10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2006

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 1-12002

ACADIA REALTY TRUST

(Exact name of registrant in its charter)

MARYLAND
(State or other jurisdiction of
incorporation or organization)
23-2715194
(I.R.S. Employer
Identification No.)

1311 MAMARONECK AVENUE, SUITE 260, WHITE PLAINS, NY
(Address of principal executive offices)
10605
(Zip Code)

(914) 288-8100

(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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

Large Accelerated Filer     Accelerated Filer       Non-accelerated Filer  

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    Yes        No   

As of August 9, 2006, there were 31,771,544 common shares of beneficial interest, par value $.001 per share, outstanding.

 

ACADIA REALTY TRUST AND SUBSIDIARIES

INDEX

		Page
Part I:	Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005	3
	Consolidated Statements of Income for the three and six months ended June 30, 2006 and 2005	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosure of Market Risk	34
Part II:	Other Information
Item 6.	Exhibits	37
	Signatures	40

2

Part I. Financial Information

Item 1. Financial Statements

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30, 2006			December 31, 2005
	(dollars in thousands)
ASSETS
Real estate:
Land	$	135,720		$	146,240
Buildings and improvements		501,998			584,962
Construction in progress		12,058			4,016
		649,776			735,218
Less: accumulated depreciation		(139,578	)		(135,891	)
Net real estate		510,198			599,327
Cash and cash equivalents		55,114			91,398
Cash in escrow		7,500			7,799
Restricted cash		549			548
Investments in and advances to unconsolidated affiliates		37,658			10,320
Investment in management contracts, net of accumulated amortization of $2,431 and $1,938, respectively		2,745			3,178
Preferred equity investment		—			19,000
Rents receivable, net		8,069			13,505
Notes receivable		57,801			15,733
Prepaid expenses		4,376			5,199
Deferred charges, net		25,556			24,288
Acquired lease intangibles		6,785			8,941
Other assets		18,741			15,786
Assets of discontinued operations		26,099			26,836
	$	761,191		$	841,858
LIABILITIES AND SHAREHOLDERS’ EQUITY
Mortgage notes payable	$	361,890		$	411,000
Accounts payable and accrued expenses		8,901			19,018
Dividends and distributions payable		6,161			6,088
Share of distributions in excess of share of income and investment in unconsolidated affiliates		23,131			10,315
Other liabilities		9,244			14,375
Liabilities of discontinued operations		13,963			14,221
Total liabilities		423,290			475,017
Minority interest in operating partnership		8,357			9,204
Minority interests in partially-owned affiliates		106,541			137,061
Total minority interests		114,898			146,265
Shareholders’ equity:
Common shares		31			31
Additional paid-in capital		223,920			223,199
Accumulated other comprehensive income (loss)		1,861			(12	)
Deficit		(2,809	)		(2,642	)
Total shareholders’ equity		223,003			220,576
	$	761,191		$	841,858

See accompanying notes

3

Part I. Financial Information

Item 1. Financial Statements

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	(dollars in thousands, except per share amounts)
Revenues
Minimum rents	$	17,448		$	19,134		$	35,236		$	37,635
Percentage rents		126			150			311			351
Expense reimbursements		3,480			3,555			7,559			7,929
Other property income		251			175			462			505
Management fee income		1,281			982			2,482			1,557
Interest income		1,907			903			3,653			1,320
Total revenues		24,493			24,899			49,703			49,297
Operating Expenses
Property operating		3,602			4,639			7,652			9,459
Real estate taxes		2,460			2,325			5,259			4,887
General and administrative		4,779			3,820			10,086			6,935
Depreciation and amortization		6,506			6,234			12,904			12,506
Total operating expenses		17,347			17,018			35,901			33,787
Operating income		7,146			7,881			13,802			15,510
Equity in earnings of unconsolidated affiliates		3,028			126			7,140			387
Interest expense		(5,654	)		(4,352	)		(10,839	)		(8,285	)
Minority interest		327			1,050			(754	)		1,251
Income from continuing operations before income taxes		4,847			4,705			9,349			8,863
Income taxes		(363	)		—			(812	)		—
Income from continuing operations		4,484			4,705			8,537			8,863
Discontinued operations:
Operating income from discontinued operations		371			400			677			692
Impairment of real estate		—			(770	)		—			(770	)
Minority interest		(7	)		10			(13	)		5
Income (loss) from discontinued operations		364			(360	)		664			(73	)
Net income	$	4,848		$	4,345		$	9,201		$	8,790
Basic earnings per share
Income from continuing operations	$	0.14		$	0.15		$	0.26		$	0.28
Income (loss) from discontinued operations		0.01			(0.01	)		0.02			—
Basic earnings per share	$	0.15		$	0.14		$	0.28		$	0.28
Diluted earnings per share
Income from continuing operations	$	0.14		$	0.15		$	0.26		$	0.27
Income (loss) from discontinued operations		0.01			(0.01	)		0.02			—
Diluted earnings per common share	$	0.15		$	0.14		$	0.28		$	0.27

See accompanying notes

4

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

(unaudited)

	June 30, 2006			June 30, 2005
	(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,201		$	8,790
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,465			12,338
Minority interests		767			(1,256	)
Equity in earnings of unconsolidated affiliates		(7,140	)		(387	)
Amortization of derivative settlement included in interest expense		218			219
Distributions of operating income from unconsolidated affiliates		6,079			310
Restricted share compensation		2,543			542
Trustee share compensation		75			—
Changes in assets and liabilities:
Cash in escrow		(1,394	)		3
Restricted cash		(1	)		102
Rents receivable		2,887			(4,773	)
Prepaid expenses		30			28
Other assets		(1,840	)		(5,764	)
Accounts payable and accrued expenses		(3,694	)		(208	)
Other liabilities		2,949			889
Net cash provided by operating activities		24,145			10,833
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and improvements		(49,268	)		(31,633	)
Investments in and advances to unconsolidated affiliates		(23,822	)		(1,398	)
Distributions from unconsolidated affiliates		26,758			489
Expenditures for deferred costs		(4,144	)		(3,984	)
Increase in notes receivable		(42,068	)		(6,489	)
Preferred equity investment		19,000			(19,500	)
Net cash used in investing activities		(73,544	)		(62,515	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages		(87,678	)		(6,029	)
Additional borrowings under mortgage notes		107,291			52,000
Dividends paid		(11,956	)		(10,940	)
Increase in dividend payable		73			78
Redemption of Operating Partnership Units		(100	)		—
Minority interest share of Operating Partnership Unit redemption		(146	)		—
Distributions to minority interests in Operating Partnership		(240	)		(256	)
Preferred distributions on Operating Partnership units		(124	)		(178	)
Distributions to minority interests in partially-owned affiliates		(34,225	)		—
Contributions from minority interests in Operating Partnership		40,124			37,303
Exercise of options		43			333
Common Shares issued under Employee Stock Purchase Plan		53			47
Net cash provided by financing activities		13,115			72,358
(Decrease) increase in cash and cash equivalents		(36,284	)		20,676
Cash and cash equivalents, beginning of period		91,398			16,043
Cash and cash equivalents, end of period	$	55,114		$	36,719
Supplemental disclosure of cash flow information:
Cash paid for interest	$	10,971		$	9,189
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of management contract rights through issuance of Preferred Operating Partnership Units	$	—		$	4,000
Increase in share of distributions in excess of share of income and investment in unconsolidated affiliates as a result of the Brandywine recapitalization (Note 2)	$	10,428		$	—

See accompanying notes

5

ACADIA REALTY TRUST

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

Acadia Realty Trust (the “Company”) is a fully integrated and self-managed real estate investment trust (“REIT”) focused primarily on the ownership, acquisition, redevelopment and management of neighborhood and community shopping centers.

All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership” or “OP”) and partnerships in which the OP owns a controlling interest. As of June 30, 2006, the Company controlled 98% of the Operating Partnership as the sole general partner.

In 2001, the Company formed a partnership, Acadia Strategic Opportunity Fund I, LP (“Fund I”), and in 2004 formed a limited liability company, Acadia Mervyn I, LLC (“Mervyns I”), with four institutional investors. The Company committed a total of $20.0 million to Fund I and Mervyns I, and the four institutional shareholders committed $70.0 million, for the purpose of acquiring a total of approximately $300.0 million in investments. As of June 30, 2006, the Company has contributed $16.2 million to Fund I and $2.7 million to Mervyns I.

The Company is the sole general partner or managing member, with a 22% interest in both Fund I and Mervyns I and is also entitled to a profit participation in excess of its invested capital based on certain investment return thresholds. Decisions made by the general partner, as it relates to purchasing, financing, and disposition of properties, are subject to the unanimous disapproval of the Advisory Committee of Fund I, which is comprised of representatives from each of the four institutional investors. Cash flow is distributed pro-rata to the partners (including the Company) until they have received a 9% cumulative return, and the return of all capital contributions. Thereafter, remaining cash flow is to be distributed 80% to the partners (including the Company) and 20% to the Company as a carried interest (“Promote”). Through December 31, 2005, the Company also earned a fee for asset management services equal to 1.5% of the allocated equity in the remaining Fund I assets, as well as market-rate fees for property management, leasing and construction services. Effective January 1, 2006, the Company converted the asset management fee to a priority distribution of the same amount as the fee, which entitles the Company to a special allocation of income equal to the amount of the priority distribution. Thereafter, cash flow is distributed as previously mentioned and the Company continues to earn the market rate property management, leasing and construction fees. Following the recapitalization of the Brandywine Portfolio in January 2006, all capital contributions and the required 9% cumulative preferred return have been distributed to the institutional investors. Accordingly, the Company is now entitled to a Promote on all future earnings and distributions.

In June of 2004, the Company formed a limited liability company, Acadia Strategic Opportunity Fund II, LLC (“Fund II”), and in August 2004 formed another limited liability company, Mervyn II, LLC (“Mervyns II”), with the investors from Fund I as well as two additional institutional investors. With $300.0 million of committed discretionary capital, Fund II and Mervyns II expect to be able to acquire up to $900.0 million of investments on a leveraged basis. The Company’s share of committed capital is $60.0 million. The Company is the sole managing member with 20% interest in the limited liability companies and is also entitled to a profit participation in excess of its invested capital based on certain investment return thresholds. The terms and structure of Fund II are substantially the same as Fund I with the exceptions that the preferred return is 8%. As of June 30, 2006, the Company has contributed $16.2 million to Fund II and $6.7 million to Mervyns II.

2. BASIS OF PRESENTATION

The consolidated financial statements include the consolidated accounts of the Company and its controlling investments in partnerships and limited liability companies, including the Operating Partnership, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Non-controlling investments in partnerships are accounted for under the equity method of accounting as the Company exercises significant influence. The information furnished in the accompanying consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Operating results for the six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2006. For further information refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

6

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. BASIS OF PRESENTATION (continued)

In 2005, the Emerging Issues Task Force (“EITF”) reached a consensus that the general partners in a limited partnership should determine whether they control a limited partnership based on the application of the framework as discussed in EITF 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights”. Under EITF 04-5, the general partners in a limited partnership are presumed to control that limited partnership regardless of the extent of the general partner’s ownership interest in the limited partnership. The assessment of whether the rights of the limited partners should overcome the presumption of control by the general partners is a matter of judgment that depends on facts and circumstances. If the limited partners have either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights, the general partners do not control the limited partnership. EITF 04-5 was effective immediately for new partnerships formed and existing limited partnerships for which the partnership agreements were modified on or after June 29, 2005, and for all other partnerships, EITF 04-5 is effective no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. The provisions of EITF 04-5 may be initially applied through either one of two methods: (1) similar to a cumulative effect of a change in accounting principle or (2) retrospective application. The Company assessed the impact of EITF 04-5 as it related to the method of accounting utilized for its equity investments and determined that its investments in Fund I, Fund II, Mervyns I and Mervyns II which were accounted for under the equity method of accounting, should be consolidated, effective upon adoption of EITF 04-5 on January 1, 2006. The Company utilized the retrospective approach in the application of EITF 04-5 and has presented all historical periods prior to 2006 on a consistent basis with 2006 and thereafter. There was no impact on net income or shareholders’ equity for any of the reported periods in the accompanying consolidated financial statements due to the consolidation of these investments.

On January 4, 2006, Fund I recapitalized its investment in a one million square foot shopping center portfolio located in Wilmington, Delaware (“Brandywine Portfolio”). The recapitalization was effected through the conversion of the 77.8% interest which was previously held by the institutional investors in Fund I to an affiliate of GDC Properties (“GDC”) through a merger of interests in exchange for cash. The Company has retained its existing 22.2% interest in the Brandywine Portfolio in partnership with GDC and continues to operate the portfolio and earn fees for such services.

Pursuant to EITF 04-5, the Company has presented the 2005 financial statements to reflect the consolidation of Fund I, including the Brandywine Portfolio which, at the time, was a wholly-owned investment of Fund I. Following the January 2006 recapitalization of the Brandywine Portfolio, the Company no longer has a controlling interest in this investment and, accordingly, currently accounts for this investment under the equity method of accounting.

3. EARNINGS PER COMMON SHARE

Basic earnings per share was determined by dividing net income for the period by the weighted average number of common shares of beneficial interest (“Common Shares”) outstanding during each period consistent with Statement of Financial Accounting Standards (“SFAS”) No. 128 “Earnings Per Share”. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Shares were exercised or converted into Common Shares or resulted in the issuance of Common Shares that then shared in the earnings of the Company. The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the periods indicated.

	Three months ended June 30,				Six months ended June 30,
	2006		2005		2006		2005
	(dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations – basic and diluted	$	4,484	$	4,705	$	8,537	$	8,863
Denominator:
Weighted average shares – basic earnings per share		32,509		31,899		32,489		31,883
Effect of dilutive securities:
Employee stock options		302		246		300		259
Denominator for diluted earnings per share		32,811		32,145		32,789		32,142
Basic earnings per share from continuing operations	$	0.14	$	0.15	$	0.26	$	0.28
Diluted earnings per share from continuing operations	$	0.14	$	0.15	$	0.26	$	0.27

7

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. EARNINGS PER COMMON SHARE (continued)

The effect of the conversion of common units in the Operating Partnership (“Common OP Units”) is not reflected in the above table as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as minority interest in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share. The effect of the conversion of Series A and B Preferred OP Units (“Preferred OP Units”) which would result in 337,079 and 522,679 additional Common Shares for each of the three and six months ended June 30, 2006 and 2005, respectively, is not reflected in the above table as such conversions would be anti-dilutive.

4. COMPREHENSIVE INCOME

The following table sets forth comprehensive income for the three and six months ended June 30, 2006 and 2005:

	Three months ended June 30,					Six months ended June 30,
	2006		2005			2006		2005
	(dollars in thousands)
Net income	$	4,848	$	4,345		$	9,201	$	8,790
Other comprehensive income (loss) 1		775		(1,419	)		1,873		623
Comprehensive income	$	5,623	$	2,926		$	11,074	$	9,413

Notes:

1 Relates to the changes in the fair value of derivative instruments accounted for as cash flow hedges.

	(dollars in thousands)
Accumulated other comprehensive income (loss)
Balance at December 31, 2005		$	(12	)
Unrealized gain on valuation of swap and cap agreements			1,873
Balance at June 30, 2006		$	1,861

As of June 30, 2006 the balance in accumulated other comprehensive income was comprised of unrealized gains on the valuation of current swap and cap agreements.

8

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. SHAREHOLDERS’ EQUITY AND MINORITY INTERESTS

The following table summarizes the change in the shareholders’ equity and minority interests since December 31, 2005:

	Shareholders’ Equity			Minority Interest in Operating Partnership			Minority Interest in partially- owned Affiliates
	(dollars in thousands)
Balance at December 31, 2005	$	220,576		$	9,204		$	137,061
Dividends and distributions declared of $0.37 per Common Share and Common OP Unit		(11,956	)		(240	)		—
Net income for the period January 1 through June 30, 2006		9,201			198			569
Distributions paid		—			—			(71,088	)
Conversion of Series A Preferred OP Units		696			(696	)		—
Acquisition of partnership interest		—			—			2,246
Other comprehensive income – Unrealized gain on valuation of swap agreements		1,655			37			—
Other comprehensive income – adjustment of swap value included in net income		218			—			—
Employee stock-based compensation		2,595			—			—
Exercise of Options		43			—			—
Redemption of 11,105 Restricted Common OP Units		(101	)		(146	)		—
Issuance of Common Stock to Trustees		76			—			—
Minority Interest contributions		—			—			37,753
Balance at June 30, 2006	$	223,003		$	8,357		$	106,541

Notes:

Minority interest in the Operating Partnership represents (i) the limited partners’ interest of 642,272 and 653,360 Common OP Units at June 30, 2006 and December 31, 2005, respectively, (ii) 188 and 884 Series A Preferred OP Units at June 30, 2006 and December 31, 2005, respectively, with a nominal value of $1,000 per unit, which are entitled to a preferred quarterly distribution of the greater of (a) $22.50 per unit (9% annually) per Series A Preferred OP Unit or (b) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit were converted into a Common OP Unit, and (iii) 4,000 Series B Preferred OP Units at June 30, 2006 and December 31, 2005, respectively, with a nominal value of $1,000 per unit, which are entitled to a preferred quarterly distribution of the greater of (a) $13.00 (5.2% annually) per unit or (b) the quarterly distribution attributable to a Series B Preferred OP Unit if such unit were converted into a Common OP Unit.

During the first quarter of 2006, holders of 696 Series A Preferred OP Units converted these into Common OP Units and ultimately into Common Shares.

During the second quarter of 2006, the Company redeemed 11,105 Restricted Common OP Units issued during July 2005 in connection with the purchase of 4343 Amboy Road.

Minority interests in partially-owned partnerships represent third-party interests. During January 2006, Fund I recapitalized the Brandywine Portfolio, and as a result, $35.5 million was distributed to the institutional investors in Fund I. During the six months ended June 30, 2006, minority interests in Mervyns I and Mervyns II received distributions of $16.5 million and $18.4 million, respectively. In the second quarter of 2006, minority interests in Fund II and Mervyns II made contributions of $20.8 million and $17.0 million, respectively. During January 2006, the Company acquired a 60% interest in the A&P Shopping Plaza located in Boonton, New Jersey, as discussed in Note 6. The remaining 40% interest is owned by a third party and is reflected as minority interest in the accompanying Consolidated Balance Sheet as of June 30, 2006.

9

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. PROPERTY ACQUISITIONS

On January 12, 2006, the Company closed on a 19,265 square foot retail building in the Lincoln Park district in Chicago. The property was acquired from an affiliate of Klaff for a purchase price of $9.9 million, including the assumption of existing mortgage debt in the principal amount of $3.8 million.

On January 24, 2006, the Company acquired a 60% interest in the A&P Shopping Plaza located in Boonton, New Jersey. The property, which is 100% occupied and located in northeastern New Jersey, is a 63,000 square foot shopping center anchored by a 49,000 square foot A&P Supermarket. A portion of the remaining 40% interest is owned by a principal of P/A Associates, LLC (“P/A”). The interest was acquired for $3.2 million. There is an existing first mortgage debt of $8.7 million encumbering the property.

On June 16, 2006, the Company purchased 8400 and 8625 Germantown Road in Philadelphia, Pennsylvania for $16.0 million. The Company assumed a $10.1 million first mortgage loan which has a maturity date of June 11, 2013. The 40,570 square foot property is 100% occupied.

7. INVESTMENTS

A. Investments In and Advances to Unconsolidated Affiliates

	June 30, 2006											December 31, 2005
	Mervyns (1)		Brandywine Portfolio			Other Investments			Total			Total
	(dollars in thousands)
Balance Sheets
Assets:
Rental property, net	$	—	$	125,416		$	46,777		$	172,193		$	165,024
Investment in unconsolidated affiliates		393,955		—			—			393,955			9,401
Other assets		—		6,165			12,757			18,922			17,181
Total assets	$	393,955	$	131,581		$	59,534		$	585,070		$	191,606
Liabilities and partners’ equity
Mortgage note payable	$	—	$	166,200		$	87,234		$	253,434		$	150,462
Other liabilities		—		13,069			7,718			20,787			54,544
Partners equity (deficit)		393,955		(47,688	)		(35,418	)		310,849			(13,400	)
Total liabilities and partners’ equity	$	393,955	$	131,581		$	59,534		$	585,070		$	191,606
Company’s investment in unconsolidated affiliates	$	25,467	$	—		$	12,191		$	37,658		$	10,320
Share of distributions in excess of share of income and investment in unconsolidated affiliates	$	—	$	(12,444	)	$	(10,687	)	$	(23,131	)	$	(10,315	)

(1) Represents the Company’s investment in unconsolidated affiliates through its RCP Venture investments.

10

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS (continued)

	Three Months Ended
	June 30, 2006								June 30, 2005 (2)
	Mervyns (1)		Brandywine Portfolio		Other Investments		Total		Total
	(dollars in thousands)
Statements of Operations:
Total revenue	$	—	$	4,591	$	3,726	$	8,317	$	2,643
Operating and other expenses		—		1,145		1,227		2,372		809
Interest expense		—		1,965		1,347		3,312		999
Equity in earnings of affiliates		23,852		—		—		23,852		—
Depreciation and amortization		—		784		417		1,201		158
Net income	$	23,852	$	697	$	735	$	25,284	$	677
Company’s share of net income	$	2,414	$	269	$	345	$	3,028	$	126

	Six Months Ended
	June 30, 2006									June 30, 2005 (2)
	Mervyns (1)		Brandywine Portfolio			Other Investments		Total		Total
	(dollars in thousands)
Statements of Operations:
Total revenue	$	—	$	9,105		$	6,814	$	15,919	$	5,351
Operating and other expenses		—		2,359			2,555		4,914		1,484
Interest expense		—		6,974			2,451		9,425		2,184
Equity in earnings of affiliates		55,414		—			—		55,414		—
Depreciation and amortization		—		1,508			840		2,348		320
Net income (loss)	$	55,414	$	(1,736	)	$	968	$	54,646	$	1,363
Company’s share of net income	$	5,730	$	991		$	419	$	7,140	$	387

(1) Represents the Company’s investment in unconsolidated affiliates through its RCP Venture investments.

(2) The Brandywine Portfolio was consolidated with Fund I for the three and six months ended June 30, 2005. There were no Mervyns or Albertsons activity for the three and six months ended June 30, 2005.

11

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS (continued)

Retailer Controlled Property Venture

On January 27, 2004, the Company entered into the Retailer Controlled Property Venture (“RCP Venture”) with Klaff Realty, L.P. (“Klaff”) and Klaff’s long-time capital partner Lubert-Adler Management, Inc. (“Lubert-Adler”) for the purpose of making investments in surplus or underutilized properties owned by retailers. On September 2, 2004, affiliates of Fund I and Fund II, through separately organized, newly formed limited liability companies on a non-recourse basis, invested in the acquisition of Mervyns through the RCP Venture, which, as part of an investment consortium of Sun Capital and Cerebus, acquired Mervyns from Target Corporation. The total acquisition price was $1.2 billion, with such affiliates’ combined $23.5 million share of the investment divided equally between them. The Company’s share of the Mervyns investment totaled $5.0 million. For the six months ended June 30, 2006, the Company’s share of net income from the investments made through the RCP Venture amounted to $5.7 million.

During June of 2006, the RCP Venture made its second investment with its participation in the acquisition of Albertson’s. Affiliates of Fund II, through the same limited liability companies which were formed for the investment in Mervyns, invested $21.2 million in the acquisition of Albertson’s through the RCP Venture, along with others as part of an investment consortium. The Company’s share of the invested capital was $4.2 million.

Brandywine Portfolio

On January 4, 2006, the institutional investors of Fund I merged their 77.8% interest in the Brandywine Portfolio into affiliates of GDC in exchange for cash. The Company merged its 22.2% share of the Brandywine Portfolio into affiliates of GDC in exchange for a 22.2% interest in such affiliates. Prior to the closing of this transaction, the Company provided $17.6 million of mortgage financing secured by certain properties within the Brandywine Portfolio. This financing was repaid in June 2006. For the six months ended June 30, 2006, the Company’s share of net income of $1.0 million included $1.1 million for reimbursement of the Company’s share of certain fees incurred by the Brandywine Portfolio by the institutional investors of Fund I. As of June 30, 2006, the Company’s share of distributions in excess of its share of income and investment in Brandywine amounted to $12.4 million.

Fund I Investments

Fund I has joint ventures with third party investors in the ownership and operation of Hitchcock Plaza, Pine Log Plaza, Sterling Heights Shopping Center, Haygood Shopping Center, and Tarrytown Centre. The Hitchcock Plaza is a 235,000 square foot shopping center located in Aiken, South Carolina. Adjacent to the Hitchcock Plaza is the 35,000 square foot Pine Log Plaza. Sterling Heights Shopping Center, is a 155,000 square foot community shopping center located in Detroit, Michigan. Haygood Shopping Center is a 162,000 square foot center located in Virginia Beach, Virginia. Lastly, the 35,000 square foot Tarrytown Centre is located in Westchester, New York. These properties are accounted for using the equity method of accounting.

Crossroads

The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads II Joint Venture (collectively “Crossroads”), which collectively own a 311,000 square foot shopping center in White Plains, New York. The Company accounts for Crossroads using the equity method of accounting. As of June 30, 2006, the Company’s share of distributions in excess of its share of income and investment in Crossroads amounted to $10.7 million.

12

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS (continued)

B. Preferred Equity Investment

In March of 2005, the Company invested $20.0 million in a preferred equity position (“Preferred Equity Investment”) with Levitz SL, L.L.C. (“Levitz SL”), the owner of fee and leasehold interests in 30 locations (the “Properties”) totaling 2.5 million square feet, of which the majority are currently leased to Levitz Furniture Stores. Klaff Realty L.P. (“Klaff”) is a managing member of Levitz SL. The Preferred Equity Investment received a return of 10%, plus a minimum return of capital of $2.0 million per annum. During March 2006, the rate of return was reset to the six-month LIBOR plus 644 basis points or approximately 11.5%. In October 2005, Levitz Furniture filed for bankruptcy under Chapter 11.

On June 1, 2006, the Company converted the Preferred Equity Investment to a mortgage loan in the amount of $31.3 million. The loan has a maturity date of May 31, 2008 and has an interest rate of 10.5%. The loan is secured by fee and leasehold mortgages as well as a pledge of the entities owning 19 of the above remaining locations totaling 1.8 million square feet. Management believes that the underlying value of the real estate is sufficient to recover the mortgage and accordingly, no reserve is required at June 30, 2006.

8. DERIVATIVE FINANCIAL INSTRUMENTS

The following table summarizes the notional values and fair values of the Company’s derivative financial instruments as of June 30, 2006. The notional value does not represent exposure to credit, interest rate or market risks.

Hedge Type	Notional Value		Interest Rate		Forward Start Date	Interest Maturity	Fair Value
	(dollars in thousands)
Current Interest Rate Swaps:
LIBOR Swap	$	36,111	4.35	%	n/a	1/1/11	$	1,516
LIBOR Swap		20,000	4.53	%	n/a	10/1/06		45
LIBOR Swap		15,023	4.32	%	n/a	1/1/07		89
LIBOR Swap		11,621	4.11	%	n/a	1/1/07		81
LIBOR Swap		8,657	4.47	%	n/a	6/1/07		80
	$	91,412
Forward-starting Interest Rate Swaps:
LIBOR Swap	$	4,640	4.71	%	1/1/10	1/10/11		101
LIBOR Swap		11,410	4.90	%	10/2/06	10/1/11		285
LIBOR Swap		8,434	5.14	%	6/1/07	3/1/12		114
	$	24,484
Interest Rate Caps:
LIBOR Cap	$	30,000	6.00	%	n/a	4/1/08		10
Derivatives receivable (1)							$	2,321

⁽¹⁾ The derivatives receivable is included in Other Assets in the Consolidated Balance Sheets.

13

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. MORTGAGE LOANS

Due to the adoption of EITF 04-5 (Note 2), all of the Fund I and Fund II loans are now included as part of the Company’s consolidated mortgage indebtedness.

On January 12, 2006, in conjunction with the purchase of a property, the Company assumed a loan of $3.8 million which bears interest at a fixed rate of 8.5%.

On January 18, 2006, the Company drew an additional $1.8 million on an existing credit facility. On April 21, 2006, the Company paid down $15.0 million on this facility. On June 1, 2006, the Company drew an additional $19.2 million on this facility. On June 22, 2006 the entire existing balance of $30.4 million was paid off by the Company.

On January 24, 2006, in conjunction with the purchase of a partnership interest, the Company assumed a loan of $8.7 million which bears interest at a fixed rate of 6.4%.

On February 22, 2006, the Company financed a property within its existing portfolio for $20.5 million. This loan bears interest at a fixed rate of 5.4%. A portion of the proceeds were used to pay down $10.9 million on an existing credit facility.

On March 27, 2006, the Company refinanced a property for $30.0 million. This loan bears interest at LIBOR plus 140 basis points. A portion of the proceeds were used to pay down the existing $12.1 million of debt on this property.

On May 31, 2006, the Company borrowed an additional $13.0 million on an existing $65.0 million revolving credit facility. This additional draw was repaid on June 30, 2006. The existing balance as of June 30, 2006 is $22.0 million.

On June 16, 2006, in conjunction with the purchase of a property, the Company assumed a loan of $10.1 million which bears interest at a fixed rate of 5.45%.

10. RELATED PARTY TRANSACTIONS

In February 2005, the Company issued $4.0 million of Restricted Common OP Units to Klaff for the balance of certain management contract rights as well as the rights to certain potential future revenue streams.

In June 2006, the Company converted its Preferred Equity Investment with Levitz SL, in which Klaff has an interest, into a mortgage loan (Note 7).

The Company also earns fees in connection with its rights to provide asset management, leasing, disposition, development and construction services for an existing portfolio of retail properties and/or leasehold interests in which Klaff has an interest. Net fees earned by the Company in connection with this portfolio were $1.0 million for the three months ended June 30, 2006 and 2005, respectively, and $2.1 million and $1.6 million for the six months ended June 30, 2006 and 2005, respectively. The amount is net of the payment of sub-management fees to Klaff of $0.3 million for the six months ended June 30, 2005.

Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $25,000 for the three months ended June 30, 2006 and 2005, respectively, and $50,000 for the six months ended June 30, 2006 and 2005, respectively.

14

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. SEGMENT REPORTING

The Company has two reportable segments: retail properties and multi-family properties. The accounting policies of the segments are the same as those described in the summary of significant accounting policies as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. The reportable segments are managed separately due to the differing nature of the leases and property operations associated with the retail versus residential tenants. The following tables set forth certain segment information for the Company for continuing operations for the three and six months ended June 30, 2006 and 2005 and does not include activity related to unconsolidated partnerships:

	Six months ended June 30, 2006
	Retail Properties			Multi-Family Properties		All Other		Total
	(dollars in thousands)
Revenues	$	39,568		$	4,000	$	6,135	$	49,703
Property operating expenses and real estate taxes		10,824			2,087		—		12,911
Other expenses		7,830			1,014		1,242		10,086
Net property income before depreciation, amortization and certain nonrecurring items	$	20,914		$	899	$	4,893	$	26,706
Depreciation and amortization	$	11,917		$	753	$	234	$	12,904
Interest expense	$	10,110		$	729	$	—	$	10,839
Real estate at cost	$	607,771		$	42,005	$	—	$	649,776
Total assets	$	722,186		$	39,005	$	—	$	761,191
Expenditures for real estate and improvements	$	48,897		$	371	$	—	$	49,268
Reconciliation to net income
Net property income before depreciation and amortization	$	26,706
Depreciation and amortization		(12,904	)
Income from discontinued operations		664
Equity in earnings of unconsolidated affiliates		7,140
Interest expense		(10,839	)
Income taxes		(812	)
Minority interest		(754	)
Net income	$	9,201

15

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. SEGMENT REPORTING (continued)

	Three months ended June 30, 2006
	Retail Properties			Multi-Family Properties		All Other		Total
	(dollars in thousands)
Revenues	$	19,341		$	1,964	$	3,188	$	24,493
Property operating expenses and real estate taxes		5,030			1,032		—		6,062
Other expenses		3,572			585		622		4,779
Net property income before depreciation, amortization and certain nonrecurring items	$	10,739		$	347	$	2,566	$	13,652
Depreciation and amortization	$	6,012		$	377	$	117	$	6,506
Interest expense	$	5,279		$	375	$	—	$	5,654
Real estate at cost	$	607,771		$	42,005	$	—	$	649,776
Total assets	$	722,186		$	39,005	$	—	$	761,191
Expenditures for real estate and improvements	$	48,129		$	232	$	—	$	48,361
Reconciliation to net income
Net property income before depreciation and amortization	$	13,652
Depreciation and amortization		(6,506	)
Income from discontinued operations		364
Equity in earnings of unconsolidated affiliates		3,028
Interest expense		(5,654	)
Income taxes		(363	)
Minority interest		327
Net income	$	4,848

16

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. SEGMENT REPORTING (continued)

	Six months ended June 30, 2005
	Retail Properties			Multi-Family Properties		All Other		Total
	(dollars in thousands)
Revenues	$	42,648		$	3,772	$	2,877	$	49,297
Property operating expenses and real estate taxes		12,444			1,902		—		14,346
Other expenses		5,846			673		416		6,935
Net property income before depreciation, amortization and certain nonrecurring items	$	24,358		$	1,197	$	2,461	$	28,016
Depreciation and amortization	$	11,566		$	723	$	217	$	12,506
Interest expense	$	7,666		$	619	$	—	$	8,285
Real estate at cost	$	613,045		$	41,060	$	—	$	654,105
Total assets	$	681,136		$	40,314	$	—	$	721,450
Expenditures for real estate and improvements	$	31,188		$	445	$	—	$	31,633
Reconciliation to net income
Net property income before depreciation and amortization	$	28,016
Depreciation and amortization		(12,506	)
(Loss) from discontinued operations		(73	)
Equity in earnings of unconsolidated affiliates		387
Interest expense		(8,285	)
Minority interest		1,251
Net income	$	8,790

17

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. SEGMENT REPORTING (continued)

	Three months ended June 30, 2005
	Retail Properties			Multi-Family Properties		All Other		Total
	(dollars in thousands)
Revenues	$	21,118		$	1,896	$	1,885	$	24,899
Property operating expenses and real estate taxes		6,036			928		—		6,964
Other expenses		3,098			433		289		3,820
Net property income before depreciation, amortization and certain nonrecurring items	$	11,984		$	535	$	1,596	$	14,115
Depreciation and amortization	$	5,759		$	363	$	112	$	6,234
Interest expense	$	4,036		$	316	$	—	$	4,352
Real estate at cost	$	613,045		$	41,060	$	—	$	654,105
Total assets	$	681,136		$	40,314	$	—	$	721,450
Expenditures for real estate and improvements	$	27,995		$	224	$	—	$	28,219
Reconciliation to net income
Net property income before depreciation and amortization	$	14,115
Depreciation and amortization		(6,234	)
(Loss) from discontinued operations		(360	)
Equity in earnings of unconsolidated affiliates		126
Interest expense		(4,352	)
Minority interest		1,050
Net income	$	4,345

18

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. DISCONTINUED OPERATIONS

SFAS No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”) requires discontinued operations presentation for disposals of a “component” of an entity. In accordance with SFAS No. 144, the Company reflects the income and expenses and assets and liabilities for properties which became held for sale, as discontinued operations.

The combined results of operations of either sold properties or properties held for sale are reported separately as discontinued operations for the three and six months ended June 30, 2006 and 2005. These are related to the Soundview Marketplace and Bradford Towne Centre which the Company was marketing for sale as of June 30, 2006. The three and six months ended June 30, 2005 also included the Berlin Shopping Center, which was sold on July 7, 2005.

The combined results of operations and assets and liabilities of the properties classified as discontinued operations are summarized as follows:

	June 30, 2006		December 31, 2005
	(dollars in thousands)
ASSETS
Net real estate	$	23,659	$	24,002
Cash and cash equivalents		—		9
Cash in escrow		144		292
Rents receivable, net		1,647		1,801
Prepaid expenses		176		165
Deferred charges, net		467		561
Other assets		6		6
Total assets of discontinued operations	$	26,099	$	26,836
LIABILITIES
Mortgage notes payable	$	13,666	$	13,800
Accounts payable and accrued expenses		55		177
Other liabilities		242		244
Total liabilities of discontinued operations	$	13,963	$	14,221

	For the three months ended June 30,						For the six months ended June 30,
	2006			2005			2006			2005
	(dollars in thousands)
Total revenues	$	1,759		$	1,796		$	3,427		$	3,795
Total expenses		1,388			1,396			2,750			3,103
		371			400			677			692
Impairment of real estate		—			(770	)		—			(770	)
Minority interest		(7	)		10			(13	)		5
Income (loss) from discontinued operations	$	364		$	(360	)	$	664		$	(73	)

19

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. STOCK-BASED COMPENSATION

The Company adopted the fair value method of recording stock-based compensation contained in SFAS No. 123R, “Accounting for Stock-Based Compensation” as of January 1, 2002. As such, stock based compensation awards granted after December 31, 2001 have been expensed over the vesting period based on the fair value at the date the stock-based compensation was granted.

