  security  agreement  and  assignment  of rents  (the
"Mortgage"),  executed  by  Borrower  for the  benefit of Lender  securing  this
Agreement, the Note and all obligations of Borrower in connection with the Loan,
granting a first  priority  lien on  Borrower's  fee  interest  in the  Project,
subject only to the Permitted Exceptions.

     (c) An  assignment of leases and rents  ("Assignment  of Leases and Rents")
made by Borrower in favor of Lender  assigning  all leases,  subleases and other
agreements  relating  to the  use and  occupancy  of all or any  portion  of the
Project, and all present and future leases, rents, issues and profits therefrom.

     (d) An assignment of purchase  contract made by Borrower in favor of Lender
assigning all purchase contracts evidencing the sale of Condominium Units within
the Project.

     (e) An  assignment  of all of  Borrower's  rights  as  Declarant  under the
Declaration  and Master  Declaration,  including but not limited to  Development
Rights and Special Declarant Rights made by Borrower in favor of Lender.

     (f) A collateral  assignment of access and recreational use agreements made
by  Borrower  in favor of Lender  assigning  to Lender all access  rights to the
Project over other  portions of the Property  commonly  known as Palomino  Park,
Douglas County, Colorado, and use rights with respect to any master recreational
facilities contained within Palomino Park made by Borrower in favor of Lender.

     (g) General  assignments  made by Borrower in favor of Lender  assigning to
Lender  the  non-exclusive  right to use all  plans and  specifications  for the
Project,  as  well  as all of  Borrower's  rights  under  any  license,  permit,
certificate  of  occupancy,  warranty  and  contract  with  respect  to the use,
occupancy or condominium conversion of all of any portion of the Property.

     (h) RESERVED

     (i) A security  agreement  made by  Borrower,  as  debtor,  in favor of the
Lender.

     (j) A guaranty of payment  ("Guaranty")  executed by Guarantor and pursuant
to which the  Guarantor  guarantees  payment of  principal,  interest  and other
amounts due under the Loan Documents,  and the payment of any operating expenses
arising  from the  Property  to the extent not paid by  Borrower,  to the extent
provided in such Guaranty.

     (k)  An  environmental   indemnity  ("Indemnity")  from  the  Borrower  and
Guarantor, jointly and severally, indemnifying Lender with regard to all matters
related to Hazardous Material and other environmental matters.

     (l) Such UCC financing statements ("UCC Financing  Statements") as Lender's
counsel determines are advisable or necessary to perfect or notify third parties
of the security interests intended to be created by the Loan Documents.

<PAGE>

     (m) Such other  documents,  instruments or  certificates  as Lender and its
counsel may reasonably  require,  including such documents as Lender in its sole
discretion deems necessary or appropriate to effectuate the terms and conditions
of this  Agreement  and the Loan  Documents,  and to comply with the laws of the
State.

     4.3 TERM OF THE LOAN.

     All principal,  interest and other sums due under the Loan Documents  shall
be due and payable in full on the Maturity Date.  All  references  herein to the
"Maturity Date " shall mean December 1, 2003; provided, however, that so long as
no Event of Default or Default has occurred and is  continuing,  Borrower  shall
have the right,  on  Borrower's  delivery of written  notice to Lender not later
than  November 1, 2003,  to extend the Maturity  Date hereof until June 1, 2004,
provided  that  Borrower  tender to Lender,  concurrently  with delivery of such
notice,  a sum equal to one  quarter of one  percent  (.25%) of the  outstanding
principal  balance of the Note and Borrower has, on or before  December 1, 2003,
paid on the  principal  of the  Note  since  the  Loan  Opening  Date the sum of
Twenty-Seven Million Dollars ($27,000,000.00). If the original principal balance
as  of  said  date  has  not  been  reduced  by  Twenty-Seven   Million  Dollars
($27,000,000.00),  the Borrower shall prepay on principal such  difference on or
before  December  1, 2003.  Notwithstanding  the fact that  Borrower  has timely
exercised its right to extend the Maturity  Date and tendered to Lender  payment
of the  aforedescribed  one quarter of one percent (.25%)  extension fee, in the
event that between the date of  Borrower's  notice of extension  and December 1,
2003,  an Event of Default  shall have occurred or a Default has occurred and is
continuing,  the Maturity Date, notwithstanding Borrower's notice and payment of
extension fee, shall not be extended and the Maturity Date shall remain December
1, 2003.

     4.4 PREPAYMENTS.

     Borrower shall have the right to make  prepayments of the Loan, in whole or
in part,  without prepayment  penalty,  upon not less than seven (7) days' prior
written  notice to  Lender.  No  prepayment  of all or part of the Loan shall be
permitted  unless same is made together with the payment of all interest accrued
on the Loan through the date of  prepayment  and an amount equal to all Breakage
Costs and reasonable  attorneys' fees and disbursements  incurred by Lender as a
result of the prepayment. Breakage Costs shall be calculated as follows:

                                 D x (A - B) x C
                                     -------
                                       360

     A = the Adjusted LIBOR Rate applicable to the principal  amount of the Loan
that is the subject of prepayment.

     B = the Adjusted  LIBOR Rate on the date of prepayment  for a term equal to
the unexpired term of the applicable LIBOR Rate Interest Period.

     C = the number of calendar  days from the date of prepayment to the date on
which the applicable  LIBOR Rate Interest  Period would have expired but for the
prepayment.

     D = the principal amount of the Loan that is being prepaid.

<PAGE>

     In no event shall the prepayment fee be less than $0.00.

     4.5 REQUIRED PRINCIPAL PAYMENTS.

     Borrower  shall make,  on or before the dates  hereinafter  set forth,  the
required principal payments hereinafter set forth;  provided,  however, that any
prepayment of principal  made pursuant to Section 4.4,  including the payment of
any Release Consideration upon the release of a Condominium Unit pursuant to the
provisions  of Section  15.2 , shall be credited  against the next due and owing
principal payment described below.

                  Date                      Principal Payment
                  ----                      -----------------
                  December 1, 2001          $  8,000,000.00
                  June 1, 2002              an additional $8,000,000.00
                  June 1, 2003              an additional $7,600,000.00

                                    ARTICLE 5
                                    INTEREST

     5.1 INTEREST RATE.

     (a) The Loan will bear interest at the Applicable Rate,  unless the Default
Rate is  applicable.  The Adjusted  Prime Rate shall be the  "Applicable  Rate",
except that the Adjusted LIBOR Rate shall be the "Applicable  Rate" with respect
to  portions  of the Loan as to which a LIBOR  Rate  Option  is then in  effect.
Borrower  shall pay  interest  in  arrears  on the first  Business  Day of every
calendar month in the amount of all interest accrued and unpaid.

     (b)  Provided  that no Event of  Default  exists,  Borrower  shall have the
option (the  "LIBOR  Rate  Option") to elect from time to time in the manner and
subject to the  conditions  hereinafter  set forth an Adjusted LIBOR Rate as the
Applicable  Rate for all or any portion of the Loan which would  otherwise  bear
interest at the  Adjusted  Prime Rate,  pursuant  to the LIBOR  Election  Notice
attached hereto as Exhibit G.

<PAGE>

     (c) The only manner in which Borrower may exercise the LIBOR Rate Option is
by giving Lender  irrevocable  notice (which may be verbal notice  provided that
Borrower  delivers to Lender  facsimile  confirmation  within  twenty-four  (24)
hours) of such  exercise  not later than 11:00  a.m.  Denver  time on the second
LIBOR Business Day prior to the proposed commencement of the relevant LIBOR Rate
Interest Period, which written notice shall specify: (i) the portion of the Loan
with respect to which  Borrower is electing the LIBOR Rate Option;  and (ii) the
LIBOR  Business Day upon which the applicable  LIBOR Rate Interest  Period is to
commence.  The Applicable Rate for any portion of the Loan with respect to which
Borrower has elected the LIBOR Rate Option  shall  revert to the Adjusted  Prime
Rate as of the last day of the LIBOR Rate  Interest  Period  applicable  thereto
(unless  Borrower again  exercises the LIBOR Rate Option for such portion of the
Loan). Lender shall be under no duty to notify Borrower that the Applicable Rate
on any portion of the Loan is about to revert from an Adjusted LIBOR Rate to the
Adjusted  Prime Rate.  The LIBOR Rate Option may be exercised  by Borrower  only
with respect to any portion of the Loan equal to or in excess of $500,000. At no
time may there be more than four (4) LIBOR Rate Interest  Periods in effect with
respect to the Loan.

     (d) If Lender  determines  (which  determination  shall be  conclusive  and
binding upon Borrower,  absent  manifest  error) (i) that Dollar  deposits in an
amount  approximately  equal to the portion of the Loan for which  Borrower  has
exercised  the LIBOR  Rate  Option for the LIBOR  Rate  Interest  Period are not
generally  available at such time in the London interbank market for deposits in
Dollars;  (ii) that the rate at which such  deposits are being  offered will not
adequately  and fairly reflect the cost to Lender of maintaining a LIBOR Rate on
such  portion  of the Loan or of funding  the same for the LIBOR  Rate  Interest
Period due to circumstances  affecting the London  interbank  market  generally;
(iii) that reasonable  means do not exist for ascertaining a LIBOR Rate; or (iv)
that an  Adjusted  LIBOR Rate would be in excess of the  maximum  interest  rate
which Borrower may by law pay,  then, in any such event,  Lender shall so notify
Borrower and all portions of the Loan bearing interest at an Adjusted LIBOR Rate
that are so affected shall, as of the date of such  notification with respect to
an event  described in clause (ii) or (iv) above, or as of the expiration of the
applicable  LIBOR Rate  Interest  Period with  respect to an event  described in
clause (i) or (iii) above,  bear interest at the Adjusted  Prime Rate until such
time as the situations described above are no longer in effect or can be avoided
by Borrower  exercising a LIBOR Rate Option for a different  LIBOR Rate Interest
Period.

     (e) Interest at the  Applicable  Rate (or Default Rate) shall be calculated
for the actual number of days elapsed on the basis of a 360-day year,  including
the first  date of the  applicable  period to,  but not  including,  the date of
repayment.

     (f) Borrower  shall pay all Breakage  Costs  incurred  from time to time by
Lender upon demand.

