10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-10524

United Dominion Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	54-0857512
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices - zip code)

(720) 283-6120

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to filing requirements for the past 90 days. Yes  x    No   ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  x    No  ¨

The number of shares of the issuer’s common stock, $1 par value, outstanding as of November 10, 2003 was 120,783,668.

UNITED DOMINION REALTY TRUST, INC.

FORM 10-Q

INDEX

		PAGES
PART I—FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002	5
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2003	6
	Notes to Consolidated Financial Statements	7-17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II—OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	32
Signatures		33

2

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

(Unaudited)

	September 30, 2003			December 31, 2002
ASSETS
Real estate owned:
Real estate held for investment	$	4,122,402		$	3,908,746
Less: accumulated depreciation		(854,465	)		(742,876	)
		3,267,937			3,165,870
Real estate under development		41,317			30,624
Real estate held for disposition (net of accumulated depreciation of $1,006 and $5,857)		8,387			22,256
Total real estate owned, net of accumulated depreciation		3,317,641			3,218,750
Cash and cash equivalents		12,940			3,152
Restricted cash		7,006			11,773
Deferred financing costs, net		21,370			17,548
Investment in unconsolidated development joint venture		2,214			—
Funds held in escrow from 1031 exchanges pending the acquisition of real estate		14,447			7,180
Other assets		37,950			17,690
Real estate held for disposition assets		128			43
Total assets	$	3,413,696		$	3,276,136
LIABILITIES AND STOCKHOLDERS’ EQUITY
Secured debt	$	1,041,476		$	1,015,740
Unsecured debt		967,251			1,041,900
Real estate taxes payable		32,270			29,743
Accrued interest payable		14,181			11,908
Security deposits and prepaid rent		21,030			21,379
Distributions payable		39,950			35,141
Accounts payable, accrued expenses, and other liabilities		39,898			49,634
Real estate held for disposition liabilities		941			204
Total liabilities		2,156,997			2,205,649
Minority interests		88,215			69,216
Stockholders’ equity:
Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized; 5,416,009 shares 8.60% Series B Cumulative Redeemable issued and outstanding (5,416,009 in 2002)		135,400			135,400
6,000,000 shares 7.50% Series D Cumulative Convertible Redeemable issued and outstanding (8,000,000 in 2002)		143,350			175,000
3,425,217 shares 8.00% Series E Cumulative Convertible issued and outstanding (0 in 2002)		56,893			—
Common stock, $1 par value; 250,000,000 shares authorized 120,162,717 shares issued and outstanding (106,605,259 in 2002)		120,163			106,605
Additional paid-in capital		1,351,307			1,140,786
Distributions in excess of net income		(629,441	)		(541,428	)
Deferred compensation—unearned restricted stock awards		(5,789	)		(2,504	)
Notes receivable from officer-stockholders		(600	)		(2,630	)
Accumulated other comprehensive loss, net		(2,799	)		(9,958	)
Total stockholders’ equity		1,168,484			1,001,271
Total liabilities and stockholders’ equity	$	3,413,696		$	3,276,136

See accompanying notes to consolidated financial statements.

3

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
REVENUES
Rental income	$	152,157		$	146,857		$	450,395		$	434,643
Non-property income		307			138			703			885
Total revenues		152,464			146,995			451,098			435,528
EXPENSES
Rental expenses:
Real estate taxes and insurance		17,092			14,883			51,388			47,604
Personnel		16,296			15,553			46,155			43,551
Utilities		9,610			8,638			27,567			24,839
Repair and maintenance		9,779			10,380			28,556			26,942
Administrative and marketing		5,658			5,693			16,772			15,819
Property management		4,252			4,312			12,631			13,028
Other operating expenses		302			277			912			931
Real estate depreciation		41,058			38,341			118,900			110,083
Interest		27,829			34,136			88,923			98,222
General and administrative		5,526			2,974			16,133			15,478
Other depreciation and amortization		807			946			2,327			3,213
Impairment loss on investments		1,392			—			1,392			—
Loss/(gain) on early debt retirement		—			12,104			(171	)		28,364
Total expenses		139,601			148,237			411,485			428,074
Income/(loss) before minority interests and discontinued operations		12,863			(1,242	)		39,613			7,454
Minority interests of outside partnerships		—			(377	)		(614	)		(1,098	)
Minority interests of unitholders in operating partnerships		(330	)		506			(724	)		881
Income/(loss) before discontinued operations, net of minority interests		12,533			(1,113	)		38,275			7,237
Income from discontinued operations, net of minority interests		7,911			21,512			11,094			38,889
Net income		20,444			20,399			49,369			46,126
Distributions to preferred stockholders—Series B		(2,911	)		(2,911	)		(8,733	)		(8,733	)
Distributions to preferred stockholders—Series D (Convertible)		(3,053	)		(3,886	)		(10,482	)		(11,815	)
Distributions to preferred stockholders—Series E (Convertible)		(1,138	)		—			(1,365	)		—
Premium on preferred share repurchases		(12,100	)		—			(18,350	)		—
Net income available to common stockholders	$	1,242		$	13,602		$	10,439		$	25,578
Earnings per common share—basic and diluted:
Loss from continuing operations available to common stockholders, net of minority interests	$	(0.06	)	$	(0.07	)	$	(0.01	)	$	(0.13	)
Income from discontinued operations, net of minority interests	$	0.07		$	0.20		$	0.10		$	0.37
Net income available to common stockholders	$	0.01		$	0.13		$	0.09		$	0.24
Common distributions declared per share	$	0.2850		$	0.2775		$	0.8550		$	0.8325
Weighted average number of common shares outstanding—basic and diluted		116,350			107,148			112,252			106,139

See accompanying notes to consolidated financial statements.

4

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
Operating Activities
Net income	$	49,369		$	46,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		122,524			121,685
Impairment loss on real estate and investments		1,392			2,301
Gains on sales of land and depreciable property		(8,149	)		(31,873	)
Minority interests		2,040			2,788
(Gain)/loss on early debt retirement		(171	)		29,340
Amortization of deferred financing costs and other		4,902			3,881
Changes in operating assets and liabilities:
Increase/(decrease) in operating liabilities		1,347			(5,827	)
(Increase)/decrease in operating assets		(8,624	)		8,861
Net cash provided by operating activities		164,630			177,282
Investing Activities
Proceeds from sales of real estate investments, net		79,083			271,494
Acquisition of real estate assets, net of liabilities assumed and equity		(159,792	)		(232,143	)
Development of real estate assets		(12,425	)		(9,188	)
Capital expenditures and other major improvements—real estate assets, net of escrow reimbursement		(38,797	)		(32,966	)
Capital expenditures—non-real estate assets		(1,176	)		(1,122	)
Funds held in escrow from tax free exchanges pending the acquisition of real estate		(14,447	)		(7,180	)
Net cash used in investing activities		(147,554	)		(11,105	)
Financing Activities
Proceeds from the issuance of secured debt		37,415			324,282
Scheduled principal payments on secured debt		(8,937	)		(7,837	)
Non-scheduled principal payments and prepayment penalties on secured debt		(2,510	)		(286,940	)
Proceeds from the issuance of unsecured debt		199,101			198,476
Payments and prepayment penalties on unsecured debt		(207,307	)		(154,843	)
Net repayment of revolving bank debt		(67,100	)		(168,200	)
Payment of financing costs		(6,094	)		(4,845	)
Proceeds from the issuance of common stock		166,151			57,473
Proceeds from the repayment of officer loans		2,030			1,288
Proceeds from the issuance of performance shares		1,000			—
Distributions paid to minority interests		(6,758	)		(6,885	)
Distributions paid to preferred stockholders		(20,429	)		(20,636	)
Distributions paid to common stockholders		(93,779	)		(87,399	)
Repurchase of common stock		(71	)		(7,803	)
Net cash used in financing activities		(7,288	)		(163,869	)
Net increase in cash and cash equivalents		9,788			2,308
Cash and cash equivalents, beginning of period		3,152			4,641
Cash and cash equivalents, end of period	$	12,940		$	6,949
Supplemental Information:
Interest paid during the period	$	86,604		$	106,369
Issuance of restricted stock awards		5,286			2,904
Non-cash transactions:
Secured debt assumed with the acquisition of properties		—			41,636
Issuance of preferred stock in connection with acquisitions		58,811			—
Issuance of preferred operating partnership units in connection with acquisitions		26,872			—
Reduction in secured debt from the disposition of properties		—			31,063
Conversion of operating partnership minority interests to common stock (70,451 shares in 2003 and 92,159 in 2002)		1,056			1,252

See accompanying notes to consolidated financial statements.

5

UNITED DOMINION REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

	Preferred Stock					Common Stock					Additional Paid-in Capital			Distributions in Excess of Net Income			Deferred Compensation—   Unearned Restricted Stock Awards			Notes Receivable from Officer— Stockholders			Accumulated Other Comprehensive Loss
	Shares		Amount			Shares		Amount																		Total
Balance, December 31, 2002	13,416,009		$	310,400		106,605,259		$	106,605		$	1,140,786		$	(541,428	)	$	(2,504	)	$	(2,630	)	$	(9,958	)	$	1,001,271
Comprehensive Income
Net income															49,369												49,369
Other comprehensive income:
Unrealized gain on derivative instruments																								7,159			7,159
Comprehensive income															49,369									7,159			56,528
Issuance of common shares to employees, officers and director-stockholders						929,055			929			10,187															11,116
Issuance of common shares through dividend reinvestment and stock purchase plan						47,657			48			796															844
Issuance of common shares through public offering						9,100,000			9,100			144,830															153,930
Issuance of 8.00% Series E Cumulative Convertible shares	3,425,217			56,893								1,918															58,811
Purchase of common stock						(4,564	)		(5	)		(66	)														(71	)
Issuance of restricted stock awards						337,936			338			4,948						(5,286	)								—
Adjustment for conversion of minority interests of unitholders in operating partnerships						70,451			71			985															1,056
Principal repayments on notes receivable from officer-stockholders																					2,030						2,030
Accretion of premium of Preferred D redemptions				12,100											(12,100	)											—
Conversion of 7.50% Series D Cumulative Convertible Redeemable shares	(2,000,000	)		(43,750	)	3,076,923			3,077			46,923															6,250
Common stock distributions declared ($0.8550 per share)															(104,702	)											(104,702	)
Preferred stock distributions declared-Series B ($1.6125 per share)															(8,733	)											(8,733	)
Preferred stock distributions declared-Series D ($1.5267 per share)															(10,482	)											(10,482	)
Preferred stock distributions declared-Series E ($0.6644 per share)															(1,365	)											(1,365	)
Amortization of deferred compensation																		2,001									2,001
Balance, September 30, 2003	14,841,226		$	335,643		120,162,717		$	120,163		$	1,351,307		$	(629,441	)	$	(5,789	)	$	(600	)	$	(2,799	)	$	1,168,484

See accompanying notes to consolidated financial statements.

6

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

1. CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of United Dominion Realty Trust, Inc. and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership”), and Heritage Communities L.P. (the “Heritage OP”), (collectively, “United Dominion”). As of September 30, 2003, there were 122,893,768 units in the Operating Partnership outstanding, of which 113,098,985 units, or 92.0%, were owned by United Dominion and 9,794,783 units, or 8.0%, were owned by limited partners. As of September 30, 2003, there were 3,492,889 units in the Heritage OP outstanding, of which 3,131,035 units, or 89.6%, were owned by United Dominion and 361,854 units, or 10.4%, were owned by non-affiliated limited partners. The consolidated financial statements of United Dominion include the minority interests of the unitholders in the Operating Partnership and the Heritage OP.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and related notes appearing in United Dominion’s Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission as amended by the Current Report on Form 8-K filed May 14, 2003.

In the opinion of management, the consolidated financial statements reflect all adjustments which are necessary for the fair presentation of financial position at September 30, 2003 and results of operations for the interim periods ended September 30, 2003 and 2002. Such adjustments are normal and recurring in nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim results presented are not necessarily indicative of results that can be expected for a full year.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Certain previously reported amounts have been reclassified to conform to the current financial statement presentation.

2. REAL ESTATE HELD FOR INVESTMENT

At September 30, 2003, there are 259 communities with 74,236 apartment homes classified as real estate held for investment. The following table summarizes the components of real estate held for investment at September 30, (dollars in thousands):

	September 30, 2003			December 31, 2002
Land and land improvements	$	774,315		$	718,109
Buildings and improvements		3,130,170			2,980,941
Furniture, fixtures, and equipment		217,917			209,696
Real estate held for investment		4,122,402			3,908,746
Accumulated depreciation		(854,465	)		(742,876	)
Real estate held for investment, net	$	3,267,937		$	3,165,870

7

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

3. INCOME FROM DISCONTINUED OPERATIONS

For the nine months ended September 30, 2003, United Dominion sold six communities with a total of 1,675 apartment homes and two commercial properties with a total of 181,503 square feet. At September 30, 2003, United Dominion had one community with 252 apartment homes and a net book value of $4.6 million and one parcel of land with a net book value of $3.8 million included in real estate held for disposition. During the nine months ended September 30, 2002, United Dominion sold 23 communities with a total of 6,564 apartment homes, one parcel of land, and one commercial property with 143,000 square feet. The results of operations for these properties and the interest expense associated with the secured debt on these properties are classified on the Consolidated Statements of Operations in the line item entitled “Income from discontinued operations, net of minority interests.”

The following is a summary of income from discontinued operations for the three and nine months ended September 30, 2003 and 2002 (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Rental income	$	2,679		$	10,485		$	9,624		$	40,527
Rental expenses		1,450			4,589			4,681			17,256
Real estate depreciation		32			1,137			1,288			8,301
Interest		—			472			—			2,017
Loss on early debt retirement		—			474			—			975
Impairment loss on real estate and investments		—			—			—			2,301
Other expenses		—			7			8			90
		1,482			6,679			5,977			30,940
Income before gains on sales of investments, and minority interests		1,197			3,806			3,647			9,587
Net gains on sales of depreciable property		7,215			19,128			8,149			31,872
Income before minority interests		8,412			22,934			11,796			41,459
Minority interests on income from discontinued operations		(501	)		(1,422	)		(702	)		(2,570	)
Income from discontinued operations, net of minority interests	$	7,911		$	21,512		$	11,094		$	38,889

8

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

4. INVESTMENT IN UNCONSOLIDATED DEVELOPMENT JOINT VENTURE

On September 10, 2002, United Dominion entered into a development joint venture with AEGON USA Realty Advisors, Inc. in which United Dominion is serving as the managing member. The joint venture is expected to develop approximately eight to ten garden-style apartment communities over the next three years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs and will provide equity contributions for the balance of the costs with AEGON providing 80% and United Dominion providing 20%. United Dominion is serving as the developer, general contractor and property manager for the joint venture and has guaranteed those project development costs, excluding financing costs (including fees and interest), which exceed the defined project cost budgeted amounts. Management estimates that its likelihood of funding its guarantor obligations is remote and that the impact to United Dominion would be immaterial. In June 2003, United Dominion contributed land with a carrying value of $3.8 million to the joint venture.

The following is a summary of the financial position of the joint venture as of September 30, 2003 (dollars in thousands):

Assets
Real estate under development	$	6,073
Cash and cash equivalents		174
Total assets	$	6,247
Liabilities and Partners’ Capital
Accounts payable and other accrued liabilities	$	147
Partners’ capital		6,100
Total liabilities and partners’ capital	$	6,247

In addition, we recognized a $1.4 million charge for the write-off of United Dominion’s investment in Realeum, Inc., an unconsolidated joint venture created to develop web-based solutions for multi-family property and portfolio management.

9

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

5. SECURED DEBT

Secured debt on continuing and discontinued operations, which encumbers $1.6 billion or 38.1% of United Dominion’s real estate owned ($2.6 billion or 61.9% of United Dominion’s real estate owned is unencumbered) consists of the following at September 30, 2003 (dollars in thousands):

	Principal Outstanding				Weighted Average Interest Rate		Weighted Average Years to Maturity	Number of Communities Encumbered
	September 30, 2003		December 31, 2002		2003		2003	2003
Fixed Rate Debt
Mortgage notes payable	$	185,239	$	187,927	7.57	%	5.9	13
Tax-exempt secured notes payable		55,155		61,278	6.56	%	10.5	7
Fannie Mae credit facilities		288,875		288,875	6.40	%	7.3	9
Fannie Mae credit facilities—swapped		17,000		17,000	6.74	%	0.6	—
Total fixed rate secured debt		546,269		555,080	6.83	%	6.9	29
Variable Rate Debt
Mortgage notes payable		46,299		11,752	2.29	%	8.1	4
Tax-exempt secured notes payable		7,770		7,770	0.85	%	24.4	1
Fannie Mae credit facilities		370,469		370,469	1.69	%	13.6	51
Freddie Mac credit facility		70,669		70,669	1.58	%	7.3	8
Total variable rate secured debt		495,207		460,660	1.72	%	12.4	64
Total Secured Debt	$	1,041,476	$	1,015,740	4.40	%	9.5	93

Approximate principal payments due during each of the next five calendar years and thereafter, as of September 30, 2003, are as follows (dollars in thousands):

Year	Fixed Rate Maturities		Variable Rate Maturities		Total Secured Maturities
2003	$	13,961	$	82	$	14,043
2004		60,592		337		60,929
2005		18,929		4,759		23,688
2006		32,259		3,706		35,965
2007		7,306		—		7,306
Thereafter		413,222		486,323		899,545
	$	546,269	$	495,207	$	1,041,476

For the nine months ended September 30, 2002, United Dominion recognized $29.3 million ($0.27 per diluted share) of expense as a result of prepayment penalties incurred from the refinancing of certain secured loans, using proceeds from the Fannie Mae and Freddie Mac credit facilities, and the early payoff of loans on the sale of properties.

10

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

6. UNSECURED DEBT

A summary of unsecured debt at September 30, 2003 and December 31, 2002 is as follows (dollars in thousands):

	September 30,		December 31,
	2003		2002
Commercial Banks
Borrowings outstanding under an unsecured credit facility due March 2007 (a)	$	108,700	$	—
Borrowings outstanding under an unsecured credit facility due August 2003 (a)		—		175,800
Borrowings outstanding under an unsecured term loan due May 2004–2005 (a)		—		100,000
Senior Unsecured Notes—Other
7.65% Medium-Term Notes due January 2003		—		10,000
7.22% Medium-Term Notes due February 2003		—		11,815
8.63% Notes due March 2003		—		78,005
7.98% Notes due March 2002–2003		—		7,428
5.05% City of Portland, OR Bonds due October 2003		7,345		7,345
7.67% Medium-Term Notes due January 2004		46,585		46,585
7.73% Medium-Term Notes due April 2005		21,100		21,100
7.02% Medium-Term Notes due November 2005		49,760		49,760
7.95% Medium-Term Notes due July 2006		85,374		85,374
7.07% Medium-Term Notes due November 2006		25,000		25,000
7.25% Notes due January 2007		92,255		92,265
4.50% Medium-Term Notes due March 2008 (b)		200,000		—
ABAG Tax-Exempt Bonds due August 2008		46,700		46,700
8.50% Monthly Income Notes due November 2008		29,081		29,081
6.50% Notes due June 2009		200,000		200,000
8.50% Debentures due September 2024 (c)		54,118		54,118
Other (d)		1,233		1,524
		858,551		766,100
Total Unsecured Debt	$	967,251	$	1,041,900

(a) During the first quarter of 2003, United Dominion closed on a new three-year $500 million unsecured revolving credit facility. The credit facility replaced United Dominion’s $375 million unsecured revolving credit facility and $100 million unsecured term loan. If United Dominion receives commitments from additional lenders or if the initial lenders increase their commitments, United Dominion will be able to increase the credit facility to $650 million. At United Dominion’s option, the credit facility can be extended for one year to March 2007. At September 30, 2003, United Dominion had three interest rate swap agreements associated with commercial bank borrowings under the revolver with an aggregate notional value of $51.5 million under which United Dominion paid a fixed rate of interest and received a variable rate of interest on the notional amounts. The interest rate swaps, which mature from May 2004 through July 2004, effectively change United Dominion’s interest rate exposure on the $51.5 million of borrowings from a variable rate to a weighted average fixed rate of approximately 8.5%. As of September 30, 2003, the weighted average interest rate of the $108.7 million in commercial borrowings, after giving effect to swap agreements, was 5.0%.

(b) In February 2003, United Dominion issued $150 million of 4.5% senior unsecured medium-term notes due in March 2008. The net proceeds of $149.3 million from the sale were used to repay amounts outstanding on United Dominion’s $375 million unsecured revolving credit facility. In August 2003, United Dominion issued an additional $50 million of 4.5% senior unsecured medium-term notes due in March 2008. The net proceeds of $49.8 million from the sale were used to repay amounts outstanding on United Dominion’s $500 million unsecured credit facility.

(c) Includes an investor put feature that grants a one-time option to redeem the debentures in September 2004.

(d) Includes $1.2 million and $1.5 million at September 30, 2003 and December 31, 2002, respectively, of deferred gains from the termination of interest rate risk management agreements.

11

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

7. FINANCIAL INSTRUMENTS

United Dominion accounts for its derivative instruments in accordance with Statements of Financial Accounting Standards No. 133 and 138, “Accounting for Certain Derivative Instruments and Hedging Activities.” At September 30, 2003, all of United Dominion’s derivative financial instruments are interest rate swap agreements that are designated as cash flow hedges of debt with variable interest rate features, and are qualifying hedges for financial reporting purposes. For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings during the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change.

The fair value of United Dominion’s derivative instruments is reported on the balance sheet at their current fair value. Estimated fair values for interest rate swaps rely on prevailing market interest rates. These fair value amounts should not be viewed in isolation, but rather in relation to the values of the underlying hedged transactions and investments and to the overall reduction in exposure to adverse fluctuations in interest rates. Each interest rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation. The interest rate swaps involve the periodic exchange of payments over the life of the related agreements. Amounts received or paid on the interest rate swaps are recorded on an accrual basis as an adjustment to the related interest expense of the outstanding debt based on the accrual method of accounting. The related amounts payable to and receivable from counterparties are included in other liabilities and other assets, respectively.

The following table presents the fair values of United Dominion’s derivative financial instruments outstanding, based on external market quotations, as of September 30, 2003 (dollars in thousands):

Notional Amount	Fixed Rate		Type of Contract	Effective Date	Contract Maturity	Fair Value
Secured Debt— FNMA:
$10,000	6.92	%	Swap	12/01/99	04/01/04	$	(312	)
7,000	6.48	%	Swap	06/30/99	06/30/04		(316	)
17,000	6.74	%					(628	)
Unsecured Debt— Bank Credit Facility:
23,500	8.52	%	Swap	11/15/00	05/15/04		(871	)
23,000	8.52	%	Swap	11/15/00	05/15/04		(853	)
5,000	8.65	%	Swap	06/26/95	07/01/04		(218	)
51,500	8.53	%					(1,942	)
$68,500	8.09	%				$	(2,570	)

During the quarter ended September 30, 2003, United Dominion recognized $1.8 million of unrealized gains in comprehensive income and no gain/loss was recorded to net income for what would be the ineffective portion of our hedging instruments. In addition, United Dominion has recognized $2.6 million of derivative financial instrument liabilities on the Consolidated Balance Sheet.

As of September 30, 2003, United Dominion expects to reclassify $2.8 million of net losses on derivative instruments from accumulated other comprehensive loss to earnings (interest expense which, combined with the interest paid on the underlying debt, results in interest expense at the fixed rates shown above) during the next twelve months on the related hedged transactions.

12

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

8. EARNINGS PER SHARE

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed based upon common shares outstanding plus the effect of dilutive stock options and other potentially dilutive common stock equivalents. The dilutive effect of stock options and other potentially dilutive common stock equivalents is determined using the treasury stock method based on United Dominion’s average stock price.

The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share data):

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Numerator for basic and diluted earnings per share—Loss from continuing operations available to common stockholders, net of minority interests	$	(6,669	)	$	(7,910	)	$	(655	)	$	(13,311	)
Denominator:
Denominator for basic and diluted earnings per share—Weighted average common shares outstanding		116,865			107,148			112,662			106,139
Non-vested restricted stock awards		(515	)		—			(410	)		—
		116,350			107,148			112,252			106,139
Basic and diluted loss per share	$	(0.06	)	$	(0.07	)	$	(0.01	)	$	(0.13	)

The effect of the conversion of the operating partnership units and convertible preferred stock is not dilutive and is therefore not included in the above calculations. If the operating partnership units were converted to common stock, the additional shares of common stock outstanding for the three and nine months ended September 30, 2003 would be 8,541,946 and 7,602,342 and 6,972,581 and 7,010,248 for the three and nine months ended September 30, 2002. If the convertible preferred stock was converted to common stock, the additional shares of common stock outstanding for the three and nine months ended September 30, 2003 would be 12,655,986 and 12,200,073 weighted average common shares and 12,307,692 weighted average common shares for the three and nine months ended September 30, 2002.

The effect of employee stock options for the three and nine months ended September 30, 2003, was not included in the above calculation since its effect would be anti-dilutive due to the loss from continuing operations available to common stockholders, net of minority interests, incurred during the periods presented.

9. STOCK-BASED COMPENSATION

United Dominion has elected to follow the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) in accounting for its employee stock options because the alternative fair value accounting provided for under Statement 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of United Dominion’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation cost has been recognized.

13

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

The following table sets forth United Dominion’s earnings and earnings per share had United Dominion’s stock-based compensation expense been determined based upon the fair value method at the date of grant, consistent with the provisions of SFAS 123 (in thousands, except per share data):

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002
Reported net income available to common stockholders	$	1,242		$	13,602		$	10,439		$	25,578
Stock-based employee compensation cost included in net income		947			498			2,003			1,245
Stock-based employee compensation cost that would have been included in net income under the fair value method		(1,021	)		(594	)		(2,226	)		(1,531	)
Adjusted net income available to common stockholders	$	1,168		$	13,506		$	10,216		$	25,292
Earnings per common share—basic and diluted
As reported	$	0.01		$	0.13		$	0.09		$	0.24
Pro forma	$	0.01		$	0.13		$	0.09		$	0.24

10. COMPREHENSIVE INCOME

Total comprehensive income for the three and nine months ended September 30, 2003 and 2002 was $22.2 million and $56.5 million for 2003 and $20.9 million and $48.5 million for 2002, respectively. The difference between net income and total comprehensive income is primarily due to the fair value accounting for interest rate swaps.

11. COMMITMENTS AND CONTINGENCIES

Commitments

United Dominion is committed to completing its real estate currently under development, which has an estimated cost to complete of $54.1 million at September 30, 2003.

Contingencies

Series A Out-Performance Program

In May 2001, the stockholders of United Dominion approved the Series A Out-Performance Program (the “Series A Program”) pursuant to which executives and other key officers of United Dominion (the “participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in a limited liability company (the “Series A LLC”), the only assets of which are a special class of partnership units of the Operating Partnership (“Series A Out-Performance Partnership Shares” or “Series A OPPSs”), for an initial investment of $1.27 million (the full market value of the Series A OPPSs at inception, as determined by an independent investment banking firm). The Series A Program measured United Dominion’s performance over a 28-month period beginning February 2001 and ending on May 31, 2003.

The Series A Program was designed to provide participants with the possibility of substantial returns on their investment if United Dominion’s total return on its common stock, measured by the cumulative amount of dividends paid plus share price appreciation during the measurement period, exceeded the greater of (a) the cumulative total return of the Morgan Stanley REIT Index over the same period; and (b) is at least the equivalent of a 30% total return, or 12% annualized.

14

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

At the conclusion of the measurement period on May 31, 2003, United Dominion’s total return satisfied these criteria. As a result, the Series A LLC as holder of the Series A OPPSs will receive distributions and allocations of income and loss from the Operating Partnership equal to the distributions and allocations that would be received on 1,853,204 interests in the Operating Partnership (“OP Units”), which distributions and allocations will be distributed to the participants on a pro rata basis based on ownership of the Series A LLC.

Series B Out-Performance Program

In May 2003, the shareholders of United Dominion approved the Series B Out-Performance Program (the “Series B Program”) pursuant to which certain executive officers and key employees of United Dominion (the “participants”) were given the opportunity to invest indirectly in United Dominion by purchasing interests in a limited liability company (the “Series B LLC”), the only assets of which are a special class of partnership units of the Operating Partnership (“Series B Out-Performance Partnership Shares” or “Series B OPPSs”) . The purchase price for the Series B OPPSs was determined by United Dominion’s board of directors to be $1,000,000, assuming 100% participation, and was based upon the advise of an independent valuation expert. The Series B Program will measure United Dominion’s performance over a 24-month period beginning June 2003.

The Series B Program is designed to provide participants with the possibility of substantial returns on their investment if the total return on United Dominion’s common stock, as measured by the cumulative amount of dividends paid plus share price appreciation during the measurement period (a) exceeds the cumulative total return of the Morgan Stanley REIT Index peer group index over the same period; and (b) is at least the equivalent of a 22% total return, or 11% annualized.

At the conclusion of the measurement period, if United Dominion’s total return satisfies these criteria, the Series B LLC as holder of the Series B OPPSs will receive (for the indirect benefit of the participants as holders of interests in the Series B LLC) distributions and allocations of income and loss from the Operating Partnership equal to the distributions and allocations that would be received on the number of OP Units obtained by:

i. determining the amount by which the cumulative total return of United Dominion’s common stock over the measurement period exceeds the greater of the cumulative total return of the Morgan Stanley REIT Index, which is the peer group index, or the minimum return (such excess being the “excess return”);

ii. multiplying 5% of the excess return by United Dominion’s market capitalization (defined as the average number of shares outstanding over the 24-month period (including common stock, OP Units, outstanding options and convertible securities) multiplied by the daily closing price of United Dominion’s common stock, up to a maximum of 2% of market capitalization; and

iii. dividing the number obtained in (ii) by the market value of one share of United Dominion’s common stock on the valuation date, determined by the weighted average price of common stock for the 20 trading days immediately preceding the valuation date.

If, on the valuation date, the cumulative total return of United Dominion’s common stock does not meet the minimum return or the total return of the peer group and there is no excess return, then the participants will forfeit their entire initial investment. It is this feature, combined with the fact that management paid market value for the indirect interest in the Series B OPPSs, that we believe makes this program better than previous programs, such as stock options, that were likewise designed to motivate and retain executives and key management, by ensuring that management’s goals are perpetually aligned with the stockholders.

12. RELATED PARTY TRANSACTIONS

As of September 30, 2003, United Dominion has $0.6 million of notes receivable from certain officers and directors of United Dominion (original principal balances of $0.6 million), at an interest rate of 7.0% that mature in June 2004. The purpose of the loans was for the borrowers to purchase shares of United Dominion’s common stock pursuant to United Dominion’s 1991 Stock Purchase

15

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

and Loan Plan. The loans are evidenced by promissory notes between the borrowers and United Dominion and are secured by a pledge of the shares of common stock (43,000 shares with a market value of $0.8 million at September 30, 2003). The notes require that dividends received on the shares be applied towards payment of the notes.

In addition, United Dominion entered into a Servicing and Purchase Agreement (the “ Servicing Agreement”) with SunTrust Bank (the “Bank”) whereby United Dominion has agreed to act as servicing agent for and to purchase certain loans made by the Bank to officers and directors of United Dominion (the “Borrowers”) to finance the purchase of shares of United Dominion’s common stock. The loans are evidenced by promissory notes (“Notes”) between each Borrower and the Bank. The Servicing Agreement provides that the Bank can require United Dominion to purchase the Notes upon an event of default by the Borrower or United Dominion under the Servicing Agreement and at certain other times during the term of the Servicing Agreement. The aggregate outstanding principal balance of the Notes as of September 30, 2003 was $7.2 million (original principal balance was $8.8 million), and all of the Notes mature during 2004. Because certain of the Borrowers elected floating rate loans and others elected fixed rate loans, the interest rates on these loans as of September 30, 2003 ranged from 2.08% to 7.68%. Each Borrower entered into a Participation Agreement with United Dominion that requires that all cash dividends received on the shares (734,243 shares at September 30, 2003 with a closing market value of $13.4 million) be applied towards payment of the Notes. Based upon the fact that 100% of all cash dividend payments are paid to amortize the Notes and that the Notes are recourse to the Borrowers, United Dominion believes that its exposure to liability under the Servicing Agreement is remote.

13. PREMIUM ON PREFERRED SHARE REPURCHASES

In the second quarter of 2003, we exercised our right to redeem 2.0 million shares of United Dominion’s Series D Cumulative Convertible Redeemable Preferred Stock (“Series D”) that were subsequently converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share. We have notified the holders of the Series D of our intent to redeem 4.0 million shares of Series D in December 2003. As a result, United Dominion recognized a $12.1 million premium on preferred share repurchases during the third quarter of 2003. The premium amount recognized to convert these shares represents the cumulative accretion to date between the face value of the preferred stock at conversion and the value at which it was recorded at the time of issuance.

14. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (FAS 150). The statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. This statement is effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. In October 2003, the FASB decided to indefinitely defer the effective date of the provisions of FAS 150 related to finite life entities and also indicated it may modify other guidance in FAS 150. United Dominion believes that its equity and its partner’s equity (classified as “Minority Interests” on our consolidated balance sheet) are properly classified.

In January 2003, the FASB issued Interpretation 46, “Consolidation of Variable Interest Entities.” This statement refines the identification process of variable interest entities and how an entity assesses its interests in a variable interest entity to decide whether to consolidate that entity. United Dominion, from time to time, enters into partnership and joint venture arrangements, which may be required to be consolidated under this statement. The provisions of Interpretation 46 were deferred and are now applicable to joint ventures created before February 1, 2003 for the first reporting period that ends after December 15, 2003. United Dominion is currently assessing the impact that this interpretation will have on its consolidated financial position and results of operations.

In November 2002, the FASB issued Interpretation 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This statement requires that a liability for the fair value of a guarantee be recognized at the time the obligation is undertaken. The statement also requires that the liability be measured over the term of the

16

UNITED DOMINION REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(UNAUDITED)

related guarantee. This statement is effective for all guarantees entered into subsequent to December 31, 2002. For all guarantees entered into prior to December 31, 2002, there is to be no change in accounting; however, disclosure of management’s estimate of its future obligation under the guarantee is to be made. As of September 30, 2003, management estimates that its likelihood of funding its guarantor obligations is remote and that the impact to United Dominion would be immaterial.

In April 2002, the FASB issued Statement 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction” (“SFAS No. 145”). Statement 4, “Reporting Gains and Losses from Extinguishment of Debt” (“SFAS No. 4”), required that gains and losses from the extinguishment of debt that were included in the determination of net income be aggregated and, if material, classified as an extraordinary item. As of March 31, 2003, United Dominion has recorded current period items and reclassified prior period items that do not meet the extraordinary classification into continuing operations in accordance with the provisions of SFAS No. 145.

15. SUBSEQUENT EVENTS

On October 1, 2003, United Dominion completed the sale of $75 million of 5.13% senior unsecured notes due in January 2014 under its shelf registration statement. The net proceeds of approximately $74.5 million from this issuance were used to repay amounts outstanding on United Dominion’s $500 million unsecured revolving credit facility.

On October 8, 2003, United Dominion completed the sale of 600,000 shares of common stock at a public offering price of $18.40 in connection with the exercise of the over-allotment option granted to the underwriter for United Dominion’s September 2003 offering of 4.0 million shares of common stock. The net proceeds of approximately $10.8 million will be used for general corporate purposes, including funding future acquisitions and development, with any remaining balance used to reduce outstanding variable rate debt under our unsecured credit facilities.

17

Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements concerning property acquisitions and dispositions, development activity and capital expenditures, capital raising activities, rent growth, occupancy, and rental expense growth. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of United Dominion to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, unanticipated adverse business developments affecting United Dominion, or its properties, adverse changes in the real estate markets and general and local economies and business conditions. Although United Dominion believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by United Dominion or any other person that the results or conditions described in such statements or the objectives and plans of United Dominion will be achieved.

Business Overview

United Dominion is a real estate investment trust, or REIT, that owns, acquires, renovates, develops, and manages middle-market apartment communities nationwide. We were formed in 1972 as a Virginia corporation and our subsidiaries include two operating partnerships, United Dominion Realty, L.P. and Heritage Communities L.P. In June 2003, United Dominion changed its state of incorporation from Virginia to Maryland. Unless the context otherwise requires, all references in this report to “we,” “us,” “our,” or “United Dominion” refer collectively to United Dominion and its subsidiaries.

We believe that we must distinguish ourselves within the industry to maintain a leadership position over the long-term. We believe an increased focus on being an excellent operator of apartment homes, in markets where we have a significant share and long-term rent growth prospects are greatest, will be a compelling and successful business model to differentiate United Dominion in the eyes of residents, associates, and investors. With this strategy, we believe that we can become the best in the multifamily industry based upon the following key principles:

OPERATIONAL EXCELLENCE—Operational excellence is a way of conducting business with consistent, disciplined, and efficient systems and business processes throughout our organization, to provide residents, suppliers, and associates with predictable, positive experiences, regardless of location. Through operational excellence, we believe that we can enhance the performance of our existing portfolio and new properties we seek to acquire, deliver superior service to our residents, and provide greater returns to our investors.

MIDDLE-MARKET—United Dominion will focus efforts on owning and managing apartments that provide housing for residents who cannot typically afford an entry-level home, or residents who choose apartment living over other alternatives. We will primarily serve the price-sensitive, value-for-money customers, in the broad middle-market segments of the population.

PORTFOLIO MANAGEMENT—We intend to continue to own and operate middle-market apartment homes across a geographically diverse platform. We believe that enhancing our presence in 25 to 30 core markets will enable us to capitalize on operating efficiencies while maintaining sufficient geographic diversification. As local market cycles create opportunities, we intend to exit current markets where long-term growth is below the national average (the “non-core markets”), and redeploy capital within our core markets.

We believe that over the long-term, the fundamental principles of operational excellence, middle-market focus, and proactive portfolio management will better position United Dominion to serve its residents, increase profitability, provide rewarding careers to our associates, and capitalize on changes in the marketplace.

18

At September 30, 2003, United Dominion’s portfolio included 260 communities with 74,630 apartment homes nationwide. The following table summarizes United Dominion’s market information by major geographic markets (includes real estate held for disposition, real estate under development, and land, but excludes commercial properties):

	As of September 30, 2003						Three Months Ended September 30, 2003				Nine Months Ended September 30, 2003
	Number of Apartment Communities	Number of Apartment Homes	Percentage of Carrying Value		Carrying Value (in thousands)		Average Physical Occupancy		Average Monthly Rental Rates		Average Physical Occupancy		Average Monthly Rental Rates
Southern California	10	2,775	6.9	%	$	287,352	95.5	%	$	1,077	95.1	%	$	1,023
Dallas, TX	15	5,133	6.4	%		264,755	95.1	%		652	95.3	%		666
Houston, TX	22	5,726	5.6	%		234,562	89.8	%		633	90.3	%		637
Phoenix, AZ	11	3,635	5.2	%		218,050	91.4	%		712	91.8	%		714
Orlando, FL	14	4,140	5.1	%		210,442	93.7	%		704	93.6	%		710
Raleigh, NC	11	3,663	5.0	%		206,943	92.3	%		661	93.1	%		711
Tampa, FL	11	3,836	4.5	%		187,135	92.1	%		720	93.1	%		707
Metropolitan DC	7	2,188	4.0	%		167,897	96.3	%		984	96.0	%		978
Arlington, TX	10	3,465	3.8	%		160,026	94.0	%		650	94.5	%		658
Columbus, OH	6	2,530	3.6	%		150,173	94.5	%		675	93.7	%		677
Monterey Peninsula, CA	9	1,706	3.6	%		148,940	93.5	%		927	93.2	%		922
San Francisco, CA	4	980	3.4	%		141,794	94.6	%		1,489	95.4	%		1,515
Charlotte, NC	10	2,711	3.4	%		140,220	94.3	%		602	95.5	%		603
Nashville, TN	8	2,220	2.9	%		121,904	92.5	%		655	93.3	%		657
Greensboro, NC	8	2,122	2.5	%		105,716	93.4	%		578	93.7	%		578
Richmond, VA	8	2,372	2.4	%		99,682	92.9	%		709	94.6	%		709
Wilmington, NC	6	1,868	2.2	%		91,991	91.9	%		622	91.5	%		628
Baltimore, MD	7	1,470	2.2	%		90,833	95.5	%		896	95.7	%		898
Atlanta, GA	6	1,426	1.8	%		73,178	90.5	%		645	91.2	%		662
Columbia, SC	6	1,584	1.5	%		63,381	93.7	%		600	93.5	%		599
Jacksonville, FL	3	1,157	1.4	%		59,675	95.8	%		678	96.2	%		678
Norfolk, VA	6	1,438	1.3	%		55,446	96.7	%		734	95.8	%		725
Lansing, MI	4	1,226	1.2	%		51,390	90.4	%		656	93.1	%		654
Seattle, WA	3	628	0.8	%		34,532	94.8	%		734	93.3	%		737
Other Western	6	2,650	3.8	%		158,676	91.9	%		776	90.9	%		782
Other Pacific	8	2,275	3.0	%		124,990	88.4	%		753	90.8	%		753
Other Southwestern	7	1,795	2.4	%		99,710	88.4	%		661	87.8	%		677
Other Florida	7	1,825	2.2	%		92,117	93.5	%		737	94.4	%		735
Other North Carolina	8	1,893	1.8	%		76,802	96.6	%		574	94.2	%		576
Other Southeastern	4	1,394	1.7	%		70,381	90.3	%		577	90.4	%		580
Other Midwestern	8	1,357	1.7	%		68,426	91.5	%		668	93.6	%		668
Other Mid-Atlantic	5	928	1.1	%		43,512	93.6	%		847	95.4	%		834
Other Northeastern	2	372	0.5	%		18,371	95.1	%		711	95.6	%		710
Real Estate Under Development	—	142	0.7	%		29,752	—			—	—			—
Land	—	—	0.4	%		15,387	—			—	—			—
Total	260	74,630	100.0	%	$	4,164,141	93.0	%	$	717	93.3	%	$	717

19

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through the sale or maturity of existing assets or by the acquisition of additional funds through capital management. Both the coordination of asset and liability maturities and effective capital management are important to the maintenance of liquidity. United Dominion’s primary source of liquidity is its cash flow from operations as determined by rental rates, occupancy levels, and operating expenses related to its portfolio of apartment homes. United Dominion routinely uses its unsecured bank credit facility to temporarily fund certain investing and financing activities prior to arranging for longer-term financing. During the past several years, proceeds from the sale of real estate have been used for both investing and financing activities.

United Dominion expects to meet its short-term liquidity requirements generally through its net cash provided by operations and borrowings under credit arrangements. We expect to meet certain long-term liquidity requirements such as scheduled debt maturities, the repayment of financing on development activities, and potential property acquisitions, through long-term secured and unsecured borrowings, the disposition of properties, and the issuance of additional debt or equity securities of United Dominion. We believe that our net cash provided by operations will continue to be adequate to meet both operating requirements and the payment of dividends by United Dominion in accordance with REIT requirements in both the short- and long-term. Likewise, the budgeted expenditures for improvements and renovations of certain properties are expected to be funded from property operations.