On January 6, 2006 (the “Grant Date”), the Company issued 62,630 options to officers (“Officers”) and employees (“Employees”) of the Company. The options, which have an exercise price of $20.65, are for ten-year terms and vest one third as of the Grant Date and one third on each of the next two anniversaries thereof. The Company has determined a value of $3.03 per option using the binomial method for valuing such options. In prior periods, the Company utilized the Black-Scholes method for valuing options granted and believes that the binomial method more accurately reflects the value of the options. This change had no material effect on the value of the unvested options or the Company’s consolidated financial statements. Accordingly, compensation expense of $12,000 and $91,000 has been recognized in the accompanying consolidated financial statements related to the options for the three and six months ended June 30, 2006.

On the Grant Date, the Company also issued a total of 121,233 Restricted Common Shares (“Restricted Shares”) to Officers and 13,136 Restricted Shares (net of subsequent forfeitures) to Employees of the Company. In general, the Restricted Shares carry all the rights of Common Shares including voting and dividend rights, but may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Vesting with respect to the Restricted Shares issued to Officers, which is subject to the recipients’ continued employment with the Company through the applicable vesting dates, is over five years with 30% vesting on the Grant Date and 17.5% vesting on each of the next four anniversaries thereafter. In addition, vesting on 50% of the unvested Restricted Shares is also subject to certain total shareholder returns on the Company’s Common Shares. Vesting with respect to the Restricted Shares issued to Employees, which is subject to the recipients’ continued employment with the Company through the applicable vesting dates, is over five years with 30% vesting on the Grant Date and 17.5% vesting on each of the next four anniversaries thereafter. In addition, vesting on 25% of the unvested Restricted Shares is also subject to certain total shareholder returns on the Company’s Common Shares.

The total value of the above Restricted Share awards on the date of grant was $2.7 million, of which $2.0 million will be recognized in compensation expense over the vesting period. Compensation expense of $0.1 million and $0.8 million has been recognized in the accompanying consolidated financial statements related to these Restricted Shares for the three and six months ended June 30, 2006.

On the Grant Date, the Company also issued a total of 224,901 Restricted Shares to Officers and 28,706 Restricted Shares to Employees in connection with a special, one-time performance bonus recognizing management’s outstanding achievements in enhancing shareholder values over the past five years, including, but not limited to, total shareholder return and the recent recapitalization of the Brandywine Portfolio. The Restricted Shares will vest over a period of five years with 50% vesting on the third anniversary and 25% vesting on the following two anniversaries of the Grant Date. The total value of this special bonus was $5.1 million and is being recognized in compensation expense over the vesting period. Compensation expense of $0.3 million and $0.5 million has been recognized in the accompanying consolidated financial statements related to this special bonus for the three and six months ended June 30, 2006.

On May 15, 2006, the Company issued 18,000 options and 4,801 unrestricted shares to Trustees of the Company in connection with Trustee fees. The options vest immediately. Trustee fee expense of $159,000 has been recognized in the accompanying consolidated financial statements related to these options and unrestricted shares.

14. DIVIDENDS AND DISTRIBUTIONS PAYABLE

On May 15, 2006, the Board of Trustees of the Company approved and declared a cash dividend for the quarter ended June 30, 2006 of $0.185 per Common Share and Common OP Unit. The dividend was paid on July 14, 2006 to shareholders of record as of June 30, 2006.

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is based on the consolidated financial statements of the Company as of June 30, 2006 and 2005 and for the three months then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements. Such factors are set forth in our Form 10-K for the year ended December 31, 2005 and include, among others, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability and creditworthiness of prospective tenants, lease rents and the availability of financing; adverse changes in our real estate markets, including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environmental/safety requirements.

OVERVIEW

We currently operate 76 properties, which we own or have an ownership interest in, consisting of 74 neighborhood and community shopping centers and two multi-family properties, which are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States. We receive income primarily from the rental revenue received from tenants at our properties, including recoveries, offset by operating and overhead expenses.

Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:

– Own and operate a portfolio of community and neighborhood shopping centers and mixed-use properties with a retail component located in markets with strong demographics.

– Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth.

– Generate internal growth within the portfolio through aggressive redevelopment, re-anchoring and leasing activities.

– Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions.

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the significant judgments and estimates used by us in the preparation of our consolidated financial statements.

Valuation of Property Held for Use and Sale

On a quarterly basis, we review both properties held for use and for sale for indicators of impairment. We record impairment losses and reduce the carrying value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where we do not expect to recover our carrying costs on properties held for use, we reduce our carrying cost to fair value, and for properties held for sale, we reduce our carrying value to the fair value less costs to sell. Management does not believe that the value of any properties in our portfolio was impaired as of June 30, 2006.

21

Bad Debts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make payments on arrearages in billed rents, as well as the likelihood that tenants will not have the ability to make payment on unbilled rents including estimated expense recoveries and straight-line rent. As of June 30, 2006, we have recorded an allowance for doubtful accounts of $2.4 million. If the financial condition of our tenants were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

RESULTS OF OPERATIONS

Comparison of the three months ended June 30, 2006 (“2006”) to the three months ended June 30, 2005 (“2005”)

Effective January 1, 2006, we account for our Funds I and II and Mervyns I and II investments on a consolidated basis pursuant to EITF 04-5. Historic results for the three and six months ended June 30, 2005 have also been presented on a consolidated basis for purposes of comparability with 2006.

In addition, the Brandywine Portfolio operations were consolidated as part of Fund I for the three and six months ended June 30, 2005. Subsequent to the recapitalization and conversion of interests from Fund I to GDC in January 2006, the Brandywine Portfolio is accounted for under the equity method of accounting for the three and six months ended June 30, 2006. In the following tables, we have excluded the Brandywine Portfolio operations for the three and six months ended June 30, 2005 for purposes of comparability with the three and six months ended June 30, 2006.

										Change
(dollars in millions)	2006		2005 As Reported		Brandywine Portfolio			2005 Adjusted		$		%
Revenues:
Minimum rents	$	17.4	$	19.1	$	(3.3	)	$	15.8	$	1.6	10	%
Percentage rents		0.1		0.1		—			0.1		—	—
Expense reimbursements		3.5		3.6		(0.6	)		3.0		0.5	17	%
Other property income		0.3		0.2		—			0.2		0.1	50	%
Management fee income		1.3		1.0		0.1			1.1		0.2	18	%
Interest income		1.9		0.9		—			0.9		1.0	111	%
Total revenues	$	24.5	$	24.9	$	(3.8	)	$	21.1	$	3.4	16	%

The increase in minimum rents was attributable to additional rents following our acquisition of Amboy Shopping Center, Clark and Diversey and A&P Shopping Plaza as well as Fund II acquisitions of 161st Street in New York and a leasehold interest in Chicago (“2005/2006 Acquisitions”).

Common area maintenance (“CAM”) expense reimbursement increased $0.1 million as a result of the 2005/2006 Acquisitions. Real estate tax reimbursements increased $0.4 million, primarily as a result of the 2005/2006 Acquisitions as well as general increases in real estate taxes.

Management fee income increased as a result of an increase in management fees related to the acquisition of the Klaff management contract rights in January 2004 and February 2005.

The increase in interest income was attributable to additional interest income on our advances and notes receivable originated in 2005 and 2006.

22

										Change
(dollars in millions)	2006		2005 As Reported		Brandywine Portfolio			2005 Adjusted		$			%
Operating Expenses:
Property operating	$	3.6	$	4.7	$	(0.8	)	$	3.9	$	(0.3	)	(8	)%
Real estate taxes		2.5		2.3		(0.2	)		2.1		0.4		19	%
General and administrative		4.8		3.8		—			3.8		1.0		26	%
Depreciation and amortization		6.5		6.2		(0.6	)		5.6		0.9		16	%
Total operating expenses	$	17.4	$	17.0	$	(1.6	)	$	15.4	$	2.0		13	%

The decrease in property operating expenses was primarily the result of the write-off of abandoned project costs in 2005 and higher bad debt expense in 2005. These decreases were offset by increased property operating expenses following the 2005/2006 Acquisitions.

The increase in real estate taxes was due to general increases in real estate taxes experienced across the portfolio as well as increased real estate tax expense related to the 2005/2006 Acquisitions.

The increase in general and administrative expense was attributable to increased compensation expense of $0.9 million, including stock-based compensation of $0.4 million, following the expansion of our infrastructure related to increased activity in Fund assets and asset management services.

Depreciation expense increased $0.4 million in 2006. This was principally a result of increased depreciation expense following the 2005/2006 Acquisitions. Amortization expense increased $0.5 million which was primarily the result of the 2005/2006 Acquisitions, specifically, amortization of tenant installation costs of $0.3 million and amortization of leasehold interest of $0.2 million.

												Change
(dollars in millions)	2006			2005 As Reported			Brandywine Portfolio		2005 Adjusted			$			%
Other:
Equity in earnings of unconsolidated affiliates	$	3.0		$	0.1		$	0.4	$	0.5		$	2.5		500	%
Interest expense		(5.7	)		(4.4	)		1.0		(3.4	)		(2.3	)	(68	)%
Minority interest		0.3			1.1			1.1		2.1			(1.8	)	(85	)%
Income taxes		(0.4	)		—			—		—			(0.4	)	(100	)%
Income from discontinued operations		0.4			(0.4	)		—		(0.4	)		0.8		200	%

Equity in earnings of unconsolidated affiliates increased primarily as a result of our pro rata share of earnings and gains on sale from its Mervyns investments of $2.4 million.

Interest expense increased $2.1 million as a result of higher average outstanding borrowings in 2006, $0.1 million resulting from higher average interest rates on the portfolio mortgage debt in 2006 as well as lower capitalized interest of $0.1 million in 2006.

Minority interest variance is attributable to the consolidation of our Fund investments.

Income taxes in 2006 relate to income taxes on our share of the gain, through our investment funds, from the sale of certain Mervyns locations in the second quarter of 2006.

Income from discontinued operations represents activity related to properties held for sale in 2006 and properties sold in 2005.

23

RESULTS OF OPERATIONS

Comparison of the six months ended June 30, 2006 (“2006”) to the six months ended June 30, 2005 (“2005”)

										Change
(dollars in millions)	2006		2005 As Reported		Brandywine Portfolio			2005 Adjusted		$		%
Revenues:
Minimum rents	$	35.2	$	37.6	$	(6.5	)	$	31.1	$	4.1	13	%
Percentage rents		0.3		0.4		(0.1	)		0.3		—	—
Expense reimbursements		7.5		7.9		(1.2	)		6.7		0.8	12	%
Other property income		0.5		0.5		—			0.5		—	—
Management fee income		2.5		1.6		0.3			1.9		0.6	32	%
Interest income		3.7		1.3		—			1.3		2.4	185	%
Total revenues	$	49.7	$	49.3	$	(7.5	)	$	41.8	$	7.9	19	%

The increase in minimum rents was attributable to the 2005/2006 Acquisitions and re-tenanting activities and increased occupancy across the portfolio.

Common area maintenance (“CAM”) expense reimbursement increased $0.1 million as a result of higher tenant reimbursements following the 2005/2006 Acquisitions offset by a decrease in tenant reimbursements as a result of lower snow removal costs in 2006. Real estate tax reimbursements increased $0.7 million, primarily as a result of the 2005/2006 Acquisitions as well as general increases in real estate taxes and re-tenanting activities throughout the portfolio.

Management fee income increased as a result of an increase in management fees related to the acquisition of the Klaff management contract rights in January 2004 and February 2005.

The increase in interest income was a combination of additional interest income on our advances and notes receivable originated in 2005 and 2006 and additional interest income earned from our investment in Levitz in March 2005.

24

										Change
(dollars in millions)	2006		2005 As Reported		Brandywine Portfolio			2005 Adjusted		$			%
Operating Expenses:
Property operating	$	7.7	$	9.5	$	(1.7	)	$	7.8	$	(0.1	)	(1	)%
Real estate taxes		5.2		4.9		(0.4	)		4.5		0.7		16	%
General and administrative		10.1		6.9		—			6.9		3.2		46	%
Depreciation and amortization		12.9		12.5		(1.2	)		11.3		1.6		14	%
Total operating expenses	$	35.9	$	33.8	$	(3.3	)	$	30.5	$	5.4		18	%

The decrease in property operating expenses was primarily the result of lower snow removal costs during 2006 offset by the recovery of approximately $0.5 million related to the settlement of our insurance claim in connection with the flood damage incurred at the Mark Plaza in 2005 and increased property operating expenses related to the 2005/2006 Acquisitions.

The increase in real estate taxes was due to general increases in real estate taxes experienced across the portfolio as well as increased real estate tax expense related to the 2005/2006 Acquisitions.

The increase in general and administrative expense was attributable to increased compensation expense of $2.8 million to existing and new employees, including stock based compensation of $1.3 million, and $0.4 million of other overhead expenses following the expansion of our infrastructure related to increased activity in Fund assets and asset management services.

Depreciation expense increased $0.7 million in 2006. This was principally a result of increased depreciation expense following the 2005/2006 Acquisitions. Amortization expense increased $0.9 million which was primarily the result of the 2005/2006 Acquisitions, specifically, loan amortization of $0.1 million, amortization of tenant installation costs of $0.4 million and amortization of leasehold interest of $0.3 million. In addition, amortization expense increased $0.1 million which was the result of the write off of certain Klaff management contracts following the disposition of these assets in 2005 and 2006.

												Change
(dollars in millions)	2006			2005 As Reported			Brandywine Portfolio		2005 Adjusted			$			%
Other:
Equity in earnings of unconsolidated affiliates	$	7.1		$	0.4		$	0.9	$	1.3		$	5.8		446	%
Interest expense		(10.8	)		(8.3	)		1.9		(6.4	)		(4.4	)	(69	)%
Minority interest		(0.8	)		1.3			2.0		3.3			(4.1	)	(124	)%
Income taxes		(0.8	)		—			—		—			(0.8	)	(100	)%
Income from discontinued operations		0.7			(0.1	)		—		(0.1	)		0.8		800	%

Equity in earnings of unconsolidated affiliates increased primarily as a result of our pro rata share of earnings and gains on sale from its Mervyns investments of $5.8 million.

Interest expense increased $4.2 million as a result of higher average outstanding borrowings in 2006, $0.1 million resulting from higher average interest rates on the portfolio mortgage debt in 2006 as well as lower capitalized interest of $0.1 million in 2006.

Minority interest variance is attributable to the consolidation of our Fund investments.

Income taxes in 2006 relate to income taxes on our share of the gain, through our investment funds, from the sale of certain Mervyns locations during the six months ended June 30, 2006.

Income from discontinued operations represents activity related to properties held for sale in 2006 and properties sold in 2005.

25

Funds from Operations

We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (or losses) from sales of depreciated property and depreciation and amortization. However, our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.

Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The reconciliation of net income to FFO for the three and six months ended June 30, 2006 and 2005 is as follows:

(dollars in millions)	Three months ended June 30,					Six months ended June 30,
	2006			2005		2006			2005
Net income	$	4.8		$	4.3	$	9.2		$	8.8
Depreciation of real estate and amortization of leasing costs (net of minority interests’ share)
Wholly-owned and consolidated partnerships		5.3			3.4		10.3			7.0
Unconsolidated partnerships		.4			.6		.8			1.2
Income attributable to Minority interest in Operating Partnership (1)		.1			.1		.2			.2
Gain on sale (net of minority share and income taxes)		(.4	)		—		(.8	)		—
Funds from operations	$	10.2		$	8.4	$	19.7		$	17.2
Cash flows provided by (used in):
Operating activities						$	24,145		$	10,833
Investing activities						$	(73,544	)	$	(62,515	)
Financing activities						$	13,115		$	72,358

Notes:

(1) Does not include distributions paid to Series A and B Preferred OP Unitholders.

USES OF LIQUIDITY

Our principal uses of liquidity are expected to be for distributions to our shareholders and OP unit holders, debt service and loan repayments, and property investment which include the funding of our joint venture commitments, acquisition, redevelopment, expansion and re-tenanting activities.

Reference is made to Note 1 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of Funds I and II and Mervyns I and II.

Distributions

In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For the quarter ended June 30, 2006, we paid a quarterly dividend of $0.1850 per Common Share and Common OP Unit on July 14, 2006.

26

Fund I and Mervyns I

On January 4, 2006, Fund I recapitalized a one million square foot retail portfolio located in Wilmington Delaware (“Brandywine Portfolio”) through a merger of interests with affiliates of GDC Properties (“GDC”). The Brandywine Portfolio was recapitalized through a “cash-out” merger of the 77.8% interest, which was previously held by the institutional investors in Fund I to GDC at a valuation of $164.0 million. We, through a subsidiary, retained our existing 22.2% interest and continue to operate the Brandywine Portfolio and earn fees for such services. At the closing, the Fund I investors, excluding us, received a return of all of their capital invested in Fund I and preferred return, thus triggering our Promote distribution in all future Fund I distributions. During June of 2006, the investors received $36.0 million of additional proceeds from this transaction following the replacement of bridge financing provided by us and the investors with permanent mortgage financing.

Following the recapitalization of the Brandywine Portfolio, there are 32 assets comprising approximately 2 million square feet remaining in Fund I, in which our interest in cash flow and income has increased from 22.2% to 37.8% as a result of the Promote as follows:

Shopping Center	Location	Year acquired	GLA
New York Region
New York
Tarrytown Shopping Center	Westchester	2004	35,291
Mid-Atlantic Region
South Carolina
Hitchcock Plaza	Aiken	2004	233,886
Pine Log Plaza	Aiken	2004	35,064
Virginia
Haygood Shopping Center	Virginia Beach	2004	165,451
Midwest Region
Ohio
Amherst Marketplace	Cleveland	2002	79,945
Granville Centre	Columbus	2002	134,997
Sheffield Crossing	Cleveland	2002	112,534
Michigan
Sterling Heights Shopping Center	Detroit	2004	154,838
Various Regions
Kroger/Safeway Portfolio	Various	2003	1,018,100
Total			1,970,106

In addition, we, along with the investors have invested in Mervyns as discussed further below.

Fund II and Mervyns II

To date, Fund II’s primary investment focus has been in the New York Urban/Infill Redevelopment Initiative and the Retailer Controlled Property Venture.

Retailer Controlled Property Venture (“RCP Venture”)

On January 27, 2004, along with our investors in Funds I and II, we entered into the RCP Venture with Klaff Realty, L.P. (“Klaff”) and Klaff’s long time capital partner Lubert-Adler Management, Inc. (“Lubert-Adler”) for the purpose of making investments in retailers or surplus or underutilized properties owned by retailers. The initial size of the RCP Venture is expected to be approximately $300.0 million in equity based on anticipated investments of approximately $1.0 billion. Each participant in the RCP Venture has the right to opt out of any potential investment. Each investment through the RCP Venture is a separate joint venture as it potentially involves different investment consortium partners. As of June 30, 2006, affiliates of Funds I and II (including us) have invested a total of $45.8 million in the RCP Venture. Fund II anticipates investing the remaining portion of the original 20% of the equity of the RCP Venture. Cash flow is to be distributed to the partners until they have received a 10% cumulative return and a full return of all contributions. Thereafter, remaining cash flow is to be distributed 20% to Klaff and 80% to the partners (including Klaff). We will also earn market-rate fees for property management, leasing and construction services on behalf of the RCP Venture.

27

During September of 2004, we made our first RCP Venture investment with our participation in the acquisition of Mervyns. Affiliates of Fund I and Fund II, through separately organized, newly formed limited liability companies on a non-recourse basis, invested in the acquisition of Mervyns through the RCP Venture, which, as part of an investment consortium with Sun Capital and Cerberus, acquired Mervyns from Target Corporation. The total acquisition price was approximately $1.2 billion subject to debt of approximately $800.0 million. Affiliates of Funds I and II invested a total of $24.6 million on a non-recourse basis. Our share of equity amounted to $5.2 million. During 2005, the consortium sold a portion of the portfolio as well as refinanced existing mortgage debt and distributed cash to the investors, of which a total of $42.7 million was distributed to affiliates of Fund I and Fund II of which our share amounted to $10.2 million. During the six months ended June 30, 2006, the consortium distributed an additional $3.4 million to affiliates of Fund I and Fund II of which $1.0 million was our share.

During June of 2006, the RCP Venture made its second investment with its participation in the acquisition of Albertson’s. Affiliates of Fund II, through the same limited liability companies which were formed for the investment in Mervyns, invested $21.2 million in the acquisition of Albertson’s through the RCP Venture, along with others as part of an investment consortium. Our share of the invested capital was $4.2 million.

New York Urban Infill Redevelopment Initiative

In September of 2004, we, through Fund II, launched our New York Urban Infill Redevelopment initiative. As retailers continue to recognize that many of the nation’s urban markets are underserved from a retail standpoint, Fund II’s intent is to capitalize on this trend by investing in redevelopment projects in dense urban areas where retail tenant demand has effectively surpassed the supply of available sites. During 2004, Fund II, together with an unaffiliated partner, P/A Associates, LLC (“P/A”), formed Acadia-P/A Holding Company, LLC (“Acadia-P/A”) for the purpose of acquiring, constructing, developing, owning, operating, leasing and managing certain retail real estate properties in the New York City metropolitan area. P/A has agreed to invest 10% of required capital up to a maximum of $2.0 million and Fund II, the managing member, has agreed to invest the balance to acquire assets in which Acadia-P/A agrees to invest. Operating cash flow is generally to be distributed pro-rata to Fund II and P/A until each has received a 10% cumulative return and then 60% to Fund II and 40% to P/A. Distributions of net refinancing and net sales proceeds, as defined, follow the distribution of operating cash flow except that unpaid original capital is returned before the 60%/40% split between Fund II and P/A, respectively. Upon the liquidation of the last property investment of Acadia-P/A, to the extent that Fund II has not received an 18% internal rate of return (“IRR”) on all of its capital contributions, P/A is obligated to return a portion of its previous distributions, as defined, until Fund II has received an 18% IRR. To date, Fund II has, in conjunction with P/A, invested in seven projects through Fund II as follows:

					Redevelopment ($ in millions)
Property	Location	Year  acquired	Purchase price		Anticipated additional costs		Estimated completion	Square feet upon completion
Liberty Avenue (1)	Queens	2005	$	—	$	15.0	1st half 2007	125,000
216th Street	Manhattan	2005		7.0		17.0	1st half 2007	60,000
Pelham Manor Shopping Center (1)	Westchester	2004		—		35.0	1st half 2008	325,000
Canarsie Plaza (2)	Brooklyn	2006		—		55.0	2nd half 2008	300,000
161st Street	Bronx	2005		49.0		21.0	2nd half 2008	225,000
400 East Fordham Road	Bronx	2004		30.0		70.0	1st half 2009	270,000
4650 Broadway	Manhattan	2005		25.0		30.0	2nd half 2009	175,000
Total			$	111.0	$	243.0		1,480,000

Notes:

(1) Fund II acquired a ground lease interest at this property.

(2) Closing is anticipated in 2006, although such closing cannot be assured.

Other Investments

During January 2006, we closed on a 20,000 square foot retail building in the Lincoln Park district in Chicago. The property was acquired from an affiliate of Klaff for $9.8 million. Tenants include Starbucks, Nine West, Vitamin Shoppe, The Body Shop, Papyrus and Cold Stone Creamery.

Also during January 2006, we acquired a 60% interest in the A&P Shopping Plaza located in Boonton, New Jersey. The property, which is 100% occupied and located in northeastern New Jersey, is a 63,000 square foot shopping center anchored by a 49,000 square foot A&P Supermarket. The remaining 40% interest is owned by a principal of P/A. Our 60% was acquired for $3.2 million.

28

On June 16, 2006, we purchased 8400 and 8625 Germantown Road in Philadelphia, Pennsylvania for $16.0 million. We assumed a $10.1 million first mortgage loan which has a maturity date of June 11, 2013. The 40,570 square foot property is 100% occupied.

In March of 2005, we invested $20.0 million in a preferred equity position (“Preferred Equity Investment”) with Levitz SL, L.L.C. (“Levitz SL”), the owner of fee and leasehold interests in 30 locations (the “Properties”), totaling 2.5 million square feet, of which the majority are currently leased to Levitz Furniture Stores. Klaff is a managing member of Levitz SL. The Preferred Equity Investment received a return of 10%, plus a minimum return of capital of $2.0 million per annum. During March 2006, the rate of return was reset to the six-month LIBOR plus 644 basis points or 11.5%.

On June 1, 2006, we converted the Preferred Equity Investment to a mortgage loan and advanced additional proceeds bringing the total outstanding amount to $31.3 million. The loan has a maturity date of May 31, 2008 and has an interest rate of 10.5%. The loan is secured by fee and leasehold mortgages as well as a pledge of the entities owning 19 of the above remaining locations totaling 1.8 million square feet. Although Levitz Furniture is currently operating under Chapter 11 bankruptcy protection, we believe the underlying value of the real estate is sufficient to recover the principal and interest due under the mortgage.

Property Development, Redevelopment and Expansion

Our redevelopment program focuses on selecting well-located neighborhood and community shopping centers and creating significant value through re-tenanting and property redevelopment. During the six months ended June 30, 2006, we did not undertake any significant redevelopment projects within our core portfolio.

Additionally, for the year ending December 31, 2006, we currently estimate that capital outlays of approximately $5.0 million to $7.0 million will be required for tenant improvements, related renovations and other property improvements.

Share Repurchase

The repurchase of our Common Shares has historically been an additional use of liquidity. We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of our outstanding Common Shares. Through May 5, 2006, we had repurchased 2.1 million Common Shares at a total cost of $11.7 million of which 2.0 million of these Common Shares have been subsequently reissued. The program may be discontinued or extended at any time and there is no assurance that we will purchase the full amount authorized. There were no Common Shares repurchased by us during the quarter ended June 30, 2006.

SOURCES OF LIQUIDITY

We intend on using the Company and Fund II as the primary vehicles for our future acquisitions, including investments in the RCP Venture and New York Urban/Infill Redevelopment initiative. Sources of capital for funding our joint venture commitments, other property acquisitions, redevelopment, expansion and re-tenanting, as well as future repurchases of Common Shares are expected to be obtained primarily from issuance of public equity or debt instruments, cash on hand, additional debt financings and future sales of existing properties. As of June 30, 2006, we had a total of approximately $43.0 million of additional capacity under our three existing debt facilities, $82.1 million under two existing debt facilities in Fund II, cash and cash equivalents on hand, inclusive of balances in Funds I and II, of $55.1 million. We anticipate that cash flow from operating activities will continue to provide adequate capital for all of our debt service payments, recurring capital expenditures and REIT distribution requirements.

Financing

At June 30, 2006, mortgage notes payable aggregated $361.9 million, including net valuation adjustment of debt at date of acquisition of $2.3 million, and were collateralized by 33 properties and related tenant leases. Interest rates on our outstanding mortgage indebtedness ranged from 5.0% to 8.5% with maturities that ranged from July 2007 to November 2032. Taking into consideration $91.4 million of notional principal under variable to fixed-rate swap agreements currently in effect, $303.7 million of the portfolio, or 84%, was fixed at a 5.8% weighted average interest rate and $55.9 million, or 16% was floating at a 6.8% weighted average interest rate. There is $0 and $54.9 million of debt scheduled to mature in 2006 and 2007, respectively, at weighted average interest rates of 6.3% for 2007. We will need to refinance this indebtedness or select other alternatives based on market conditions at that time.

The following summarizes the financing and refinancing transactions since December 31, 2005:

On January 12, 2006, in conjunction with the purchase of a property, we assumed a loan of $3.8 million which bears interest at a fixed rate of 8.5%.

On January 18, 2006, we drew an additional $1.8 million on an existing credit facility. On April 21, 2006, we paid down $15.0 million on this existing credit facility. On June 1, 2006, we drew an additional $19.2 million on this facility. On June 22, 2006 we paid off the entire existing balance of $30.4 million .

29

On January 24, 2006, in conjunction with the purchase of a partnership interest, we assumed a loan of $8.7 million which bears interest at a fixed rate of 6.4%.

On February 22, 2006, we financed a property within its existing portfolio for $20.5 million. This loan bears interest at a fixed rate of 5.4%. A portion of the proceeds were used to pay down $10.9 million on an existing credit facility.

On March 27, 2006, we refinanced a property for $30.0 million. This loan bears interest at LIBOR plus 140 basis points. A portion of the proceeds were used to pay down the existing $12.1 million of debt on this property.

On May 31, 2006, we borrowed an additional $13.0 million on an existing $65.0 million revolving credit facility. This additional draw was repaid on June 30, 2006. The remaining existing balance as of June 30, 2006 is $22.0 million.

On June 16, 2006, in conjunction with the purchase of a property, we assumed a loan of $10.1 million which bears interest at a fixed rate of 5.45%.

The following table summarizes our mortgage indebtedness as of June 30, 2006 and December 31, 2005:

(dollars in millions)	June 30, 2006			December 31, 2005			Interest Rate at June 30, 2006		Maturity		Properties Encumbered		Payment Terms
Mortgage notes payable – variable-rate
Bank of America, N.A.	$	22.0		$	22.0		6.65% (LIBOR + 1.30%	)	6/1/2010		(1	)	(29	)
Washington Mutual Bank, FA		23.4			23.7		6.85% (LIBOR + 1.50%	)	4/1/2011		(2	)	(28	)
Bank of America, N.A.		33.6			44.5		6.75% (LIBOR + 1.40%	)	6/29/2012		(3	)	(31	)
Bank of America, N.A.		10.0			10.0		6.75% (LIBOR + 1.40%	)	6/29/2012		(4	)	(28	)
RBS Greenwich Capital		30.0			—		6.75% (LIBOR + 1.40%	)	4/1/2008		(5	)	(29	)
Bank of America, N.A.		4.9			4.9		6.60% (LIBOR + 1.25%	)	12/31/2008		(6	)	(29	)
JP Morgan Chase.		5.5			5.6		7.35% (LIBOR + 2.00%	)	10/5/2007		(7	)	(28	)
Bank of China, New York Branch		18.0			18.0		7.10% (LIBOR + 1.75%	)	11/1/2007		(8	)	(29	)
Bank of America, N.A.		0			24.4		6.10% (LIBOR + 1.75%	)	3/1/2008		(9	)	(29	)
Bank of America, N.A.		—			12.1		6.07% (LIBOR + 1.50%	)	2/1/2006		(5	)	(29	)
Interest rate swaps		(91.4	)		(92.4	)
Total variable-rate debt		56.0			72.8
Mortgage notes payable – fixed-rate
Sun America Life Insurance Company		12.8			12.9		6.46	%	7/1/2007		(10	)	(28	)
Bank of America, N.A.		15.8			15.9		7.55	%	1/1/2011		(11	)	(28	)
RBS Greenwich Capital		15.8			15.9		5.19	%	6/1/2013		(12	)	(32	)
RBS Greenwich Capital		15.0			15.0		5.64	%	9/6/2014		(13	)	(33	)
RBS Greenwich Capital		17.6			17.6		4.98	%	9/6/2015		(14	)	(34	)
RBS Greenwich Capital		12.5			12.5		5.12	%	11/6/2015		(15	)	(35	)
Bear Stearns Commercial		34.6			34.6		5.53	%	1/1/2016		(16	)	(36	)
Bear Stearns Commercial		20.5			—		5.44	%	3/1/2016		(17	)	(29	)
LaSalle Bank, N.A.		3.8			—		8.50	%	4/11/2028		(18	)	(28	)
GMAC Commercial		8.6			—		6.40	%	11/1/2032		(19	)	(28	)
Column Financial, Inc.		10.1			—		5.45	%	6/11/2013		(20	)	(28	)
Bank of China		19.0			19.0		5.26	%	9/1/2007		(21	)	(29	)
Cortlandt Deposit Corp		7.4			9.9		6.62	%	2/1/2009		(22	)	(37	)
Cortlandt Deposit Corp		7.3			9.8		6.51	%	1/15/2009		(23	)	(37	)
The Ohio National Life Insurance Co.		4.6			4.7		8.20	%	6/1/2022		(24	)	(28	)
Canada Life Insurance Company		6.8			6.9		8.00	%	1/1/2023		(25	)	(28	)
UBS Warburg Real Estate		—			30.0		4.69	%	2/11/2008		(26	)	(29	)
UBS Warburg Real Estate		—			21.0		7.01	%	7/11/2012		(26	)	(28	)
UBS Warburg Real Estate		—			16.0		7.32	%	6/11/2012		(27	)	(28	)
Interest rate swaps		91.4			92.4		5.77	%	(38	)
Total fixed-rate debt		303.6			334.1
Total fixed and variable debt		359.6			406.9
Valuation of debt at date of acquisition, net of amortization		2.3			4.1
Total	$	361.9		$	411.0

30

Notes:
(1)	Bloomfield Town Square
	Walnut Hill Plaza
	Hobson West Plaza
	Marketplace of Absecon
	Village Apartments
	$22,000 is outstanding under this $65,000 revolving facility
(2)	Ledgewood Mall
(3)	Abington Towne Center
	Branch Shopping Center
	Methuen Shopping Center
	Town Line Plaza
(4)	Smithtown Shopping Center
(5)	244-268 161st Street
(6)	216th Street
(7)	Granville Center
(8)	400 East Fordham Road
(9)	Acadia Strategic Acquisition Fund II, LLC
(10)	Merrillville Plaza
(11)	GHT Apartments/Colony Apartments
(12)	239 Greenwich Avenue
(13)	New Loudon Center
(14)	Crescent Plaza
(15)	Pacesetter Park Shopping Center
(16)	Elmwood Park Shopping Center
(17)	Gateway Shopping Center
(18)	Clark-Diversey
(19)	Boonton
(20)	Chestnut Hill
(21)	Sherman Avenue
(22)	Kroger Portfolio
(23)	Safeway Portfolio
(24)	Amherst Marketplace
(25)	Sheffield Crossing
(26)	Brandywine Town Center
(27)	Market Square Shopping Center
(28)	Monthly principal and interest.
(29)	Interest only monthly.
(30)	Interest only monthly until fully drawn; monthly principal and interest thereafter.
(31)	Annual principal and monthly interest.
(32)	Interest only monthly until 5/05; monthly principal and interest thereafter.
(33)	Interest only monthly until 9/06; monthly principal and interest thereafter.
(34)	Interest only monthly until 9/10; monthly principal and interest thereafter.
(35)	Interest only monthly until 11/08; monthly principal and interest thereafter.
(36)	Interest only monthly until 1/10; monthly principal and interest thereafter.
(37)	Annual principal and interest payments.
(38)	Maturing between 10/1/08 and 1/1/11.

Financing – Investments

During June of 2006, we and GDC refinanced the Brandywine Portfolio for $166.2 million. Of the proceeds, $30.0 million were used to repay existing mortgage debt, $18.2 million to repay our bridge financing, $45.3 million to repay bridge financing from the other Fund I investors and $72.0 million distributed to us and GDC. Including the repayment of our bridge financing with interest, our distribution from this financing totaled $34.2 million.

31

Asset Sales

Historically, asset sales have been an additional source of our liquidity. We continually review our portfolio to identify non-core assets. We are marketing the Soundview Marketplace and Bradford Towne Centre for sale. We intend to defer the entire taxable gain which will be realized from these transactions by utilizing the provisions of Section 1031 of the Internal Revenue Code of 1986, as amended. If we are unable to defer such gain, it is possible we would either distribute part or all of the gain to our shareholders.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

At June 30, 2006, maturities on our mortgage notes ranged from July 2007 to November 2032. In addition, we have non-cancelable ground leases at five of our shopping centers. We also lease space for our White Plains corporate office for a term expiring in 2010. The following table summarizes our debt maturities and obligations under non-cancelable operating leases of June 30, 2006:

	Payments due by period
(dollars in millions)	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Future debt maturities	$	359.6	$	1.3	$	104.3	$	49.7	$	204.3
Interest obligations on debt		128.5		11.1		39.5		29.7		48.2
Operating lease obligations		22.9		1.1		3.0		2.9		15.9
Total	$	511.0	$	13.5	$	146.8	$	82.3	$	268.4

OFF BALANCE SHEET ARRANGEMENTS

We have investments in the following joint ventures for the purpose of investing in operating properties. We account for these investments using the equity method of accounting as we have a non-controlling interest. As such, our financial statements reflect our share of income from but not the assets and liabilities of these joint ventures.

We own a 49% interest in Crossroads. Our pro rata share of Crossroads mortgage debt as of June 30, 2006 was $31.4 million. This fixed-rate debt bears interest at 5.4% and matures in December 2014.

We own a 22.2% investment in various entities which own the Brandywine Portfolio. Our pro-rata share of Brandywine debt as of June 30, 2006, was $36.9 million with a fixed interest rate of 5.99%. These loans mature on July 1, 2016.

We also have 50% interests in two Fund I investments of which our pro-rata share of mortgage debt (also net of the Fund I minority interest share) as of June 30, 2006, was $2.6 million with a weighted average interest rate of 6.99%. Both of these loans mature during August 2010.

HISTORICAL CASH FLOW

The following discussion of historical cash flow compares our cash flow for the six months ended June 30, 2006 (“2006”) with our cash flow for the six months ended June 30, 2005 (“2005”).