     (g) Any change in any Law,  regulation or treaty, or in the  interpretation
thereof  by any  Governmental  Authority  charged  with  the  administration  or
interpretation  thereof,  shall  make it  unlawful  for Lender to  maintain  the
Applicable  Rate at an  Adjusted  LIBOR  Rate  with  respect  to the Loan or any
portion  thereof,  or to fund the Loan or any portion  thereof in Dollars in the
London  interbank  market,  or to give effect to its  obligations  regarding the
LIBOR Rate Option as contemplated  by the Loan Documents,  then (1) Lender shall
notify Borrower that Lender is no longer able to maintain the Applicable Rate at
an Adjusted LIBOR Rate, (2) the LIBOR Rate Option shall  immediately  terminate,
(3) the  Applicable  Rate for any  portion of the Loan for which the  Applicable
Rate is then an Adjusted  LIBOR Rate shall  automatically  be  converted  to the
Adjusted Prime Rate, and (4) Borrower shall pay to Lender the amount of Breakage
Costs (if any) incurred in connection with such conversion. Thereafter, Borrower
shall not be entitled to exercise  the LIBOR Rate Option  until such time as the
situation  described herein is no longer in effect or can be avoided by Borrower
exercising a LIBOR Rate Option for a different term.

<PAGE>

                                    ARTICLE 6

                            COSTS OF MAINTAINING LOAN

     6.1 INCREASED COSTS AND CAPITAL ADEQUACY.

     (a) Borrower  recognizes that the cost to Lender of maintaining the Loan or
any portion thereof may fluctuate and,  Borrower agrees to pay Lender additional
amounts to  compensate  Lender for any increase in its actual costs  incurred in
maintaining the Loan or any portion thereof  outstanding or for the reduction of
any amounts received or receivable from Borrower as a result of:

     (i) any change after the date hereof in any applicable  Law,  regulation or
treaty, or in the interpretation or administration  thereof,  or by any domestic
or foreign  court,  (A)  changing  the basis of taxation of payments  under this
Agreement  to Lender  (other  than taxes  imposed  on all or any  portion of the
overall  net income or  receipts  of  Lender),  or (B)  imposing,  modifying  or
applying any reserve,  special deposit or similar requirement against assets of,
deposits  with  or for  the  account  of,  credit  extended  by,  or  any  other
acquisition  of  funds  for  loans by  Lender  (which  includes  the Loan or any
applicable portion thereof),  or (C) imposing on Lender, or the London interbank
market  generally,  any other  condition  affecting the Loan,  provided that the
result of the  foregoing  is to increase the cost to Lender of  maintaining  the
Loan or any  portion  thereof  or to reduce the  amount of any sum  received  or
receivable from Borrower by Lender under the Loan Documents; or

     (ii) the  maintenance  by Lender of reserves  in  accordance  with  reserve
requirements promulgated by the Board of Governors of the Federal Reserve System
of the United  States with respect to  "Eurocurrency  Liabilities"  of a similar
term to that of the  applicable  portion of the Loan  (without  duplication  for
reserves  already  accounted for in the  calculation of a LIBOR Rate pursuant to
the terms hereof).

     (b) If the application of any Law, rule, regulation or guideline adopted or
arising  out of  the  July,  1988  report  of the  Basle  Committee  on  Banking
Regulations and Supervisory  Practices  entitled  "International  Convergence of
Capital  Measurement  and Capital  Standards",  or the  adoption  after the date
hereof of any  other  Law,  rule,  regulation  or  guideline  regarding  capital
adequacy, or any change after the date hereof in any of the foregoing, or in the
interpretation or administration thereof by any domestic or foreign Governmental
Authority,  central bank or comparable agency charged with the interpretation or
administration  thereof,  or compliance by Lender, with any request or directive
regarding  capital adequacy (whether or not having the force of law) of any such
authority,  central bank or  comparable  agency,  has the effect of reducing the
rate of return on Lender's capital to a level below that which Lender would have
achieved but for such application,  adoption,  change or compliance (taking into
consideration  the policies of Lender with respect to capital  adequacy),  then,
from time to time Borrower shall pay to Lender such  additional  amounts as will
compensate  Lender for such  reduction  with  respect to any portion of the Loan
outstanding.

<PAGE>

     (c) Any amount payable by Borrower  under  subsection (a) or subsection (b)
of this Section 6.1 shall be paid within five (5) days of receipt by Borrower of
a certificate signed by an authorized officer of Lender setting forth the amount
due and the basis for the determination of such amount, which statement shall be
conclusive and binding upon Borrower, absent manifest error. Failure on the part
of Lender to demand  payment from Borrower for any such amount  attributable  to
any particular  period shall not constitute a waiver of Lender's right to demand
payment of such amount for any  subsequent  or prior  period.  Lender  shall use
reasonable  efforts to deliver to Borrower  prompt notice of any event described
in  subsection  (a) or (b)  above,  of the  amount of the  reserve  and  capital
adequacy payments resulting  therefrom and the reasons therefor and of the basis
of calculation of such amount; provided,  however, that any failure by Lender to
so notify Borrower shall not affect Borrower's obligation to pay the reserve and
capital adequacy payment resulting therefrom.

     6.2 BORROWER WITHHOLDING.

     If by reason of a change in any applicable  Laws  occurring  after the date
hereof,  Borrower is required by Law to make any  deduction  or  withholding  in
respect of any taxes (other than taxes  imposed on or measured by the net income
of Lender or any franchise tax imposed on Lender),  duties or other charges from
any  payment  due under the Note,  the sum due from  Borrower in respect of such
payment  shall be  increased to the extent  necessary to ensure that,  after the
making of such deduction or  withholding,  Lender receives and retains a net sum
equal  to the  sum  which  it  would  have  received  had no such  deduction  or
withholding been required to be made.

                                    ARTICLE 7

                            LOAN EXPENSE AND ADVANCES

     7.1 LOAN AND ADMINISTRATION EXPENSES.

<PAGE>

     Borrower  unconditionally  agrees to pay all expenses of the Loan  required
under this Agreement, including all amounts payable pursuant to Sections 7.2 and
7.3 and any and all other fees owing to Lender  pursuant to the Loan  Documents,
and also  including,  without  limiting the  generality  of the  foregoing,  all
recording,  filing and  registration  fees and charges,  mortgage or documentary
taxes, all insurance premiums, title insurance premiums and other charges of the
Title Insurer, photocopying expenses, survey fees and charges, cost of certified
copies of  instruments  and the Title  Policy,  charges of the Title  Insurer or
other escrowee for administering  disbursements,  all fees and costs of Lender's
Environmental  Consultant,  all appraisal fees, insurance  consultant's fees and
all costs and expenses  incurred by Lender in connection with the  determination
of whether or not Borrower has performed the obligations  undertaken by Borrower
hereunder or has satisfied any conditions precedent to the obligations of Lender
hereunder and, if any default or Event of Default occurs  hereunder or under any
of the Loan Documents or if the Loan or Note or any portion  thereof is not paid
in full when and as due,  all costs and expenses of Lender  (including,  without
limitation,  court  costs  and  reasonable  counsel's  fees  and  disbursements)
incurred in  attempting  to enforce  payment of the Loan and  expenses of Lender
incurred (including court costs and reasonable counsel's fees and disbursements)
in attempting  to realize,  while a default or Event of Default  exists,  on any
security or incurred in connection  with the sale or disposition (or preparation
for sale or  disposition)  of any security for the Loan.  Borrower agrees to pay
all brokerage,  finder or similar fees or commissions payable in connection with
the  transactions  contemplated  hereby  and  shall  indemnify  and hold  Lender
harmless  against  all  claims,  liabilities,   costs  and  expenses  (including
reasonable  attorneys'  fees and  expenses)  arising in relation to any claim by
broker, finder or similar person on behalf of Borrower.

     7.2 COMMITMENT FEE.

     Borrower  shall  pay  to  Lender  on or  before  the  Loan  Opening  Date a
commitment   fee  in  the  amount  of  One  Hundred  Twenty   Thousand   Dollars
($120,000.00). Such fee is fully earned and non-refundable as of Loan Opening.

     7.3 LENDER'S ATTORNEYS' FEES AND DISBURSEMENTS.

     Borrower   agrees  to  pay   Lender's   reasonable   attorneys'   fees  and
disbursements   incurred  in  connection  with  this  Loan,  including  (i)  the
preparation of this  Agreement and the other Loan Documents and the  preparation
of the  closing  binders;  (ii) the  administration  of the Loan;  and (iii) the
enforcement of the terms of this Agreement and the other Loan Documents.

     7.4 TIME OF PAYMENT OF FEES AND EXPENSES.

     Borrower shall pay all expenses and fees incurred as of the Loan Opening on
the Loan  Opening  Date  (unless  sooner  required  herein).  At the time of the
Opening  of  the  Loan,  Lender  may  pay  from  the  proceeds  of  the  initial
disbursement  of the Loan all Loan  expenses.  Lender may require the payment of
outstanding  fees and expenses as a condition to any  disbursement  of the Loan.
Lender is hereby  authorized,  without  any  specific  request or  direction  by
Borrower,  but after notice to Borrower, to make disbursements from time to time
in  payment  of or to  reimburse  Lender  for all Loan  expenses  and fees which
Borrower fails to make within ten (10) days after receipt of notice from Lender.

     7.5 EXPENSES AND ADVANCES SECURED BY LOAN DOCUMENTS.

     Any and all  advances or payments  made by Lender under this Article 7 from
time to time, and any amounts  expended by Lender  pursuant to this Agreement or
any of the other  Loan  Documents,  shall,  as and when  advanced  or  incurred,
constitute  additional  indebtedness  evidenced  by the Note and  secured by the
Mortgage and the other Loan Documents.

     7.6 RIGHT OF LENDER TO MAKE ADVANCES TO CURE BORROWER'S DEFAULTS.

     In the event that Borrower  fails to perform any of  Borrower's  covenants,
agreements or  obligations  contained in this Agreement or any of the other Loan
Documents (after the expiration of applicable  grace or cure periods,  except in
the event of an emergency or other exigent circumstances), Lender may (but shall
not be required to) perform any of such covenants,  agreements and  obligations,
and any amounts expended by Lender in so doing and shall  constitute  additional
indebtedness  evidenced  by the Note and secured by the  Mortgage  and the other
Loan Documents.