United Dominion has a shelf registration statement filed with the Securities and Exchange Commission which provides for the issuance of up to an aggregate of $1 billion in common shares, preferred shares, and debt securities to facilitate future financing activities in the public capital markets. Throughout 2003, United Dominion has completed various financing activities under its $1.0 billion shelf registration statement. These activities are summarized in the section entitled “Financing Activities” that follows. As of September 30, 2003, approximately $642.4 million of equity and debt securities remained available for use under the shelf registration statement. Access to capital markets is dependent on market conditions at the time of issuance.

On July 3, 2003, we entered into a sales agreement pursuant to which we may issue and sell through an agent up to a total of 5,000,000 shares of common stock from time to time in “at the market offerings,” as defined in Rule 415 of the Securities Act of 1933. These sales will be made under our $1 billion shelf registration statement. The sale price of the common stock will be no lower than the minimum price designated by us prior to the sale. As of September 30, 2003, we had not sold any shares of common stock pursuant to the sales agreement.

In September 2003, Standard & Poor’s Rating Services upgraded the rating on our senior unsecured debt from BBB- to BBB, our preferred stock from BB+ to BBB- and our corporate credit rating from BBB-/Positive to BBB/Stable outlook.

In November 2003, we increased our medium-term note program from $300 million to $500 million.

Future Capital Needs

Future development expenditures are expected to be funded primarily through joint ventures, with proceeds from the sale of property, with construction loans and, to a lesser extent, with cash flows provided by operating activities. Acquisition activity in strategic markets is expected to be largely financed through the issuance of equity and debt securities, the issuance of operating partnership units, the assumption or placement of secured debt, and by the reinvestment of proceeds from the sale of property in non-strategic markets.

During the remainder of 2003, United Dominion has approximately $14.0 million of secured debt and $7.5 million of unsecured debt which will mature and we anticipate repaying that debt with proceeds from borrowings under our secured or unsecured credit facilities or the issuance of new unsecured debt securities.

Critical Accounting Policies and Estimates

Our critical accounting policies are those having the most impact on the reporting of our financial condition and results and those requiring significant judgments and estimates. These policies include those related to (1) capital expenditures, (2) impairment of long-

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lived assets, and (3) derivatives and hedging activities. Our critical accounting policies are described in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2002. There have been no significant changes in our critical accounting policies from those reported in our 2002 Annual Report on Form 10-K. With respect to these critical accounting policies, management believes that the application of judgments and assessments is consistently applied and produces financial information that fairly depicts the results of operations for all periods presented.

Statements of Cash Flow

The following discussion explains the changes in net cash provided by operating activities and net cash used in investing and financing activities that are presented in United Dominion’s Consolidated Statements of Cash Flows.

Operating Activities

For the nine months ended September 30, 2003, United Dominion’s cash flow provided by operating activities was $164.6 million compared to $177.3 million for the same period in 2002. The decrease in cash flow provided by operating activities resulted primarily from a $14.1 million decrease in total property operating income and a decrease in the overall size of United Dominion’s apartment community portfolio (see discussion under “Apartment Community Operations”). The decrease in property cash flow was partially offset by an $11.3 million decrease in interest expense and an increase in operating assets primarily due to an $8.0 million note receivable placed on a property that United Dominion currently manages.

Investing Activities

For the nine months ended September 30, 2003, net cash used in investing activities was $147.6 million compared to $11.1 million for the same period in 2002. Changes in the level of investing activities from period to period reflect United Dominion’s strategy as it relates to its acquisition, capital expenditure, development, and disposition programs, as well as the impact of the capital market environment on these activities, all of which are discussed in further detail below.

Acquisitions

During the nine months ended September 30, 2003, United Dominion acquired four apartment communities in Orange County, California totaling 1,068 homes, the remaining 47% joint venture partners’ ownership interest in nine communities totaling 1,706 homes in Salinas and Pacific Grove, California, one apartment community with 464 apartment homes in St. Petersburg, Florida, one community with 149 apartment homes in Anaheim, California, and one parcel of land in Irving, Texas for an aggregate consideration of approximately $265.9 million. Consistent with our long-term strategic plan to achieve greater operating efficiencies by investing in fewer, more concentrated markets with long-term growth potential, United Dominion, over the last two years, has been expanding its interests in the fast growing Southern California market. Throughout the remainder of 2003, we plan to continue to channel new investments to those markets we believe will provide the best investment returns for us over the next ten years. Markets will be targeted based upon defined criteria including past performance, expected job growth, current and anticipated housing supply and demand, and the ability to attract and support household formation.

Capital Expenditures

In conformity with accounting principles generally accepted in the United States, United Dominion capitalizes those expenditures related to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset. Expenditures necessary to maintain an existing property in ordinary operating condition are expensed as incurred.

During the first nine months of 2003, $38.8 million or $524 per home was spent on capital expenditures for all of United Dominion’s communities excluding development and commercial properties. These capital improvements included turnover related expenditures for floor coverings and appliances, other recurring capital expenditures such as HVAC equipment, roofs, landscaping, siding, parking lots, and other non-revenue enhancing capital expenditures, which aggregated $27.9 million or $376 per home. In addition, revenue enhancing capital expenditures, including water sub-metering, the initial installation of microwaves or washer-dryers, and extensive interior upgrades totaled $8.2 million or $111 per home and major renovations totaled $2.7 million or $37 per home for the nine months ended September 30, 2003.

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The following table outlines capital expenditures and repair and maintenance costs for United Dominion’s total portfolio, excluding real estate under development and commercial properties for the periods presented (dollars in thousands):

	Nine Months Ended September 30,						Nine Months Ended September 30, (per unit)
	2003		2002		% Change		2003		2002		% Change
Turnover capital expenditures	$	11,618	$	12,727	-8.7	%	$	157	$	166	-5.4	%
Other recurring capital expenditures		16,249		13,114	23.9	%		219		171	28.1	%
Total recurring capital expenditures		27,867		25,841	7.8	%		376		337	11.6	%
Revenue enhancing improvements		8,200		6,750	21.5	%		111		88	26.1	%
Major renovations		2,730		375	628.0	%		37		5	640.0	%
Total capital improvements	$	38,797	$	32,966	17.7	%	$	524	$	430	21.9	%
Repair and maintenance		29,638		29,805	-0.6	%		400		389	2.8	%
Total expenditures	$	68,435	$	62,771	9.0	%	$	924	$	819	12.8	%

Total capital improvements increased $5.8 million or $94 per home for the first nine months of 2003 compared to the same period in 2002. United Dominion will continue to selectively add revenue enhancing improvements which we believe will provide a return on investment substantially in excess of United Dominion’s cost of capital. Recurring capital expenditures during 2003 are currently expected to be approximately $460 per home.

Real Estate Under Development

Development activity is focused in core markets in which we have operations. For the nine months ended September 30, 2003, United Dominion invested approximately $12.4 million in development projects, an increase of $3.2 million from $9.2 million for the same period in 2002.

The following projects were under development at September 30, 2003:

	Location	Number of Apartment Homes	Completed Apartment Homes	Cost to Date (In thousands)		Budgeted Cost (In thousands)		Estimated Cost Per Home		Expected Completion Date
The Mandolin II	Dallas, TX	178	142	$	11,600	$	13,300	$	74,700	4Q03
2000 Post III	San Francisco, CA	24	—		2,400		7,000		291,700	3Q04
Rancho Cucamonga	Los Angeles, CA	414	—		15,700		63,500		153,400	4Q05
		616	142	$	29,700	$	83,800	$	136,000

In addition, United Dominion owns seven parcels of land that it continues to hold for future development that had a carrying value at September 30, 2003 of $11.6 million. Five of the seven parcels represent additional phases to existing communities as United Dominion plans to add apartment homes adjacent to currently owned communities that are in improving markets.

Development Joint Venture

In September 2002, United Dominion entered into a development joint venture with AEGON USA Realty Advisors, Inc. in which United Dominion serves as the managing member. The joint venture is expected to develop approximately eight to ten garden-style apartment communities over the next three to five years, with a total development cost of up to $210 million. The joint venture will obtain bank construction financing for 65% to 80% of total costs. The joint venture will provide equity contributions for the balance of the costs with AEGON providing 80% and United Dominion providing 20%. United Dominion will serve as the developer, general contractor, and property manager for the joint venture, and will guarantee those project development costs, excluding

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financing costs (including fees and interest), which exceed the defined project cost budgeted amounts for each respective project, as they come to fruition. Management estimates that its likelihood of funding its guarantor obligations is remote and that the impact to United Dominion would be immaterial.

The following joint venture project was under development at September 30, 2003:

	Location	Number of Apartment Homes	Completed Apartment Homes	Cost to Date (In thousands)		Budgeted Cost (In thousands)		Estimated Cost Per Home		Expected Completion Date
Villa Tuscana	Houston, TX	504	—	$	6,100	$	28,400	$	56,300	4Q05

Disposition of Investments

For the nine months ended September 30, 2003, United Dominion sold six communities with 1,675 apartment homes and two commercial properties for an aggregate sales price of approximately $83.9 million and recognized gains for financial reporting purposes of $8.1 million. Proceeds from the sales were used primarily to reduce debt.

During 2003, United Dominion plans to continue to pursue its strategy of exiting markets where long-term growth prospects are limited and redeploying capital into markets that would enhance future growth rates and economies of scale. We intend to use proceeds from 2003 dispositions to acquire communities, fund development activity, and reduce debt.

Financing Activities

Net cash used in financing activities during the nine months ended September 30, 2003 was $7.3 million compared to net cash used in financing activities of $163.9 million for the nine months ended September 30, 2002. As part of the plan to improve United Dominion’s balance sheet, we utilized proceeds from dispositions, equity and debt offerings, and refinancings to extend maturities, pay down existing debt, and purchase new properties.

The following is a summary of our financing activities for the nine months ended September 30, 2003:

• Repaid $11.4 million of secured debt and $207.3 million of unsecured debt.

• Sold 2.0 million shares of common stock at a public offering price of $15.71 per share under our $1 billion shelf registration statement in January 2003. The net proceeds from the offering of $31.2 million were used to repay debt and for general corporate purposes.

• Sold $150 million aggregate principal amount of 4.50% medium-term notes due in March 2008 in February 2003 under our medium-term note program. The net proceeds from the issuance of $149.3 million were used to repay amounts outstanding on our $375 million unsecured revolving credit facility.

• Negotiated a new $500 million unsecured revolving credit facility to replace United Dominion’s $375 million unsecured revolver and $100 million unsecured term loan in March 2003. The credit facility’s interest rate is 25 and 30 basis points lower than the previous unsecured revolver and term loan, respectively.

• Sold 3.0 million shares of common stock in April 2003 at a public offering price of $16.97 per share. The net proceeds from this offering of $49.2 million were ultimately used to acquire additional apartment communities. United Dominion sold an additional 100,000 shares of common stock at a public offering price of $16.97 per share in connection with the exercise of the underwriter’s over-allotment option in May 2003. The net proceeds of $1.6 million were used for general corporate purposes.

• Exercised our right to redeem 2.0 million shares of our Series D Cumulative Redeemable Preferred Stock in May 2003 that were subsequently converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share.

• Issued $56.9 million of a new cumulative convertible preferred stock, the “Series E” preferred stock, and 1,617,815 Operating Partnership Units (“OP Units”) totaling $26.9 million in June 2003 as partial consideration for the purchase of four communities in Southern California. Each share of Series E and OP Units were priced at $16.61 per share and dividends on the Series E and OP

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Units carry a fixed coupon of 8.0% until such time as the common share dividend is equal to or exceeds this amount for four consecutive quarters, at which time the Series E and OP Units will be entitled to receive dividends equivalent to the dividends paid to holders of United Dominion’s common stock.

• Sold an additional $50 million of 4.50% medium-term notes due in March 2008 in July 2003 under our medium-term note program. The net proceeds from the issuance of approximately $49.9 million were used to repay amounts outstanding on United Dominion’s $500 million unsecured revolving credit facility.

• Sold 4.0 million shares of common stock in September 2003 at a public offering price of $18.40 per share under our $1 billion shelf registration statement. United Dominion also granted the underwriter an option to purchase an additional 600,000 shares to cover over-allotments. The net proceeds from the offering of approximately $72.3 million will be used for general corporate purposes, including funding future acquisitions and development, with any remaining balance used to reduce outstanding variable rate debt under our unsecured credit facilities.

Credit Facilities

United Dominion has four secured revolving credit facilities with Fannie Mae with an aggregate commitment of $860 million and one with Freddie Mac for $72 million. As of September 30, 2003, $676.3 million was outstanding under the Fannie Mae credit facilities leaving $183.7 million of unused capacity. The Fannie Mae credit facilities are for an initial term of ten years, bear interest at floating and fixed rates, and can be extended for an additional five years at United Dominion’s discretion. As of September 30, 2003, $70.7 million had been funded under the Freddie Mac credit facility leaving $1.3 million of unused capacity. The Freddie Mac credit facility is for an initial term of five years with an option by United Dominion to extend for an additional four-year term at the then market rate. As of September 30, 2003, the aggregate borrowings under both the Fannie Mae and Freddie Mac credit facilities was $747.0 million. We have $305.9 million of the funded balance fixed at a weighted average interest rate of 6.4%. The remaining balance on these facilities is currently at a weighted average variable rate of 1.7%.

United Dominion has a $500 million three-year unsecured revolving credit facility that matures in March 2006. The credit facility replaces United Dominion’s $375 million unsecured revolver and $100 million unsecured term loan. If United Dominion receives commitments from additional lenders or if the initial lenders increase their commitments, we will be able to increase the credit facility to $650 million. At United Dominion’s option, the credit facility can be extended one year to March 2007. Based on our current credit ratings, the credit facility bears interest at a rate equal to LIBOR plus 90 basis points. As of September 30, 2003, $108.7 million was outstanding under the credit facility leaving $391.3 million of unused capacity.

The Fannie Mae and Freddie Mac credit facilities and the bank revolving credit facility are subject to customary financial covenants and limitations.

Information concerning short-term bank borrowings under United Dominion’s credit facility and unsecured term loan is summarized in the table that follows (dollars in thousands):

	Three months ended September 30, 2003			Twelve months ended December 31, 2002
Total line of credit	$	500,000		$	475,000
Borrowings outstanding at end of period		108,700			275,800
Weighted average daily borrowings during the period		241,176			256,493
Maximum daily borrowings outstanding during the period		272,800			411,600
Weighted average interest rate during the period		2.0	%		3.0	%
Weighted average interest rate at end of period		1.8	%		2.5	%
Weighted average interest rate at end of period, after giving effect to swap agreements		5.0	%		6.8	%

Derivative Instruments

As part of United Dominion’s overall interest rate risk management strategy, we use derivatives as a means to fix the interest rates of variable rate debt obligations or to hedge anticipated financing transactions. United Dominion’s derivative transactions used

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for interest rate risk management include various interest rate swaps with indices that relate to the pricing of specific financial instruments of United Dominion. United Dominion believes that it has appropriately controlled its interest rate risk through the use of derivative instruments. During the first nine months of 2003, the fair value of United Dominion’s derivative instruments has improved from an unfavorable value position of $9.6 million at December 31, 2002 to an unfavorable value position of $2.6 million at September 30, 2003. This decrease is primarily due to the normal progression of the fair market value of derivative instruments to get closer to zero as they near the end of their terms (see Note 7 to the consolidated financial statements).

Funds from Operations

Funds from operations (“FFO”) is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (losses) from sales of depreciable property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. United Dominion computes FFO for all periods presented in accordance with the recommendations set forth by the National Association of Real Estate Investment Trust’s (“NAREIT”) October 1, 1999 White Paper. Adjusted funds from operations (“AFFO”) is defined as FFO less recurring capital expenditures for our stabilized portfolio of an estimated $460 per home in 2003 and an actual $425 per home in 2002. The 2003 per home charge will be adjusted at year-end to reflect actual expenditures. United Dominion considers FFO and AFFO in evaluating property acquisitions and its operating performance, and believes that FFO and AFFO should be considered along with, but not as an alternative to, net income as a measure of United Dominion’s operating performance and liquidity. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs.

Historical cost accounting for real estate assets in accordance with generally accepted accounting principles implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical costs depreciation, among other items, from net income based on generally accepted accounting procedures. The use of FFO, combined with the required presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. We generally consider FFO to be a useful measure for reviewing our comparative operating and financial performance (although FFO should be reviewed in conjunction with net income which remains the primary measure of performance) because by excluding gains or losses related to sales of previously depreciated operating real estate assets and excluding real estate asset depreciation and amortization, FFO can help one compare the operating performance of a company’s real estate between periods or as compared to different companies. We believe that FFO and AFFO are the best measures of economic profitability for real estate investment trusts.

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The following table outlines United Dominion’s FFO calculation and reconciliation to generally accepted accounting principles for the three and nine months ended September 30, (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Net income	$	20,444		$	20,399		$	49,369		$	46,126
Adjustments:
Distributions to preferred stockholders		(7,102	)		(6,797	)		(20,580	)		(20,548	)
Real estate depreciation, net of outside partners’ interest		41,058			37,993			118,465			108,948
Minority interests of unitholders in operating partnership		330			(506	)		724			(881	)
Real estate depreciation related to unconsolidated entities		52			60			137			437
Discontinued Operations:
Real estate depreciation		32			1,137			1,288			8,301
Minority interests of unitholders in operating partnership		501			1,422			702			2,570
Net gains on sales of depreciable property		(7,215	)		(19,128	)		(8,149	)		(31,872	)
Funds from operations (“FFO”)—basic	$	48,100		$	34,580		$	141,956		$	113,081
Distribution to preferred stockholders—Series D and E (Convertible)		4,191			3,886			11,847			11,815
Funds from operations—diluted	$	52,291		$	38,466		$	153,803		$	124,896
Gains on the disposition of real estate developed for sale		812			—			812			—
FFO with gains on the disposition of real estate developed for sale—diluted	$	53,103		$	38,466		$	154,615		$	124,896
Recurring capital expenditures		(8,662	)		(8,069	)		(25,593	)		(24,438	)
Adjusted funds from operations (“AFFO”)—diluted	$	44,441		$	30,397		$	129,022		$	100,458
Weighted average number of common shares and OP Units outstanding—basic		124,979			114,121			119,923			113,149
Weighted average number of common shares, OP Units, and common stock equivalents outstanding—diluted		140,424			128,557			134,870			127,534

In the computation of diluted FFO, OP Units, out-performance partnership shares, and the shares of Series D and Series E convertible preferred stock are dilutive; therefore, they are included in the diluted share count.

Gains from the disposition of real estate investments developed for sale is defined as net sales proceeds less a tax provision (such development by REITs must be conducted in a TRS) and the gross investment basis of the asset before accumulated depreciation. We consider FFO with gains/losses on real estate developed for sale to be a meaningful supplemental measure of performance because of the short-term use of funds to produce a profit which differs from the traditional long-term investment in real estate for REITs.

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The following is a reconciliation of GAAP gains from the disposition of real estate developed for sale to gross gains from the disposition of real estate developed for sale for the three and nine months ended September 30, (dollars in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2003			2002		2003			2002
GAAP gains from the disposition of real estate developed for sale	$	1,249		$	—	$	1,249		$	—
Less: accumulated depreciation		(437	)		—		(437	)		—
Gains from the disposition of real estate developed for sale	$	812		$	—	$	812		$	—

FFO also does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and therefore should not be considered an alternative to net cash flows from operating activities, as determined by generally accepted accounting principles, as a measure of liquidity. Additionally, it is not necessarily indicative of cash availability to fund cash needs. A presentation of cash flow metrics based on generally accepted accounting principles is as follows (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
In thousands	2003			2002			2003			2002
Net cash provided by operating activities	$	57,574		$	60,340		$	164,630		$	177,282
Net cash provided by (used in) investing activities		9,797			106,559			(147,554	)		(11,105	)
Net cash used in financing activities		(56,058	)		(165,529	)		(7,288	)		(163,869	)

Results of Operations

The following discussion includes the results of both continuing and discontinued operations for the periods presented.

Net Income Available to Common Stockholders

Net income available to common stockholders was $1.2 million ($0.01 per common share) for the quarter ended September 30, 2003, compared to $13.6 million ($0.13 per common share) for the same period in the prior year. The decrease for the quarter ended September 30, 2003 when compared to the same period in 2002 resulted primarily from the following items, all of which are discussed in further detail elsewhere within this report:

• $11.9 million less in gains recognized from the sale of depreciable property during the current quarter;

• a $2.6 million decrease in operating results during the current quarter;

• a $1.6 million increase in depreciation expense in the current quarter;

• a $2.6 million increase in general and administrative expense during the current quarter;

• a charge of $1.4 million during the current quarter for the write-off of United Dominion’s investment in Realeum, Inc.; and

• a charge of $12.1 million during the current quarter for a premium on preferred share repurchases.

These decreases in income were partially offset by a $6.8 million decrease in interest expense during the current period, and a $12.6 million decrease in losses from the early retirement of debt as a result of prepayment penalties incurred in 2002.

For the nine months ended September 30, 2003, net income available to common stockholders decreased $15.1 million ($0.15 per common share) compared to the same period in the prior year. The decrease in net income available to common stockholders for the nine months ended September 30, 2003 when compared to the same period in the prior year resulted primarily from the following items, all of which are discussed in further detail elsewhere within this report:

• $23.8 million less in gains recognized from the sale of depreciable property in 2003;

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• a $13.8 million decrease in operating results in 2003;

• a $1.8 million decrease in depreciation expense in 2003; and

• a charge of $18.4 million in 2003 for a premium on preferred share repurchases.

These decreases in income were partially offset by an $11.3 million decrease in interest expense in 2003, $29.3 million less in prepayment penalties in 2003 from the refinancing of mortgage debt and the early payoff of loans on the sale of properties, and a $2.3 million impairment charge taken in 2002 related to a portfolio in Memphis, Tennessee.

Apartment Community Operations

United Dominion’s net income is primarily generated from the operation of its apartment communities. The following table summarizes the operating performance of United Dominion’s total apartment portfolio for each of the periods presented (dollars in thousands):

	Three Months Ended September, 30,								Nine Months Ended September 30,
	2003			2002			% Change		2003			2002			% Change
Property rental income	$	154,631		$	157,082		-1.6	%	$	459,306		$	474,148		-3.1	%
Property operating expense*		(59,780	)		(59,628	)	0.3	%		(174,855	)		(175,567	)	-0.4	%
Property operating income	$	94,851		$	97,454		-2.7	%	$	284,451		$	298,581		-4.7	%
Weighted average number of homes		75,555			76,812		-1.6	%		74,330			77,491		-4.1	%
Physical occupancy**		93.0	%		92.6	%	0.4	%		93.3	%		93.1	%	0.2	%

* Excludes depreciation, amortization, and property management expenses.

** Based upon weighted average number of homes.

The decrease in property operating income provided by the same communities, development communities, and acquisition communities since September 30, 2002 is primarily due to an overall decrease in same community property operating income.

Same Communities

United Dominion’s same communities (those communities acquired, developed, and stabilized prior to January 1, 2002 and held on January 1, 2003, which consisted of 67,916 apartment homes) provided 89% of our property operating income for the nine month period ended September 30, 2003.

For the third quarter of 2003, same community property operating income decreased 3.1% or $2.8 million compared to the same period in 2002 as a result of a 1.2% or $1.7 million decrease in revenues from rental and other income and a 2.0% or $1.1 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 2.6% or $4.0 million decrease in rental rates. This decrease in income was partially offset by a 7.6% or $0.9 million decrease in vacancy loss, a 13.5% or $0.7 million decrease in concession expense, and a 16.9% or $0.6 million increase in sub-meter, gas, and trash reimbursements. Physical occupancy for the quarter increased 0.3% to 92.9% for the quarter. The increase in property operating expenses was primarily driven by a 117.3% or $1.2 million increase in insurance costs and a 7.4% or $0.6 million increase in utilities expense. These increases were offset by an 8.4% or $0.9 million decrease in repair and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin (property operating income divided by property rental income) decreased 1.2% to 61.0%.

For the nine months ended September 30, 2003, same community property operating income decreased 4.0% or $10.6 million compared to the same period in 2002 as a result of a 1.6% or $6.7 million decrease in revenues from rental and other income and a 2.6% or $3.9 million increase in operating expenses. The decrease in revenues from rental and other income was primarily driven by a 2.3% or $9.9 million decrease in rental rates. This decrease in income were partially offset by a 19.8% or $2.0 million increase in sub-

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meter, gas, and trash reimbursements, a 3.0% or $0.9 million decrease in vacancy loss, and a 4.3% or $0.6 million decrease in concession expense. Physical occupancy for nine months ended September 30, 2003 increased 0.1% to 93.3% compared to the same period in the prior year. The increase in property operating expenses was primarily driven by a 5.3% or $1.3 million increase in utilities expense, a 1.9% or $0.8 million increase in personnel costs, a 5.0% or $0.7 million increase in administrative and marketing costs, a 1.7% or $0.7 million increase in taxes, and a 1.4% or $0.4 million increase in repair and maintenance costs.

As a result of the percentage changes in property rental income and property operating expenses, the operating margin decreased 1.6% to 61.9%.

Non-Mature Communities

The remaining 11% of United Dominion’s property operating income during the first nine months of 2003 was generated from communities that we classify as “non-mature communities” (those communities acquired or developed during 2002 and 2003, sold properties, and those properties classified as real estate held for disposition). The 16 communities with 5,103 apartment homes acquired by United Dominion during 2002 and 2003 provided $20.8 million of property operating income. The six communities with 1,675 apartment homes sold during 2003 provided $3.8 million of property operating income. In addition, United Dominion’s development communities, which included 936 apartment homes constructed since January 1, 2002, provided $3.5 million of property operating income during 2003, the one community with 252 apartment homes classified as real estate held for disposition provided $0.8 million of property operating income, and other non-mature communities provided $1.2 million of property operating income for the nine months ended September 30, 2003.

Real Estate Depreciation

For the three and nine months ended September 30, 2003, real estate depreciation on both continuing and discontinued operations remained relatively constant compared to the same period in 2002, regardless of the decrease in the weighted average number of apartment homes experienced from September 30, 2002 to September 30, 2003, primarily due to the newly acquired properties having a significantly higher per home cost compared to those properties that have been disposed of, and other capital expenditures.

Interest Expense

For the three months ended September 30, 2003, interest expense on both continuing and discontinued operations decreased $6.8 million or 19.6% from the same period in 2002 primarily due to debt refinancings, decreasing interest rates, and an overall decrease in the weighted average level of debt outstanding. For the quarter ended September 30, 2003, the weighted average amount of debt outstanding decreased 0.7% or $13.8 million when compared to the same period in the prior year and the weighted average interest rate decreased from 6.2% to 5.4% in 2003. The weighted average amount of debt outstanding during 2003 is lower than 2002 primarily due to the high acquisition volume at the beginning of 2002 that was subsequently mitigated by high disposition activity in the second half of 2002. Furthermore, acquisition costs in 2003 that exceeded disposition proceeds have been funded, in most part, by equity and OP Unit issuances. The decrease in the average interest rate during 2003 reflects the ability of United Dominion to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.

For the nine months ended September 30, 2003, interest expense on both continuing and discontinued operations decreased $11.3 million or 11.3% from the same period in 2002 primarily due to debt refinancings, decreasing interest rates, and an overall decrease in the weighted average level of debt outstanding. For the nine months ended September 30, 2003, the weighted average amount of debt outstanding decreased 0.9% or $19.2 million compared to the same period in the prior year and the weighted average interest rate decreased from 6.2% to 5.5% during the first nine months of 2003. The weighted average amount of debt outstanding during 2003 is lower than 2002 primarily due to the high acquisition volume at the beginning of 2002 that was subsequently mitigated by high disposition activity in the second half of 2002. Furthermore, acquisition costs in 2003 that exceeded disposition proceeds have been funded, in most part, by equity and OP Unit issuances. The decrease in the average interest rate during 2003 reflects the ability of United Dominion to take advantage of declining interest rates through refinancing and the utilization of variable rate debt.

29

General and Administrative

For the three months ended September 30, 2003, general and administrative expenses increased $2.6 million or 85.8% compared to the same period in 2002 primarily as a result of the reversal in the third quarter of 2002 of a provision made in the first quarter of 2002 for the pending buyout of certain long-term security monitoring contracts that United Dominion had on 25% of its apartment portfolio. For the nine months ended September 30, 2003, general and administrative expenses increased $0.7 million or 4.2% over the comparable period in 2002 primarily due to an increase in incentive compensation expense.

Impairment Loss on Investments

During the third quarter of 2003, we recognized a $1.4 million charge for the write-off of United Dominion’s investment in Realeum, Inc., an unconsolidated development joint venture created to develop web-based solutions for multi-family property and portfolio management.

Gains on Sales of Land and Depreciable Property

For the three and nine months ended September 30, 2003, United Dominion recognized gains for financial reporting purposes of $7.2 and $8.1 million, respectively, compared to $19.1 million and $31.9 million for the comparable period in 2002. Changes in the level of gains recognized from period to period reflect the changing level of United Dominion’s divestiture activity from period to period, as well as the extent of gains related to specific properties sold.

Premium on Preferred Share Repurchases

In the second quarter of 2003, we exercised our right to redeem 2.0 million shares of United Dominion’s Series D Cumulative Convertible Redeemable Preferred Stock (“Series D”) that were subsequently converted by the holder into 3,076,923 shares of common stock at a price of $16.25 per share. We have notified the holders of the Series D of our intent to redeem 4.0 million shares of Series D in December 2003. As a result, United Dominion recognized a $12.1 million premium on preferred share repurchases during the third quarter of 2003. The premium amount recognized to convert these shares represents the cumulative accretion to date between the face value of the preferred stock at conversion and the value at which it was recorded at the time of issuance.

Inflation

United Dominion believes that the direct effects of inflation on our operations have been immaterial. Substantially all of United Dominion’s leases are for a term of one year or less which generally minimizes our risk from the adverse effects of inflation.

Factors Affecting Our Business Prospects

There are many factors that affect our business and the results of our operations, some of which are beyond our control. These factors include:

• Unfavorable changes in apartment market and economic conditions that could adversely affect occupancy levels and rental rates.

• The failure of acquisitions to achieve anticipated results.

• Possible difficulty in selling apartment communities.

• The timing and closing of planned dispositions under agreement.

• Competitive factors that may limit our ability to lease apartment homes or increase or maintain rents.

• Insufficient cash flow that could affect our debt financing and create refinancing risk.

• Failure to generate sufficient revenue, which could impair our debt service payments and distributions to stockholders.

• Development and construction risks that may impact our profitability.

30

• Delays in completing developments and lease-ups on schedule.

• Our failure to succeed in new markets.

• Changing interest rates, which could increase interest costs and affect the market price of our securities.

• Potential liability for environmental contamination, which could result in substantial costs.

• The imposition of federal taxes if we fail to qualify as a REIT in any taxable year.

For a discussion of these and other factors affecting our business and prospects, see “Item 1. —Business—Factors Affecting Our Business and Prospects” in our Annual Report on Form 10-K for the year ended December 31, 2002 and “Item 2.—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.

Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

United Dominion is exposed to interest rate changes associated with our unsecured credit facility and other variable rate debt as well as refinancing risk on our fixed rate debt. United Dominion’s involvement with derivative financial instruments is limited and we do not expect to use them for trading or other speculative purposes. United Dominion uses derivative instruments solely to manage its exposure to interest rates.

See our Annual Report on Form 10-K for the year ended December 31, 2002 “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for a more complete discussion of our interest rate sensitive assets and liabilities. As of September 30, 2003, our market risk has not changed materially from the amounts reported on our Annual Report on Form 10-K for the year ended December 31, 2002.

Item 4.    CONTROLS AND PROCEDURES

As of September 30, 2003, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. In addition, our Chief Executive Officer and our Chief Financial Officer concluded that during the quarter ended September 30, 2003, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our internal control over financial reporting is designed with the objective of providing reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

31

PART II

Item 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The exhibits filed or furnished with this Report are set forth in the Exhibit Index.

(b) Reports on Form 8-K.

We filed or furnished the following Current Reports on Form 8-K during the quarter ended September 30, 2003. The information provided under Item 12. Results of Operations and Financial Condition is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

Current Report on Form 8-K dated July 3, 2003, filed with the Securities and Exchange Commission on July 3, 2003, under  Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

Current Report on Form 8-K dated July 28, 2003, furnished to the Securities and Exchange Commission on July 29, 2003, under Item 12. Results of Operations and Financial Condition.

Current Report on Form 8-K dated September 5, 2003, filed with the Securities and Exchange Commission on September 9, 2003, under Item 5. Other Events and under Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED DOMINION REALTY TRUST, INC.
	(registrant)
Date: November 12, 2003	/s/    CHRISTOPHER D. GENRY
	Christopher D. Genry
	Executive Vice President and Chief Financial Officer
Date: November 12, 2003	/s/    SCOTT A. SHANABERGER
	Scott A. Shanaberger
	Senior Vice President and Chief Accounting Officer

33

EXHIBIT INDEX

Exhibit	Description
3.1	Bylaws (as amended through July 18, 2003).
4.1	4.50% Medium-Term Notes due March 2008.
4.2	5.13% Medium-Term Notes due January 2014.
10.1	Second Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.
10.2	Third Amendment to Third Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.
10.3	Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.
10.4	First Amendment of Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.
10.5	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P.
12	Computation of Ratio of Earnings to Fixed Charges.
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.
32.1	Section 1350 Certification of the Chief Executive Officer.
32.2	Section 1350 Certification of the Chief Financial Officer.

EX-3.1

                                                                     EXHIBIT 3.1

                                     BYLAWS

                                       OF

                       UNITED DOMINION REALTY TRUST, INC.

                             a Maryland corporation


                       (as amended through July 18, 2003)


                                TABLE OF CONTENTS

ARTICLE I    OFFICES...........................................................1

   Section 1.1  Principal Office in Maryland and Resident Agent................1
   Section 1.2  Other Offices..................................................1

ARTICLE II   STOCKHOLDERS' MEETINGS............................................1

   Section 2.1  Place of Meetings..............................................1
   Section 2.2  Annual Meetings................................................2
   Section 2.3  Special Meetings...............................................2
   Section 2.4  Notice of Meetings.............................................2
   Section 2.5  Record Date....................................................3
   Section 2.6  Quorum and Voting..............................................4
   Section 2.7  Right to Vote; Proxies.........................................4
   Section 2.8  Voting of Shares by Certain Holders............................5
   Section 2.9  Inspectors.....................................................6
   Section 2.10 Action Without Meetings........................................6
   Section 2.11 Voting by Ballot...............................................6

ARTICLE III  DIRECTORS.........................................................7

   Section 3.1  Number and Term of Office......................................7
   Section 3.2  Powers.........................................................7
   Section 3.3  Vacancies......................................................7
   Section 3.4  Resignations and Removals......................................7
   Section 3.5  Meetings.......................................................8
   Section 3.6  Quorum and Voting..............................................8
   Section 3.7  Action Without Meeting.........................................9
   Section 3.8  Fees and Compensation..........................................9
   Section 3.9  Presumption of Assent..........................................9
   Section 3.10 Committees.....................................................9

ARTICLE IV   OFFICERS.........................................................11

   Section 4.1  Officers Designated...........................................11
   Section 4.2  Tenure and Duties of Officers.................................11

                                      - i -



ARTICLE V    EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
             SECURITIES OWNED BY THE CORPORATION..............................12

   Section 5.1  Execution of Corporate Instruments............................12
   Section 5.2  Voting of Securities Owned by Corporation.....................12

ARTICLE VI   SHARES OF STOCK..................................................13

   Section 6.1  Certificates..................................................13
   Section 6.2  Transfers.....................................................13
   Section 6.3  Replacement Certificate.......................................13
   Section 6.4  Stock Ledger..................................................14
   Section 6.5  Issuance of Units.............................................14
   Section 6.6  Fractional Share Interests or Scrip...........................14
   Section 6.7  Dividends.....................................................15

ARTICLE VII  EXEMPTION FROM CONTROL SHARE ACQUISITION ACT.....................15

ARTICLE VIII OTHER SECURITIES OF THE CORPORATION..............................15

ARTICLE IX   CORPORATE SEAL...................................................15

ARTICLE X    FISCAL YEAR......................................................16

ARTICLE XI   INDEMNIFICATION..................................................16

   Section 11.1 Right to Indemnification......................................16
   Section 11.2 Provisions Nonexclusive.......................................16
   Section 11.3 Authority to Insure...........................................16
   Section 11.4 Survival of Rights............................................17
   Section 11.5 Subrogation...................................................17
   Section 11.6 No Duplication of Payments....................................17


                                     - ii -


                                     BYLAWS

                                       OF

                       UNITED DOMINION REALTY TRUST, INC.


                                     Offices

Section 1.1  Principal Office in Maryland and Resident Agent.

     The address of the principal office of the corporation in the State of
Maryland is 300 E. Lombard Street, Baltimore, Maryland 21202. The name and
address of the resident agent in the State of Maryland is The Corporation Trust
Incorporated, a Maryland corporation, 300 E. Lombard Street, Baltimore, Maryland
21202.

Section 1.2  Other Offices.

     The corporation may also have and maintain such other offices or places of
business, both within and outside the State of Maryland as the Board of
Directors may from time to time determine or the business of the corporation may
require.

                                   ARTICLE II

                             Stockholders' Meetings

Section 2.1  Place of Meetings.

     (a)  Meetings of stockholders may be held at such place, either within or
outside the State of Maryland, as may be designated by or in the manner provided
in these Bylaws or, if not so designated, as determined by the Board of
Directors. The Board of Directors may, in its sole discretion, determine that
the meeting may not be held at any place, but may instead be held solely by
means of remote communication as authorized by paragraph (b) of this Section
2.1.

     (b)  guidelines and procedures as the Board of Directors may adopt,
stockholders and proxyholders not physically present at a meeting of
stockholders may, by means of remote communication:

          (i)    Participate in a meeting of stockholders; and

          (ii)   Be deemed present in person and vote at a meeting of
stockholders whether such meeting is to be held at a designated place or solely
by means of remote communication, provided that the corporation (A) implements
reasonable measures to verify that each person deemed present and permitted to
vote at the meeting by means of remote communication is a stockholder or
proxyholder, (B) implements reasonable measures to provide such stockholders and
proxyholders a reasonable opportunity to participate in the meeting and to

                                       1



vote on matters submitted to the stockholders, and (C) maintains a record of any
vote or action by any stockholder or proxyholder at the meeting by means of
remote communication.

     (c)  "Remote communication" means a conference telephone or similar
communications equipment provided that all persons participating in the meeting
can hear each other at the same time.

Section 2.2  Annual Meetings.

     The annual meetings of the stockholders of the corporation, for the purpose
of election of directors and for such other business as may lawfully come before
it, shall be held on such date and at such time the Board of Directors
designates from time to time. Failure to hold an annual meeting does not
invalidate the corporation's existence or affect any otherwise valid corporate
act.

Section 2.3  Special Meetings.

     Special meetings of the stockholders of the corporation may be called, for
any purpose or purposes, by the Chairman of the Board of Directors or the
President or the Board of Directors at any time. Upon written request of any
stockholder or stockholders entitled to cast at least ten percent (10%) of all
the votes entitled to be cast at the meeting, if such request states the purpose
of the meeting and the matters proposed to be acted on at it, delivered in
person or sent by registered mail to the Chairman of the Board of Directors,
President or Secretary of the corporation, the Secretary shall inform the
stockholders who make the request of the reasonably estimated cost of preparing
and mailing a notice of the meeting and on payment of these costs to the
corporation, notify each stockholder entitled to notice of the meeting. The
Board of Directors has the sole power to fix the record date for determining
stockholders entitled to request a special meeting of the stockholders, the
record date for determining stockholders entitled to notice of and to vote at
the special meeting and the date, time and place of the special meeting.

Section 2.4  Notice of Meetings.

     (a)  Except as otherwise provided by law or in the Articles of
Incorporation, written notice of each meeting of stockholders, specifying the
place, if any, date and hour and, in the case of a special meeting or as
otherwise may be required by law, purpose or purposes of the meeting, and the
means of remote communication, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at such meeting, shall be given
by the Secretary of the Corporation not less than ten (10) nor more than ninety
(90) days before the date of the meeting to each stockholder entitled to vote
thereat, directed to his or her address as it appears upon the books of the
corporation. No business shall be transacted at a special meeting of
stockholders except as specifically designated in the notice.

     (b)  When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time, place, if any, thereof, and the
means of remote communication, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at such adjourned meeting, are
announced at the meeting at which the adjournment is taken unless the
adjournment is for more than one hundred twenty (120) days

                                       2



after the original record date, or unless after the adjournment a new record
date is fixed for the adjourned meeting, in which event a notice of the
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting.

     (c)  Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, either before or after such meeting, and, to the
extent permitted by law, will be waived by any stockholder by his or her
attendance thereat, in person or by proxy. Any stockholder so waiving notice of
such meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.

     (d)  Without limiting the manner by which notice otherwise may be given
effectively to stockholders, any notice to stockholders given by the corporation
under any provision of Maryland General Corporation Law, the Articles of
Incorporation or these Bylaws shall be effective when it is (i) personally
delivered to the stockholder, (ii) left at the stockholder's residence or usual
place of business, (iii) mailed to the stockholder at the stockholder's address
as it appears on the records of the corporation or (iv) if consented to by such
stockholder, transmitted to the stockholder by electronic mail to any electronic
mail address of the stockholder or by any other electronic means. Any such
consent shall be revocable by the stockholder by written notice to the
corporation. Any such consent shall be deemed revoked if (i) the corporation is
unable to deliver by electronic mail or other means two consecutive notices
given by the corporation in accordance with such consent, and (ii) such
inability becomes known to the Secretary or an assistant secretary of the
corporation or to the transfer agent or other person responsible for the giving
of notice; provided, however, the inadvertent failure to treat such inability as
a revocation shall not invalidate any meeting or other action. An affidavit of
the Secretary or an assistant secretary or of the transfer agent or other agent
of the corporation that the notice has been given by a form of electronic mail
or other means shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of these Bylaws, "electronic mail" or
"electronic means" means any form of communication, not directly involving the
physical transmission of paper, that creates a record that may be retained,
retrieved and reviewed by a recipient thereof, and that may be directly
reproduced in paper form by such a recipient through an automated process.

Section 2.5  Record Date.

     For purposes of determining the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to receive
payment of any dividend or other distribution or allotment of any rights, or to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may (a) fix,
in advance, a record date which shall not be more than ninety (90) days prior to
the date of any such meeting or the taking of such other actions; or (b) direct
that the stock transfer books be closed for a period not to exceed twenty (20)
days. A record date may not precede the date on which the record date is fixed.
In the case of a meeting of stockholders, the record date or the closing of the
transfer books shall be at least ten (10) days before the meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. Except where the Board of Directors fixes a new record date for any
adjourned meeting, any stockholder who was a

                                       3



stockholder on the original record date shall be entitled to receive notice of
and to vote at a meeting of stockholders or any adjournment thereof and to
receive a dividend or allotment of rights even though he or she has since such
date disposed of his or her shares, and no stockholder becoming a stockholder
after such date shall be entitled to receive notice of or to vote at such
meeting or any adjournment thereof or to receive such dividend or allotment of
rights.