Cash and cash equivalents were $55.1 million and $36.7 million at June 30, 2006 and 2005, respectively. The increase of $18.4 million was a result of the following increases and decreases in cash flows:

	Six months ended June 30,
(dollars in millions)	2006			2005			Change
Net cash provided by operating activities	$	24.1		$	10.8		$	13.3
Net cash used in investing activities	$	(73.5	)	$	(62.5	)	$	(11.0	)
Net cash provided by financing activities	$	13.1		$	72.4		$	(59.3	)

32

The variance in net cash provided by operating activities resulted from an increase of $4.6 million in operating income in 2006, after adjustments for non-cash expenses, which was primarily due to those factors discussed within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. In addition, a net increase in cash of $8.7 million resulted from changes in operating assets and liabilities.

The increase in net cash used in investing activities was primarily the result of the $21.2 million investment in Albertson’s during 2006 and a $17.6 million increase in cash used for real estate acquisitions, development and tenant installations during 2006. These decreases were offset by a $26.3 million of additional return of capital from unconsolidated partnerships in 2006, primarily from our investment in the Brandywine Portfolio.

The increase in net cash used in financing activities resulted primarily from $34.2 million of distributions to minority interests in partially owned affiliates in 2006, primarily relating to the Mervyns investment, and $26.4 million of additional cash used for the net repayment of debt in 2006.

INFLATION

Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions include clauses enabling us to receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and/or, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indexes. In addition, many of our leases are for terms of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if current rents are below the then existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

33

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk exposure is to changes in interest rates related to our mortgage debt. See the discussion under Item 2 for certain quantitative details related to our mortgage debt.

Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap agreements. We are a party to current and forward-starting interest rate swap and cap transactions to hedge our exposure to changes in LIBOR with respect to $91.4 million, $24.5 million and $30.0 million of notional principal, respectively.

The following table sets forth information as of June 30, 2006 concerning our long-term debt obligations, including principal cash flows by scheduled maturity and weighted average interest rates of maturing amounts:

Consolidated mortgage debt:

(dollars in millions)

Year	Scheduled Amortization		Maturities		Total		Weighted average interest rate
2006	$	1.3	$	—	$	1.3	n/a
2007		7.3		54.9		62.2	6.34	%
2008		7.2		34.9		42.1	6.73	%
2009		7.4		—		7.4	n/a
2010		5.6		36.7		42.3	7.01	%
Thereafter		38.2		166.1		204.3	5.87	%
	$	67.0	$	292.6	$	359.6

Mortgage debt in unconsolidated partnerships (at our pro rata share):

(dollars in millions)

Year	Scheduled amortization		Maturities		Total		Weighted average interest rate
2006	$	—	$	—	$	—	n/a
2007		0.4		—		0.4	n/a
2008		0.4		—		0.4	n/a
2009		0.5		—		0.5	n/a
2010		0.5		2.5		3.0	6.99	%
Thereafter		2.2		64.3		66.5	5.84	%
	$	4.0	$	66.8	$	70.8

Of our total outstanding debt, $54.9 million will become due in 2007. As we intend on refinancing some or all of such debt at the then-existing market interest rates which may be greater than the current interest rate, our interest expense would increase by approximately $0.5 million annually if the interest rate on the refinanced debt increased by 100 basis points. Interest expense on our variable debt as of June 30, 2006 would increase by $0.6 million for a 100 basis point increase in LIBOR on our $56.0 million of floating rate debt after taking into account the effect of interest rate swaps which hedge such debt. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.

34

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

(b) Internal Control over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

There have been no material legal proceedings beyond those previously disclosed in the Company’s filed Annual Report on Form 10-K for the year ended December 31, 2005.

Item 1A. Risk Factors

There have been no material changes in risk factors beyond those previously disclosed in the Company’s filed Annual Report on Form 10-K for the year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

On May 15, 2006, we held our annual meeting of shareholders. The shareholders voted, in person or by proxy for the following proposals. The results of the voting are shown below:

Proposal 1 -

Election of Trustees:

	Votes Cast For	Votes Withheld
Kenneth F. Bernstein	28,052,097	267,204
Douglas Crocker II	27,974,566	344,735
Alan S. Forman	27,914,966	404,335
Suzanne M. Hopgood	27,367,472	951,829
Lorrence T. Kellar	27,307,072	1,012,229
Wendy Luscombe	27,974,666	344,635
Lee S. Wielansky	27,436,454	882,847

Proposal 2 -

Approve the 2006 Share Incentive Plan:

Votes Cast For	Votes Against	Abstain
21,298,346	3,958,956	3,830

Proposal 3 -

Approve Amendment to Declaration of Trust to Eliminate the 4% Excess Share Provision:

Votes Cast For	Votes Against	Abstain
25,210,695	46,174	4,263

35

Proposal 4 -

The ratification of the appointment of BDO Seidman, LLP as the Independent Registered Public Accounting Firm for the Company for the fiscal year ending December 31, 2006:

Votes Cast For	Votes Against	Abstain
27,184,067	11,253	230

Proposal 5 -

The Adjournment or Postponement of the Annual Meeting, if necessary:

Votes Cast For	Votes Against	Abstain
15,109,530	12,002,928	83,092

Item 5. Other Information

None

36

Part II. Other Information

Item 6. Exhibits

ExhibitNo.	Description
3.1	Declaration of Trust of the Company, as amended (1)
3.2	Fourth Amendment to Declaration of Trust (4)
3.3	Amended and Restated By-Laws of the Company (22)
4.1	Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (14)
10.1	1999 Share Option Plan (8) (20)
10.2	2003 Share Option Plan (16) (20)
10.3	Form of Share Award Agreement (17) (21)
10.4	Form of Registration Rights Agreement and Lock-Up Agreement (18)
10.5	Registration Rights and Lock-Up Agreement (RD Capital Transaction) (11)
10.6	Registration Rights and Lock-Up Agreement (Pacesetter Transaction) (11)
10.7	Contribution and Share Purchase Agreement dated as of April 15, 1998 among Mark Centers Trust, Mark Centers Limited Partnership, the Contributing Owners and Contributing Entities named therein, RD Properties, L.P. VI, RD Properties, L.P. VIA and RD Properties, L.P. VIB (9)
10.8	Agreement of Contribution among Acadia Realty Limited Partnership, Acadia Realty Trust and Klaff Realty, L.P. and Klaff Realty, Limited (18)
10.9	Employment agreement between the Company and Kenneth F. Bernstein (6) (21)
10.11	Amendment to employment agreement between the Company and Kenneth F. Bernstein (18) (21)
10.12	First Amendment to Employment Agreement between the Company and Kenneth Bernstein dated as of January 1, 2001 (12) (21)
10.14	Letter of employment offer between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated February 19, 2003 (15) (21)
10.15	Severance Agreement between the Company and Joel Braun, Sr. Vice President, dated April 6, 2001 (13) (21)
10.16	Severance Agreement between the Company and Joseph Hogan, Sr. Vice President, dated April 6, 2001 (13) (21)
10.17	Severance Agreement between the Company and Joseph Napolitano, Sr. Vice President dated April 6, 2001 (18) (21)
10.18	Severance Agreement between the Company and Robert Masters, Sr. Vice President and General Counsel dated January 2001 (18) (21)
10.19	Severance Agreement between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated February 19, 2003 (15) (21)
10.20	Secured Promissory Note between RD Absecon Associates, L.P. and Fleet Bank, N.A. dated February 8, 2000 (7)
10.21	Promissory Note between 239 Greenwich Associates, L.P. and Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18)
10.22	Open-End Mortgage, Assignment of Leases and Rents, and Security Agreement between 239 Greenwich Associates, L.P. and Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18)
10.23	Promissory Note between Merrillville Realty, L.P. and Sun America Life Insurance Company dated July 7, 1999 (7)
10.24	Secured Promissory Note between Acadia Town Line, LLC and Fleet Bank, N.A. dated March 21, 1999 (7)
10.25	Promissory Note between RD Village Associates Limited Partnership and Sun America Life Insurance Company Dated September 21, 1999 (7)
10.26	Amended and Restated Mortgage Note between Port Bay Associates, LLC and Fleet Bank, N.A. dated July 19, 2000 (3)
10.27	Mortgage and Security Agreement between Port Bay Associates, LLC and Fleet Bank, N.A. dated July 19, 2000 (10)
10.28	Mortgage Note between Port Bay Associates, LLC and Fleet Bank, N.A. dated December 1, 2003 (18)
10.29	Mortgage and Security Agreement, and Assignment of Leases and Rents between Port Bay Associates, LLC and Fleet Bank, N.A. dated December 1, 2003 (18)
10.30	Note Modification Agreement between Port Bay Associates, LLC and Fleet Bank, N.A. dated December 1, 2003 (18)
10.31	Amended and Restated Promissory Note between Acadia Realty L.P. and Metropolitan Life Insurance Company for $25.2 million dated October 13, 2000 (10)
10.32	Amended and Restated Mortgage, Security Agreement and Fixture Filing between Acadia Realty L.P. and Metropolitan Life Insurance Company dated October 13, 2000 (10)
10.33	Term Loan Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10)
10.34	Mortgage Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10)
10.35	Promissory Note between RD Whitegate Associates, L.P. and Bank of America, N.A. dated December 22, 2000 (10)
10.36	Promissory Note between RD Columbia Associates, L.P. and Bank of America, N.A. dated December 22, 2000 (10)
10.37	Term Loan Agreement dated as of December 28, 2001, among Fleet National Bank and RD Branch Associates, L.P., et al (13)
10.38	Term Loan Agreement dated as of December 21, 2001, among RD Woonsocket Associates Limited Partnership, et al. and The Dime Savings Bank of New York, FSB (13)
10.39	Option Extension of Term Loan as of December 19, 2003 between RD Woonsocket Associates Limited Partnership, et al. and Washington Mutual Bank, FA (18)
10.40	Revolving Loan Promissory Note dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual Bank, FA (15)
10.41	Revolving Loan Agreement dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual Bank, FA (15)
10.42	Mortgage Agreement dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual Bank, FA (15)
10.43	Note Modification Agreement between RD Elmwood Associates, L.P. and Washington Mutual Bank, FA dated December 19, 2003 (18)
10.44	Prospectus Supplement Regarding Options Issued under the Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share Incentive Plan (19) (21)
10.45	Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share Incentive Plan Deferral and Distribution Election Form (19) (21)
10.46	Amended, Restated And Consolidated Promissory Note between Acadia New Loudon, LLC and Greenwich Capital Financial Products, Inc. dated August 13, 2004 (19)
10.47	Amended, Restated And Consolidated Mortgage, Assignment Of Leases And Rents And Security Agreement between Acadia New Loudon, LLC and Greenwich Capital Financial Products, Inc. dated August 13, 2004 (19)
10.48	Amended and Restated Term Loan Agreement between Fleet National Bank and Heathcote Associates, L.P., Acadia Town Line, LLC, RD Branch Associates, L.P., RD Abington Associates Limited Partnership, And RD Methuen Associates Limited Partnership dated September 30, 2004 (19)

37

Exhibit No.	Description
10.49	Mortgage Modification Agreement between Fleet National Bank and Acadia Town Line, LLC dated September 30, 2004 (19)
10.49a	Mortgage Modification Agreement between Fleet National Bank and Heathcote Associates, L.P. dated September 30, 2004 (19)
10.49b	Mortgage Modification Agreement between Fleet National Bank and RD Branch Associates dated September 30, 2004 (19)
10.49c	Mortgage Modification Agreement between Fleet National Bank and RD Methuen Associates dated September 30, 2004 (19)
10.49d	Mortgage Modification Agreement between Fleet National Bank and RD Abington Associates Limited Partnership dated September 30, 2004 (19)
10.50	Revolving Loan Agreement between Fleet National Bank and The Bank of China and RD Absecon Associates, L.P., RD Bloomfield Associates, L.P., RD Hobson Associates, L.P., RD Village Associates, L.P., and RD Woonsocket Associates L.P. dated May 26, 2005 (22)
10.51	Mortgage, Assignment of Leases and Rents and Security Agreement between Acadia Crescent Plaza, LLC and Greenwich Capital Financial Products, Inc. dated August 31, 2005 (22)
10.52	Mortgage, Assignment of Leases and Rents and Security Agreement between Pacesetter/Ramapo Associates and Greenwich Capital Financial Products, Inc. dated October 17, 2005 (22)
10.53	Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9, 2005 (22)
10.54	Mortgage and Security Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9, 2005 (22)
10.55	Agreement and Plan Of Merger Dated as of December 22, 2005 by and among Acadia Realty Acquisition I, LLC, Ara Btc LLC, ARA MS LLC, ARA BS LLC, ARA BC LLC and ARA BH LLC, Acadia Investors, Inc., AII BTC LLC, AII MS LLC, AII BS LLC, AII BC LLC And AII BH LLC, Samuel Ginsburg 2000 Trust Agreement #1, Martin Ginsburg 2000 Trust Agreement #1, Martin Ginsburg, Samuel Ginsburg and Adam Ginsburg, and GDC SMG, LLC, GDC Beechwood, LLC, Aspen Cove Apartments, LLC and SMG Celebration, LLC (23)
10.56	Amended and Restated Loan Agreement between Acadia Realty Limited Partnership, as lender, and Levitz SL Woodbridge, L.L.C., Levitz SL St. Paul, L.L.C., Levitz SL La Puente, L.L.C., Levitz SL Oxnard, L.L.C., Levitz SL Willowbrook, L.L.C., Levitz SL Northridge, L.L.C., Levitz SL San Leandro, L.L.C., Levitz SL Sacramento, L.L.C., HL Brea, L.L.C., HL Deptford, L.L.C., HL Hayward, L.L.C., HL San Jose, L.L.C., HL Scottsdale, L.L.C., HL Torrance, L.L.C., HL Irvine 1, L.L.C., HL West Covina, L.L.C., HL Glendale, L.L.C. and HL Northridge, L.L.C., each a Delaware limited liability company, Levitz SL Langhorne, L.P. and HL Fairless Hills, L.P., each a Delaware limited partnership (each, together with its permitted successors and assigns, a “Borrower”, and collectively, together with their respective permitted successors and assigns, “Borrowers”), dated June 1, 2006 (24)
10.57	Consent and Assumption Agreement between Thor Chestnut Hill, LP, Thor Chestnut Hill II, LP, Acadia Chestnut, LLC, Acadia Realty Limited Partnership and Wells Fargo Bank, N.A. dated June 9, 2006, original Mortgage and Security Agreement between Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP and Column Financial, Inc. dated June 5, 2003 and original Assignment of Leases and Rents from Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP to Column Financial, Inc. dated June 2003. (24)
21	List of Subsidiaries of Acadia Realty Trust (22)
23.1	Consent of Registered Public Accounting Firm to Form S-3 and Form S-8 (22)
23.2	Consent of former Registered Public Accounting Firm to Form S-3 and Form S-8 (22)
31.1	Certification of Chief Executive Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (24)
31.2	Certification of Chief Financial Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (24)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (24)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (24)
99.1	Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11)
99.2	First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11)
99.3	Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18)
99.4	Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18)
99.5	Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (2)
99.6	Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (18)

38

Notes:

(1)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal Year ended December 31, 1994
(2)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 1997
(3)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998
(4)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998
(5)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-11 (File No. 33-60008)
(6)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 1998
(7)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 1999
(8)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-8 filed September 28, 1999
(9)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 8-K filed on April 20, 1998
(10)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 10-K filed for the fiscal year ended December 31, 2000
(11)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-3 filed on March 3, 2000
(12)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 2001
(13)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2001
(14)	Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002
(15)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2002
(16)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed April 29, 2003.
(17)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on July 2, 2003
(18)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003
(19)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2004.
(20)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2004.
(21)	Management contract or compensatory plan or arrangement.
(22)	Incorporated by reference to the copy thereof filed as an exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2005.
(23)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on January 4, 2006
(24)	Filed herewith.

39

SIGNATURES

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

ACADIA REALTY TRUST

August 9, 2006	/s/ Kenneth F. Bernstein Kenneth F. Bernstein President and Chief Executive Officer (Principal Executive Officer)
August 9, 2006	/s/ Michael Nelsen Michael Nelsen Senior Vice President and Chief Financial Officer (Principal Financial Officer)

40

EX-10.56

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

                              AMENDED AND RESTATED

                                 LOAN AGREEMENT

                            Dated as of June 1, 2006

                                     Between

                          Borrowers (as defined herein)

                                       And

                       ACADIA REALTY LIMITED PARTNERSHIP,

                                    as Lender

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



                                 TO BE REVIEWED

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

1.   DEFINITIONS; PRINCIPLES OF CONSTRUCTION.............................     1
     1.1  Specific Definitions...........................................     2
     1.2  Principles of Construction.....................................     8
2.   GENERAL LOAN TERMS..................................................     8
          2.1.1  The Loan................................................     8
          2.1.2  Use of Loan Proceeds....................................     8
     2.2  Payments.......................................................     8
          2.2.1  Taxes...................................................     9
     2.3  Loan Repayment.................................................     9
          2.3.1  Repayment...............................................     9
          2.3.2  Casualty/Condemnation Payment ..........................     9
          2.3.3  Optional Prepayments....................................     9
     2.4  Release of Property............................................     9
          2.4.1  Release on Payment in Full..............................    10
          2.4.2  Sale/Refinance of Properties............................    10
                 2.4.2.1 Release of Property.............................    10
                 2.4.2.2 Application of Sale Proceeds....................    10
3.   REPRESENTATIONS AND WARRANTIES......................................    11
     3.1  Borrowers' Representations.....................................    11
          3.1.1  Organization; Special Purpose...........................    11
          3.1.2  Proceedings; Enforceability.............................    11
          3.1.3  No Conflicts............................................    11
          3.1.4  Litigation..............................................    12
          3.1.5  Agreements..............................................    12
          3.1.6  Title...................................................    12
          3.1.7  Survey..................................................    12
          3.1.8  No Bankruptcy Filing....................................    12
          3.1.9  Full and Accurate Disclosure............................    13
          3.1.10 No Plan Assets..........................................    13
          3.1.11 Compliance..............................................    13
          3.1.12 Contracts...............................................    14
          3.1.13 Financial Information...................................    13
          3.1.14 Condemnation............................................    14
          3.1.15 Federal Reserve Regulations.............................    14
          3.1.16 Utilities and Public Access.............................    14
          3.1.17 Not a Foreign Person....................................    14


                                       -i-



          3.1.18 Separate Lots...........................................    14
          3.1.19 Assessments.............................................    14
          3.1.20 Enforceability..........................................    14
          3.1.21 Insurance...............................................    14
          3.1.22 Use of Properties; Licenses.............................    14
          3.1.23 Flood Zone..............................................    15
          3.1.24 Physical Condition......................................    15
          3.1.25 Encroachments...........................................    15
          3.1.26 Leases..................................................    15
          3.1.27 Filing and Recording Taxes..............................    16
          3.1.28 Investment Company Act..................................    16
          3.1.29 Fraudulent Transfer.....................................    16
          3.1.30 Ownership of Borrower...................................    16
          3.1.31 Management Agreement....................................    16
          3.1.32 Hazardous Substances....................................    17
          3.1.33 Name; Principal Place of Business.......................    17
          3.1.34 Other Debt..............................................    17
          3.1.35 Ground Lease............................................    17
          3.1.36 Homelife Properties.....................................    18
     3.2  Survival of Representations and Covenants......................    18
4.   AFFIRMATIVE COVENANTS...............................................    18
     4.1  Existence......................................................    18
     4.2  Taxes..........................................................    18
     4.3  Repairs; Maintenance and Compliance; Alterations...............    19
          4.3.1  Repairs; Maintenance and Compliance.....................    19
          4.3.2  Alterations.............................................    19
     4.4  Litigation.....................................................    20
     4.5  Performance of Other Agreements................................    20
     4.6  Notices........................................................    20
     4.7  Cooperate in Legal Proceedings.................................    20
     4.8  Further Assurances.............................................    20
     4.9  Financial Statements and Other Reports.........................    20
          4.9.1  Financial Statements....................................    20
          4.9.2  Accountants' Reports....................................    22
          4.9.3  Tax Returns.............................................    22
          4.9.4  Annual Budgets..........................................    22
          4.9.5  Annual Ownership Report.................................    22
          4.9.6  Material Notices........................................    23
          4.9.7  Events of Default, etc..................................    23
          4.9.8  Litigation..............................................    23
          4.9.9  Insurance...............................................    23
          4.9.10 Other Information.......................................    23
          4.9.11 Breach..................................................    23
          4.9.12 Consolidated Statements.................................    24


                                      -ii-



     4.10 Environmental Matters..........................................    24
          4.10.1 Hazardous Substances....................................    24
          4.10.2 Environmental Monitoring................................    24
     4.11 Title to the Property..........................................    26
     4.12 Leases.........................................................    26
          4.12.1 Intentionally Omitted...................................    26
          4.12.2 New and Renewal Leases..................................    26
          4.12.3 Levitz Lease............................................    26
     4.13 Estoppel Statement.............................................    27
     5.14 Property Management............................................    27
          4.14.1 Management Agreement....................................    27
          4.14.2 Termination of Manager..................................    27
     4.15 Expenses.......................................................    28
     4.16 Indemnity......................................................    28
          4.16.1 Indemnity Obligations...................................    28
5.   NEGATIVE COVENANTS..................................................    29
     5.1  Management Agreement...........................................    29
     5.2  Liens..........................................................    30
     5.3  Change In Business or Operation of Property....................    30
     5.4  Debt Cancellation..............................................    30
     5.5  Assets.........................................................    30
     5.6  Transfers......................................................    30
     5.7  Debt...........................................................    30
     5.8  Assignment of Rights...........................................    30
     5.9  Principal Place of Business....................................    30
     5.10 Corporate Organization.........................................    30
     5.11 ERISA..........................................................    30
6.   INSURANCE; CASUALTY; AND CONDEMNATION...............................    31
     6.1  Insurance......................................................    31
          6.1.1  Coverage................................................    31
          6.1.2  Policies................................................    32
     6.2  Casualty.......................................................    32
          6.2.1  Notice; Restoration.....................................    33
          6.2.2  Settlement of Proceeds..................................    33
     6.3  Condemnation...................................................    33
          6.3.1  Notice; Restoration.....................................    33
          6.3.2  Collection of Award.....................................    33
     6.4  Application of Proceeds or Award...............................    34
          6.4.1  Application to Restoration..............................    34
          6.4.2  Application to Debt.....................................    34
          6.4.3  Procedure for Application to Restoration................    34
          6.4.4  Ground Lease............................................    35


                                      -iii-



7.   DEFAULTS............................................................    35
     7.1  Events of Default..............................................    35
     7.2  Remedies.......................................................    37
          7.2.1  Acceleration............................................    37
          7.2.2  Remedies Cumulative.....................................    38
          7.2.3  Delay...................................................    38
          7.2.4  Lender's Right to Perform...............................    38
8.   MISCELLANEOUS.......................................................    39
     8.1  Exculpation....................................................    39
     8.2  Notices........................................................    40
          8.2.1  Borrowers' Agent........................................    40
     8.3  Brokers and Financial Advisors.................................    41
     8.4  Survival.......................................................    41
     8.5  Lender's Discretion............................................    41
     8.6  Governing Law..................................................    41
     8.7  Modification, Waiver in Writing................................    42
     8.8  Delay Not a Waiver.............................................    43
     8.9  Trial by Jury..................................................    43
     8.10 Headings/Exhibits..............................................    43
     8.11 Severability...................................................    43
     8.12 Preferences....................................................    43
     8.13 Waiver of Notice...............................................    43
     8.14 Remedies of Borrower...........................................    44
     8.15 Prior Agreements...............................................    44
     8.16 Offsets, Counterclaims and Defenses............................    44
     8.17 No Usury.......................................................    44
     8.18 Conflict; Construction of Documents............................    45
     8.19 No Third Party Beneficiaries...................................    45
     8.20 Assignment.....................................................    45
     8.21 Sale of the Properties.........................................    45
     8.22 Joint and Several..............................................    45
     8.23 Counterparts...................................................    46


                                      -iv-



Schedule 1 - Fee and Ground Lease Properties
Schedule 2 - Intentionally Omitted
Schedule 3 - Exceptions to Representations and Warranties
Schedule 4 - Intentionally Omitted
Schedule 5 - Organization of Borrower
Schedule 6 - Intentionally Omitted
Schedule 7 - Intentionally Omitted
Schedule 8 - Property Condition Reports


                                       -v-



                              AMENDED AND RESTATED

                                 LOAN AGREEMENT

     AMENDED AND RESTATED LOAN AGREEMENT dated as of June 1, 2006 between Levitz
SL Woodbridge, L.L.C., Levitz SL St. Paul, L.L.C., Levitz SL La Puente, L.L.C.,
Levitz SL Oxnard, L.L.C., Levitz SL Willowbrook, L.L.C., Levitz SL Northridge,
L.L.C., Levitz SL San Leandro, L.L.C., Levitz SL Sacramento, L.L.C., HL Brea,
L.L.C., HL Deptford, L.L.C., HL Hayward, L.L.C., HL San Jose, L.L.C., HL
Scottsdale, L.L.C., HL Torrance, L.L.C., HL Irvine 1, L.L.C., HL West Covina,
L.L.C., HL Glendale, L.L.C. and HL Northridge, L.L.C., each a Delaware limited
liability company, Levitz SL Langhorne, L.P. and HL Fairless Hills, L.P., each a
Delaware limited partnership (each, together with its permitted successors and
assigns, a "BORROWER", and collectively, together with their respective
permitted successors and assigns, "BORROWERS"), and ACADIA REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership (together with its successors and
assigns, "LENDER").

                                    RECITALS

     WHEREAS, the Borrowers and Greenwich Capital Financial Products, Inc.
("GREENWICH") entered into a certain loan (the "EXISTING LOAN") as described in
a certain loan agreement dated June 21, 2002 (the "LOAN AGREEMENT") which was
amended by a certain First Amendment dated May 23, 2003, a Second Amendment
dated April 30, 2004 and a Third Amendment dated November 16, 2004 (the Loan
Agreement with all amendments shall be referred to as the "EXISTING LOAN
AGREEMENT"); and

     WHEREAS, the principal amount now owing by Borrowers is $12,980,188.95; and

     WHEREAS, LaSalle Bank National Association, as Trustee for the Registered
Holders of Greenwich Capital Commercial Funding Corp., Commercial Mortgage
Pass-Through Certificates, Series 2004-FL2 by Wachovia Bank, National
Association, as Master Servicer (the "TRUSTEE"), assignee of Greenwich, assigned
to Lender the Existing Loan Agreement along with the note evidencing the
Existing Loan (the "EXISTING NOTE") and all the collateral, including various
mortgages and assignments as described in that certain Assignment Agreement
dated on or about the date hereof made by the Trustee in favor of Lender (the
"EXISTING COLLATERAL"); and

     WHEREAS, Lender has agreed to change the principal amount of the Existing
Loan to $30,980,188.95; and

     WHEREAS, Borrowers will simultaneously deliver to Lender an Amended and
Restated Note in the principal amount of $31,280,225.74 (the "NOTE"); and

     WHEREAS, Lender and Borrowers have agreed to and amend and restate the
Existing Loan Agreement as herein set forth;

1.   DEFINITIONS; PRINCIPLES OF CONSTRUCTION

     1.1  Specific Definitions. The following terms have the meanings set forth
          below:



          ACADIA LEVITZ LLC: a Delaware limited liability company which is
wholly owned by Lender and has a senior, preferred equity interest in Levitz SL,
L.L.C., a Delaware limited liability company.

          AFFILIATE: as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.

          AGREEMENT: this Amended and Restated Loan Agreement, as the same may
from time to time be modified, supplemented, amended or otherwise changed.

          BORROWERS' AGENT: Klaff Realty, LP, a Delaware limited partnership.

          BORROWER MEMBER: Levitz SL, L.L.C., a Delaware limited liability
company.

          BORROWER REPRESENTATIVE: (i) with respect to Levitz SL Langhorne,
L.P., Levitz SL-GP L.L.C., a Delaware limited liability company, the sole
general partner of such Borrower, and (ii) with respect to HL Fairless Hills,
L.P., HL GP, L.L.C., a Delaware limited liability company, the sole general
partner of each such Borrower.

          BUSINESS DAY: any day other than (i) a Saturday or a Sunday, and (ii)
a day on which federally insured depository institutions in New York, New York
are authorized or obligated by law, regulation, governmental decree or executive
order to be closed.

          CODE: the Internal Revenue Code of 1986, as amended and as it may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

          CONTROL: with respect to any Person, either (i) ownership directly or
indirectly of 49% or more of all equity interests in such Person or (ii) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, by contract or otherwise.

          DEBT: the unpaid Principal, all interest accrued and unpaid thereon
and all other sums due to Lender in respect of the Loan or under any Loan
Document.

          DEFAULT: the occurrence of any event under any Loan Document which,
with the giving of notice or passage of time, or both, would be an Event of
Default.

          DEFAULT RATE: A rate of interest per annum (calculated for the actual
number of days elapsed on the basis of a 360-day year) equal to the rate of
interest per annum otherwise provided in the Note plus 5%, provided that such
interest rate shall in no event exceed the maximum interest rate which Borrowers
may by law pay.


                                       2



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

          ERISA AFFILIATE: all members of a controlled group of corporations and
all trades and business (whether or not incorporated) under common control and
all other entities which, together with Borrower, are treated as a single
employer under any or all of Section 414(b), (C), (m) or (o) of the Code.

          FINANCIAL STATEMENTS: (i) statements of operations and retained
earnings, statements of cash flow, and balance sheets, (ii) such other financial
reports as the subject entity shall routinely and regularly prepare and (iii)
such other financial reports as Lender may from time to time reasonably require.

          FISCAL YEAR: each twelve month period commencing on January 1 and
ending on December 31 during each year of the Term.

          GAAP: generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.

          GOVERNMENTAL AUTHORITY: any court, board, agency, commission, office
or authority of any nature whatsoever for any governmental unit (federal, state,
county, district, municipal, city or otherwise) now or hereafter in existence.

          GUARANTOR: the L-A Guarantors and Klaff Realty, LP, jointly and
severally.

          GROUND LEASES: the ground leases and other leases identified on
Schedule 1 (including the Homelife Leases).

          HOMELIFE LEASES: the leases described in items 10 - 20 on Schedule 1.

          HOMELIFE PROPERTIES: the leasehold properties that are the subject of
the Homelife Leases.

          L-A GUARANTORS: Lubert-Adler Real Estate Fund II, L.P. and
Lubert-Adler Real Estate Parallel Fund II, L.P, jointly and severally.

          LEASES: all leases and other agreements or arrangements heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, a Property or any Improvements, including
any guarantees, extensions, renewals, modifications or amendments thereof and
all additional remainders, reversions and other rights and estates appurtenant
thereunder.

          LEGAL REQUIREMENTS: statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting any Borrower, any Loan Document or all or part of any Property or the
construction, ownership, use, alteration or operation


                                       3



thereof, whether now or hereafter enacted and in force, and all permits,
licenses and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instrument, either of
record or known to any Borrower, at any time in force affecting all or part of
any Property, including any that may (i) require repairs, modifications or
alterations in or to all or part of any Property, or (ii) in any way limit the
use and enjoyment thereof.

          LEVITZ: PLVTZ, a Delaware limited liability company and assignee of
Levitz Furniture Corporation, Levitz Furniture Company of the Midwest, Inc., and
Levitz Furniture Company of Washington Realty, Inc.

          LEVITZ LEASE: collectively, (A) that certain Unitary Lease dated June
8, 1999 between certain of the Borrowers, as landlord, and Levitz, together with
various subsidiaries of Levitz, as tenant, as amended by (i) the First Amendment
to Unitary Lease dated October 8, 1999, (ii) the Second Amendment to Unitary
Lease dated December 23, 1999, (iii) the Third Amendment to Unitary Lease dated
December 29, 1999, (iv) the Fourth Amendment to Unitary Lease dated January 3,
2001, (v) the Fifth Amendment to Unitary Lease dated March 8, 2001, (vi) the
Sixth Amendment to Unitary Lease dated May 2, 2001, (vii) the Seventh Amendment
to Unitary Lease dated December 13, 2001, (viii) the Eighth Amendment to Unitary
Lease dated April 3, 2002, (ix) the Ninth Amendment to Unitary Lease dated April
19, 2002, (x) the Tenth Amendment to Unitary Lease dated May 31, 2002, (xi) the
Eleventh Amendment to Unitary Lease dated February 12, 2003, (xii) the Twelfth
Amendment to Unitary Lease dated May 22, 2003, (xiii) the Thirteenth Amendment
to Unitary Lease dated August 29, 2003, (xiv) the Fourteenth Amendment to
Unitary Lease dated May 12, 2004, (xv) the Fifteenth Amendment to Unitary Lease
dated May 24, 2004, (xvi) the Sixteenth Amendment to Unitary Lease dated October
31, 2004 and (xvii) the Seventeenth Amendment to Unitary Lease dated April 17,
2006, (B) that certain Agreement dated as of December 13, 2001 between Klaff
Realty, LP, on behalf of certain of the Borrowers and their affiliates and
Levitz, together with various subsidiaries of Levitz, (C) Agreement dated as of
November 12, 2004, among Levitz, certain of the Borrowers and their affiliates
and KLA Breuners, LLC, (D) Lease Assignment Agreement dated as of April 17,
2006, between PLVTZ d/b/a Levitz Furniture and certain of the Borrowers and
their affiliates and (E) letter dated April 17, 2006, from certain of the
Borrowers and their affiliates to Levitz.

          LIEN: any mortgage, deed of trust, lien (statutory or otherwise),
pledge, hypothecation, easement, restrictive covenant, preference, assignment,
security interest or any other encumbrance, charge or transfer of, on or
affecting all or part of any Property or any interest therein, or in any
Borrower or any Borrower Representative, including any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, the filing of any financing statement,
and mechanic's, materialmen's and other similar liens and encumbrances.

          LOAN DOCUMENTS: this Agreement and all other documents, agreements and
instruments now or hereafter evidencing, securing or delivered to Lender in
connection with the Loan, including the following: (i) the Amended and Restated
Note made by Borrowers to Lender in the maximum principal amount of the Loan
(the "NOTE"), (ii) each Mortgage, Assignment of Leases and Rents and Security
Agreement made or hereafter made by a Borrower and each Deed of Trust,


                                       4



Assignment of Leases and Rents and Security Agreement made or hereafter made by
a Borrower to a trustee in favor of Lender and each other similar instrument,
each of which covers a Property (collectively, the "MORTGAGES"), (iii) each
Assignment of Leases and Rents from a Borrower to Lender (collectively, the
"ASSIGNMENTS OF LEASES"), (iv) each Assignment of Agreements from a Borrower to
Lender (collectively, the "ASSIGNMENTS OF AGREEMENTS"), (v) each Pledge
Agreement made by Borrower Member and/or Borrower Representatives, as
applicable, to Lender (collectively, the "PLEDGE AGREEMENTS"), (vi) the Guaranty
of Recourse Obligations made by Guarantor for the benefit of Lender; as each of
the foregoing may be (and each of the foregoing defined terms shall refer to
such documents as they may be) amended, restated, replaced, supplemented or
otherwise modified from time to time.

          MANAGEMENT AGREEMENT: the provisions of Section 4.7 of the Member LLC
Agreement, and any replacement management agreement entered into with the prior
approval of Lender.

          MANAGEMENT FEES: all fees in the nature of management fees payable to
Manager under the Management Agreement.

          MANAGER: Acadia D.R. Management, Inc., a Delaware corporation, as
assignee of Klaff Realty, L.P., or any successor or assignee, provided that each
successor or assignee shall be approved by Lender, which approval shall not be
unreasonably withheld.

          MATERIAL ADVERSE EFFECT: (i) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of any Borrower, Borrower Member or Guarantor, or (ii) the impairment of the
ability of any Borrower or Guarantor to perform its obligations under any Loan
Documents, or (iii) the impairment of the ability of Lender to enforce or
collect any of the Debt as a result of such material adverse effect. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then occurring events and existing conditions
would result in a Material Adverse Effect.

          MATERIAL ALTERATION: any alteration affecting structural elements of a
Property the cost of which exceeds $250,000; provided, however, that in no event
shall tenant improvement work, or alterations performed as part of a
Restoration, or work which the Tenant under the Levitz Lease has a right to
perform without the consent of the landlord thereunder, constitute a Material
Alteration.

          MATERIAL LEASE: as to any Property, all Leases which individually or
in the aggregate with respect to the same tenant and its Affiliates (i)
constitute more than 5% of such Property's gross leaseable area, (ii) have a
gross annual rent of more than 5% of the total annual Rents of such Property or
(iii) demise at least one full floor of the Improvements at any such Property.
The Levitz Lease shall be deemed to be a Material Lease.


                                       5



          MATURITY DATE: the date on which the final payment of principal of the
Amended and Restated Note becomes due and payable as therein provided, whether
at the Stated Maturity Date, by declaration of acceleration, or otherwise.

          MEMBER LLC AGREEMENT: the Limited Liability Company Agreement of
Borrower Member as in effect on the date hereof.

          NET PROCEEDS: the gross proceeds of the sale of a Property less only
reasonable and customary closing costs (i.e., brokerage, transfer taxes and
reasonable attorneys' fees) as reasonably approved by Lender.