<PAGE>

                                    ARTICLE 8

                             REQUIREMENTS PRECEDENT
                           TO THE OPENING OF THE LOAN

     8.1 CONDITIONS PRECEDENT.

     Borrower agrees that Lender's obligation to open the Loan and thereafter to
make further  disbursements  of proceeds  thereof is conditioned upon Borrower's
performance and satisfaction of the following  conditions  precedent in form and
substance  satisfactory  to Lender in its  reasonable  discretion  and  Lender's
approval of the documents and other information provided by Borrower or required
under this Section 8.1.

     (a) Borrower  shall have  furnished to Lender an ALTA Loan Title  Insurance
Policy, insuring the Loan, issued by the Title Insurer, insuring the lien of the
Mortgage as a valid  first,  prior and  paramount  lien upon the Project and all
appurtenant  easements,  and subject to no  exceptions  other than the Permitted
Exceptions (the "Title Policy"). The Title Policy shall satisfy the requirements
of Exhibit C attached hereto and made a part hereof.

     (b)  Borrower  shall have  furnished  an ALTA plat of survey of the Project
prepared and certified by a surveyor  licensed in the State in which the Land is
located and otherwise  satisfactory to Lender, in triplicate,  showing,  through
the use of course  bearings and distances (i) all of the  Improvements in place;
(ii) the  dimensions  and  locations of all easements and roads or rights of way
and setback lines, if any, affecting the Project,  or required by subsection (j)
of this  Section  and  that the same are  unobstructed;  (iii)  the  dimensions,
boundaries and square footage of the Improvements; (iv) that all foundations and
other   structures  are  within  the  lot  lines  and  in  compliance  with  any
restrictions of record or ordinances  relating to the location thereof;  (v) the
dimensions  of all  buildings  and  improvements,  if any,  and distance of such
buildings and  improvements  from the lot lines;  (vi) no  encroachments  by any
improvements located on adjoining property;  (vii) whether or not the Project is
located  within a flood  plain or flood  hazard  area;  (viii) the  location  of
adjoining  streets  and  utilities  and the  distance  and  name of the  nearest
intersecting streets; (ix) the dimensions and locations of all parking areas, if
any; and (x) such additional  information which may be required by Lender.  Said
survey  shall  be dated no  earlier  than  ninety  (90)  days  prior to the Loan
Opening, shall be made (and certified to have been made) as set forth in Exhibit
D attached  hereto and made a part hereof.  Such survey shall  include the legal
description of the Land.

     (c)  Borrower  shall have  furnished  to Lender not less than ten (10) days
prior to the Loan Opening Date  satisfactory  evidence that insurance  coverages
are in effect with respect to the Project and Borrower,  in accordance  with the
Insurance Requirements attached hereto as Exhibit E, for which the premiums have
been fully prepaid with endorsements satisfactory to Lender.

     (d)  Borrower  shall  have   furnished   evidence  that  no  litigation  or
proceedings shall be pending or threatened which could or might cause a Material
Adverse Change with respect to Borrower, Guarantor or the Project.

<PAGE>

     (e) Borrower shall have  furnished to Lender (by way of utility  letters or
otherwise) evidence  establishing to the satisfaction of Lender that the Project
has adequate water supply,  storm and sanitary sewerage  facilities,  telephone,
gas, electricity, means of ingress and egress to and from the Project and public
highways  and any  other  required  public  utilities  and that the  Project  is
benefitted by insured easements as may be required for any of the foregoing.

     (f)  Borrower  shall have  furnished  to Lender an opinion from counsel for
Borrower and Guarantor  covering due  authorization,  execution and delivery and
enforceability  of the Loan  Documents  and also  containing  such  other  legal
opinions as Lender shall require.

     (g)  Lender  shall  have   obtained  an  Appraisal,   which   Appraisal  is
satisfactory  to Lender in all  respects,  and shall  confirm that the principal
amount of the Loan does not exceed seventy-five  percent (75%) of the Discounted
Bulk Sales Value of the Project.

     (h) Borrower shall have furnished to Lender current bankruptcy, federal tax
lien and judgment searches and searches of all Uniform Commercial Code financing
statements  filed  in  each  place  UCC  Financing  Statements  are to be  filed
hereunder, demonstrating the absence of adverse claims.

     (i)  Borrower  shall have  furnished  to Lender  current  annual  financial
statements  of  Borrower  and the  Guarantor,  each in form  and  substance  and
certified by such individual as acceptable to Lender. Borrower and the Guarantor
shall provide such other  additional  financial  information  Lender  reasonably
requires.

     (j)  Borrower  shall  have  furnished  to Lender a pro forma  statement  of
projected  income and expenses of the Project  covering the  succeeding  two (2)
year period (the "Pro Forma Projection").

     (k) Borrower  shall have  furnished to Lender  legible  copies of all title
exception  documents  cited in the Title  Policy and all other  legal  documents
affecting the Project or the use thereof.

     (l) Borrower shall have delivered to Lender executed copies of any leasing,
management and other agreements  entered into by Borrower in connection with the
use and operation of the Project.

     (m) Lender has received evidence that the Project is not located in an area
designated by the Secretary of Housing and Urban  Development as a special flood
hazard  area,  or  flood  hazard  insurance  acceptable  to  Lender  in its sole
discretion.

     (n) If the Title  Policy  does not include a zoning  endorsement,  Borrower
shall have furnished to Lender a zoning letter or other evidence with respect to
the Project reasonably satisfactory to Lender.

<PAGE>

     (o) Borrower shall have furnished to Lender proof satisfactory to Lender of
authority,  formation,  organization  and  good  standing  in the  State  of its
incorporation or formation and, if applicable, qualification as a foreign entity
in  good  standing  in the  state  of its  incorporation  or  formation,  of all
corporate,  partnership, trust and limited liability company entities (including
Borrower and Guarantor) executing any Loan Documents,  whether in their own name
or  on  behalf  of  another  entity.   Borrower  shall  also  provide  certified
resolutions in form and content satisfactory to Lender,  authorizing  execution,
delivery and performance of the Loan Documents,  and such other documentation as
Lender may reasonably require to evidence the authority of the persons executing
the Loan Documents.

     (p) Borrower shall have furnished to Lender a copy of the Declaration,  Map
and Association's Articles of Incorporation and Bylaws, as well as a copy of the
Master  Declaration  and Master  Association's  Articles  of  Incorporation  and
Bylaws,  and a copy  of the  recorded  deed  conveying  any  real  property  and
improvements  contemplated  under the Master  Declaration  to be conveyed to the
Master Association.

     (q)  Borrower  shall have  furnished to Lender a copy of the Rec Center Use
Agreement between Borrower and Wellsford Park Highlands Corp.

     (r)  Borrower  shall  have  furnished  to Lender a  satisfactory  phase one
environmental  report  ("Environmental  Report")  prepared  by an  environmental
consultant acceptable to Lender.

     (s) Borrower  shall have furnished to Lender a payoff  statement,  proof of
payment and release of record with  respect to that certain  Public  Improvement
Assessment  Lien dated  December 1, 1995 from Park at Highlands  LLC, a Colorado
limited  liability  company,  for the use of Palomino  Park  Public  Improvement
Corporation, a Colorado non-profit corporation, which Lien was recorded December
27, 1995,  in Book 1308 at Page 2298 of the Records of the Clerk and Recorder of
Douglas County, Colorado, burdening the Project.

     (t)  Borrower  shall  have  furnished  to  Lender  such  other   materials,
documents,  papers or requirements regarding the Project, Borrower and Guarantor
as Lender shall reasonably request.

     (u) Borrower  shall have furnished to Lender a certificate of occupancy for
each building containing  Apartment Units within the Project, as well as for any
building containing any recreational amenities.

     (v) Borrower shall have  furnished to Lender a copy of a budget  ("Budget")
setting  forth  all  costs  contemplated  by  Borrower  in  connection  with the
conversion of the Project to a Condominium.

<PAGE>

     (w) The conditions contained in this Section 8.1 are for th sole benefit of
Lender, and Lender may, in its sole discretion, waive Borrower's compliance with
any one or more  conditions,  provided  that in no event shall the waiver of one
condition by Lender constitute a waiver of any other condition listed above.

                                    ARTICLE 9

                              BORROWER'S AGREEMENTS

     9.1 BORROWER FURTHER COVENANTS AND AGREES AS FOLLOWS:

     (a)  Opening  of Loan on or  Prior to Loan  Opening  Date.  All  conditions
precedent  to the Opening of the Loan shall be complied  with on or prior to the
Loan Opening  Date.  If such  conditions  are not  complied  with as of the Loan
Opening Date,  Lender may at its sole option  terminate  Lender's  obligation to
fund the Loan by written notice to Borrower.

     (b)  Mechanic's  Liens and  Contest  Thereof.  Borrower  will not suffer or
permit any mechanic's lien claims to be filed or otherwise  asserted against the
Project and will promptly discharge the same in case of the filing of any claims
for liens or proceedings for the enforcement thereof;  provided,  however,  that
Borrower  shall  have the right to  contest  in good  faith and with  reasonable
diligence the validity of any such lien or claim upon  furnishing to Lender cash
security in the amount of one  hundred  twenty-five  percent  (125%) of the Lien
Claim or other security or title insurance protection  satisfactory to Lender in
its sole judgment.

     (c) Settlement of Mechanics'  Lien Claims.  If Borrower shall fail promptly
either (i) to discharge;  or (ii) to contest claims  asserted and provide Lender
with the security in the manner  provided in Subsection (b) of this Section,  or
having commenced to contest the same, and having given such security, shall fail
to prosecute such contest with diligence, or upon adverse conclusion of any such
contest, to cause any judgment or decree to be satisfied and lien to be released
within ten (10) days thereof, and in any event prior to a sale of any portion of
the  Project  pursuant  to such  judgment  or lien,  then and in any such event,
Lender may, at its election (but shall not be required to),  procure the release
and  discharge  of any such claim and any judgment or decree  thereon  using the
cash security posted with Lender, and further, may in its sole discretion effect
any discharge,  settlement or compromise of the same. In settling,  compromising
or discharging any claims for lien, Lender shall not be required to inquire into
the validity or amount of any such claim.

     (d) Renewal of  Insurance.  Borrower  shall  timely pay all premiums on all
insurance policies required hereunder, and as and when any policies of insurance
expire,  furnish to Lender,  premiums prepaid,  additional and renewal insurance
policies  with  companies,  coverage  and in amounts  satisfactory  to Lender in
accordance with Section 8.1(c).