     If the Board of Directors does not so fix a record date or close the stock
transfer books, then:

     (a)  The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the later of (i) at the close or
business on the day on which notice is mailed or (ii) at the close of business
on the thirtieth (30/th/) day next preceding the day on which the meeting is
held.

     (b)  The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto provided that the payment of a dividend
or allotment of rights may not be made more than sixty (60) days after the date
on which such resolution was adopted.

Section 2.6  Quorum and Voting.

     (a)  At all meetings of stockholders except where otherwise provided by
law, the Articles of Incorporation or these Bylaws, the presence, in person or
by proxy duly authorized, of the holders of a majority of all the votes entitled
to be cast at the meeting shall constitute a quorum for the transaction of
business. Shares, the voting of which at said meeting have been enjoined, or
which for any reason cannot be lawfully voted at such meeting, shall not be
counted to determine a quorum at said meeting. In the absence of a quorum, any
meeting of stockholders may be adjourned, from time to time, by vote of the
holders of a majority of the shares represented thereat, but no other business
shall be transacted at such meeting. At such adjourned meeting at which a quorum
is present or represented, any business may be transacted that might have been
transacted at the original meeting.

     (b)  Except as otherwise provided by law, the Articles of Incorporation or
these Bylaws, a majority of all the votes cast at a meeting at which a quorum is
present is sufficient to approve any matter that properly comes before the
meeting, except that a plurality of all the votes cast at a meeting at which a
quorum is present is sufficient to elect a director.

     (c)  Except as otherwise provided by law or the Articles of Incorporation,
where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes present in person or represented by
proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter, and the affirmative vote of the majority of shares of such
class or classes present in person or represented by proxy at the meeting shall
be the act of such class.

Section 2.7  Right to Vote; Proxies.

     Unless the Articles of Incorporation provide for a greater or lesser number
of votes per share or limit or deny voting rights, each outstanding share of
stock, regardless of class, is

                                       4



entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may cast the votes entitled to be cast by the shares
of the corporation owned of record by him or her, either in person or by proxy
in any manner authorized by law, by the stockholder or by his or her duly
authorized attorney in fact. Such proxy shall be filed with the Secretary before
or at the time of the meeting. A stockholder may authorize another person to act
as proxy by transmitting, or authorizing the transmission of, an authorization
by telegram, cablegram, datagram, electronic mail or any other electronic or
telephonic means to the person authorized to act as proxy or to any other person
authorized to receive the proxy authorization on behalf of the person authorized
to act as proxy, including a proxy solicitation firm or proxy support service
organization. No proxy shall be valid after eleven (11) months from the date of
its execution, unless otherwise provided in the proxy. A proxy is revocable by a
stockholder at any time without condition or qualification unless the proxy
states that it is irrevocable and the proxy is coupled with an interest. A proxy
may be made irrevocable for so long as it is coupled with an interest. The
interest with which a proxy may be coupled includes an interest in the stock to
be voted under the proxy or another general interest in the corporation or its
assets or liabilities.

Section 2.8  Voting of Shares by Certain Holders.

     (a)  Shares registered in the name of a corporation, partnership, trust or
other entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such shares pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any director or other
fiduciary may vote shares registered in his or her name as such fiduciary,
either in person or by proxy.

     (b)  Shares registered in the name of a person adjudged incompetent may be
voted and all rights incident thereto may be exercised only by his or her
guardian, in person or by proxy. Shares registered in the name of a deceased
person may be voted and all rights incident thereto may be exercised only by his
or her executor or administrator, in person or by proxy. Shares registered in
the name of a minor may be voted and all rights incident thereto may be
exercised by his or her guardian, in person or by proxy, or in the absence of
such representation by his or her guardian, by the minor, in person or by proxy,
whether or not the corporation has notice, actual or constructive, of the
minority or the appointment of a guardian, and whether or not a guardian has in
fact been appointed.

     (c)  Shares registered in the names of two or more persons shall be voted
or represented in accordance with the vote or consent of the majority of the
persons in whose names the shares stand. If only one such person is present in
person or by proxy, he or she may vote all the shares, and all the shares
standing in the names of such persons are represented for the purpose of
determining a quorum. This procedure also applies to the voting of shares by two
or more administrators, executors, trustees or other fiduciaries, unless the
instrument or order of court appointing them otherwise directs.

                                       5



     (d)  Shares of the corporation directly or indirectly owned by it shall not
be voted at any meeting and shall not be counted in determining the total number
of outstanding shares entitled to be voted at any given time, unless they are
held by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.

     (e)  The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the corporation that any shares registered
in the name of the stockholder are held for the account of a specified person
other than the stockholder. The resolution shall set forth: the class of
stockholders who may make the certification; the purpose for which the
certification may be made; the form of certification; the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified shares in place of the stockholder who makes the certification.

Section 2.9  Inspectors.

     At any meeting of stockholders, the chairman of the meeting may appoint one
or more persons as inspectors for such meeting. Such inspectors shall ascertain
and report the number of shares represented at the meeting based on their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders. Each report of an
inspector or inspectors shall be in writing and signed by him or by a majority
of them if there is more than one inspector; the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.

Section 2.10 Action Without Meetings.

     Except as provided in the next sentence, any action required or permitted
to be taken at a meeting of stockholders may be taken without a meeting if there
is filed with the records of stockholders' meetings a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter. Unless the Articles of Incorporation require otherwise, the
holders of any class of stock other than common stock, entitled to vote
generally in the election of directors, may take action or consent to any action
by the written consent of stockholders entitled to cast not less than the
minimum number of votes that would be necessary to authorize or take the action
at a stockholders meeting if the corporation gives notice of the action to each
stockholder not later than ten (10) days after the effective time of the action.

Section 2.11 Voting by Ballot.

     If ordered by the presiding officer of any stockholder meeting, the vote
upon any election or question shall be by ballot.

                                       6



                                   ARTICLE III

                                    Directors

Section 3.1  Number and Term of Office.

     The number of directors of the corporation shall not be less than one (1)
nor more than twelve (12) until changed by a Bylaw amending this Section 3.1
duly adopted by the Board of Directors. The exact number of directors shall be
fixed from time to time, within the limits specified in this Section 3.1, by the
Board of Directors. Subject to the foregoing provisions for changing the number
of directors, the number of directors of the corporation has been fixed at
eleven (11).

     With the exception of the first Board of Directors, which shall be elected
by the incorporators, and except as provided in Section 3.3, the directors shall
be elected by a plurality vote of the shares represented in person or by proxy,
at the stockholders annual meeting in each year and entitled to vote on the
election of directors. Elected directors shall hold office until the next annual
meeting and until their successors are duly elected and qualified. Directors
need not be stockholders. A director may not stand for re-election if he or she
has attained age seventy (70) on or before the date of the annual meeting at
which directors are elected.

Section 3.2  Powers.

     The powers of the corporation shall be exercised, its business conducted
and its property controlled by or under the direction of the Board of Directors.

Section 3.3  Vacancies.

     Vacancies and newly created directorships resulting from any increase in
the authorized number of directors may be filled only by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director, and each director so elected shall hold office for the unexpired
portion of the term of the director whose place is vacant and until his or her
successor is duly elected and qualified. A vacancy in the Board of Directors
shall be deemed to exist under this Section 3.3 in the case of the death,
removal or resignation of any director, or if the stockholders fail at any
meeting of stockholders at which directors are to be elected (including any
meeting referred to in Section 3.4 below) to elect the number of directors then
constituting the whole Board of Directors.

Section 3.4  Resignations and Removals.

     (a)  Any director may resign at any time by delivering his or her
resignation to the Secretary in writing or by electronic transmission, such
resignation to specify whether it will be effective at a particular time, upon
receipt by the Secretary or at the pleasure of the Board of Directors. If no
such specification is made it shall be deemed effective at the pleasure of the
Board of Directors. When one or more directors resigns from the Board of
Directors effective at a future date, only a majority of the remaining directors
then in office, even if such remaining directors do not constitute a quorum,
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations become effective, and each

                                       7



director so chosen shall hold office for the unexpired portion of the term of
the director whose place is vacated and until his or her successor is duly
elected and qualified.

     (b)  At a special meeting of stockholders called for the purpose in the
manner provided above, the Board of Directors or any individual director may be
removed from office with cause, by the affirmative vote of at least two-thirds
of all the votes entitled to be cast by the stockholders generally in the
election of directors.

Section 3.5  Meetings.

     (a)  The annual meeting of the Board of Directors shall be held immediately
after the annual stockholders' meeting and at the place where such meeting is
held or at the place announced by the Chairman at such meeting. No notice of an
annual meeting of the Board of Directors shall be necessary, and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it. The Board of Directors may provide, by
resolution, the time and place, either within or outside the State of Maryland,
for the holding of regular meetings of the Board of Directors without notice
other than such resolution.

     (b)  Special meetings of the Board of Directors may be called by or at the
request of the Chairman of the Board of Directors, the Chief Executive Officer
or by a majority of the members of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix any place,
either within or outside the State of Maryland, as the place for holding any
special meeting of the Board of Directors called by them.

     (c)  Written notice of the time and place of all special meetings of the
Board of Directors shall be delivered personally to each director or sent by
telegram or facsimile transmission or other form of electronic transmission at
least twenty-four (24) hours before the start of the meeting, or sent by first
class mail at least five (5) days before the date of the meeting. Notice of any
meeting may be waived in writing, which shall be filed with the records of the
meeting, at any time before or after the meeting and will be waived by any
director by attendance thereat.

Section 3.6  Quorum and Voting.

     (a)  A quorum of the Board of Directors shall consist of a majority of the
exact number of directors fixed from time to time in accordance with Section
3.1; provided, however, at any meeting whether a quorum is present or otherwise,
a majority of the directors present may adjourn from time to time until the time
fixed for the next regular meeting of the Board of Directors, without notice
other than by announcement at the meeting.

     (b)  At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by a vote of a majority
of the directors present, unless a different vote is required by law, the
Articles of Incorporation or these Bylaws.

     (c)  Any member of the Board of Directors, or of any committee thereof, may
participate in a meeting by means of conference telephone or other communication
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and participation in a meeting by such means shall
constitute presence in person at such meeting.

                                       8



     (d)  The transactions of any meeting of the Board of Directors, or any
committee thereof, however called or noticed, or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, or a consent to holding
such meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.

Section 3.7  Action Without Meeting.

     Unless otherwise restricted by the Articles of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if a
unanimous written consent which sets forth the action is signed by each member
of the Board of Directors or of such committee, as the case may be, filed with
the minutes of proceedings of the Board of Directors or committee.

Section 3.8  Fees and Compensation.

     Directors and members of committees may receive such compensation, if any,
for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the Board of Directors.

Section 3.9  Presumption of Assent.

     A director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (a) such director announces his or her
dissent at the meeting and (b)(i) his or her dissent is entered in the minutes
of the meeting, (ii) he or she files his or her written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof or (iii) he or she forwards such dissent within twenty-four (24) hours
after the meeting is adjourned, by certified mail, return receipt requested,
bearing a postmark from the United States Postal Service to the secretary of the
meeting or the Secretary of the corporation. Such right to dissent shall not
apply to a director who voted in favor of such action or failed to make his or
her dissent known at the meeting.

Section 3.10 Committees.

     (a)  The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, appoint an Executive Committee of one or more
directors. The Executive Committee to the extent permitted by law shall have and
may exercise all powers of the Board of Directors in the management of the
business and affairs of the corporation, except as prohibited by law. If the
Board of Directors has given general authorization for the issuance of stock
providing for or establishing a method or procedure for determining the maximum
number of shares to be issued, a committee of the Board of Directors, in
accordance with that general authorization or any stock option or other plan or
program adopted by the Board of Directors, may authorize or fix the terms of
stock subject to classification or reclassification and the terms on which any
stock may be issued, including all terms and conditions required or permitted to
be established or authorized by the Board of Directors under Sections 2-203 and
2-208 of the Maryland General Corporation Law.

                                       9



     (b)  The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, from time to time appoint such other committees as may
be permitted or required by law. Such other committees appointed by the Board of
Directors shall have such powers and perform such duties as may be prescribed by
the resolution or resolutions creating such committee, but in no event shall any
such committee have the powers denied to the Executive Committee in these
Bylaws.

     (c)  The members of all committees of the Board of Directors shall serve a
term coexistent with that of the Board of Directors which appointed such
committee. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Section 3.10, may at any time increase or decrease the number of
members of a committee or terminate the existence of a committee; provided that
no committee shall consist of less than one member. The membership of a
committee member shall terminate on the date of his or her death or voluntary
resignation, but the Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he, she or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.

     (d)  Unless the Board of Directors otherwise provides, regular meetings of
the Executive Committee or any other committee appointed pursuant to this
Section 3.10 shall be held at such times and places as are determined by the
Board of Directors, or by any such committee, and when notice thereof has been
given to each member of such committee, no further notice of such regular
meetings need be given thereafter. Special meetings of any such committee may be
held at the principal office of the corporation or at any place which has been
designated from time to time by resolution of such committee or by written
consent of all members thereof, and may be called by any director who is a
member of such committee upon written notice to the members of such committee of
the time and place of such special meeting given in the manner provided for the
giving of written notice to members of the Board of Directors of the time and
place of special meetings of the Board of Directors. Notice of any special
meeting of any committee may be waived in writing at any time before or after
the meeting and will be waived by any director by attendance thereat. A majority
of the authorized number of members of any such committee shall constitute a
quorum for the transaction of business, and the act of a majority of those
present at any meeting at which a quorum is present shall be the act of such
committee.

                                       10



                                   ARTICLE IV

                                    Officers

Section 4.1  Officers Designated.

     The Board of Directors, promptly after its election in each year, shall
appoint a Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors and a President (all of whom shall be directors) and a Treasurer and
Secretary and may appoint one or more Vice Presidents and such other officers or
assistant officers as it may deem proper. Any officer may hold more than one
office, except for the offices of President and Vice President. A person who
holds more than one office in the corporation may not act in more than one
capacity to execute, acknowledge or verify an instrument required by law to be
executed, acknowledged or verified by more than one officer. Vacancies among the
officers and assistant officers shall be filled by the Board of Directors.

Section 4.2  Tenure and Duties of Officers.

     (a)  All officers shall hold office at the pleasure of the Board of
Directors and until their successors are duly elected and qualified, unless
sooner removed. Any officer elected or appointed by the Board of Directors may
be removed at any time by the Board of Directors if the Board of Directors in
its judgment finds that the best interests of the corporation will be served. If
the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors. Nothing in these Bylaws shall be construed as
creating any kind of contractual right to employment with the corporation.

     (b)  The Chairman of the Board of Directors when present shall preside at
all meetings of the stockholders and the Board of Directors. The Chairman of the
Board of Directors shall perform such other duties and have such other powers as
the Board of Directors may designate from time to time.

     (c)  The Vice Chairman in the absence of the Chairman of the Board of
Directors shall preside at all meetings of the stockholders and at all meetings
of the Board of Directors. The Vice Chairman of the Board of Directors shall
perform such other duties and have such other powers as the Board of Directors
may designate from time to time.

     (d)  The President shall be the chief executive officer of the corporation
and in the absence of the Chairman and Vice Chairman of the Board of Directors,
shall preside at all meetings of the stockholders and at all meetings of the
Board of Directors. The President shall perform such other duties and have such
other powers as the Board of Directors may designate from time to time.

     (e)  The Vice Presidents, in the order of their seniority, may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of the President is vacant. The Vice Presidents
shall perform such other duties and have such other powers as the Board of
Directors or the President may designate from time to time.

                                       11



     (f)  The Secretary shall attend all meetings of the stockholders and of the
Board of Directors and any committee thereof, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice, in conformity with these Bylaws, of all meetings of the
stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform such other duties and have
such other powers as the Board of Directors may designate from time to time. The
President may direct any assistant secretary to assume and perform the duties of
the Secretary in the absence or disability of the Secretary, and each assistant
secretary shall perform such other duties and have such other powers as the
Board of Directors or the President may designate from time to time.

     (g)  The Treasurer shall keep or cause to be kept the books of account of
the corporation in a thorough and proper manner, and shall render statements of
the financial affairs of the corporation in such form and as often as required
by the Board of Directors or the President. The Treasurer, subject to the order
of the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Treasurer shall perform all other duties commonly incident
to his or her office and shall perform such other duties and have such other
powers as the Board of Directors or the President may designate from time to
time. The President may direct any assistant treasurer to assume and perform the
duties of the Treasurer in the absence or disability of the Treasurer, and each
assistant treasurer shall perform such other duties and have such other powers
as the Board of Directors or the President may designate from time to time.

                                    ARTICLE V

                     Execution of Corporate Instruments and
                  Voting of Securities Owned by the Corporation

Section 5.1  Execution of Corporate Instruments.

     (a)  The Board of Directors may in its discretion determine the method and
designate the signatory officer or officers, or other person or persons, to
execute any corporate instrument or document, or to sign the corporate name
without limitation, except where otherwise provided by law, and such execution
or signature shall be binding upon the corporation.

     (b)  All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors may authorize.

     (c)  Execution of any corporate instrument may be effected in such form,
either manual, facsimile or electronic signature, as may be authorized by the
Board of Directors.

Section 5.2  Voting of Securities Owned by Corporation.

     All stock and other securities of other corporations owned or held by the
corporation for itself or for other parties in any capacity shall be voted, and
all proxies with respect thereto shall be executed, by the person authorized so
to do by resolution of the Board of Directors or, in the

                                       12



absence of such authorization, by the Chairman of the Board of Directors, the
President or any Vice President.

                                   ARTICLE V1

                                 Shares of Stock

Section 6.1  Certificates.

     Each stockholder shall be entitled to a certificate or certificates which
represent and certify the number of shares of each class held by him or her in
the corporation; provided, however, that the Board of Directors may provide by
resolution or resolutions that some or all of any class or series of shares may
be uncertificated. Each certificate shall include on its face the name of the
corporation, the name of the stockholder or other person to whom it is issued
and the class of stock and number of shares it represents. Each certificate
shall be signed by the Chairman of the Board of Directors, the President or any
Vice President and countersigned by the Secretary or an assistant secretary or
the Treasurer or an assistant treasurer and may be sealed with the seal, if any,
of the corporation. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the corporation issues
several classes of shares, each class may have its own numbered series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. A stock certificate may not be issued
until the stock represented by it is fully paid. Each certificate representing
shares which are restricted as to their transferability shall contain a full
statement of such restriction or state that the corporation will furnish
information about the restriction to the stockholder on request and without
charge. Except as otherwise provided by law, the fact that a stock certificate
does not contain or refer to a restriction on transferability that is adopted
after the date of issuance of the stock certificate does not mean that the
restriction is invalid or unenforceable. If the corporation has authority to
issue shares of more than one class, the certificate shall contain on the face
or back a full statement or summary of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption of each class of shares which the corporation is authorized to issue
and, if the corporation is authorized to issue any preferred or special class in
series, the differences in the relative rights and preferences between the
shares of each series to the extent they have been set and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
series. In lieu of such statement or summary, the certificate may state that the
corporation will furnish a full statement of such information to any stockholder
upon request and without charge.

Section 6.2  Transfers.

     Upon surrender to the corporation or the transfer agent of the corporation
of a stock certificate duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the corporation shall issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction on its books. Notwithstanding the foregoing, transfers of
shares of any class will be subject in all respects to the Articles of
Incorporation and all of the terms and conditions contained therein.

                                       13



Section 6.3  Replacement Certificate.

     The Secretary and any other officer designated by the Board of Directors
may direct a new certificate to be issued in place of any certificate previously
issued by the corporation alleged to have been lost, stolen or destroyed upon
the making of an affidavit of that fact by the person claiming the certificate
to be lost, stolen or destroyed. When authorizing the issuance of a new
certificate, the Secretary or other officer designated by the Board of Directors
may, in his or her discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or the
owner's legal representative to give bond, with sufficient surety, to the
corporation to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.

Section 6.4  Stock Ledger.

     The corporation shall maintain at its principal office or at the office of
its counsel, accountants or transfer agent, an original or duplicate stock
ledger containing the name and address of each stockholder and the number of
shares of each class held by such stockholder. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The corporation shall be entitled
to treat the holder of record of any share as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Share or on the part of any other person, whether or not it has
express or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.

Section 6.5  Issuance of Units.

     Notwithstanding any other provision of these Bylaws to the contrary, the
Board of Directors may issue units consisting of different securities of the
corporation. Any security issued in a unit shall have the same characteristics
as any identical securities issued by the corporation, except that the Board of
Directors may provide that, for a specified period, securities of the
corporation issued in such unit may be transferred on the books of the
corporation only in such unit.

Section 6.6  Fractional Share Interests or Scrip.

     The corporation may, but is not obliged to, issue fractional shares of
stock, eliminate a fractional interest by rounding off to a full share of stock,
arrange for the disposition of a fractional interest by the person entitled to
it, pay cash for the fair value of a fractional share of stock determined as of
the time when the person entitled to receive it is determined, or issue scrip,
or other evidence of ownership aggregating a full share for a certificate which
represents the share and, unless otherwise provided, does not entitle the holder
to exercise any voting rights, to receive dividends thereon or to participate in
any of the assets of the corporation in the event of liquidation. The Board of
Directors may impose any reasonable condition on the issuance of scrip or other
evidence of ownership, and may cause such scrip or other evidence of ownership
to be issued subject to the condition that it will become void if not exchanged
for a certificate representing a full share of stock before a specified date or
subject to the condition that the shares for which such scrip or other evidence
of indebtedness are exchangeable may be sold by the corporation and the proceeds
thereof distributed to the holders of such scrip or other evidence

                                       14



of indebtedness, or subject to a provision of forfeiture of such proceeds to the
corporation if not claimed within a period of not less than three years from the
date the scrip or other evidence of ownership was originally issued.

Section 6.7  Dividends.

     If declared by the Board of Directors at any meeting thereof, the
corporation may pay dividends on its shares in cash, property, or in shares of
the capital stock of the corporation, unless such dividend is contrary to law or
to a restriction contained in the Articles of Incorporation.

                                   ARTICLE VII

                  Exemption From Control Share Acquisition Act

     The provisions of Title 3, Subtitle 7 of the Maryland General Corporation
Law (the Maryland Control Share Acquisition Act), or any successor statute,
shall not apply to any acquisition by any person of shares of the corporation.
This Article VII may be repealed, in whole or in part, at any time, whether
before or after an acquisition of control shares and, upon such repeal, may, to
the extent provided by any successor bylaw and consistent with applicable law,
apply to any prior or subsequent control share acquisition.

                                  ARTICLE VIII

                       Other Securities of the Corporation

     Each certificate which represents any bond, note, guaranty, obligation or
other corporate security (other than stock) shall be signed by the Chairman of
the Board of Directors, the President or any Vice President and countersigned by
the Secretary, an assistant secretary, the Treasurer or the assistant treasurer.
Such certificate may be sealed with the actual corporate seal or a facsimile of
it or in any other form. The signatures on the certificate may be either manual
or facsimile signatures. A certificate is valid and may be issued whether or not
an officer who signed it is still an officer at the time it is issued.

                                   ARTICLE IX

                                 Corporate Seal

     The corporate seal shall be a flat-faced circular die, of which there may
be any number of counterparts, with the word "SEAL" and the name of the
corporation engraved thereon. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise. If the
corporation is required to place its corporate seal to a document, it is
sufficient to meet the requirements of any law, rule or regulation relating to a
corporate seal to place the word "(seal)" adjacent to the signature of the
person authorized to sign the document on behalf of the corporation.

                                       15



                                    ARTICLE X

                                   Fiscal Year

     The fiscal year of the corporation shall be the twelve (12) calendar months
ending December 31 in each year, unless otherwise provided by the Board of
Directors.

                                   ARTICLE XI

                                 Indemnification

Section 11.1 Right to Indemnification.

     The corporation shall indemnify its directors and officers, whether serving
the corporation or, at its request, any other entity, to the full extent
required or permitted by the general laws of the State of Maryland now or
hereafter in force, including the advancement of expenses under the procedures
and to the full extent permitted by law. The corporation may indemnify other
employees and agents, whether serving the corporation or, at its request, any
other entity, to such extent as may be authorized by the Board of Directors and
as permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled. The Board of Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of these Bylaws or repeal of any of its provisions shall limit
or eliminate the foregoing right to indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or repeal.

Section 11.2 Provisions Nonexclusive.

     The rights conferred on any person by this Article XI shall not be
exclusive of any other rights that such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, agreement, vote
of stockholders or disinterested directors, or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles of Incorporation,
agreement or vote of the stockholders or disinterested directors is inconsistent
with these Bylaws, the provision, agreement or vote shall take precedence.

Section 11.3 Authority to Insure.

     The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation or who,
while a director, officer, employee or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan against any liability asserted
against and incurred by such person in any such capacity or arising out of such
person's position, whether or

                                       16



not the corporation would have the power to indemnify against liability under
the general laws of the State of Maryland.

Section 11.4 Survival of Rights.

     The rights provided by this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.

Section 11.5 Subrogation.

     In the event of payment under this Article, the corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
director or officer, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the corporation effectively to bring suit
to enforce such rights.

Section 11.6 No Duplication of Payments.

     The corporation shall not be liable under this Article to make any payment
in connection with any claim made against a director or officer to the extent
the director or officer has otherwise actually received payment (under any
insurance policy, agreement, vote or otherwise) of the amounts otherwise
indemnifiable hereunder.

                                       17

EX-4.1

                                                                     EXHIBIT 4.1

                       UNITED DOMINION REALTY TRUST, INC.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") (55 WATER STREET, NEW YORK, NEW YORK) TO THE
ISSUER HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.


REGISTERED                    CUSIP No.:                   PRINCIPAL AMOUNT:
No. FXR-2                     91019PCH3                    $50,000,000
- ----------------------------  ---------------------------  ---------------------
                       UNITED DOMINION REALTY TRUST, INC.

                                MEDIUM-TERM NOTE
                                  (Fixed Rate)

ORIGINAL ISSUE DATE:          INTEREST RATE:  4.50%        STATED MATURITY
August 5, 2003                                             DATE:  March 3, 2008

INTEREST PAYMENT DATE(S)      [ ] CHECK IF DISCOUNT NOTE
[X] March 1 and September 1,         Issue Price: %
commencing September 1, 2003
[ ] Other:

INITIAL REDEMPTION            INITIAL REDEMPTION           ANNUAL REDEMPTION
DATE:  N/A                    PERCENTAGE:  N/A             PERCENTAGE
                                                           REDUCTION:   N/A

OPTIONAL REPAYMENT
DATE(S):  N/A

SPECIFIED CURRENCY:           AUTHORIZED DENOMINATION:     EXCHANGE RATE
[X] United States dollars     [X] $1,000 and integral      AGENT:  N/A
[ ] Other:                        multiples thereof
                              [ ] Other:

ADDENDUM ATTACHED             DEFAULT INTEREST RATE:  N/A  OTHER/ADDITIONAL
                                                           PROVISIONS:  N/A
[ ] Yes
[X] No



     UNITED DOMINION REALTY TRUST, INC., a Maryland corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to CEDE & Co., as
nominee for The Depository Trust Company, or registered assigns, the Principal
Amount of FIFTY MILLION DOLLARS ($50,000,000), on the Stated Maturity Date
specified above (or any Redemption Date or Repayment Date, each as defined on
the reverse hereof, or any earlier date of acceleration of maturity) (each such
date being hereinafter referred to as the "Maturity Date" with respect to the
principal repayable on such date) and to pay interest thereon (and on any
overdue principal, premium and/or interest to the extent legally enforceable) at
the Interest Rate per annum specified above, until the principal hereof is paid
or duly made available for payment. The Company will pay interest in arrears on
each Interest Payment Date, if any, specified above (each, an "Interest Payment
Date"), commencing with the first Interest Payment Date next succeeding the
Original Issue Date specified above, and on the Maturity Date; provided,
however, that if the Original Issue Date occurs between a Record Date (as
defined below) and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date next succeeding the Original
Issue Date to the registered holder (the "Holder") of this Note on the Record
Date with respect to such second Interest Payment Date. Interest on this Note
will be computed on the basis of a 360-day year of twelve 30-day months.

     Interest on this Note will accrue from, and including, the immediately
preceding Interest Payment Date to which interest has been paid or duly provided
for (or from, and including, February 27, 2003 if no interest has been paid or
duly provided for) to, but excluding, the applicable Interest Payment Date or
the Maturity Date, as the case may be (each, an "Interest Period"). The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, subject to certain exceptions described herein, be paid to the person
in whose name this Note (or one or more predecessor Notes, as defined on the
reverse hereof) is registered at the close of business on the fifteenth calendar
day (whether or not a Business Day, as defined below) immediately preceding such
Interest Payment Date (the "Record Date"); provided, however, that interest
payable on the Maturity Date will be payable to the person to whom the principal
hereof and premium, if any, hereon shall be payable. Any such interest not so
punctually paid or duly provided for on any Interest Payment Date other than the
Maturity Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on the close of business on any Record Date and, instead, shall be paid
to the person in whose name this Note is registered at the close of business on
a special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice
whereof shall be given to the Holder of this Note by the Trustee not less than
10 calendar days prior to such Special Record Date or may be paid at any time in
any other lawful manner, all as more fully provided for in the Indenture.

     Payment of principal, premium, if any, and interest in respect of this Note
due on the Maturity Date will be made in immediately available funds upon
presentation and surrender of this Note (and, with respect to any applicable
repayment of this Note, upon delivery of instructions as contemplated on the
reverse hereof) at the office or agency maintained by the Company for that
purpose in the Borough of Manhattan, The City of New York, currently the office
of the Trustee located at 40 Broad Street, 5/th/ Floor, New York, New York
10004, or at such other paying agency in the Borough of Manhattan, The City of
New York, as the Company may determine; provided, however, that if the Specified
Currency (as defined below) is other than United States dollars and such payment
is to be made in the Specified Currency in accordance with the provisions set
forth below, such payment will be made by wire transfer of immediately available
funds to an account with a bank designated by the Holder hereof at least 15
calendar days prior to the Maturity Date, provided that such bank has
appropriate facilities therefor and that this Note is presented and surrendered
and, if applicable, instructions are delivered at the aforementioned office or
agency maintained by the Company in time for the Trustee to make such payment in
such funds in accordance with its normal procedures. Payment of interest due on
any Interest Payment Date other than the Maturity Date will be made at the
aforementioned office or agency maintained by the Company or, at the option of
the Company, by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register maintained by the Trustee;
provided, however, that a Holder of U.S.$10,000,000 (or, if the Specified
Currency is other than United States dollars, the equivalent thereof in the
Specified Currency) or more in aggregate principal amount of Notes (whether
having identical or different terms and provisions) will be entitled to receive
interest payments on such Interest Payment Date by wire transfer of immediately
available funds if such Holder has delivered appropriate wire transfer
instructions in writing to the Trustee not less than 15 calendar days prior to
such Interest Payment Date. Any such wire transfer instructions received by the
Trustee shall remain in effect until revoked by such Holder.

                                       2



     If any Interest Payment Date or the Maturity Date falls on a day that is
not a Business Day, the required payment of principal, premium, if any, and/or
interest shall be made on the next succeeding Business Day with the same force
and effect as if made on the date such payment was due, and no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.

     As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that if the Specified Currency is other
than United States dollars, such day must not be a day on which commercial banks
are authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
Specified Currency (or, if the Specified Currency is Euro, such day must be a
day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open). "Principal Financial Center" means the
capital city of the country issuing the Specified Currency, except that with
respect to United States dollars, Australian dollars, Canadian dollars, Euros,
South African rands and Swiss francs, the "Principal Financial Center" shall be
The City of New York, Sydney, Toronto, Johannesburg and Zurich, respectively.

     The Company is obligated to make payment of principal, premium, if any, and
interest in respect of this Note in the Specified Currency specified above (or,
if such Specified Currency is not at the time of such payment legal tender for
the payment of public and private debts in the country issuing such Specified
Currency or, if such Specified Currency is Euro, in the member states of the
European Union that have adopted the single currency in accordance with the
Treaty establishing the European Community, as amended by the Treaty on European
Union, then in the currency which is at the time of such payment legal tender in
the related country or in the adopting member states of the European Union) (the
"Specified Currency"). If the Specified Currency is other than United States
dollars, except as otherwise provided below, any such amounts so payable by the
Company will be converted by the Exchange Rate Agent specified above into United
States dollars for payment to the Holder of this Note.

     If the Specified Currency is other than United States dollars, the Holder
of this Note may elect to receive any amounts payable hereunder in such
Specified Currency. If the Holder of this Note shall not have duly made an
election to receive all or a specified portion of any payment of principal,
premium, if any, and/or interest in respect of this Note in the Specified
Currency, any United States dollar amount to be received by the Holder of this
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 A.M., New York City time, on
the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent)
selected by the Exchange Rate Agent and approved by the Company for the purchase
by the quoting dealer of the Specified Currency for United States dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Notes scheduled to receive United States
dollar payments and at which the applicable dealer commits to execute a
contract. All currency exchange costs will be borne by the Holder of this Note
by deductions from such payments. If three such bid quotations are not
available, payments on this Note will be made in the Specified Currency.

     If the Specified Currency is other than United States dollars, the Holder
of this Note may elect to receive all or a specified portion of any payment of
principal, premium, if any, and/or interest in respect of this Note in the
Specified Currency by submitting a written request for such payment to the
Trustee at its corporate trust office in The City of New York on or prior to the
applicable Record Date or at least 15 calendar days prior to the Maturity Date,
as the case may be. Such written request may be mailed or hand delivered or sent
by cable, telex or other form of facsimile transmission. The Holder of this Note
may elect to receive all or a specified portion of all future payments in the
Specified Currency in respect of such principal, premium, if any, and/or
interest and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to the Trustee, but
written notice of any such revocation must be received by the Trustee on or
prior to the applicable Record Date or at least 15 calendar days prior to the
Maturity Date, as the case may be.

     If the Specified Currency is other than United States dollars and the
Holder of this Note shall have duly made an election to receive all or a
specified portion of any payment of principal, premium, if any, and/or interest
in respect of this Note in the Specified Currency, but the Specified Currency is
not available due to the imposition of exchange controls or other circumstances
beyond the control of the Company, the Company will be entitled to

                                       3



satisfy its obligations to the Holder of this Note by making such payment in
United States dollars on the basis of the Market Exchange Rate (as defined
below) determined by the Exchange Rate Agent on the second Business Day prior to
such payment date or, if such Market Exchange Rate is not then available, on the
basis of the most recently available Market Exchange Rate. The "Market Exchange
Rate" for the Specified Currency means the noon dollar buying rate in The City
of New York for cable transfers for the Specified Currency as certified for
customs purposes (or, if not so certified, as otherwise determined) by the
Federal Reserve Bank of New York. Any payment made in United States dollars
under such circumstances shall not constitute an Event of Default (as defined in
the Indenture).

     All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holder of this Note.

     The Company agrees to indemnify the Holder of any Note against any loss
incurred by such Holder as a result of any judgment or order being given or made
against the Company for any amount due hereunder and such judgment or order
requiring payment in a currency (the "Judgment Currency") other than the
Specified Currency, and as a result of any variation between (i) the rate of
exchange at which the Specified Currency amount is converted into the Judgment
Currency for the purpose of such judgment or order, and (ii) the rate of
exchange at which such Holder, on the date of payment of such judgment or order,
is able to purchase the Specified Currency with the amount of the Judgment
Currency actually received by such Holder, as the case may be. The foregoing
indemnity constitutes a separate and independent obligation of the Company and
continues in full force and effect notwithstanding any such judgment or order as
aforesaid. The term "rate of exchange" includes any premiums and costs of
exchange payable in connection with the purchase of, or conversion into, the
relevant currency.

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof and, if so specified on the face hereof, in an Addendum
hereto, which further provisions shall have the same force and effect as if set
forth on the face hereof.

     Notwithstanding the foregoing, if an Addendum is attached hereto or
"Other/Additional Provisions" apply to this Note as specified above, this Note
shall be subject to the terms set forth in such Addendum or such
"Other/Additional Provisions".

     Unless the Certificate of Authentication hereon has been executed by the
Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.

                                       4



     IN WITNESS WHEREOF, United Dominion Realty Trust, Inc. has caused this Note
to be duly executed by one of its duly authorized officers.

                                         UNITED DOMINION REALTY TRUST, INC.


                                         By  /s/ Christopher D. Genry
                                            ------------------------------------
                                             Name:  Christopher D. Genry
                                             Title: Executive Vice President and
                                                    Chief Financial Officer


ATTEST:


By  /s/ Mary Ellen Norwood
   ------------------------------------
    Name:  Mary Ellen Norwood
    Title: Vice President and Secretary


Dated:  August 5, 2003


TRUSTEE'S CERTIFICATE OF AUTHENTICATION:

This is one of the Debt Securities of
the series designated therein referred
to in the within-mentioned Indenture.


WACHOVIA BANK, NATIONAL ASSOCIATION,
as Trustee


By  /s/ Sarah A. McMahon
   ------------------------------------
           Authorized Signatory

                                       5



                                [REVERSE OF NOTE]

                       UNITED DOMINION REALTY TRUST, INC.

                                MEDIUM-TERM NOTE
                                  (Fixed Rate)


     This Note is one of a duly authorized series of Debt Securities (the "Debt
Securities") of the Company issued and to be issued under an Indenture, dated as
of November 1, 1995, as amended, modified or supplemented from time to time (the
"Indenture"), between the Company and Wachovia Bank, National Association,
(formerly known as First Union National Bank of Virginia) as trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the Debt
Securities, and of the terms upon which the Debt Securities are, and are to be,
authenticated and delivered. This Note is one of the series of Debt Securities
designated as "Medium-Term Notes Due Nine Months or More From Date of Issue"
(the "Notes"). All terms used but not defined in this Note or in an Addendum
hereto shall have the meanings assigned to such terms in the Indenture or on the
face hereof, as the case may be.

     This Note is issuable only in registered form without coupons in minimum
denominations of U.S. $1,000 and integral multiples thereof or other Authorized
Denomination specified on the face hereof.

     This Note will not be subject to any sinking fund and, unless otherwise
specified on the face hereof in accordance with the provisions of the following
two paragraphs, will not be redeemable or repayable prior to the Stated Maturity
Date.

     This Note will be subject to redemption at the option of the Company on any
date on or after the Initial Redemption Date, if any, specified on the face
hereof, in whole or from time to time in part in increments of U.S. $1,000 or
other integral multiple of an Authorized Denomination (provided that any
remaining principal amount hereof shall be at least U.S. $1,000 or such other
minimum Authorized Denomination), at the Redemption Price (as defined below),
together with unpaid interest accrued thereon to the date fixed for redemption
(the "Redemption Date"), on written notice given to the Holder hereof (in
accordance with the provisions of the Indenture) not more than 60 nor less than
30 calendar days prior to the Redemption Date. The "Redemption Price" shall be
the Initial Redemption Percentage specified on the face hereof (as adjusted by
the Annual Redemption Percentage Reduction, if any, specified on the face hereof
as set forth below) multiplied by the unpaid principal amount of this Note to be
redeemed. The Initial Redemption Percentage shall decline at each anniversary of
the Initial Redemption Date by the Annual Redemption Percentage Reduction, if
any, until the Redemption Price is 100% of unpaid principal amount to be
redeemed. In the event of redemption of this Note in part only, a new Note of
like tenor for the unredeemed portion hereof and otherwise having the same terms
and provisions as this Note shall be issued by the Company in the name of the
Holder hereof upon the presentation and surrender hereof.

     This Note will be subject to repayment by the Company at the option of the
Holder hereof on the Optional Repayment Date(s), if any, specified on the face
hereof, in whole or in part in increments of U.S. $1,000 or other integral
multiple of an Authorized Denomination (provided that any remaining principal
amount hereof shall be at least U.S. $1,000 or such other minimum Authorized
Denomination), at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued thereon to the date fixed
for repayment (the "Repayment Date"). For this Note to be repaid, the Trustee
must receive at its corporate trust office not more than 60 nor less than 30
calendar days prior to the Repayment Date, such Note and instructions to such
effect forwarded by the Holder hereof. Exercise of such repayment option by the
Holder hereof shall be irrevocable. In the event of repayment of this Note in
part only, a new Note of like tenor for the unrepaid portion hereof and
otherwise having the same terms and provisions as this Note shall be issued by
the Company in the name of the Holder hereof upon the presentation and surrender
hereof.

     If this Note is specified on the face hereof to be a Discount Note, the
amount payable to the Holder of this Note in the event of redemption, repayment
or acceleration of maturity will be equal to the sum of (1) the Issue Price

                                       6



specified on the face hereof (increased by any accruals of the Discount, as
defined below) and, in the event of any redemption of this Note (if applicable),
multiplied by the Initial Redemption Percentage (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) and (2) any unpaid interest
accrued thereon to the Redemption Date, Repayment Date or date of acceleration
of maturity, as the case may be. The difference between the Issue Price and 100%
of the principal amount of this Note is referred to herein as the "Discount".

     For purposes of determining the amount of Discount that has accrued as of
any Redemption Date, Repayment Date or date of acceleration of maturity of this
Note, such Discount will be accrued so as to cause the yield on the Note to be
constant. The constant yield will be calculated using a 30-day month, 360-day
year convention, a compounding period that, except for the Initial Period (as
defined below), corresponds to the shortest period between Interest Payment
Dates (with ratable accruals within a compounding period) and an assumption that
the maturity of this Note will not be accelerated. If the period from the
Original Issue Date to the initial Interest Payment Date (the "Initial Period")
is shorter than the compounding period for this Note, a proportionate amount of
the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period, with the short period
being treated as provided in the preceding sentence.

     In addition to the covenants set forth in the Indenture, the Company is
required to maintain Total Unencumbered Assets (as defined below) of not less
than 150% of the aggregate outstanding principal amount of the Company's
Unsecured Debt (as defined below). For purposes of this requirement, the
following capitalized terms shall be defined as follows:

     "Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets (as defined below) not subject to an encumbrance and (ii) all
other assets of the Company and its Subsidiaries (as defined below) not subject
to encumbrance determined in accordance with generally accepted accounting
principles (but excluding accounts receivable and intangibles).

     "Subsidiaries" means a corporation, a limited liability company or a
partnership a majority of the outstanding voting stock, limited liability
company or partnership interests, as the case may be, of which is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries of
the Company. For purposes of this definition, "voting stock" means stock having
voting power for the election of directors, managing members or trustees,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.

     "Undepreciated Real Estate Assets" as of any date means the original cost
plus capital improvements of real estate assets of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles.