          PERMITTED ENCUMBRANCES: (i) the Liens created by the Loan Documents,
(ii) all Liens and other matters disclosed in the Title Insurance Policy, and in
the updated commitments delivered by Borrowers prior to the date hereof, (iii)
Liens, if any, for Taxes or all maintenance charges, impositions other than
Taxes, and any other charges, including vault charges and license fees for the
use of vaults, chutes and similar areas adjoining any Property, now or hereafter
levied or imposed against any Property or any part thereof not yet due and
payable and not delinquent and (iv) such other title and survey exceptions as
Lender approves in writing in Lender's discretion.

          PERMITTED TRANSFERS: provided that no Default or Event of Default
shall then exist (i) a Lease (or an amendment, extension, modification, waiver
or renewal thereof) entered into in accordance with the Loan Documents, (ii) a
Special Transfer, provided that Borrowers have delivered (or caused to be
delivered) to Lender evidence in writing that the transferee assumes all
obligations of Borrowers under the Loan Documents, (iii) a Permitted Encumbrance
or (iv) a Transfer of a partnership interest in any Borrower that is a limited
partnership by a partner other than any Borrower Representative, or a transfer
of a membership interest in a member of any Borrower that is a limited liability
company or a transfer of any interest in any Borrower Representative if such
Transfer would not cause the transferee to acquire Control of any Borrower or of
the Borrower Member or of any Borrower Representative or to increase its direct
or indirect interest in any Borrower or in the Borrower Member or in any
Borrower Representative to an amount which equals or exceeds 49%. For the
purposes of clause (iv) of this definition, the beneficial ownership interests
in any Borrower held by Lubert-Adler Real Estate Fund II, L.P. and Lubert-Adler
Real Estate Parallel Fund II, L.P. shall be viewed as being held by one entity.

          PERSON: any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
person or entity, and any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.

          PLAN: (i) an employee benefit or other plan established or maintained
by a Borrower or any ERISA Affiliate or to which any Borrower or any ERISA
Affiliate makes or is obligated to make contributions and (ii) which is covered
by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.

          PROPERTIES: collectively, the parcels of real property and
Improvements thereon


                                       6



owned in fee or leased by any Borrower and identified on Schedule 1 hereto;
together with all rights pertaining to such real property and Improvements, and
all other collateral for the Loan, including but not limited to the property
described in the Granting Clauses of the Mortgages.

          PROPERTY CONDITION REPORTS: collectively, the Property Condition
Assessment Reports for the Properties described on Schedule 8.

          RELEASE AMOUNT: 85% of the Net Proceeds for such Property or
Properties.

          RENTS: all rents, rent equivalents, moneys payable as damages or in
lieu of rent or rent equivalents, royalties (including all oil and gas or other
mineral royalties and bonuses), income, fees, receivables, receipts, revenues,
deposits (including security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, and other payment and
consideration of whatever form or nature received by or paid to or for the
account of or benefit of a Borrower, Manager or any of their agents or employees
from any and all sources arising from or attributable to the Properties and the
Improvements, including all receivables, customer obligations, installment
payment obligations and other obligations now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the use and occupancy of the Properties or rendering of services by
a Borrower or Manager and proceeds, if any, from business interruption or other
loss of income insurance.

          SPECIAL TRANSFER: the sale of all of the Properties in accordance with
Section 8.21.

          STATE: as to any Property, the state in which such Property is
located.

          STATED MATURITY DATE: May 31, 2008.

          TAXES: all real estate and personal property taxes, assessments, water
rates or sewer rents, now or hereafter levied or assessed or imposed against all
or part of the Properties.

          TERM: the entire term of this Agreement, which shall expire upon
repayment in full of the Debt and full performance of each and every obligation
to be performed by Borrowers pursuant to the Loan Documents (including
representations, warranties, covenants and obligations expressly set forth in
this Agreement that survive in perpetuity).

          TITLE INSURANCE POLICY: a mortgagee title insurance policy by a
nationally recognized title insurance company, in form and substance
satisfactory to Lender, insuring the Lien of each Mortgage, the premium and
charges for which have been paid in full by Borrowers and which has been
assigned to Lender by the Trust.

          TRANSACTION COSTS: all fees, costs, expenses and disbursements paid or
payable by Borrowers or any of them relating to the Loan, including all
appraisal fees, legal fees, accounting fees and the costs and expenses described
in Section 4.15.

          TRANSFER: any sale, conveyance, transfer, lease (including any
amendment, extension,


                                       7



modification, waiver or renewal thereof), assignment, Lien, whether by law or
otherwise, of, on, in or affecting (i) all or part of any Property (including
any legal or beneficial direct or indirect interest therein, and including any
options contained in any Ground Lease), (ii) any direct or indirect interest in
a Borrower (including any profit interest), or (iii) any direct or indirect
interest in the Borrower Member or in any Borrower Representative.

          TRUST: LaSalle Bank National Association, as Trustee for the
Registered Holders of Greenwich Capital Commercial Funding Corp., Commercial
Mortgage Pass-Through Certificates, Series 2004-FL2 by Wachovia Bank, National
Association, as Master Servicer.

          WELFARE PLAN: an employee welfare benefit plan, as defined in Section
3(1) of ERISA.

     1.2 Principles of Construction. Unless otherwise specified, (i) all
references to sections and schedules are to those in this Agreement, (ii) the
words "hereof," "herein" and "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular provision, (iii) all
definitions are equally applicable to the singular and plural forms of the terms
defined, (iv) the word "including" means "including but not limited to," and (v)
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.

2.   GENERAL LOAN TERMS

          2.1.1 The Loan. Subject to and upon the terms and conditions of this
Agreement, Lender agrees to make a Loan to the Borrowers (the "LOAN") in the
amount of $30,980,180.95 (the "PRINCIPAL"). No amount repaid in respect of the
Loan may be reborrowed. The Loan shall mature on the Stated Maturity Date. The
Borrowers represent to Lender that (i) there exists no claims by any Borrower
against Lender and (ii) there are no offsets, defenses or counterclaims by any
Borrower to the payment of any amounts required under the Loan Documents or
otherwise to enforcement by the holder of the Loan.

          2.1.2 Use of Loan Proceeds. Borrowers shall use the Loan Proceeds to
pay off the Existing Note to the Trust, to redeem Acadia Levitz, LLC's Senior
Preferred Equity Interest in Levitz SL, L.L.C. and to pay Transaction Costs to
the extent of any remaining Loan proceeds.

     2.2 Payments.

          2.2.1 Taxes. Any and all payments by any Borrower hereunder and under
the other Loan Documents shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on Lender's income, and franchise taxes imposed on Lender by the law or
regulation of any Governmental Authority (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to in this Section 2.2.1 as "APPLICABLE TAXES"). If any Borrower shall
be required by law to deduct any Applicable Taxes from or in respect of any sum
payable hereunder to Lender, the following shall apply: (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including


                                       8



deductions applicable to additional sums payable under this Section 2.2.1),
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. Borrowers also
agree to pay any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any payment
made hereunder or from the execution, delivery or recordation of, or otherwise
with respect to, this Agreement or any other Loan Document ("OTHER TAXES").
Borrowers shall indemnify Lender for the full amount of Applicable Taxes or
Other Taxes (including any Applicable Taxes or Other Taxes imposed by any
jurisdiction on amounts paid or payable under this Section 2.2.1) paid by Lender
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, whether or not such Applicable Taxes or Other Taxes
were correctly or legally asserted. Payments pursuant to this Section 2.2.1
shall be made within ten days after the date Lender makes written demand
therefor.

     2.3 Loan Repayment.

          2.3.1 Repayment. Borrower shall repay the entire outstanding principal
balance of the Note in full on the Stated Maturity Date, together with interest
thereon to (but excluding) the date of repayment and any other amounts due and
owing under the Loan Documents.

          2.3.2 Casualty/Condemnation Payment. The Loan is subject to mandatory
prepayment in certain instances of Insured Casualty or Condemnation (each a
"CASUALTY/CONDEMNATION PREPAYMENT"), in the manner and to the extent set forth
in Section 6.4.2. Each Casualty/Condemnation Prepayment shall be made when
received by Borrowers and shall be applied as follows in the following order of
priority: First, to costs and expenses of Lender (if any), including the
Lender's reasonable attorney's fees and disbursements, in connection with such
prepayment or reasonably expended by Lender to protect the collateral value of
the applicable Property or in connection with the settlement or collection of
the Proceeds or Award; Second, to repay the Loan.

          2.3.3 Optional Prepayments. Borrowers shall have the right to prepay
all or any portion of the Principal in accordance with the provisions of the
Note.

     2.4 Release of Property. Except as set forth in Section 2.3.3 or in this
Section 2.4, no repayment or prepayment shall cause, give rise to a right to
require, or otherwise result in, the release of the Lien of any Mortgage or
Pledge Agreement.

          2.4.1 Release on Payment in Full. Lender shall, upon the written
request and at the expense of Borrowers, upon payment in full of the Debt in
accordance herewith, release the Lien of the Loan Documents if not theretofore
released.

          2.4.2 Sale/Refinance of Properties.

               2.4.2.1 Release of Property. Lender shall release a Property from
the Lien of the Loan Documents upon a sale or refinancing of such Property (or
shall release its Lien on a


                                       9



membership or partnership interest in a Borrower upon such sale or refinancing
of the Property owned by such Borrower), provided the following conditions are
satisfied:

               (a) the subject sale or refinancing is pursuant to an arms'
length agreement (it being understood and agreed that any such sale or
refinancing shall be deemed to be an arms' length transaction if the
consideration being given in connection therewith approximates the fair market
value of such Property, as determined by Lender in its reasonable discretion);

               (b) Simultaneously with the closing of the subject sale or
refinancing, Borrowers make the payments described in clauses (a) through (d) of
Section 2.4.2.2;

               (c) Both immediately before the closing of such sale or
refinancing and immediately thereafter, no Default or Event of Default shall be
continuing;

               (d) The representations and warranties made by Borrowers in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such sale or refinancing (and after giving
effect to such sale or refinancing);

               (e) Borrowers shall have given Lender at least 10 days' prior
written notice of such sale or refinancing, accompanied by a copy of the
applicable contract sale, and all related documents, and drafts of any
applicable release documents (which shall be subject to Lender's approval);

               (f) Borrowers shall have delivered to Lender a copy of the final
closing settlement statement for such sale or refinancing prior to the closing
of such sale or refinancing;

               (g) Borrowers shall have paid to Lender all costs and expenses
(including reasonable attorneys' fees) incurred by Lender in connection with
such release; and

               (h) Borrowers and Guarantor (the latter only as to any guaranties
given or required to be given by Guarantor under this Agreement) shall execute
and deliver such documents as Lender may reasonably request to confirm the
continued validity of the Loan Documents and the Liens thereof;

               2.4.2.2 Application of Sale Proceeds. Notwithstanding anything to
the contrary set forth in Section 2.3.1, the gross proceeds of any sale or
refinancing made pursuant to this Section 2.4.2 shall be applied as follows:

               (a) First, to pay all reasonable and customary transaction costs,
including market rate brokerage commissions due to Manager;

               (b) Second, to pay all accrued and unpaid interest on the
Principal being prepaid pursuant to clause (c) below;

               (c) Third, to prepay Principal by an amount equal to the Release
Amount


                                       10



for such Property (as calculated immediately before the release of such Property
from the Lien of the Loan Documents); and

               (d) Lastly, if no Default or Event of Default exists, the balance
shall be paid to Borrowers.

3.   REPRESENTATIONS AND WARRANTIES

     3.1 Borrowers' Representations. Each Borrower, subject to the provisions of
Section 3.1.36, represents and warrants as of the date hereof that, except to
the extent (if any) disclosed on Schedule 3 with reference to a specific
subsection of this Section 3.1:

          3.1.1 Organization; Special Purpose. Each Borrower, Borrower Member
and each Borrower Representative has been duly organized and is validly existing
and in good standing under the laws of the State of formation, with requisite
power and authority, and all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to own its properties and to transact the
business in which it is now engaged. Each Borrower, Borrower Member and each
Borrower Representative is duly qualified to do business and is in good standing
in each jurisdiction where it is required to be so qualified in connection with
its properties, business and operations.

          3.1.2 Proceedings; Enforceability. Such Borrower has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents. The Loan Documents have been duly executed and delivered by such
Borrower and constitute legal, valid and binding obligations of such Borrower
enforceable against such Borrower in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and similar laws affecting rights
of creditors generally, and general principles of equity.

          3.1.3 No Conflicts. The execution, delivery and performance of the
Loan Documents by such Borrower and the transactions contemplated hereby will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
(other than pursuant to the Loan Documents) upon any of the property of such
Borrower pursuant to the terms of, any agreement or instrument to which such
Borrower is a party or by which its property is subject, nor will such action
result in any violation of the provisions of any statute or any order, rule or
regulation of any Governmental Authority having jurisdiction over such Borrower
or any of its properties. Such Borrower's rights under the Licenses will not be
adversely affected by the execution and delivery of the Loan Documents, such
Borrower's performance thereunder, the recordation of the Mortgage, or the
exercise of any remedies by Lender. Any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by such Borrower of the Loan Documents
has been obtained and is in full force and effect.

          3.1.4 Litigation. There are no actions, suits or other proceedings at
law or in equity by or before any Governmental Authority now pending or
threatened against or affecting any Borrower, Borrower Member, any Borrower
Representative, the Manager or any Property, which, if adversely determined,
might materially adversely affect the condition (financial or otherwise) or


                                       11



business of any Borrower, Borrower Member, any Borrower Representative, Manager
or the condition or ownership of any Property.

          3.1.5 Agreements. Such Borrower is not a party to any agreement or
instrument or subject to any restriction which might adversely affect such
Borrower or any Property, or such Borrower's business, properties, operations or
condition, financial or otherwise. Such Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Permitted Encumbrance or
any other agreement or instrument to which it is a party or by which it or any
Property is bound.

          3.1.6 Title. Such Borrower has good, marketable and indefeasible title
in fee to the Property (or if such Property is a Ground Lease, such Borrower has
good, marketable and indefeasible title to the leasehold estate created by such
Ground Lease) and good title to the balance of such Property, free and clear of
all Liens except the Permitted Encumbrances. The Mortgages when properly
recorded in the appropriate records, together with any UCC Financing Statements
required to be filed in connection therewith, will create (i) a valid, perfected
first priority lien on the fee interest in each Property owned by a Borrower in
fee and a valid, perfected first priority lien on the two leasehold estates
created by the Ground Leases affecting Properties in Woodbridge, New Jersey and
Sacramento, California, respectively and (ii) valid and perfected first priority
security interests in and to, and perfected collateral assignments of, all
personalty (including the Leases), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. The Permitted
Encumbrances do not materially adversely affect the value, operation or use of
any Property, or Borrowers' ability to repay the Loan. There are no claims for
payment for work, labor or materials affecting any Property which are or may
become a Lien prior to, or of equal priority with, the Liens created by the Loan
Documents. There are no outstanding options to purchase or rights of first
refusal affecting all or any portion of any Property in favor of anyone other
than a Borrower.

          3.1.7 Survey. To the best knowledge of such Borrower, the surveys for
the Properties delivered to Lender reflect all material matters affecting any
Property or the title thereto.

          3.1.8 No Bankruptcy Filing. Such Borrower is not contemplating either
the filing of a petition by it under any state or federal bankruptcy or
insolvency law or the liquidation of all or a major portion of its property (a
"BANKRUPTCY PROCEEDING"), and such Borrower has no knowledge of any Person
contemplating the filing of any such petition against it. In addition, neither
such Borrower nor Borrower Member, nor any Borrower Representative nor any
principal nor Affiliate of any of the foregoing has been a party to, or the
subject of a Bankruptcy Proceeding for the past ten years.

          3.1.9 Full and Accurate Disclosure. No statement of fact made by such
Borrower in any Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make statements contained
therein not misleading. There is no material fact presently known to such
Borrower that has not been disclosed to Lender which adversely affects, or, as
far as such Borrower can foresee, might adversely affect, any Property or the
business, operations or condition (financial or otherwise) of any Borrower.


                                       12



          3.1.10 No Plan Assets. Such Borrower is not an "employee benefit
plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and
none of the assets of Borrower constitutes or will constitute "plan assets" of
one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.

          3.1.11 Compliance. Except as disclosed in writing to Lender, Borrowers
and the Properties and the use thereof comply in all material respects with all
applicable Legal Requirements. No Borrower is in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority, the
violation of which might materially adversely affect the condition (financial or
otherwise) or business of any Borrower. There has not been and shall never be
committed by any Borrower or any other Person in occupancy of or involved with
the operation or use of any Property any act or omission affording any
Governmental Authority the right of forfeiture as against any Property or any
part thereof or any monies paid in performance of any Borrower's obligations
under any Loan Document.

          3.1.12 Contracts. There are no service, maintenance or repair
contracts affecting any Property which are binding on Borrower that are not
terminable on one month's notice or less without cause and without penalty or
premium (other than elevator and/or security system service contracts which are
with persons not Affiliated with Borrower and are on market rate terms and
conditions). All service, maintenance or repair contracts affecting any Property
have been entered into at arms-length in the ordinary course of the applicable
Borrower's business and provide for the payment of fees in amounts and upon
terms comparable to existing market rates.

          3.1.13 Financial Information. All financial data, including the
statements of cash flow and income and operating expense, that have been
delivered to Lender in respect of any Borrower and, to the best of Borrowers'
knowledge, the Properties (i) are true, complete and correct in all material
respects, (ii) accurately represent the financial condition of such Borrower and
the Properties as of the date of such reports, and (iii) to the extent prepared
by an independent certified public accounting firm, have been prepared in
accordance with GAAP consistently applied throughout the periods covered, except
as disclosed therein. No Borrower has any contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments, unrealized or anticipated
losses from any unfavorable commitments or any liabilities or obligations not
expressly permitted by this Agreement. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of any Borrower or any Property from that set
forth in said financial statements.

          3.1.14 Condemnation. No Condemnation or other proceeding, to the best
knowledge of any Borrower, is contemplated with respect to all or part of any
Property or for the relocation of roadways providing access to any Property.

          3.1.15 Federal Reserve Regulations. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose that would be inconsistent with such
Regulation U or any other regulation of such Board of Governors,


                                       13



or for any purpose prohibited by Legal Requirements or any Loan Document.

          3.1.16 Utilities and Public Access. Each Property has rights of access
to public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service it for its intended uses. All public utilities
necessary or convenient to the full use and enjoyment of each Property are
either located in the public right-of-way abutting such Property or located in
private property in which a valid easement exists for the benefit of such
Property, and all such utilities are connected so as to serve such Property
without passing over other property absent a valid easement. All roads necessary
for the use of each Property for its current purpose have been completed and
dedicated to public use and accepted by all Governmental Authorities.

          3.1.17 Not a Foreign Person. Such Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.

          3.1.18 Separate Lots. Each parcel comprising a Property is a separate
tax lot and is not a portion of any other tax lot that is not a part of such
Property.

          3.1.19 Assessments. There are no pending or proposed special or other
assessments for public improvements or otherwise affecting any Property, or any
contemplated improvements to any Property that may result in such special or
other assessments.

          3.1.20 Enforceability. The Loan Documents are not subject to, and no
Borrower has asserted, any right of rescission, set-off, counterclaim or
defense, including the defense of usury. No exercise of any of the terms of the
Loan Documents, or any right thereunder, will render any Loan Document
unenforceable.

          3.1.21 Insurance. Borrowers have obtained and have delivered (or have
caused to be obtained and delivered) to Lender insurance policies reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement.

          3.1.22 Use of Properties; Licenses. Each Property that is not vacant
is used exclusively for retail and/or warehouse and other appurtenant and
related uses. All certifications, permits, licenses and approvals, including
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of the Properties (collectively, the "LICENSES"), have
been obtained and are in full force and effect. The use being made of each
Property is in conformity with the certificate of occupancy issued for such
Property and all other restrictions, covenants and conditions affecting such
Property.

          3.1.23 Flood Zone. Except as shown on surveys delivered to Lender in
connection with the Loan, no portion of any Property is located in an area as
identified by the Federal Emergency Management Agency as an area having special
flood hazards.

          3.1.24 Physical Condition. Except as disclosed in the Property
Condition Reports, the Properties, including all Improvements, parking
facilities, systems, Equipment and landscaping, are in good condition, order and
repair in all material respects; there exists no structural or other


                                       14



material defect or damages to any Property, whether latent or otherwise. No
Borrower has received any notice from any insurance company or bonding company
of any defect or inadequacy in any Property, or any part thereof, which would
adversely affect its insurability or cause the imposition of extraordinary
premiums or charges thereon or any termination of any policy of insurance or
bond.

          3.1.25 Encroachments. Except as shown on surveys delivered to Lender
in connection with the Loan, all of the Improvements included in determining the
appraised value of each Property lie wholly within the boundaries and building
restriction lines of such Property, and no improvement on an adjoining property
encroaches upon any Property, and no easement or other encumbrance upon any
Property encroaches upon any of the Improvements, except those insured against
by the Title Insurance Policy.

          3.1.26 Leases. (i) each Lease is in full force and effect; (ii) the
tenants under the Leases have accepted possession of and are in occupancy of all
of their respective demised premises, have commenced the payment of rent under
the Leases, and there are no offsets, claims or defenses to the enforcement
thereof; (iii) all rents due and payable under the Leases have been paid and no
portion thereof has been paid for any period more than 30 days in advance; (iv)
the rent payable under each Lease is the amount of fixed rent set forth therein,
and there is no claim or basis for a claim by the tenant thereunder for an
adjustment to the rent (except as otherwise expressly set forth in the Levitz
Lease); (v) no tenant has made any claim against the landlord under any Lease
which remains outstanding, there are no defaults on the part of the landlord
under any Lease, and no event has occurred which, with the giving of notice or
passage of time, or both, would constitute such a default; (vi) to Borrowers'
best knowledge, there is no present material default by the tenant under any
Lease; (vii) all security deposits under Leases are as set forth therein; (viii)
a Borrower is the sole owner of the entire lessor's interest in each Lease; (ix)
each Lease is the valid, binding and enforceable obligation of the Borrower and
the applicable tenant thereunder; (x) no Person has any possessory interest in,
or right to occupy, such Property except under the terms of the Lease; and (xi)
each Lease is subordinate to the Loan Documents, either pursuant to its terms or
pursuant to a subordination and attornment agreement. None of the Leases
contains any option to purchase or right of first refusal to purchase any
Property or any part thereof. Neither the Leases nor the Rents have been
assigned or pledged except to Lender, and no other Person has any interest
therein except the tenants thereunder.

          3.1.27 Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements in connection with the
transfer of the Properties to Borrowers have been paid. All mortgage, recording,
stamp, intangible or other similar taxes required to be paid by any Person under
applicable Legal Requirements in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the Loan
Documents have been paid.

          3.1.28 Investment Company Act. No Borrower is (i) an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended; (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any


                                       15



other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.

          3.1.29 Fraudulent Transfer. No Borrower has entered into the Loan or
any Loan Document with the actual intent to hinder, delay, or defraud any
creditor, and each Borrower has received reasonably equivalent value in exchange
for its obligations under the Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of each Borrower's
assets exceeds and will, immediately following the execution and delivery of the
Loan Documents, exceed such Borrower's total liabilities, including
subordinated, unliquidated, disputed or contingent liabilities. The fair
saleable value of each Borrower's assets is and will, immediately following the
execution and delivery of the Loan Documents, after giving effect to the
borrowing of the Loan and the transactions contemplated under the Loan
Documents, be greater than such Borrower's probable liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured. Each Borrower's assets do not and, immediately following
the execution and delivery of the Loan Documents will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. No Borrower intends to, or believes that it will, incur debts
and liabilities (including contingent liabilities and other commitments) beyond
its ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of such Borrower).

          3.1.30 Ownership of Borrower. The sole member of each Borrower that is
a limited liability company is Borrower Member. The sole general partner of each
Borrower that is a limited partnership is the Borrower Representative applicable
to such Borrower and such Borrower's sole limited partner is Borrower Member.
The Borrower Member is the sole member of each Borrower Representative. The
membership interest in each Borrower Representative and the membership or
partnership interests in each Borrower are owned free and clear of all Liens,
warrants, options and rights to purchase. Borrower has no obligation to any
Person to purchase, repurchase or issue any ownership interest in it. The
organizational charts attached hereto as Schedule 5 is complete and accurate and
illustrates all Persons who have a direct or indirect ownership interest in each
Borrower.

          3.1.31 Management Agreement. The Management Agreement is in full force
and effect. There is no default, breach of violation existing thereunder, and no
event has occurred (other than payments due but not yet delinquent) that, with
the passage of time or the giving of notice, or both, would constitute a
default, breach of violation thereunder, by either party thereto. The Management
Fee and the terms and provisions of the Management Agreement are subordinate to
the Loan Documents.

          3.1.32 Hazardous Substances. Except as discussed in written
environmental reports delivered to Lender in connection with the Loan: (i) no
property is in violation of any Legal Requirement pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance


                                       16



Control Act, the Safe Drinking Water Act, the Occupational Safety and Health
Act, any state super-lien and environmental clean-up statutes, any local law
requiring related permits and licenses and all amendments to and regulations in
respect of the foregoing laws (collectively, "ENVIRONMENTAL LAWS"); (ii) no
Property is subject to any private or governmental Lien or judicial or
administrative notice or action or inquiry, investigation or claim relating to
hazardous, toxic, dangerous and/or regulated substances, wastes, materials, raw
materials which include hazardous constituents, pollutants or contaminants,
including asbestos, asbestos containing materials, petroleum, tremolite,
anthlophylite, actinolite, polychlorinated biphenyls or any other substances or
materials which are included under or regulated by Environmental Laws or which
are considered by scientific opinion to be otherwise dangerous in terms of the
health, safety and welfare of humans (collectively, "HAZARDOUS SUBSTANCES");
(iii) to the best of Borrowers' knowledge, after due inquiry, no Hazardous
Substances are or have been (including the period prior to Borrowers'
acquisition of the Properties), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from any Property other
than in compliance with all Environmental Laws; (iv) to the best of Borrowers'
knowledge, after due inquiry, no Hazardous Substances are present in, on or
under any nearby real property which could migrate to or otherwise affect any
Property; (v) no underground storage tanks exist on any Property and no Property
has ever been used as a landfill; and (vi) there have been no environmental
investigations, studies, audits, reviews or other analyses conducted by or on
behalf of any Borrower which have not been provided to Lender.

          3.1.33 Name; Principal Place of Business. No Borrower uses or will use
any trade name or has done or will do business under any name other than its
actual name set forth herein. The principal place of business of each Borrower
is its primary address for notices as set forth in Section 8.2, and Borrower has
no other place of business.

          3.1.34 Other Debt. There is no indebtedness with respect to any
Property or any excess cash flow or any residual interest therein, whether
secured or unsecured, other than Permitted Encumbrances and the permitted
indebtedness described in Section 5.7.

          3.1.35 Ground Lease. Each Ground Lease is in full force and effect and
has not been modified or amended. There are no defaults under any Ground Lease
and no event has occurred, which with the passage of time, the giving of notice,
or both, would constitute a default under any Ground Lease. All rents,
additional rents and other sums due and payable under each Ground Lease have
been paid in full. Neither Borrower nor the landlord under any Ground Lease has
commenced any action or given or received any notice for the purpose of
terminating any Ground Lease.

          3.1.36 Homelife Properties. Notwithstanding anything to the contrary
in this Article 3, Borrowers represent and warrant that they have no independent
knowledge with respect to the matters set forth in the representations and
warranties set forth in Sections 3.1.7, 3.1.11, 3.1.14, 3.1.16, 3.1.18, 3.1.19,
3.1.22, 3.1.23, 3.1.24, 3.1.25 and 3.1.32, solely as the same relate to the
Homelife Properties, and accordingly, no representation or warranty in such
Sections shall apply to the Homelife Properties.

     3.2 Survival of Representations and Covenants. All of the representations
and warranties


                                       17



in Section 3.1 and elsewhere in the Loan Documents (i) shall survive for so long
as any portion of the Debt remains owing to Lender and (ii) shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf, provided, however, that the
representations, warranties and covenants set forth in Section 3.1.32, 4.10 and
4.16 shall survive in perpetuity and shall not be subject to the exculpation
provisions of Section 8.1.

4.   AFFIRMATIVE COVENANTS

     Until the end of the Term, each Borrower hereby covenants and agrees with
Lender that:

     4.1 Existence. Such Borrower shall (i) do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its existence,
rights, and franchises, (ii) continue to engage in the business presently
conducted by it, (iii) obtain and maintain all Licenses, and (iv) qualify to do
business and remain in good standing under the laws of each jurisdiction, in
each case as and to the extent required for the ownership, maintenance,
management and operation of each Property.

     4.2 Taxes. Such Borrower shall pay all Taxes as the same become due and
payable, and deliver to Lender receipts for payment or other evidence
satisfactory to Lender that the Taxes have been so paid no later than 30 days
before they would be delinquent if not paid. Such Borrower shall not suffer and
shall promptly cause to be paid and discharged any Lien against the Properties,
and shall promptly pay for all utility services provided to the Properties.
After prior notice to Lender, such Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith and
with due diligence, the amount or validity or application of any Taxes or Liens,
provided that (i) no Default or Event of Default has occurred and is continuing,
(ii) such proceeding shall suspend the collection of the Taxes or Liens, (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which such Borrower is subject and shall
not constitute a default thereunder, (iv) no part of or interest in any Property
will be in danger of being sold, forfeited, terminated, canceled or lost, (v)
such Borrower shall have furnished such security as may be required in the
proceeding, or as may be requested by Lender, to insure the payment of any such
Taxes or Liens, together with all interest and penalties thereon, which shall
not be less than 125% of the Taxes or Liens being contested, and (vi) such
Borrower shall promptly upon final determination thereof pay the amount of such
Taxes or Liens, together with all costs, interest and penalties. Lender may pay
over any such security or part thereof held by Lender to the claimant entitled
thereto at any time when, in the judgment of Lender, the entitlement of such
claimant is established.

     4.3 Repairs; Maintenance and Compliance; Alterations.

          4.3.1 Repairs; Maintenance and Compliance. Borrowers shall at all
times maintain, preserve and protect all franchises and trade names, and
Borrowers shall cause the Properties to be maintained in a good and safe
condition and repair and shall not remove, demolish or alter the Improvements or
Equipment (except for alterations performed in accordance with Section 4.3.2 and
normal replacement of Equipment with Equipment of equivalent value and
functionality). Borrowers shall promptly comply with all Legal Requirements (or
cause such compliance) and


                                       18



immediately cure properly any violation of a Legal Requirement (or cause such
cure). Borrowers shall notify Lender in writing within one Business Day after
any Borrower first receives notice of any such non-compliance. Borrowers shall
promptly repair, replace or rebuild any part of a Property that becomes damaged,
worn or dilapidated and shall complete and pay for any Improvements at any time
in the process of construction or repair.

          4.3.2 Alterations. Any Borrower may, without Lender's consent, perform
alterations to the Improvements and Equipment which (i) do not constitute a
Material Alteration, (ii) do not adversely affect such Borrower's financial
condition or the cash flow of any Property and (iii) are in the ordinary course
of such Borrower's business. No Borrower shall perform any Material Alteration
without Lender's prior written consent, which consent shall not be unreasonably
withheld or delayed; provided, however, that Lender may, in its sole and
absolute discretion, withhold consent to any alteration the cost of which is
reasonably estimated to exceed $1,000,000. In considering a Borrower's request
for Lender's consent to a Material Alteration, Lender shall have the right to
retain an architect and/or engineer, at Borrowers' expense, to review and
approve the plans and specifications for such Material Alteration. Lender may,
as a condition to giving its consent to a Material Alteration, require that
Borrowers deliver to Lender as security for payment of the cost of such Material
Alteration and as additional security for the Debt any of the following: (1)
cash, (2) U.S. Treasury securities or (3) an irrevocable and assignable Letter
of Credit (payable on sight draft only) naming Lender as beneficiary and issued
by a New York clearinghouse bank reasonably satisfactory to Lender. Such
security shall be in an amount equal to 125% of the cost of the Material
Alteration as estimated by Lender. Upon the occurrence of a Default or Event of
Default, Lender may apply such security to payment of the Debt. If the security
posted is other than cash, upon substantial completion of the Material
Alteration and submission to Lender of evidence satisfactory to Lender that (i)
the Material Alteration was constructed in accordance with applicable Legal
Requirements and substantially in accordance with plans and specifications
approved by Lender (which approval shall not be unreasonably withheld or
delayed), (ii) all contractors, subcontractors, materialmen and professionals
who provided work, materials or services in connection with the Material
Alteration have been paid in full and have delivered unconditional releases of
lien and (iii) all material Licenses necessary for the use, operation and
occupancy of the Material Alteration (other than those which depend on the
performance of tenant improvement work) have been issued, Lender shall, provided
no Default or Event of Default then exists, return the security (or the
unapplied portion thereof) to Borrowers. If the security posted is cash, Lender
shall disburse such cash in accordance with the same procedures as are
applicable to disbursement of Proceeds or an Award under Section 6.4.3.
Borrowers shall reimburse Lender upon demand for all out-of-pocket costs and
expenses (including the reasonable fees of all professionals) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 4.3.2.

     4.4 Litigation. Such Borrower shall give prompt written notice to Lender of
any litigation, governmental proceedings or claims or investigations pending or
threatened against such Borrower, Borrower Member or any Borrower Representative
which might materially adversely affect Borrowers', Borrower Member's or such
Borrower Representative's condition (financial or otherwise) or business or any
Property.


                                       19



     4.5 Performance of Other Agreements. Such Borrower shall observe and
perform each and every term to be observed or performed by it pursuant to the
terms of any agreement or instrument affecting or pertaining to any Property,
including the Loan Documents.

     4.6 Notices. Such Borrower shall promptly advise Lender, in writing, of any
material adverse change in such Borrower's, Borrower Member's or any Borrower
Representative's condition, financial or otherwise, or of the occurrence of any
Default or Event of Default of which such Borrower has knowledge. Such Borrower
shall cause to be delivered to Lender any Securities and Exchange Commission or
other public filings, if any, of Borrower, Borrower Member, any Borrower
Representative, Manager, or any Affiliate of any of the foregoing within two (2)
Business Days of such filing.

     4.7 Cooperate in Legal Proceedings. Such Borrower shall cooperate fully
with Lender with respect to, and permit Lender, at its option, to participate
in, any proceedings before any Governmental Authority which may in any way
affect the rights of Lender under any Loan Document.

     4.8 Further Assurances. Such Borrower shall, at such Borrower's sole cost
and expense, (i) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the Debt, as Lender may reasonably require from
time to time; (ii) do and execute all and such further lawful and reasonable
acts, conveyances and assurances for the better and more effective carrying out
of the intents and purposes of the Loan Documents, as Lender shall reasonably
require from time to time and (iii) upon Lender's request therefor given from
time to time after the occurrence of any Default or Event of Default pay for (a)
reports of UCC, federal tax lien, state tax lien, judgment and pending
litigation searches with respect to Borrowers, Borrower Member and each Borrower
Representative and (b) searches of title to the Properties, each such search to
be conducted by search firms reasonably designated by Lender in each of the
locations reasonably designated by Lender.

     4.9 Financial Statements and Other Reports.

          4.9.1 Financial Statements.

               (a) ANNUAL REPORTING. Within 120 days after the end of each
calendar year, each Borrower, Borrower Member and Guarantor shall provide true
and complete copies of its Financial Statements for such year to Lender (other
than with respect to the Financial Statements for the L-A Guarantors, which
shall be provided within 180 days after the end of each calendar year). All such
Financial Statements (other than the Financial Statements provided by Klaff
Realty, LP) shall be audited by a "Big Four" accounting firm or by other
independent certified public accountants acceptable to Lender, and shall bear
the unqualified certification of such accountants that such Financial Statements
present fairly in all material respects the financial position of the subject
company. Notwithstanding the foregoing, Lender hereby approves of CBIZ
Accounting, Tax & Advisory Services and Mayer Hoffman McCann P.C. as the
aforementioned independent certified public accountant, provided, however, that
Lender reserves the right to disapprove CBIZ


                                       20



Accounting, Tax & Advisory Services and Mayer Hoffman McCann P.C. as the
aforementioned independent certified public accountant (and to require a "Big
Four" accounting firm or another independent certified public accountant
reasonably acceptable to Lender) if in Lender's reasonable opinion, CBIZ
Accounting, Tax & Advisory Services and Mayer Hoffman McCann P.C. is not
preparing the requisite financial statements in accordance with the terms of
this Section 4.9. The annual Financial Statements for each Borrower, Borrower
Member and Guarantor shall be accompanied by a certification executed by the
entity's authorized representative, satisfying the criteria set forth below. The
annual Financial Statements of each Borrower also shall be accompanied by a
Compliance Certificate (as defined below). Together with each delivery of annual
Financial Statements pursuant to this Section, each Borrower and Borrower Member
will deliver a written statement by its independent certified public accountants
(1) stating that the examination has included a review of the terms of this
Agreement as such terms relate to accounting matters, (2) stating whether, in
connection with the examination, any condition or event that constitutes a
Default or an Event of Default has come to their attention, and (3) if such a
condition or event has come to their attention, specifying the nature and period
of existence thereof.