<PAGE>

     (e)  Payment  of  Taxes.  Borrower  shall  pay all real  estate  taxes  and
assessments  and charges of every kind upon the  Project  before the same become
delinquent,  provided,  however,  that Borrower shall have the right to pay such
tax under protest or to otherwise  contest any such tax or assessment,  but only
if (i) such contest has the effect of preventing the collection of such taxes so
contested  and also of  preventing  the sale or forfeiture of the Project or any
part thereof or any interest  therein;  (ii) Borrower has notified Lender of its
intent to contest such taxes;  and (iii) Borrower has deposited cash security in
an amount satisfactory to Lender, in its sole discretion,  and has increased the
amount of such security so deposited  promptly after Lender's request  therefor.
If Borrower  fails to commence such contest or, having  commenced to contest the
same, and having deposited such security required by Lender for its full amount,
shall  thereafter  fail to  prosecute  such  contest  in good  faith or with due
diligence,  or, upon adverse  conclusion of any such contest,  shall fail to pay
such tax,  assessment or charge  within ten (10) days thereof,  and in any event
prior to a sale of any portion of the Project pursuant to such judgment or lien,
Lender may, at its election  (but shall not be required  to), pay and  discharge
any such tax,  assessment or charge,  and any interest or penalty  thereon using
the cash security posted with Lender,  and any additional amounts so expended by
Lender  shall  be  deemed  to  constitute  disbursements  of the  Loan  proceeds
hereunder  (even if the total  amount of  disbursements  would  exceed  the face
amount of the Note).

     (f) Escrow  Accounts.  Borrower  shall,  following  the written  request of
Lender  subsequent to the occurrence of an Event of Default,  make insurance and
tax escrow  deposits,  in amounts  reasonably  determined by Lender from time to
time as being  needed to pay  taxes  and  insurance  premiums  when  due,  in an
interest  bearing  escrow  account held by Lender in Lender's name and under its
sole dominion and control. All payments deposited in the escrow account, and all
interest  accruing thereon,  are pledged as additional  collateral for the Loan.
Notwithstanding  Lender's  holding of the escrow  account,  nothing herein shall
obligate  Lender to pay any  insurance  premiums  or real  property  taxes  with
respect to any portion of the  Project,  provided  that,  so long as no Event of
Default  exists,  Lender shall make  available to Borrower  such funds as may be
deposited  in the escrow  account  from time to time for  Borrower's  payment of
insurance premiums or real property taxes due with respect to the Project.

     (g) Personal  Property.  All of  Borrower's  personal  property,  fixtures,
attachments and equipment delivered upon, attached to or used in connection with
the use,  operation  and sale of the  Project  shall  always be  located  at the
Project and shall be kept free and clear of all liens, encumbrances and security
interests.

     (h)  Leasing  Restrictions.  Without the prior  written  consent of Lender,
Borrower and Borrower's  agents shall not enter into any Lease,  other than on a
form which has been  approved by Lender,  nor shall  Borrower  accept any rental
payment in advance of its due date.

     (i) Defaults Under Leases. Borrower will not suffer or permit any breach or
default to occur in any of  Borrower's  obligations  under any of the Leases nor
suffer or permit the same to  terminate  by reason of any failure of Borrower to
meet any requirement of any Lease.

<PAGE>

     (j) Lender's  Attorneys' Fees for Enforcement of Agreement.  In case of any
default  or Event of  Default  hereunder,  Borrower  (in  addition  to  Lender's
attorneys'  fees,  if any, to be paid pursuant to Section 7.3) will pay Lender's
attorneys' and paralegal fees (including,  without limitation,  any attorney and
paralegal  fees  and  costs  incurred  in  connection  with  any  litigation  or
bankruptcy or  administrative  hearing and any appeals  therefrom) in connection
with the enforcement of this Agreement;  without  limiting the generality of the
foregoing,  if at any time or times hereafter Lender employs counsel (whether or
not any  suit  has  been or  shall be  filed  and  whether  or not  other  legal
proceedings have been or shall be instituted) for representation with respect to
the Project, this Agreement,  or any of the other Loan Documents, or to protect,
collect, lease, sell, take possession of, or liquidate any of the Project, or to
attempt to enforce any security  interest or lien in any portion of the Project,
or to enforce any rights of Lender or Borrower's obligations hereunder,  then in
any of such events all of the attorneys'  fees arising from such  services,  and
any expenses, costs and charges relating thereto, shall constitute an additional
liability owing by Borrower to Lender, payable on demand.

     (k)  Appraisals.  Lender  shall  have the right to obtain a new or  updated
Appraisal of the Project from time to time, but in no event, so long as Borrower
is not in Default, more than once a year (at Borrower's expense). Borrower shall
cooperate with Bank in this regard.  If the Appraisal is obtained to comply with
this Agreement or any applicable law or regulatory  requirement,  or bank policy
promulgated  to comply  therewith,  or if an Event of Default  exists,  Borrower
shall pay for any such  Appraisal  upon  Bank's  request.  In the event that any
subsequent  Appraisal  indicates that the outstanding  principal  balance of the
Loan to the discounted bulk sales value of the then unreleased Condominium Units
within the Project is greater than  seventy-five  percent  (75%) ("Loan to Value
Ratio"), then Borrower agrees to prepay on principal, without the release of any
additional  Condominium Units from the lien of the Mortgage, a sum sufficient to
reduce the outstanding  principal  balance so that the Loan to Value Ratio shall
not exceed seventy-five percent (75%).

     (l) Furnishing Information. Borrower shall deliver or cause to be delivered
to Lender unaudited  annual  consolidated  financial  statements with respect to
Borrower and consolidated and consolidating financial statements with respect to
Guarantor not later than ninety (90) days after the end of each  calendar  year,
and unaudited quarterly consolidated financial statements in each case certified
by Borrower or Guarantor, as applicable,  with respect to Borrower and Guarantor
not later than forty-five (45) days after the end of each of the first three (3)
calendar quarters.  All such financial  statements shall be in a format approved
in writing by Lender,  prepared in accordance with generally accepted accounting
principles  ("GAAP")  consistently  applied.  Each financial  statement shall be
certified  as true,  complete  and  correct by  Borrower  or, in the case of the
Guarantor's  financial  statements,  by the Guarantor.  Within fifteen (15) days
following the end of each month or calendar  quarter,  as  applicable,  Borrower
shall deliver to Lender: (i) quarterly unaudited operating income statements for
the Project,  certified as true, complete and correct by Borrower showing actual
sources  and uses of cash  during  the  preceding  quarter;  and (ii)  monthly a
current  rent roll with  respect to the Project  during the  preceding  calendar
month;  and (iii)  monthly a sales and  marketing  report  ("Sales and Marketing
Report")  identifying  each (x) Apartment Unit within the Project which is under
contract for sale as a Condominium Unit to a bonafide  unaffiliated third party,
(y) each Apartment  Unit in the Project which was previously  under contract for
sale as a  Condominium  Unit to a  bonafide  third  party  purchaser  but  which
contract was terminated and the reason for such termination during the preceding
calendar  month,  and (z)  each  contract  for sale of any  Apartment  Unit as a
Condominium Unit which was closed during the preceding calendar month.  Borrower
and the Guarantor shall provide such  additional  financial  information  Lender
reasonably requires.  Borrower shall during regular business hours permit Lender
or any of its agents or representatives to have access to and examine all of its
books and records  regarding the operation and sale of Condominium  Units within
the Property.  Further,  Borrower shall,  during regular business hours,  permit
Lender and any of its agents or representatives to have access to the Project to
inspect and examine the same.

<PAGE>

     (m) Lost Note.  Upon  Lender's  furnishing to Borrower an affidavit to such
effect,  Borrower  shall, if the Note is mutilated,  destroyed,  lost or stolen,
deliver to Lender,  in  substitution  therefor,  a new note  containing the same
terms and conditions as the Note.

     (n) Indemnification.  Borrower shall indemnify Lender, including each party
owning  an  interest  in the  Loan and  their  respective  officers,  directors,
employees and consultants  (each,  an  "Indemnified  Party") and defend and hold
each  Indemnified  Party harmless from and against all claims,  injury,  damage,
loss and liability,  cost and expense  (including  reasonable  attorneys'  fees,
costs and  expenses)  of any and every kind to any persons or property by reason
of (i) the construction; (ii) the use, operation,  maintenance, leasing and sale
of the Project or any portion  thereof;  (iii) any breach of  representation  or
warranty,  default  or Event of  Default;  or (iv) any other  matter  arising in
connection with the Loan, Borrower or the Project. No Indemnified Party shall be
entitled  to  be  indemnified  against  its  own  gross  negligence  or  willful
misconduct.

     (o) No Additional Debt.  Except for the Loan,  Borrower shall not incur any
indebtedness (whether personal or nonrecourse,  secured or unsecured) other than
customary trade payables paid within sixty (60) days after they are incurred.

     (p)  Sign and  Publicity.  Lender  may,  at its own  expense,  erect a sign
approved  in  advance  by  Borrower  (as  to  location  and  design),  not to be
unreasonably withheld or delayed,  indicating that the financing for the Project
is provided by Lender.  Lender reserves the right to publicize the making of the
Loan.

     (q)  Compliance  With  Laws.  Borrower  shall  comply  with all  applicable
requirements  (including  applicable Laws) of any Governmental  Authority having
jurisdiction  over Borrower or the Project,  the  conversion of the Project to a
Condominium or the sale of Condominium Units within the Project.

     (r) Organizational Documents. Borrower shall not, without the prior written
consent of Lender,  permit or suffer (i) a material amendment or modification of
its organizational  documents;  (ii) the admission of any new member, partner or
shareholder;  (iii) any dissolution or termination of its existence; (iv) change
in Manager of Borrower; or (v) transfer of any Membership Interest in Borrower.

     (s)  Furnishing  Reports.  Upon Lender's  request,  Borrower  shall provide
Lender  with  copies  of  all  inspections,  reports,  test  results  and  other
information received by any Borrower,  which in any way relate to the Project or
any part thereof.

     (t) Management  Contracts.  Borrower shall not enter into,  modify,  amend,
terminate or cancel any management  contracts for the Project or agreements with
agents or brokers,  without the prior written approval of Lender, which approval
shall not be unreasonably withheld.

<PAGE>

     (u)  Furnishing  Notices.  Borrower shall provide Lender with copies of all
material notices pertaining to the Project received by Borrower from any Tenant,
purchaser of a Condominium  Unit,  Governmental  Authority or insurance  company
within five (5) days after such notice is received.