     "Unsecured Debt" means debt of the Company or any Subsidiary which is not
secured by any mortgage, lien, charge, pledge or security interest of any kind
upon any of their properties.

     If an Event of Default shall occur and be continuing, the principal of the
Notes may, and in certain cases shall, be accelerated in the manner and with the
effect provided in the Indenture.

     The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debt Securities at any time by the
Company and the Trustee with the consent of the Holders of a majority of the
aggregate principal amount of all Debt Securities at the time outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of a majority of the aggregate principal amount of the outstanding Debt
Securities of any series, on behalf of the Holders of all such Debt Securities,
to waive compliance by the Company with certain provisions of the Indenture.
Furthermore, provisions in the Indenture permit the Holders of a majority of the
aggregate principal amount of the outstanding Debt Securities of any series, in
certain instances, to waive, on behalf

                                       7



of all of the Holders of Debt Securities of such series, certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and other Notes issued upon the registration of
transfer hereof or in exchange heretofore or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.

     No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay principal, premium, if any, and interest in
respect of this Note at the times, places and rate or formula, and in the coin
or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein and
herein set forth, the transfer of this Note is registrable in the Security
Register of the Company upon surrender of this Note for registration of transfer
at the office or agency of the Company in any place where the principal hereof
and any premium or interest hereon are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or by his attorney duly
authorized in writing, and thereupon one or more new Notes having the same terms
and provisions, of Authorized Denominations and for the same aggregate principal
amount, will be issued by the Company to the designated transferee or
transferees.

     As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Note is exchangeable for a like aggregate principal
amount of Notes of different Authorized Denominations but otherwise having the
same terms and provisions, as requested by the Holder hereof surrendering the
same.

     No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Holder as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary, except as required by law.

     THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.

                                       8



                                  ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM   - as tenants in common    UNIF GIFT MIN ACT  - ______ Custodian ______
TEN ENT   - as tenants by the                            (Cust)          (Minor)
            entireties                                 under Uniform Gifts to
JT TEN    - as joint tenants with                      Minors
            right of survivorship                      Act______________________
            and not as tenants in                                (State)
            common

     Additional abbreviations may also be used though not in the above list.

                                   ----------

                                   ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR
              OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------
________________________________________________________________________________

________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

________________________________________________________________________________
this Note and all rights thereunder hereby irrevocably constituting and
appointing

________________________________________________________________________________
Attorney to transfer this Note on the books of the Company, with full power of
substitution in the premises.

Dated:  ______________________       ___________________________________________
        ______________________       ___________________________________________
                                       Notice: The signature(s) on this
                                       Assignment must correspond with the
                                       name(s) as written upon the face of this
                                       Note in every particular, without
                                       alteration or enlargement or any change
                                       whatsoever.

                                       9

EX-4.2

                                                                     EXHIBIT 4.2

                       UNITED DOMINION REALTY TRUST, INC.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") (55 WATER STREET, NEW YORK, NEW YORK) TO THE
ISSUER HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.


REGISTERED                    CUSIP No.:                   PRINCIPAL AMOUNT:
No. FXR-3                     91019PCJ9                    $75,000,000
- ----------------------------  ---------------------------  ---------------------

                       UNITED DOMINION REALTY TRUST, INC.

                                MEDIUM-TERM NOTE
                                  (Fixed Rate)

ORIGINAL ISSUE DATE:          INTEREST RATE:  5.13%        STATED MATURITY
October 3, 2003                                            DATE: January 15,
                                                                 2014
INTEREST PAYMENT DATE(S)      [ ] CHECK IF DISCOUNT NOTE
[X] April 15 and October 15,        Issue Price: %
commencing April 15, 2004
[ ] Other:

INITIAL REDEMPTION            INITIAL REDEMPTION           ANNUAL REDEMPTION
DATE:  N/A                    PERCENTAGE:  N/A             PERCENTAGE
                                                           REDUCTION:  N/A

OPTIONAL REPAYMENT
DATE(S):  N/A

SPECIFIED CURRENCY:           AUTHORIZED DENOMINATION:     EXCHANGE RATE
[X] United States dollars     [X] $1,000 and integral      AGENT:  N/A
[ ] Other:                        multiples thereof
                              [ ] Other:

ADDENDUM ATTACHED             DEFAULT INTEREST RATE:  N/A  OTHER/ADDITIONAL
                                                           PROVISIONS:  N/A
[ ] Yes
[X] No



     UNITED DOMINION REALTY TRUST, INC., a Maryland corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to CEDE & Co., as
nominee for The Depository Trust Company, or registered assigns, the Principal
Amount of SEVENTY FIVE MILLION DOLLARS ($75,000,000), on the Stated Maturity
Date specified above (or any Redemption Date or Repayment Date, each as defined
on the reverse hereof, or any earlier date of acceleration of maturity) (each
such date being hereinafter referred to as the "Maturity Date" with respect to
the principal repayable on such date) and to pay interest thereon (and on any
overdue principal, premium and/or interest to the extent legally enforceable) at
the Interest Rate per annum specified above, until the principal hereof is paid
or duly made available for payment. The Company will pay interest in arrears on
each Interest Payment Date, if any, specified above (each, an "Interest Payment
Date"), commencing with the first Interest Payment Date next succeeding the
Original Issue Date specified above, and on the Maturity Date; provided,
however, that if the Original Issue Date occurs between a Record Date (as
defined below) and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date next succeeding the Original
Issue Date to the registered holder (the "Holder") of this Note on the Record
Date with respect to such second Interest Payment Date. Interest on this Note
will be computed on the basis of a 360-day year of twelve 30-day months.

     Interest on this Note will accrue from, and including, the immediately
preceding Interest Payment Date to which interest has been paid or duly provided
for (or from, and including, October 3, 2003 if no interest has been paid or
duly provided for) to, but excluding, the applicable Interest Payment Date or
the Maturity Date, as the case may be (each, an "Interest Period"). The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, subject to certain exceptions described herein, be paid to the person
in whose name this Note (or one or more predecessor Notes, as defined on the
reverse hereof) is registered at the close of business on the fifteenth calendar
day (whether or not a Business Day, as defined below) immediately preceding such
Interest Payment Date (the "Record Date"); provided, however, that interest
payable on the Maturity Date will be payable to the person to whom the principal
hereof and premium, if any, hereon shall be payable. Any such interest not so
punctually paid or duly provided for on any Interest Payment Date other than the
Maturity Date ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on the close of business on any Record Date and, instead, shall be paid
to the person in whose name this Note is registered at the close of business on
a special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice
whereof shall be given to the Holder of this Note by the Trustee not less than
10 calendar days prior to such Special Record Date or may be paid at any time in
any other lawful manner, all as more fully provided for in the Indenture.

     Payment of principal, premium, if any, and interest in respect of this Note
due on the Maturity Date will be made in immediately available funds upon
presentation and surrender of this Note (and, with respect to any applicable
repayment of this Note, upon delivery of instructions as contemplated on the
reverse hereof) at the office or agency maintained by the Company for that
purpose in the Borough of Manhattan, The City of New York, currently the office
of the Trustee located at 40 Broad Street, 5/th/ Floor, New York, New York
10004, or at such other paying agency in the Borough of Manhattan, The City of
New York, as the Company may determine; provided, however, that if the Specified
Currency (as defined below) is other than United States dollars and such payment
is to be made in the Specified Currency in accordance with the provisions set
forth below, such payment will be made by wire transfer of immediately available
funds to an account with a bank designated by the Holder hereof at least 15
calendar days prior to the Maturity Date, provided that such bank has
appropriate facilities therefor and that this Note is presented and surrendered
and, if applicable, instructions are delivered at the aforementioned office or
agency maintained by the Company in time for the Trustee to make such payment in
such funds in accordance with its normal procedures. Payment of interest due on
any Interest Payment Date other than the Maturity Date will be made at the
aforementioned office or agency maintained by the Company or, at the option of
the Company, by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register maintained by the Trustee;
provided, however, that a Holder of U.S.$10,000,000 (or, if the Specified
Currency is other than United States dollars, the equivalent thereof in the
Specified Currency) or more in aggregate principal amount of Notes (whether
having identical or different terms and provisions) will be entitled to receive
interest payments on such Interest Payment Date by wire transfer of immediately

                                       2



available funds if such Holder has delivered appropriate wire transfer
instructions in writing to the Trustee not less than 15 calendar days prior to
such Interest Payment Date. Any such wire transfer instructions received by the
Trustee shall remain in effect until revoked by such Holder.

     If any Interest Payment Date or the Maturity Date falls on a day that is
not a Business Day, the required payment of principal, premium, if any, and/or
interest shall be made on the next succeeding Business Day with the same force
and effect as if made on the date such payment was due, and no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.

     As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that if the Specified Currency is other
than United States dollars, such day must not be a day on which commercial banks
are authorized or required by law, regulation or executive order to close in the
Principal Financial Center (as defined below) of the country issuing the
Specified Currency (or, if the Specified Currency is Euro, such day must be a
day on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open). "Principal Financial Center" means the
capital city of the country issuing the Specified Currency, except that with
respect to United States dollars, Australian dollars, Canadian dollars, Euros,
South African rands and Swiss francs, the "Principal Financial Center" shall be
The City of New York, Sydney, Toronto, Johannesburg and Zurich, respectively.

     The Company is obligated to make payment of principal, premium, if any, and
interest in respect of this Note in the Specified Currency specified above (or,
if such Specified Currency is not at the time of such payment legal tender for
the payment of public and private debts in the country issuing such Specified
Currency or, if such Specified Currency is Euro, in the member states of the
European Union that have adopted the single currency in accordance with the
Treaty establishing the European Community, as amended by the Treaty on European
Union, then in the currency which is at the time of such payment legal tender in
the related country or in the adopting member states of the European Union) (the
"Specified Currency"). If the Specified Currency is other than United States
dollars, except as otherwise provided below, any such amounts so payable by the
Company will be converted by the Exchange Rate Agent specified above into United
States dollars for payment to the Holder of this Note.

     If the Specified Currency is other than United States dollars, the Holder
of this Note may elect to receive any amounts payable hereunder in such
Specified Currency. If the Holder of this Note shall not have duly made an
election to receive all or a specified portion of any payment of principal,
premium, if any, and/or interest in respect of this Note in the Specified
Currency, any United States dollar amount to be received by the Holder of this
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 A.M., New York City time, on
the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent)
selected by the Exchange Rate Agent and approved by the Company for the purchase
by the quoting dealer of the Specified Currency for United States dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Notes scheduled to receive United States
dollar payments and at which the applicable dealer commits to execute a
contract. All currency exchange costs will be borne by the Holder of this Note
by deductions from such payments. If three such bid quotations are not
available, payments on this Note will be made in the Specified Currency.

     If the Specified Currency is other than United States dollars, the Holder
of this Note may elect to receive all or a specified portion of any payment of
principal, premium, if any, and/or interest in respect of this Note in the
Specified Currency by submitting a written request for such payment to the
Trustee at its corporate trust office in The City of New York on or prior to the
applicable Record Date or at least 15 calendar days prior to the Maturity Date,
as the case may be. Such written request may be mailed or hand delivered or sent
by cable, telex or other form of facsimile transmission. The Holder of this Note
may elect to receive all or a specified portion of all future payments in the
Specified Currency in respect of such principal, premium, if any, and/or
interest and need not file a separate election for each payment. Such

                                       3



election will remain in effect until revoked by written notice to the Trustee,
but written notice of any such revocation must be received by the Trustee on or
prior to the applicable Record Date or at least 15 calendar days prior to the
Maturity Date, as the case may be.

     If the Specified Currency is other than United States dollars and the
Holder of this Note shall have duly made an election to receive all or a
specified portion of any payment of principal, premium, if any, and/or interest
in respect of this Note in the Specified Currency, but the Specified Currency is
not available due to the imposition of exchange controls or other circumstances
beyond the control of the Company, the Company will be entitled to satisfy its
obligations to the Holder of this Note by making such payment in United States
dollars on the basis of the Market Exchange Rate (as defined below) determined
by the Exchange Rate Agent on the second Business Day prior to such payment date
or, if such Market Exchange Rate is not then available, on the basis of the most
recently available Market Exchange Rate. The "Market Exchange Rate" for the
Specified Currency means the noon dollar buying rate in The City of New York for
cable transfers for the Specified Currency as certified for customs purposes
(or, if not so certified, as otherwise determined) by the Federal Reserve Bank
of New York. Any payment made in United States dollars under such circumstances
shall not constitute an Event of Default (as defined in the Indenture).

     All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holder of this Note.

     The Company agrees to indemnify the Holder of any Note against any loss
incurred by such Holder as a result of any judgment or order being given or made
against the Company for any amount due hereunder and such judgment or order
requiring payment in a currency (the "Judgment Currency") other than the
Specified Currency, and as a result of any variation between (i) the rate of
exchange at which the Specified Currency amount is converted into the Judgment
Currency for the purpose of such judgment or order, and (ii) the rate of
exchange at which such Holder, on the date of payment of such judgment or order,
is able to purchase the Specified Currency with the amount of the Judgment
Currency actually received by such Holder, as the case may be. The foregoing
indemnity constitutes a separate and independent obligation of the Company and
continues in full force and effect notwithstanding any such judgment or order as
aforesaid. The term "rate of exchange" includes any premiums and costs of
exchange payable in connection with the purchase of, or conversion into, the
relevant currency.

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof and, if so specified on the face hereof, in an Addendum
hereto, which further provisions shall have the same force and effect as if set
forth on the face hereof.

     Notwithstanding the foregoing, if an Addendum is attached hereto or
"Other/Additional Provisions" apply to this Note as specified above, this Note
shall be subject to the terms set forth in such Addendum or such
"Other/Additional Provisions".

     Unless the Certificate of Authentication hereon has been executed by the
Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.

                                       4



     IN WITNESS WHEREOF, United Dominion Realty Trust, Inc. has caused this Note
to be duly executed by one of its duly authorized officers.


                                         UNITED DOMINION REALTY TRUST, INC.


                                         By  /s/ Christopher D. Genry
                                            ------------------------------------
                                             Name:  Christopher D. Genry
                                             Title: Executive Vice President and
                                                    Chief Financial Officer


ATTEST:


By  /s/ Mary Ellen Norwood
   ------------------------------------
    Name:  Mary Ellen Norwood
    Title: Vice President and Secretary


Dated:  October 3, 2003


TRUSTEE'S CERTIFICATE OF AUTHENTICATION:

This is one of the Debt Securities of
the series designated therein referred
to in the within-mentioned Indenture.


WACHOVIA BANK, NATIONAL ASSOCIATION,
as Trustee


By  /s/ Sarah A. McMahon
   ------------------------------------
           Authorized Signatory

                                       5



                                [REVERSE OF NOTE]

                       UNITED DOMINION REALTY TRUST, INC.

                                MEDIUM-TERM NOTE
                                  (Fixed Rate)


     This Note is one of a duly authorized series of Debt Securities (the "Debt
Securities") of the Company issued and to be issued under an Indenture, dated as
of November 1, 1995, as amended, modified or supplemented from time to time (the
"Indenture"), between the Company and Wachovia Bank, National Association,
(formerly known as First Union National Bank of Virginia) as trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the Debt
Securities, and of the terms upon which the Debt Securities are, and are to be,
authenticated and delivered. This Note is one of the series of Debt Securities
designated as "Medium-Term Notes Due Nine Months or More From Date of Issue"
(the "Notes"). All terms used but not defined in this Note or in an Addendum
hereto shall have the meanings assigned to such terms in the Indenture or on the
face hereof, as the case may be.

     This Note is issuable only in registered form without coupons in minimum
denominations of U.S. $1,000 and integral multiples thereof or other Authorized
Denomination specified on the face hereof.

     This Note will not be subject to any sinking fund and, unless otherwise
specified on the face hereof in accordance with the provisions of the following
two paragraphs, will not be redeemable or repayable prior to the Stated Maturity
Date.

     This Note will be subject to redemption at the option of the Company on any
date on or after the Initial Redemption Date, if any, specified on the face
hereof, in whole or from time to time in part in increments of U.S. $1,000 or
other integral multiple of an Authorized Denomination (provided that any
remaining principal amount hereof shall be at least U.S. $1,000 or such other
minimum Authorized Denomination), at the Redemption Price (as defined below),
together with unpaid interest accrued thereon to the date fixed for redemption
(the "Redemption Date"), on written notice given to the Holder hereof (in
accordance with the provisions of the Indenture) not more than 60 nor less than
30 calendar days prior to the Redemption Date. The "Redemption Price" shall be
the Initial Redemption Percentage specified on the face hereof (as adjusted by
the Annual Redemption Percentage Reduction, if any, specified on the face hereof
as set forth below) multiplied by the unpaid principal amount of this Note to be
redeemed. The Initial Redemption Percentage shall decline at each anniversary of
the Initial Redemption Date by the Annual Redemption Percentage Reduction, if
any, until the Redemption Price is 100% of unpaid principal amount to be
redeemed. In the event of redemption of this Note in part only, a new Note of
like tenor for the unredeemed portion hereof and otherwise having the same terms
and provisions as this Note shall be issued by the Company in the name of the
Holder hereof upon the presentation and surrender hereof.

     This Note will be subject to repayment by the Company at the option of the
Holder hereof on the Optional Repayment Date(s), if any, specified on the face
hereof, in whole or in part in increments of U.S. $1,000 or other integral
multiple of an Authorized Denomination (provided that any remaining principal
amount hereof shall be at least U.S. $1,000 or such other minimum Authorized
Denomination), at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued thereon to the date fixed
for repayment (the "Repayment Date"). For this Note to be repaid, the Trustee
must receive at its corporate trust office not more than 60 nor less than 30
calendar days prior to the Repayment Date, such Note and instructions to such
effect forwarded by the Holder hereof. Exercise of such repayment option by the
Holder hereof shall be irrevocable. In the event of repayment of this Note in
part only, a new Note of like tenor for the unrepaid portion hereof and
otherwise having the same terms and provisions as this Note shall be issued by
the Company in the name of the Holder hereof upon the presentation and surrender
hereof.

                                       6



     If this Note is specified on the face hereof to be a Discount Note, the
amount payable to the Holder of this Note in the event of redemption, repayment
or acceleration of maturity will be equal to the sum of (1) the Issue Price
specified on the face hereof (increased by any accruals of the Discount, as
defined below) and, in the event of any redemption of this Note (if applicable),
multiplied by the Initial Redemption Percentage (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) and (2) any unpaid interest
accrued thereon to the Redemption Date, Repayment Date or date of acceleration
of maturity, as the case may be. The difference between the Issue Price and 100%
of the principal amount of this Note is referred to herein as the "Discount".

     For purposes of determining the amount of Discount that has accrued as of
any Redemption Date, Repayment Date or date of acceleration of maturity of this
Note, such Discount will be accrued so as to cause the yield on the Note to be
constant. The constant yield will be calculated using a 30-day month, 360-day
year convention, a compounding period that, except for the Initial Period (as
defined below), corresponds to the shortest period between Interest Payment
Dates (with ratable accruals within a compounding period) and an assumption that
the maturity of this Note will not be accelerated. If the period from the
Original Issue Date to the initial Interest Payment Date (the "Initial Period")
is shorter than the compounding period for this Note, a proportionate amount of
the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period, with the short period
being treated as provided in the preceding sentence.

     In addition to the covenants set forth in the Indenture, the Company is
required to maintain Total Unencumbered Assets (as defined below) of not less
than 150% of the aggregate outstanding principal amount of the Company's
Unsecured Debt (as defined below). For purposes of this requirement, the
following capitalized terms shall be defined as follows:

     "Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets (as defined below) not subject to an encumbrance and (ii) all
other assets of the Company and its Subsidiaries (as defined below) not subject
to encumbrance determined in accordance with generally accepted accounting
principles (but excluding accounts receivable and intangibles).

     "Subsidiaries" means a corporation, a limited liability company or a
partnership a majority of the outstanding voting stock, limited liability
company or partnership interests, as the case may be, of which is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries of
the Company. For purposes of this definition, "voting stock" means stock having
voting power for the election of directors, managing members or trustees,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.

     "Undepreciated Real Estate Assets" as of any date means the original cost
plus capital improvements of real estate assets of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles.

     "Unsecured Debt" means debt of the Company or any Subsidiary which is not
secured by any mortgage, lien, charge, pledge or security interest of any kind
upon any of their properties.

     If an Event of Default shall occur and be continuing, the principal of the
Notes may, and in certain cases shall, be accelerated in the manner and with the
effect provided in the Indenture.

     The Indenture contains provisions for defeasance of (i) the entire
indebtedness of the Notes or (ii) certain covenants and Events of Default with
respect to the Notes, in each case upon compliance with certain conditions set
forth therein, which provisions apply to the Notes.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debt Securities at any time by the
Company and the Trustee with the consent of the Holders of a majority of the

                                       7



aggregate principal amount of all Debt Securities at the time outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of a majority of the aggregate principal amount of the outstanding Debt
Securities of any series, on behalf of the Holders of all such Debt Securities,
to waive compliance by the Company with certain provisions of the Indenture.
Furthermore, provisions in the Indenture permit the Holders of a majority of the
aggregate principal amount of the outstanding Debt Securities of any series, in
certain instances, to waive, on behalf of all of the Holders of Debt Securities
of such series, certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and other Notes issued upon the registration of transfer hereof or in exchange
heretofore or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Note.

     No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay principal, premium, if any, and interest in
respect of this Note at the times, places and rate or formula, and in the coin
or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein and
herein set forth, the transfer of this Note is registrable in the Security
Register of the Company upon surrender of this Note for registration of transfer
at the office or agency of the Company in any place where the principal hereof
and any premium or interest hereon are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or by his attorney duly
authorized in writing, and thereupon one or more new Notes having the same terms
and provisions, of Authorized Denominations and for the same aggregate principal
amount, will be issued by the Company to the designated transferee or
transferees.

     As provided in the Indenture and subject to certain limitations therein and
herein set forth, this Note is exchangeable for a like aggregate principal
amount of Notes of different Authorized Denominations but otherwise having the
same terms and provisions, as requested by the Holder hereof surrendering the
same.

     No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Holder as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary, except as required by law.

     THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.

                                       8



                                  ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM   - as tenants in common    UNIF GIFT MIN ACT  - ______ Custodian ______
TEN ENT   - as tenants by the                            (Cust)          (Minor)
            entireties                                 under Uniform Gifts to
JT TEN    - as joint tenants with                      Minors
            right of survivorship                      Act______________________
            and not as tenants in                                (State)
            common

     Additional abbreviations may also be used though not in the above list.

                                   ----------

                                   ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR
              OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------

________________________________________________________________________________

________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

________________________________________________________________________________
this Note and all rights thereunder hereby irrevocably constituting and
appointing

________________________________________________________________________________
Attorney to transfer this Note on the books of the Company, with full power of
substitution in the premises.

Dated:  ______________________       ___________________________________________
        ______________________       ___________________________________________
                                       Notice: The signature(s) on this
                                       Assignment must correspond with the
                                       name(s) as written upon the face of this
                                       Note in every particular, without
                                       alteration or enlargement or any change
                                       whatsoever.

                                       9

EX-10.1

                                                                    EXHIBIT 10.1

                               SECOND AMENDMENT TO
                           THIRD AMENDED AND RESTATED
                       AGREEMENT OF LIMITED PARTNERSHIP OF
                          UNITED DOMINION REALTY, L.P.

          This SECOND AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF UNITED DOMINION REALTY, L.P. (this "Amendment") is made
and entered into as of June 12, 2003 (the "Effective Date") by and among United
Dominion Realty, L.P., a Virginia limited partnership (the "Partnership"),
United Dominion Realty Trust, Inc., a Maryland corporation (the "Company"), as
the general partner of the Partnership, and Windjammer Apartments, L.P.
("WJLP"), M.V. JV, LLC ("MVLLC"), Mesa Verde Villas II, L.P. ("MVLP" and,
together with WJLP and MVLLC, the "Contributors"), and the recipients of the
Class A Partnership Units (as defined below) party to this Amendment (the "Unit
Recipients") and amends that certain Third Amended and Restated Agreement of
Limited Partnership of United Dominion Realty, L.P. dated as of December 7, 1998
as amended by that certain First Amendment to Third Amended and Restated
Agreement of Limited Partnership of United Dominion Realty, L.P. dated as of May
8, 2001 (as amended, the "Partnership Agreement"). The Partnership, the Company,
the Contributors and the Unit Recipients are sometimes referred to in this
Amendment collectively as the "Parties" and individually as a "Party." Unless
indicated otherwise, all section, schedule, appendix and exhibit references
contained in this Amendment are to sections, schedules and exhibits of this
Amendment.

                                    RECITALS
                                    --------

          A.   On the Effective Date, the Contributors have made a Capital
Contribution of an aggregate of $28,738,273 to the Partnership in exchange for
which the Contributors are entitled to receive an aggregate of 1,730,179 limited
partnership interests in the Partnership, with the rights and preferences set
forth in this Amendment (the "Class A Partnership Units").

          B.   On the Effective Date, the Contributors have distributed all or a
portion of the Class A Partnership Units to the Unit Recipients.

          C.   Pursuant to the authority granted to the General Partner under
the Partnership Agreement, the General Partner desires to amend the Partnership
Agreement to reflect (a) the issuance of the Class A Partnership Units, (b) the
admission of the Contributors and the Unit Recipients, as the case may be, as
Additional Limited Partners and (c) certain other matters described in this
Amendment.

          D.   The Contributors and the Unit Recipients desire to become parties
to the Partnership Agreement as Limited Partners and to be bound by all terms,
conditions and other provisions of this Amendment and the Partnership Agreement
(as amended by this Amendment).



          NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Parties agree as follows:

          1.   Definitions. Capitalized terms used in this Amendment, unless
otherwise defined in this Amendment, shall have the meanings as set forth in the
Partnership Agreement.

          2.   Admission of Contributors. The Contributors and the Unit
Recipients are admitted as Additional Limited Partners in accordance with
Section 4.02(a) of the Partnership Agreement holding such number of Class A
Partnership Units as is set forth on Appendix A, attached to this Amendment.
Each Contributor and Unit Recipient agrees to become a party to the Partnership
Agreement as a Limited Partner and to be bound by all the terms, conditions and
other provisions of the Partnership Agreement, as amended by this Amendment. The
admission of the Contributors and the Unit Recipients shall become effective as
of the Effective Date, which shall also be the date on which the names of the
Contributors and the Unit Recipients are recorded on the books and records of
the Partnership.

          3.   Restatement of Exhibit A. Exhibit A to the Partnership Agreement
is hereby deleted in its entirety and replaced with Appendix A.

          4.   Definitions. Section 1.01 of the Partnership Agreement is hereby
amended by adding the following defined terms in the correct alphabetical order.

               "Class A Partner" means a Limited Partner who holds Class A
     Partnership Units.

               "Class A Partnership Units" means Partnership Interests
     having the rights and preferences of a Class A Partnership Unit as set
     forth in this Agreement.

               "Class A Specified Redemption Date" means the date that
     Class A Partnership Units are required to be redeemed or acquired
     pursuant to Section 8.05(d).

               "Contribution Agreements" means collectively that certain
     Contribution Agreement dated as of May 2, 2003 between the General
     Partner, the Partnership, Mesa Verde Villas II, L.P. and M.V. JV, LLC
     and that certain Contribution Agreement dated as of May 2, 2003
     between the General Partner, the Partnership and Windjammer
     Apartments, L.P.

               "Cross Over Date" means the date on which a Class A Partner
     would have received distributions with respect to the Class A
     Partnership Units held by such Class A Partner equal to or greater
     than the Threshold Amount for a period of four consecutive calendar
     quarters, assuming such Class A Partner had received distributions
     based on the Dividend Equivalent instead of distributions on the Class
     A Partnership Units pursuant to this Agreement.

                                       2



               "First Amendment" means the First Amendment to the Third
     Amended and Restated Agreement of Limited Partnership of United
     Dominion Realty, L.P., dated as of June 1, 2001.

               "Preferred Return" means, as to each Class A Partner, a
     cumulative annual, non-compounded return on each Class A Partnership
     Unit equal to eight percent (8%) based upon a value of $16.61 per
     Class A Partnership Unit.

               "Threshold Amount" means a fixed distribution of $1.3288 per
     annum.

          5.   Distributions. Section 5.02(a) of the Partnership Agreement is
hereby deleted in its entirety and replaced with the following:

                         "5.02 Distribution of Cash.

               (a)  Except as provided in Section 5.06, the General Partner
     shall be required to make distributions of Available Cash pursuant to
     Sections 5.02(a)(i), 5.02(a)(ii), 5.02(a)(iii) and 5.02(a)(iv) on a
     quarterly (or, at the election of the General Partner, more frequent)
     basis to the Partners who are Partners on the Partnership Record Date
     with respect to such quarter (or other distribution period). The
     amount and frequency of the distributions of Available Cash pursuant
     to section 5.02(a)(v) shall be determined by the General Partner in
     its sole discretion. Available Cash shall be distributed to the
     Partners in the following order of priority:

                    (i)   First, to the Class A Partners until the Cross
          Over Date, in an amount sufficient to provide each Class A
          Partner its Preferred Return from the date of the first issuance
          of Class A Partnership Units through the date of the distribution
          less any prior distributions to the Class A Partners pursuant to
          this Section 5.01(a)(i); provided that if the Partnership does
          not have sufficient funds to distribute to provide each Class A
          Partner with its Preferred Return, distributions pursuant to this
          Section 5.02(a)(i) shall be made pro rata to the Class A Partners
          in accordance with the amount otherwise due to each Class A
          Partner under this Section 5.02(a)(i);

                    (ii)  Second, to the Outside Partners (which shall
          exclude the Class A Partners prior to the Cross Over Date, but
          shall include the Class A Partners, other than Class A Partners
          that are also UDR Partners, on and after the Cross Over Date) in
          proportion to their respective Percentage Interests on the
          Partnership Record Date, until each Outside Partner has received
          an amount equal to its Dividend Equivalent for such quarter (or
          other distribution period);

                    (iii) Third, to the UDR Partners, other than, prior to
          the Cross Over Date, UDR Partners who are also Class A Partners,
          in

                                       3



          proportion to their respective Percentage Interests on the
          Partnership Record Date, until each UDR Partner has received an
          amount equal to the excess, if any, of (A) the amount that such
          UDR Partner would have received pursuant to Sections 5.02(a)(iv)
          and 5.02(a)(v) in the absence of Section 5.02(a)(ii) and this
          Section 5.02(a)(iii) from the date of this Agreement to the end
          of the period to which the distribution relates (assuming that
          distributions under Section 5.02(a)(v), like the distributions
          under Sections 5.02(a)(i) through 5.02(a)(iv), were required to
          be made on a quarterly or more frequent basis), over (B) the sum
          of all prior distributions to such UDR Partner pursuant to this
          Section 5.02(a)(iii), Section 5.02(a)(iv) and Section 5.02(a)(v);

                    (iv)  Fourth, to the Partners (which shall exclude the
          Class A Partners prior to the Cross Over Date, but shall include
          the Class A Partners on and after the Cross Over Date) in
          accordance with their respective Percentage Interests on the
          Partnership Record Date, until each such Outside Partner has
          received an amount equal to the excess, if any, of (A) the amount
          equal to its Dividend Equivalent from the date of this Agreement
          to the end of the period to which the distribution relates, over
          (B) the sum of all prior distributions to such Outside Partner
          pursuant to Section 5.02(a)(ii) and this Section 5.02(a)(iv); and

                    (v)   Thereafter, to the Partners (which shall exclude
          the Class A Partners prior to the Cross Over Date, but shall
          include the Class A Partners on and after the Cross Over Date) in
          accordance with their respective Percentage Interests on the
          Partnership Record Date.

          The amount and frequency of distributions of any cash other than
     Available Cash shall be determined by the General Partner in its sole
     discretion and, if distributed, such cash shall be distributed to the
     Partners in accordance with this Section 5.02(a). If a new or existing
     Partner acquires an additional Partnership Interest in exchange for a
     Capital Contribution on any date other a Partnership Record Date, the
     cash distribution attributable to such additional Partnership Interest
     for the Partnership Record Date following the issuance of such
     additional Partnership Interest shall be reduced in the proportion
     that the number of days that such additional Partnership Interest is
     held by such Partner bears to the number of days between such
     Partnership Record Date and the immediately preceding Partnership
     Record Date."

          6.   Transactions. Section 7.01(c)(iv) of the Partnership Agreement is
hereby deleted in its entirety and replaced with the following:

               "(iv) the Company merges, consolidates, or combines with or
     into another entity and, immediately after such merger, (A)
     substantially all of the assets of the surviving entity, other than
     Partnership Units and the ownership interests in any wholly-owned
     Subsidiaries held by the Company, are contributed to the Partnership
     as a Capital Contribution in exchange for Partnership units with

                                       4



     a fair market value equal to the value of the assets so contributed as
     determined pursuant to Section 704(b) of the Code, (B) any successor
     or surviving corporation expressly agrees to assume all obligations of
     the Company hereunder, and (C) the Conversion Factor is adjusted
     appropriately to reflect the ratio at which REIT Shares are converted
     into shares of the surviving entity."

          7.   Limitation on Liability. Section 8.03 of the Partnership
Agreement is hereby deleted in its entirety and replaced by the following:

               "8.03 Limitation on Liability of Limited Partners. No Limited
     Partner shall be liable for any debts, liabilities, contracts or
     obligations of the Partnership. A Limited Partner shall be liable to the
     Partnership only to make payments of its Capital Contribution, if any, as
     and when due hereunder. After its Capital Contribution is fully paid, no
     Limited Partner shall, except as otherwise required by the Act, be required
     to make any further Capital Contributions or other payments or lend any
     funds to the Partnership. Notwithstanding the foregoing provisions of this
     Section 8.03, a Class A Partner shall be liable to the Partnership or to
     its lenders to the extent set forth in any guarantee of Partnership debt or
     in any agreement to contribute capital to the Partnership in connection
     with any Partnership debt, in each case only to the extent so agreed by
     such Class A Partner in such guarantee or contribution agreement."

          8.   Redemption.

               (a)  Sections 8.05(a), 8.05(b), 8.05(c) and 8.05(d) of the
     Partnership Agreement are hereby deleted in their entirety and replaced by
     the following:

                    "(a) Subject to Sections 8.05(b), 8.05(c), 8.05(d), and
          8.05(e), and the provisions of any agreement between the Partnership
          and any Limited Partner with respect to Partnership Units held by such
          Limited Partners, such Limited Partner, other than the Original
          Limited Partner, shall have the right (the "Redemption Right") to
          require the Partnership to redeem on a Specified Redemption Date, or
          on the Class A Specified Redemption Date with respect to a Class A
          Partner, all or a portion of the Partnership Units held by such
          Limited Partner at a redemption price equal to and in the form of the
          Cash Amount to be paid by the Partnership, provided, that such
          Partnership Units shall have been outstanding for at least one year.
          The Redemption Right shall be exercised pursuant to a Notice of
          Redemption delivered to the Partnership (with a copy to the General
          Partner) by the Limited Partner who is exercising the Redemption Right
          (the "Redeeming Partner"); provided, however, that the Partnership
          shall not be obligated to satisfy such Redemption Right if the General
          Partner elects to purchase the Partnership Units subject to the Notice
          of Redemption pursuant to Section 8.05(b); and provided, further, that
          no Limited Partner may deliver more than two Notices of Redemption
          during each calendar year, provided that each Class A Partner may
          deliver a Notice of Redemption more frequently provided it is limited
          to one Notice of Redemption per calendar quarter. A Limited Partner
          may not exercise the Redemption Right for less than 1,000 Partnership
          Units or, if such Limited Partner holds less than 1,000 Partnership
          Units, all of the

                                       5



          Partnership Units held by such Partner. Except as otherwise provided
          in Section 8.05(h), the Redeeming Partner shall have no right, with
          respect to any Partnership Units so redeemed, to receive any
          distribution paid with respect to Partnership Units if the record date
          for such distribution is on or after the Specified Redemption Date or
          the Class A Specified Redemption Date, as applicable."

                    "(b) Notwithstanding the provisions of Section 8.05(a), a
          Limited Partner that exercises the Redemption Right shall be deemed to
          have offered to sell the Partnership Units described in the Notice of
          Redemption to the General Partner, and the General Partner may, in its
          sole and absolute discretion but subject to the last sentence of this
          subsection (b), elect to purchase directly and acquire such
          Partnership Units by paying to the Redeeming Partner either the Cash
          Amount or the REIT Shares Amount, as elected by the General Partner
          (in its sole and absolute discretion), on the Specified Redemption
          Date or on the Class A Specified Redemption Date with respect to a
          Class A Partner, whereupon the General Partner shall acquire the
          Partnership Units offered for redemption by the Redeeming Partner and
          shall be treated for all purposes of this Agreement as the owner of
          such Partnership Units. If the General Partner shall elect to exercise
          its right to purchase Partnership Units under this Section 8.05(b)
          with respect to a Notice of Redemption, it shall so notify the
          Redeeming Partner within five (three for any Class A Partner) Business
          Days after the receipt by the General Partner of such Notice of
          Redemption. Such notice shall indicate whether the General Partner
          will pay the Cash Amount or the REIT Shares Amount. Unless the General
          Partner (in its sole and absolute discretion) shall exercise its right
          to purchase Partnership Units from the Redeeming Partner pursuant to
          this Section 8.05(b), the General Partner shall not have any
          obligation to the Redeeming Partner or the Partnership with respect to
          the Redeeming Partner's exercise of the Redemption Right. In the event
          the General Partner shall exercise its right to purchase Partnership
          Units with respect to the exercise of a Redemption Right in the manner
          described in the first sentence of this Section 8.05(b), the
          Partnership shall have no obligation to pay any amount to the
          Redeeming Partner with respect to such Redeeming Partner's exercise of
          such Redemption Right, and each of the Redeeming Partner, the
          Partnership, and the General Partner shall treat the transaction
          between the General Partner and the Redeeming Partner for federal
          income tax purposes as a sale of the Redeeming Partner's Partnership
          Units to the General Partner. Each Redeeming Partner agrees to execute
          such documents as the Partnership may reasonably require in connection
          with the issuance of REIT Shares upon exercise of the Redemption
          Right. If Section 5.05 hereof shall prevent the Partnership from
          satisfying, in whole or in part, any exercise of the Redemption Right
          by a Redeeming Partner, then the Company (whether or not it is then
          the General Partner) shall be deemed to have elected pursuant to this
          Section 8.05(b) to purchase, and hereby agrees to purchase, directly
          from such Redeeming Partner, such number of Partnership Units as the
          Partnership is unable to redeem due to the operation of Section 5.05."

                                       6



                    "(c) Notwithstanding the provisions of Section 8.05(a) and
          8.05(b), a Limited Partner shall not be entitled to exercise the
          Redemption Right if the delivery of REIT Shares to such Partner on the
          Specified Redemption Date by the Company pursuant to Section 8.05(b)
          (regardless of whether or not the Company would in fact exercise its
          rights under Section 8.05(b)) would (i) result in REIT Shares being
          owned by fewer than 100 persons (determined without reference to any
          rules of attribution), (ii) result in the Company being "closely held"
          within the meaning of Section 856(h) of the Code, (iii) cause the
          Company to own, directly or constructively, 10% or more of the
          ownership interests in a tenant of the Company's, the Partnership's or
          a Subsidiary's real property, within the meaning of Section
          856(d)(2)(B) of the Code, (iv) in the good faith opinion of the Board
          of Directors of the Company, otherwise disqualify the Company as a
          REIT, or (v) in the opinion of counsel for the Company, constitute or
          result in a violation of Section 5 of the Securities Act of 1933, as
          amended (the "Securities Act"), or cause the acquisition of REIT
          Shares by such Partner to be "integrated" with any other distribution
          of REIT Shares for purposes of complying with the registration
          provisions of the Securities Act. The Company, in its sole and
          absolute discretion, may waive the restriction on redemption set forth
          in this Section 8.05(c); provided, however, that in the event such
          restriction is waived, the Redeeming Partner shall be paid the Cash
          Amount. Notwithstanding the foregoing, each Class A Partner shall be
          entitled to exercise its Redemption Right with respect to the Class A
          Partnership Units regardless of whether the issuance of REIT Shares to
          such Class A Partner would violate the restrictions set forth above,
          provided that the Class A Partner shall receive the Cash Amount in
          connection with such redemption."

                    "(d) Any Cash Amount to be paid by the Partnership to a
          Redeeming Partner pursuant to Section 8.05(a), and any Cash Amount or
          REIT Shares Amount to be paid by the General Partner to a Redeeming
          Partner pursuant to Section 8.05(b), shall be paid within 20 Business
          Days, or with respect to a Redeeming Partner who is a Class A Partner,
          five Business Days, after the initial date of receipt by the General
          Partner of the Notice of Redemption relating to the Partnership Units
          to be redeemed; provided, however, that such 20 Business Day period,
          but not the five Business Day period, may be extended for up to an
          additional 180-day period to the extent required for the Company to
          issue and sell securities the proceeds of which will be contributed to
          the Partnership to provide cash for payment of the Cash Amount.
          Notwithstanding the foregoing, the General Partner agrees to use its
          best efforts to cause the closing of the acquisition of redeemed
          Partnership Units hereunder to occur as quickly as reasonably
          possible."

               (b)  The following are hereby added to Section 8.05 of the
     Partnership Agreement as Sections 8.05(g) and 8.05(h), respectively:

                    "(g) If a Class A Partner exercises its Redemption Right
          with respect to Class A Partnership Units and the Partnership elects
          to pay the Cash Amount with respect to such redemption and does not
          pay such amount to such

                                       7



          Class A Partner by the Class A Specified Redemption Date then on such
          date the Partnership shall issue such Class A Partner a promissory
          note (the "Class A Note"). The Class A Note shall be payable within 30
          calendar days and will bear interest at a rate per annum equal to
          LIBOR plus 90 basis points. Payment of the Class A Note shall be
          guaranteed by the General Partner. For purposes of this Section
          8.05(g), "LIBOR" means the rate per annum (rounded upwards, if
          necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750
          (or any successor page) as the London interbank offered rate for
          deposits in Dollars at approximately 11:00 a.m. (London time) two
          Business Days prior to the date the Class A Note is issued for a term
          of 30 days. If for any reason such rate is not available, the term
          "LIBOR" shall mean the rate per annum (rounded upwards, if necessary,
          to the nearest 1/100 of 1%) appearing on the Reuters Screen LIBO Page
          as the London interbank offered rate for deposits in Dollars at
          approximately 11:00 a.m. (London time) two Business Days prior to the
          date the Class A Note is issued for a term of 30 days; provided,
          however, if more than one rate is specified on the Reuters Screen LIBO
          Page, the applicable rate shall be the arithmetic mean of all such
          rates."