               (b) QUARTERLY REPORTING - BORROWERS. Within 30 days after the end
of each calendar quarter, each Borrower shall provide true and complete copies
of its Financial Statements (prepared in accordance with an "income tax basis"
of accounting consistently applied) for such quarter to Lender, together with a
certification executed on behalf of each Borrower by its authorized
representative in accordance with the criteria set forth below. In addition,
within the same time, each Borrower shall provide certified rental status
reports, a certified rent roll and a Compliance Certificate.

               (c) MONTHLY REPORTING. Within 20 days after the end of each
calendar month, each Borrower shall provide to Lender (i) operating statements
(prepared in accordance with an "income tax basis" of accounting consistently
applied) for such Borrower prepared on a cash basis and in form reasonably
satisfactory to Lender, (x) for such month, (y) for the year to date, including
a comparison of budgeted to actual income and expenses and an explanation of
material variances, and (z) for the 12-month period ending in and including the
subject month and (ii) an updated rent roll. Along with such operating
statements, each Borrower shall deliver to Lender a certification of such
Borrower's authorized representative satisfying the criteria set forth below.

               (d) ADDITIONAL REPORTING. In addition to the foregoing, each of
each Borrower, Borrower Member and Guarantor shall promptly provide to Lender
such further documents and information concerning its operations, properties,
ownership, and finances as Lender shall from time to time reasonably request.

               (e) GAAP. Each Borrower, Borrower Member and Guarantor will
maintain systems of accounting established and administered in accordance with
sound business practices and sufficient in all respects to permit preparation of
Financial Statements in conformity with GAAP or in accordance with an "income
tax basis" of accounting consistently applied. All annual Financial Statements
shall be prepared in accordance with GAAP, consistently applied.

               (f) CERTIFICATIONS OF FINANCIAL STATEMENTS, COMPLIANCE
CERTIFICATE.


                                       21



The Financial Statements for each Borrower and Borrower Member submitted under
this Section shall be accompanied by a certification in form and substance
reasonably satisfactory to Lender, executed on behalf of such Borrower and
Borrower Member, as applicable, by its authorized representative, stating that
such Financial Statements are true and complete and do not omit to state any
material information without which the same might reasonably be misleading. In
addition, where this Agreement requires a "COMPLIANCE CERTIFICATE", such
Borrower will deliver a certificate duly executed on behalf of such Borrower by
the authorized representative of such Borrower, in form and substance
satisfactory to Lender, stating that there does not exist any Default or Event
of Default under the Loan Documents (or if the any exists, specifying the same
in detail), and stating to the best of such Borrower's knowledge after due
inquiry that all Financial Statements, reports, calculations, and other
information submitted therewith to Lender are true and materially complete and
do not omit to state any material information without which the same might
reasonably be misleading.

               (g) FISCAL YEAR. Each of each Borrower, Borrower Member and
Guarantor represents that its fiscal year ends on December 31, and agrees that
it shall not change its fiscal year.

          4.9.2 Accountants' Reports. Promptly upon receipt thereof, each
Borrower and each of Borrower Member and Guarantor will deliver copies of all
significant reports submitted by independent public accountants in connection
with each annual, interim or special audit of the Financial Statements or other
affairs of such party made by such accountants, including the comment letter
submitted by such accountants to management in connection with the annual audit.

          4.9.3 Tax Returns. Within 30 days after filing the same, each of each
Borrower, Borrower Member and Guarantor shall deliver to Lender a copy of its
Federal income tax returns (or the return of the applicable Person into which
such party's Federal income tax return is consolidated) certified on its behalf
by its authorized representative to be true and correct.

          4.9.4 Annual Budgets. Intentionally Omitted.

          4.9.5 Annual Ownership Report. Together with its annual Financial
Statements, each Borrower and Borrower Member shall deliver to Lender a written
statement duly executed on such party's behalf by its authorized representative
or secretary of the entity, in form and substance satisfactory to Lender,
identifying in particularity and detail all direct and indirect ownership and
beneficial interests in such party, and stating whether any such interest is
encumbered or pledged, in each case as of the date of delivery of such notice.

          4.9.6 Material Notices.

               (a) Each Borrower shall promptly deliver, or caused to be
delivered, copies of all notices given or received by such Borrower with respect
to noncompliance with any term or condition related to any indebtedness of
Borrower, including indebtedness under the Loan Documents, and shall notify
Lender within two Business Days of any potential or actual event of default with
respect to any such indebtedness.


                                       22



               (b) Each Borrower shall promptly deliver to Lender any and all
material notices (including without limitation any notice alleging any default
or breach) received from any manager, franchisors, licensors, or tenant for or
pertaining to any Property.

          4.9.7 Events of Default, etc. Promptly upon any Borrower obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its authorized representative
specifying the nature and period of existence of such condition or event and
what action such Borrower or any Affiliate thereof has taken, is taking and
proposes to take with respect thereto: (1) any condition or event that
constitutes an Event of Default or Default; or (2) any Material Adverse Effect
with respect to Borrower.

          4.9.8 Litigation. Promptly upon any Borrower's obtaining knowledge of
(i) the institution of any action, suit, proceeding, governmental investigation
or arbitration against or affecting such Borrower or any property of such
Borrower not previously disclosed in writing by such Borrower to Lender or (ii)
any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting Borrower
or any property of Borrower which, in each case, is reasonably likely to have a
Material Adverse Effect, Borrower will give notice thereof to Lender and provide
such other information as may be reasonably available to them to enable Lender
and its counsel to evaluate such matter.

          4.9.9 Insurance. Within the 30 day period prior to the end of each
insurance policy year of Borrowers, Borrowers will deliver a report in form and
substance reasonably satisfactory to Lender outlining all material insurance
coverage maintained as of the date of such report by Borrowers and all material
insurance coverage planned to be maintained by Borrowers in the subsequent
insurance policy year.

          4.9.10 Other Information. With reasonable promptness, each of each
Borrower, Borrower Member and Guarantor will deliver such other information and
data with respect to Borrowers, Borrower Member and Guarantor as from time to
time may be reasonably requested by Lender.

          4.9.11 Breach. If any Borrower fails to provide to Lender or its
designee any of the financial statements, certificates, reports or information
(the "REQUIRED RECORDS") required by this Section 4.9 within 30 days after the
date upon which such Required Record is due, Borrowers shall pay to Lender, at
Lender's option and in its discretion, an amount equal to $10,000 for each
Required Record that is not delivered; provided Lender has given Borrowers at
least 15 days prior notice of such failure. In addition, 30 days after any
Borrower's failure to deliver any Required Records, Lender shall have the
option, upon 15 days notice to such Borrower to gain access to such Borrower's
books and records and prepare or have prepared at Borrowers' expense, any
Required Records not delivered by such Borrower.

          4.9.12 Consolidated Statements. Notwithstanding anything to the
contrary in the foregoing, so long as the Borrowers that are limited liability
companies file a consolidated tax return together with Borrower Member, such
Borrowers may deliver any information required by this


                                       23



Section 4.9.12 on a consolidated basis, provided that all such information is
set forth separately for each Property.

     4.10 Environmental Matters.

          4.10.1 Hazardous Substances. So long as such Borrower owns or is in
possession of any Property, such Borrower (i) shall keep such Property free from
Hazardous Substances and in compliance with all Environmental Laws, (ii) shall
promptly notify Lender if such Borrower shall become aware that (A) any
Hazardous Substance is on or near any Property, (B) any Property is in direct or
indirect violation of any Environmental Laws or (C) any condition on or near any
Property shall pose a threat to the health, safety or welfare of humans, (iii)
shall remove such Hazardous Substances and/or cure such violations and/or remove
such threats, as applicable, as required by law (as determined by Lender or by a
licensed hydrogeologist, licensed environmental engineer or other qualified
environmental consulting firm engaged by Lender ("LENDER'S CONSULTANT")),
promptly after Borrower becomes aware of same, at Borrowers' sole expense and
(iv) shall comply with all of the recommendations contained in the environmental
reports delivered to Lender in connection with the origination of the Loan.
Nothing herein shall prevent any Borrower from recovering such expenses from any
other party that may be liable for such removal or cure.

          4.10.2 Environmental Monitoring.

          (1) Borrowers shall give prompt written notice to Lender of (i) any
proceeding or written inquiry by any party (including any Governmental
Authority) with respect to the presence of any Hazardous Substance on, under,
from or about any Property, (ii) all claims made or threatened in writing by any
third party (including any Governmental Authority) against any Borrower or any
Property or any party occupying any Property relating to any loss or injury
resulting from any Hazardous Substance, and (iii) any Borrower's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
any Property that could cause such Property to be subject to any investigation
or cleanup pursuant to any Environmental Law. Borrowers shall permit Lender to
join and participate in, as a party if it so elects, any legal or administrative
proceedings or other actions initiated with respect to any Property in
connection with any Environmental Law or Hazardous Substance, and Borrowers
shall pay all reasonable attorneys' fees and disbursements incurred by Lender in
connection therewith.

          (2) Upon Lender's request, at any time and from time to time,
Borrowers shall provide an inspection or audit of the Properties (or any of
them) prepared by a licensed hydrogeologist, licensed environmental engineer or
qualified environmental consulting firm approved by Lender assessing the
presence or absence of Hazardous Substances on, in or near such Properties. The
cost and expense of such audit or inspection shall be paid by Borrowers not more
frequently than once every five calendar years after the occurrence of any
Secondary Market Transaction, unless a Default or an Event of Default exists or
Lender, in its good faith judgment, determines that reasonable cause exists for
the performance of an environmental inspection or audit of such Properties, in
which cases such inspections or audits shall be at Borrowers' sole expense. Such
inspections and audit may include, without limitation, soil bearings and ground
water monitoring. If Borrowers fail to provide any such inspection or audit
within 30 days after such


                                       24



request, Lender may order same, and each Borrower hereby grants to Lender and
its employees and agents access to its Property and a license to undertake such
inspection or audit. The cost of such inspection or audit shall be paid by
Borrowers upon demand and if not paid, shall be added to the Debt.

          (3) If any environmental site assessment report prepared in connection
with such inspection or audit recommends that an operations and maintenance plan
be implemented for any Hazardous Substance, whether such Hazardous Substance
existed prior to the ownership of such Property by a Borrower, or presently
exists or is reasonably suspected of existing, Borrowers shall cause such
operations and maintenance plan to be prepared and implemented at its expense
upon request of Lender. In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind is
reasonably necessary under an applicable Environmental Law ("REMEDIAL WORK"),
Borrower shall, within 30 days after written demand by Lender, commence and
thereafter diligently prosecute to completion all such Remedial Work (which
amount of time shall not exceed any applicable period of time as may be required
under applicable law). All Remedial Work shall be performed by licensed
contractors approved in advance by Lender and under the supervision of a
consulting engineer approved by Lender. All costs of such Remedial Work shall be
paid by Borrowers, including Lender's reasonable attorneys' fees and
disbursements incurred in connection with the monitoring or review of such
Remedial Work. If Borrowers do not timely commence and diligently prosecute to
completion the Remedial Work, Lender may (but shall not be obligated to) cause
such Remedial Work to be performed. All costs and expenses (including reasonable
attorneys' fees and disbursements) relating to or incurred by Lender in
connection with monitoring, reviewing or performing any Remedial Work in
accordance herewith shall be paid by Borrowers upon demand from Lender and if
not, shall be added to the Debt. Notwithstanding the foregoing, Borrowers shall
not be required to commence such Remedial Work within the above specified time
period: (x) if prevented from doing so by any Governmental Authority, (y) if
commencing such Remedial Work within such time period would result in a Borrower
or such Remedial Work violating any Environmental Law, or (z) if a Borrower, at
its expense and after prior written notice to Lender, is contesting by
appropriate legal, administrative or other proceedings, conducted in good faith
and with due diligence, the need to perform Remedial Work. A Borrower shall have
the right to contest the need to perform such Remedial Work, provided that, (1)
such Borrower is permitted by the applicable Environmental Laws to delay
performance of the Remedial Work pending such proceedings, (2) neither the
Properties nor any of them nor any part thereof or interest therein will be
sold, forfeited or lost if such Borrower fails to promptly perform the Remedial
Work being contested, and if such Borrower fails to prevail in contest, such
Borrower would thereafter have the opportunity to perform such Remedial Work,
(3) Lender would not, by virtue of such permitted contest, be exposed to any
risk of any civil liability for which Borrowers have not furnished additional
security as provided in clause (4) below, or to any risk of criminal liability,
and neither the Properties nor any of them nor any interest therein would be
subject to the imposition of any Lien for which Borrowers have not furnished
additional security as provided in clause (4) below, as a result of the failure
to perform such Remedial Work and (4) Borrowers shall have furnished to Lender
additional security in respect of the Remedial Work being contested and the loss
or damage that may result from the applicable Borrower's failure to prevail in
such contest in such amount as may be reasonably requested by Lender but in no
event less than one hundred twenty-five percent (125%) of the cost of such
Remedial Work as estimated by Lender or Lender's


                                       25



Consultant and any loss or damage that may result from the applicable Borrower's
failure to prevail in such contest.

          (4) Borrower shall not install or permit to be installed on any
Property any underground storage tank.

     4.11 Title to the Property. Each Borrower will warrant and defend the title
to its Property, and the validity and priority of all Liens granted or otherwise
given to Lender under the Loan Documents, subject only to Permitted
Encumbrances, against the claims of all Persons.

     4.12 Leases.

          4.12.1 Intentionally Omitted.

          4.12.2 New and Renewal Leases. No Borrower shall enter into any
proposed new Leases or proposed renewals, extensions, modifications or
amendments of existing Leases without the prior written consent of Lender;
provided, however, that prior written consent is not required if such proposed
new, renewed, modified or extended Lease: (i) is not a Material Lease; (ii) with
respect to such Lease, the representations set forth in Section 3.1.26 are true
and accurate with respect to such Lease as of the day of the effectiveness of
such Lease; (iii) shall have an initial term of not less than three years or
greater than ten years; and (iv) shall be to a tenant that is experienced,
creditworthy and reputable. No later than ten days after the execution of a new
or renewal Lease, Borrowers shall deliver to Lender a modified and updated rent
roll, and, if requested by Lender, a tenant estoppel certificate satisfactory to
Lender and a subordination and attornment agreement satisfactory to Lender.
Notwithstanding the foregoing, with respect to any Material Lease other than the
Levitz Lease, the prior written consent of Lender shall not be required for a
non-material modification or amendment to such Lease, it being understood that a
modification shall be deemed material if, without limitation, such modification
(i) changes the rent or other amounts payable thereunder, (ii) changes the term
or otherwise modifies any renewal options thereunder, (iii) grants to the tenant
thereunder any purchase option, right of first refusal for additional space or
termination right, or (iv) increases the obligations of the applicable Borrower
thereunder.

          4.12.3 Levitz Lease. Notwithstanding anything to the contrary
contained in this Agreement: (i) in no event may Borrowers amend, terminate,
accept a surrender of, cancel or otherwise modify the Levitz Lease or any
provision thereof without Lender's prior written consent (which consent shall
not be required with respect to any amendment, the sole purpose of which is to
either (x) reallocate the rent payable thereunder pursuant to Section 24 of the
Twelfth Amendment to Unitary Lease or (y) release a specific Property from the
demised premises thereunder in accordance with Section 2.4.2), (ii) Borrowers
shall deliver to Lender a copy of any material plan, material report or other
written communication of any kind delivered to any Borrower or Manager by or on
behalf of the tenant under the Levitz Lease, within five (5) Business Days after
receipt by such Borrower or Manager, (iii) each Borrower shall give Lender a
copy of any written notice given or received by such Borrower or Manager to or
from the tenant under the Levitz Lease simultaneously with the giving of such
notice to such tenant, or in the case of notices received by such Borrower or
Manager from the tenant under the Levitz Lease, within five (5) Business Days
after receipt of such


                                       26



written notice and (iv) Borrowers shall be able to freely reallocate rent
payable under the Levitz Lease and Lender shall not withhold its consent to an
amendment of the Levitz Lease on account of a reallocation of rent or a release
of a Property in accordance with Section 2.4.2. Notwithstanding anything to the
contrary contained herein, Borrowers may reduce the amount of rent payable under
the Levitz Lease, at any time, provided that (A) no Event of Default shall have
commenced and then be continuing; (B) the aggregate amount of all such rent
reductions (after taking into account any previous rent reductions, but
excluding any reductions of Rent made in connection with a Severed Lease or
Severed Property (all of which are defined in the Levitz Lease) pursuant to
Section 29.02 of the Levitz Lease) shall not exceed $600,000; and (C) Borrowers
shall (i) make a prepayment of Principal in an amount equal to (x) .85 times the
amount obtained by dividing the amount of the rent reduction being made by (y)
0.10, and (ii) pay all accrued and unpaid interest on the Principal being
prepaid pursuant to clause (i).

     4.13 Estoppel Statement. After request by Lender, Borrowers shall within
ten days furnish Lender with a statement addressed to Lender, its successors and
assigns, duly acknowledged and certified, setting forth (i) the unpaid
Principal, (ii) the interest rate, (iii) the date installments of interest
and/or Principal were last paid, (iv) any offsets or defenses to the payment of
the Debt, and (v) that the Loan Documents are valid, legal and binding
obligations and have not been modified or if modified, giving particulars of
such modification. After request by Lender (but no more frequently than twice in
any year as to any one Borrower), each Borrower (x) shall furnish to Lender
within ten days, a certificate addressed to Lender, its successors and assigns
reaffirming all representations and warranties of such Borrower set forth in the
Loan Documents as of the date requested by Lender or, to the extent of any
changes to any such representations and warranties, so stating such changes, and
(y) use commercially reasonable efforts to obtain and deliver to Lender within
30 days, tenant estoppel certificates addressed to Lender, its successors and
assigns from each tenant at such Borrower's Property in form and substance
reasonably satisfactory to Lender.

     4.14 Property Management.

          4.14.1 Management Agreement. Borrower shall cause each Property to be
managed by Manager pursuant to the Management Agreement.

          4.14.2 Termination of Manager. Notwithstanding anything contained in
this Agreement to the contrary, any Borrower may from time to time appoint a
successor manager to manage its Property, which successor manager shall be
approved in writing by Lender in Lender's reasonable discretion. Notwithstanding
the foregoing, any successor manager selected hereunder by a Borrower to serve
as Manager (i) shall be a reputable management company having at least seven (7)
years' experience in the management of commercial properties with similar uses
as the Property in question and in the same geographic area in which the
Property in question is located and (ii) shall not be paid management fees in
excess of fees which are market fees for comparable managers of comparable
properties in the same geographic area.

     4.15 Expenses. Borrowers shall reimburse Lender upon receipt of notice for
all reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and


                                       27



delivery of this Agreement, related documents and the consummation of the
transactions contemplated thereby and all the costs of furnishing all opinions
by counsel for Borrower; (ii) Borrowers' and Lender's ongoing performance under
and compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements; (iii) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications of or under any Loan Document and any other documents or
matters requested by Lender; (iv) filing and recording of any Loan Documents;
(v) title insurance, surveys, inspections and appraisals; (vi) the creation,
perfection or protection of Lender's Liens in the Properties, (vii) enforcing or
preserving any rights in response to third party claims or the prosecuting or
defending of any action or proceeding or other litigation, in each case against,
under or affecting any Borrower, the Loan Documents, the Properties, or any
other security given for the Loan; and (viii) enforcing any obligations of or
collecting any payments due from any Borrower under any Loan Document or with
respect to any Property or in connection with any refinancing or restructuring
of the Loan in the nature of a "work-out", or any insolvency or bankruptcy
proceedings. The obligations and liabilities of Borrowers under this Section
4.15 shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Properties
or any of them by foreclosure or a conveyance in lieu of foreclosure.

     4.16 Indemnity.

          4.16.1 Indemnity Obligations. Borrowers shall defend, indemnify and
hold harmless Lender and each of its Affiliates and their respective successors
and assigns, including the directors, officers, partners, members, shareholders,
participants, employees, professionals and agents of any of the foregoing and
each other Person, if any, who controls Lender, its Affiliates or any of the
foregoing (each, an "INDEMNIFIED PARTY"), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel for an Indemnified
Party in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not Lender shall be designated a
party thereto, court costs and costs of appeal at all appellate levels,
investigation and laboratory fees, consultant fees and litigation expenses),
that may be imposed on, incurred by, or asserted against any Indemnified Party
(collectively, the "INDEMNIFIED LIABILITIES") in any manner, relating to or
arising out of or by reason of the Loan, including: (i) any breach by Borrower
of its obligations under, or any misrepresentation by any Borrower contained in,
any Loan Document; (ii) the use or intended use of the proceeds of the Loan;
(iii) any information provided by or on behalf of any Borrower, or contained in
any documentation approved by any Borrower; (iv) ownership of the Mortgage; any
Property or any interest therein, or receipt of any Rents; (v) any accident,
injury to or death of persons or loss of or damage to property occurring in, on
or about any Property or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (vi) any use, nonuse or condition in,
on or about any Property or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (vii) performance of any labor or
services or the furnishing of any materials or other property in respect of any
Property; (viii) the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release, or threatened release of any Hazardous Substance
on, from or affecting any Property; (ix) any personal injury (including wrongful
death) or property damage (real or


                                       28



personal) arising out of or related to such Hazardous Substance; (x) any lawsuit
brought or threatened, settlement reached, or government order relating to such
Hazardous Substance; (xi) any violation of the Environmental Laws which is based
upon or in any way related to such Hazardous Substance, including the costs and
expenses of any Remedial Work; (xii) any failure of any Property to comply with
any Legal Requirement; (xiii) any claim by brokers, finders or similar persons
claiming to be entitled to a commission in connection with any Lease or other
transaction involving any Property or any part thereof, or any liability
asserted against Lender with respect thereto; and (xiv) the claims of any lessee
of any portion of any Property or any Person acting through or under any lessee
or otherwise arising under or as a consequence of any Lease; provided, however,
that Borrowers shall not have any obligation to any Indemnified Party hereunder
to the extent that it is finally judicially determined that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of such Indemnified Party. If any Indemnified Party becomes involved
in any action, proceeding or investigation in connection with any transaction or
matter referred to or contemplated in this Agreement, Borrowers shall
periodically reimburse any Indemnified Party upon demand therefor in an amount
equal to its reasonable legal and other expenses (including the costs of any
investigation and preparation) incurred in connection therewith. To the extent
that the undertaking to indemnify, defend and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, Borrowers shall contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by any Indemnified Party. Any amounts payable
to any Indemnified Party by reason of the application of this paragraph shall
become immediately due and payable. The obligations and liabilities of Borrowers
under this Section 4.16.1 shall survive the Term and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties or any of them by foreclosure or a conveyance in
lieu of foreclosure.

5. NEGATIVE COVENANTS

     Until the end of the Term, each Borrower covenants and agrees with Lender
that it will not, directly or indirectly:

     5.1 Management Agreement. Without Lender's prior written consent: (i)
surrender, terminate, cancel, extend or renew the Management Agreement or
otherwise replace the Manager or enter into any other management agreement
(except pursuant to Section 4.14.2); (ii) reduce or consent to the reduction of
the term of the Management Agreement; (iii) increase or consent to the increase
of the amount of any charges under the Management Agreement; (iv) otherwise
modify, change, supplement, alter or amend in any material respect, or waive or
release any of its rights and remedies under, the Management Agreement; or (v)
suffer or permit the occurrence and continuance of a default beyond any
applicable cure period under the Management Agreement (or any successor
management agreement) if such default permits the Manager to terminate the
Management Agreement (or such successor management agreement);

     5.2 Liens. Without Lender's prior written consent, create, incur, assume,
permit or suffer to exist any Lien on all or any portion of the Property or any
legal or beneficial ownership interest in any Borrower, except Liens in favor of
Lender and Permitted Encumbrances, unless such Lien is


                                       29



bonded or discharged within 30 days after Borrower first receives notice of such
Lien;

     5.3 Change In Business or Operation of Property. Enter into any line of
business other than the ownership and operation of its Property, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business or otherwise cease to operate its Property as a retail
and/or warehouse property or terminate such business for any reason whatsoever
(other than temporary cessation in connection with renovations to or development
of such Property);

     5.4 Debt Cancellation. Cancel or otherwise forgive or release any claim or
debt owed to such Borrower by any Person, except for adequate consideration and
in the ordinary course of such Borrower's business in its reasonable judgment;

     5.5 Assets. Purchase or own any property other than its Property (other
than the acquisition of the fee estate of any Property;

     5.6 Transfers. Make, suffer or permit the occurrence of any Transfer other
than a Permitted Transfer, nor Transfer any License required for the operation
of its Property;

     5.7 Debt. Create, incur or assume any indebtedness other than the Debt and
unsecured trade payables incurred in the ordinary course of business relating to
the ownership and operation of its Property and are paid within thirty (30) days
of the date incurred;

     5.8 Assignment of Rights. Without Lender's prior written consent, attempt
to assign such Borrower's rights or interest under any Loan Document in
contravention of any Loan Document;

     5.9 Principal Place of Business. Change its principal place of business or
chief executive office without first giving Lender 30 days' prior notice;

     5.10 Corporate Organization. Make or permit any material change, amendment
or modification to the organizational documents of Borrower, Borrower Member or
any Borrower Representative;

     5.11 ERISA. Maintain, sponsor, contribute to or become obligated to
contribute to, or suffer or permit any ERISA Affiliate of such Borrower to,
maintain, sponsor, contribute to or become obligated to contribute to, any Plan
or any Welfare Plan or permit the assets of such Borrower to become "plan
assets," whether by operation of law or under regulations promulgated under
ERISA.

6. INSURANCE; CASUALTY; AND CONDEMNATION

     6.1 Insurance.

          6.1.1 Coverage. Each Borrower, at its sole cost, for the mutual
benefit of Borrower


                                       30



and Lender, shall obtain and maintain during the Term the following policies of
insurance with respect to such Borrower's Property:

          (1) Property insurance insuring against loss or damage by standard,
"all-risk" perils (which shall include coverage for damage or destruction caused
by the acts of "Terrorists" (or such policies shall have no exclusion from
coverage with respect thereto)), which shall (i) be in an amount equal to the
greatest of (A) the then full replacement cost of such Property without
deduction for physical depreciation, (B) the unpaid Principal, and (C) such
amount as is necessary so that the insurer would not deem such Borrower a
co-insurer under such policies, (ii) have deductibles no greater than the lesser
of $100,000 or 5% of net cash flow per occurrence, (iii) be paid annually in
advance and (iv) contain a "Replacement Cost Endorsement" with a waiver of
depreciation.

          (2) Flood insurance if any part of such Property is located in an area
identified by the Federal Emergency Management Agency as an area having special
flood hazards and in which flood insurance is available, in an amount at least
equal to the lesser of: (i) the greater of (A) the then full replacement cost of
such Property without deduction for physical depreciation and (B) the unpaid
Principal and (ii) the maximum limit of coverage available with respect to such
Property.

          (3) Commercial general public liability insurance, including broad
form property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year; together with at
least $10,000,000 excess and/or umbrella liability insurance for any and all
claims, including all legal liability imposed upon such Borrower and all court
costs and attorneys' fees incurred in connection with the ownership, operation
and maintenance of such Property.

          (4) Rental loss and/or business interruption insurance in an amount
equal to the estimated Rents for the next succeeding 18-month period. The amount
of such insurance shall be increased from time to time during the Term as and
when the estimated or actual Rents increase.

          (5) Insurance against loss or damage from (i) leakage of sprinkler
systems and (ii) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and Equipment, pressure vessels or similar apparatus
now or hereafter installed in any of the Improvements (without exclusion for
explosions), in an amount at least equal to $2,000,000 or such higher amount
Lender may require at any time.

          (6) Worker's compensation insurance with respect to any employees of
such Borrower, as required by any Legal Requirement.

          (7) During any period of repair or restoration, builder's "all-risk"
insurance in an amount equal to not less than the full insurable value of such
Property, against such risks (including fire and extended coverage and collapse
of the Improvements to agreed limits) as Lender may request, in form and
substance acceptable to Lender.

          (8) Coverage to compensate for the cost of demolition and the
increased cost of


                                       31



construction in an amount satisfactory to Lender.

          (9) Earthquake coverage and such other insurance (including
environmental liability insurance and windstorm insurance) as may from time to
time be reasonably required by Lender in order to protect its interests.

          (10) The amount of deductibles, if any, under the foregoing Policies
shall be satisfactory to Lender in its sole and absolute discretion.

          6.1.2 Policies. All policies of insurance (the "POLICIES") required
pursuant to Section 6.1.1 shall (i) be issued by companies approved by Lender
and licensed to do business in the State, with a claims paying ability rating of
"AA"; (ii) name Lender and its successors and/or assigns as their interest may
appear as the mortgagee (in the case of property insurance) or an additional
insured (in the case of liability insurance); (iii) contain (in the case of
property insurance) a Non-Contributory Standard Lender Clause and a Lender's
Loss Payable Endorsement, or their equivalents, naming Lender as the person to
which all payments made by such insurance company shall be paid; (iv) contain a
waiver of subrogation against Lender; (v) be assigned and the originals thereof
delivered to Lender; (vi) contain such provisions as Lender deems reasonably
necessary or desirable to protect its interest, including endorsements providing
that neither any Borrower, Lender nor any other party shall be a co-insurer
under the Policies and that Lender shall receive at least 30 days' prior written
notice of any modification, reduction or cancellation of any of the Policies;
and (vii) be satisfactory in form and substance to Lender and approved by Lender
as to amounts, form, risk coverage, deductibles, loss payees and insureds.
Borrowers shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as
the same become due and payable and furnish to Lender evidence of the renewal of
each of the Policies together with receipts for or other evidence of the payment
of the Insurance Premiums reasonably satisfactory to Lender. If Borrowers do not
furnish such evidence and receipts at least 30 days prior to the expiration of
any expiring Policy, then Lender may, but shall not be obligated to, procure
such insurance and pay the Insurance Premiums therefor, and Borrowers shall
reimburse Lender for the cost of such Insurance Premiums promptly on demand.
Borrowers shall deliver to Lender a certified copy of each Policy within 30 days
after its effective date. Within 30 days after request by Lender, Borrowers
shall obtain such increases in the amounts of coverage required hereunder as may
be reasonably requested by Lender, taking into consideration changes in the
value of money over time, changes in liability laws, changes in prudent customs
and practices, and the like.

     6.2 Casualty.

          6.2.1 Notice; Restoration. If any Property is damaged or destroyed, in
whole or in part, by fire or other casualty (a "CASUALTY"), Borrowers shall give
prompt notice thereof to Lender. Following the occurrence of a Casualty,
Borrowers, regardless of whether insurance proceeds are available, shall
promptly proceed to restore, repair, replace or rebuild such Property in
accordance with Legal Requirements to be of at least equal value and of
substantially the same character as prior to such damage or destruction.

          6.2.2 Settlement of Proceeds. In the event of a Casualty covered by
any of the


                                       32



Policies (an "INSURED Casualty") where the loss does not exceed $250,000,
provided no Default or Event of Default has occurred and is continuing,
Borrowers may settle and adjust any claim without the prior written consent of
Lender; provided such adjustment is carried out in a competent and timely
manner, and Borrowers are hereby authorized to collect and receipt for the
insurance proceeds (the "PROCEEDS"). In the event of an Insured Casualty where
the loss equals or exceeds $250,000 (a "SIGNIFICANT CASUALTY"), Lender may, in
its reasonable discretion, settle and adjust any claim without the consent of
any Borrower and agree with the insurer(s) on the amount to be paid on the loss,
and the Proceeds shall be due and payable solely to Lender and held by Lender
and disbursed in accordance herewith. If any Borrower or any party other than
Lender is a payee on any check representing Proceeds with respect to a
Significant Casualty, the applicable Borrower(s) shall immediately endorse, and
cause all such third parties to endorse, such check payable to the order of
Lender. Each Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, to endorse such check payable to the
order of Lender. The expenses incurred by Lender in the settlement, adjustment
and collection of the Proceeds shall become part of the Debt and shall be
reimbursed by Borrowers to Lender upon demand.

     6.3 Condemnation.

          6.3.1 Notice; Restoration. Borrowers shall promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting the Property (a "CONDEMNATION") and shall deliver to Lender
copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Borrowers, regardless of whether an
Award is available, shall promptly proceed to restore, repair, replace or
rebuild the affected Property in accordance with Legal Requirements to the
extent practicable to be of at least equal value and of substantially the same
character (and to have the same utility) as prior to such Condemnation.

          6.3.2 Collection of Award. Lender is hereby irrevocably appointed as
each Borrower's attorney-in-fact, coupled with an interest, with exclusive power
to collect, receive and retain any award or payment in respect of a Condemnation
(an "AWARD") and to make any compromise, adjustment or settlement in connection
with such Condemnation. Notwithstanding any Condemnation (or any transfer made
in lieu of or in anticipation of such Condemnation), Borrowers shall continue to
pay the Debt at the time and in the manner provided for in the Loan Documents,
and the Debt shall not be reduced unless and until any Award shall have been
actually received and applied by Lender to expenses of collecting the Award and
to discharge of the Debt. Lender shall not be limited to the interest paid on
the Award by the condemning authority but shall be entitled to receive out of
the Award interest at the rate or rates provided in the Note. If the affected
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of such Award, Lender shall have the right, whether or not a deficiency
judgment on the Note shall be recoverable or shall have been sought, recovered
or denied, to receive all or a portion of the Award sufficient to pay the Debt.
Each Borrower shall cause any Award that is payable to such Borrower to be paid
directly to Lender. Lender shall hold such Award and disburse such Award in
accordance with the terms hereof.

     6.4 Application of Proceeds or Award.


                                       33



          6.4.1 Application to Restoration. In the event of an Insured Casualty
or Condemnation where (i) the loss is in an aggregate amount less than the 15%
of the unpaid Principal, (ii) in the reasonable judgment of Lender, the affected
Property can be restored within six months, and prior to six months before the
Stated Maturity Date and prior to the expiration of the rental or business
interruption insurance with respect thereto, to the affected Property's
pre-existing condition and utility as existed immediately prior to such Insured
Casualty or Condemnation and to an economic unit not less valuable and not less
useful than the same was immediately prior to the Insured Casualty or
Condemnation, and after such restoration will adequately secure the Debt and
(iii) no Default or Event of Default shall have occurred and be then continuing,
then the Proceeds or the Award, as the case may be (after reimbursement of any
expenses incurred by Lender), shall be applied to reimburse the applicable
Borrower for the cost of restoring, repairing, replacing or rebuilding the
affected Property (the "RESTORATION"), in the manner set forth herein. The
applicable Borrower shall commence and diligently prosecute such Restoration.
Notwithstanding the foregoing, in no event shall Lender be obligated to apply
the Proceeds or Award to reimburse any Borrower for the cost of Restoration
unless, in addition to satisfaction of the foregoing conditions, Borrowers shall
pay (and if required by Lender, Borrowers shall deposit with Lender in advance)
all costs of such Restoration in excess of the net amount of the Proceeds or the
Award made available pursuant to the terms hereof.

          6.4.2 Application to Debt. Except as provided in Section 6.4.1, any
Proceeds and/or Award may, at the option of Lender in its discretion, be applied
to the sum of (i) accrued but unpaid interest on the Note, (ii) the unpaid
Principal and (iii) other charges due under the Note and/or any of the other
Loan Documents (such sum, the "AGGREGATE CASUALTY/CONDEMNATION PREPAYMENT
AMOUNT"), or applied to reimburse the applicable Borrower for the cost of any
Restoration, in the manner set forth in Section 6.4.3.

          6.4.3 Procedure for Application to Restoration. If any Borrower is
entitled to reimbursement out of the Proceeds or an Award held by Lender, such
Proceeds or Award shall be disbursed from time to time upon Lender being
furnished with (i) evidence satisfactory to Lender of the estimated cost of
completion of the Restoration, (ii) a fixed price or guaranteed maximum cost
construction contract for Restoration satisfactory to Lender, (iii) prior to the
commencement of Restoration, all immediately available funds in addition to the
Proceeds or Award that in Lender's judgment are required to complete the
proposed Restoration, (iv) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey, permits, approvals, licenses and such other documents and items as
Lender may reasonably require and approve in Lender's discretion, and (iv) all
plans and specifications for such Restoration, such plans and specifications to
be approved by Lender prior to commencement of any work. Lender may, at
Borrowers' expense, retain a consultant to review and approve all requests for
disbursements, which approval shall also be a condition precedent to any
disbursement. No payment made prior to the final completion of the Restoration
shall exceed 90% of the value of the work performed from time to time; funds
other than the Proceeds or Award shall be disbursed prior to disbursement of
such Proceeds or Award; and at all times, the undisbursed balance of such
Proceeds or Award remaining in the hands of Lender, together with funds
deposited for that purpose or irrevocably committed to the satisfaction of
Lender by or on behalf of Borrowers for that purpose,


                                       34



shall be at least sufficient in the reasonable judgment of Lender to pay for the
cost of completion of the Restoration, free and clear of all Liens or claims for
Lien. Provided no Default or Event of Default then exists, any surplus that
remains out of the Proceeds held by Lender after payment of such costs of
Restoration shall be paid to the applicable Borrower. Any surplus that remains
out of the Award received by Lender after payment of such costs of Restoration
shall, in the discretion of Lender, be retained by Lender and applied to payment
of the Debt or returned to the applicable Borrower.