     (v) Alterations. Without the prior written consent of Lender, which consent
shall not be  unreasonably  withheld  or  delayed,  Borrower  shall not make any
material alterations to the Project, other than as contemplated under the Budget
approved by Lender.

     (w) Cash  Distributions.  Borrower  shall  not make  any  distributions  to
partners,  members or  shareholders  to the  extent  needed by  Borrower  to pay
Operating  Expenses or amounts,  including debt service,  payable under the Loan
Documents during the next ensuing one (1) calendar month period.

     (x)  Maintenance.  Borrower  shall  maintain  the Project and each  portion
thereof in a good,  safe,  sanitary  and  healthy  condition  and shall make all
needed repairs and replacements to the Project or any portion  thereof,  whether
the same are of a capital  nature or not.  All such  repairs,  replacements  and
maintenance shall be performed in a prompt and diligent manner and in compliance
with all applicable laws, rules, regulations and codes.

     (y) Condominium Declaration. Borrower shall not record the Declaration, Map
or any of the association documents until the same have been approved by Lender,
and once approved by Lender, shall not amend or modify the same without Lender's
prior  written  consent,  which consent  shall not be  unreasonably  withheld or
delayed.

     (z) Sale of  Condominium  Units.  Borrower  shall not  commence the sale of
Condominium Units in the Project until such time as Borrower has registered as a
developer  and has  obtained  a  certificate  of  registration  pursuant  to the
requirements  of C.R.S.  ss.12-61-401,  et seq., and Borrower shall at all times
prior  to the  Maturity  Date,  keep its  registration  and  certification  as a
developer in full force and effect.  Further,  all Condominium Units offered for
sale within the Project shall be located in those  portions of the Project which
have been  submitted to the terms of the  Declaration  pursuant to an annexation
agreement recorded with the Clerk and Recorder of Douglas County, Colorado.

     (aa) Master  Declaration.  Borrower shall not record the Master Declaration
or any of the Master Association  documents until the same have been approved by
Lender, and once approved by Lender, Borrower shall not amend or modify the same
without Lender's prior written consent, which shall not be unreasonably withheld
or delayed.

                                   ARTICLE 10

                           CASUALTIES AND CONDEMNATION

     10.1 LENDER'S ELECTION TO APPLY PROCEEDS ON INDEBTEDNESS.

<PAGE>

     (a) Subject to the provisions of Section 10.1(b) below, Lender may elect to
collect, retain and apply upon the indebtedness of Borrower under this Agreement
or any of the other Loan  Documents  all proceeds of  insurance or  condemnation
(individually and collectively referred to as "Proceeds") after deduction of all
expenses of collection and settlement,  including attorneys' and adjusters' fees
and charges.  Any proceeds  remaining after repayment of the indebtedness  under
the Loan Documents shall be paid by Lender to Borrower.

     (b)  Notwithstanding  anything in Section  10.1(a) to the contrary,  in the
event of any casualty to the  Improvements  or any  condemnation  of part of the
Project,  Borrower shall have the option of applying the Proceeds to restoration
of the  Improvements  if (i) no Event of Default  exists;  (ii) all Proceeds are
deposited  with Lender;  (iii) in Lender's  reasonable  judgment,  the amount of
Proceeds   available  for  restoration  of  the   Improvements   (together  with
undisbursed  proceeds  of the  Loan,  if  any,  allocated  for  the  cost of the
Construction and any sums or other security  acceptable to Lender deposited with
Lender by Borrower for such  purpose) is sufficient to pay the full and complete
costs of such restoration;  (iv) if the cost of restoration  exceeds ten percent
(10%) of the Loan Amount,  in Lender's sole  determination  after  completion of
restoration  the Loan Amount will not exceed  seventy-five  percent (75%) of the
Discounted  Bulk  Sale  Value  of  the  Project;   (v)  in  Lender's  reasonable
determination,   the  Project  can  be  restored  to  an   architecturally   and
economically  viable  project in compliance  with  applicable  Laws; and (vi) in
Lender's  reasonable  determination,  such restoration is likely to be completed
not later than three months prior to the Maturity Date.

     10.2 BORROWER'S OBLIGATION TO REBUILD AND USE OF PROCEEDS THEREFOR.

     In case  Lender does not elect to apply or does not have the right to apply
the Proceeds to the  indebtedness,  as provided in Section 10.1 above,  Borrower
shall:

     (a)  Proceed  with  diligence  to  make  settlement  with  insurers  or the
appropriate governmental authorities and cause the Proceeds to be deposited with
Lender;

     (b) In the event of any delay in making  settlement  with  insurers  or the
appropriate  governmental  authorities or effecting  collection of the Proceeds,
deposit  with  Lender the full  amount  required  to  complete  construction  as
aforesaid;

     (c) In the event the  Proceeds and the  available  proceeds of the Loan are
insufficient  to assure the Lender  that the Loan will be in  balance,  promptly
deposit with Lender any amount necessary to place the Loan in balance; and

     (d)  Promptly   proceed  with  the  assumption  of   construction   of  the
Improvements,  including  the  repair of all  damage  resulting  from such fire,
condemnation or other cause and restoration to its former condition.

     Any request by Borrower for a disbursement  by Lender of Proceeds and funds
deposited by Borrower  shall be treated by Lender as if such request were for an
advance of the Loan hereunder, and the disbursement thereof shall be conditioned
upon  Borrower's  compliance  with  and  satisfaction  of  the  same  conditions
precedent  as would be  applicable  under this  Agreement  for an advance of the
Loan, as well as all conditions  precedent to the  disbursement of Proceeds with
respect to a construction loan contained in a standard form of construction loan
agreement  used by Lender with  respect to the  construction  of  apartments  or
condominium projects.

<PAGE>

                                   ARTICLE 11

                       ASSIGNMENTS BY LENDER AND BORROWER

     11.1 ASSIGNMENTS AND PARTICIPATIONS.

     Lender may from time to time sell the Loan and the Loan  Documents  (or any
interest therein) and may grant  participations in the Loan.  Borrower agrees to
cooperate, at no additional expense to Borrower, with Lender's efforts to do any
of the foregoing and to execute all documents  reasonably  required by Lender in
connection  therewith which do not materially adversely affect Borrower's rights
under the Loan Documents.

     11.2 PROHIBITION OF ASSIGNMENTS AND TRANSFERS BY BORROWER.

     Borrower  shall not  assign or  attempt  to assign  its  rights  under this
Agreement and any purported  assignment shall be void. Without the prior written
consent of Lender,  in Lender's sole  discretion,  Borrower  shall not suffer or
permit (i) any change in the  management  (whether  direct or  indirect)  of the
Project; or (ii) the sale,  transfer,  lease (other than a Lease of an Apartment
Unit), conveyance, alienation, pledge, assignment, encumbrance, hypothecation or
other disposition (a "Transfer") of (1) all or any portion of the Project or any
portion  of any other  security  for the  Loan,  (2) all or any  portion  of the
Borrower's right, title and interest in and to the Project or any portion of any
other security for the Loan (unless the Loan is simultaneously  repaid in full),
or (3) any interest in Borrower.  Notwithstanding the foregoing,  Borrower shall
have the right to enter into contracts for sale of individual  Condominium Units
within the Project; provided,  however, that no conveyance of a Condominium Unit
under such contract for sale shall be consummated,  unless such Condominium Unit
is  released  from the lien of the  Mortgage  for the  benefit  of the Lender in
accordance with and pursuant to the release provisions hereinafter set forth.

     11.3 PROHIBITION OF TRANSFERS IN VIOLATION OF ERISA.

     In addition to the prohibitions  set forth in Section 11.2 above,  Borrower
shall not assign,  sell, pledge,  encumber,  transfer,  hypothecate or otherwise
dispose  of its  interest  or rights in this  Agreement  or in the  Project,  or
attempt to do any of the foregoing or suffer any of the foregoing, nor shall any
party owning a direct or indirect  interest in Borrower  assign,  sell,  pledge,
encumber,  transfer,  hypothecate  or otherwise  dispose of any of its rights or
interest (direct or indirect) in Borrower, attempt to do any of the foregoing or
suffer  any of the  foregoing,  if such  action  would  cause the  Loan,  or the
exercise of any of Lender's  rights in  connection  therewith,  to  constitute a
prohibited  transaction  under ERISA or the  Internal  Revenue Code or otherwise
result in Lender being deemed in violation of any applicable provision of ERISA.
Borrower  agrees to indemnify and hold Lender free and harmless from and against
all losses,  costs  (including  attorneys'  fees and expenses),  taxes,  damages
(including  consequential  damages) and expenses  Lender may suffer by reason of
the  investigation,  defense  and  settlement  of claims  and in  obtaining  any
prohibited  transaction exemption under ERISA necessary or desirable in Lender's
sole  judgment  or by  reason  of a breach of the  foregoing  prohibitions.  The
foregoing  indemnification  shall be a recourse obligation of Borrower and shall
survive  repayment  of the Note,  notwithstanding  any  limitations  on recourse
contained herein or in any of the Loan Documents.

<PAGE>

     11.4 SUCCESSORS AND ASSIGNS.

     Subject to the foregoing  restrictions on transfer and assignment contained
in this  Article 11, this  Agreement  shall inure to the benefit of and shall be
binding on the parties  hereto and their  respective  successors  and  permitted
assigns.

                                   ARTICLE 12

                               TIME OF THE ESSENCE

     12.1 TIME IS OF THE ESSENCE.

     Borrower agrees that time is of the essence under this Agreement.

                                   ARTICLE 13

                                EVENTS OF DEFAULT

     13.1 EVENTS OF DEFAULT.  The occurrence of any one or more of the following
shall constitute an "Event of Default" as said term is used herein:

     (a) Failure of Borrower (i) (x) to make any  principal or interest  payment
within  five (5) days after the date when due,  or (y) to observe or perform any
of the other covenants or conditions by Borrower to be performed under the terms
of this  Agreement or any other Loan Document  concerning  the payment of money,
for a period of ten (10) days after written  notice from Lender that the same is
due and payable;  or (ii) for a period of thirty (30) days after written  notice
from  Lender,  to observe or perform  any  non-monetary  covenant  or  condition
contained in this  Agreement or any other Loan  Documents;  provided that if any
such failure  concerning a non-monetary  covenant or condition is susceptible to
cure and cannot  reasonably  be cured  within said thirty (30) day period,  then
Borrower  shall have an  additional  thirty (30) day period to cure such failure
and no Event  of  Default  shall be  deemed  to exist  hereunder  so long as (x)
Borrower  commences  such cure  within the  initial  thirty  (30) day period and
diligently  and in good  faith  pursues  such  cure to  completion  within  such
resulting  sixty (60) day period from the date of Lender's  notice,  and (y) the
existence  of such  default  will not result in any  prospective  purchaser of a
Condominium  Unit having the right to terminate  its purchase  contract with any
tenant of an Apartment  Unit having the right to terminate its Lease due to such
default;  and  provided  further  that if a different  notice or grace period is
specified  under any other  subsection  of this  Article  13 with  respect  to a
particular breach, the specific provision shall control.