                    "(h) Notwithstanding anything set forth in this Agreement to
          the contrary, if a Class A Partner delivers a Notice of Redemption, a
          Partnership Record Date subsequently occurs with respect to a
          distribution to the Class A Partners pursuant to Section 5.02 and such
          distribution is not distributed prior to the Class A Specified
          Redemption Date, then the Class A Partner whose Class A Partnership
          Units are redeemed on such date shall be entitled to receive the
          distribution pursuant to Section 5.02(a) with respect to such Class A
          Partnership Units notwithstanding such redemption unless such Class A
          Partnership Units are redeemed for REIT Stock and such Class A
          Specified Redemption Date occurs on or before the record date for the
          payment of a dividend on such REIT Stock that is payable in respect of
          the same period as such distribution on the Class A Partnership Units
          so redeemed, in which event the distribution made to such Class A
          Partner pursuant to Section 5.02(a) shall be reduced by the amount of
          such dividend on the REIT Stock."

          9.   Transfer. Section 9.02 of the Partnership Agreement is hereby
amended by the addition of the following as Sections 9.02(f) and 9.02(g) and
renumbering Section 9.02(f) of the Partnership Agreement as Section 9.02(h):

               "(f) Notwithstanding Section 9.02(a), a Class A Partner may
          transfer the Class A Partnership Units held by such Class A
          Partner to (i) any Person who, directly or indirectly, owned an
          equity interest in such Class A Partner immediately prior to such
          transfer, (ii) any Family Member of such Class A Partner, (iii)
          any trust of which a Person described in clause (i) of this
          Section 9.02(f) or a Family Member of such Person or such Class A
          Partner and/or a bona fide tax-exempt charitable organization are
          the sole beneficiaries and (iv) any bona fide tax-exempt
          charitable organization in connection with a bona fide gift or
          donation. Further, notwithstanding Section 9.02(a), a Class A
          Partner may pledge

                                       8



          the Class A Partnership Units held by such Class A Partner (i) as
          set forth in Section 7.04 of the respective Contribution
          Agreements and (ii) to a lending institution to secure a bona
          fide loan or extension of credit made by such lending institution
          to such Class A Partner and, upon such lending institution
          exercising its remedy, if any, to foreclose and take possession
          of such Class A Partnership Units and taking possession of such
          Class A Partnership Units with respect to a default under such
          loan or extension of credit and compliance by such lending
          institution with the provisions of Section 9.03(a), the General
          Partner will consent to the admission of such lending institution
          to the Partnership as a Substitute Limited Partner
          notwithstanding the provisions of Section 9.03(a)(vii); provided
          that notwithstanding the foregoing the General Partner may
          withhold such consent if the General Partner in its sole
          discretion determines that there is a reasonable business purpose
          for the Partnership not to admit such lending institution as a
          Substitute Limited Partner."

               "(g) Notwithstanding anything set forth in this Agreement to
          the contrary, no transfer of a Class A Partnership Unit is
          permitted without the consent of the General Partner, which
          consent may be given or withheld in its sole and absolute
          discretion, if such transfer would result in more than eighty
          (80) "partners" of the Partnership holding all outstanding Class
          A Partnership Units for purposes of Section II.A of Internal
          Revenue Service Notice 88-75, 1988-2 C.B. 386."

          10.  Class A Voting Rights. The Partnership Agreement is hereby
amended by the addition of the following as a new Section 11.03:

               "11.03 Class A Voting Rights.

               (a)  So long as any Class A Partnership Units remain outstanding,
     neither the General Partner nor the Partnership shall, without the
     affirmative vote of the Class A Partners holding at least a majority of the
     Class A Partnership Units then outstanding increase the authorized or
     issued amount of Class A Partnership Units or reclassify any Partnership
     Interest into Class A Partnership Units or create, authorize or issue any
     obligations or security convertible into or evidencing the right to
     purchase any Class A Partnership Units. Further, subject to the
     Partnership's rights set forth in Section 7.03(g) of the respective
     Contribution Agreements during the Tax Protection Period (as defined in
     such Contribution Agreements), the consent of the Class A Partners holding
     at least a majority of the Class A Partnership Units then outstanding will
     be required to approve any merger, acquisition or other fundamental
     transaction involving the Partnership, unless (i) the holders of such Class
     A Partnership Units will not recognize a taxable gain in the transaction
     and the tax protections set forth in Section 7.03 of each of the
     Contribution Agreements are preserved following such merger, acquisition or
     other fundamental transaction, (ii) the Class A Partners are offered a
     portion of the consideration offered to the holders of Limited Partner
     Interests which is in proportion to the Value of their respective
     Partnership Interests, (iii) the value, as determined in good faith by the
     General Partner, of the liquidation, redemption rights and preferences of
     the

                                       9



     Class A Limited Partners set forth in this Agreement, either in respect of
     the Partnership or another limited partnership, limited liability company
     or other "pass-through" entity for federal income tax purposes which
     succeeds to the interests of or is the survivor of a transaction with the
     Partnership, are preserved in connection with such merger, acquisition or
     other fundamental transaction and (iv) the Class A Limited Partners' fixed
     or guaranteed entitlements or preferences as to dividends or distributions
     as set forth herein are preserved and the other relative rights,
     preferences and privileges of the Class A Partnership Units are maintained.

               (b)  So long as any Class A Partnership Units remain outstanding,
     no amendment or modification to this Agreement that adversely affects the
     relative rights, preferences or privileges of the Class A Partnership Units
     shall be effective without the prior written approval of Class A Partners
     holding at least a majority of the Class A Partnership Units then
     outstanding."

          11.  Offset. Except as otherwise provided in a written agreement
between a Class A Partner and the Partnership, the Partnership agrees that it
will not exercise any right to offset amounts payable to a Contributor as
distributions pursuant to the Partnership Agreement or in connection with a
redemption of Class A Partnership Units by a Contributor against any amounts
owed by such Contributor to the Partnership.

          12.  Additional Agreements. The Parties agree that (a) the Class A
Partnership Units will be evidenced by certificates in accordance with Section
2.06 of the Partnership Agreement and (b) the Class A Partnership Units will be
subject to the provisions set forth in Article VII of the Contribution
Agreements.

          13.  Continuing Effect of Partnership Agreement. Except as
specifically amended by this Amendment, the Partnership Agreement is hereby
ratified and confirmed in its entirety and shall remain and continue in full
force and effect. All references in any document to the Partnership Agreement
shall mean the Partnership Agreement, as amended hereby.

          14.  Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement. Signatures to this Amendment may be
transmitted by facsimile and such transmission shall be deemed an original.

                            {Signature Pages Follow}

                                       10



     IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
by their respective authorized representatives as of the Effective Date.

                                      UNITED DOMINION REALTY TRUST, INC., a
                                      Maryland corporation


                                      By:   /s/ W. Mark Wallis
                                         ---------------------------------------
                                      Name:   W. Mark Wallis
                                      Title:  Senior Executive Vice President


                                      UNITED DOMINION REALTY, L.P., a Virginia
                                      limited partnership


                                      By:  United Dominion Realty Trust, Inc.,
                                           a Maryland corporation, its General
                                           Partner


                                           By:  /s/ W. Mark Wallis
                                              ----------------------------------
                                           Name:   W. Mark Wallis
                                           Title:  Senior Executive
                                                   Vice President



                                      "Contributors"

                                      MESA VERDE VILLAS II, L.P.,
                                      a California limited partnership


                                      By:  B&B Mortgage, Inc., a California
                                           corporation, its General Partner


                                           By:  /s/ David T. Beauchamp
                                              ----------------------------------
                                              David T. Beauchamp
                                              its Secretary


                                      M.V. JV, LLC,
                                      a California limited liability company

                                      By:  DB Holdings, L.P., a California
                                           limited partnership, its Manager


                                           By:  DTB Holdings, LLC,
                                                a California limited liability
                                                company, its Managing General
                                                Partner


                                                By:  /s/ David T. Beauchamp
                                                   -----------------------------
                                                   David T. Beauchamp
                                                   its Managing Member



                                      WINDJAMMER APARTMENTS, L.P.,
                                      a California limited partnership


                                      By:  W/Jammer, LLC,
                                           a California limited liability
                                           company, its General Partner


                                           By:  MLB Development,
                                                a California limited
                                                partnership, its Manager


                                                By:  Midlands Company,
                                                     a Delaware corporation
                                                     its General Partner


                                                     By:  /s/ David T. Beauchamp
                                                        ------------------------
                                                        David T. Beauchamp
                                                        its President


                                      By:  Midlands Company,
                                           a Delaware corporation,
                                           its Manager


                                           By:  /s/ David T. Beauchamp
                                              ----------------------------------
                                              David T. Beauchamp
                                              its President


                                      MLB DEVELOPMENT, L.P.,
                                      a California limited partnership


                                      By:  Watco, Inc.
                                           a California corporation,
                                           Its General Partner


                                           By: /s/David T. Beauchamp
                                              ----------------------------------
                                              David T. Beauchamp
                                              Its President



                                      1999 BEAUCHAMP SPECIAL TRUST - DTB
                                      EXEMPT TRUST, DATED MAY 1, 1999


                                      By: /s/ David T. Beauchamp
                                         ---------------------------------------
                                         David T. Beauchamp
                                         Its General Partner


                                      1999 BEAUCHAMP SPECIAL TRUST - RFB
                                      EXEMPT TRUST, DATED MAY 1, 1999


                                      By: /s/ Robert F. Beauchamp, Sr.
                                         ---------------------------------------
                                         Robert F. Beauchamp, Sr.
                                         Its General Partner


                                      1999 BEAUCHAMP SPECIAL TRUST - RLB
                                      EXEMPT TRUST, DATED MAY 1, 1999


                                      By: /s/ Richard L. Beauchamp
                                         ---------------------------------------
                                         Richard L. Beauchamp
                                         Its General Partner


                                      1999 BEAUCHAMP SPECIAL TRUST - BG
                                      EXEMPT TRUST, DATED MAY 1, 1999


                                      By: /s/ Beverley Grimstad
                                         ---------------------------------------
                                         Beverley Grimstad
                                         Its Trustee


                                      1999 BEAUCHAMP SPECIAL TRUST - DBR
                                      EXEMPT TRUST, DATED MAY 1, 1999


                                      By: /s/ Dorothy Beauchamp Riechers
                                         ---------------------------------------
                                         Dorothy Beauchamp Riechers
                                         Its General Partner



                                      THE BEAUCHAMP FAMILY TRUST DATED
                                      APRIL 5, 1990, AS AMENDED


                                      By: /s/ David T. Beauchamp
                                         ---------------------------------------
                                         David T. Beauchamp
                                         Its Trustee


                                      THE GRANDCHILDREN'S POT TRUST
                                      CREATED UNDER THE BEVERLEY
                                      GRIMSTAD 2001 GRANT TRUST u/d/t 6/15/01


                                      By: /s/ John Andor Grimstad
                                         ---------------------------------------
                                         John Andor Grimstad
                                         Its Trustee


                                      THE TIMOTHY SCOTT WAGNER REVOCABLE
                                      TRUST DATED 6/1/88, AS AMENDED


                                      By: /s/ Timothy S. Wagner
                                         ---------------------------------------
                                         Timothy S. Wagner
                                         Its Trustee





                                           APPENDIX A

- -----------------------------------------------------------------------------------------------
                                                                Capital            Class A
            Additional Limited Partners and Address           Contribution    Partnership Units
- -----------------------------------------------------------------------------------------------
                                                                     
1.    Midlands Company c/o United Dominion Realty Trust,       1,866,366.04             112,364
      Inc., 1745 Shea Center Drive, Suite 200, Highlands
      Ranch, CO 80129
- -----------------------------------------------------------------------------------------------
2.    Mesa Verde Villas II, L.P., c/o Beauchamp Realty,        6,296,136.77             379,057
      Inc., 1641 Langley Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
3.    Windjammer Apartments, L.P., c/o Beauchamp Realty,       3,393,223.68             204,288
      Inc., 1641 Langley Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
4.    MLB Development, L.P., c/o Beauchamp Realty, Inc.,       8,466,831.23             509,743
      1641 Langley Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
5.    The Timothy Scott Wagner Revocable Trust dated             698,716.26              42,066
      6/1/88, as amended, Timothy S. Wagner as Trustee,
      c/o Beauchamp Realty, Inc., 1641 Langley Avenue,
      Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
6.    1999 Beauchamp Special Trust - DTB Exempt Trust            924,745.14              55,674
      dated May 1, 1999, David T. Beauchamp as Trustee,
      c/o Beauchamp Realty, Inc., 1641 Langley Avenue,
      Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
7.    1999 Beauchamp Special Trust - RLB Exempt Trust            924,745.14              55,674
      dated May 1, 1999, Richard L. Beauchamp as Trustee,
      c/o Beauchamp Realty, Inc., 1641 Langley Avenue,
      Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
8.    1999 Beauchamp Special Trust - RFB Exempt Trust            924,745.14              55,674
      dated May 1, 1999, Robert F. Beauchamp, Sr. as
      Trustee, c/o Beauchamp Realty, Inc., 1641 Langley
      Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
9.    1999 Beauchamp Special Trust - BG Exempt Trust dated       924,745.14              55,674
      May 1, 1999 Beverley Grimstad as Trustee, c/o
      Beauchamp Realty, Inc., 1641 Langley Avenue, Irvine,
      CA 92614
- -----------------------------------------------------------------------------------------------


                                       A-1





- -----------------------------------------------------------------------------------------------
                                                               Capital              Class A
              Additional Limited Partners and Address        Contribution     Partnership Units
- -----------------------------------------------------------------------------------------------
                                                                     
10.   1999 Beauchamp Special Trust - DBR Exempt Trust            924,745.14              55,674
      dated May 1, 1999, Dorothy Beauchamp Riechers as
      Trustee, c/o Beauchamp Realty, Inc., 1641 Langley
      Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------
11.   Beauchamp Family Trust dated April 15, 1990 as           1,696,611.84             102,144
      amended, David T. Beauchamp as Trustee, c/o
      Beauchamp Realty, Inc., 1641 Langley Avenue, Irvine,
      CA 92614
- -----------------------------------------------------------------------------------------------
12.   The Grandchildren's Pot Trust created under the         16,696,611.84             102,144
      Beverley Grimstad 2001 Grantor trust, John Grimstad
      as Trustee,  c/o Beauchamp Realty, Inc., 1641
      Langley Avenue, Irvine, CA 92614
- -----------------------------------------------------------------------------------------------


                                       A-2

EX-10.2

                                                                    EXHIBIT 10.2

                               THIRD AMENDMENT TO
                     THIRD AMENDED AND RESTATED AGREEMENT OF
               LIMITED PARTNERSHIP OF UNITED DOMINION REALTY, L.P.

     This THIRD AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF UNITED DOMINION REALTY, L.P., dated as of June 20, 2003 (this
"Amendment"), is being executed by United Dominion Realty Trust, Inc., a
Maryland corporation (the "Company"), as the general partner of United Dominion
Realty, L.P., a Virginia limited partnership (the "Partnership"), pursuant to
the authority conferred upon the Company by Section 4.02(a) of the Third Amended
and Restated Agreement of Limited Partnership of United Dominion Realty, L.P.,
dated as of December 7, 1998, as amended and/or supplemented from time to time
(the "Agreement"). Capitalized terms used, but not otherwise defined herein,
shall have the respective meanings ascribed thereto in the Agreement.

     WHEREAS, pursuant to Section 4.02(a) of the Agreement, the Company is
authorized to determine the designations, preferences and relative,
participating, optional or other special rights, powers and duties of
Partnership Units.

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

     (1)  The Agreement is hereby amended by the addition of a new exhibit,
entitled "Exhibit D," in the form attached hereto, which shall be attached and
made a part of the Agreement.

     (2)  Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and continue
in full force and effect and, except as amended hereby, all of the terms,
covenants, provisions and conditions of the Agreement are hereby ratified and
confirmed in all respects.

     IN WITNESS WHEREOF, this Amendment has been executed as of the date first
written above.

                                        UNITED DOMINION REALTY TRUST, INC.


                                        By: /s/ Thomas W. Toomey
                                           -------------------------------------
                                           Thomas W. Toomey
                                           Chief Executive Officer and President



                                    EXHIBIT D

                          PARTNERSHIP UNIT DESIGNATION
                                     OF THE
                   CLASS II OUT-PERFORMANCE PARTNERSHIP SHARES
                         OF UNITED DOMINION REALTY, L.P.

     1.   NUMBER OF UNITS AND DESIGNATION.

     A class of Partnership Units is hereby designated as "Class II
Out-Performance Partnership Shares," and the number of Partnership Units
initially constituting such class shall be one million (1,000,000).

     2.   DEFINITIONS.

     For purposes of this Partnership Unit Designation, the following terms
shall have the meanings indicated in this Section 2. Capitalized terms used and
not otherwise defined herein shall have the meanings assigned thereto in the
Agreement.

     "Change of Control" shall mean the occurrence of any of the following
events:

     (i)   an acquisition of any voting securities of the Company (the "Voting
Securities") by any "person" (as the term "person" is used for purposes of
Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) immediately after which such person has
"beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) ("Beneficial Ownership") of 30% or more of the combined voting
power of the Company's then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting Securities that are
acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition that would cause a Change in Control. "Non-Control
Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (1) the Company or (2) any
corporation, partnership or other person of which a majority of its voting power
or its equity securities or equity interest is owned directly or indirectly by
the Company or in which the Company serves as a general partner or manager (a
"Subsidiary"), (B) the Company or any Subsidiary, or (C) any person in
connection with a Non-Control Transaction (as hereinafter defined);

     (ii)  the individuals who constitute the Board of Directors of the Company
as of May 6, 2003 (the "Incumbent Board") cease for any reason to constitute at
least two-thirds (2/3) of the members of the Board of Directors of the Company;
provided, however, that if the election, or nomination for election by the
Company's stockholders, of any new director was approved by a vote of at least
two-thirds (2/3) of the Incumbent Board, such new director shall be considered
as a member of the Incumbent Board; provided, further, that no individual shall
be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "election contest"
(as described in Rule 14a-11 promulgated under the



Exchange Act) (an "Election Contest") or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board of
Directors of the Company (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest; or

     (iii) approval by stockholders of the Company of: (A) a merger,
consolidation, share exchange or reorganization involving the Company, unless
(1) the stockholders of the Company immediately before such merger,
consolidation, share exchange or reorganization, own, directly or indirectly
immediately following such merger, consolidation, share exchange or
reorganization, at least 60% of the combined voting power of the outstanding
voting securities of the corporation that is the successor in such merger,
consolidation, share exchange or reorganization (the "Surviving Company") in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, share exchange or reorganization,
(2) the individuals who were members of the Incumbent Board immediately prior to
the execution of the agreement providing for such merger, consolidation, share
exchange or reorganization constitute at least two-thirds (2/3) of the members
of the board of directors of the Surviving Company, and (3) no persons (other
than the Company or any Subsidiary of the Company, any employee benefit plan (or
any trust forming a part thereof) maintained by the Company, the Surviving
Company or any Subsidiary of the Company, or any person who, immediately prior
to such merger, consolidation, share exchange or reorganization had Beneficial
Ownership of 30% or more of the then outstanding Voting Securities has
Beneficial Ownership of 30% or more of the combined voting power of the
Surviving Company's then outstanding voting securities (a transaction described
in clauses (1) through (3) is referred to herein as a "Non-Control
Transaction"); (B) a complete liquidation or dissolution of the Company; or (C)
an agreement for the sale or other disposition of all or substantially all of
the assets of the Company to any person (other than a transfer to a Subsidiary
of the Company).

     Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any person (a "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company that, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Subject Person, provided that if a
Change of Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, such Subject Person becomes the Beneficial
Owner of any additional Voting Securities that increases the percentage of the
then outstanding Voting Securities Beneficially Owned by such Subject Person,
then a Change of Control shall occur.

     "Class II Out-Performance Partnership Share" shall mean a Partnership Unit
with the designations, preferences and relative, participating, optional or
other special rights, powers and duties as are set forth in this Exhibit D.

     "Class II Out-Performance Valuation Date" shall mean the earlier to occur
of (i) May 31, 2005, or (ii) the date on which a Change of Control occurs.



     "Conversion Factor" shall mean the quotient obtained by (a) multiplying 5%
of the Excess Return by the Company's Market Capitalization and (b) dividing the
number obtained in clause (b) by the market value of one REIT Share on the Class
II Out-Performance Valuation Date, as the weighted average price per day of
common stock for the 20 trading days immediately preceding the Class II
Out-Performance Valuation Date

     "Determination Date" shall mean (i) when used with respect to any dividend
or other distribution, the date fixed for the determination of the holders of
the securities entitled to receive such dividend or distribution, or, if a
dividend or distribution is paid or made without fixing such a date, the date of
such dividend or distribution, and (ii) when used with respect to any split,
subdivision, reverse stock split, combination or reclassification of securities,
the date upon which such split, subdivision, reverse stock split, combination or
reclassification becomes effective.

     "Excess Return" shall mean the amount, if any, by which the cumulative
Total Return of REIT Shares over the Measurement Period exceeds the greater of
the cumulative Total Return of the Morgan Stanley REIT Index, which is the peer
group index, or the Minimum Return.

     "Ex-Date" shall mean (i) when used with respect to any dividend or
distribution, the first date on which the securities on which the dividend or
distribution is payable trade regular way on the relevant exchange or in the
relevant market without the right to receive such dividend or distribution, and
(ii) when used with respect to any split, subdivision, reverse stock split,
combination or reclassification of securities, the first date on which the
securities trade regular way on such exchange or in such market to reflect such
split, subdivision, reverse stock split, combination or reclassification
becoming effective.

     "Extraordinary Distribution" shall mean the distribution by the Company, by
dividend or otherwise, to all holders of its REIT Shares of evidences of its
indebtedness or assets (including securities) other than cash.

     "Family Controlled Entity" means, as to any holder of Class II
Out-Performance Shares, (a) any corporation more than 50% of the outstanding
voting stock of which is owned by such holder and such holder's Family Members,
(b) any trust, whether or not revocable, of which such holder and such holder's
Family Members are the sole beneficiaries, (c) any partnership of which such
holder and such holder's Family Members hold partnership interests representing
at least 25% of such partnership's capital and profits and (d) any limited
liability company of which such holder is the manager and in which such holder
and such holder's Family Members hold membership interests representing at least
25% of such limited liability company's capital and profits.

     "Family Members" means, as to a Person that is an individual, such Person's
spouse, ancestors, descendants (whether by blood or by adoption), brothers,
sisters and inter vivos or testamentary trusts of which only such Person and his
spouse, ancestors, descendants (whether by blood or by adoption), brothers and
sisters are beneficiaries.



     "First Amendment" means the First Amendment to the Agreement, dated as of
June 1, 2001.

     "Industry Total Return" shall mean the Total Return of the securities
included in the Industry Peer Group Index for the Measurement Period, with such
average determined in a manner consistent with the manner in which such index is
calculated; provided, however, that if such Industry Total Return would be less
than zero without giving effect to the reinvestment of dividends, then the
"Industry Total Return" shall be equal to zero.

     "Industry Peer Group Index" shall mean the Morgan Stanley REIT Index.

     "Initial Holder" shall mean UDR Out-Performance II, LLC, a Maryland limited
liability company.

     "Measurement Period" shall mean the 24 month period beginning June 1, 2003
to but excluding the Class II Out-Performance Valuation Date.

     "Minimum Return" shall mean a 22% Total Return (compounded annually) or 11%
annualized as of the Class II Out-Performance Valuation Date or, if the Class II
Out-Performance Valuation Date is not May 31, 2005, 11% (compounded annually)
per annum from June 1, 2003.

     "Morgan Stanley REIT Index" shall mean the Morgan Stanley REIT Index quoted
on the American Stock Exchange under the symbol "RMS".

     "Partnership" shall mean United Dominion Realty, L.P., a Virginia limited
partnership.

     "Total Return" shall mean, for any security or index and for any period,
the cumulative total return for such security or index over such period, as
measured by the sum of (a) the cumulative amount of dividends paid in respect of
such security or index for such period (assuming that all cash dividends are
reinvested in such security as of the payment date for such dividend based on
the security price on the dividend payment date), and (b) an amount equal to (x)
the security price or index value at the end of such period, minus (y) the
security price or index value at the beginning of the measurement period.

     "UDR Market Capitalization" shall mean the average number of REIT Shares
outstanding over the Measurement Period (including, for this purpose, REIT
Shares, Partnership Units, outstanding options and convertible securities, but
not including Class II Out-Performance Partnership Shares) multiplied by the
daily closing price of the REIT Shares.

     "UDR Total Return" shall mean the Total Return of the REIT Shares for the
Measurement Period.



     3.   FORFEITURE.

     If, on the Class II Out-Performance Valuation Date, there is no Excess
Return, then, from and after such date, each Class II Out-Performance
Partnership Share shall, without any action on the part of the Partnership, the
Company or the holder thereof, be automatically forfeited and be no longer
outstanding.

     4.   DISTRIBUTIONS.

     Subject to Section 5.06 of the Agreement, on and after the Class II
Out-Performance Valuation Date, the holders of Class II Out-Performance
Partnership Shares not forfeited under Section 3 shall be entitled to receive
distributions at the same time and in the same amount that would be received on
the number of Partnership Units held by Outside Partners (assuming such
Partnership Units were originally issued on the Class II Out-Performance
Valuation Date) that is obtained by multiplying the number of Class II
Out-Performance Partnership Shares by the Conversion Factor.

     5.   ALLOCATIONS.

          (a)  From and after the Class II Out-Performance Valuation Date,
Profits and Losses shall be allocated to each of the holders of Class II
Out-Performance Partnership Shares not forfeited under Section 3 at the same
time and in the same amount that would be allocated on the number of Partnership
Units held by Outside Partners (assuming such Partnership Units were originally
issued on the Class II Out-Performance Valuation Date) that is obtained by
multiplying the number of Class II Out-Performance Partnership Shares by the
Conversion Factor.

          (b)  In the event that the Partnership disposes of all or
substantially all of its assets in a transaction that will lead to a liquidation
of the Partnership pursuant to Article II of the Agreement, then,
notwithstanding Section 5.06 of the Agreement, each holder of Class II
Out-Performance Partnership Shares not forfeited under Section 3 shall be, to
the extent possible, specially allocated items of Partnership income and gain in
an amount sufficient to cause the Capital Account of such holder to be equal to
that of an Outside Partner that holds Partnership Units equal to the number of
Class II Out-Performance Partnership Shares held by such holder multiplied by
the Conversion Factor. Amounts allocated pursuant to this Section 5(b) and/or
Section 5(b) of the First Amendment shall be excluded from "Profits" and
"Losses" otherwise determined under the Agreement.

     6.   EXCHANGE.

     If the Class II Out-Performance Partnership Shares have not been forfeited
under Section 3 and the Class II Out-Performance Partnership Shares have been
transferred by the Initial Holder in accordance with Section 8, the transferee
and subsequent transferees of the Class II Out-Performance Partnership Shares
may exchange from time to time some or all of the Class II Out-Performance
Partnership Shares for a number Partnership Units equal to the Class II
Out-Performance Partnership Shares multiplied by the Conversion Factor.



     7.   REDEMPTION UPON CHANGE OF CONTROL.

     Upon the occurrence of a Change of Control, and subject to the applicable
requirements of Federal securities laws and any securities exchange or quotation
system rules or regulations, each holder of Class II Out-Performance Partnership
Shares shall have the redemption rights of Limited Partners set forth in Section
8.05 of the Agreement with respect to a number of Partnership Units equal to the
number of Class II Out-Performance Partnership Shares multiplied by the
Conversion Factor and the 40-month transfer limitation period applicable to the
Class II Out-Performance Partnership Shares shall be deemed to have passed.

     8.   RESTRICTIONS ON OWNERSHIP AND TRANSFER.

     The restrictions on Transfer set forth in Article IX of the Agreement shall
not apply to Transfers of Class II Out-Performance Partnership Shares. Prior to
the Class II Out-Performance Valuation Date, the Class II Out-Performance
Partnership Shares shall be owned and held solely by the Initial Holder. On or
after the later of the Class II Out-Performance Valuation Date and the twenty
four (24) month period from the date the Class II Out-Performance Partnership
Shares are issued the Class II Out-Performance Partnership Shares may be
Transferred (i) by the Initial Holder to (a) any Person who is a member (a
"Member") of the Initial Holder immediately prior to such transfer, (b) a Family
Member of a Member, (c) a Family Controlled Entity of a Member, (d) any Person
with respect to whom the Member constitutes a Family Controlled Entity, (e) upon
the death of a Member, by will or by the laws of descent and distribution to any
Family Member or Family Controlled Entity, and (ii) by any other Person to (a) a
Family Member of a such Person, (b) a Family Controlled Entity of such Person,
(c) any other Person with respect to whom such Person constitutes a Family
Controlled Entity, (d) upon the death of such Person, by will or by the laws of
descent and distribution to any Family Member or Family Controlled Entity;
provided, however, that, until May 31, 2005, the Class II Out-Performance
Partnership Shares may not be Transferred by the Initial Holder without the
approval of the managers of the Initial Holder.

     9.   ADJUSTMENTS.

          (a)  In the event of any Extraordinary Distribution occurring on or
after May 6, 2003, for purposes of determining the Value of a REIT Share or the
UDR Total Return, each price of a REIT Share determined as of a date on or after
the Ex-Date for such Extraordinary Distribution shall be adjusted by multiplying
such price by a fraction (i) the numerator of which shall be the price of a REIT
Share on the date immediately prior to such Ex-Date, and (ii) the denominator of
which shall be (A) the price of a REIT Share on the date immediately prior to
such Ex-Date, minus (B) the fair market value on the date fixed for such
determination of the portion of the evidences of indebtedness or assets so
distributed applicable to one REIT Share (as determined by the Company, whose
determination shall be conclusive); provided further, that such amount shall be
so adjusted for each such Extraordinary Distribution occurring on or after May
6, 2003.



          (b)  In the event that, on or after May 6, 2003, the Company (i)
declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (ii) splits or subdivides its outstanding REIT Shares, (iii) effects a
reverse stock split or otherwise combines its outstanding REIT Shares into a
smaller number of REIT Shares, or (iv) otherwise reclassifies its outstanding
REIT Shares, then, for purposes of determining the Value of a REIT Share or the
UDR Total Return, each price of a REIT Share determined as of a date on or after
the Ex-Date for such transaction shall be adjusted by multiplying such price by
a fraction (x) the numerator of which shall be the number of REIT Shares issued
and outstanding on the Determination Date for such dividend, distribution,
split, subdivision, reverse stock split, combination or reclassification
(assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has occurred as of such time) and (y)
the denominator of which shall be the actual number of REIT Shares (determined
without the above assumption) issued and outstanding on the Determination Date
for such dividend, distribution, split, subdivision, reverse stock split.
combination or reclassification.

          (c)  The Company shall have authority to appropriately adjust the UDR
Market Capitalization, the UDR Total Return or the Value of a REIT Share if any
other transaction or circumstance occurs or arises that without such adjustment
would have an inequitable result.

     10.  GENERAL.

     The ownership of Class II Out-Performance Partnership Shares may (but need
not, in the sole and absolute discretion of the Company) be evidenced by one or
more certificates. The Company shall amend Exhibit A to the Agreement from time
to time to the extent necessary to reflect accurately the issuance of, and
subsequent conversion, redemption, or any other event having an effect on the
ownership of Class II Out-Performance Partnership Shares.



     IN WITNESS WHEREOF, ASR, Heritage SGP and UDR have caused this First
Amendment to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

- --------------------------------------------------------------------------------
                                        ASR INVESTMENTS CORPORATION


                                        By:   /s/ [illegible]
                                             -----------------------------------
                                        Its: President


- --------------------------------------------------------------------------------
                                        HERITAGE SGP CORPORATION


                                        By:   /s/ [illegible]
                                             -----------------------------------
                                        Its: President


- --------------------------------------------------------------------------------
                                        UNITED DOMINION REALTY TRUST, INC.


                                        By:   /s/ Kathryn Surface
                                             -----------------------------------
                                        Its: Senior Vice President


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

EX-10.3

                                                                    EXHIBIT 10.3

                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES L.P.

                          dated as of September 18 1997

                                  by and among

                          ASR INVESTMENTS CORPORATION,
                   a Maryland corporation, as General Partner,

                            HERITAGE SGP CORPORATION,
               an Arizona corporation, as Special General Partner,
                                       and

                     The Persons listed on Exhibit A hereto,
                               as Limited Partners


- --------------------------------------------------------------------------------
THE PARTNERSHIP INTERESTS AND UNITS IN HERITAGE COMMUNITIES L.P. (THE "UNITS")
ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET
FORTH IN ARTICLE XI OF THIS AGREEMENT AND MAY NOT BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS THEREOF. THEREFORE, PURCHASERS OF THE UNITS WILL
BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD OF
TIME. THE UNITS HAVE NOT BEEN REGISTERED (i) UNDER ANY STATE SECURITIES LAWS
(THE "STATE ACTS"), OR (ii) UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "FEDERAL ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED THEREIN, AND
NEITHER THE UNITS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED, OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF ARTICLE XI OF THIS AGREEMENT AND (A) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR WHICH IS
OTHER WISE IN COMPLIANCE WITH SUCH STATE ACTS, AND (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN COMPLIANCE WITH
THE FEDERAL ACT. IN ADDITION, ANY UNITS ACQUIRED BY NON-U.S. PERSONS MAY NOT,
DIRECTLY OR INDIRECTLY, BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED, OR TRANSFERRED IN THE UNITED STATES OR TO OR FOR THE ACCOUNT OF A U.S.
PERSON EXCEPT IN COMPLIANCE WITH THIS AGREEMENT AND THE FEDERAL ACT AND ALL
APPLICABLE STATE ACTS. AS USED HEREIN, "UNITED STATES" MEANS THE UNITED STATES
OF AMERICA, ITS TERRITORIES AND POSSESSIONS, AND ALL AREAS SUBJECT TO ITS
JURISDICTION, AND A "U.S. PERSON" MEANS A CITIZEN OR RESIDENT OF THE UNITED
STATES (INCLUDING THE ESTATE OF ANY SUCH PERSON), A CORPORATION, PARTNERSHIP, OR
OTHER PERSON CREATED OR ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR ANY
POLITICAL SUBDIVISION THEREOF OR THEREIN, AND AN ESTATE OR TRUST THE INCOME OF
WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION REGARDLESS OF ITS
SOURCE.[ ]


                               TABLE OF CONTENTS
                                                                            Page

ARTICLE I     DEFINITIONS......................................................2

     1.1   Definition..........................................................2

     1.2   Currency...........................................................12

     1.3   Schedules and Exhibits.............................................12

     1.4   Construction of Term "Including."..................................12

     1.5   Certain Accounts...................................................12

     1.6   Interest Calculations..............................................12

     1.7   Other Terms........................................................13

ARTICLE II    ORGANIZATIONAL MATTERS..........................................13

     2.1   Organization and Continuation; Application of Act..................13

     2.2   Name...............................................................13

     2.3   Registered Office and Agent; Principal Office......................13

     2.4   Term...............................................................14

ARTICLE III   PURPOSE.........................................................14

     3.1   Purpose and Business...............................................14

     3.2   Powers.............................................................14

ARTICLE IV    CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS; CAPITAL ACCOUNTS......14

     4.1   Capital Contributions of the Partners..............................14

     4.2   Issuances of Additional Partnership Interests......................16

     4.3   No Preemptive Rights...............................................18

     4.4   Capital Accounts of the Partners...................................18

     4.5   Waiver and Recontribution..........................................20

ARTICLE V     DISTRIBUTIONS...................................................21

     5.1   Requirement and Characterization of Distributions..................21

     5.2   Amounts Withheld...................................................22

     5.3   Distribution Upon Liquidation......................................22

ARTICLE VI    ALLOCATIONS.....................................................22

     6.1   Allocations for Capital Account Purposes...........................22

     6.2   Special Allocation Rules...........................................23

                                       -i-



                               TABLE OF CONTENTS
                                  (Continued)
                                                                            Page

     6.3   Allocations for Tax Purposes.......................................24

ARTICLE VII   MANAGEMENT AND OPERATIONS OF BUSINESS...........................25

     7.1   Management.........................................................25

     7.2   Certificate of Limited Partnership.................................29

     7.3   Restrictions on General Partner's Authority........................29

     7.4   Responsibility for Expenses........................................30

     7.5   Outside Activities of the General Partner..........................30

     7.6   Contracts with Affiliates..........................................30

     7.7   Indemnification....................................................31

     7.8   Liability of the General Partners..................................32

     7.9   Other Matters Concerning the General Partners......................33

     7.10  Title to Partnership Assets........................................33

     7.11  Reliance by Third Parties..........................................33

ARTICLE VIII  RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS......................34

     8.1   Limitation of Liability............................................34

     8.2   Management of Business.............................................34

     8.3   Outside Activities of Limited Partners.............................34

     8.4   Priority Among Limited Partners....................................35

     8.5   Rights of Limited Partners Relating to the Partnership.............35

     8.6   Redemption Right...................................................36

ARTICLE IX    BOOKS, RECORDS, ACCOUNTING AND REPORTS..........................36

     9.1   Records and Accounting.............................................36

     9.2   Fiscal Year........................................................37

     9.3   Reports............................................................37

ARTICLE X     TAX MATTERS.....................................................37

     10.1  Preparation of Tax Returns.........................................37

     10.2  Tax Elections......................................................37

     10.3  Tax Matter Partner.................................................38

     10.4  Organizational Expenses............................................39

     10.5  Withholding........................................................39

                                      -ii-



                               TABLE OF CONTENTS
                                  (Continued)
                                                                            Page

ARTICLE XI    TRANSFERS AND WITHDRAWALS.......................................40

     11.1  Transfer...........................................................40

     11.2  Transfer of General Partner's or Special General Partner's
           Partnership Interest...............................................40

     11.3  Limited Partners' Rights to Transfer...............................41

     11.4  Substituted Limited Partners.......................................42

     11.5  Assignees..........................................................43

     11.6  General Provisions.................................................43

ARTICLE XII   ADMISSION OF PARTNERS...........................................44

     12.1  Admission of Successor General Partner.............................44

     12.2  Admission of Additional Limited Partners...........................44

     12.3  Amendment of Agreement and Certificate.............................44

ARTICLE XIII  DISSOLUTION AND LIQUIDATION.....................................45

     13.1  Dissolution........................................................45

     13.2  Winding Up.........................................................46

     13.3  Compliance with Timing Requirements of Regulations; Allowance
           for Contingent or Unforeseen Liabilities or Obligations............47

     13.4  Rights of Limited Partners.........................................47

     13.5  Notice of Dissolution..............................................47

     13.6  Cancellation or Certificate of Limited Partnership.................48

     13.7  Reasonable Time for Winding-Up.....................................48

ARTICLE XIV   AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS....................48

     14.1  Amendments Generally...............................................48

     14.2  General Partner's Power to Amend...................................48

     14.3  Consent of Adversely Affected Partner Required.....................49

     14.4  When Consent of Limited Partnership Interests Required.............49

ARTICLE XV    GENERAL PROVISIONS..............................................49

     15.1  Addresses and Notice...............................................49

     15.2  Titles and Captions................................................49

     15.3  Pronouns and Plurals...............................................50

     15.4  Further Action.....................................................50

                                     -iii-



                               TABLE OF CONTENTS
                                   (Continued)
                                                                            Page

     15.5  Binding Effect.....................................................50

     15.6  Waiver of Partition................................................50

     15.7  Entire Agreement...................................................50

     15.8  Securities Law Provisions..........................................50

     15.9  Remedies Not Exclusive.............................................50

     15.10 Time...............................................................50

     15.11 Creditors..........................................................50

     15.12 Waiver.............................................................50

     15.13 Execution Counterparts.............................................50

     15.14 Applicable Law.....................................................51

     15.15 Severability.......................................................51

     15.16 Limitation of Liability............................................51

ARTICLE XVI   POWER OF ATTORNEY...............................................51

     16.1  Scope..............................................................51

     16.2  Irrevocability ....................................................52

                                      -iv-


                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                              HERITAGE COMMUNITIES

     THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
HERITAGE COMMUNITIES LP., is made as of the 18th day of September, 1997, by and
among ASR Investments Corporation, a Maryland corporation, as the General
Partner, Heritage SGP Corporation, an Arizona corporation, as the Special
General Partner, and the Persons whose names are set forth on Exhibit A attached
hereto, as the Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.

                                    RECITALS

     A.    Pursuant to the Formation Agreement, the General Partner, the Special
General Partner and the Formation Limited Partner formed the Partnership.

     B.    The General Partner, the Special General Partner and certain Limited
Partners entered into the Winton Contribution Agreement pursuant to which, among
other things, they agreed to admit such Limited Partners (the "Winton Limited
Partners") as limited partners in the Partnership.

     C.    Upon the admission of the Winton Limited Partners, the Formation
Limited Partner withdrew as a limited partner in the Partnership in exchange for
the return of his Capital Contribution.

     D.    Pursuant to Section 4.2 of the Agreement, the General Partner, the
Special General Partner and certain Additional Limited Partners entered into the
Merit Contribution Agreements pursuant to which, among other things, they have
agreed to admit such Additional Limited Partners to the Partnership in exchange
for the contribution of properties.

     E.    The General Partner, the Special General Partner and the Limited
Partners, being all of the Partners in the Partnership, desire to continue the
Partnership as a limited partnership under the Revised Uniform Limited
Partnership Act of the State of Delaware, and make this Agreement to amend and
restate all prior agreements to reflect and conform the foregoing admissions and
to amend and restate and supersede in its entirety all prior agreements, as
hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises, the mutual promises and
agreements herein made, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the General Partner, the
Special General Partner, and the Limited Partners, intending to be legally
bound, have agreed and do hereby agree as follows:

                                       1



                                    ARTICLE I

                                   DEFINITIONS

     1.1   Definition. Unless otherwise clearly indicated to the contrary, the
following terms shall have the following meanings:

          1.1.1  "Accrual Account" means an account maintained with respect to
each Limited Partner Unit to which shall be credited (except as otherwise
provided in the last sentence of this paragraph) on a monthly basis an amount,
calculated as if interest at a per annum rate equal to the Prime Rate (as said
rate may change from time to time), plus one percentage point, on the average
daily balance of such Limited Partner Unit's Unpaid Distribution Account, and
from which shall be debited the amount of any distributions of available Cash or
Capital Transaction Proceeds with respect to such Accrual Account pursuant to
clause (i) of Section 5.1.1 or clause (i) of Section 5.1.2 hereof. The amount to
be credited to each Accrual Account shall be cumulative and shall compound
annually, if unpaid.

          1.1.2  "Act" means the Delaware Revised Uniform Limited Partnership
Act as it may be amended from time to time, and any successor to such statute.

          1.1.3  "Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.2.1 hereof and who is
shown as such on the books and records of the Partnership.

          1.1.4  "Adjusted Capital Account" means the Capital Account maintained
for each Partner as of the end of each Partnership Year (a) increased by any
amounts which such Partner is obligated to restore pursuant to any provisions of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulation sections 1.704-2(g)(l) and
1.704-2(i)(5) and (b) decreased by the items described in paragraphs (4), (5)
and (6) of Treasury Regulation section 1.704-l(b)(2)(ii)(d). This definition of
Adjusted Capital Account is intended to comply with the provisions of Treasury
Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.