          6.4.4 Ground Lease. If Lender shall have the right or option hereunder
to apply Proceeds or an Award to payment of the Debt, but under any controlling
provision in any Ground Lease, Lease or in the Levitz Lease, such Proceeds or
Award are required to be applied to Restoration of a Collateral Property, then
notwithstanding anything to the contrary in this Article 6, such Proceeds or
Award shall be applied to Restoration in accordance with such Ground Lease,
Lease or the Levitz Lease, subject to such conditions and procedures as Lender
may impose which are not inconsistent with the terms of such Ground Lease, Lease
or the Levitz Lease, as applicable.

7. DEFAULTS

     7.1 Events of Default. An "Event of Default" shall exist with respect to
the Loan if any of the following shall occur:

          (1) any portion of the Debt (including any payment due under Article
2) is not paid when due;

          (2) any of the Taxes are not paid when due, subject to Borrowers'
right to contest Taxes in accordance with Section 4.2;

          (3) the Policies are not kept in full force and effect, or are not
delivered to Lender upon request;

          (4) a Transfer other than a Permitted Transfer occurs;

          (5) any representation or warranty made by any Borrower or Guarantor
or in any Loan Document, or in any report, certificate, financial statement or
other instrument, agreement or document furnished by any Borrower or Guarantor
in connection with any Loan Document, shall be false or misleading in any
material respect as of the date the representation or warranty was made;

          (6) any Borrower, Borrower Member, any Borrower Representative or
Guarantor shall make an assignment for the benefit of creditors, or shall
generally not be paying its debts as they become due;

          (7) a receiver, liquidator or trustee shall be appointed for any
Borrower, Borrower Member, any Borrower Representative or Guarantor; or any
Borrower, Borrower Member, any Borrower Representative or Guarantor shall be
adjudicated a bankrupt or insolvent; or any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar


                                       35



federal or state law, shall be filed by or against, consented to, or acquiesced
in by, any Borrower, Borrower Member, any Borrower Representative, or Guarantor
as the case may be; or any proceeding for the dissolution or liquidation of any
Borrower, Borrower Member, any Borrower Representative or Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by such Borrower, Borrower
Member, any Borrower Representative or Guarantor, as the case may be, only upon
the same not being discharged, stayed or dismissed within 60 days;

          (8) any Borrower breaches any negative covenant contained in Section
5;

          (9) except as expressly permitted hereunder, the actual or threatened
alteration, improvement, demolition or removal of all or any of portion of the
Improvements without the prior written consent of Lender;

          (10) an Event of Default as defined or described elsewhere in this
Agreement or in any other Loan Document occurs; or any other event shall occur
or condition shall exist, if the effect of such event or condition is to
accelerate or to permit Lender to accelerate the maturity of any portion of the
Debt;

          (11) any Borrower or Guarantor shall be in default under any term,
covenant or provision set forth herein or in any other Loan Document which
specifically contains a notice requirement or grace period and such notice has
been given and such grace period has expired;

          (12) any Borrower fails to (A) notify Lender of the occurrence of a
Default within ten (10) days of the day on which such Borrower first has
knowledge of such Default or (B) give any notice due to any Person under any
Loan Document (a) within two (2) days after such notice was due or (b) in
accordance with the applicable procedural requirements set forth in the Loan
Documents;

          (13) Intentionally Omitted;

          (14) with the exception of the following Borrowers: HL Fairless Hills,
L.P., HL Deptford, L.L.C., HL Scottsdale, L.L.C. and HL Glendale, L.L.C., any
Borrower shall fail to pay when due any rent, additional rent or other charge
payable under any Ground Lease; or any Borrower shall default in the observance
or performance of any other term, covenant or condition of any Ground Lease and
such default is not cured within 10 days prior to the expiration of any
applicable grace period provided therein; or any event shall occur that would
cause any Ground Lease to terminate without notice or action by the landlord
thereunder or would entitle such landlord to terminate any Ground Lease and the
term thereof by giving notice to the applicable Borrower; or the leasehold
estate created by any Ground Lease shall be surrendered or any Ground Lease
shall be terminated or canceled for any reason or under any circumstance
whatsoever; or any term of any Ground Lease shall be modified or supplemented
without Lender's consent or Borrower shall fail to exercise its option to renew
any Ground Lease prior to the expiration of the period during which such option
may be exercised, or, after exercising such option, shall fail or neglect to
pursue diligently all actions necessary to exercise such renewal rights pursuant
to the applicable Ground


                                       36



Lease;

          (15) any Borrower shall continue to be in default under any of the
other terms, covenants or conditions of this Agreement or any other Loan
Document not otherwise specified in this Section 7.1, for ten days after notice
to such Borrower from Lender, in the case of any default which can be cured by
the payment of a sum of money, or for 30 days after notice from Lender in the
case of any other default; provided, however, that if such non-monetary default
is susceptible of cure but cannot reasonably be cured within such 30-day period,
and such Borrower shall have commenced to cure such default within such 30-day
period and thereafter diligently and expeditiously proceeds to cure the same,
such 30-day period shall be extended for an additional period of time as is
reasonably necessary for such Borrower in the exercise of due diligence to cure
such default, such additional period not to exceed 60 days;

          (16) any Guarantor shall continue to be in default under any Guaranty
for ten days after notice to such Guarantor from Lender, in the case of any
default which can be cured by the payment of a sum of money, or for 30 days
after notice from Lender in the case of any other default; provided, however,
that if such non-monetary default is susceptible of cure but cannot reasonably
be cured within such 30-day period, and such Guarantor shall have commenced to
cure such default within such 30-day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30-day period shall be extended
for an additional period of time as is reasonably necessary for such Guarantor
in the exercise of due diligence to cure such default, such additional period
not to exceed 60 days; or

          (17) if any Borrower shall continue to be in default under any of the
terms, covenants or conditions of the Levitz Lease and such default is not cured
prior to the expiration of the applicable grace period provided therein.

          (18) Notwithstanding anything contained to the contrary in this
Agreement, with respect to each of HL Fairless Hills, L.P., HL Deptford, L.L.C.,
HL Scottsdale, L.L.C. and HL Glendale, L.L.C., and its respective Property, any
Transfer, Lien, judgment, or encumbrance arising out of such Borrower's failure
to comply with any provision of its Ground Lease shall not be an Event of
Default

     7.2 Remedies.

          7.2.1 Acceleration. Upon the occurrence of an Event of Default (other
than an Event of Default described in paragraph (6) or (7) of Section 7.1) and
at any time and from time to time thereafter, in addition to any other rights or
remedies available to it pursuant to the Loan Documents or at law or in equity,
Lender may take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against any or all Borrowers and in
and to the Properties; including declaring the Debt to be immediately due and
payable (including unpaid interest through the date of repayment (compounded
monthly), interest at the Default Rate and any other amounts owing by
Borrowers), without notice or demand; and upon any Event of Default described in
paragraph (6) or (7) of Section 7.1, the Debt (including unpaid interest,
interest at the Default Rate and any other amounts owing by Borrowers) shall
immediately and automatically


                                       37



become due and payable, without notice or demand, and each Borrower hereby
expressly waives any such notice or demand, anything contained in any Loan
Document to the contrary notwithstanding.

          7.2.2 Remedies Cumulative. Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrowers under the Loan Documents or at law or in
equity may be exercised by Lender at any time and from time to time, whether or
not all or any of the Debt shall be declared, or be automatically, due and
payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents. Any such actions taken by Lender shall be cumulative
and concurrent and may be pursued independently, singly, successively, together
or otherwise, at such time and in such order as Lender may determine in its
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth in the Loan Documents. Without limiting the
generality of the foregoing, each Borrower agrees that if an Event of Default is
continuing, (i) to the extent permitted by applicable law, Lender is not subject
to any "one action" or "election of remedies" law or rule, and (ii) all Liens
and other rights, remedies or privileges provided to Lender shall remain in full
force and effect until Lender has exhausted all of its remedies against the
Properties, the Mortgages have been foreclosed, the Properties have been sold
and/or otherwise realized upon in satisfaction of the Debt or the Debt has been
paid in full. To the extent permitted by applicable law, nothing contained in
any Loan Document shall be construed as requiring Lender to resort to any
particular Property or any portion of any Property for the satisfaction of any
of the Debt in preference or priority to any other Property or portion, and
Lender may seek satisfaction out all or less than all of the Properties or any
part of any Property, in its discretion.

          7.2.3 Delay. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default, or the granting of any indulgence or
compromise by Lender shall impair any such remedy, right or power hereunder or
be construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default shall not be construed to be a waiver of any
subsequent Default or Event of Default or to impair any remedy, right or power
consequent thereon. Notwithstanding any other provision of this Agreement,
Lender reserves the right to seek a deficiency judgment or preserve a deficiency
claim in connection with the foreclosure of any Mortgage to the extent necessary
to foreclose on all or less than all of the Properties, the Rents, or any other
collateral.

          7.2.4 Lender's Right to Perform. If any Borrower fails to perform any
covenant or obligation contained herein and such failure shall continue for a
period of (5) five Business Days after such Borrower's receipt of written notice
thereof from Lender, without in any way limiting Lender's right to exercise any
of its rights, powers or remedies as provided hereunder, or under any of the
other Loan Documents, Lender may, but shall have no obligation to, perform, or
cause performance of, such covenant or obligation, and all costs, expenses,
liabilities, penalties and fines of Lender incurred or paid in connection
therewith shall be payable by Borrowers to Lender upon demand and if not paid
shall be added to the Debt (and to the extent permitted under applicable laws,


                                       38



secured by the Mortgages and other Loan Documents) and shall bear interest
thereafter at the Default Rate. Notwithstanding the foregoing, Lender shall have
no obligation to send notice to any Borrower of any such failure.

8.   MISCELLANEOUS

     8.1 Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of any Borrower to perform and observe the
obligations contained in the Loan Documents by any action or proceeding wherein
a money judgment shall be sought against such Borrower, except that Lender may
bring a foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Lender to enforce and realize upon
its interest and rights under the Loan Documents, or in all or any of the
Properties, the Rents or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be enforceable against a
Borrower only to the extent of such Borrower's interest in the Properties, in
the Rents and in any other collateral given to Lender, and Lender shall not sue
for, seek or demand any deficiency judgment against any Borrower in any such
action or proceeding under or by reason of or under or in connection with any
Loan Document. The provisions of this Section shall not, however, (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by any
Loan Document; (ii) impair the right of Lender to name one or more Borrowers as
a party defendant in any action or suit for foreclosure and sale under any
Mortgage; (iii) affect the validity or enforceability of any of the Loan
Documents or any guaranty made in connection with the Loan or any of the rights
and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the
appointment of a receiver; (v) impair the enforcement of the Assignment of
Leases; (vi) constitute a prohibition against Lender to commence any other
appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgages or to exercise its remedies against the
Properties or any of them; or (vii) constitute a waiver of the right of Lender
to enforce the liability and obligation of Borrowers, by money judgment or
otherwise, to the extent of any loss, damage, cost, expense, liability, claim or
other obligation incurred by Lender (including attorneys' fees and costs
reasonably incurred) arising out of or in connection with the following: (a)
fraud or intentional misrepresentation by any Borrower or any guarantor in
connection with the Loan; (b) the gross negligence or willful misconduct of any
Borrower; (c) the breach of any representation, warranty, covenant or
indemnification in any Loan Document concerning Environmental Laws or Hazardous
Substances, including Sections 3.1.32 and 4.10, and clauses (viii) through (xi)
of Section 4.16.1; (d) physical waste or after an Event of Default, the removal
or disposal of any portion of any Property; (e) the misapplication or conversion
by any Borrower of (x) any Proceeds paid by reason of any Insured Casualty, (y)
any Award received in connection with a Condemnation, or (z) any Rents or refund
of Taxes (including any distributions or payments to
members/partners/shareholders of any Borrower during a period which Lender did
not receive the full amounts required to be paid to Lender under the Loan
Documents); (f) failure to pay charges for labor or materials or other charges
that can create Liens on any portion of any Property unless such charges are the
subject of a bona fide dispute in which a Borrower is contesting the amount or
validity thereof; and (g) any security deposits collected with respect to any
Property which are not delivered to Lender upon a foreclosure of the applicable
Mortgage or action in lieu thereof, except to the extent any such security
deposits were applied in accordance with the terms and conditions of any of the
Leases prior


                                       39



to the occurrence of the Event of Default that gave rise to such foreclosure or
action in lieu thereof.

     Notwithstanding anything to the contrary in this Agreement or any of the
Loan Documents, (A) Lender shall not be deemed to have waived any right which
Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of
the U.S. Bankruptcy Code to file a claim for the full amount of the Debt or to
require that all collateral shall continue to secure all of the Debt in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse to
Borrowers in the event that (1) any Borrower or any Person owning an interest
(directly or indirectly) in any Borrower commences any action, suit, claim,
arbitration, governmental investigation or other proceeding (x) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors seeking to have an
order for relief entered with respect to any Borrower, or seeking to adjudicate
any Borrower a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to any Borrower or any Borrower's debts, or (y) seeking appointment
of a receiver, trustee, custodian or other similar official for any Borrower or
for all or substantially all of any Borrower's assets or (2) any interest in any
Property or any Borrower is Transferred other than a Permitted Transfer.

     8.2 Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document (a "NOTICE") shall be given
in writing and shall be effective for all purposes if hand delivered or sent (i)
by certified or registered United States mail, postage prepaid, or (ii) by (A)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and (B) telecopier (with answer back
acknowledged), in any case addressed as follows (or to such other address or
Person as a party shall designate from time to time by notice to the other
party): If to Lender: Acadia Realty Limited Partnership, 1311 Mamaroneck Avenue,
Suite 260, White Plains, New York 10605, Attention: Robert Masters, Esq.,
Facsimile: (914) 288-2139; if to Borrowers or any of them: c/o Klaff Realty, LP,
122 South Michigan Avenue, Suite 1000, Chicago, Illinois 60603, Attention:
Hersch Klaff and Keith J. Brown, Facsimile: (312) 360-0606, with copies to
Klehr, Harrison, Harvey, Branzburg & Ellers LLP, 260 South Broad Street,
Philadelphia, Pennsylvania 19102, Attention: Heather Levine, Facsimile (215)
568-6603. A notice shall be deemed given when delivered (or if delivery is
refused, when refused).

          8.2.1 Borrowers' Agent.

          (1) Each of the Borrowers hereby makes, constitutes and appoints
Borrowers' Agent the true and lawful attorney-in-fact of such Borrower, with the
power from time to time, in the name, place and stead of such Borrower to give
and receive notices of any kind on behalf of such Borrower under this Agreement
or any of the other Loan Documents. Any notice given by Lender to Borrower's
Agent shall be deemed to have been given to each and every Borrower.

          (2) If Borrowers' Agent is not an individual, Borrowers' Agent shall
notify Lender of the names of its senior executive officers authorized to
request and take other actions on behalf of Borrowers. Lender shall be entitled
to rely conclusively on any such officer's authority to give and receive notices
and take other all other actions of any kind on behalf of Borrowers or any of


                                       40



them until Lender receives written notice to the contrary. Lender shall have no
duty to verify the authenticity of the signature appearing on any notice.

     8.3 Brokers and Financial Advisors. Each Borrower hereby represents that it
has dealt with no financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the Loan. Borrowers shall indemnify and
hold Lender harmless from and against any and all claims, liabilities, costs and
expenses (including attorneys' fees, whether incurred in connection with
enforcing this indemnity or defending claims of third parties) of any kind in
any way relating to or arising from a claim by any Person that such Person acted
on behalf of Borrowers or any of them in connection with the transactions
contemplated herein. The provisions of this Section 8.3 shall survive the
expiration and termination of this Agreement and the repayment of the Debt.

     8.4 Survival. This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lender of the Loan and the execution and delivery to
Lender of the Note, and shall continue in full force and effect so long as any
of the Debt is unpaid or such longer period if expressly set forth in this
Agreement. All Borrowers' covenants and agreements in this Agreement shall inure
to the benefit of the respective legal representatives, successors and assigns
of Lender.

     8.5 Lender's Discretion. Whenever pursuant to this Agreement or any other
Loan Document, Lender exercises any right given to it to approve or disapprove,
or consent or withhold consent, or any arrangement or term is to be satisfactory
to Lender or is to be in Lender's discretion, the decision of Lender to approve
or disapprove, to consent or withhold consent, or to decide whether arrangements
or terms are satisfactory or not satisfactory, or acceptable or unacceptable or
in Lender's discretion shall (except as is otherwise specifically herein
provided) be in the sole discretion of Lender and shall be final and conclusive.

     8.6 Governing Law.

          (1) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK AND THE
PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND
THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION,
AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT. TO THE


                                       41



FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO Section 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

          (2) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND EACH BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER
DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEM AT 163 BROADWAY, NEW
YORK, NEW YORK 10019, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND
AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN
NOTICE OF SAID SERVICE OF SUCH BORROWER MAILED OR DELIVERED TO SUCH BORROWER IN
THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON SUCH BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF
SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. EACH
BORROWER (i) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE
A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE
SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

     8.7 Modification, Waiver in Writing. No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement or of any
other Loan Document, nor consent to any departure by any Borrower therefrom,
shall in any event be effective unless the same shall be in a writing signed by
the party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein, no notice to or demand on
any Borrower shall entitle any Borrower to any other or future notice or demand
in the same, similar or other circumstances.

     8.8 Delay Not a Waiver. Neither any failure nor any delay on the part of
Lender in insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, or
under any other Loan Document, shall operate as or constitute a waiver thereof,
nor shall a single or partial exercise thereof preclude any other future


                                       42



exercise, or the exercise of any other right, power, remedy or privilege. In
particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under any Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under the Loan Documents, or to declare an Event of Default for
failure to effect prompt payment of any such other amount.

     8.9 Trial by Jury. BORROWERS AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY BORROWERS AND LENDER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE
OTHER.

     8.10 Headings/Exhibits. The Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose. The Exhibits attached hereto, are hereby
incorporated by reference as a part of the Agreement with the same force and
effect as if set forth in the body hereof.

     8.11 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

     8.12 Preferences. Lender shall have the continuing and exclusive right to
apply or reverse and reapply any and all payments by any Borrower to any portion
of the Debt. To the extent any Borrower makes a payment to Lender, or Lender
receives proceeds of any collateral, which is in whole or part subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Debt or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender. This provision shall survive the
expiration or termination of this Agreement and the repayment of the Debt.

     8.13 Waiver of Notice. No Borrower shall be entitled to any notices of any
nature whatsoever from Lender except with respect to matters for which this
Agreement or any other Loan Document specifically and expressly requires the
giving of notice by Lender to such Borrower and except with respect to matters
for which such Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Each Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for which
no Loan Document


                                       43



specifically and expressly requires the giving of notice by Lender to such
Borrower.

     8.14 Remedies of Borrower. If a claim or adjudication is made that Lender
or any of its agents, has acted unreasonably or unreasonably delayed acting in
any case where by law or under any Loan Document, Lender or any such agent, as
the case may be, has an obligation to act reasonably or promptly, Borrowers
agree that neither Lender nor its agents, shall be liable for any monetary
damages, and Borrowers' sole remedy shall be to commence an action seeking
injunctive relief or declaratory judgment. Any action or proceeding to determine
whether Lender has acted reasonably shall be determined by an action seeking
declaratory judgment. Each Borrower specifically waives any claim against Lender
and its agents, with respect to actions taken by Lender or its agents on such
Borrower's behalf.

     8.15 Prior Agreements. This Agreement and the other Loan Documents contain
the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements,
understandings and negotiations among or between such parties, whether oral or
written, are superseded by the terms of this Agreement and the other Loan
Documents.

     8.16 Offsets, Counterclaims and Defenses. Each Borrower hereby waives the
right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents, or otherwise
offset any obligations to make payments required under the Loan Documents. Any
assignee of Lender's interest in and to the Loan Documents shall take the same
free and clear of all unrelated offsets, counterclaims or defenses which a
Borrower may otherwise have against any assignor of such documents, and no such
unrelated offset, counterclaim or defense shall be interposed or asserted by any
Borrower in any action or proceeding brought by any such assignee upon such
documents, and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by each Borrower.

     8.17 No Usury. Borrowers and Lender intend at all times to comply with
applicable state law or applicable United States federal law (to the extent that
it permits Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under state law) and that this Section 8.17 shall
control every other agreement in the Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under the Note or any other Loan Document, or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lender's
exercise of the option to accelerate the maturity of the Loan or any prepayment
by any Borrower results in any Borrower having paid any interest in excess of
that permitted by applicable law, then it is Borrowers' and Lender's express
intent that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrowers), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the Loan
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and


                                       44



spread throughout the full stated term of the Loan until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate from time to time in effect and applicable to the Debt for
so long as the Debt is outstanding. Notwithstanding anything to the contrary
contained in any Loan Document, it is not the intention of Lender to accelerate
the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.

     8.18 Conflict; Construction of Documents. In the event of any conflict
between the provisions of this Agreement and any of the other Loan Documents,
the provisions of this Agreement shall control. The parties hereto acknowledge
that each is represented by separate counsel in connection with the negotiation
and drafting of the Loan Documents and that the Loan Documents shall not be
subject to the principle of construing their meaning against the party that
drafted them.

     8.19 No Third Party Beneficiaries. The Loan Documents are solely for the
benefit of Lender and Borrowers and nothing contained in any Loan Document shall
be deemed to confer upon anyone other than the Lender and Borrowers any right to
insist upon or to enforce the performance or observance of any of the
obligations contained therein.

     8.20 Assignment. The Loan, the Note, the Loan Documents and/or Lender's
rights, title, obligations and interests therein may be assigned by Lender and
any of its successors and assigns to any Person at any time in its discretion,
in whole or in part, whether by operation of law (pursuant to a merger or other
successor in interest) or otherwise. Upon such assignment, all references to
Lender in this Loan Agreement and in any Loan Document shall be deemed to refer
to such assignee or successor in interest and such assignee or successor in
interest shall thereafter stand in the place of Lender. No Borrower may assign
its rights, title, interests or obligations under this Loan Agreement or under
any of the Loan Documents.

     8.21 Sale of the Properties. With the prior written consent of Lender,
which may be given or withheld in Lender's sole discretion, Borrowers may
simultaneously sell all (but not less than all) of the Properties provided that
the purchaser assumes in writing all of the obligations of Borrowers under the
Loan Documents; and provided further that (i) no Default or Event of Default
shall have occurred; and (ii) Lender shall have received from Borrowers (A) such
legal opinions with respect to enforceability, authorization and such other
matters as Lender may reasonably request, (B) title insurance policies or
endorsements as may be reasonably required by Lender to assure the validity and
priority of the Liens of the Mortgages and (C) an assumption fee equal to 1% of
the unpaid Principal being assumed together with all expenses incurred by the
Lender in connection with such Special Transfer.

     8.22 Joint and Several. The Borrowers shall be jointly and severally liable
for payment of the Debt and performance of all other obligations of Borrowers
(or any of them) under this Agreement or any other Loan Document.

     8.23 Counterparts; No Defenses. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which


                                       45



shall together constitute one and the same instrument. Borrower represents that
it has no defenses, offsets or counterclaims with respect to its obligations
under the Loan Documents, and the Loan Documents are hereby ratified and remain
in full force and effect.

                       [Signatures on the following page]


                                       46



     IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.

                                      BORROWER:

                                      LEVITZ SL WOODBRIDGE, L.L.C.
                                      LEVITZ SL ST. PAUL, L.L.C.
                                      LEVITZ SL LA PUENTE, L.L.C.
                                      LEVITZ SL OXNARD, L.L.C.
                                      LEVITZ SL WILLOWBROOK, L.L.C.
                                      LEVITZ SL NORTHRIDGE, L.L.C.
                                      LEVITZ SL SAN LEANDRO, L.L.C.
                                      LEVITZ SL SACRAMENTO, L.L.C.
                                      HL BREA, L.L.C.
                                      HL DEPTFORD, L.L.C.
                                      HL HAYWARD, L.L.C.
                                      HL SAN JOSE, L.L.C.
                                      HL SCOTTSDALE, L.L.C.
                                      HL TORRANCE, L.L.C.
                                      HL IRVINE 1, L.L.C.
                                      HL WEST COVINA, L.L.C.
                                      HL GLENDALE, L.L.C.
                                      HL NORTHRIDGE, L.L.C.

                                      each a Delaware limited liability company


                                      By:
                                          -------------------------------------
                                          Keith Brown
                                          Authorized Representative

                    [Signatures continued on following page]



                                 LEVITZ SL LANGHORNE, L.P., a Delaware
                                 limited  partnership

                                 By: Levitz SL-GP, L.L.C., a Delaware limited
                                     liability company, its general partner


                                     By:
                                         --------------------------------------
                                         Keith Brown
                                         Authorized Representative


                                 HL FAIRLESS HILLS, L.P., a Delaware limited
                                 partnership

                                 By: HL GP, L.L.C., a Delaware limited
                                     liability company, its general partner


                                     By:
                                         --------------------------------------
                                         Keith Brown
                                         Authorized Representative


                                 LENDER:

                                 ACADIA REALTY LIMITED PARTNERSHIP,
                                 a Delaware limited partnership

                                 By: Acadia Realty Trust, a Maryland real estate
                                     investment trust, its general partner


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

                    [Signatures continued on following page]

The L-A Guarantors hereby agree to the provisions of Section 4.9

LUBERT-ADLER REAL ESTATE FUND II, LP, a Delaware limited partnership

By: Lubert-Adler Group, LLC, its sole general partner


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

LUBERT-ADLER REAL ESTATE PARALLEL FUND II, LP, a Delaware limited partnership




By: Lubert-Adler Group, LLC, its sole general partner


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

Klaff Realty, LP hereby agrees to the provisions of Section 4.9


KLAFF REALTY, LP, a Delaware limited partnership

By: Klaff Realty, Limited, an Illinois corporation, its sole general partner


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



                                   Schedule 1

                              Fee Title Properties

1.   Property Location: Oxnard, 2420 N. Oxnard Blvd., Oxnard, CA 93030-2090

2.   Property Location: St. Paul, 3201 Country Dr., St. Paul, MN 55117-1096

3.   Property Location: Northridge, 19350 Nordhoff St., Northridge, CA
                        91324-2492

                              Leasehold Properties

4.   (A) Property Location: Woodbridge, 429 Route 1 South, Iselin, NJ 08830-3009
                            06489-1594

     (B) Ground Lease:

          1.   Ground Lease, dated October 28, 1966, by and between Mario
               Cellentani and Helen Cellentani (Landlord) and Litwin Properties,
               Inc. (Tenant).

          2.   Assignment of Lease by and between Woodbridge Mall No. 2, Inc.
               (formerly known as Litwin Properties, Inc.), as assignor, and
               Carthay Realty Corp., as assignee.

          3.   Assignment of Lease, dated June 29, 1973, by and between Carthay
               Realty Corp., as assignor, and Mann Theatres Corporation of
               California, as assignee.

          4.   Acceptance of Assignment, dated July 1, 1973, by Mann Theatres
               Corporation.

          5.   Assignment of Lease, dated February 1, 1980, by and between
               Theatres Corporation of California, as assignor, to Levitz
               Furniture Corporation of the Eastern Region, Inc., as assignee.

5.   (A) Property Location: Willowbrook, 531 Route 46, Fairfield, NJ 07004-1907

     (B) Ground Lease:

          1.   Ground Lease, dated November 22, 1971, by and between Peerage
               Equities Corporation (Lessor) and Spice Properties Co., Inc.
               (Lessee).

          2.   Lease Agreement, dated November 22, 1971, by and between Peerage
               Equities Corporation (Lessor) and Levitz Furniture Corporation
               (Lessee).

          3.   Assignment of Lease, dated November 22, 1971, by and between
               Peerage Equities Corporation (Assignor) and Spice Properties Co.,
               Inc. (Assignee).

          4.   Assignment of Lease and Agreement, dated November 22, 1971, by
               and between Spice Properties Co., Inc. (Assignor) and Levitz
               Furniture Corporation (Assignee).

          5.   Lease Assignment and Assumption Agreement, dated September 30,



               1996, by and between Levitz Furniture Corporation (Assignor) and
               Levitz Furniture Realty Corporation (Assignee).

6.   (A) Property Location: Langhorne, 1661 East Lincoln Highway, Langhorne, PA
                            19047-3096

     (B) Ground Lease:

          1.   Lease, dated May 1, 1973, by and between Quint Leasing Company
               (Lessor) and Levitz Furniture Corporation (Lessee).

          2.   Letter, dated October 9, 1992, by Levitz Furniture Corporation
               electing to extend the term of the Lease until June 30, 2003.

7.   (A) Property Location: San Leandro, 3199 Alvarado Street, San Leandro, CA
                            94577-5790

     (B) Ground Lease:

          1.   Lease Agreement, dated as of August 25, 1971, by and between
               Peerage Equities Corporation (Lessor) and Levitz Furniture
               Corporation (Lessee).

          2.   Warranty Deed dated 8/25/71 between Peerage Equities Corporation
               and Ruth E. Jensen (Building and Improvements only).

          3.   Assignment of Levitz Lease dated 8/25/71 between Peerage Equities
               Corporation, as assignor, and Ruth E. Jensen, as assignee.

          4.   First Amendment to Lease Agreement, dated December 21, 1971.

          5.   Warranty Deed dated 12/31/71 between Peerage Equity Corporation,
               as grantor and Corporate Property Investors, as grantee (land
               only exclusive of any buildings).

          6.   Warranty Deed, dated March 3, 1981, between Ruth E. Jensen, as
               grantor, and Frederick G. Gould, grantee (Buildings and
               Improvements only).

          7.   Assignment of Ground Lease, dated March 3, 1981, between Ruth E.
               Jensen, assignor, and Frederick G. Gould, as assignee.

          8.   Assignment of Levitz Lease, dated March 3, 1981, between Ruth E.
               Jensen, as assignor, and Frederick G. Gould, as assignee.

          9.   General Assignment, dated March 3, 1981, between Ruth E. Jensen,
               as assignor, and Frederick G. Gould, as assignee.

          10.  Warranty Deed dated October 11, 1982, between Frederick G. Gould,
               as grantor and John A. Washburn, as grantee (Buildings and
               Improvements only).

          11.  Assignment of Ground Lease, dated October 11, 1982, between
               Frederick G. Gould, as assignor, and John A. Washburn, as
               assignee.

          12.  Assignment of Levitz Lease, dated October 11, 1982, between
               Frederick G. Gould, as assignor, and John A. Washburn, as
               assignee.

          13.  General Assignment, dated as of October 11, 1982, between
               Frederick G. Gould, as assignor, and John A. Washburn, as
               assignee.

          14.  Notice to Levitz Furniture Corporation of assignment of lease.

          15.  Letter, dated October 29, 1996, by Levitz Furniture Corporation
               exercising its first option to extend Lease from July 1, 1997 to
               June 30,



               2002.

8.   (A) Property Location: Sacramento, 4741 Watt Avenue, North Highlands, CA
                            95660-5515

     (B) Ground Lease:

          1.   Agreement of Lease, dated as of March 9, 1970, by and between A&A
               Key Builders Supply, Inc. and B&B Enterprises, Inc. (Lessor) and
               Levitz Furniture Co. of Santa Clara, Inc. (Lessee).

          2.   Resolution, dated May 26, 1970, amending the Articles of
               Incorporation for Levitz Furniture Company of Santa Clara to
               read, Levitz Furniture Company of Northern California, Inc.

          3.   Resolution, dated March 21, 1973, amending the Articles of
               Incorporation of Levitz Furniture Company of Northern California,
               Inc. to read, Levitz Furniture Company of the Pacific, Inc.

          4.   Letter, dated April 27, 1994, by Levitz Furniture Corporation
               exercising its first option to extend the Lease from September 1,
               1995 to August 31, 2005.

          5.   Option to Purchase, dated as of March 9, 1970, by and between A&A
               Key Builders Supply, Inc. and B&B Enterprises, Inc. (Lessor) and
               Levitz Furniture Co. of Santa Clara, Inc. (Lessee).

9.   (A) Property Location: La Puente, 17520 E. Castleton Street, City of
                            Industry, CA 91744-1701

     (B) Ground Lease:

          1.   Lease, dated March 1, 1979, by and between Wincorp Industries
               Inc. (Landlord) and Levitz Furniture Corporation (Tenant).

          2.   Letter, dated July 1, 1980, from Wincorp Industries Inc. to
               Levitz Furniture Corporation giving notice of commencement date
               as June 29, 1980.

          3.   First Amendment to Lease, dated September 1, 1979, between
               Wincorp Industries, Inc., a Delaware corporation, and Levitz
               Furniture Corporation.

                               Homelife Properties

10.  (A) Property Location: The Court of Oxford Valley, 110 Commerce Boulevard,
                            Oxford Valley, PA 19030 (Store No. 4065)

     (B) Ground Lease:

          1.   Specialty Store Lease dated January 25, 1995 by and between
               Oxford Valley Road Associates, as landlord, and Sears, Roebuck
               and Co. ("Sears"), as tenant.

          2.   Amendment to Specialty Store Lease dated March 27, 1995 by and
               between Oxford Valley Road Associates and Sears.

          3.   Lease Supplement dated March 5, 1996 between Oxford Valley Road



               Associates and Sears.

          4.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife Corporation ("Homelife").

          5.   Assignment and Assumption of Lease Agreement dated February 15,
               2002 between Homelife and HL Fairless Hills, LP.

11.  (A) Property Location: 13732 Jamboree Road, Tustin, CA 92602 (Store No.
                            4108)

     (B) Ground Lease:

          1.   Lease dated December 15, 1995 by and between Irvine Retail
               Properties Company, as landlord, and Sears, as tenant.

          2.   Lease Supplement dated January 22, 1997 between Irvine Retail
               Properties Company and Sears.

          3.   First Amendment to Lease dated May 26, 1998 between Irvine Retail
               Properties Company and Sears.

          4.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife.

          5.   Assignment and Assumption of Lease Agreement dated January 25,
               2002 between Homelife and HL Irvine 1, L.L.C.

12.  (A) Property Location: 19800 Hawthorne Boulevard, Suite 280, Torrance CA
                            90503 (Store No. 4109)

     (B) Ground Lease:

          1.   Lease dated May 3, 1996 by and between Gateway Pioneer, Inc. No.
               1, as landlord, and Sears, as tenant.

          2.   Lease Supplement dated January 14, 1997 between Gateway Pioneer,
               Inc. No. 1 and Sears.

          3.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife.

          4.   Assignment and Assumption of Lease Agreement dated February 15,
               2002 between Homelife and HL Torrance, L.L.C.

13.  (A) Property Location: 2335 E. Imperial Highway, Brea, CA 92821 (Store No.
                             4189)

     (B) Ground Lease:

          1.   Lease dated January 7, 1999 by and between BUP II Partners, as
               landlord, and Sears, as tenant.

          2.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife.

          3.   First Amendment to Lease dated September 19, 2000 between BUP II
               Partners and Homelife.

          4.   Assignment and Assumption of Lease Agreement dated January 25,
               2002 between Homelife and HL Brea, L.L.C.



14.  (A) Property Location: 2753 Eastland Center Drive #2000, West Covina, CA
                            91790 (Store No. 4307)

     (B) Ground Lease:

          1.   Lease dated April 13, 200 by and between Eastland Shopping Center
               LLC, as landlord, and Homelife, as tenant.

          2.   Lease Amendment No. 1 dated August 31, 2000 between Eastland
               Shopping Center LLC and Homelife.

          3.   Assignment and Assumption of Lease Agreement dated ___________,
               2002 between Homelife and HL West Covina, L.L.C.

15.  (A) Property Location: 1561 Almonesson Road, Deptford, NJ 08096 (Store No.
                            4334)

     (B) Ground Lease:

          1.   Specialty Store Lease dated February 17, 1997 by and between
               Almonesson Associates II, LLC, as landlord, and Sears, as tenant.

          2.   Amendment to Specialty Store Lease dated March 21, 1997 between
               Almonesson Associates II, LLC and Sears.

          3.   Lease Supplement dated July 27, 1998 between Almonesson
               Associates II, LLC and Sears.

          4.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife.

          5.   Assignment and Assumption of Lease Agreement dated February 15,
               2002 between Homelife and HL Deptford, L.L.C.

16.  (A) Property Location: 680 W. Winton Road, Hayward, CA 94545 (Store No.
                            4349)

     (B) Ground Lease:

          1.   Sublease dated February 1, 1999 by and between Sears, as
               sublandlord, and Homelife, as subtenant.

          2.   Lease Supplement dated September 22, 2000 between Sears and
               Homelife.

          3.   Assignment and Assumption of Sublease Agreement dated January 25,
               2002 between Homelife and HL Hayward, L.L.C.

17.  (A) Property Location: 9130 E. Indian Bend Road, Scottsdale, AZ 85250
                            (Store No. 4497)

     (B) Ground Lease:

          1.   Lease dated February 11, 1991 by and between Pima Grande
               Development, as landlord, and Sears, as tenant.

          2.   Short Form Memorandum of Lease dated February 11, 1991 between
               Pima Grande Development, as landlord, and Sears, as



               tenant.

          3.   Lease Supplement dated November 7, 1991 between Pima Grande
               Development and Sears.

          4.   First Amendment to Lease dated June 6, 1997 between Pima Grande
               Development and Sears.

          5.   Assignment and Assumption of Leases dated February 1, 1999
               between Sears and Homelife.

          6.   Assignment and Assumption of Lease Agreement dated March 7, 2002
               between Homelife and HL Scottsdale, L.L.C.