     (b) Any Transfer or other  disposition  in  violation  of Sections  11.2 or
11.3.

     (c) If any warranty, representation,  statement, report or certificate made
now or hereafter by Borrower or Guarantor is untrue or incorrect in any material
respect  at the  time  made  or  delivered,  provided  that if  such  breach  is
reasonably  susceptible of cure, then no Event of Default shall exist so long as
Borrower  cures said  breach (i) within the notice and cure  period  provided in
(a)(i)  above for a breach  that can be cured by the  payment of money;  or (ii)
within the  notice  and cure  period  provided  in  (a)(ii)  above for any other
breach.

<PAGE>

     (d)  Borrower  or  Guarantor  shall  commence a voluntary  case  concerning
Borrower or such  Guarantor  under Title 11 of the United  States Code  entitled
"Bankruptcy"  as now or hereafter  in effect,  or any  successor  thereto or any
other  present or future  bankruptcy  or  insolvency  statute  (the  "Bankruptcy
Code"); or an involuntary  proceeding is commenced against Borrower or Guarantor
under  the  Bankruptcy  Code and  relief is  ordered  against  Borrower  or such
Guarantor,  or the petition is  controverted  but not dismissed or stayed within
sixty (60) days after the  commencement  of the case, or a custodian (as defined
in the Bankruptcy Code) is appointed for or takes charge of all or substantially
all of the  property of  Borrower or  Guarantor;  or the  Borrower or  Guarantor
commences  any  other   proceedings  under  any   reorganization,   arrangement,
readjustment of debt, relief of debtors, dissolution,  insolvency or liquidation
or similar Law of any  jurisdiction  whether now or hereafter in effect relating
to the  Borrower  or  Guarantor;  or  there is  commenced  against  Borrower  or
Guarantor any such proceeding which remains undismissed or unstayed for a period
of sixty (60) days; or the Borrower or Guarantor fails to controvert in a timely
manner any such case under the Bankruptcy  Code or any such  proceeding,  or any
order of relief or other order approving any such case or proceeding is entered;
or the Borrower or Guarantor by any act or failure to act  indicates its consent
to,  approval  of,  or  acquiescence  in any  such  case  or  proceeding  or the
appointment of any custodian or the like of or for it for any  substantial  part
of its  property or suffers any such  appointment  to continue  undischarged  or
unstayed for a period of sixty (60) days.

     (e)  Borrower  or  Guarantor  shall make an  assignment  for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall consent to the appointment of a receiver or trustee or
liquidator  of all of its  property  or the major  part  thereof  or if all or a
substantial  part of the assets of Borrower or Guarantor are  attached,  seized,
subjected to a writ or distress  warrant,  or are levied upon,  or come into the
possession  of any receiver,  trustee,  custodian or assignee for the benefit of
creditors.

     (f) If Borrower is  enjoined,  restrained  or in any way  prevented  by any
court order from operating the Project.

     (g) One or more  final,  unappealable  judgments  are  entered  (i) against
Borrower  in  amounts  aggregating  in excess of One  Hundred  Thousand  Dollars
($100,000.00); or (ii) against Guarantor in amounts aggregating in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00),  and said judgments are not stayed
or bonded over within thirty (30) days after entry.

     (h) If Borrower or Guarantor shall fail to pay any debt owed by it or is in
default under any agreement with Lender or any other party (other than a failure
or default for which Borrower's  maximum  liability does not exceed  $100,000.00
and Guarantor's  maximum liability does not exceed $250,000.00) and such failure
or  default  continues  after  any  applicable  grace  period  specified  in the
instrument or agreement relating thereto.

     (i)  As  of  the  end  of  each  calendar  quarter,   Guarantor's  and  its
consolidated   wholly-owned   subsidiary's   liquid  assets,  as  determined  in
accordance with generally acceptable accounting  principles,  are less than Five
Million Dollars ($5,000,000.00).

<PAGE>

     (j) As of the end of each calendar quarter,  Guarantor's tangible net worth
(i.e., Guarantor's and its consolidated  wholly-owned subsidiary's total assets,
excluding intangible assets, such as good will, trademarks, patents, copyrights,
organizational  expenses and similar intangible assets,  less all liabilities of
Guarantor and its consolidated  wholly-owned subsidiary,  including subordinated
debt) does not equal or exceed Fifty Million Dollars ($50,000,000.00).

     (k) If a Material  Adverse  Change  occurs with  respect to  Borrower,  the
Project or Guarantor.

     (l) The  occurrence of any other event or  circumstance  denominated  as an
Event of  Default  herein  or under  any of the  other  Loan  Documents  and the
expiration of any applicable grace or cure periods,  if any,  specified for such
Event of Default herein or therein, as the case may be.

                                   ARTICLE 14

                      LENDER'S REMEDIES IN EVENT OF DEFAULT

     14.1 REMEDIES CONFERRED UPON LENDER.

     Upon the  occurrence of any Event of Default,  Lender may pursue any one or
more of the following remedies concurrently or successively, it being the intent
hereof that none of such remedies shall be to the exclusion of any other:

     (a)  Withhold  further  disbursement  of the  proceeds  of the Loan  and/or
terminate Lender's obligations to make further disbursements hereunder;

     (b) Declare the Note to be immediately due and payable;

     (c) Use and apply any  monies or letters of credit  deposited  by  Borrower
with Lender,  regardless  of the purposes for which the same was  deposited,  to
cure any such  default  or to apply on account  of any  indebtedness  under this
Agreement which is due and owing to Lender; and

     (d) Exercise or pursue any other remedy or cause of action  permitted under
this  Agreement  or any  other  Loan  Documents,  or  conferred  upon  Lender by
operation of Law.

     Notwithstanding the foregoing,  upon the occurrence of any Event of Default
under Section 13.1, all amounts evidenced by the Note shall automatically become
due and payable, without any presentment,  demand, protest or notice of any kind
to Borrower.

<PAGE>

                                   ARTICLE 15

                          RELEASE OF CONDOMINIUM UNITS

     15.1 FULL PAYMENT.

     Except as provided in Section 15.2 below,  unless Lender otherwise consents
in writing,  the  Property or any part thereof  encumbered  by the Deed of Trust
shall not be released until all of the indebtedness  secured by the Note and the
obligations of Borrower  hereunder and under the other Loan Documents shall have
been paid and performed in full.

     15.2 PARTIAL RELEASES.

     Lender shall release a Condominium  Unit from the lien of the Mortgage upon
satisfaction  of  the  following  conditions  precedent  with  respect  to  each
Condominium  Unit for which a release is requested.  At the time of the release,
no Event of Default shall have occurred. Borrower shall have paid to Lender with
respect  to each  Condominium  Unit to be  released  the  greater  of (i) ninety
percent (90%) of the net sales  proceeds  received by Borrower  arising from the
sale of a Condominium  Unit for which a release has been requested;  or (ii) One
Hundred Sixty-One Thousand Two Hundred Twelve Dollars  ($161,212.00);  provided,
however,  that with  respect  to ten (10)  Units  which are Star Mesa  Models or
Dillon  Mesa  Models,  the amount  payable  with  respect to the release of such
Condominium  Unit from the lien of the  Mortgage  shall be one  hundred  percent
(100%) of the net sales  proceeds  received  by  Borrower  upon the sale of such
Condominium Unit ("Release Consideration"). The term net sales proceeds, as used
herein, shall mean the gross sales price of the Condominium Unit in question, as
set forth in the purchase and sale agreement for such Condominium Unit, less (i)
the amount of all closing costs,  brokerage commissions and other customary fees
and  charges  incurred  by  a  seller  of  a  Condominium  Unit  in  the  Denver
Metropolitan Area; provided,  however, that any and all of such amount shall not
in the  aggregate  exceed  eight  percent  (8%)of the gross  sales price of such
Condominium  Unit;  and/or (ii) the charge for all  optional  items and upgrades
which are  identified  in the  purchase  agreement  for such  Condominium  Unit.
Borrower shall have provided Lender with a description of the  Condominium  Unit
to be released,  which  description  shall be  satisfactory  to Lender and Title
Company.

                                   ARTICLE 16

                               GENERAL PROVISIONS

     16.1 CAPTIONS.

     The captions and headings of various Articles,  Sections and subsections of
this Agreement and Exhibits  pertaining  hereto are for convenience only and are
not to be  considered  as defining or limiting in any way the scope or intent of
the provisions hereof.

<PAGE>

     16.2 MODIFICATION; WAIVER.

     No  modification,  waiver,  amendment or discharge of this Agreement or any
other Loan  Document  shall be valid unless the same is in writing and signed by
the party against which the enforcement of such modification,  waiver, amendment
or discharge is sought.

     16.3 GOVERNING LAW.

     Irrespective  of the place of execution  and/or  delivery,  this  Agreement
shall be governed by, and shall be construed in accordance with, the laws of the
State of Colorado.

     16.4 ACQUIESCENCE NOT TO CONSTITUTE WAIVER OF LENDER'S REQUIREMENTS.

     Each and every  covenant and condition for the benefit of Lender  contained
in this Agreement may be waived by Lender, provided, however, that to the extent
that  Lender  may have  acquiesced  in any  noncompliance  with  any  conditions
precedent to the Opening of the Loan or to any subsequent  disbursement  of Loan
proceeds, such acquiescence shall not be deemed to constitute a waiver by Lender
of such requirements with respect to any future disbursements of Loan proceeds.