          1.1.5  "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.

          1.1.6  "Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Section 4.4 hereof.

          1.1.7  "Affiliate" means, with respect to any Person, (a) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (b) any Person owning or controlling 10 percent or more of the
outstanding voting interests of such Person, (c) any Person of which such Person
owns or controls 10 percent or more of the voting interests, or (d) any officer,
director, general partner or trustee of such Person or any Person referred to in
clauses (a), (b), and (c) above.

                                       2



          1.1.8  "Agreed Value" means (a) in the case of any Contributed
Property set forth in Exhibit B and, as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit B and (b)
in the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Code section 752 and the regulations
thereunder.

          1.1.9  "Agreement" means this Agreement of Limited Partnership, as it
may be amended, supplemented or restated from time to time.

          1.1.10 "Articles of Incorporation" means the Articles of Incorporation
of ASR Investments Corporation, as filed with the Secretary of State of the
State of Maryland, as further amended or restated from time to time.

          1.1.11 "Assignee" means a Person to whom one or more Partnership Units
have been transferred in a manlier permitted under this Agreement, but who has
not become a Substituted Limited Partner, and who has only the rights set forth
in Section 11.5.

          1.1.12 "Available Cash" means with respect to any period for which
such calculation is being made:

               (a)  all cash revenues and funds received by the Partnership from
whatever source, excluding, however, Capital Transaction Proceeds, plus the
amount of any reduction (including, without limitation, a reduction resulting
because the General Partner determines such amounts are no longer necessary) in
reserves of the Partnership, which reserves are referred to in clause (b)(iv)
and Section 1.1.18 below;

               (b)  less the sum of the following (except to the extent taken
into account in determining Capital Transaction Proceeds):

                    (i)   all interest, principal and other debt payments made
during such period by the Partnership,

                    (ii)  all reasonable cash expenditures (including capital
expenditures) made by the Partnership during such period,

                    (iii) investments in any entity (including loans made
thereto) to the extent that such investments are permitted under this Agreement
and are not otherwise described in clauses (b)(i) or (ii), and

                    (iv)  the amount of any increase in reserves (including
reserves to make capital expenditures) established during such period which the
General Partner or the Special General Partner determines is necessary or
appropriate in its sole and absolute discretion.

Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.

                                       3



          1.1.13 "Book-Tax Disparities" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 4.4 and the hypothetical balance of such Partner's Capita! Account
computed as if it had been maintained strictly in accordance with federal income
tax account principles.

          1.1.14 "Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York, New York, are authorized or required
by law to close.

          1.1.15 "Capital Account" means the Capital Account maintained for a
Partner pursuant to Section 4.4 hereof.

          1.1.16 "Capital Contribution" means with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Section 4.1 or 4.2 hereof and which shall be treated as a contribution to the
Partnership pursuant to Code section 721(a).

          1.1.17 "Capital Transaction" means a sale, exchange or other
disposition (other than in liquidation of the Partnership or any Subsidiary
Partnership) or a financing or refinancing by the Partnership or any Subsidiary
Partnership (which shall not include any loan or financing to the General
Partner as permitted by Section 7.1.1(c)) of a Partnership or Subsidiary
Partnership asset or any portion thereof, that under generally accepted
accounting principles the proceeds of which are deemed attributable to capital.

          1.1.18 "Capital Transaction Proceeds" means the net cash proceeds of a
Capital Transaction received by the Partnership, after deducting all reasonable
expenses incurred in connection therewith and after application of any proceeds,
at the sole discretion of the General Partner or the Special General Partner,
toward the payment of any indebtedness of the Partnership or any Subsidiary
Partnership secured by the property that is the subject of that Capital
Transaction, the purchase or financing of any improvements or an expansion of
Partnership or Subsidiary Partnership property, the distribution of proceeds to
the general partner of any Subsidiary Partnership, or the establishment of any
reserves that the General Partner determines are necessary or appropriate in it
sole and absolute discretion; provided, however, that if the Partnership or any
Subsidiary Partnership obtains financing for their respective properties for
which no permanent financing has previously existed, the proceeds of such
financing shall not be deemed to be Capital Transaction Proceeds if and to the
extent that the General Partner or the Special General Partner determines to
reinvest such proceeds in additional and existing real property investments of
the Partnership or any Subsidiary Partnership.

          1.1.19 "Capital Transaction Record Date" has the meaning set forth in
Section 5.1.2.

          1.1.20 "Carrying Value" means (a) with respect to a Contributed
Property or Adjusted Property, the Code section 704(c) value of such property
(or in the case of an Adjusted

                                       4



Property, the fair market value of such property at the time of its latest
adjustment under Section 4.4.4) reduced (but not below zero) by all Depreciation
with respect to such property charged to the Partners' Capital Accounts and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income - purposes, all as of the time of determination. The
Carrying Value of any property shall be adjusted from time to time in accordance
with Section 4.4 hereof and to reflect changes, additions or other adjustments
to the Carrying Value for dispositions and acquisitions of Partnership
properties, as deemed appropriate by the General Partner.

          1.1.21 "Certificate" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the Secretary of State of the
State of Delaware, as amended from time to time in accordance with the terms
hereof and the Act.

          1.1.22 "Code" means the Internal Revenue Code of 1986, as amended. Any
reference herein to a specific Code section or sections shall be deemed to
include a reference to any corresponding provision of future law.

          1.1.23 "Code Section 704(c) Value" of any Contributed Property means
the Agreed Value of such property as set forth in Exhibit B. Subject to Section
4.4 hereof, the General Partner shall use such method as it deems reasonable and
appropriate to allocate the aggregate of the Code Section 704(c) Value of
Contributed Properties among each separate property on a basis proportional to
its fair market value.

          1.1.24 "Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act contributed or
deemed contributed to the Partnership. Once the Carrying Value of a Contributed
Property is adjusted pursuant to Section 4.4.4 hereof, such property shall no
longer constitute a Contributed Property for purposes of Section 4.4.4 hereof,
but shall be deemed an Adjusted Property for such purposes.

          1.1.25 "Contribution Date" means the date that a property was
contributed to the Partnership as set forth on Exhibit B.

          1.1.26 "Convention Right" shall have the meaning set forth in Section
4.2.2 hereof.

          1.1.27 "Converting Partner" has the meaning set forth in Section 4.2.2
hereof.

          1.1.28 "Depreciation" means for each fiscal year or other period, an
amount equal to the federal income tax depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Carrying Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such year bears to such beginning adjusted
tax basis; provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Carrying Value
using any reasonable method selected by the General Partner, provided that the
General Partner shall

                                       5



determine Depreciation consistently with the method used in respect of real
property owned directly by the General Partner.

          1.1.29 "Dissolution Event" has the meaning set forth in Section 13.1.

          1.1.30 "Formation Agreement" means that certain Agreement of Limited
Partnership of Heritage Communities L.P., by and among the General Partner, the
Special General Partner and the Formation Limited Partner.

          1.1.31 "Formation Limited Partner" means Jon A. Grove.

          1.1.32 "Funds from Operations" means, with respect to any period for
which such calculation is being made, the net income of the General Partner
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect Funds from Operations on a
consistent basis.

          1.1.33 "General Partner" means ASR Investments Corporation, a Maryland
corporation operating as a real estate investment trust, or its permitted
successors as a general partner in the Partnership.

          1.1.34 "General Partners" means the General Partner and the Special
General Partner.

          1.1.35 "General Partnership Interest" means a Partnership Interest
held by the General Partner or the Special General Partner that is a general
partnership interest. A General Partnership Interest may be expressed as a
number of General Partner Units determined by dividing such Partner's Capital
Contributions by 518.10.

          1.1.36 "Immediate Family" means, with respect to any natural Person,
such natural Person's spouse, parents, descendants, nephews, nieces, brothers
and sisters and trusts for the benefit of any of the foregoing.

          1.1.37 "Incapacity" or "Incapacitated" means (a) as to any individual
Partner, death, total physical disability or entity by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(b) as to any corporation which is a partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (c) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (d) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (e) as to any trust which is a Partner, the termination of the
trust (but not the substitution of a new trustee); or (f) as to any Partner, the
bankruptcy of such Partner. For purposes of this definition, bankruptcy of a
Partner shall be deemed to have occurred when the Partner (i) makes an
assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against
him an order of relief in any bankruptcy or insolvency proceeding, (iv) files a
petition or answer seeking for himself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law of regulation, (v)

                                       6



files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against him in any proceeding of this nature,
(vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver
or liquidator of the Partner or of all or any substantial part of his
properties, (vii) the Partner is the debtor in any proceeding seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, which has not been
dismissed within 120 days after the commencement thereof, (viii) the
appointment, without the partner's consent or acquiescence, of a trustee,
receiver or liquidator has not been vacated or stayed within 90 days after the
appointment, or such appointment is not vacated within 90 days after the
expiration of any such stay.

          1.1.38 "Indemnitee" means (a) any Person made a party to a proceeding
by reason of his status as (i) the General Partner, (ii) the Special General
Partner, (iii) a Limited Partner or (iv) a director, officer, trustee or
shareholder of the Partnership or a Partner, and (b) such other Persons
(including Affiliates of the General Partner, the Special General Partner or the
Partnership) acting in good faith on behalf of the Partnership as determined by
the General Partner in its good faith judgment, other than for any action taken
by any such Person (described in clause (a) or (b) of this sentence) involving
mud, willful misconduct or gross negligence.

          1.1.39 "Initial Agreement" means that certain Amended and Restated
Agreement of Limited Partnership of Heritage Communities, L.P., by and among the
General Partner, the Special General Partner and the Winton Limited Partners,
dated as of April 30, 1997.

          1.1.40 "IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.

          1.1.41 "Limited Partner" means any Partner named as a Limited Partner
in Exhibit A attached hereto, as such exhibit may be amended from time to time,
or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner in the Partnership.

          1.1.42 "Limited Partner Consent" means the written consent of Limited
Partners owning more than 50 percent of the Limited Partnership Interests at the
time in question.

          1.1.43 "Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Limited Partner Units.

          1.1.44 "Liquidating Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, results in the sale or other disposition
of all or substantially all of the assets of the Partnership.

          1.1.45 "Liquidator" has the meaning set forth in Section 13.2.

                                       7



          1.1.46 "Merit Contribution Agreements" means those certain Exchange
and Contribution Agreements, dated as of July 16, 1997 (Merit Place Apartments
and Park on Preston Apartments) and August 1, 1997 (Smith Summit Apartments),
among the General Partner, the Special General Partner, certain Limited
Partners, the Partnership, and certain other parties identified therein, which
provides for the issuance of Limited Partner Units in the Partnership in
exchange for contribution of certain properties listed in Exhibit B, as amended.

          1.1.47 "Net Income" means for any taxable period, the excess, if any,
of the Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
Section 4.4.2. Once an item of income, gain, loss or deduction that has been
included in the initial computation of Net Income is subjected to the special
allocation rules in Section 6.2 and 6.3, Net Income or the resulting Net Loss,
whichever the case may be, shall be recomputed without regard to such item.

          1.1.48 "Net Lou" means for any taxable period, the excess, if any, of
the Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Section 4.4.2. Once an item of income, gain, loss or deduction that has been
included in the initial computation of Net Loss is subjected to the special
allocation rules in Sections 6.2 and 6.3, Net Loss or the resulting Net Income,
whichever the case may be, shall be recomputed without regard to such item.

          1.1.49 "Nonrecourse Built-in Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of taxable gain
that would be allocated to the Partners pursuant to Section 6.3.2 if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.

          1.1.50 "Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of Treasury
Regulation section 1.704-2(c).

          1.1.51 "Nonrecourse Liability" has the meaning set forth in Treasury
Regulation section 1.752-1(a)(2).

          1.1.52 "Notice of Conversion" means the Notice of Conversion
substantially in the form of Exhibit C attached to this Agreement.

          1.1.53 "Partner" means a General Partner, a Special General Partner or
a Limited Partner, and "Partners" means the General Partner, the Special General
Partner and the Limited Partners.

          1.1.54 "Partner Minimum Gain" means an amount with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulation section 1.704-2(i)(3).

                                       8



          1.1.55 "Partner Nonrecourse Debt" has the meaning set forth in
Treasury Regulation section 1.704-2(b)(4).

          1.1.56 "Partner Nonrecourse Deductions" has the meaning set forth in
Treasury Regulation section 1.704-(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Treasury Regulation section
1.704-2(i)(2).

          1.1.57 "Partnership" means the limited partnership formed under the
Act and continued pursuant to this Agreement, and any successor thereto.

          1.1.58 "Partnership Interest" means an ownership Interest in the
Partnership representing a Capital Contribution by either a Limited Partner, the
Special General Partner or the General Partner and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Partnership Interest may be
expressed as a number of Partnership Units.

          1.1.59 "Partnership Minimum Gain" has the meaning set forth in
Treasury Regulation section 1.704-2(b)(2), and the amount of Partnership Minimum
Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Treasury
Regulation section 1.704-2(d).

          1.1.60 "Partnership Record Date" means the record date established by
the General Partner for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall be the same as the record date established
by the General Partner for a dividend to its shareholders.

          1.1.61 "Partnership Unit" or "Unit" means a fractional, undivided
share of the Partnership Interests of ail Partners issued pursuant to Sections
4.1 and 4.2, in such number as set forth in Exhibit A attached hereto, as such
exhibit may be amended from time to time in accordance with the terms of this
Agreement.

          1.1.62 "Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.

          1.1.63 "Percentage Interest" means, as to a Partner, its interest in
the Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such exhibit may be amended from time
to time.

          1.1.64 "Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.

          1.1.65 "Prime Rate" means, on any date, a fluctuating rate of interest
per annum equal to the "prime rate" published in the "Money Rates" or equivalent
section of the Western Edition of The Wall Street Journal, provided that if a
"prime rate" range is published by The Wall Street Journal, then the highest
rate of such range will be used, or if The Wall Street

                                       9



Journal ceases publishing a prime rate or a prime rate range, then the General
Partner will select a prime rate, prime rate range or another substitute
interest rate index that is based upon comparable information.

          1.1.66 "Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Code section 734 or Code
section 743) upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income for federal income tax purposes
because it represents the recapture of deductions previously taken with respect
to such property or asset.

          1.1.67 "Recourse Liabilities" has the meaning set forth in Treasury
Regulation section 1.752-1(a)(1).

          1.1.68 "Redemption Amount" means an amount of cash equal to the number
of Limited Partner Units, multiplied by the Unit Adjustment Factor, that are the
subject of a Notice of Conversion multiplied by the Value on the Valuation Date
of the Shares that the Partner delivering the Notice of Conversion would have
been entitled to receive under Section 4.2.2 plus, except as otherwise provided
in Section 4.2.2(d), the unreturned balances in the Accrual Accounts and Unpaid
Distribution Accounts maintained for the Limited Partner Units that are the
subject of such Notice of Conversion.

          1.1.69 "REIT" means a real estate investment trust under Code section
856.

          1.1.70 "Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange of other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 6.3,2(a)(i) or Section 6.3.2(b)(i) to eliminate
Book-Tax Disparities.

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

          1.1.72 "Shares" means the shares of common stock, $0.01 par value, of
ASR Investments Corporation, a Maryland corporation.

          1.1.73 "Special General Partner" means Heritage SGP Corporation, an
Arizona corporation operating as a qualified REIT subsidiary under Code section
856(i), or its permitted successors as a general partner in the Partnership.

          1.1.74 "Specified Conversion Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Conversion.

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

          1.1.76 "Subsidiary Partnership" means a limited partnership formed
under the laws of any state in the United States, the sole limited partner of
which is the Partnership and the sole general partner or general partners of
which are the General Partner and/or the Special

                                       10



General Partner in which the interest of the General Partner and the Special
General Partner in all items of income, gain, loss, deduction, credit and
distributions shall not exceed, in the aggregate, one percent.

          1.1.77 "Substituted Limited Partner" means a Person who is admitted as
a Limited Partner to the Partnership pursuant to Section 11.4.

          1.1.78 "Transaction" has the meaning set forth in Section 11.2.2.

          1.1.79 "Treasury Regulation" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

          1.1.80 "Unit Adjustment Factor" means initially 1.0; provided that in
the event that the General Partner (i) declares or pays a dividend on its
outstanding Shares in Shares or makes a distribution to all holders of its
outstanding Shares in Shares, (ii) subdivides its outstanding Shares, or (iii)
combines its outstanding Shares into a smaller number of Shares, the Unit
Adjustment Factor shall be adjusted by multiplying the Unit Adjustment Factor by
a &action, the numerator of which shall be the number of Shares issued and
outstanding on the record date (assuming for such purposes that such dividend,
distribution, subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of Shares (determined without
the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination.

          1.1.81 "Unpaid Distribution Account" means an account maintained with
respect to each Limited Partner Unit to which shall be credited on a quarterly
basis, but only to the extent not distributed currently in accordance with
clause (iii) of Section 5.1.1 hereof, an amount per Limited Partner Unit
(multiplied by the Unit Adjustment Factor) equal to the dividend per Share paid
by the General Partner for such quarter, and from which shall be debited the
amount of any distributions of Available Cash or Capital Transaction Proceeds
with respect of such Unpaid Distribution Account pursuant to clause (ii) of
Section 5.1.1 or clause (ii) of Section 5.1.2 hereof.

          1.1.82 "Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (a) the
fair market value of such property (as determined under Section 4.4 hereof) as
of such date, over (b) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Section 4.4 hereof) as of such date.

          1.1.83 "Unrealized Loss" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
Section 4.4 hereof) as of such date, over (b) the fair market value of such
property (as determined under Section 4.4 hereof) as of such date.

          1.1.84 "Valuation Date" means the date of receipt by the General
Partner of a Notice of Conversion or, if such date is not a Business Day, the
first Business Day thereafter.

          1.1.85 "Value" means, with respect to a Share, the average of the
daily market price for the 10 consecutive trading days immediately preceding the
Valuation Date. The market

                                       11



price for each such trading day shall be: (a) if the Shares are listed or
admitted to trading on any securities exchange or the NASDAQ-National Market
System, the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day,
(b) if the Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the last reported sale price on
such day or, if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or (c) if the Shares are not listed or
admitted to trading on any securities exchange or the NASDAQ-National Market
System and no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reliable quotation source designated by the General
Partner, or if there shall be no bid and asked prices on such day, the average
of the high bid and low asked prices, as so reported, on the most recent day
(not more than 10 days prior to the date in question) for which prices have been
so reported; provided, that if there are no bid and asked prices reported during
the 10 days prior the date in question, the Value of the Shares shall be
determined by the board of directors of the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment appropriate.

          1.1.86 "Winton Contribution Agreement" means that certain Master
Combination and Contribution Agreement, dated as of November 8, 1996, among the
General Partner, the Special General Partner, the Winton Limited Partners, the
Partnership, and certain other parties identified therein, which provides for
the issuance of Limited Partner Units in the Partnership in exchange for the
contribution of certain properties listed in Exhibit B, as amended.

          1.1.87 "Winton Limited Partner" means a Limited Partner who holds a
Limited Partner Unit granted in exchange for the contribution of property
pursuant to the Winton Contribution Agreement.

     1.2   Currency. All payments, advances and cash contributions of capital to
be made by a Partner to or on behalf of the Partnership and all cash
distributions and other payments made by the Partnership to a Partner shall be
made in lawful money of the United States of America, which shall at the time of
payment be legal tender in payment of all debts and dues, public and private.
All references in this Agreement to "dollars" shall mean United States of
America dollars.

     1.3   Schedules and Exhibits. All schedules and exhibits annexed or
attached hereto are expressly incorporated into and made a part of this
Agreement.

     1.4   Construction of Term "Including." The terms "include" and "including"
shall be construed as if followed by the phrase "without limitation."

     1.5   Certain Accounts. The Accrual Accounts and the Unpaid Distribution
Accounts do not constitute capital accounts, but are established and maintained
solely for the purpose of computing various distributions to be made hereunder.

     1.6   Interest Calculations. Any interest (or other amounts calculated like
interest under this Agreement) which is to be calculated under this Agreement
shall be computed on the

                                       12



daily outstanding balance of the amount on which interest accrues hereunder. All
interest calculations under this Agreement, including the determination of
accruals on the various accounts, shall be made monthly (but compounding, if
any, would occur only on an annual basis) and shall be computed on the basis of
a fraction the denominator of which is the actual number of days in the
particular calendar year and the numerator of which is the actual number of days
in the month for which interest is being calculated.

     1.7   Other Terms. Any term used in this Agreement which is not defined in
this Article I shall have the meaning set forth elsewhere in this Agreement.

                                   ARTICLE II

                             ORGANIZATIONAL MATTERS

     2.1   Organization and Continuation; Application of Act.

          2.1.1  Organization and Continuation of Partnership. The General
Partner, the Special General Partner and the Limited Partners do hereby continue
the Partnership as a limited partnership according to all of the terms and
provision of this Agreement and otherwise in accordance with the Act. The
General Partner and the Special General Partner are the only general partners
and the Limited Partners are the only limited partners in the Partnership. All
Partnership profits, losses, and distributive shares of tax items accruing prior
to the effectiveness of this Agreement shall be allocated in accordance with,
and the respective rights and obligations of partners with respect to the period
prior to the effectiveness of this Agreement shall be governed by the Initial
Agreement.

          2.1.2  Application of Act. The Partnership is a limited partnership
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the contrary,
the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. No Partner has any
interest in any Partnership property, and the Partnership Interest of each
Partner shall be personal property for all purposes.

     2.2   Name. The name of the Partnership is Heritage Communities L.P. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P." "Ltd." or similar
words or letters shall be included in the Partnership's name where necessary for
the purposes of complying with the laws of any jurisdiction that so requires.
The General Partner in its sole and absolute discretion may change the name of
the Partnership at any time and from time to time and shall promptly notify the
Limited Partners of such change, provided, that the name of the Partnership may
not be changed to include the name, or any variant thereof, of any Limited
Partner without the written consent of that Limited Partner.

     2.3   Registered Office and Agent; Principal Office. The address of the
registered office of the Partnership in the State of Delaware is located at 1029
Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered
agent for service of process on the

                                       13



Partnership in the State of Delaware at such registered office is The
Corporation Trust Company. The principal office of the Partnership is 335 North
Wilmot, Suite 250, Tucson, Arizona 85711, or such other place in the United
States as the General. Partner may from time to time designate by notice to the
Limited Partners. The Partnership may maintain offices at such other place or
places within or outside the State of Delaware as the General Partner deems
advisable.

     2.4   Term. The term of the Partnership shall commence on the date hereof
and shall continue until December 31, 2086, unless it is dissolved sooner
pursuant to the provisions of Article XIII or as otherwise provided by law.

                                   ARTICLE III

                                     PURPOSE

     3.1   Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership is (a) to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act and in
connection therewith to sell or otherwise dispose of Partnership assets, (b) to
enter into any partnership, joint venture or other similar arrangement to engage
in any of the foregoing or the ownership of interests in any entity engaged in
any of the foregoing, and (c) to do anything necessary or incidental to the
foregoing which, in each case, is not in breach of this Agreement; provided,
however, that each of the foregoing clauses (a), (b), and (c) shall be limited
and conducted in such a manner as to permit the General Partner at all times to
be classified as a REIT, unless the General Partner provides notice to the
Partnership that it intends to cease or has ceased to qualify as a REIT.

     3.2   Powers. The Partnership is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership; provided, the
Partnership shall not take any action which, in the reasonable business judgment
of the General Partner, (a) could adversely affect the ability of the General
Partner to continue to qualify as a REIT, (b) could subject the General Partner
to any additional taxes under Code section 857 or Code section 4981, or (c)
could violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.

                                   ARTICLE IV

           CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS; CAPITAL ACCOUNTS

     4.1   Capital Contributions of the Partners.

          4.1.1  Initial Capital Contributions.

               (a)  The General Partner, the Special General Partner and the
Formation Limited Partner each previously contributed $100.00 to the
Partnership's capital. The Formation Limited Partner has withdrawn and his
Capital Contribution has been returned. The

                                       14



Winton Limited Partners have made their respective Capital Contributions in
accordance with Code section 721(a) as set forth in the Winton Contribution
Agreement and Exhibit B.

               (b)  At the time of the execution of this Agreement, the Partners
shall make or shall have made their respective Capital Contributions as required
or permitted by the Merit Contribution Agreements and as set forth in Exhibit A
to this Agreement. The General Partner's Capital Contribution may include all or
any part of the Partnership's costs associated with the contribution and
acquisition of the properties contributed by the Limited Partners, including due
diligence costs, transfer fees and other closing costs, as determined in the
General Partner's sole discretion. Partnership Units acquired by the General
Partner or the Special General Partner in exchange for such Capital
Contributions shall be deemed to be the General Partnership Interest. The
Limited Partners' contributions shall be contributions of property to the
Partnership in accordance with Code section 721(a) as set forth in the
Contribution Agreements and Exhibit B attached hereto.

               (c)  The Partners shall own Partnership Units in the amounts set
forth in Exhibit A and shall have a Percentage Interest in the Partnership as
set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A
from time to time by the General Partner in accordance with Section 1.1.63 to
the extent necessary to reflect accurately redemptions, conversions, Capital
Contributions, the issuance of additional Partnership Units, or similar events
having an effect on a Partner's Percentage Interest.

          4.1.2  Additional Capital Contributions or Assessments. No Partner
shall be assessed or, except for any such amounts which a Limited Partner may be
obligated to repay under Section 10.5, be required to contribute additional
funds, except as provided in Sections 4.1.5 and 7.1.1(c), or other property to
the Partnership. Any additional funds required by the Partnership, as determined
by the General Partner in its reasonable business judgment, may, at the option
of the General Partner and without an obligation to do so, be contributed by the
General Partner, the Special General Partner, or both as additional Capital
Contributions; provided, however, that the General Partner, separately or
together with the Special General Partner, shall contribute to the Partnership
an additional $400,000 as a Capital Contribution during each Fiscal Year in
exchange for General Partner Units which shall be added to the General
Partnership Interest. If and as the General Partner or the Special General
Partner makes additional Capital Contributions to the Partnership as provided
for in this Section 4.1.2, each such Partner shall receive additional General
Partner Units.

          4.1.3  Return of Capital Contributions. Except as otherwise expressly
provided herein, the Capital Contribution of each Partner will be returned to
that Partner only in the manner and to the extent provided in Article V and
Article XIII hereof, and no Partner may withdraw from the Partnership or
otherwise have any right to demand or receive the return of its Capital
Contribution to the Partnership (as such), except as specifically provided
herein. Under circumstances requiring a return of any Capital Contribution, no
Partner shall have the right to receive property other than cash, except as
specifically provided herein. No Partner shall be entitled to interest on any
Capital Contribution or Capital Account notwithstanding any disproportion
therein as between the Partners. Except as specifically provided herein, neither
the General partner nor the Special General Partner shall be liable for the
return of any portion

                                       15



of the Capital Contribution of any Limited Partner, and the return of such
Capital Contributions shall be made solely from Partnership assets.

          4.1.4  Liability of Limited Partners. No Limited Partner shall have
any further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Partnership, nor shall any Limited Partner
be personally liable for any obligations of the Partnership, except as otherwise
provided in Section 4.1.2 or in the Act. No Limited Partner shall be required'
to make any contributions to the capital of the Partnership other than its
Capital Contribution.

          4.1.5  Negative Capital Account. If the General Partner or the Special
General Partner, on the date of "liquidation" of its respective interest in the
Partnership (within the meaning of Treasury Regulation section
1.704-1(b)(2)(ii)(g)), has a negative balance in its Capital Account, then such
Partner shall contribute in cash to the capital of the Partnership the amount
required to increase its Capital Account as of such date to zero. Any such
contribution required of the General Partner or the Special General Partner
under this Section 4.1.5 shall be made by such Partner on or before the later of
(i) the end of the Partnership Year in which such Partner's interest in the
Partnership is liquidated, or (ii) the ninetieth calendar day following the date
of such liquidation. Notwithstanding any provision of this Agreement to the
contrary, all amounts so contributed by the General Partner or the Special
General Partner to the capital of the Partnership in accordance with this
Section 4.1.5 shall, upon liquidation of the Partnership under Article XIII
hereof, be distributed in accordance with Section 13.2.1 hereof.

          4.1.6  Minimum Capital Contribution by General Partners.
Notwithstanding anything contained herein to the contrary, the minimum aggregate
Capital Contribution by the General Partner and the Special General Partner
shall be an amount equal to at least 1.01 percent of aggregate Capital
Contributions of the Limited Partners. In the event that such required minimum
Capital Contribution is increased as a result of the admission of any Additional
Limited Partners and the General Partner and the Special General Partner have
not contributed the required minimum amount to the Partnership, the amount
necessary to satisfy such required minimum Capital Contribution shall be payable
by the General Partner or the Special General Partner upon admission of such
Additional Limited Partner.

     4.2   Issuances of Additional Partnership Interests.

          4.2.1  General.

               (a)  The General Partner is hereby authorized to cause the
Partnership to issue such additional Partnership Interests in the form of
Limited Partner Units for any Partnership purpose at any time or from time to
time, to the Partners or to other Persons for such consideration and on such
terms and conditions as shall be established by the General Partner in its sole
and absolute discretion; provided, however, if the General Partner issues
additional Limited Partnership Interests in exchange for the contribution of
additional properties, the General Partners' obligation to make additional
Capital Contributions under Section 4.1.2 shall increase by an amount equal to
$400,000 multiplied by the fraction whose numerator is the number of Limited
Partner Units to be issued in exchange for the additional property and whose

                                       16



denominator is the total number of outstanding Limited Partner Units as of the
date of this Agreement.

               (b)  The General Partner may make Capital Contributions of
additional real properties in exchange for Limited Partner Units. The number of
Limited Partner Units to be issued in exchange for such properties shall be
equal to the Agreed Value of such property divided by the Value of Share, and
the Valuation Date shall be the date that such property is contributed to the
Partnership. The General Partner's contributions of such properties as a Limited
Partner shall be set forth on Exhibit B attached hereto.

          4.2.2  Conversion of Units.

               (a)  Subject to the further provisions of this Section 4.2.2 and
subject to Section 8.6, each Limited Partner shall have the right (the
"Conversion Right") to exchange any or all of the Limited Partner Units held by
that Partner for Shares, with one Limited Partner Unit (as adjusted pursuant to
4.2.2(b)) being exchangeable for one fully paid, non-assessable Share. The
Conversion Right may be exercised by a Limited Partner (a "Converting Partner")
at any time after the first anniversary date of the issuance of the Limited
Partner Unit that is the subject of such Notice of Conversion and from time to
time thereafter by delivering such Notice of Conversion in the form attached as
Exhibit C to the General Partner. Upon receipt by the General Partner of a
Notice of Conversion, on the Specified Conversion Date the General Partner shall
issue to the Converting Partner the number of Shares equal to the number of
Limited Partner Units to be exchanged. The General Partner shall at all times
reserve and keep available out of its authorized but unissued Shares, solely for
the purpose of effecting the exchange of Limited Partner Units for Shares, such
number of Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Limited Partner Units. No Limited Partner shall,
solely by virtue of being the holder of one or more Limited Partner Units, be
deemed to be a shareholder of or have any other interest in the General Partner.

               (b)  For purposes of this Section 4.2.2, the number of Limited
Partner Units exchanged by any Limited Partner shall be proportionately adjusted
by multiplying the number of Limited Partner Units being exchanged by such
Limited Partner by the Unit Adjustment Factor, the intent of this provision is
that one Limited Partner Unit (as adjusted) remains exchangeable for one Share
without dilution. In the event the General Partner issues any Shares in exchange
for Limited Partner Units pursuant to this Section 4.2.2, any such Limited
Partner Units so acquired by the General Partner shall thereafter be owned by
the General Partner as Limited Partner Units for all purposes of this Agreement,
except for those actions requiring the vote of the Limited Partners or Limited
Partner Consent Each Converting Partner agrees to execute such documents as the
General Partner may reasonably require in connection with the issuance of Shares
upon exercise of the Conversion Right.

               (c)  On any Specified Conversion Date occurring on or prior to
the tenth anniversary of the issuance of the Limited Partner Unit that is the
subject of such Notice of Conversion, the Partnership shall pay in cash to any
Converting Partner the then unreturned balances in the Accrual Accounts and
Unpaid Distribution Accounts maintained for the Limited Partner Units that are
the subject of the Notice of Conversion.

                                       17



               (d)  On any Specified Conversion Date occurring after the tenth
anniversary of the issuance of the Limited Partner Unit that is the subject of
such Notice of Conversion, the Partnership shall pay in cash to any Converting
Partner the then unreturned balances in the. Accrual Accounts and Unpaid
Distribution Accounts maintained for the Limited Partner Units that are the
subject of the Notice of Conversion; provided, however, that no such payment of
the then unreturned balances in such Accrual Accounts and Unpaid Distribution
Accounts shall be required if the Value of a Share for which a Limited Partner
Unit is exchangeable pursuant to a Limited Partner's Conversion Right is at
least 110 percent of the sum of (i) the quotient obtained by dividing the
Converting Partner's Capital Contribution as set forth on Exhibit A by the
number of Limited Partner Units (multiplied by the Unit Adjustment Factor)
originally held by such Partner and (ii) the then unreturned balances per
Limited Partner Unit (as adjusted by the Unit Adjustment Factor) in the Accrual
Accounts and Unpaid Distribution Accounts maintained for the Partnership Units
that are the subject of the Notice of Conversion.

     4.3   No Preemptive Rights. Except as specifically provided in this
Agreement, no Person shall have any preemptive, preferential or other similar
right with respect to (a) additional Capital Contributions or loans to the
Partnership or (b) issuance or sale of any Partnership Units.

     4.4   Capital Accounts of the Partners.

          4.4.1  General. The Partnership shall maintain for each partner a
separate Capital Account in accordance with the rules of Treasury Regulation
section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (a) the
amount of all Capital Contributions made by such Partner to the Partnership
pursuant to this Agreement and (b) all items of Partnership income and gain
(including income and gain exempt from tax) computed in accordance with Section
4.4.2 hereof and allocated to such Partner pursuant to Sections 6.1 and 6.2 of
this Agreement, and decreased by (i) the amount of cash or Agreed Value of all
actual and deemed distributions of cash or property made to such Partner
pursuant to this Agreement and (ii) all items of Partnership deduction and loss
computed in accordance with Section 4.4.2 hereof and allocated to such Partner
pursuant to Sections 6.1 and 6.2 of this Agreement.

          4.4.2  Income, Gains, Deductions, and Losses. For purposes of
computing the amount of any item of income, gain, loss or deduction to be
reflected in the Partner's Capital Accounts, unless otherwise specified in this
Agreement, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes determined in accordance with Code section 703(a)
(for this purpose all items of income, gain, loss or deduction required to be
stated separately pursuant to Code section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:

               (a)  Except as otherwise provided in Treasury Regulation section
1.704l(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Code section 754
which may be made by the Partnership; provided, the amounts of any adjustments
to the adjusted bases of the assets of the Partnership made pursuant to Code
section 734 as a result of the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not previously been reflected
in the Partners' Capital Accounts) shall be reflected in the Capital Accounts of
the Partners in the

                                       18



manner and subject to the limitations prescribed in Treasury Regulation section
1.704-1(b)(2)(iv)(m).

               (b)  The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that items described in Code
sections 705(a)(1)(b) or 705(a)(2)(b) are not includable in gross income or are
neither currently deductible nor capitalized for federal income tax purposes.

               (c)  Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal in amount to
the Partnership's Carrying Value with respect to such property as of such date.

               (d)  In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year.

               (e)  In the event the Carrying Value of any Partnership asset is
adjusted pursuant to Section 4.4.4 hereof, the amount of any such adjustment
shall be taken into account as gain or loss from the disposition of such asset.

               (f)  Any items specifically allocated under Section 6.3 hereof
shall not be taken into account.

          4.4.3  Transfer of Partnership Units. A transferee of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor.

          4.4.4  Unrealized Gains and Losses.

               (a)  (a) Consistent with the provisions of Treasury Regulation
section 1.704l(b)(2)(iv)(f), and as provided in Section 4.4.4(b), the Carrying
Values of all Partnership assets shall be adjusted upward or downward to reflect
any Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as of the times of the adjustments provided in Section 4.4.4(b)
hereof, as if such Unrealized Gain or Unrealized Loss has been recognized on an
actual sale of each such property and allocated pursuant to Section 6.1 of the
Agreement.

               (b)  Such adjustments shall be made as of the following times:
(i) immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (ii) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of Property as
consideration for an interest in the Partnership; and (Hi) immediately prior to
the liquidation of the Partnership or the General Partner's interest in the
Partnership within the meaning of Treasury Regulation section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership.

                                       19



               (c)  In accordance with Treasury Regulation section
1.704-1(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in
kind shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of the time any
such asset is distributed.

               (d)  In determining such Unrealized Gain or Unrealized Loss the
aggregate cash amount and fair market value of all Partnership assets (including
cash or cash equivalents) shall be determined by the General Partner using such
reasonable method of valuation as it may adopt, or in the case of a liquidating
distribution pursuant to Article XIII of this Agreement, be determined and
allocated by the Liquidator using such reasonable methods of valuation as it may
adopt.

          4.4.5  Modification by General Partner. The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation section 1.7041(b), and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debts or credits thereto (including, without limitation, debits
or credits relating to liabilities which are secure by contributed or
distributed property or which are assumed by the Partnership, the General
Partner, or any Limited Partners) are computed to comply with such Regulations,
the General Partner shall give prompt written notice to each of the Limited
Partners. In the event that the General Partner does not receive a written
objection to such proposed modification within 20 Business Days after the date
on which the General Partner first sent such notice, the General Partner may
make such modification. In the event that the General Partner receives one or
more written objections within such 20 Business Day period, the General Partner
and the objecting Limited Partners shall attempt to resolve such matter within
10 Business Days from the expiration of such 20 Business Day period. In the
event that the General Partner and the objecting Limited Partners cannot resolve
such matter, the Partners select Deloitte & Touche to decide such matter and
such determination shall be final. Notwithstanding the foregoing, no
modification hereunder shall be made by the General Partner where such
modification would have a material effect on the amounts distributable to any
Person pursuant to Article XIII of this Agreement upon the liquidation of the
Partnership. The General Partner also shall (a) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Treasury Regulation section 1.104-1 (b)(2)(iv)(q), and (b) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Treasury Regulation section 1.704-1(b).

          4.4.6  General Partner's Minimum Capital Account Balance.
Notwithstanding anything contained herein to the contrary, the General Partner
and the Special General Partner shall at all times maintain an aggregate Capital
Account balance of at least the lesser of (i) one percent of the positive
aggregate Capital Account balances of all Partners (including the General
Partner and the Special General Partner), or (ii) $500,000.

     4.5   Waiver and Recontribution. Each Limited Partner understands that (a)
the offer and sale of the Units has not been registered under the Securities
Act, and (b) the failure to register the Units could result in the Limited
Partner being granted certain rights under federal

                                       20



securities law to rescind the Limited Partner's contribution to the Partnership.
Each Limited Partner (i) hereby waives any and all rights it now has or may
hereafter be granted under federal or applicable state securities laws to
rescind its contribution to the Partnership on the basis that the offer and sale
of the Units was not registered under the Securities Act (the "Waiver") and (ii)
agrees that if the Waiver is deemed void or unenforceable for any reason,
including, without limitation, Section 14 of the Securities Act, the entire
beneficial interest in all property and amounts received by the Limited Partner
in payment of any such rescission (regardless of whether such action was
initiated by the Limited Partner) or otherwise received by the Limited Partner
as damages solely for failure to register the offer and sale of the Units under
the Securities Act, will be promptly paid over and contributed by the Limited
Partner to the Partnership, for no additional consideration from the General
Partner or the Partnership and the Limited Partner will retain its Units and
remain a Limited Partner of the Partnership. Each Limited Partner hereby
consents to the disclosure of the agreements contained in this Section 4.5 in
any prospectus forming a part of any registration statement of the General
Partner filed with the Securities and Exchange Commission pursuant to the
Securities Act.

                                    ARTICLE V

                                  DISTRIBUTIONS

     5.1   Requirement and Characterization of Distributions.

          5.1.1  Distributions of Available Cash Flow. Subject to Sections 5.2
and 5.3 hereof, the General Partner shall distribute quarterly an amount equal
to 100 percent of Available Cash generated by the Partnership during such
quarter to the Partners who are Partners at the close of business on the
Partnership Record Date with respect to such quarter in the following order of
priority and to the extent of such Available Cash: (a) first, to each Limited
Partner to the extent of and in proportion to the then unreturned balance of the
Accrual Account maintained with respect to each Limited Partner Unit held by
such Limited Partner; (b) second, to each Limited Partner to the extent of and
in 'proportion to the then unreturned balance of the Unpaid Distribution Account
maintained with respect to each Limited Partner Unit held by such Limited
Partner; (c) third, to each Limited Partner to the extent of and in proportion
to an amount per Limited Partner Unit (multiplied by the Unit Adjustment Factor)
held by such Limited Partner equal to the dividend per Share paid by the General
Partner for such quarter, and (d) fourth, the balance, if any, of the Available
Cash for such quarter shall be distributed to the General Partners, pro rata,
based upon their respective General Partner Units. No distribution (other than
to a Converting Partner as provided in Section 4.4.2(c) and 4.2.2(d)) shall be
made for any distribution period in respect of General Partner Units held by the
General Partners unless all distributions due the Limited Partners in accordance
with clauses (a), (b) and (c) of this Section 5.1.1 shall have been paid for all
prior periods. Notwithstanding anything to the contrary contained herein, in no
event may a Partner receive a distribution of Available Cash attributable to any
period with respect to a Unit if such Partner is entitled to receive a dividend
out of Funds from Operations attributable to such period with respect to a Share
for which such Unit has been redeemed or exchanged.

          5.1.2  Distributions of Capital Transaction Proceeds. Subject to
Sections 5.2 and 5.3 hereof, until the tenth anniversary of the Contribution
Date of any property set forth

                                       21



on Exhibit B that is the subject of a Capital Transaction, the General Partner
shall distribute Capital Transaction Proceeds received by the Partnership within
30 days after the date on which said Capital Transaction occurs (the "Capital
Transaction Record Date") to the Partners who are Partners at the close of
business on the Capital Transaction Record Date in the following order of
priority and to the extent of such Capital Transaction Proceeds: (a) first, to
each Limited Partner to the extent of and in proportion to the then unreturned
balance of the Accrual Account maintained with respect to each Limited Partner
Unit held by such Limited Partner, (b) second, to each Limited Partner to the
extent of and in proportion to the then unreturned balance of the Unpaid
Distribution Account maintained with respect to each Limited Partner Unit held
by such Limited Partner, and (c) third, the balances, if any, of the Capital
Transaction Proceeds shall be distributed to the General Partners, pro rata,
based upon their General Partnership Interests. After the tenth anniversary of
the Contribution Date of any property set forth on Exhibit B that is the subject
of a Capital Transaction, the General Partner shall distribute Capital
Transaction Proceeds received by the Partnership within 30 days after the
Capital Transaction Record Date to the General Partners, pro rata, based upon
their General Partnership Interests, and no other Partner shall have a right to
share in such distribution; provided that the General Partner shall give the
Limited Partners 10 days prior written notice of any such distribution.