18.  (A) Property Location: 5353 Almaden Expressway, Suite 5C San Jose, CA
                            (Store No. 4019)

     (B) Ground Lease:

          1.   Sublease dated February 1, 1999 by and between Sears, as
               sublandlord, and Homelife, as subtenant.

          2.   Assignment and Assumption of Sublease Agreement dated _________
               __, 2002 between Homelife and HL San Jose, L.L.C.

19.  (A) Property Location: 9301 Tampa, Avenue, Northridge, CA 91325

     (B) Ground Lease:

          1.   Lease dated February 1, 2002 between Sears and HL Northridge,
               L.L.C.

20.  (A) Property Location: 314 N. Central Avenue, Glendale, CA 91203

     (B) Ground Lease:

          1.   Lease dated February 1, 2002 between Sears and HL Glendale,
               L.L.C.



                                   SCHEDULE 2

                              INTENTIONALLY OMITTED



                                   SCHEDULE 3

                  EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES

Exception to 3.1.14 - Currently there is a pending condemnation matter with
respect to St. Paul, MN.

Exception to 3.1.19 - Currently there exists a special tax assessment for
Oxnard, CA.

Exception to 3.1.24 - Certain building components were stolen at the Northridge,
CA property.



                                   SCHEDULE 4

                              INTENTIONALLY OMITTED



                                   SCHEDULE 5

                            ORGANIZATION OF BORROWER

                                 (SEE ATTACHED)



                                   SCHEDULE 6

                              INTENTIONALLY OMITTED



                                   SCHEDULE 7

                              INTENTIONALLY OMITTED



                                   SCHEDULE 8

                           PROPERTY CONDITION REPORTS

REPORT: PROPERTY CONDITION ASSESSMENT
PROVIDER: PARAGON ENVIRONMENTAL SERVICES

      PROPERTY          LOCATION           DATE OF REPORT
    -----------   --------------------   ------------------
1   NORTHRIDGE    NORTHRIDGE, CA         SEPTEMBER 20, 2001
2   WOODBRIDGE    WOODBRIDGE, NJ         SEPTEMBER 17, 2001
3   OXNARD        OXNARD, CA             SEPTEMBER 21, 2001
4   ST. PAUL      ST. PAUL, MN           SEPTEMBER 19, 2001
5   LANGHORNE     LANGHORNE, PA          MAY 27, 1999
6   WILLOWBROOK   FAIRFIELD, NJ          SEPTEMBER 18, 2001
7   LA PUENTE     CITY OF INDUSTRY, CA   SEPTEMBER 19, 2001
8   SACRAMENTO    NORTH HIGHLAND, CA     MAY 27, 1999
9   SAN LEANDRO   SAN LEANDRO, CA        SEPTEMBER 19, 2001



                                   SCHEDULE 9

                              INTENTIONALLY OMITTED

EX-10.57

                                                       (For Recorder's Use Only)

RECORDING REQUESTED BY AND    Mortgage and Security Agreement dated as of June
AFTER RECORDING RETURN TO:    5, 2003, executed by Seller in favor of Original
Midland Loan Services, Inc.   Lender, filed for record on June 24, 2003, in the
10851 Mastin, Suite 700       Commission of Records for the City and County of
Overland Park, KS  66210      Philadelphia, Pennsylvania (the "Recording
Attention: Mindy S. Planer    Office") as Instrument No. 50697188 (the "Security
                              Instrument"), as assigned to Lender pursuant to
                              that certain Assignment of Mortgage and Security
                              Agreement dated as of June 10, 2003, executed by
                              Original Lender, filed for record on August 4,
                              2004, in the Recording Office as Instrument No.
                              50985495 ("Assignment of Mortgage").

                                                          Loan Number 03-0238961

                             CONSENT AND ASSUMPTION
                             AGREEMENT WITH RELEASE

     This Consent and Assumption Agreement With Release (this "Agreement") is
entered into as of June 16, 2006 by and among THOR CHESTNUT HILL, LP, a Delaware
limited partnership, and THOR CHESTNUT HILL II, LP, a Delaware limited
partnership, jointly and severally, as tenants-in-common, having an address at
139 Fifth Avenue, New York, New York 10010 (collectively, "Seller"), JOSEPH J.
SITT, an individual, having an address at 139 Fifth Avenue, New York, New York
10010 ("Original Principal"), ACADIA CHESTNUT LLC, a Delaware limited liability
company, having an address at 1311 Mamaroneck Avenue, Suite 260, White Plains,
New York 10605 ("Buyer"), ACADIA REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership, having an address at 1311 Mamaroneck Avenue, Suite 260, White
Plains, New York 10605 (referred to herein as "New Principal" or "New Property
Manager"), WELLS FARGO BANK, N.A., successor by consolidation to Wells



Fargo Bank Minnesota, N.A., as Trustee under the Pooling and Servicing Agreement
dated as of December 1, 2003, for the Registered Holders of Credit Suisse First
Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates
Series 2003-C5, having an address at c/o Midland Loan Services, Inc., 10851
Mastin, Suite 700, Overland Park, KS 66210, Re: Loan Number 03-0238961
("Lender").

                                    RECITALS

     A. Seller is the owner of certain real property located in Philadelphia
County, Commonwealth of Pennsylvania, commonly known as The Borders and Shoppes
at Chestnut Hill, which real property is more particularly described in Exhibit
"A" attached hereto and incorporated herein by reference. Such real property,
together with all improvements, fixtures and personal property located thereon,
is collectively referred to as the "Property".

     B. By assignment, Lender is the owner and holder of certain documents (the
"Loan Documents") evidencing and securing a loan (the "Loan") made by Column
Financial, Inc., a Delaware corporation ("Original Lender"), to Seller,
including, without limitation, the:

          (i)  Promissory Note dated as of June 5, 2003, in the original
               principal amount of $10,500,000.00, executed by Seller, as maker,
               in favor of Original Lender (the "Note").

          (ii) Mortgage and Security Agreement dated as of June 5, 2003,
               executed by Seller in favor of Original Lender, filed for record
               on June 24, 2003, in the Commission of Records for the City and
               County of Philadelphia, Pennsylvania (the "Recording Office") as
               Instrument No. 50697188 (the "Security Instrument"), as assigned
               to Lender pursuant to that certain Assignment of Mortgage and
               Security Agreement dated as of June 10, 2003, executed by
               Original Lender, filed for record on August 4, 2004, in the
               Recording Office as Instrument No. 50985495 ("Assignment of
               Mortgage").

          (iii) Assignment of Leases and Rents dated as of June 5, 2003,
               executed by Seller in favor of Original Lender, filed for record
               on June 24, 2003, in the Recording Office as Instrument No.
               50697189 (the "Assignment of Leases"), as assigned to Lender
               pursuant to that certain Assignment of Assignment of Leases and
               Rents dated as of June 10, 2003, executed by Original Lender,
               filed for record on June 24, 2003, in the Recording Office as
               Instrument No. 50697189 ("Assignment of ALR").

          (iv) Hazardous Substances Indemnity Agreement dated as of June 5,
               2003, executed by Seller and Original Principal in favor of
               Original Lender (the "Original Hazardous Substances Indemnity
               Agreement").

          (v)  Indemnity and Guaranty Agreement dated as of June 5, 2003,
               executed by Original Principal in favor of Original Lender (the
               "Original Guaranty").

          (vi) Certain UCC financing statements executed by Seller, as debtor,
               in favor of Original Lender, as secured party, which financing
               statements have been assigned of record to Lender ("Original
               UCCs").

     C. Midland Loan Services, Inc., a Delaware corporation, services the Loan
for Lender, as Master Servicer ("Servicer"), pursuant to that certain Pooling
and Servicing Agreement dated as


                                       2



of December 1, 2003, by and among Credit Suisse First Boston Mortgage Securities
Corp., as Depositor, Servicer, as Master Servicer, Clarion Partners, LLC, as
Special Servicer, Wells Fargo Bank Minnesota, N.A., predecessor-in-interest to
Wells Fargo Bank, N.A., as Trustee (the "Pooling and Servicing Agreement").

     D. Seller and Buyer are parties to a Real Estate Purchase and Sale
Agreement dated as of March 15, 2006 (the "Purchase Agreement"), pursuant to
which the Property is to be transferred to Buyer and Buyer is to assume the Loan
(the "Transfer and Assumption"), and Seller and Buyer have requested that Lender
consent to the Transfer and Assumption.

     E. Subject to the terms and conditions of this Agreement, Lender has agreed
to consent to the Transfer and Assumption.

                                    AGREEMENT

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:

1. CONSENT TO TRANSFER. Subject to satisfaction of all of the conditions
contained herein, Lender consents to the Transfer and Assumption and, in
connection therewith, to a change in management of the Property from Thor
Equities LLC, a Delaware limited liability company ("Original Property
Manager"), to New Property Manager. This consent is strictly limited to the
Transfer and Assumption described in this Agreement. This Agreement shall not
constitute a waiver or modification of any requirement of obtaining Lender's
consent to any future transfer of the Property or any portion thereof or
interest therein or future change in property management, nor shall it
constitute a modification of the terms, provisions, or requirements in the Loan
Documents in any respect except as expressly provided herein. Buyer specifically
acknowledges that any subsequent transfer of any interest in any of the Property
or interest in Buyer or change in property management in violation of the Loan
Documents shall be a default thereunder. The Loan Documents are hereby ratified
and, except as expressly modified in this Agreement, remain unmodified and are
in full force and effect.

2. LOAN INFORMATION. The parties hereto agree that as of the date hereof:

     (a)   The outstanding principal balance of the Note is $10,074,623.52.

     (b)   The interest rate of the Note is a fixed rate of 5.45% per annum.

     (c)   The maturity date of the Note is June 11, 2013.

     (d)   The following listed payments are due and payable on the eleventh
           (11th) day of each and every calendar month as of the date of Closing
           (as hereinafter defined):

           (i)   $59,288.87 principal and interest installments;

           (ii)  $19,491.75 Impound Account (as defined in the Security
                 Instrument) deposits;

           (iii) $677.50 Replacement Reserve (as defined in the Security
                 Instrument) deposits; and

     (e)   Deposits to the TILC reserve shall be made in accordance with the
           Loan Documents.


                                       3



     (f)   The current balance of each escrow account held by Lender with
           respect to the Loan Note is:

           (i)   $105,045.85 Impound Account (as defined in the Security
                 Instrument);

           (ii)  $11,985.59 Replacement Reserve (as defined in the Security
                 Instrument);

           (iii) $14,375.00 Repair and Remediation Reserve (as defined in the
                 Security Instrument) after the increase to such reserve
                 contemplated by Section 35(f) hereof; and

           (iv)  $0.00 TILC Reserve (as defined in the Security Instrument);

     (g)   All required payments due through June 11, 2006, under the Loan
           Documents have been paid.

     (h)   Lender is the current owner and holder of the Loan Documents.

3. CONDITIONS. In addition to any other conditions set forth herein or required
by Lender, the following are conditions precedent that must be satisfied prior
to the closing of the Transfer and Assumption (the "Closing"):

     (a)   The execution, acknowledgment, delivery and recordation of this
           Agreement by all of the parties concurrently with the Closing.

     (b)   The execution, delivery and recordation or filing, as applicable, of
           one or more new financing statements, or amendments to existing
           financing statements as required by Lender at Closing.

     (c)   Buyer's delivery to Lender of satisfactory evidence that all
           insurance over the Property required by the Loan Documents (the
           "Required Insurance") is in full force and effect as of the Closing,
           with all required premiums paid, and contains a mortgagee's clause
           (the "Mortgagee's Clause") satisfactory to Lender in favor of Wells
           Fargo Bank, N.A., successor by consolidation to Wells Fargo Bank
           Minnesota, N.A., as Trustee under the Pooling and Servicing Agreement
           dated as of December 1, 2003, for the Registered Holders of Credit
           Suisse First Boston Mortgage Securities Corp. Commercial Mortgage
           Pass-Through Certificates Series 2003-C5, and its successors and/or
           assigns, c/o Midland Loan Services, Inc., Master Servicer, 10851
           Mastin, Suite 700, Overland Park, KS 66210; re: Loan Number
           030238961.

     (d)   Lender's receipt of satisfactory Title Endorsements (hereinafter
           defined).

     (e)   The full release and reconveyance of any other liens or monetary
           encumbrances against the Property.

     (f)   Lender's receipt of all of the Required Payments (hereinafter
           defined).

     (g)   Lender's receipt of legal opinions from counsel for Buyer in form and
           substance satisfactory to Lender.

     (h)   Lender's receipt of a W9 form from Buyer.


                                       4



     (i)   Execution by Buyer and New Principal and delivery to Lender of a new
           Hazardous Substances Indemnity Agreement in form and substance
           acceptable to Lender in its sole and absolute discretion (the "New
           Hazardous Substances Indemnity Agreement").

     (j)   Execution by New Principal and delivery to Lender of a new Indemnity
           and Guaranty Agreement in form and substance acceptable to Lender in
           its sole and absolute discretion (the "New Guaranty").

     (k)   Buyer shall enter into a Cash Management Agreement in form and
           substance acceptable to Lender.

     (l)   Bank of America shall enter into a Deposit Account Agreement in form
           and substance acceptable to Lender.

     (m)   Dismissal with Prejudice of that certain lawsuit (the "Lawsuit"),
           Thor Chestnut Hill, L.P., a Delaware limited partnership and Thor
           Chestnut Hill, L.P., a Delaware limited partnership, Plaintiffs,
           against Wells Fargo Bank, N.A. f/k/a Wells Fargo Bank Minnesota,
           N.A., as trustee for the Registered Holders of Credit Suisse First
           Boston Mortgage Security Corp. Commercial Mortgage Pass-Through
           Certificates, Series 2003-C5, Case Number 2:05-CV-02765-LDD, pending
           in the Untied States District Court, Eastern District of
           Pennsylvania, pursuant to the Dismissal attached hereto.

4. FEES, PAYMENT AND EXPENSES. Buyer covenants and agrees to pay to Lender at
Closing the following (the "Required Payments"):

     (a)   $25,186.56, which represents an assumption fee for Lender's consent
           to the Transfer and Assumption (the "Assumption Fee") and an
           application fee of $5,000.00.

     The Required Payments and any other fees and adjustments due and owing
under the Loan Documents or in connection with the Transfer and Assumption shall
be paid in accordance with Lender's settlement charges statement (the
"Settlement Statement") delivered at Closing for signature by Buyer and Seller.
In addition, at Closing, Buyer shall pay all of Lender's attorneys' fees
incurred in connection with this Agreement or the Transfer and Assumption in the
amount set forth on the Settlement Statement.

5. TITLE ENDORSEMENTS. At Closing, Buyer shall (a) cause First American Title
Insurance Company to issue such endorsements to Lender's mortgagee's title
insurance policy (Policy No. 294833) in such form as Lender may require ("Title
Endorsements"), including showing that the Buyer is the owner of the Property,
changing the effective date of such title policy to the date of the Closing, and
showing that the Loan Documents are in a first lien position, and (b) pay the
cost of the Title Endorsements, any escrow, filing or recording fees applicable
to this transaction, and any other costs and expenses incurred in connection
with this Agreement or this transaction, including, without limitation,
attorneys' fees.

6. BUYER'S ASSUMPTION OF LOAN; FINANCING STATEMENTS. Buyer hereby expressly
assumes the obligation to pay the unpaid balance due and owing on the Loan, all
interest thereon as provided in the Note and all other obligations under the
Loan Documents, with the same force and effect as if Buyer had been specifically
named therein as the original maker, borrower or grantor, as applicable. Without
limiting the generality of the foregoing, Buyer expressly assumes the obligation
to pay all loan installments as they become due and to observe all obligations
of the Loan Documents. Buyer's assumption of the foregoing obligations (a) is
absolute, unconditional and is not subject to any defenses, waivers, claims or
offsets, (b) shall not be affected or impaired by any agreement, condition,


                                       5



statement or representation of any person or entity other than Lender. Buyer
expressly agrees that it has read, approved and will comply with and be bound by
all of the terms, conditions, and provisions contained in the Loan Documents.
Buyer specifically agrees that if the Note is recourse, Lender's remedies shall
not in any respect or extent be limited solely to the Property or any other
collateral securing the Loan.

     Buyer and New Principal, by their execution of this Agreement, jointly and
severally, agree to reimburse, defend, indemnify and hold Lender, its officers,
agents, loan servicers and employees harmless from and against any and all
liabilities, claims, damages, penalties, expenditures, losses or charges
(including, but not limited to, all legal fees and court costs), which may now
or in the future be undertaken, suffered, paid, awarded, assessed or otherwise
incurred as a result of or arising out of any fraudulent or tortious conduct of
Buyer or New Principal, in connection with this Agreement or the Property,
including the intentional misrepresentation of financial data presented to
Lender.

     Buyer hereby authorizes Lender to file one or more new financing
statements, or amendments to existing financing statements, covering fixtures
and personal property collateral included in the Property and covered by the
security agreement contained in the Loan Documents, without signature of Buyer
where permitted by law. Buyer acknowledges and agrees that Lender continues to
have a security interest in all fixtures, personal property and other property
described in the Loan Documents (the "Collateral") transferred to Buyer by
Seller and further acknowledges and agrees that Lender shall continue to have a
security interest (and is hereby granted a security interest) in all Collateral
whether such Collateral is now owned by Buyer or is hereafter acquired by Buyer.

7. NO REPRESENTATIONS OF LENDER. The parties hereto agree that (a) Lender has
made no representations or warranty, either express or implied regarding the
Property and has no responsibility whatsoever with respect to the Property, its
condition, or its use, occupancy or status, and (b) no claims relating to the
Property, its condition, or its use, occupancy or status, will be asserted
against Lender or its agents, employees, professional consultants, affiliated
entities, successors or assigns, either affirmatively or as a defense.

8. ENVIRONMENTAL MATTERS. Buyer agrees, at its sole cost and expense, to keep or
cause the Property to be kept free of any hazardous, toxic or infectious
substance, material, gas or waste, including, without limitation, asbestos,
petroleum products and underground storage tanks, which is or becomes regulated
by any governmental authority with jurisdiction over the Property or Buyer, or
which has been identified as a toxic cancer-causing, or other hazardous
substance (collectively the "Hazardous Materials"), and to remove or take
remedial action with regard to any Hazardous Materials released into the
environment at, on or near the Property, provided that:

     (a)   Any such removal or remedial action shall be undertaken in a manner
           so as to minimize any impact on tenants of the Property.

     (b)   Buyer shall indemnify Lender for any action taken by Buyer or Lender
           to comply with this requirement.

     (c)   In the event Buyer fails to fully comply and satisfy this requirement
           and fails to cure such failure within 30 days after Lender gives
           written notice to Buyer, Lender may, at its sole option, declare the
           Loan immediately due and payable and/or cause the Hazardous Materials
           to be removed from the Property and add all costs incurred in
           affecting the removal to the balance of the Loan. Buyer grants to
           Lender and its agents and employees access to the Property and the
           license to remove such Hazardous Materials.


                                       6



9. ENVIRONMENTAL INDEMNIFICATION. Supplementing the terms of the Loan Documents
and any "New Loan Documents" (as hereinafter defined), Buyer acknowledges and
agrees that it will reimburse, defend, indemnify and hold Lender, its officers,
agents, loan servicers and employees harmless from and against any and all
liabilities, claims, damages, penalties, expenditures, losses or charges
(including, but not limited to, all costs of investigation, monitoring, legal
fees, remedial response, removal, restoration or permit acquisition) which may
now or in the future, be undertaken, suffered, paid, awarded, assessed or
otherwise incurred as a result of:

     (a)   any Hazardous Materials existing on, in, above or under the Property
           at the time of execution of this Agreement or at any time in the
           future;

     (b)   any investigation, monitoring, cleanup, removal, restoration,
           remedial response or remedial work undertaken with regard to
           Hazardous Materials on, in, above or under the Property.

10. SELLER'S AND ORIGINAL PRINCIPAL'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Seller and Original Principal hereby represent, warrant, and covenant that:

     (a)   Seller is the owner of the Property and Seller and Original Principal
           are duly authorized to execute, deliver and perform this Agreement.

     (b)   Any court or third-party approvals necessary for Seller or Original
           Principal to enter into this Agreement have been obtained.

     (c)   The entities and/or persons executing this Agreement on behalf of
           Seller and Original Principal are duly authorized to execute and
           deliver this Agreement.

     (d)   This Agreement and the Loan Documents are in full force and effect
           and the transactions contemplated therein constitute valid and
           binding obligations of Seller and Original Principal, as applicable,
           enforceable against Seller and Original Principal, as applicable, in
           accordance with their terms, and have not been modified either orally
           or in writing.

     (e)   Lender has not waived any requirements of the Loan Documents nor any
           of Lender's rights thereunder.

     (f)   There is no existing "Event of Default" (as defined in the Loan
           Documents) or event or condition that, with the giving of notice or
           passage of time or both, would constitute an Event of Default.

     (g)   All taxes and assessments applicable to the Property that are due and
           payable as of the Closing have been paid.

     (h)   The next payment for real property taxes applicable to the Property
           is due on or before December 31, 2006.

     (i)   To the best of Seller's knowledge, all representations and warranties
           in the Purchase Agreement are true and correct.

     (j)   All representations and warranties referred to herein shall be true
           as of the date of this Agreement and the Closing and shall survive
           the Closing, provided that nothing herein shall mean or be deemed to
           mean that the representations and warranties in the Purchase


                                       7



           Agreement, which are not also specifically set forth herein, shall
           survive, except as may be expressly set forth in the Purchase
           Agreement.

     (k)   Upon consummation of the Transfer and Assumption, Seller shall have
           no further interest in the escrow accounts held by Lender and
           described in subsection 2(e) of this Agreement.

     Lender is entitled to rely, and has relied, upon these representations,
warranties and covenants in the execution and delivery of this Agreement and all
other documents and instruments executed and delivered by Lender in connection
with this Agreement.

11. BUYER'S AND NEW PRINCIPAL'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Buyer
and New Principal hereby represent, warrant, and covenant that:

     (a)   Buyer and New Principal are duly authorized to execute, deliver and
           perform this Agreement.

     (b)   Any court or third-party approvals necessary for Buyer or New
           Principal to enter into this Agreement have been obtained.

     (c)   The entities and/or persons executing this Agreement on behalf of
           Buyer or New Principal are duly authorized to execute and deliver
           this Agreement.

     (d)   This Agreement, the "New Loan Documents" (as hereinafter defined),
           and the Loan Documents are in full force and effect and the
           transactions contemplated therein constitute valid and binding
           obligations of Buyer and New Principal, as applicable, enforceable
           against Buyer and New Principal, as applicable, in accordance with
           their terms and have not been modified either orally or in writing.

     (e)   There is no existing Event of Default or event or condition that,
           with the giving of notice or passage of time or both, would
           constitute an Event of Default.

     (f)   All taxes and assessments applicable to the Property that are due and
           payable as of the Closing have been paid.

     (g)   The next payment for real property taxes applicable to the Property
           is due on or before December 31, 2006.

     (h)   All representations and warranties in the Purchase Agreement are true
           and correct.

     (i)   There is no bankruptcy, receivership or insolvency proceeding pending
           or threatened against Buyer or New Principal.

     (j)   Neither Buyer nor New Principal has Buyer does not have any intention
           to do any of the following prior to the Closing or within the 180
           days following the Closing: (i) seek entry of any order for relief as
           debtor and a proceeding under the Code (hereinafter defined), (ii)
           seek consent to or not contest the appointment of a receiver or
           trustee for itself or for all or any part of its property, (iii) file
           a petition seeking relief under any bankruptcy, arrangement,
           reorganization or other debtor relief laws, or (iv) make a general
           assignment for the benefit of its creditors.


                                       8



     (k)   All of the Required Insurance is in full force and effect, with all
           required premiums paid, and contains the required Mortgagee's Clause.

     (l)   The general partner of New Principal is Acadia Realty Trust (the
           "Final Owner"). Final Owner owns 98% of New Principal and controls
           New Principal.

     (m)   All representations and warranties referred to herein shall be true
           as of the date of this Agreement and the Closing and shall survive
           the Closing.

Lender is entitled to rely, and has relied, upon these representations,
warranties and covenants in the execution and delivery of this Agreement and all
other documents and instruments executed and delivered by Lender in connection
with this Agreement.

12. RELEASE OF SELLER AND ORIGINAL PRINCIPAL. Lender hereby releases Seller and
Original Principal from all liability and obligations under the Loan Documents
arising from and after the Closing, including, but not limited to, repayment of
the Loan, but excepting, without limitation (i) any environmental or other
damage to the Property occurring prior to the Closing, (ii) any obligations
arising from the Purchase Agreement, (iii) any liability related to or arising
from Seller's acts or omissions occurring prior to the Closing, and (iv) any
liability related to or arising from fraudulent or tortious conduct, including
intentional misrepresentation of financial data presented to Lender.

13. RELEASE OF LENDER. Seller, for itself and for its agents, employees,
representatives, officers, directors, general partners, limited partners, joint
shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates,
employees, servants and attorneys, and Original Principal, for itself and for
its agents, employees, representatives, officers, directors, general partners,
limited partners, joint shareholders, beneficiaries, trustees, administrators,
subsidiaries, affiliates, employees, servants and attorneys (collectively, the
"Seller Releasing Parties") jointly and severally release and forever discharge
Lender, Clarion Partners, LLC and Midland Loan Services, Inc., and their
respective successors, assigns, partners, directors, officers, employees,
agents, attorneys, administrators, trustees, subsidiaries, affiliates,
beneficiaries, shareholders and representatives from all liabilities,
obligations, costs, expenses, claims and damages, at law or in equity, known or
unknown, which any of the Seller Releasing Parties may now or hereafter hold or
claim to hold under common law or statutory right, arising in any manner out of
the Property, the Loan, any of the Loan Documents or any of the documents,
instruments or any other transactions relating thereto or the transactions
contemplated thereby. Without limiting the generality of the foregoing, this
release shall include the following matters: (a) the Lawsuit and any and all
claims that were or could have been brought therein, (b) all aspects of this
Agreement and the Loan Documents, any negotiations, demands or requests with
respect thereto, and (c) Lender's exercise or attempts to exercise any of its
rights under this Agreement, any of the Loan Documents, at law or in equity. In
connection with its release of any and all claims relating to the Lawsuit,
Seller has delivered to Lender the Dismissal and agrees to take any and all
actions necessary to fully dismiss the Lawsuit with prejudice. The Seller
Releasing Parties agree that this release is a full, final and complete release
and that it may be pleaded as an absolute bar to any or all suit or suits
pending or which may thereafter be filed or prosecuted by any of the Seller
Releasing Parties, or anyone claiming by, through or under any of the Seller
Releasing Parties. The Seller Releasing Parties agree that this release is
binding upon each of them and their respective agents, employees,
representatives, officers, directors, general partners, limited partners, joint
shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates,
employees, servants and attorneys.

     Buyer, for itself and for its agents, employees, representatives, officers,
directors, general partners, limited partners, joint shareholders,
beneficiaries, trustees, administrators, subsidiaries, affiliates, employees,
servants and attorneys, and New Principal, for itself and for its agents,
employees,


                                       9



representatives, officers, directors, general partners, limited partners, joint
shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates,
employees, servants and attorneys (collectively, the "Buyer Releasing Parties")
jointly and severally release and forever discharge Lender and Midland Loan
Services, Inc., and their respective successors, assigns, partners, directors,
officers, employees, agents, attorneys, administrators, trustees, subsidiaries,
affiliates, beneficiaries, shareholders and representatives from all
liabilities, obligations, costs, expenses, claims and damages, at law or in
equity, known or unknown, which arise out of any matters occurring prior to the
Closing in connection with the transactions contemplated hereby. The Buyer
Releasing Parties agree that this release is a full, final and complete release
and that it may be pleaded as an absolute bar to any or all suit or suits
pending or which may thereafter be filed or prosecuted by any of the Buyer
Releasing Parties, or anyone claiming by, through or under any of the Buyer
Releasing Parties. The Buyer Releasing Parties agree that this release is
binding upon each of them and their respective agents, employees,
representatives, officers, directors, general partners, limited partners, joint
shareholders, beneficiaries, trustees, administrators, subsidiaries, affiliates,
employees, servants and attorneys.

14. REFERENCES IN THE LOAN DOCUMENTS. Seller, Original Principal, Buyer, New
Principal, and Lender hereby acknowledge and agree that the terms "Mortgagee"
"Grantee", "Beneficiary", "Lender" and "Assignee" contained in the Loan
Documents shall be deemed to refer to Lender and its successors and/or assigns.
Seller, Original Principal, Buyer, New Principal, and Lender further acknowledge
and agree that from and after the date of this Agreement, the terms "Mortgagor"
"Grantor", "Borrower" and/or "Assignor" contained in the Loan Documents shall be
deemed to refer to Buyer.

15. RATIFICATION AND CONFIRMATION OF THE LOAN. Buyer and New Principal agree to
perform each and every obligation under the Loan Documents, as specifically
modified by this Agreement, and any other loan documents executed on or about
the date of this Agreement for the purpose of evidencing, securing or otherwise
relating to the Loan (the "New Loan Documents") in accordance with their
respective terms and conditions. Buyer and New Principal ratify, affirm,
reaffirm, acknowledge, confirm and agree that the Loan Documents, as
specifically modified by this Agreement, remain in full force and effect and,
together with any New Loan Documents, represent legal, valid and binding
obligations of Buyer and New Principal, as applicable, enforceable against Buyer
and New Principal, as applicable, in accordance with their terms. Buyer and New
Principal agree that this Agreement does not diminish, impair, release or
relinquish the liens, powers, titles, security interests and rights securing or
guaranteeing payment of the Loan, including the validity or first priority of
the liens and security interests encumbering the Property granted Lender by the
Loan Documents and the New Loan Documents.

16. NONWAIVER. The parties hereto acknowledge and agree that (a) any
performance or non-performance of the Loan Documents prior to the date of this
Agreement does not affect or diminish Lender's ability to require future
compliance with the Loan Documents, and (b) in the future, Lender will require
strict compliance with and performance of the Loan Documents. Nothing contained
herein shall be construed as a waiver of any of Lender's rights or remedies with
respect to any default under this Agreement or any Loan Document.

17. BANKRUPTCY OF BUYER OR NEW PRINCIPAL. Buyer covenants and agrees that in the
event Buyer shall (i) file any petition with any bankruptcy court or be the
subject of any petition under the United States Bankruptcy Code (11 U.S.C.
Section 101 et seq., the "Code"), (ii) file or be the subject of any petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors, (iii)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator, or (iv) be the subject of any order,
judgment, or decree entered by any


                                       10



court of competent jurisdiction approving a petition filed against such party
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or relief for debtors, Lender shall
thereupon be entitled, and Buyer irrevocably consents, to the entry of an order
by a bankruptcy court granting to Lender relief from any automatic stay imposed
by Section 362 of the Code, or otherwise, on or against the exercise of the
rights and remedies otherwise available to Lender as provided in the Loan
Documents, this Agreement or as otherwise provided by law or in equity, and
Buyer irrevocably waives its right to object to, attempt to enjoin or otherwise
interfere with such relief and the exercise and enforcement by Lender of its
rights and remedies following entry of such order. Without limiting the
generality of the immediately preceding sentence, Buyer agrees that Lender will
be entitled to and it consents to immediate relief from the automatic stay
imposed by the Code to allow Lender to take any and all actions necessary,
desirable or appropriate to enforce any rights Lender may have under the Loan
Documents, including, but not limited to, the right to possession of the
Property, collection of rents, and/or the commencement or continuation of an
action to foreclose Lender's liens and security interests. Buyer further agrees
that the filing of any petition for relief under the Code which postpones,
prevents, delays or otherwise hinders Lender's efforts to collect the amounts
due under the Note or to liquidate any of the collateral therefor shall be
deemed to have been filed in bad faith and, therefore, shall be subject to
prompt dismissal or conversion to a liquidation case under the Code upon motion
therefor by Lender. Further, Buyer agrees that it will not seek, apply for or
cause the entry of any order enjoining, staying, or otherwise prohibiting or
interfering with Lender's obtaining an order granting relief from the automatic
stay and enforcement of any rights which Lender may have under the Loan
Documents, including, but not limited to, Lender's right to possession of the
Property, collection of rents and/or the commencement or continuation of an
action to foreclose Lender's liens and security interests under the Loan
Documents.

     New Principal covenants and agrees that in the event New Principal shall
(i) file any petition with any bankruptcy court or be the subject of any
petition under the Code, (ii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors, (iii)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator, or (iv) be the subject of any order,
judgment, or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or relief for debtors, Lender shall thereupon be entitled, and New
Principal irrevocably consents, to the entry of an order by a bankruptcy court
granting to Lender relief from any automatic stay imposed by Section 362 of the
Code, or otherwise, on or against the exercise of the rights and remedies
otherwise available to Lender as provided in the Loan Documents, this Agreement
or as otherwise provided by law or in equity, and New Principal irrevocably
waives its right to object to, attempt to enjoin or otherwise interfere with
such relief and the exercise and enforcement by Lender of its rights and
remedies following entry of such order. Without limiting the generality of the
immediately preceding sentence, New Principal agrees that Lender will be
entitled to and it hereby consents to immediate relief from the automatic stay
imposed by the Code to allow Lender to take any and all actions necessary,
desirable or appropriate to enforce any rights Lender may have under the Loan
Documents, including, but not limited to, the right to possession of the
Property, collection of rents, and/or the commencement or continuation of an
action to foreclose Lender's liens and security interests. New Principal further
agrees that the filing of any petition for relief under the Code which
postpones, prevents, delays or otherwise hinders Lender's efforts to collect the
amounts due under the Note or to liquidate any of the collateral therefor shall
be deemed to have been filed in bad faith and, therefore, shall be subject to
prompt dismissal or conversion to a liquidation case under the Code upon motion
therefor by Lender. Further, New Principal agrees that it will not seek, apply
for or cause the entry of any order enjoining, staying, or otherwise prohibiting
or interfering with Lender's obtaining an order granting relief from the
automatic stay and enforcement of any rights which Lender may have


                                       11



under the Loan Documents, including, but not limited to, Lender's right to
possession of the Property, collection of rents and/or the commencement or
continuation of an action to foreclose Lender's liens and security interests
under the Loan Documents.

18. COMPLIANCE WITH INTEREST LAW. It is the intention of the parties hereto to
conform strictly to any present or future law which has application to the
interest and other charges under the Loan Documents (the "Interest Law").
Accordingly, notwithstanding anything to the contrary in the Loan Documents, the
parties hereto agree that the aggregate amount of all interest or other charges
taken, reserved, contracted for, charged or received under the Loan Documents or
otherwise in connection with the Loan shall under no circumstances exceed the
maximum amount of interest allowed by the Interest Law. If any excess interest
is provided for in the Loan Documents, then any such excess shall be deemed a
mistake and canceled automatically and, if theretofore paid, shall be credited
against the indebtedness evidenced and secured by the Loan Document (the
"Indebtedness") (or if the Indebtedness shall have been paid in full, refunded
by Lender), and the effective rate of interest under the Loan Documents shall be
automatically reduced to the maximum effective contract rate of interest that
Lender may from time to time legally charge under the then applicable Interest
Law with respect to the Loan. To the extent permitted by the applicable Interest
Law, all sums paid or agreed to be paid to Lender for the use, forbearance or
detention of the Indebtedness shall be amortized, prorated, allocated and spread
throughout the full term of the Loan.

19. FURTHER ASSURANCES. The parties hereto agree to do any act or execute any
additional documents required by Lender, from time to time, to correct errors in
the documenting of the Transfer and Assumption, to effectuate the purposes of
this Agreement or to better assure, convey, assign, transfer, perfect or confirm
unto Lender the property and rights intended to be given it in the Loan
Documents and the New Loan Documents.

20. LIABILITY. If any party hereto consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
assigns forever.

21. SEVERABILITY. If any term, covenant or condition of this Agreement is held
to be invalid, illegal or unenforceable in any respect, this Agreement shall be
construed without such term, covenant or condition and the validity or
enforceability of the remaining terms, covenants or conditions shall not in any
way be affected.

22. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed and construed
in accordance with the laws of the state in which the Property is located. The
parties hereto submit to personal jurisdiction in the state courts located in
said state and the federal courts of the United States of America located in
said state for the enforcement of any obligations hereunder and waive any and
all personal rights under the law of any other state to object to jurisdiction
within such state for the purposes of any action, suit, proceeding or litigation
to enforce such obligations.

23. NO RESTRICTIONS ON PERFORMANCE. The execution and delivery of this Agreement
and compliance with the provisions hereof, will not conflict with, or constitute
a breach of or a default under any agreement or other instrument to which any
party hereto is a party or by which it is bound.