     16.5 DISCLAIMER BY LENDER.

     This Agreement is made for the sole benefit of Borrower and Lender,  and no
other person or persons shall have any benefits,  rights or remedies under or by
reason of this  Agreement,  or by reason of any actions taken by Lender pursuant
to  this   Agreement.   Lender   shall  not  be   liable  to  any   contractors,
subcontractors,   supplier,   architect,   engineer,   tenant,  purchaser  of  a
Condominium  Unit or other party for labor or services  performed  or  materials
supplied in the use,  operation,  maintenance,  lease,  sale or ownership of the
Project. Lender shall not be liable for any debts or claims accruing in favor of
any such parties against Borrower or others or against the Project.  Lender,  by
making  the Loan or taking  any action  pursuant  to any of the Loan  Documents,
shall not be deemed a partner or a joint  venturer with Borrower or fiduciary of
Borrower.

     16.6 PARTIAL INVALIDITY; SEVERABILITY.

     If any of the provisions of this Agreement,  or the application  thereof to
any  person,  party or  circumstances,  shall,  to any  extent,  be  invalid  or
unenforceable,  the  remainder of this  Agreement,  or the  application  of such
provision or provisions to persons, parties or circumstances other than those as
to whom or which it is held  invalid  or  unenforceable,  shall not be  affected
thereby, and every provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.

     16.7 DEFINITIONS INCLUDE AMENDMENTS.

<PAGE>

     Definitions   contained  in  this  Agreement   which  identify   documents,
including,  but not limited to, the Loan  Documents,  shall be deemed to include
all amendments and  supplements to such documents from the date hereof,  and all
future  amendments  and  supplements  thereto  entered into from time to time to
satisfy the  requirements  of this  Agreement or  otherwise  with the consent of
Lender.  Reference to this Agreement contained in any of the foregoing documents
shall be deemed to include all amendments and supplements to this Agreement.

     16.8 ENTIRE AGREEMENT.

     This Agreement, taken together with all of the other Loan Documents and all
certificates  and other  documents  delivered by Borrower to Lender,  embody the
entire agreement and supersede all prior agreements,  written or oral,  relating
to the subject matter hereof.

     16.9 WAIVER OF DAMAGES.

     In no event shall Lender be liable to Borrower for  punitive,  exemplary or
consequential damages, including, without limitation, lost profits, whatever the
nature of a breach by Lender of its  obligations  under this Agreement or any of
the Loan Documents,  and Borrower for itself and its Guarantors waive all claims
for punitive,  exemplary or consequential damages,  including without limitation
lost profits.

     16.10 CLAIMS AGAINST LENDER.

     Lender  shall not be in default  under this  Agreement,  or under any other
Loan Documents,  unless a written notice specifically setting forth the claim of
Borrower  shall have been given to Lender within three (3) months after Borrower
first had knowledge of the occurrence of the event which  Borrower  alleges gave
rise to such claim and Lender does not remedy or cure the default,  if any there
be, promptly  thereafter.  Borrower waives any claim, set-off or defense against
Lender  arising by reason of any alleged  default by Lender as to which Borrower
does not give such notice timely as aforesaid.  Borrower  acknowledges that such
waiver is or may be  essential  to  Lender's  ability  to enforce  its  remedies
without delay and that such waiver  therefore  constitutes a substantial part of
the bargain between Lender and Borrower with regard to the Loan.

     16.11 JURISDICTION.

<PAGE>

     TO THE GREATEST EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES ANY AND ALL
RIGHTS TO  REQUIRE  MARSHALING  OF ASSETS BY LENDER.  WITH  RESPECT TO ANY SUIT,
ACTION  OR  PROCEEDINGS  RELATING  TO THIS  AGREEMENT  (EACH,  A  "PROCEEDING"),
BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE  JURISDICTION OF THE STATE
AND  FEDERAL  COURTS  HAVING  JURISDICTION  IN THE CITY AND  COUNTY OF DENVER OR
COUNTY OF DOUGLAS AND STATE OF COLORADO,  AND (B) WAIVES ANY OBJECTION  WHICH IT
MAY HAVE AT ANY TIME TO THE  LAYING OF VENUE OF ANY  PROCEEDING  BROUGHT  IN ANY
SUCH  COURT,  WAIVES  ANY  CLAIM  THAT ANY  PROCEEDING  HAS BEEN  BROUGHT  IN AN
INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT,  WITH RESPECT TO SUCH
PROCEEDING,  THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING
IN THIS AGREEMENT  SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER
JURISDICTION  NOR  WILL  THE  BRINGING  OF A  PROCEEDING  IN  ANY  ONE  OR  MORE
JURISDICTIONS  PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER  JURISDICTION.
BORROWER FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE
OF PROCESS  PROVIDED  FOR UNDER  APPLICABLE  LAW,  ALL SERVICE OF PROCESS IN ANY
PROCEEDING IN ANY COLORADO  STATE OR UNITED STATES COURT SITTING IN THE CITY AND
COUNTY OF DENVER OR COUNTY OF DOUGLAS  MAY BE MADE BY  CERTIFIED  OR  REGISTERED
MAIL,  RETURN RECEIPT  REQUESTED,  DIRECTED TO BORROWER AT THE ADDRESS INDICATED
BELOW,  AND  SERVICE SO MADE SHALL BE  COMPLETE  UPON  RECEIPT;  EXCEPT  THAT IF
BORROWER SHALL REFUSE TO ACCEPT DELIVERY,  SERVICE SHALL BE DEEMED COMPLETE FIVE
(5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

     16.12 SET-OFFS.

     After the  occurrence  and during the  continuance  of an Event of Default,
Borrower hereby  irrevocably  authorizes and directs Lender from time to time to
charge Borrower's accounts and deposits with Lender (or its Affiliates),  and to
pay over to  Lender  an amount  equal to any  amounts  from time to time due and
payable to Lender  hereunder,  under the Note or under any other Loan  Document.
Borrower hereby grants to Lender a security interest in and to all such accounts
and deposits maintained by the Borrower with Lender (or its Affiliates).

                                   ARTICLE 17
                                     NOTICES

     Any notice,  demand,  request or other communication which any party hereto
may be required or may desire to give hereunder shall be in writing and shall be
deemed to have been properly given (a) if hand delivered, when delivered; (b) if
mailed  by  United  States  Certified  Mail  (postage  prepaid,  return  receipt
requested), three Business Days after mailing (c) if by Federal Express or other
reliable overnight courier service,  on the next Business Day after delivered to
such courier  service or (d) if by telecopier on the day of transmission so long
as copy is sent on the same day by overnight courier as set forth below:

                  If to Borrower:

                  Silver Mesa at Palomino Park LLC
                  1600 Wynkoop Street, Suite 202
                  Denver, Colorado  80202
                  Telephone:        (303) 534-4396
                  Facsimile:        (303) 534-4398

<PAGE>

                  With a copy to:

                  Wellsford Capital
                  535 Madison Avenue, 26th Floor
                  New York, New York  10022
                  Telephone:        (212) 838-3400
                  Facsimile:        (212) 421-7244

                  and with respect to notices of default only:

                  Brownstein Hyatt & Farber, P.C.
                  410 17th Street, 22nd Floor
                  Denver, Colorado  80202
                  Attn:  Howard J. Pollack, Esq.
                  Telephone:        (303) 534-6335
                  Facsimile:        (303) 623-1956

                  If to Lender:

                  KeyBank National Association
                  Mailstop CO-02-WT-0401
                  1675 Broadway, Suite 400
                  Denver, Colorado  80202
                  Attn:  Senior Vice President
                            Commercial Real Estate
                  Telephone:  720-904-4000
                  Facsimile:  720-904-4420

                  With a copy to:

                  KeyBank National Association
                  Mailstop CO-02-WT-0401
                  1675 Broadway, Suite 400
                  Denver, Colorado  80202
                  Attn:  Vice President CRE Services
                  Telephone:  720-904-4000
                  Facsimile:  720-904-4420

or at such  other  address  as the  party  to be  served  with  notice  may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.

<PAGE>

                                   ARTICLE 18

                              WAIVER OF JURY TRIAL

     BORROWER  AND LENDER  EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER
LOAN  DOCUMENTS  OR RELATING  THERETO OR ARISING  FROM THE LENDING  RELATIONSHIP
WHICH IS THE  SUBJECT  OF THIS  AGREEMENT  AND  AGREE  THAT ANY SUCH  ACTION  OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

                  EXECUTED as of the date first set forth above.

BORROWER:        SILVER MESA AT PALOMINO PARK LLC,
                          a Colorado limited liability company

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

                                   By: /s/ David M. Strong
                                       -----------------------
                                   Name:  David M. Strong
                                   Title:  Vice President
                                   Borrower's Tax ID No. 84-1461354

LENDER:          KEYBANK NATIONAL ASSOCIATION

                          By: /s/ Patricia McLaghlin
                              --------------------------
                          Name: Patricia McLaghlin
                          Title: Assistant Vice President

<PAGE>

                                    EXHIBIT A

                            LEGAL DESCRIPTION OF LAND

<PAGE>

                                    EXHIBIT B

                              PERMITTED EXCEPTIONS

<PAGE>

                                    EXHIBIT C

                               TITLE REQUIREMENTS

1. Title  Insurance  Company  Requirements.  The maximum single risk (i.e.,  the
amount  insured  under any one policy) by a title  insurer may not exceed 25% of
that insurer's surplus and statutory  reserves.  Reinsurance must be obtained by
closing for any policy exceeding such amount.

2. Loan Policy Forms.  Standard 1992  American Land Title  Association  ("ALTA")
form of loan title insurance  policy,  or the 1987 or 1970 (amended  October 17,
1970 and October 17, 1984) ALTA loan form  policies  must be used (the ALTA 1990
loan policy will not be accepted).

3.  Insurance  Amount.  The  amount  insured  must  equal at least the  original
principal amount of the Loan.

4. Named Insured. The named insured under the Title Policy must be substantially
the same as the following:  "KeyBank  National  Association,  and its respective
successors and assigns."

5. Creditors' Rights. Any "creditors'  rights" exception or other exclusion from
coverage for voidable transactions under bankruptcy,  fraudulent conveyance,  or
other debtor  protection laws or equitable  principles must be removed by either
an endorsement or a written waiver.

6.  Arbitration.  In the event that the form policy which is utilized includes a
compulsory  arbitration  provision,  the insurer must agree that such compulsory
arbitration  provisions  do not  apply  to any  claims  by or on  behalf  of the
insured. Please note that the 1987 and 1990 ALTA form loan policies include such
provisions.