     5.2   Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of any state or local tax law' and Section 10.5 hereof with respect
to any allocation, payment or distribution to the General Partner, the Special
General Partner or any Limited Partners or Assignees shall be promptly paid
solely out of funds of the Partnership by the General Partner to the appropriate
taxing authority and treated as amounts distributed to the General Partner or
such Limited Partners or Assignees pursuant to Section 5.1 for all purposes
under this Agreement.

     5.3   Distribution Upon Liquidation. Proceeds from a Liquidating
Transaction shall be distributed to the Partners in accordance with Section
13.2.

                                   ARTICLE VI

                                   ALLOCATIONS

     6.1   Allocations for Capital Account Purposes. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.4 hereof) shall be allocated among the
Partners for each taxable year (or portion thereof) as provided herein below.

          6.1.1  Net Income. After giving effect to the special allocations set
forth in Section 6.2 below, Net Income shall be allocated (a) first, to each
Limited Partner to the extent that, on a cumulative basis, Net Losses previously
allocated to the Limited Partners pursuant to Section 6.1.2 exceed Net Income
previously allocated to the Limited Partners pursuant to this clause (a) of this
Section 6.1.1, (b) second, to each Limited Partner until each Limited Partner
has been allocated on a cumulative basis, Net Income equal to the sum of the
distributions paid to such Limited Partner and the unreturned balances in the
Accrual Accounts and the Unpaid Distribution Accounts maintained with respect to
the Limited Partner Units held by such

                                       22



Limited Partner, and (c) thereafter, to the General Partners, pro rata, based
upon their respective General Partner Units. Notwithstanding the foregoing, the
General Partners shall be allocated on a combined basis not less than one
percent of each item of Partnership gain, loss, income and deduction for each
year.

          6.1.2  Net Losses. After giving effect to the special allocations set
forth in Section 6.2 below, Net Losses shall be allocated to the Partners in
accordance with their respective Percentage Interests; provided that Net Losses
shall not be allocated to any Limited Partner pursuant to this Section 6.1.2 to
the extent that such allocation would cause such Limited Partner to have an
Adjusted Capital Account Deficit at the end of such taxable year (or increase
any existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in the preceding sentence of this Section 6.1.2 shall be
allocated to the General Partners, pro rata, based upon their respective General
Partner Units.

          6.1.3  Nonrecourse Liabilities. For purposes of Treasury Regulation
section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (a) the amount of Partnership Minimum Gain
and (b) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.

          6.1.4  Gains. Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall to the extent possible,
after taking into account other required allocations of gain pursuant to Section
6.2 below, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture Income.

     6.2   Special Allocation Rules. Notwithstanding any other provision of the
Agreement, the following special allocations shall be made in the following
order:

          6.2.1  Minimum Gain Chargeback. Notwithstanding any other provisions
of Article VI, if there is a net decrease in Partnership Minimum rain during any
Partnership Year, each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Partner's share of the net decrease in Partnership Minimum Gain,
as determined under Treasury Regulation section 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Treasury Regulation section
1.704-2(f)(6). This Section 6.2.1 is intended to comply with the minimum gain
chargeback requirements in Treasury Regulation section 1.704-2(f), and, for
purposes of this Section 6.2.1 only, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant t6 Section
6.1 of the Agreement with respect to such fiscal year and without regard to any
decrease in Partner Minimum Gain during such fiscal year.

          6.2.2  Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Article VI (except Section 6.2.1 hereof), if there is a net
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any Partnership fiscal year, each Partner who has a share of the Partner
Minimum Gain attributable to such Partner

                                       23



Nonrecourse Debt, determined in accordance with Treasury Regulation section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Treasury Regulation
section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with Treasury Regulation section 1.704-2(i)(4). This Section 6.2.2 is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulation section 1.704-2(i)(4) and shall be interpreted consistently
therewith. Solely for purposes of this Section 6.2.2, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Article VI of this Agreement with respect to such fiscal year, other
than allocations pursuant to Section 6.2.1 hereof.

          6.2.3  Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in paragraphs
(4), (5) or (6) of Treasury Regulation section 1.704-1(b)(2)(ii)(d), and after
giving effect to the allocations required under Section 6.2.1 and 6.2.2 hereof,
such Partner has an Adjusted Capital Account Deficit, items of Partnership
income and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.

          6.2.4  Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be allocated in a
different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Code section 704(b), the General Partner is
authorized, upon notice to the Limited Partners in accordance with Section 4.4.5
hereof, to revise the prescribed ratio to the numerically closest ratio which
does satisfy such requirements.

          6.2.5  Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any fiscal year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulation section 1.704-2(i)(2).

          6.2.6  Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code section 734(b)
or Code section 743(b) is required pursuant to Treasury Regulation section
I.704-I(b)(2)(iv)(m) to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
section of the Treasury Regulations.

     6.3   Allocations for Tax Purposes.

                                       24



          6.3.1  General. Except as otherwise provided in this Section 6.3, for
federal income tax purposes, each item of income, gain, loss and deduction shall
be allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Sections 6.1 and
6.2 of this Agreement.

          6.3.2  To Eliminate Book-Tax Disparities. In an attempt to eliminate
Book-Tax Disparities attributable to a Contributed Property or Adjusted
Property, items of income, gain, loss, and deduction shall be allocated for
federal income tax purposes among the Partners as follows:

               (a)  (i) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners consistent with the
principles of Code section 704(c) that takes into account the variation between
the Code section 704( c) Value of such property and its adjusted basis at the
time of contribution; and (ii) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the Partners in
the same manner as its correlative item of "book" gain or loss is allocated
pursuant to Sections 6.1 and 6.2 of this Agreement.

               (b)  (i) In the case of an Adjusted Property, such items shall
(A) first, be allocated among the Partners in a manner consistent with the
principles of Code section 704(c) to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and the allocations thereof
pursuant to Section 4.4, and (B) second, in the event such property was
originally a Contributed Property, be allocated among the Partners in a manner
consistent with Section 6.3.2(a)(i); and (ii) any item of Residual Gain or
Residual Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Sections 6.1 and 6.2 of this Agreement.

               (c)  All other items of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as their correlative item of
"book" gain or loss is allocated pursuant to Sections 6.1 and 6.2 of this
Agreement.

          6.3.3  Power of General Partner to Elect Method. To the extent
Treasury Regulations promulgated pursuant to Code section 704(c) permit a
partnership to utilize alternative methods to eliminate the disparities between
the agreed value of property and its adjusted basis the General Partner shall
elect the traditional method without curative allocations to be used by the
Partnership and such ejection shall be binding on all Partners.

                                   ARTICLE VII

                      MANAGEMENT AND OPERATIONS OF BUSINESS

     7.1   Management.

          7.1.1  Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are vested exclusively in the General Partner, and no other
Partner shall have any right to participate in or exercise control or management
power over the business and affairs of the Partnership; provided, however, that
the General Partner may delegate any of its powers set

                                       25



forth in this Agreement or under applicable law to the Special General Partner,
provided that the Special General Partner is a direct or indirect wholly owned
subsidiary of the General Partner. Notwithstanding anything to the contrary in
this Agreement, neither the General Partner nor the Special General Partner may
be removed by the Limited Partners with or without cause; provided, however,
that if the Special General Partner is not a direct or indirect wholly owned
subsidiary of the General Partner, the Special General Partner may be removed
with or without cause by Limited Partner Consent. In addition to the powers now
or hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner (or delegated to the Special
General Partner) under any other provision of this Agreement, the General
Partner, subject to Section 7.3 hereof, shall have full power and authority to
do all things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effect the purposes set forth in Section 3.] hereof, including, without
limitation:

               (a)  the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and borrowing
money to permit the Partnership to make distributions to its Partners in such
amounts as will permit the General Partner (so long as the General Partner
desires to qualify as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Code section 4981) and
to make distributions to its shareholders sufficient to permit the General
Partner to maintain REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of evidences
of indebtedness (including the securing of same by mortgage, deed of trust or
other lien or encumbrance on the Partnership's assets) and the incurring of any
obligations it deems necessary for the conduct of the activities of the
Partnership;

               (b)  the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;

               (c)  the acquisition, disposition, conveyance, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the Partnership, which
powers shall include, without limitation, the power to pledge any or all of the
assets of the Partnership to secure a loan or other financing to the General
Partner (the proceeds of which are not required to be contributed or loaned to
this Partnership); provided, however, that to the extent that any payment of
debt service on and closing costs in connection with any such mortgage, pledge,
encumbrance or hypothecation shall result in the Partnership being unable to pay
..the maximum amount payable with respect to any quarterly distributions to
Limited Partners pursuant to Section 5.1, then the General Partner shall make
additional Capital Contributor's as are necessary to enable the Partnership to
pay the maximum amount payable with respect to any quarterly distributions to
Limited Partners pursuant to Section 5.1 (provided that the General Partner
shall have no obligation to make such additional Capital Contributions in an
amount exceeding the amount of debt service and closing costs actually paid),
and provided, further, that the General Partner shall and does hereby indemnify
the Limited Partners to the extent any foreclosure on any such mortgage, pledge,
encumbrance or hypothecation results in a loss in the value of the Limited
Partnership Interests;

                                       26



               (d)  the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the General Partner (to the extent
necessary to maintain its REIT status), the Partnership, any Subsidiary
Partnership, or any of the Partnership's Subsidiaries, the lending of funds to
other Persons (including and Subsidiary Partnership and the Partnership's
Subsidiaries) and the repayment of obligations of the Partnership, its
Subsidiaries, the Subsidiary Partnerships and any other Person in which it has
an equity investment and the making of capital contributions to the Subsidiary
Partnerships and its Subsidiaries, the creation, by grant or otherwise, of
easements or servitudes, and the performance of any and all acts necessary or
appropriate to the operation of the Partnership assets, including applications
for rezoning, objections to rezoning, constructing, altering, improving,
repairing, renovating, rehabilitating, razing, demolishing or condemning any
improvements or property of the Partnership;

               (e)  the negotiation, execution, and performance of (i) any
contracts, conveyances or other instruments (including with Affiliates of the
Partnership to the extent provided in Section 7.6) that the General Partner
considers useful or necessary to the conduct of the Partnership's operations or
the implementation of the General Partner's powers under this Agreement,
including, without limitation, the execution and delivery of leases on behalf of
or in the name of the Partnership or any Subsidiary Partnership (including the
lease of Partnership property for any purpose and without limit as to the term
thereof, whether or not such term (including renewal terms) shall extend beyond
the date of termination of the Partnership and whether or not the portion so
leased is to be occupied by the lessee or, in turn, subleased in whole or in
part to others), (ii) a management agreement with ASR Investments Corporation on
behalf of the Partnership providing for the day-to-day management of the
Partnership on terms substantially similar to the management agreements
currently existing between the General Partner and its Affiliates, and (iii)
property management agreements with a REIT subsidiary or Affiliate providing for
the day-to-day management of the Partnership and Subsidiary Partnership
properties on terms substantially similar to the property management agreements
currently existing for such properties;

               (f)  the contribution, transfer or conveyance of any Partnership
properties to (i) any Subsidiary Partnership in a transaction qualifying for
nonrecognition treatment under Code section 721 for the purpose of holding
Partnership property in a single purpose entity;

               (g)  the opening and closing of bank accounts, the investment of
Partnership funds in securities, certificates of deposit and other instruments,
and the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;

               (h)  the selection and dismissal of employees of the Partnership,
any Subsidiary Partnership, the General Partner or the Special General Partner
(including, without limitation, employees having titles such as "president,"
"vice president," "secretary" and "treasurer"), and the engagement and dismissal
of agents, outside attorneys, accountants, engineers, appraisers, consultants,
contractors and other professionals on behalf of the General Partner, the
Special General Partner, the Partnership or any Subsidiary Partnership and the
determination of their compensation and other terms of employment or hiring;

                                       27



               (i)  the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;

               (j)  the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;

               (k)  the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as it may adopt and as is consistent with Section 4.4 hereof; and

               (l)  the execution, acknowledgment and delivery of any and all
documents and instruments to effect any or all of the foregoing.

          7.1.2  No Approval Required for Above Powers. Each of the Limited
Partners agrees that either the General Partner or the Special General Partner
arc authorized to execute, deliver and perform the above-mentioned agreements
and transactions on behalf of the Partnership without any further act, approval
or vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3 and except where Limited Partner Consent is
expressly required herein), the Act or any applicable law, role or regulation.
The execution, delivery or performance by the General Partner, the Special
General Partner or the Partnership of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the General Partner or by
the Special General Partner of any duty that the General Partner or the Special
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.

          7.1.3  Insurance. At all times from and after the date hereof, the
General Partner shall cause the Partnership to obtain and maintain casualty,
liability and other insurance on the properties of the Partnership and each
Subsidiary Partnership and liability insurance for the Indemnitees hereunder,
provided, that in maintaining liability insurance for the Indemnitees hereunder,
the Partnership shall be allocated the cost thereof on a fair and equitable
basis as determined by the General Partner.

          7.1.4  Working Capital Reserves. At all times from and after the date
hereof, the General Partner may cause the Partnership to establish and maintain
reserves for any purpose, including the purchase of capital assets and working
capital, and in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.

          7.1.5  No Obligation to Consider Tax Consequences to Limited Partners.
In exercising their authority under this Agreement, the General Partner and the
Special General Partner may, but shall be under no obligation to, take into
account the tax consequences to any Partner of any action taken by it. The
General Partner, the Special General Partner and the Partnership shall not have
liability to a Limited Partner under any circumstances as a result of an income
tax liability incurred by such Limited Partner as a result of an action (or
inaction) by the General Partner or the Special General Partner pursuant to
their authority under this

                                       28



Agreement. The General Partner shall use its reasonable efforts to effect the
disposition of assets through means of exchanges which defer federal income
taxation; however, except as provided in Section 7.3.5, the General Partner
shall have the sole discretion to determine whether to consummate an asset
disposition through a tax deferred exchange and shall have no liability to the
Limited Partners, or any of them, if such disposition is effected through a
taxable transaction.

     7.2   Certificate of Limited Partnership. To the extent that such action is
determined by the General Partner to be reasonable and necessary or appropriate,
the General Partner shall file amendments to and restatements of the Certificate
and do all the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other jurisdiction in which the Partnership
may elect to do business or own property. Within 15 Business Days after filing,
the General Partner will deliver or mail a copy of the Certificate, as it may be
amended or restated from time to time, to any Limited Partner. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the Limited Partners have limited liability) in the
State of Delaware and any other jurisdiction in which the Partnership may elect
to do business or own property.

     7.3   Restrictions on General Partner's Authority. Neither the General
Partner nor the Special General Partner may take any action in contravention of
this Agreement or the partnership agreement of any Subsidiary Partnership.
Without the written consent of ail of the Limited Partners, the General Partner
and the Special General Partner shall not cause or permit the Partnership or any
Subsidiary Partnership to do any of the following:

          7.3.1  Take any action that would make it impossible to carry on the
ordinary business of the Partnership or any Subsidiary Partnership, except as
otherwise provided in this Agreement;

          7.3.2  Possess property of the Partnership or any Subsidiary
Partnership, or assign any rights in specific Partnership or Subsidiary
Partnership property, for other than a Partnership purpose except as otherwise
provided in this Agreement;

          7.3.3  Admit a Person as a Partner, except as otherwise provided in
this Agreement;

          7.3.4  Perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other liability except
as expressly provided herein or under the Act;

          7.3.5  Until the earlier to occur of (a) the date on which 75 percent
of the Limited Partner Units issued in exchange for the contribution of such
real property shall have been exchanged pursuant to Limited Partners' Conversion
Rights, or (b) the tenth anniversary of the Contribution Date of such real
property, dispose of any interest in real property of the Partnership or any
Subsidiary Partnership other than (i) in transactions that qualify as tax
deferred exchanges under Code section 1031, (ii) transfers by the

                                       29



Partnership to any Subsidiary Partnership or by any Subsidiary Partnership to
the Partnership, or (iii) a pledge of any assets of the Partnership to secure a
loan or other financing to the General Partner as provided in Section 7.1.1(c);
provided, however, that this Section 7.3.5 shall not apply to any real property
contributed by the General Partner in exchange for Limited Partner Units, and
for purposes of this Section 7.3.5, the General Partner shall have sole
discretion to consummate any such transaction based upon its good faith
determination of the values of the assets so exchanged; or

          7.3.6  Cause the Partnership to merge or consolidate, or engage in any
forced share exchange, with any other Person.

     7.4   Responsibility for Expenses.

          7.4.1  No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments, and allocations to which it may be entitled),
neither the General Partner nor the Special General Partner shall be compensated
for their services as general partners of the Partnership.

          7.4.2  Responsibility for Ownership and Operation Expenses. The
Partnership shall be responsible for and shall pay all expenses relating to the
Partnership's ownership of its assets, and the operation of, or for the benefit
of, the Partnership, and the General Partners shall be reimbursed on a monthly
basis, for all reasonable and customary expenses incurred relating to the
Partnership's ownership of its assets and the operation of, or for the benefit
of, the Partnership; provided, that the amount of any such reimbursement shall
be reduced by any interest earned by the General Partners with respect to bank
accounts or other instruments held by them as permitted in Section 7.10. Such
reimbursements shall be in addition to any reimbursement to the General Partners
as a result of indemnification pursuant to Section 7.7 hereof.

     7.5   Outside Activities of the General Partner. Nothing herein contained
shall prevent or prohibit the General Partner, the Special General Partner or
any employee or other Affiliate of the General Partner or the Special General
Partner from entering into, engaging in or conducting any other activity or
performing for a fee any service, including engaging in any business dealing
with real property of any type or location; owning, managing, leasing or
disposing of any real property of any type or location; acting as a director,
officer or employee of any corporation, as a trustee of any trust, as a general
partner of any partnership, or as an administrative official of any other
business entity, or receiving compensation for services to, or participating in
profits derived from, the investments of any such business, property,
corporation, trust, partnership or other entity, regardless of whether such
activities are competitive with the Partnership; and nothing herein shall
require the General Partner or any employee or Affiliate thereof to offer any
interest in such activities to the Partnership or any Partner.

     7.6   Contracts with Affiliates. Except as otherwise expressly contemplated
pursuant to Section 7.1, neither the General Partners nor any of their
Affiliates shall (a) sell, transfer or convey any property to, or purchase any
property from, the Partnership, directly or indirectly, or (b) enter into any
agreement for the provision of services to the Partnership, except, in both such

                                       30



cases, pursuant to transactions or agreements that are on terms that are fair
and reasonable and no less favorable to the Partnership than would be obtained
from an unaffiliated third party in connection therewith. In entering into such
transactions with Affiliates, the General Partners shall not allocate expenses
and similar items disproportionately between the General Partners and the
Partnership.

     7.7   Indemnification.

          7.7.1  General. The Partnership shall indemnity an Indemnitee for,
from and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative, or
investigative, that relate to the operations of the Partnership as set forth in
this Agreement in which any Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (a) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty, willful misconduct or gross negligence; (b) the
Indemnitee actually received an improper personal benefit in money, property or
services; or (c) in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.7.1. The termination of any proceeding by conviction
or upon a plea of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this Section 7.7.1.
Any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership.

          7.7.2  In Advance of Final Disposition. Reasonable expenses incurred
by an Indemnitee who is a party to a proceeding may be paid or reimburse by the
Partnership in advance of the final disposition of the proceeding upon receipt
by the Partnership of (a) a written affirmation by the Indemnitee of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Partnership as authorized in this Section 7.7 has been
met and (b) a written undertaking by or on behalf of the Indemnitee to repay the
amount if it shall ultimately be determined that the standard of conduct has not
been met.

          7.7.3  Other Than by This Section. The indemnification provided by
this Section 7.7 shall be in addition to any other rights to which an Indemnitee
or any other Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity.

          7.7.4  Insurance. The Partnership may purchase and maintain insurance
on behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement; provided,
that in maintaining such insurance, the Partnership shall be allocated the cost
thereof on a fair and equitable basis as determined by the General Partner.

                                       31



          7.7.5  No Personal Liability for Limited Partners. In no event may an
Indemnitee subject the Limited Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.

          7.7.6  Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise expressly permitted by
the terms of this Agreement.

          7.7.7  Binding Effect. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of any other
Persons.

     7.8   Liability of the General Partners.

          7.8.1  General. Notwithstanding anything to the contrary set forth in
this Agreement, neither the General Partner nor the Special General partner
shall be liable for monetary damages to the Partnership, any Partners or any
Assignees for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission by the General Partner or the Special General
Partner, except that the General Partners shall be liable to the Partnership and
Partners for losses sustained or liabilities incurred in whole or in part by a
general partner's fraud, willful misconduct or gross negligence.

          7.8.2  No Obligation to Consider Interests of Limited Partners. The
Limited Partners expressly acknowledge (a) that the General Partner and the
Special General Partner are acting on behalf of the Partnership, in a manner
consistent with their roles as general partners; (b) that, except to the limited
extent provided in Section 7.1.5 hereof, neither the General Partner nor the
Special General Partner are under any obligation to consider the separate
interests of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause the
Partnership to take (or decline to take) any actions which the General Partner
or the Special General Partner has undertaken in good faith on behalf of the
Partnership; and (c) that neither the General Partner nor the Special General
Partner shall be liable for monetary damages for losses sustained, liabilities
incurred, or benefits not derived by Limited Partners in connection with such
decisions, provided that the General Partner or the Special General Partner has
acted in good faith.

          7.8.3  Acts of Agents. Subject to the obligations and duties set forth
in Section 7.1.1 hereof, the General Partner of the Special General Partner may
exercise any of the powers granted to them by this Agreement and perform any of
the duties imposed upon them hereunder either directly or by or through their
agents. Neither the General Partner nor the Special General partner shall be
responsible for any misconduct or negligence on the part of any such agent
appointed in good faith.

          7.8.4  Effect of Amendment. Any amendment, modification or repeal of
this Section 7.8 or any provision hereof shall be prospective only and shall not
in any way affect the limitations on the General Partner's or the Special
General Partner's liability to the Partnership and the Limited Partners under
this Section 7.8 as in effect immediately prior to such

                                       32



amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

     7.9   Other Matters Concerning the General Partners.

          7.9.1  Reliance on Documents. The General Partners may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties.

          7.9.2  Reliance On Consultants and Advisers. The General Partners may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisers selected by it, and any
act taken or omitted to be taken in reliance upon and in accordance with the
opinion of such Persons as to matters which the General Partners reasonably
believe to be within such Person's professional or expert competence shall be
prima facie evidence that such act was done or omitted in good faith and in
accordance with such opinion.

          7.9.3  Action Through Officers and Attorneys. The General Partners
shall have the right, in respect of any of their powers or obligations
hereunder, to act through any duly authorized officers and a duly appointed
attorney or attorneys-in-fact. Each such attorney shall, to the extent provided
by the General Partner or the Special General Partner in a power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner or the Special
General Partner hereunder.

          7.9.4  Actions to Maintain REIT Status or Avoid Taxation of the
General Partner. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decisions of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in good faith belief that such action or omission is
necessary or advisable in order (a) to protect the ability of the General
Partner to continue to quality as a REIT or (b) to avoid the General Partner
incurring any taxes under Code section 857 or Code section 4981, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.

     7.10  Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets shall be held
in the name of the Partnership. All Partnership assets shall be recorded as the
property of the Partnership in its books and records.

     7.11  Reliance by Third Parties. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner and the Special General Partner each have full
power and authority to encumber, sell or

                                       33



otherwise use in any manner any and all assets of the Partnership (including,
without limitation, in connection with any pledge of Partnership assets to
secure a loan or other financing to the General Partner as provided by Section
7.1.1(c))and to enter into any contracts on behalf of the Partnership, and such
Person shall be entitled to deal with the General Partner or the Special General
Partner as if it were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner or the Special General Partner in
connection with any such dealing. In no event shall any Person dealing with the
General Partner, the Special General Partner or their representatives be
obligated to ascertain that the terms of this Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner, the Special General Partner or their representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner, the Special General Partner or their
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.

                                  ARTICLE VIII

                   RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

     8.1   Limitation of Liability. The Limited Partners shall have no liability
under this Agreement except as expressly provided in Section 10.5 hereof.

     8.2   Management of Business. No Limited Partner or Assignee (other than
the General Partner, the Special General Partner, or any of their Affiliates or
any officer, director, employee, partner, agent or trustee of the General
Partner, the Special General Partner, the Partnership or any of their
Affiliates, in their capacities as such) shall take part in the operation,
management or control (within the meaning of the Act) of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, the Special General Partner, any of their
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Special General Partner, the Partnership or any of their
Affiliates, in their capacities as such, shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.

     8.3   Outside Activities of Limited Partners. The following rights shall
govern outside activities of Limited Partners: (a) any Partner and any officer,
director, employee, agent, trustee, Affiliate, partner, beneficiary or
shareholder of any such Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership, the General Partner or their Affiliates; (b) neither the
Partnership nor any Partners shall have any rights by virtue of this Agreement
in any business ventures of any Partner or Assignee; (c) none

                                       34



of the Partners nor any other Person shall have any rights by virtue of this
Agreement or the partnership relationship established hereby in any business
ventures of any other Person, other than the General Partner, and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Partner or any such other Person,
even if such opportunity is of a character which, if presented to the
Partnership, any Partner or such other Person, could be taken by such Person;
(d) the fact that a Partner may encounter opportunities to purchase, otherwise
acquire, lease, sell or otherwise dispose of real or personal property and may
take advantage of such opportunities himself or introduce such opportunities to
entities in which he has or has not any interest, shall not subject such Partner
to liability to the Partnership or any of the other Partners on accounts of the
lost opportunity; and (e) except as otherwise specifically provided herein,
nothing contained in this Agreement shall be deemed to prohibit a Partner or any
Affiliate of a Partner from dealing, or otherwise engaging in business, with
Persons transacting business or operation of real or personal property
(including real estate brokerage services) and receiving compensation therefor,
from any Persons who have transacted business with the Partnership or other
third parties.

     8.4   Priority Among Limited Partners. No Partner (Limited or General) or
Assignee shall have priority over any other Partner (Limited or General) or
Assignee either as to the return of Capital Contributions or, except to the
extent provided by Sections 5.1, 6.2 or 6.3 hereof, or otherwise expressly
provided in this Agreement, as to profits, losses or distributions.

     8.5   Rights of Limited Partners Relating to the Partnership.

          8.5.1  Copies of Business Records. In addition to other rights
provided by this Agreement or by the Act, and except as limited by Section 8.5.3
hereof, each Limited Partner shall be provided the following without demand,
except as otherwise provided below, at the Partnership's expense:

               (a)  promptly after becoming available, a copy of the most recent
annual, quarterly and current reports and proxy statements provided to
shareholders of the General Partner and, upon specific written request, copies
of such documents as filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, if any;

               (b)  promptly after becoming available, a copy of the
Partnership's federal, state and local income tax returns for each Partnership
Year;

               (c)  upon demand and for a purpose reasonably related to such
Limited Partner's interest as a Limited Partner in the Partnership, a current
list of the name and last known business, residence or mailing address of each
Partner;

               (d)  a copy of this Agreement and the Certificate and all
amendments hereto and thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all amendments
hereto and thereto have been executed; and

               (e)  true and full information regarding the amount of cash and a
description and statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future, and the
date on which each became a partner.

                                       35



          8.5.2  Notification of Changes in Unit Adjustment Factor. The
Partnership shall notify each Limited Partner in writing of any change made to
the Unit Adjustment Factor within 10 Business Days of the date such change
becomes effective.

          8.5.3  Confidential Information. Notwithstanding any other provision
of this Section 8.5, the General Partners may keep confidential from the Limited
Partners, for such period of time as the General Partners determine to be
reasonable, any information relating to the General Partner, the Special General
Partner or the conduct of the General Partner's business that the General
Partner believes, in its good faith judgment, the disclosure of which
information would adversely affect a material financing, acquisition,
disposition of assets or securities to which the General Partner is a party.
Nothing contained in this Section 8.5.3 shall permit the General Partner to keep
confidential from the Limited Partners any information relating to the
Partnership or its business.

     8.6   Redemption Right. Notwithstanding the provisions of Section 4.4.2,
the General Partner may, in the event it receives an opinion of its legal
counsel that such action is necessary to maintain and preserve its
classification as a REIT, or upon a determination by the General Partner that
the delivery of Shares on the Specified Conversion Date would be prohibited by
the Articles of Incorporation, satisfy the Conversion Right exercised by a
Converting Partner set forth in a Notice of Conversion by paying to such
Converting Partner the Redemption Amount on the Specified Conversion Date. In
the event the General Partner acquires Limited Partner Units by satisfying the
Conversion Right by paying the Redemption Amount, any such Limited Partner Units
so acquired by the General Partner shall thereafter be owned by the General
Partner as Limited Partner Units for all purposes of this Agreement, except for
those actions requiring the vote of the Limited Partners or Limited Partner
Consent. The General Partner may elect to pay the Redemption Amount for Limited
Partner Units only upon receipt of a Notice of Conversion and only to the extent
of the Units to be exchanged. In the event the General Partner shall exercise
its right to satisfy the Conversion Right in the manner described in this
Section 8.6, the Partnership shall have no obligation to pay any amount to the
Converting Partner with respect to such Converting Partner's exercise of the
Conversion Right, and each of the Converting Partner, the Partnership, and the
General Partner shall treat the transaction between the General Partner and the
Converting Partner as a sale of the Converting Partner's Limited Partner Units
to the General Partner for federal income tax purposes; each Converting Partner
that the General Partner has elected to pay the Redemption Amount agrees to
execute such documents as the General Partner may reasonably require in
connection with the payment of the Redemption Amount.

                                   ARTICLE IX

                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

     9.1   Records and Accounting. The General Partner shall keep or cause to be
kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership's business, including all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 8.5 or 9.3 hereof. Any
records maintained by or on behalf of the Partnership in the regular course of
its business may be kept on, or be in the form of, magnetic tape, photographs,

                                       36



micrographics or any other information storage device; provided, that the
records so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained for
financial purposes on an accrual basis in accordance with general accepted
accounting principles and for tax reporting purposes on the accrual basis.

     9.2   Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.

     9.3   Reports.

         9.3.1   Annual Reports. As soon as practicable, but in no event later
than the date when mailed to the shareholders of the General Partner, the
General Partner shall cause to be mailed to each Limited Partner an annual
report, as of the close of the Partnership Year, containing unaudited financial
statements of the Partnership, or audited financial statements of the General
Partner if such statements are prepared solely on a consolidated basis with the
General Partner for such Partnership Year, presented in accordance with
generally accepted accounting principles. Any audited financial statements of
the General Partner shall be prepared by a nationally recognized firm of
independent public accountants selected by the General Partner.

         9.3.2   Quarterly Reports. As soon as practicable, but in no event
later than the date when mailed to the shareholders of the General Partner, the
General Partner shall cause to be mailed to each Limited Partner, as of the last
day of the calendar quarter (except the last calendar quarter of each year),
unaudited financial statements of the Partnership, a report containing
information in a form similar to that supplied to the General Partner's
shareholders on a quarterly basis, and such other information as may be required
by applicable law or regulation, or as the General Partner determines to be
appropriate.

                                    ARTICLE X

                                   TAX MATTERS

     10.1  Preparation of Tax Returns. The General Partner shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes, and shall use all reasonable efforts to furnish,
within 90 days of the close of each taxable year, the tax information reasonably
required by Limited Partners for federal and state income tax reporting
purposes.

     10.2  Tax Elections. Except as otherwise provided herein, the General
Partner shall in its reasonable discretion; determine whether to make any
available election pursuant to the Code; provided, however, that the General
Partner shall make the election under Code section 754 in accordance with
applicable regulations thereunder and shall do so effective for the
Partnership's first taxable year. The General Partner shall have the right,
after the first taxable year, to seek to revoke any such election (including the
election under Code section 754) upon the General Partner's determination in its
reasonable discretion that such revocations is in the best interests of the
Partners.

                                       37



     10.3  Tax Matter Partner.

          10.3.1 General. The General Partner shall be the "tax matters partner"
of the Partnership for federal income tax purposes. Pursuant to Code section
6223{ c), upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of each
of the Limited Partners; provided, however, that such information is provided to
the Partnership by the Limited Partners.

          10.3.2 Powers. The tax matters partner is authorized but not required:

               (a)  to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax purposes
(such administrative proceedings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judicial review"), and in the
settlement agreement the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such settlement agreement shall
not bind any Partner (i) who (within the time prescribed pursuant to the Code
and Regulations) files a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a settlement agreement on
behalf of such Partner or (ii) who is a "notice partner" (as defined in Code
section 6231) or a member of a "notice group" (as defined in Code section
6223(b)(2)), and, to the extent provided by law, the General Partner shall cause
each Limited Partnership to be designated a notice partner;

               (b)  in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is mailed or
otherwise given to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for readjustment with the
Tax Court or the United States Court of Federal Claims, or the filing of a
complaint for refund with the District Court of the United States for the
district in which the Partnership's principal place of business is located;

               (c)  to intervene in any action brought by any other Partner for
judicial review of a final adjustment;

               (d)  to file a request for an administrative adjustment with the
IRS at any time and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition, complaint or other document) for
judicial review with respect to such request;

               (e)  to enter into an agreement, with the IRS to extend the
period for assessing any tax which is attributable to any item required to be
taken into account by a Partner for tax purposes, or an item affected by such
item; and

               (f)  to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding to
the extent permitted by applicable law or regulations.

                                       38



     The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the reasonable discretion of the tax matters
partner, and the provisions relating to indemnification of the General Partner
set forth in Section 7.7 of this Agreement shall be fully applicable to the tax
matters partner in its capacity as such.

          10.3.3 Reimbursement. The tax matters partner shall receive no
compensation for its services. All third-party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
accounting fees) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm and a law
firm to assist the tax matters partner in discharging his duties hereunder, so
long as the compensation paid by the Partnership for such services is
reasonable.

     10.4  Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Code section 709.

     10.5  Withholding. Each Limited Partner hereby authorizes the Partnership
to withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including any taxes required to be withheld or paid by the
Partnership pursuant to Code sections 1441, 1442,1445, or 1446. The General
Partner shall give prompt notice to any Limited Partner with respect to which
withholding is effected in accordance with this Section 10.5. Any amount paid on
behalf of or with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by such Limited
Partner within 15 days after notice from the General Partner that such payment
must be made unless (a) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner or (b) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (a) or (b) shall be treated as having
been distributed to such Limited Partner and shall be promptly paid, solely out
of funds of the Partnership, by the General Partner to the appropriate taxing
authority. Each Limited Partner hereby unconditionally and irrevocably grants to
the Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the Partnership
any amounts required to be paid pursuant to this Section 10.5. In the event that
a Limited Partner fails to pay any amounts owed to the Partnership pursuant to
this Section 10.5 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned
such amount to such defaulting Limited Partner and shall succeed to all rights
and remedies of the Partnership as against such defaulting Limited Partner
(including, without limitation, the right to receive distributions which would
otherwise be made to such Limited Partner until such loan, with interest, has
been paid in full). Any amounts payable by a Limited Partner hereunder shall
bear interest at a per annum rate of interest equal to the Prime Rate, plus two
percentage points (but not higher than the maximum lawful rate) from the date
such amount is due (i.e., 15 days after demand) until such amount is paid in
full. Each Limited

                                       39



Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created hereunder.
For the avoidance of doubt, any distributions which would have otherwise been
distributed to a Limited Partner, but are retained by the Partnership or
received by the General Partner in accordance with this Section ]0.5 shall, for
all other purposes under this Agreement, be deemed to have been distributed to
such Limited Partner.

                                   ARTICLE XI

                            TRANSFERS AND WITHDRAWALS

     11.1  Transfer.

          11.1.1 Definition. The term "transfer," when used in this Artic]e XI
with respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner or the Special General Partner purports to assign all
or any portion of its General Partner Units to another Person or by which a
Limited Partner purports to assign all or any portion of its Limited Partner
Units to another Person, and includes a direct or indirect sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise. The term "transfer" when used in Article XI
does not include any exchange of Limited Partner Units by a Limited Partner
pursuant to Section 4.2.2 or acquisition of Limited Partner Units from a Limited
Partner by the General Partner pursuant to Section 8.6.

          11.1.2 Requirements. No Limited Partnership Interest shall be
transferred, in whole or in part, except in accordance with the terms and
conditions set forth in this Article XI. Any transfer or purported transfer of a
Limited Partnership Interest not made in accordance with this Article XI shall
be null and void.

     11.2  Transfer of General Partner's or Special General Partner's
Partnership Interest.

          11.2.1 General. Neither the General Partner nor the Special General
Partner may transfer any of its General Partnership Interest (other than any
transfer to an Affiliate) or withdraw as General Partner or Special General
Partner (other than pursuant to a permitted transfer), other than in connection
with a transaction described in Section 11.2.2. Any transfer or purported
transfer of the such a Partner's Partnership Interest not made in accordance
with this Section 11.2 shall be null and void. Notwithstanding any permitted
transfer of its General Partnership Interest or withdrawal as General Partner
hereunder (other than in connection with a transaction described in Section
11.2.2), the General Partner shall remain subject to Sections 4.2.2, 7.1.1(c),
7.8 and 8.6 of this Agreement unless such transferee General Partner provides
substantially similar rights to the Limited Partners and the Limited Partners
owning more than 50 percent of the Limited Partner Interests at such time
expressly approve such rights in writing. Nothing contained in this Section
11.2.1 shall entitle the General Partner or the Special General Partner to
withdraw as General Partners unless a successor General Partner or Special
General Partner has been appointed and approved by the Limited Partners owning
more than 50 percent of the Limited Partner Interests at such time.

                                       40



          11.2.2 Transfer in Connection With Reclassification, Recapitalization,
or Business Combination Involving General Partner. The General Partner shall not
engage in any merger, consolidation or other business combination with or into
another Person, sale of all or substantially all of its assets, or any
reclassification, recapitalization or change of outstanding Shares (other than a
change in par value, or from par value to no par value, or as a result of a
subdivision or combination as described in the definition of Unit Adjustment
Factor) ("Transaction"), unless appropriate provision shall be made as part of
the terms of such Transaction such that each Limited Partner thereafter remains
entitled to exchange each Limited Partner Unit owned by such Limited Partner
(after application of the Unit Adjustment Factor) for an amount of cash,
securities, or other property equal to the greatest amount of cash, securities
or other property which such Limited Partner would have received from such
Transaction, if such Limited Partner had exercised its Conversion Right
immediately prior to the Transaction, provided that if, in connection with the
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of more than 50 percent of the outstanding Shares, the
holders of Partnership Units shall receive the greatest amount of cash,
securities, or other property which a Limited Partner would have received had it
exercised the Conversion Right and received Shares in exchange for its Limited
Partner Units immediately prior to the expiration of such purchase, tender or
exchange offer.

     11.3  Limited Partners' Rights to Transfer.

          11.3.1 General. No transfer of a Limited Partnership Interest by a
Limited Partner is permitted without the prior written consent of the General
Partner and the Special General Partner, which consent may be withheld in such
Partner's sole discretion; provided that a Limited Partner may transfer Units:
(a) to members of the Limited Partner's Immediate Family pursuant to applicable
laws of descent and distribution or otherwise; (b) among its Affiliates; (c) to
a lender where such Units are pledged to secure a bona fide obligation of the
Limited Partner and any transfer in accordance with the rights of such lender
under the instruments evidencing such obligation (provided that the General
Partner received 10 days prior written notice of any transfer under this clause
(c)) (d) if the Limited Partner is a trust, to the beneficiaries of the Limited
Partner or to another trust (i) that is either established by the same grantor
as the Limited Partner or (ii) whose beneficiaries include members of the
Immediate Family of the grantor of the Limited Partner; and (e) if the Limited
Partner is an entity, to the equity holders of the Limited Partner (including
distributions of Limited Partnership Interests to the partners of any limited
partnership). To effect any transfer under this Section 11.3, the Limited
Partner must deliver to the General Partner a duly executed copy of the
instrument making such transfer and such instrument must evidence the written
acceptance by the assignee of all of the terms and conditions of this Agreement
and represent that such assignment Was made in accordance with all applicable
laws and regulations.

          11.3.2 Incapacitated Limited Partners. If a Limited Partner is subject
to Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners for the purpose of settling or managing the estate and such
power as the Incapacitated Limited Partner possessed to transfer all or any part
of his or its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.

                                       41



          11.3.3 Transfers Resulting in Corporation Status; Transfer Through
Established Securities or Secondary Markets. Regardless of whether the General
Partner or the Special General Partner is required to provide or has provided
its consent under Section 11.3.1, no transfer by a Limited Partner of its
Limited Partner Units (or any economic or other interest, right or attribute
therein) may be made to any Person if (a) legal counsel for the Partnership
renders an opinion letter that it would result in the Partnership being treated
as an association taxable as a corporation or (b) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Code section 7704.
Notwithstanding anything to the contrary in this Agreement, (i) no interests in
the Partnership shall be issued in a transaction that is (or transactions that
are) registered or required to be registered under the Securities Act of 1933;
(ii) no Person shall be admitted as or shall otherwise constitute a Partner
unless such Partner or its predecessor made an initial capital contribution to
the Partnership of at least $20,000; and (iii) no Partnership Interest (or
interest or unit of interest in the Partnership) shall be subdivided for resale
into interests or units thereof smaller than an interest or unit for which the
initial capital contribution to the Partnership would have been at least
$20,000.

          11.3.4 Transfers to Holders of Nonrecourse Liabilities. Regardless of
whether the General Partner or the Special General Partner is required to
provide or has provided its consent under Section 11.3.1, no transfer of any
Limited Partner Units may be made to a lender to the Partnership or any
Subsidiary Partnership or any Person who is related (within the meaning of
Treasury Regulation section 1.752-4(b)) to any lender to the Partnership or any
Subsidiary Partnership whose loan constitutes a Nonrecourse Liability without
the consent of the General Partner, in its sole and absolute discretion;
provided, that as a condition to such consent the lender will he required to
enter into an arrangement with the Partnership or any Subsidiary Partnership and
the General Partner to exchange or redeem for the Redemption Amount' any Limited
Partner Units in which a security interest is held simultaneously with the time
at which such lender would he deemed to he a partner in the Partnership for
purposes of allocating liabilities to such lender under Code section 752.

          11.3.5 Transfers Causing Termination. Regardless of whether the
General Partner or the Special General Partner is required to provide or has
provided its consent under Section 11.3.1, no transfer of any Limited Partner
Units shall he effective if such transfer would, in the opinion of counsel for
the Partnership, result in the termination of the Partnership for federal income
tax purposes, in which event such transfer shall he made effective as of the
first fiscal quarter in which such termination would not occur, if the Limited
Partner making such transfer continues to desire to effect the transfer.