7. Date of Policy. The effective date of the Title Policy must be as of the date
and time of the closing.

8. Legal  Description.  The legal  description of the property  contained in the
Title  Policy must conform to (a) the legal  description  shown on the survey of
the property,  and (b) the legal description  contained in the Mortgage.  In any
event,  the Title  Policy  must be endorsed  to provide  that the insured  legal
description is the same as that shown on the survey.

9.  Easements.  Each Title Policy shall  insure,  as separate  parcels:  (a) all
appurtenant  easements and other estates  benefitting the property,  and (b) all
other  rights,  title,  and  interests  of the borrower in real  property  under
reciprocal easement agreements,  access agreements,  operating  agreements,  and
agreements  containing covenants,  conditions,  and restrictions relating to the
Property.

10.  Exceptions  to Coverage.  With  respect to the  exceptions,  the  following
applies:

     a) Each Title Policy shall  afford the broadest  coverage  available in the
state in which the subject property is located.

<PAGE>

     b) The  "standard"  exceptions  (such as for parties in possession or other
matters not shown on public records) must be deleted.

     c)  The  "standard"   exception   regarding  tenants  in  possession  under
residential leases,  should also be deleted.  In the alternative,  the exception
should  read as  follows:  "Rights  or claims of  parties  in  possession  under
residential leases or occupants of apartment units, as tenants only, without any
right of first refusal to purchase any portion of the  property." For commercial
properties, a rent roll should be attached in lieu of the general exception.

     d) The  standard  survey  exception  to the Title  Policy  must be deleted.
Instead, a survey reading reflecting the current survey should be incorporated.

     e) Any  exception  for taxes,  assessments,  or other  lienable  items must
expressly  insure that such taxes,  assessments,  or other items are not yet due
and payable.

     f) Any lien,  encumbrance,  condition,  restriction,  or easement of record
must be listed in the Title  Policy,  and the Title  Policy  must  affirmatively
insure that the  improvements  do not  encroach  upon the insured  easements  or
insure against all loss or damage due to such encroachment.

     g) The Title Policy may not contain any  exception for any filed or unfiled
mechanics' or materialmen's liens.

     h) In the event that a  comprehensive  endorsement  has been issued and any
Schedule B exceptions continue to be excluded from the coverage provided through
that  endorsement,  then a  determination  must be made whether such  exceptions
would be  acceptable  to Bank.  In the  event  that it is  determined  that such
exception is acceptable,  a written explanation regarding the acceptability must
be submitted as part of the delivery of the Loan Documents.

If Schedule B indicates  the presence of any  easements  that are not located on
the survey, the Title Policy must provide affirmative insurance against any loss
resulting  from the exercise by the holder of such  easement of its right to use
or maintain  that  easement.  ALTA Form 103.1 or an  equivalent  endorsement  is
required for this purpose.

11. Endorsements. With respect to endorsements, the following applies:

     a) Each Title Policy must include an  acceptable  environmental  protection
lien  endorsement on ALTA Form 8.1. Please note that Form 8.1 may take exception
for an entire statute which  contains one or more specific  sections under which
environmental protection liens could take priority over the Mortgage;  provided,
however,  that such specific sections under which the lien could arise must also
be referenced.

     b) Each Title Policy must contain an  endorsement  which  provides that the
insured legal description is the same as shown on the survey.

<PAGE>

     c) Each Title Policy must contain a comprehensive endorsement (ALTA Form 9)
if a lien,  encumbrance,  condition,  restriction,  or  easement  is  listed  in
Schedule B to the title insurance policy.

     d)  Lender  may  require  the  following   endorsements   where  reasonably
applicable and available:

-access                            -due execution     -single tax lot
-address                           -first loss        -subdivision
-assessments                       -last dollar       -tie in
-assignment of leases and rents    -leasehold         -usury
-assignment of loan documents      -mineral rights    -zoning (ALTA 3.1-
-contiguity                        -mortgage tax         with parking)
-doing business                    -reverter

     12.  Other  Coverages.  Each Title  Policy  shall  insure the  following by
endorsement or affirmative insurance to the extent such coverage is not afforded
by the ALTA Form 9 or its equivalent in a particular jurisdiction:

     a) that no conditions,  covenants,  or restrictions of record affecting the
property:

     (i) have been violated,

     (ii) create lien rights which prime the insured mortgage,

     (iii)  contain a right of reverter or  forfeiture,  a right of reentry,  or
power of termination, or

     (iv) if  violated  in the future  would  result in the lien  created by the
insured   mortgage  or  title  to  the  property  being  lost,   forfeited,   or
subordinated; and

     b)  that  except  for   temporary   interference   resulting   solely  from
maintenance,  repair,  replacement,  or  alteration  of  lines,  facilities,  or
equipment located in easements and rights of way taken as certain  exceptions to
each Title  Policy,  such  exceptions  do not and shall not  prevent the use and
operation  of the  Property  or the  improvements  as used and  operated  on the
effective date of the Title Policy.

     13.  Informational  Matters.  The Policy must include,  as an informational
note, the following:

     a) The recorded plat number together with recording information; and

     b)  The  property  parcel  number  or the  tax  identification  number,  as
applicable.

<PAGE>

     14. Delivery of Copies. Legible copies of all easements,  encumbrances,  or
other  restrictions  shown as  exceptions  on the Title Policy must be delivered
with the first draft of the title commitment.

<PAGE>

                                    EXHIBIT D

                          FORM OF SURVEY CERTIFICATION

                      CERTIFICATION FOR SURVEYS (LONG-FORM)

I hereby certify to KeyBank  National  Association,  its successors and assigns,
and _____________  (insert Borrower and Title Insurance Company) that the survey
prepared by me entitled " ________ " was actually  made upon the ground and that
it and the  information,  courses and distances shown thereon are correct;  that
the title  lines and lines of  actual  possession  are the same;  that the size,
location and type of buildings and  improvements are as shown and all are within
the boundary lines of the property;  that there are no easements,  encroachments
or use affecting this property  appearing from a careful physical  inspection of
the same, other than those shown and depicted thereon; that all utility services
required for the  operations of the premises  either enter the premises  through
adjoining public streets, or the survey shows the point of entry and location of
any utilities which pass through or are located on adjoining  private land; that
the survey shows the location and  direction of all storm  drainage  systems for
the collection and disposal of all roof and surface drainage; that any discharge
into streams, rivers or other conveyance system is shown on the survey; and that
the parcels  described  heron do not lie within flood hazard areas in accordance
with the document entitled "Department of Housing and Urban Development, Federal
Insurance  Administration - Special Flood Hazard Area Maps". This survey is made
in accordance  with the "Minimum  Standard  Detail  Requirements  for Land Title
Surveys"  jointly  established and adopted by ALTA and ACSM" in 1997 for Class A
Urban Survey and includes items 1-4, 6-11 and 13 of Table A.

<PAGE>

                                    EXHIBIT E

                             INSURANCE REQUIREMENTS

Borrower  shall  obtain and keep in full force and effect  permanent  All Perils
insurance coverage as appropriate,  satisfactory to Lender, on the Project.  All
insurance  policies shall be issued by carriers with a Best's Insurance  Reports
policy  holder's  rating of A and a financial size category of Class X and shall
include  a  standard  mortgage  clause  (without  contribution)  in favor of and
acceptable  to Lender.  The policies  shall provide for the  following,  and any
other coverage that Lender may from time to time deem necessary:

     a) Coverage Against All Peril in the amount of 100% of the replacement cost
of all  Improvements  located  or to be  located  on the Land.  If the policy is
written on a  CO-INSURANCE  basis,  the policy  shall  contain an AGREED  AMOUNT
ENDORSEMENT  as evidence that the coverage is in an amount  sufficient to insure
the full amount of the mortgage indebtedness.  "KeyBank National Association and
its successors and assigns" shall be named as the "Mortgagee" and "Loss Payee".

     b)  Public  liability  coverage  in a  minimum  amount  of  not  less  than
$1,000,000 per  occurrence and $2,000,000 in the aggregate and excess  liability
coverage of not less than  $5,000,000.  "KeyBank  National  Association  and its
successors and assigns" shall be named as an "Additional Insured".

     c) Rent loss or business interruption coverage in a minimum amount approved
by Lender.

     d) Flood hazard coverage in a minimum amount available, if the premises are
located in a special  flood hazard area ("Flood  Hazard  Area") as designated by
the Federal  Emergency  Management  Agency on its Flood Hazard  Boundary Map and
Flood Insurance Rate Maps, and the Department of Housing and Urban  Development,
Federal Insurance Administration, Special Flood Hazard Area Maps.

     e) Workers Compensation and Disability insurance as required by law.

     f) Such other types and amounts of  insurance  with respect to the premises
and the  operation  thereof  which are commonly  maintained in the case of other
property and buildings similar to the premises in nature, use, location, height,
and type of construction, as may from time to time be required by the mortgagee.

Each policy shall  provide that it may not be  canceled,  reduced or  terminated
without at least thirty (30) days prior written notice to Lender.

<PAGE>

                                    EXHIBIT F

                                     BUDGET

<PAGE>

                                    EXHIBIT G

                              LIBOR NOTICE ELECTION
                        NOTICE OF LIBOR FUNDING ELECTION

Date:

KeyBank National Association
1675 Broadway, Suite 400
Denver, Colorado  80202

Gentlemen:

Reference is made to the Promissory Note dated as of _______________, _____ (the
"Note").  The undersigned  hereby gives notice pursuant to the Loan Agreement of
its desire for a LIBOR FUNDING ELECTION of a portion of the proceeds of the loan
evidenced  by the Note.  The  following  are the  details  of the LIBOR  funding
election to be set up as of the commencement date specified below:

1.       The LIBOR funding commencement date is:              __________
2.       The LIBOR funding period expires:                    __________
3.       The LIBOR funding principal amount is:               __________
4.       The LIBOR funding rate is LIBOR plus 2% or:          __________

The sources for the above LIBOR are as follows (choose as appropriate):

         Prime Note Outstanding Balance
         Interest Due
         Current LIBOR Maturing
         Current LIBOR Maturing
         Total

The next LIBOR FUNDING ELECTION NOTIFICATION date is ___________________.

The  undersigned  represents  and  warrants  that  the  LIBOR  Funding  Election
requested hereby complies with the requirements of the Loan Agreement.

                        BORROWER:

                        SILVER MESA AT PALOMINO PARK LLC, a
                        Colorado limited liability company

                        By:________________________________________
                        Its:__________________________________________
<PAGE>

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