     11.4  Substituted Limited Partners.

          11.4.1 Consent of General Partner Required. Notwithstanding any other
provision of this Agreement, the General Partner and the Special General Partner
shall have the right to consent to the admission of a transferee of the interest
of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited
Partner, which consent may be given or withheld by the General Partner and the
Special General Partner in their sole and absolute discretion.

                                       42



          11.4.2 Rights and Duties of Substituted Limited Partners. A transferee
who has been admitted as a Substituted Limited Partner in accordance with this
Article XI shall have all the rights and powers and be subject to all the
restrictions and liabilities of a Limited Partner under this Agreement.

          11.4.3 Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect the name,
address, number of Limited Partner Units, and Percentage Interest of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address and interest of the predecessor of such Substituted Limited Partner.

     11.5  Assignees. If a transferee under Section 11.4.1 is not a Substituted
Limited Partner, such transferee shall be considered an Assignee for purposes of
this Agreement. An Assignee shall be entitled to all the rights of an assignee
of a limited partnership interest under the Act, including the right to exchange
Units for Shares under Section 4.2.2, the right to receive distributions from
the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income attributable to the Limited Partner Units assigned to such
transferee, but shall not be deemed to be a holder of Limited Partner Units for
any other purpose under this Agreement, and shall not be entitled to vote such
Limited Partner Units in any matter presented to the Limited Partners for a vote
(such Limited Partner Units being deemed to have been voted on such matter in
the same proportion as all Limited Partner Units held by Limited Partners are
voted). In the event any such transferee desires to make a further assignment of
any such Limited Partner Units, such transferee shall he subject to all the
provisions of this Article XI to the same extent and in the same manner as any
Limited Partner desiring to make an assignment of Limited Partner Units.

     11.6  General Provisions.

          11.6.1 Withdrawal of Limited Partner. No Limited Partner may withdraw
from the Partnership other than as a result of a permitted transfer of all of
such Partner's Limited Partner Units in accordance with this Article XI or
pursuant to the exchange of all of its Limited Partner Units under Section 4.2.2
or the purchase of its Limited Partner Units under the Section 8.6.

          11.6.2 Transfer of All Limited Partner Units by Limited Partner. Any
Limited Partner who transfers all of its Limited Partner Units in a transfer
permitted pursuant to this Article XI or pursuant to the exchange of all of its
Limited Partner Units under Section 4.2.2 or pursuant to the purchase of all of
its Limited Partner Units under Section 8.6 shall cease to be a Limited Partner.

          11.6.3 Timing of Transfers. Transfers pursuant to this Article XI may
only be made on the first day of a calendar month, unless the General Partner
otherwise agrees.

          11.6.4 Allocation When Transfer Occurs. If any Partnership Interest is
transferred during any quarterly segment of the Partnership's fiscal year in
compliance with the provisions of this Article XI or converted pursuant to
Section 4.2.2 or purchased pursuant to Section 8.6, Net Income, Net Losses, each
item thereof and all other items attributable to such

                                       43



interest for such fiscal year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Code section 706(d),
using the interim closing of the books method (other than Net Income
attributable to a Capital Transaction, which shall be allocated as of the
Capital Transaction Record Date). Solely for the purposes of making such
allocations, each of such items for the calendar month in which the transfer or
redemption occur shall be allocated to the Person who is a Partner as of
midnight on the last day of said month. All distributions of Available Cash or
Capital Transaction Proceeds with respect to which the Partnership Record Date
or the Capital Transaction Record Date is before the date of such transfer or
redemption shall be made to the transferor Partner, and all distributions of
Available Cash or Capital Transaction Proceeds thereafter shall be made to the
transferee Partner.

                                   ARTICLE XII

                              ADMISSION OF PARTNERS

     12.1  Admission of Successor General Partner. A successor to all of the
General Partner's or the Special General Partner's General Partnership Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
General Partner or Special General Partner shall be admitted to the Partnership
as the General Partner or Special General Partner, effective upon such transfer.
Any such transferee shall carry on the business of the Partnership without
dissolution. In each case, the admission shall be subject to the successor
General Partner or Special General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission.

     12.2  Admission of Additional Limited Partners.

          12.2.1 General. After the formation of the Partnership and except as
otherwise provided in Section 4.2.1 and in Article XI hereof, a Person who makes
a Capital Contribution to the Partnership in accordance with this Agreement
shall be admitted to the Partnership as an Additional Limited Partner upon
furnishing to the General Partner (a) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Article XVI hereof, and (b) such other documents or instruments as may be
required in the discretion of the General Partner to effect such Person's
admission as an Additional Limited Partner.

          12.2.2 Consent of General Partner Required. Notwithstanding anything
to the contrary in this Section 12.2, no Person shall be admitted as an
Additional Limited Partner without the consent of the General Partner, which
consent may be given or withheld in the General Partner's sole and absolute
discretion. The admission of any Person as an Additional Limited Partner shall
become effective on the date upon which the name of such Person is recorded on
the books and records of the Partnership, following the consent of the General
Partner to such admission.

     12.3  Amendment of Agreement and Certificate. For the admission to the
Partnership of any Partner, the General Partner shall take all steps necessary
and appropriate

                                       44



under the Act to amend the records of the Partnership and, if necessary, to
prepare as soon as practical an amendment of this Agreement (including an
amendment of Exhibit A) and, if required by law, shall prepare and file an
amendment to the Certificate and may for this purpose exercise the power of
attorney granted pursuant to Article XVI hereof.

                                  ARTICLE XIII

                           DISSOLUTION AND LIQUIDATION

     13.1  Dissolution. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner or Special General Partner in
accordance with the terms of this Agreement. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
(each a "Dissolution Event"):

               (a)  the expiration of its terms as provided in Section 2.4
hereof;

               (b)  an event of withdrawal of the last remaining General Partner
(including the Special General Partner), as defined in the Act (other than an
event of bankruptcy), unless, within 90 days after the withdrawal all the
remaining Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of withdrawal, of a substitute
general partner;

               (c)  from and after the date of this Agreement through December
31, 2086, an election to dissolve the Partnership made by the General Partner;
provided, however, that the General Partner obtains Limited Partner Consent;

               (d)  entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;

               (e)  the sale, exchange or other disposition of all or
substantially all of the Partnership's assets, unless such sale or other
disposition involves the acquisition of any additional property or any deferred
payment of the consideration for such sale or disposition, in which latter event
the Partnership shall dissolve on the last day of the calendar month during
which the balance of such deferred payment is received by the Partnership;

               (f)  the last remaining General Partner (including the Special
General Partner) (i) makes an assignment for the benefit of creditors; (ii)
files a voluntary petition in bankruptcy; (iii) is adjudged a bankrupt, or
insolvent, or has entered against him an order of relief in any bankruptcy or
insolvency proceeding; (iv) files a petition or answer seeking for himself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (v) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against him in any proceeding of this nature; or (vi) seeks
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the General Partner or of all or any substantial part of his
properties, unless, in each case, within 90 days after the occurrence of any
event enumerated in clauses (i) through (vi), all remaining Partners agree in
writing to continue the business of the partnership and to the appointment,
effective as of the occurrence of such event, of a substitute general partner;
or

                                       45



               (g)  120 days after the commencement of any proceeding against
the last remaining General Partner (including the Special General Partner)
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or if within 90 days after the appointment
without its consent or acquiescence of a trustee, receiver or liquidator of the
General Partner or of all or any substantial part of its properties, the
appointment is not vacated, unless, in any such case, within 90 days after the
occurrence of any such event, all remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the occurrence of such event, of a substitute general partner.

     13.2  Winding Up.

          13.2.1 General. Upon the occurrence of a Dissolution Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner or the Special General
Partner (or, in the event there is no remaining General Partner, any Person
elected by a majority in interest of the Limited Partners (the
"Liquidator"))shall be responsible for overseeing the winding up and dissolution
of the Partnership and shall take full account of the Partnership's liabilities
and property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
shall be applied and distributed in the following order:

               (a)  First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the Partners;

               (b)  Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners, pro rata in accordance with
amounts owed to each such Partner, and

               (c)  The balance, if any, to the General Partner, the Special
General Partner and Limited Partners in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and allocations for all
period.

     Neither the General Partner nor the Special General Partner shall receive
any additional compensation for any services performed pursuant to this Article
XIII.

          13.2.2 Where Immediate Sale of Partnership's Assets Impractical.
Notwithstanding the provisions of Section 13.2.1 hereof, which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sale and absolute discretion, defer far a
reasonable time the liquidations of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) or,
with the consent of all Limited Partners, distribute to the Partners, in lieu of
cash, as tenants in common and in accordance with the provisions of Section
13.2.1

                                       46



hereof, undivided interests in such Partnership assets as the Liquidator deems
not suitable far liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidator, such distributions in kind are
in the best interest of the Partners, and shall be subject to such conditions
relating to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable mitotic of
valuation as it may adopt.

     13.3  Compliance with Timing Requirements of Regulations; Allowance for
Contingent or Unforeseen Liabilities or Obligations. Notwithstanding anything to
the contrary in this Agreement, in the event the Partnership is "liquidated"
within the meaning of Treasury Regulation section 1.704.l(b)(2)(ii)(g),
distributions shall be made pursuant to this Article XIII to the General
Partner, the Special General Partner and the Limited Partners who have positive
Capital Accounts in compliance with Treasury Regulation section
1.704.1(b)(2)(ii)(b)(2) (including any timing requirements therein). In the
discretion of the General Partner, a pro rata portion of the distributions that
would otherwise be made to the General Partner the Special General Partner and
Limited Partners pursuant to this Article XIII may be: (a) distributed to a
liquidating trust established for the benefit of the General Partner, the
Special General Partner and the Limited Partners far the purposes of liquidating
the Partnership assets, collecting amounts awed to the Partnership, and paying
any contingent or unforeseen liabilities or obligations of the Partnership or of
the General Partners arising out of or in connection with the Partnership (the
assets of any such trust shall be distributed to the General Partner, the
Special General Partner and Limited Partners from time to time, in the
reasonable discretion of the General Partner, in the same proportions as the
amount distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner, the Special General Partner and Limited
Partners pursuant to this Agreement); or (b) withheld to provide a reasonable
reserve for Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership;
provided, that such withheld amounts shall be distributed to the General
Partner, the Special General Partner and Limited Partners as soon as
practicable.

     13.4  Rights of Limited Partners. Except as specifically provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership far the return of his Capital Contribution and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as specifically provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of his Capital
Contributions, distributions, or allocations.

     13.5  Notice of Dissolution. In the event a Dissolution Event or an event
occurs that would, but for provisions of Section 13.1, result in a dissolution
of the Partnership, the General Partner shall, within 10 days thereafter,
provide written notice thereof to each of the Partners and to all other parties
with whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).

                                       47



     13.6  Cancellation or Certificate of Limited Partnership. Upon the
completion of the liquidation of the Partnership as provided in Section 13.2
hereof, the Partnership shall be terminated and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.

     13.7  Reasonable Time for Winding-Up. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the liquidation of its assets pursuant to Section 13.2 hereof, to minimize any
losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.

                                   ARTICLE XIV

                  AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

     14.1  Amendments Generally. Amendments to this Agreement may be proposed by
the General Partner, the Special General Partner or by any Limited Partners
holding 25 percent or more of the Percentage Interests. Following such proposal,
the General Partner shall submit any proposed amendment to the Partners. The
General Partner shall seek the written vote of the Partners on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that it may deem appropriate. For purposes of obtaining a written vote,
the General Partner may require a response within a reasonable specified time,
but not less than 15 days, and failure to respond in such time period shall
constitute a vote which is consistent with the General Partner's recommendation
with respect to the proposal. Except as provided in Section 14.2, 14.3 or 14.4,
a proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and the Special General Partner and it
receives Limited Partner Consent.

     14.2  General Partner's Power to Amend. Notwithstanding Section 14.1, the
General Partner shall have the power, without the consent of the Limited
Partners, to amend this Agreement as may be required to facilitate or implement
any of the following purposes:

               (a)  to add to the obligations of the General Partner or the
Special General Partner or surrender any right or power granted to the General
Partner, the Special General Partner or any Affiliate of the General Partners
for the benefit of the Limited Partners;

               (b)  to reflect the admission, substitution, termination or
withdrawal of Partners in accordance with this 'Agreement;

               (c)  to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any material respect, or to
cure any ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;

                                       48



               (d)  to satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; and

               (e)  to reflect adjustments in the respective Percentage
Interests of the Partners in accordance with Section 4.1.1(c) hereof.

     14.3  Consent of Adversely Affected Partner Required. Notwithstanding
Section 14.1 hereof, this Agreement shall not be amended without the consent of
each Partner adversely affected if such amendment would (a) convert a Limited
Partner's Interest in the Partnership into a general partner's interest; (b)
modify the limited liability of a Limited Partner, (c) alter rights of the
Partner to receive distributions pursuant to Articles V or XIII the allocations
specified in Article VI (except as permitted pursuant to Section 4.2 hereof), or
the General Partner's or Special General Partner's obligation to make additional
Capital Contributions pursuant to Sections 4.1.5 and 7.I.1(c); (d) alter or
modify the Conversion Right or the Redemption Amount as set forth in Sections
4.2.2 and 8.6, and related definitions hereof, (e) cause the termination of the
Partnership prior 0 the time set forth in Sections 2.4 or 13.1; or (f) amend
this Section 14.3. Further, no amendment may alter the restrictions on the
General Partner's and Special General Partner's authority set forth in Section
7.3 without the consent specified in that Section.

     14.4  When Consent of Limited Partnership Interests Required.
Notwithstanding Section 14.1 hereof, the General Partner shall not amend
Sections 7.6 or 11.2 without Limited Partner Consent, and the General Partner
shall not amend Sections 4.1.5, 7.1.1(c), 7.3 or 14.3 or this Section 14.4
without the unanimous consent of the Limited Partners.

                                   ARTICLE XV

                               GENERAL PROVISIONS

     15.1  Addresses and Notice. All notices and demands under this Agreement
shall be in writing and may be either delivered by U.S. Mail or a nationally
recognized overnight courier, by telefax, telex or other wire transmission (with
request for assurance of receipt in a manner appropriate with respect to
communications of that type; provided, that a confirmation copy is concurrently
sent by a nationally recognized express courier for next Business Day delivery)
or mailed, postage prepaid, by certified or registered mail, return receipt
requested, directed to the parties at their respective addresses set forth on
Exhibit A attached hereto, as it may be amended for time to time, and, if to the
Partnership, such notices and demands sent in the aforesaid manner must be
delivered at its principal place of business set forth above. Unless delivered
personally or by telefax, telex or other wire transmission as above (which shall
be effective on the date of such delivery or transmission), any notice shall be
deemed to have been made upon receipt. Any party hereto may designate a
different address to which notices and demands shall thereafter be directed by
written notice given in the same manner and directed to the Partnership at its
office hereinabove set forth.

     15.2  Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as

                                       49



specifically provided otherwise, references to "Articles" and "Sections" are to
Articles and Sections of this Agreement.

     15.3  Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.

     15.4  Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.

     15.5  Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.

     15.6  Waiver of Partition. The Partners hereby agree that the Partnership
properties are not and will not be suitable for partition. Accordingly, each of
the Partners hereby irrevocably waives any and all rights (if any) that it may
have to maintain any action for partition of any of the Partnership properties.

     15.7  Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the matters contained herein; it supersedes
any prior agreements or understandings among them with respect to the matters
contained herein and it may not be modified or amended in any manner other than
pursuant to Article XIV.

     15.8  Securities Law Provisions. The Partnership Units have not been
registered under the federal or state securities laws of any state and,
therefore, may not be resold unless appropriate federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.

     15.9  Remedies Not Exclusive. Any remedies herein contained for breaches of
obligations hereunder shall not be deemed to be exclusive and shall not impair
the right of any party to exercise any other right or remedy, whether for
damages, injunction or otherwise.

     15.10 Time. Time is of the essence of this Agreement.

     15.11 Creditors. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.

     15.12 Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.

     15.13 Execution Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.

                                       50



     15.14 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.

     15.15 Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.

     15.16 Limitation of Liability. Any obligation or liability whatsoever of
the General Partner or the Special General Partner which may arise at any time
under this Agreement or any obligation or liability which may be incurred
pursuant to any other instrument, transaction or undertaking contemplated hereby
shall be satisfied, if at all, out of the General Partner's or the Special
General Partner's assets only. No such obligation or liability shall be
personally binding upon nor shall resort for the enforcement thereof be had to,
the property of any of its shareholders, trustees, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise. Except as otherwise provided in Section 4.1.5
hereof, any obligation or liability whatsoever of the Partnership to any Partner
or Partners which may arise at any time under this Agreement shall be satisfied,
if at all, out of the Partnership's assets only and no such obligation or
liability shall be personally binding upon, nor shall resort for the enforcement
thereof be had to, the property of any of its Partners, including the General
Partner and the Special General Partner, regardless of whether such obligation
or liability is in the nature of contract, tort or otherwise.

                                   ARTICLE XVI

                                POWER OF ATTORNEY

     16.1  Scope. Each Limited Partner and each Assignee constitutes and
appoints the General Partner, the Special General Partner, any Liquidator, and
authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to:

               (a)  execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (i) all certificates, documents and other
instruments (including, without limitation, this Agreement and the Certificate
and all amendments or restatements thereof) that the General Partner, the
Special General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (ii) all instruments that the
General Partner or the Special General Partner reasonably deems appropriate or
necessary to reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (iii) all conveyances and other
instruments or documents that the General Partner or the Special General Partner
deems appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (iv) all instruments or documents and
all certificates and acknowledgements

                                       51



relating to any mortgage, pledge, or other form of encumbrance in connection
with any loan or other financing to the General Partner as provided by Section
7.1.1(c); (v) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in Article
XII or XIII hereof or the Capital Contribution of any Partner, and (vi) all
certificates, documents and other instruments relating to the determination of
the rights, preferences and privileges of Partnership Interests; and

               (b)  execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments appropriate or
necessary, in the reasonable discretion of the General Partner or the Special
General Partner, to make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by the Partners
hereunder or is consistent with the terms of this Agreement or appropriate or
necessary, in the reasonable discretion of the General Partner or the Special
General Partner to effectuate the terms or intent of this Agreement.

     Nothing contained herein shall be construed as authorizing the General
Partner or the Special General Partner to amend this Agreement except in
accordance with Article XIV hereof, or as may be otherwise expressly provided
for in this Agreement.

     16.2  Irrevocability. The foregoing power of attorney is hereby declared to
be irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
or the Special General Partner to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive
and not be affected by the subsequent Incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Limited Partner Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or the Special General Partner, acting in good faith
pursuant to such power of attorney, and each such Limited Partner or Assignee
hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner, taken in good faith under such
power of attorney.

                                       52



                                 SIGNATURE PAGE
                                       TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES LP.

                            Dated September 18, 1997

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

GENERAL PARTNER:

ASR INVESTMENTS CORPORATION,
a Maryland corporation


By:      /s/ [illegible]
   -------------------------------------
Its:     President
    ------------------------------------


SPECIAL GENERAL PARTNER:

HERITAGE SGP CORPORATION,
an Arizona corporation


By:      /s/ [illegible]
   -------------------------------------
Its:     President
    ------------------------------------


                                       53



                                 SIGNATURE PAGE
                                       TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES LP.

                            Dated September 18, 1997

LIMITED PARTNERS:

FIRST ASPEN COURT ASSOCIATES, L.P.

FIRST BRIAR PARK ASSOCIATES, A WASHINGTON LIMITED PARTNERSHIP

FIRST CHELSEA PARK ASSOCIATES, L.P.

FIRST APPIAN WAY ASSOCIATES, L.P.

FIRST GREENWOOD CREEK ASSOCIATES, L.P.

FIRST HIGHLANDS ASSOCIATES, L.P.

FIRST MARYMONT ASSOCIATES, L.P.

FIRST MONTFORT ASSOCIATES, L.P.

FIRST RIVER WAY ASSOCIATES

FIRST SPRINGFIELD ASSOCIATES, L.P.

FIRST TIMBERCREEK LANDING ASSOCIATES, L.P.

CAMPUS DEVELOPMENT ASSOCIATES LIMITED PARTNERSHIP

CAMPUS COMMONS ASSOCIATES - LIMITED PARTNERSHIP

FIRST PACIFIC SOUTH CENTER ASSOCIATES, L.P.

MOUNTAIN VIEW ASSOCIATES


By:  /s/ Don W. Winton
   -------------------------------------
     Don W. Winton, general partner
     of each of the Limited Partners
     listed above


                                       54



                                 SIGNATURE PAGE
                                       TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES LP.

                            Dated September 18, 1997

LIMITED PARTNERS (continued):

MERIT PRESTON PARK APARTMENTS LIMITED PARTNERSHIP

GENTRY PLACE APARTMENTS LIMITED PARTNERSHIP


By:  MTP, Inc., a Texas corporation
Its: General Partner


     By:   /s/ David R. Roelke
        --------------------------------
     Name: David R. Roelke
          ------------------------------
     Its:  CFO
         -------------------------------


SMITH SUMMIT APARTMENTS PARTNERSHIP


By:  Lincor/Smith Summit Apartments Limited Partnership,
     a Texas Limited Partnership
Its: General Partner


     By:    MTP, Inc., a Texas corporation
     Its:   General Partner


            By:   /s/ David R. Roelke
               -------------------------
            Name: David R. Roelke
                 -----------------------
            Its:  CFO
                ------------------------


                                       55



                                 SIGNATURE PAGE
                                       TO
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES LP.

                            Dated September 18, 1997

LIMITED PARTNERS (continued):


         /s/ Robert S. Levy
- ----------------------------------------
Robert S. Levy


         /s/ Sander M. Levy
- ----------------------------------------
Sander M. Levy


         /s/ Richard Linhart
- ----------------------------------------
Richard Linhart


         /s/ Arthur J. Nagle
- ----------------------------------------
Arthur J. Nagle


         /s/ Paige L. Nagle
- ----------------------------------------
Paige L. Nagle


                                       56



                                    EXHIBIT A

                            HERITAGE COMMUNITIES L.P.


                                                     Initial      Limited
                                                     Capital      Partner
Partner                                            Contribution    Units     Address
                                                                    
General Partners
- ----------------
ASR Investments Corporation                                                  335 North Wilmot, Suite 250, Tucson, Arizona 85711
Heritage SGP Corporation                                                     335 North Wilmot, Suite 250, Tucson, Arizona 85711
Limited Partners
- ----------------
ASR Investment Corporation                                                   335 North Wilmot, Suite 250, Tucson, Arizona 85711
Winton Limited Partners
- -----------------------
First Aspen Court Associates, L.P.                 $  2,262,699      43,288  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Briar Park Associates,                       $    732,706       1,782  3845 FM 1960 West, Suite 450, Houston, Texas 77068
a Washington limited partnership
First Chelsea Park Associates, L.P.                $  2,624,627     128,543  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Appian Way Associates                        $  1,748,876      22,428  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Greenwood Creek Associates, L.P.             $  2,257,414      19,377  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Highlands Associates, L.P.                   $  3,802,050     186,802  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Marymont Associates, L.P.                    $  1,761,383      14,629  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Montfort Associates, L.P.                    $  1,542,446      28,487  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First River Way Associates                         $    698,208       3,802  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Springfield Associates, L.P.                 $  2,805,174     131,818  3845 FM 1960 West, Suite 450, Houston, Texas 77068
First Timbercreek Landing Associates, L.P.         $  2,084,016       9,478  3845 FM 1960 West, Suite 450, Houston, Texas 77068
Campus Development Associates Limited Partnership  $  3,918,903     208,235  3845 FM 1960 West, Suite 450, Houston, Texas 77068
Campus Commons Associates - Limited Partnership    $  1,266,801      33,796  3845 FM 1960 West, Suite 450, Houston, Texas 77068


                                       A-1





                                                     Initial      Limited
                                                     Capital      Partner
Partner                                            Contribution    Units     Address
                                                                    

First Pacific South Center Associates, L.P.        $  1,921,912      88,260  3845 FM 1960 West, Suite 450, Houston, Texas 77068
Mountain View Associates                                             22,976  3845 FM 1960 West, Suite 450, Houston, Texas 77068
Merit Limited Partners
- ----------------------
Robert S. Levy                                     $     32,585       1,464  166 Palm Beach Lakes Boulevard, Suite 502
                                                                             West Palm Beach, Florida 33401
Sander M. Levy                                     $     32,585       1,464  62 West 62nd Street, #24B
                                                                             New York, New York 10023
Richard Linhart                                    $    284,735      12,797  Opus Capital Corporation, 1776 Broadway Avenue,
                                                                             18th Floor, New York, New York 10708
Arthur J. and Paige L. Nagle                       $    266,906      11,996  19 Garden Avenue
                                                                             Bronxville, New York 10708


                                       A-2


                                    EXHIBIT B

                            HERITAGE COMMUNITIES LP.



                                                                                                                    Contribution
Property Name                      City     County     State    Contributor                            Agreed Value Date
                                                                                                  
Winton Properties
- -----------------
Aspen Court Apartment           Arlington  Tarrant   Texas      First Aspen Court Associates, L.P.     $  4,400,000 April 30, 1997
Briar Park Apartments           Houston    Harris    Texas      First Briar Park Associates, a         $  2,200,000 April 30, 1997
                                                                Washington Limited Partnership
Chelsea Park Apartments         Houston    Harris    Texas      First Chelsea Park Associates, L.P.    $  5,600,000 April 30, 1997
Country Club Place Apartments   Richmond   Fort Bend Texas      First Appian Way Associates, L.P.      $  5,350,000 April 30, 1997
Greenwood Creek Apartments      Fort Worth Tarrant   Texas      First Greenwood Creek Associates, L.P. $  7,700,000 April 30, 1997
Highlands of Preston            Plano      Collin    Texas      First Highlands Associates, L.P.       $  8,800,000 April 30, 1997
Marymont Apartments             Tomball    Harrison  Texas      First Marymont Associates, L.P.        $  4,350,000 April 30, 1997
14400 Montfort Townhomes        Dallas     Dallas    Texas      First Montfort Associates, L.P.        $  5,650,000 April 30, 1997
Riverway Apartments             Bay City   Matagorda Texas      First Riverway Associates, L.P.        $  1,900,000 April 30, 1997
Springfield Apartments          Dallas     Denton    Texas      First Springfield Associates, L.P.     $  8,420,000 April 30, 1997
Timbercreek Landings Apartments Houston    Harris    Texas      First Timbercreek Landing Associates,  $  5,500,000 April 30, 1997
                                                                L.P.
Campus Commons North Apartments Pullman    Whitman   Washington Campus Development Associates Limited  $ 10,900,000 April 30, 1997
                                                                Partnership
Campus Commons South Apartments Pullman    Whitman   Washington Campus Development Associates Limited  $  4,100,000 April 30, 1997
                                                                Partnership
Pacific South Center Office     Seattle    King      Washington First Pacific South Center             $  5,400,000 April 30, 1997
Building                                                        Associates, L.P.
Merit Properties
- ----------------
Merit Place Apartments          Grand                Texas      Gentry Place Apartments Limited        $ 11,400,000 September __,
                                Prairie                         Partnership                                         1997


                                      B-1





                                                                                                                    Contribution
Property Name                      City     County     State    Contributor                            Agreed Value Date
                                                                                                  
Park on Preston Apartments      Dallas               Texas      Merit Preston Park Apartments Limited  $  9,145,810 September __,
                                                                Partnership                                         1997
Smith Summit Apartments         Mesquite             Texas      Smith Summit Apartments Partnership    $  8,800,000 September __,
                                                                                                                    1997
ASR Properties
- --------------
Ivystone/Woods Edge Apartments  Houston    Harris    Texas      ASR Investments Corporation            $            March ___, 1997
London Park Apartments          Houston    Harris    Texas      ASR Investments Corporation            $            March ___, 1997
The Court Apartments            Seattle    King      Washington ASR Investments Corporation            $            March ___, 1997
Arbor Terrace Apartments -                           Washington ASR Investments Corporation            $            September __,
Phase I                                                                                                             1997
Arbor Terrace Apartments -                           Washington ASR Investments Corporation            $            September __,
Phase II                                                                                                            1997
On the Boulevard Apartments                          Washington ASR Investments Corporation            $            September __,
                                                                                                                    1997


                                      B-2



                                    EXHIBIT C

                              NOTICE OF CONVERSION

     The undersigned, being the record owner of _____________________ Limited
Partner Units (not giving effect to the application of the Unit Adjustment
Factor) in Heritage Communities L.P., in accordance with the terms of the
Agreement of Limited Partnership of Heritage Communities L.P. (the "Agreement"),
hereby irrevocably (a) exercises the option to exchange________________________
Limited Partner Units (after giving effect to the application of the Unit
Adjustment Factor) for Shares of the General Partner or into such other cash,
securities or other property as shall be authorized under the terms of the
Agreement, (b) surrenders such Limited Partner Units and all right, title and
interest therein and (c) directs that the Shares issuable or other consideration
deliverable upon exercise of the Conversion Right be delivered to, and
registered or placed in, the name and at the address specified below, and, if
applicable, that a new certificate representing ownership of Units not so
exchanged be issued and delivered to the undersigned.

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


- -------------------------------------------------
Name of Limited Partner


- -------------------------------------------------
Signature of Limited Partner


- -------------------------------------------------
Street Address


- -------------------------------------------------
City             State             Zip Code


- -------------------------------------------------
Social Security or Taxpayer Identification Number

                                      C-1

EX-10.4

                                                                    EXHIBIT 10.4

                                 FIRST AMENDMENT
                                       OF
                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            HERITAGE COMMUNITIES L.P.

     THIS FIRST AMENDMENT OF SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF HERITAGE COMMUNITIES L.P. ("First Amendment"), made as of the
27th day of March, 1998, by ASR INVESTMENTS CORPORATION, a Maryland corporation
("ASR"), as General Partner, and HERITAGE SGP CORPORATION, an Arizona
corporation ("Heritage SGP"), as Special General Partner, and joined in by
UNITED DOMINION REALTY TRUST, INC., a Virginia corporation ("UDR"), for the
purposes herein specified.

                                    RECITALS

ASR is the General Partner and Heritage SGP is the Special General Partner of
Heritage Communities L.P., a Delaware partnership existing under a Second
Amended and Restated Agreement of Limited Partnership of Heritage Communities
L.P., dated as of September 18, 1997 (the "Partnership Agreement", by and among
ASR, as General Partner, Heritage SGP, as Special General Partner, and the
persons identified in Exhibit A thereto, as Limited Partners (the "Limited
Partners"). Terms used and not defined herein are defined in the Partnership
Agreement. Upon consummation of an Agreement and Plan of Merger dated as of
December 19, 1997 (the "Merger Agreement"), among UDR, ASR and ASR Acquisition
Sub, Inc., a Maryland corporation ("Sub"), Sub will merge with and into ASR (the
"Merger"), each outstanding share of Common Stock, $.01 par value, of ASR ("ASR
Common Stock") will be converted into 1.575 shares of Common Stock, $1.00 par
value, of UDR ("UDR Common Stock"), with cash in lieu of any fractional share,
ASR will become a wholly-owned subsidiary of UDR and the public market for ASR
Common Stock will terminate. Section 11.2.2 of the Partnership Agreement
prohibits the General Partner from engaging in the Merger unless appropriate
provision is made as a part of the terms of such Transaction so that each
Limited Partner thereafter remains entitled to exchange each Limited Partner
Unit owned by such Limited Partner (after application of the Unit Adjustment
Factor) for an amount of cash, securities or other property equal to the
greatest amount of cash, securities or other property which such Limited Partner
would have received from such Transaction, if such Limited Partner had exercised
its Conversion Right immediately prior to the Transaction. In Section 5.12 of
the Merger Agreement, UDR undertakes to make the provision for the Limited
Partners required by Section 11.2.2 of the Partnership Agreement, and UDR and
ASR have agreed that amendment of the Partnership Agreement as provided herein
is the most efficient means therefor. ASR is authorized so to amend the
Partnership Agreement under Section 14.2(c) thereof without the consent of the
Limited Partners.



NOW, THEREFORE, the Partnership Agreement is amended as follows:

11.  Section 1.1.10 of the Partnership Agreement is amended to read as follows:

   Section 1.1.10. "Articles of Incorporation" means, as the context may
   indicate, the Articles of Incorporation of ASR Investments Corporation, as
   filed with the Secretary of State of the State of Maryland, or the Articles
   of Incorporation of UDR, as filed in the Clerk's Office of the Virginia
   State Corporation Commission, in either case as further amended or restated
   from time to time.

12.  Section 1.1.72 of the Partnership Agreement is amended to read as follows:

   Section 1.1.72. "Shares" means the shares of Common Stock, $1.00 par value,
   of UDR.

13.  The reference to the General Partner in Section 1.1.80 of the Partnership
Agreement shall be deemed a reference to UDR.

14.  New Sections 1.1.88, 1.1.89 and 1.1.90 are added to the Partnership
Agreement, as follows:

   Section 1.1.88. "Merger" means the merger of ASR Acquisition Sub, Inc., a
   Maryland corporation, with and into the General Partner.

   Section 1.1.89. "Merger Closing Date" means March 27, 1998, or such other
   date on which the merger shall become effective.

   Section 1.1.90. "UDR" means United Dominion Realty Trust, Inc., a Virginia
   corporation.

15.  Sections 4.2.2(a) and (b) of the Partnership Agreement are amended to read
as follows:

     (i)  (a)  Subject to the further provisions of this Section 4.2.2 and
subject to Section 8.6, each Person who was a Limited Partner on the Merger
Closing date shall have the right (the "Conversion Right") to exchange any or
all of the Limited Partner Units held by that Partner for Shares, with one
Limited Partner Unit (as adjusted pursuant to 4.2.2(b)) being exchangeable for
1.575 fully paid, non-assessable Shares. In the event that any exercise of the
Conversion Right shall result in such Limited Partner being entitled to receive
a fractional Share, such Limited Partner shall receive a cash payment in lieu of
such fractional Share equal to such fractional proportion of the closing price
per Share on the New York Stock Exchange, reported as "New York Stock Exchange
Composite Transactions" by The Wall Street Journal, on the Merger Closing Date.

          (b)  Subject to the further provisions of this Section 4.2.2 and
subject to Section 8.6, each Person who becomes a Limited Partner at any time
after the Merger Closing Date shall have the right (the "Conversion Right") to
exchange any or all of the Limited Partner Units held by that Partner for
Shares, with one Limited Partner Unit (as adjusted pursuant to 4.2.2(b)) being
exchangeable for one fully paid, non-assessable Share.

                                       2



          (c)  The Conversion Right may be exercised by a Limited Partner (a
"Converting Partner") at any time after the first anniversary of the issuance of
the Limited Partner Unit that is the subject of Notice of Conversion and from
time to time thereafter by delivering such Notice of Conversion in the form
attached as Exhibit C to the General Partner. Upon receipt by the General
Partner of a Notice of Conversion, on the Specified Conversion date, UDR shall
issue to the Converting Partner the number of Shares to which the Converting
Partner is entitled under (i) or (ii) above, as appropriate, based on the number
of Limited Partner Units to be exchanged, together with the fractional Share
cash payment, if any, to which such Converting Partner is entitled. UDR shall at
all times reserve and keep available out of its authorized but unissued Shares,
solely for the purpose of effecting the exchange of Limited Partner Units for
Shares, such number of Shares as shall from time to time be sufficient to effect
the conversion of all outstanding Limited Partner Units. No Limited Partner
shall, solely by virtue of being the holder of one or more limited Partner
Units, be deemed to be a shareholder of or have any other interest in UDR.

     (ii) For purposes of this Section 4.2.2, the number of Limited Partner
Units exchanged by any Limited Partner shall be proportionately adjusted by
multiplying the number of Limited Partner Units being exchange by such Limited
Partner by the Unit Adjustment Factor: the intent of this provision is that one
Limited Partner Unit (as adjusted) remains exchangeable for 1.575 Shares or one
Share, as the case may be, without dilution. In the event UDR issues any Shares
in exchange for Limited Partner Units pursuant to this section 4.2.2, any such
Limited Partner Units so acquired by UDR shall thereafter be owned by UDR as
Limited Partner Units for all purposes of this Agreement, except for those
actions requiring the vote of the Limited Partners or Limited Partner Consent.
Each Converting Partner agrees to execute such documents as UDR may reasonably
require in connection with the issuance of Shares upon exercise of the
Conversion Right.

16.  All reference to the General Partner in Section 8.6 of the Partnership
Agreement shall be deemed references to UDR.

17.  This First Amendment shall become effective on the Merger Closing Date.

18.  UDR joins in this First Amendment for purposes of evidencing its acceptance
of and agreement to be bound by the terms of the Partnership Agreement as
amended hereby.

                                       3



     IN WITNESS WHEREOF, ASR, Heritage SGP and UDR have caused this First
Amendment to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

- --------------------------------------------------------------------------------
                                        ASR INVESTMENTS CORPORATION


                                        By:   /s/ [illegible]
                                             -----------------------------------
                                        Its: President


- --------------------------------------------------------------------------------
                                        HERITAGE SGP CORPORATION


                                        By:   /s/ [illegible]
                                             -----------------------------------
                                        Its: President


- --------------------------------------------------------------------------------
                                        UNITED DOMINION REALTY TRUST, INC.


                                        By:   /s/ Kathryn Surface
                                             -----------------------------------
                                        Its: Senior Vice President


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

                                       4

EX-10.5

                                                                    EXHIBIT 10.5

                               SECOND AMENDMENT TO
                    SECOND AMENDED AND RESTATED AGREEMENT OF
                LIMITED PARTNERSHIP OF HERITAGE COMMUNITIES L.P.

     This SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF HERITAGE COMMUNITIES L.P., dated as of September 30, 2003
(this "Amendment"), is being executed by ASR Investments Corporation, a Maryland
corporation (the "General Partner"), as the general partner of Heritage
Communities L.P., a Delaware limited partnership (the "Partnership"), pursuant
to the authority conferred upon the General Partner by the Second Amended and
Restated Agreement of Limited Partnership of Heritage Communities L.P., dated as
of September 18, 1997, as amended and/or supplemented from time to time (the
"Agreement"). Capitalized terms used, but not otherwise defined herein, shall
have the respective meanings ascribed thereto in the Agreement.

     WHEREAS, pursuant to Section 14.2(c) of the Agreement, the General Partner
is authorized to amend the Agreement, without the consent of the Limited
Partners, to reflect a change that is of inconsequential nature and does not
adversely affect the Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in the Agreement not inconsistent
with law or with the provisions of the Agreement; and

     WHEREAS, the General Partner has determined that the amendment provided for
herein is of an inconsequential nature and does not adversely affect the Limited
Partners in any material respect.

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

     (1)  Section 2.4 of the Agreement is hereby amended to read in its entirety
as follows:

          "2.4 Term. The term of the Partnership shall commence on the
     date hereof and shall continue until the Partnership is dissolved
     pursuant to the provisions of Article XIII or as otherwise
     provided by law."

     (2)  Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and continue
in full force and effect and, except as amended hereby, all of the terms,
covenants, provisions and conditions of the Agreement are hereby ratified and
confirmed in all respects.



                            [Signature Page Follows]




     IN WITNESS WHEREOF, this Amendment has been executed as of the date first
written above.


                                        ASR INVESTMENTS CORPORATION,
                                        General Partner


                                        By:  /s/ Mary Ellen Norwood
                                           -------------------------------------
                                        Name:   Mary Ellen Norwood
                                        Title:  Vice President & Secretary

EX-12

                                                                      EXHIBIT 12

                       UNITED DOMINION REALTY TRUST, INC.
           Computation of Ratio of Earnings to Combined Fixed Charges
                         and Preferred Stock Dividends
                        (In thousands, except ratio data)



                                                Three months ended     Nine months ended
                                                   September 30,         September 30,
                                               --------------------    --------------------
                                                 2003       2002         2003       2002
                                               ---------  ---------    ---------  ---------
                                                                      
Income/(loss) before discontinued operations,
 net of minority interests                     $  12,533  ($  1,113)   $  38,275  $   7,237
Add:
   Portion of rents representative
    of the interest factor                           160        156          493        517
   Minority interests                                330  (     129)       1,338        217
   Interest on indebtedness                       27,829     34,136       88,921     98,222
                                               ---------  ---------    ---------  ---------
      Earnings                                 $  40,852  $  33,050    $ 129,027  $ 106,193
                                               =========  =========    =========  =========
Fixed charges and preferred stock dividend:
   Interest on indebtedness                    $  27,829  $  34,136    $  88,921  $  98,222
   Capitalized interest                            1,030         82        1,355        782
   Portion of rents representative
    of the interest factor                           160        156          493        517
                                               ---------  ---------    ---------  ---------
      Fixed charges                               29,019     34,374       90,769     99,521
                                               ---------  ---------    ---------  ---------
Add:
   Preferred stock dividend                        7,102      6,797       20,580     20,548
   Accretion of preferred stock                   12,100         --       18,350         --
                                               ---------  ---------    ---------  ---------
      Preferred stock dividend                    19,202      6,797       38,930     20,548
                                               ---------  ---------    ---------  ---------
      Combined fixed charges and preferred
       stock dividend                          $  48,221  $  41,171    $ 129,699  $ 120,069
                                               =========  =========    =========  =========
Ratio of earnings to fixed charges                  1.41x        --x        1.42x      1.07x
Ratio of earnings to combined fixed charges
 and preferred stock dividend                         --x        --x          --x        --x


For the three months ended September 30, 2003, the ratio of earnings to combined
fixed charges and preferred stock dividend was deficient of achieving a 1:1
ratio by $7.4 million.

For the three months ended September 30, 2002, the ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and preferred stock
dividend were deficient of achieving a 1:1 ratio by $1.3 million and $8.1
million, respectively.

For the nine months ended September 30, 2003, the ratio of earnings to combined
fixed charges and preferred stock dividend was deficient of achieving a 1:1
ratio by $0.7 million.

For the nine months ended September 30, 2002, the ratio of earnings to combined
fixed charges and preferred stock dividend was deficient of achieving a 1:1
ratio by $13.9 million.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Thomas W. Toomey, Chief Executive Officer and President of United Dominion Realty Trust, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were

made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as

of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) (Reserved)

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003	/s/ THOMAS W. TOOMEY
	Thomas W. Toomey Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Christopher D. Genry, Executive Vice President and Chief Financial Officer of United Dominion Realty Trust, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of United Dominion Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) (Reserved)

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003	/S/    CHRISTOPHER D. GENRY
	Christopher D. Genry Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

In connection with the periodic report of United Dominion Realty Trust, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2003, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas W. Toomey, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: November 12, 2003	/s/  THOMAS W. TOOMEY
	Thomas W. Toomey Chief Executive Officer and President

EX-32.2

EXHIBIT 32.2

CERTIFICATION

In connection with the periodic report of United Dominion Realty Trust, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2003, as filed with the Securities and Exchange Commission (the “Report”), I, Christopher D. Genry, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: November 12, 2003	/s/  CHRISTOPHER D. GENRY
	Christopher D. Genry Executive Vice President and Chief Financial Officer