24. DEFINITIONS. Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Agreement
(including pronouns) shall include the corresponding masculine, feminine or
neuter forms, and the singular form of such words shall include the plural and
vice versa. The words "included", "includes" and "including" shall each be
deemed to be


                                       12



followed by the phrase, "without limitation." The words "herein", "hereby",
"hereof", and "hereunder" shall each be deemed to refer to this entire Agreement
and not to any particular paragraph, article or section hereof. Not withstanding
the foregoing, if any law is amended so as to broaden the meaning of any term
defined in it, such broader meaning shall apply subsequent to the effective date
of such amendment. Where a defined term derives its meaning from a statutory
reference, any regulatory definition is broader than the statutory reference and
any reference or citation to a statute or regulation shall be deemed to include
any amendments to that statute or regulation and judicial and administrative
interpretations of it.

25. SECURITIES ACT OF 1933. Neither Seller nor Buyer nor any agent acting for
any of them has offered the Note or any similar obligation for sale to or
solicited any offers to buy the Note or any similar obligation from any person
or party other than Lender, and neither Seller nor Buyer nor any agent acting
for any of them will take any action which would subject the sale of the Note to
the provisions of Section 5 of the Securities Act of 1933, as amended.

26. COMPLIANCE WITH ERISA. As of the date of this Agreement, neither Seller,
Buyer nor New Principal maintains any employee benefit plan which require
compliance with ERISA. If at any time Seller, Buyer or New Principal shall
institute any employee benefit plans, they shall at all times comply with the
requirements of ERISA.

27. SOLE DISCRETION OF LENDER. Wherever pursuant to this Agreement, Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Lender, Lender's decision to approve or disapprove
or to decide that arrangements or terms are satisfactory or not satisfactory
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.

28. HEADINGS, ETC. The headings and captions of various paragraphs of this
Agreement are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.

29. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which when taken
together shall constitute one and the same Agreement.

30. INTEGRATION, SURVIVAL. This Agreement, any New Loan Documents, and the Loan
Documents embody the entire agreement by and between the parties hereto with
respect to the Loan, and any and all prior correspondence, discussions or
negotiations are deemed merged therein. Except as otherwise specifically
provided herein, all obligations of any party contained in this Agreement, the
New Loan Documents or the Loan Documents shall survive the Closing, and Lender
hereby preserves all of its rights against all persons or entities and all
collateral securing the Loan, including, without limitation, the Property.

31. NO ORAL CHANGE. This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of any party hereto, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought. In addition, nothing contained in any document submitted for Lender's
review, including, without limitation any organizational documents of Buyer, New
Principal or any of their general partners, managers/members or officers, shall
modify, amend, waive, extend, change, discharge or terminate any term or
provision of the Loan Documents or constitute Lender's consent to any matter in
the Loan Documents requiring Lender's consent unless and until such time, if
any, as an agreement specifically


                                       13



allowing such modification, amendment, waiver, extension, change discharge or
termination or consenting to such matter has been executed in writing by Lender.

32. NOTICES. Except as otherwise specified herein, any notice, consent, request
or other communication required or permitted hereunder shall be in writing and
shall be deemed properly given if delivered in accordance with the notice
requirements contained in the Loan Documents using the address for a party
hereto set forth at the top of the first page of this Agreement. Any notices or
other communications required or permitted under the Loan Documents shall be
provided in accordance with the requirements therefor as set forth in the Loan
Documents; provided, however, that from and after the date hereof the addresses
of Lender and Buyer (identified as "BORROWER" in the Security Instrument),
shall, subject to change as provided in the Loan Documents, be as set forth at
the top of the first page of this Agreement.

33. WAIVER OF JURY TRIAL. THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THE LOAN OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE NEW LOAN DOCUMENTS, OR THE LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF
ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER'S CONSENT
TO THE TRANSFER AND ASSUMPTION.

34. INSURANCE. At all times Buyer shall comply with all terms of the Loan
Documents, including without limitation, the insurance requirements of the
Security Instrument. Although the Lender may accept certain evidence of
insurance for purposes of closing this Transfer and Assumption, Lender or its
servicer may at any time and from time to time request additional insurance
information from Buyer to ensure or monitor Buyer's compliance with the
insurance provisions of the Security Instrument and may request that Buyer
provide such coverages as Lender or its servicer may require consistent with the
terms of the Security Instrument. By entering into this Agreement, Lender
specifically does not waive or modify any of the insurance requirements under
the Security Instrument nor any of the remedies provided therein for failure to
secure such required insurance coverage.

35. AMENDMENTS TO AND AGREEMENT REGARDING SECURITY INSTRUMENT.

     (a)  Buyer acknowledges and agrees that from and after the date of the
          Security Instrument, the provisions of Section 1.13 of the Security
          Instrument shall apply to New Principal as if New Principal is now the
          sole member of Buyer.

     (b)  Section 1.13(a) is hereby modified and amended to delete the first
          full paragraph following Section 1.13(a)(5) including subparagraphs
          (x), (y), and (z). The deleted first full paragraph begins with the
          words "Notwithstanding the foregoing, for so long as Thor Chestnut
          Hill Equity, L.P." and ends at the end of subparagraph (z) with the
          words "connection with the loan secured hereby".

     (c)  Section 1.22(c) of the Security Instrument is hereby amended by
          deleting the addresses for Mortgagor and replacing them with the
          following address:

               "Acadia Chestnut LLC
               1311 Mamaroneck Avenue, Suite 260
               White Plains, New York  10605 "


                                       14



          Section 1.22(c) of the Security Instrument is further amended by
          deleting the address for Mortgagee and replacing it with the following
          address:

               "Wells Fargo Bank, N.A. successor by consolidation to Wells Fargo
               Bank Minnesota, N.A., as Trustee for the Registered Holders of
               Credit Suisse First Boston Mortgage Securities Corp. Commercial
               Mortgage Pass-Through Certificates Series 2003-C5
               % Midland Loan Services, Inc.
               10851 Mastin, Suite 300
               Overland Park, KS  66210"

     (d)  Section 1.29 of the Security Instrument is hereby amended by deleting
          all references to "Thor Equities LLC" as the acceptable property
          manager and replacing them with "Acadia Realty Limited Partnership, a
          Delaware limited partnership."

     (e)  Section 4.4 of the Security Instrument is hereby amended by deleting
          the notice addresses provided therein and substituting the following
          therefor:

               "Mortgagee   Wells Fargo Bank, N.A. successor by consolidation to
                            Wells Fargo Bank Minnesota, N.A., as Trustee for the
                            Registered Holders of Credit Suisse First Boston
                            Mortgage Securities Corp. Commercial Mortgage
                            Pass-Through Certificates Series 2003-C5
                            c/o Midland Loan Services, Inc.
                            10851 Mastin, Suite 300
                            Overland Park, KS  66210

               Servicer:    Midland Loan Services, Inc.
                            10851 Mastin, Suite 300
                            Overland Park, KS  66210

               Mortgagor:   Acadia Chestnut LLC
                            1311 Mamaroneck Avenue, Suite 260
                            White Plains, New York  10605 "

     (f)  Section C-1 of the Repair and Remediation Reserve is hereby modified
          and amended to delete from the fourth line thereof the reference to
          the amount of "$6,875.00" and to replace it with the amount of
          "$14,375.00". Further, the second sentence of Section C-1, which
          begins with the words "Manager shall cause each of the" and replacing
          it with the following:

               Manager shall cause each of the items described in that certain
               Limited Property Condition Review for Loan Number 03-0238961 The
               Gallery at Chestnut Hill Nova Project Number B06-0867 prepared by
               Nova Consulting Group, Inc., dated April 14, 2006 (the
               "Engineering Report"), relative to the Property, a copy of which
               has been provided to, and receipt of which is hereby acknowledged
               by, Mortgagor (the "Deferred Maintenance") to be completed,
               performed, remediated and corrected to the satisfaction of
               Mortgagee and as necessary to bring the Property into compliance
               with all applicable laws, ordinances, rules and regulations on or
               before December 16, 2006, as such time period may be extended by
               Mortgagee in its sole discretion.


                                       15



     (g)  Section C-2 of the Security Instrument is hereby modified and amended
          to delete from the 11th line hereof the reference to the amount of
          "$517.83" and replace it with the amount of "$677.50."

36. ACKNOWLEDGEMENT BY BUYER AND NEW PRINCIPAL REGARDING 1031 EXCHANGE. Buyer
and New Principal have informed Lender that Buyer is acquiring the Property and
assuming the Loan as part of a transaction which Buyer and New Principal
anticipate will comply with the provisions of Section 1031 of the Internal
Revenue Code allowing the deferment of any taxable gain or loss as the exchange
of like kind property. Buyer and New Principal acknowledge that they have not
relied on any advice, representations or statements of Lender or Midland Loan
Services, Inc., a Delaware corporation, or their respective employees or agents
concerning the tax, legal or investment consequences of Buyer's acquisition of
the Property and the assumption of the Loan, including, without limiting the
generality of the foregoing, whether the acquisition of the Property and
assumption of the Loan will comply with the requirements of Section 1031 of the
Internal Revenue Code or whether the Buyer's and New Principal's investment in
the Property is suitable, but instead Buyer and New Principal have obtained such
tax, legal and investment advice as to the effect of Buyer's acquisition of the
Property and assumption of the Loan from their own legal and other financial
advisors.

     All of the membership interests of Buyer ("INTERESTS") are currently owned
by CDECRE, Inc., an Illinois corporation ("ACCOMMODATOR"), which is wholly owned
by Chicago Deferred Exchange Corporation. The Property has been indirectly
acquired by Accommodator, as exchange accommodation titleholder, to effect a
reverse like-kind exchange under Section 1031 of the Internal Revenue Code and
Rev. Proc. 2000-37, 2000-2 C.B. 308. This arrangement is described in a
Qualified Exchange Accommodation Agreement of even date herewith, between
Accommodator and New Principal. Following the disposition by New Principal of
certain relinquished property, Accommodator will transfer all of the Interests
to New Principal.

     In order to qualify for "like-kind" treatment under Revenue Procedure
2000-37, the disposition of the relinquished property and the transfer of the
Interests to New Principal must occur on or before 180 days following the
acquisition by Buyer of the Property. The Qualified Exchange Accommodation
Agreement also provides that the right to cause the Accommodator to complete the
transfer of the Interests to New Principal prior to the expiration of the 180
day period, and if New Principal does not exercise such right during the 180-day
exchange period, Accommodator will transfer the Interests to New Principal on or
before the expiration of the 180 days period.

     Also, as part of the exchange transaction, the acquisition of the Property
by Buyer has been financed using the proceeds of a loan made by New Principal to
Accommodator and Buyer ("ACQUISITION LOAN"). The obligations of Accommodator
under the Acquisition Loan are evidenced by a Promissory Note ("ACCOMMODATION
NOTE") made and given by Accommodator and Buyer of even date herewith in the
principal amount of the Acquisition Loan. The obligations of Accommodator and
Buyer under the Acquisition Loan are secured by an assignment to New Principal
by Accommodator of all of the Interests pursuant to that certain Pledge and
Security Agreement dated of even date herewith ("PLEDGE AGREEMENT"). The
Acquisition Loan will be repaid in full at the time the Interests are
transferred to New Principal. Prior to such transfer, all or substantially all
of the net revenue of the Property will be paid to New Principal as interest
under the Acquisition Loan.

     The failure by any one of Assuming Borrower, New Principal and/or
Accommodator to cause the transfer of Interests to occur within the 180 day
period shall constitute an Event of Default under the Loan Documents. Further,
any assignment or pledge or other transfer New Principal's interests under the
Accommodation Note or the Pledge Agreement shall constitute an Event of Default
under the Loan Documents. Buyer shall deliver written notice to Lender
acknowledging the date that such Exchange


                                       16



Transfer occurred ("EXCHANGE NOTICE"). Furthermore, Buyer shall include all
documents evidencing and documenting the transfer of Interests with the Exchange
Notice. Furthermore, in connection with the delivery of the Exchange Notice,
Buyer and New Principal shall deliver a certificate to Lender, in a form
acceptable to Lender in its reasonable discretion, whereby Buyer and New
Principal ratify and reaffirm all of their respective obligations under the Loan
Documents and upon receipt of the items referred to herein, the Lender will
consent to such transfer of Interests. Buyer shall pay, or cause to be paid at
closing, all Lender's costs and expenses of Lender including reasonable
attorneys fees for the transfer of Interests.

37. ACKNOWLEDGEMENT OF LIMITED LIABILITY OF ACCOMMODATOR. Notwithstanding any
provisions of these Loan Documents to the contrary ("ACCOMMODATOR"), is acting
as an exchange Accommodator titleholder in connection with a like-kind exchange
under IRC Section 1031 and Revenue Procedure 2000-37 for the benefit of the New
Principal. As an Accommodator party, the general credit of Accommodator is not
obligated or available for the payment of the indebtedness secured by the Loan
Documents. Lender will not look to Accommodator or Accommodator's directors,
officers, and employees with respect to the indebtedness evidenced by the Loan
Documents or any covenant, stipulation, promise, indemnity, agreement or
obligation contained herein. The Lender will not seek a deficiency or other
money judgment against Accommodator or Accommodator's member's, directors,
officers, and employees and will not institute any separate action against
Accommodator by reason of any default that may occur in the performance of any
of the terms and conditions of the Loan Documents between Buyer and Lender. This
agreement on the part of the Lender shall not be construed in any way so as to
effect or impair the lien of the Loan Documents or the Lender's right to
foreclose hereunder as provided by law or foreclosure proceedings or other
enforcement of payment of the indebtedness secured hereby out of and from the
security given therefore.

                  [remainder of page intentionally left blank]


                                       17



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day, month and year
first above written.

                                        SELLER:

                                        THOR CHESTNUT HILL, LP, a Delaware
                                        limited partnership

                                        By: THOR GP CHESTNUT HILL, LLC, a
                                        Delaware limited liability  company,
                                        its general partner


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

                       [signatures continue on next page]



                                        THOR CHESTNUT HILL II, LP, a Delaware
                                        limited partnership

                                        By: THOR GP CHESTNUT  HILL II, LLC, a
                                        Delaware limited liability company,
                                        its general partner


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

                       [signatures continue on next page]



                                        ORIGINAL PRINCIPAL:


                                        ----------------------------------------
                                        JOSEPH J. SITT, an individual

                       [signatures continue on next page]



                                        BUYER:

                                        ACADIA CHESTNUT LLC, a Delaware limited
                                        liability company

                                           By: ACADIA REALTY LIMITED
                                           PARTNERSHIP, a Delaware limited
                                           partnership, as its manager

                                              By: ACADIA REALTY TRUST, as its
                                              general partner

                                                 By:
                                                     ---------------------------
                                                     Name: Robert Masters
                                                     Title: Senior Vice
                                                            President


                       [signatures continue on next page]



                                        NEW PRINCIPAL:

                                        ACADIA REALTY LIMITED PARTNERSHIP,
                                        a Delaware limited partnership

                                        By: ACADIA REALTY TRUST, as its general
                                        partner


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

                       [signatures continue on next page]



                                        LENDER:

                                        WELLS FARGO BANK, N.A., SUCCESSOR BY
                                        CONSOLIDATION TO WELLS FARGO BANK
                                        MINNESOTA, N.A., AS TRUSTEE UNDER THE
                                        POOLING AND SERVICING AGREEMENT DATED AS
                                        OF DECEMBER 1, 2003 (THE "POOLING AND
                                        SERVICING AGREEMENT"), FOR THE
                                        REGISTERED HOLDERS OF CREDIT SUISSE
                                        FIRST BOSTON MORTGAGE SECURITIES CORP.
                                        COMMERCIAL MORTGAGE PASS-THROUGH
                                        CERTIFICATES SERIES 2003-C5

                                        By: MIDLAND LOAN SERVICES, INC., a
                                        Delaware corporation, as Master Servicer
                                        under the Pooling and Servicing
                                        Agreement and its Attorney-in-Fact

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

                     [acknowledgments continue on next page]



                                 ACKNOWLEDGMENTS

State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared ______________________, known to me (or
satisfactory proven) to be the ___________________ of Thor GP Chestnut Hill,
LLC, a Delaware limited liability company, which is the general partner of Thor
Chestnut Hill, LP, a Delaware limited partnership, and acknowledged that he as
such _____________________ being duly authorized to do so, executed the
foregoing instrument on behalf of such limited liability company, as manager of
such limited partnership, for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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

                     [acknowledgments continue on next page]


                                       A-1



State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared ______________________, known to me (or
satisfactory proven) to be the ___________________ of Thor GP Chestnut Hill II,
LLC, a Delaware limited liability company, which is the general partner of Thor
Chestnut Hill II, LP, a Delaware limited partnership, and acknowledged that he
as such _____________________ being duly authorized to do so, executed the
foregoing instrument on behalf of such limited liability company, as manager of
such limited partnership, for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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

                     [acknowledgments continue on next page]


                                       A-2



State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared Joseph J. Sitt, an individual, known to
me (or satisfactory proven) to be the person who executed the foregoing
instrument, and acknowledged that he executed the foregoing instrument for the
purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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

                     [acknowledgments continue on next page]


                                       A-3



State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared Robert Masters, known to me (or
satisfactory proven) to be the Senior Vice President of Acadia Realty Trust,
which is the general partner of Acadia Realty Limited Partnership, a Delaware
limited partnership, which is the manager of Acadia Chestnut LLC, a Delaware
limited liability company, and acknowledged that he as such Senior Vice
President being duly authorized to do so, executed the foregoing instrument on
behalf of such trust, for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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

                     [acknowledgments continue on next page]


                                       A-4



State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared ______________________, known to me (or
satisfactory proven) to be the ___________________ of Acadia Realty Trust, which
is the general partner of Acadia Realty Limited Partnership, a Delaware limited
partnership, and acknowledged that he as such _____________________ being duly
authorized to do so, executed the foregoing instrument on behalf of such limited
partnership, as _____________ of such trust, for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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

                     [acknowledgments continue on next page]


                                       A-5



State
County

On this, the _____ day of June, 2006, before me ________________, the
undersigned officer, personally appeared ______________________, known to me (or
satisfactory proven) to be the ___________________ of Midland Loan Services,
INC., a Delaware corporation, as Master Servicer on behalf of Wells Fargo Bank,
N.A., successor by consolidation to Wells Fargo Bank Minnesota, N.A., as Trustee
under the Pooling and Servicing Agreement dated as of December 1, 2003, for the
Registered Holders of Credit Suisse First Boston Mortgage Securities Corp.
Commercial Mortgage Pass-Through Certificates Series 2003-C5 ("Lender"), and
acknowledged that he as such _____________________ being duly authorized to do
so, executed the foregoing instrument on behalf of such Lender, as _____________
of such corporation, for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal

(Seal)

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


                                       A-6



                                   EXHIBIT "A"
                                LEGAL DESCRIPTION

PARCEL ONE

ALL THAT CERTAIN lot or piece of ground, with improvements erected thereon,
situated in the Ninth Ward of the City of Philadelphia and described according
to an ALTA/ACSM Survey and Plan of Property made by Joel S. Cirello, Surveyor
and Regulator of the Ninth Survey District, dated 6/12/1998, last revised April
25, 2003:

BEGINNING at a point of intersection of the Southwesterly legally open side of
Germantown Avenue (on City Plan 70' wide, legally open 60' wide) and the
Northwesterly legally open side of Gravers Lane (on City Plan 50' wide, legally
open 33' wide); thence extending southwestwardly along the northwest legally
open line of Gravers Lane, South 39 degrees 07 minutes 25 seconds West, the
distance of 190.922' to a point; thence extending and crossing the unopened
portion of said Gravers Lane, North 50 degrees 52 minutes 35 seconds West, the
distance of 8.500' to a point on the northwest confirmed line of said Gravers
Lane; thence extending North 50 degrees 52 minutes 35 seconds West, the distance
of 112.00 feet to a point; thence extending South 39 degrees 07 minutes 25
seconds West, the distance of 84.000' to a point; thence extending North 50
degrees 52 minutes 35 seconds West, the distance of 28.000' to a point; thence
extending South 39 degrees 07 minutes 25 seconds West, the distance of 45.385'
to a point; thence extending North 50 degrees 52 minutes 35 seconds West, the
distance of 47.531' to a point; thence extending North 39 degrees 05 minutes 08
seconds East, the distance of 0.083' to a point; thence extending North 50
degrees 32 minutes 15 seconds West, the distance of 152.062' to a point; thence
extending South 39 degrees 00 minutes 35 seconds West, the distance of 2.969' to
a point; thence extending North 50 degrees 32 minutes 15 seconds West, the
distance of 140.000' to a point on the Southeasterly side of Highland Avenue (on
City Plan 60' wide, legally open); thence extending along the Southeasterly side
of Highland Avenue, North 39 degrees 00 minutes 35 seconds East, the distance of
52.969' to a point; thence extending South 50 degrees 32 minutes 15 seconds
East,. the distance of 170.990' to a point; thence extending North 39 degrees 00
minutes 35 seconds East, the distance of 40.000' to a point; thence extending
South 50 degrees 32 minutes 15 seconds East, the distance of 25.000' to a point;
thence extending South 39 degrees 00 minutes 35 seconds West, the distance of
8.000' to a point; thence extending South 50 degrees 32 minutes 15 seconds East,
the distance of 38.094' to a point; thence extending South 39 degrees 05 minutes
08 seconds West, the distance of 22.000' to a point; thence extending South 50
degrees 32 minutes 15 seconds East, the distance of 58.083' to a point; thence
extending and partly passing thru a portion of a (3) three story building wall,
North 39 degrees 05 minutes 08 seconds East, the distance of 257.041' to a point
on the said Southwesterly confirmed line of Germantown Avenue; thence extending
and recrossing the unopened portion of Germantown Avenue, North 39 degrees 05
minutes 08 seconds East, the distance of 5.000' to a point on the Southwesterly
legally open line of Germantown Avenue; thence extending along the said
Southwesterly legally open line of Germantown Avenue, South 50 degrees 20
minutes 45 seconds East, the distance of 196.257' to a point on the said
northwesterly legally open line of Gravers Lane, the first mentioned point and
place of beginning.

BEING commonly known as: 8400 Germantown Avenue.


                                       A-7



PARCEL TWO

ALL THAT CERTAIN lot or piece of ground, with improvements erected thereon,
situate in the Ninth Ward of the City of Philadelphia, and described according
to an ALTAIASCM Survey and Plan of Property made by Joel S. Cirello, Surveyor
and Regulator of the Ninth Survey District dated 6/18/1998, last revised April
25, 2003.

BEGINNING at the point of intersection of the Northwesterly side of Bethlehem
Pike (60 feet wide, legally opened) and the Northeasterly side of Germantown
Avenue (60 feet wide, legally open); thence extending along the said
Northeasterly side of Germantown Avenue, North 58 degrees 56 minutes 00 seconds
West, the distance of 169.031 feet to a point; thence extending North 30 degrees
42 minutes 40 seconds East, the distance of 123.793 feet to a point; thence
extending South 76 degrees 43 minutes 56 seconds East, the distance of 112.358
feet to a point on the said Northwesterly side of Bethlehem Pike; thence
extending along the said Northwesterly side of Bethlehem Pike, South 9 degrees
24 minutes 05 seconds West, the distance of 170.156 feet to a point on the said
Northeasterly side of Germantown Avenue, the first mentioned point and place of
beginning.

BEING commonly known as: 8625-8639 Germantown Avenue.


                                       A-8



WHEN RECORDED, RETURN TO:
Winston & Strawn
200 Park Avenue
New York, New York 10166 Attn; David M. Traitel, Esq.

                         MORTGAGE AND SECURITY AGREEMENT

                                 Loan No. 271089

     THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made as of June
_, 2003, between THOR CHESTNUT HILL, LP, a Delaware limited partnership
("Chestnut I") and THOR CHESTNUT HILL II, LP, a Delaware limited partnership
("Chestnut II"), each having an address c/o Thor Equities, LLC, 139 Fifth
Avenue, New York, New York 10010, (Chestnut I aid Chestnut II are, collectively,
"Mortgagor"), jointly and severally for the benefit of COLUMN FINANIAL, INC., a
Delaware corporation ("Mortgagee"), whose address Eleven Madison Avenue, 9th
Floor, New York, New York 1001.03629 Att: Edmund Taylor.

                                   WITNESSETH:

     THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NOT 100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, INCLUDING THE INDEBTEDNESS HEREIN
RECITED AND THE TRUST HEREIN CREATED, THE RECEIPT AND SUFFICIENCY OF WHICH ARE -
HEREBY ACKNOWLEDGED, MORTGAGOR HAS MORTGAGED, GRANTED, CONVEYED, BARGAINED,
SOLD, TRANSFERRED, PLEDGED, ALIENED, ENFEOFFED, RELEASED, CONFIRMED,
WARRANTED AND SET OVER AND HEREBY IRREVOCABLY MORTGAGES, GRANTS, CONVEYS,
BARGAINS, SELLS, TRANSFERS, PLEDGES, ALIENS, ENFEOFFS, RELEASES, CONFIRMS,
WARRANTS, SETS OVER AND ASSIGNS, AND GRANTS A SECURITY INTEREST, TO AND IN FAVOR
OF MORTGAGEE, ITS SUCCESSORS AND ASSIGNS, in all of Mortgagor's estate, right,
title and interest in, to and under any and all of the following described
property, whether now owned or hereafter acquired (collectively, the
"Property"):

     (A) All that certain real property situated in the County of Philadelphia,
Commonwealth of Pennsylvania, more particularly described on Exhibit A attached
hereto and incorporated herein by this reference (the "Real Estate"), together
with all of the easements, rights, privileges, franchises, tenements,
hereditaments, and appurtenances now or hereafter thereunto belonging or in any
way appertaining thereto, and all of the estate, right, title, interest,



claim and demand whatsoever of Mortgagor therein or thereto, either at law or in
equity, in possession or in expectancy, now owned or hereafter acquired;

     (B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Real Estate
(the "Improvements");

     (C) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Real Estate or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions. and remainders whatsoever, in any
way belonging, relating or appertaining to the Property or any part thereof, or
which hereafter shaft in any way belong, relate or be appurtenant thereto,
whether now owned or hereafter acquired by Mortgagor;

     (D) All furniture, furnishings, fixtures, goods, equipment, inventory or
personal property owned by Mortgagor and now or hereafter located on, attached
to or used in or about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Mortgagor as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and equipment hereafter situated on or about the Real Estate or Improvements,
and all warranties and guaranties relating thereto, and all additions thereto
and substitutions and replacements therefore (exclusive of any of the foregoing
owned or leased by tenants of space in the Improvements);

     (E) All water, water courses, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights and powers which are
appurtenant to, located on, under or above or used in connection with the Real
Estate or the Improvements, or any part thereof, together (i) with all
utilities, utility lines, utility commitments, utility capacity, capital
recovery charges, impact fees and other fees paid in connection with same, (ii)
reimbursements or other rights pertaining to utility or utility services.
provided to the Real Estate and/or Improvements and (iii) the present or future
use or availability of waste water capacity, or other utility facilities to the
extent same pertain to or benefit the Real Estate and/or Improvements,
including, without limitation, all reservations of or commitments or letters
covering any such use in the future, whether now existing or hereafter created
or acquired;

     (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Real Estate;

     (G) All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created or held by Mortgagee pursuant to this
Mortgage or any other of the Loan Documents (as hereinafter defined) including,
without limitation, all funds now or hereafter on deposit in the Reserves (as
hereinafter defined);


                                       -2-



     (H) All leases, licenses, tenancies, concessions and occupancy agreements
of the Real Estate or the Improvements now or hereafter entered into and all
rents, royalties, issues, profits, revenue, income and other benefits
(collectively, the "Rents" or "Rents and Profits") of the Real Estate, the
Improvements, or the fixtures or equipment, now or hereafter arising from the
use or enjoyment of all or any portion thereof or from any present or future
lease, license, tenancy, concession, occupancy agreement or other agreement
pertaining thereto or arising from any of the Contracts (as hereinafter defined)
or any of the General Intangibles (as hereinafter defined) and all cash or
securities (the "Security Deposits".) that secure performance by the tenants, -
lessees or licensees, as -applicable, of their obligations under any such
leases, licenses, concessions or occupancy agreements, whether said cash or
securities are to be held until the expiration of the terms of said leases,
licenses, concessions or occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject
to, however, the provisions contained in Section 1.11 of this Mortgage;

     (I) All contracts and agreements now or hereafter entered into covering any
part of the Real Estate or the Improvements (collectively, the "Contracts") and
all revenue, income and other benefits thereof, including, without limitation;
management agreements, service contracts, maintenance contracts, equipment.
leases, personal property leases and any contracts or documents relating to
construction on any part of the Real Estate or the Improvements (including
plans, specifications, studies, drawings, surveys, tests, operating and other
reports, bonds and governmental approvals) or to the management or operation of
any part of the Real Estate or the Improvements;

     (J) All present and future monetary deposits given to any public or private
utility with respect to utility services furnished to any part of the Real
Estate or the Improvements;

     (K) All present and future funds, accounts,  instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including,
without limitation, trademarks, trade names, servicemarks and symbols now or
hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Mortgagor has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Real Estate or the Improvements) and all notes or chattel paper
now or hereafter arising from or by virtue of any transactions related to the
Real Estate 'or the Improvements (collectively, the "General Intangibles");

     (L) All water taps, sewer taps, certificates of occupancy, permits, special
permits, uses, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Real
Estate or the Improvements and all present and future; warranties and guaranties
relating to the Improvements or to any equipment, fixtures, furniture,
furnishings, personal property or components of any of the foregoing now or
hereafter located or installed on the Real Estate or the Improvements;

     (M) All building materials, supplies and equipment now or hereafter placed
on the Real Estate or in the Improvements and all architectural renderings,
models, drawings, plans, specifications, studies and data now or hereafter
relating to the Real Estate or the Improvements;


                                       -3-



     (N) All right, title and interest of Mortgagor in any insurance policies or
binders now or hereafter relating to the Property including any unearned
premiums thereon;

     (O) All proceeds, products, substitutions and accessions (including claims.
and demands therefore of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards; and

     (P) All other or greater rights and interests of every nature in the Real
Estate or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Mortgagor.

     FOR THE PURPOSE OF SECURING:

     (1) The debt evidenced by that certain Promissory Note (such Promissory
Note, together with any and all renewals, modifications, amendments,
restatements, consolidations, substitutions, replacements, and extensions
thereof, is hereinafter referred to as the "Note") of even date with this
Mortgage, made by Mortgagor and payable to the order of Mortgagee in the
original principal amount of TEN MILLION FIVE HUNDRED THOUSAND AND NOI100
DOLLARS ($10,500,000.00) (the "Loan" or the "Loan Amount"), together with
interest and any fees as therein provided;

     (2) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations herein contained and contained in any
other agreements, documents or instruments now or hereafter evidencing, securing
or otherwise relating to the indebtedness evidenced by the Note (the Note, this
Mortgage, the Assignment (as hereinafter defined), and such other agreements,
documents and instruments, together with any and all renewals, modifications,
amendments, restatements, consolidations, substitutions, replacements, and
extensions and modifications thereof, are hereinafter collectively referred to
as the "Loan Documents") and the payment of all other sums therein covenanted to
be paid, including, without limitation, any applicable yield maintenance
premiums or prepayment fees;

     (3) Any and all future or additional advances (whether or not obligatory)
made by Mortgagee to protect or preserve the Property, or the lien or security
interest created hereby on the Property, or for taxes, assessments or insurance
premiums as hereinafter provided or for performance of any of Mortgagor's
obligations hereunder or under the other Loan Documents or for any other'
purpose provided herein or in the other Loan Documents (whether or not the
original Mortgagor remains the owner of the Property at the time of such
advances), together with interest thereon at the Default Interest Rate (as
defined in the Note); and

     (4) Any and all other indebtedness now owing or which may hereafter be
owing by Mortgagor to Mortgagee, however and whenever incurred or evidenced,
whether express or implied, direct or indirect, absolute or, contingent, or due
or to become due, and all renewals, modifications, amendments, restatements,
consolidations, substitutions, replacements and extensions thereof.

     (All of the sums referred to in Paragraphs (1) through (4) above are
herein sometimes referred to as the "secured indebtedness" or the "indebtedness
secured hereby").


                                       -4-



     TO HAVE AND TO HOLD the Property unto Mortgagee, its successors and assigns
forever, for the purposes and uses herein set forth.

     PROVIDED, HOWEVER, that if the principal and interest and all other sums
due or to become due under the Note, including, without limitation, any
prepayment fees required pursuant to the terms of the Note, shall have been paid
at the time and in the manner stipulated therein and all other sums payable
hereunder and all other indebtedness secured hereby shall have been paid and all
other covenants contained in the Loan Documents shall have been performed, then,
in such case, this Mortgage shall be satisfied and the estate, right, title and
interest of Mortgagee in the Property shall cease, and upon payment to Mortgagee
of all costs and expenses incurred for the preparation of the release
hereinafter referenced and all recording costs if allowed by law, Mortgagee
shall release this Mortgage and the lien hereof by proper instrument

                                    ARTICLE I
                             COVENANTS OF MORTGAGOR

     For the purpose of further securing the indebtedness secured hereby and for
the protection of the security of this Mortgage, for so long as the indebtedness
secured hereby or any part thereof remains unpaid; Mortgagor represents,
covenants and agrees as follows:

     1.1. - Warranties of Mortgagor. Mortgagor, for itself and its successors
and assigns, does hereby represent, warrant and covenant to and with Mortgagee,
its successors and assigns, that:

          (a) Mortgagor has good, marketable and indefeasible fee simple title
to the Property, subject only to those matters expressly set forth on Exhibit B
attached hereto and by this reference incorporated herein (the "Permitted
Exceptions"), and has full power and lawful authority to grant, bargain, sell,
convey, assign, transfer and encumber its interest in the Property in the manner
and form hereby done or intended. None of the Permitted Exceptions materially
interferes with the security intended to be provided by this Mortgage, the
current primary use of the Property, or the current ability of the Property to
generate income sufficient to service the Loan. Mortgagor will preserve its
interest in and title to the Property and will forever warrant and defend the
same to Mortgagee against any and all claims whatsoever and will forever warrant
and defend the validity and priority of the lien and security interest created
herein against the claims of all persons and parties whomsoever, subject to the
Permitted Exceptions. The foregoing warranty of title shall survive 'the
foreclosure, exercise of any power of sale or other enforcement of this Mortgage
and shall inure to the benefit of and be enforceable by Mortgagee in the event
Mortgagee acquires title to the Property pursuant to any foreclosure, exercise
of any power of sale or otherwise;

          (b) No bankruptcy or insolvency proceedings are pending or
contemplated by Mortgagor or, to the best knowledge of Mortgagor, against
Mortgagor or by or against any endorser, cosigner or guarantor of the Note;

          (c) All reports, certificates, affidavits, statements and other data
furnished by Mortgagor to Mortgagee in connection with the Loan evidenced by the
Note are true and correct


                                       -5-



in all material respects and do not omit to state any fact or circumstance
necessary to make the statements contained therein not misleading;

          (d) The execution, delivery and performance of this Mortgage, the Note
and all of the other Loan Documents have been duly authorized by all necessary
action to be taken, and are, binding and enforceable against Mortgagor in
accordance with the respective terms thereof and do not contravene, result in a
breach of or constitute (upon the giving of notice or the passage of time or
both) a default under the partnership agreement, certificate or articles of
incorporation or other organizational documents of Mortgagor, or any contract or
agreement of any nature to which Mortgagor is a party or by which Mortgagor or
any of its property may be bound, and do not violate, or contravene any law,
order, decree, rule or regulation to which Mortgagor is subject;

          (e) Mortgagor is not required to obtain any consent, approval or
authorization from or to file any declaration or statement with, any
governmental authority or agency in connection with or as a condition to the
execution, delivery or performance of this Mortgage, the Note or the other Loan
Documents which has not been so obtained or filed;

          (f) Mortgagor has obtained or made all necessary (i) consents,
approvals and authorizations and registrations and filings of or with all
governmental authorities or agencies and (ii) consents, approvals, waivers and
notifications of partners, stockholders, members, creditors, lessors and other
non-governmental persons and/or entities, in each case, which are required to be
obtained or made by Mortgagor in connection with the execution and delivery of,
and the performance by Mortgagor of its obligations under, the Loan Documents;

          (g) Mortgagor is not an "investment company", or a company
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended;

          (h) No part of the proceeds of the indebtedness secured hereby will be
used for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulations T, U or X or any other Regulations of such Board of Governors, or
for any purpose prohibited by legal requirements or by the terms and conditions
of the Loan Documents;

          (i) Mortgagor and, if Mortgagor is a partnership, any general partner
of Mortgagor, has filed all federal, state and local tax returns required to be
filed and has paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments, including sales and payroll
taxes, payable by Mortgagor and its general partners, if any. Mortgagor and its
general partners, if any, believe that their respective tax returns properly
reflect the income and taxes of Mortgagor and said general partners, if any, for
the periods covered thereby, subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit;

          (j) -Mortgagor is not an "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject


                                      -6-



to Title I of ERISA and the assets of Mortgagor do not constitute "plan assets"
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-103;

          (k) Except as set forth in those certain confirmation statements from
the City of Philadelphia nos. 161534 and 161550 both dated May 29, 2003, the
Real Estate and the Improvements and the intended use thereof by Mortgagor
comply with all applicable restrictive covenants, zoning ordinances, subdivision
and building codes, flood disaster laws, applicable health and environmental
laws and regulations and all other ordinances, orders or requirements issued by
any state, federal or municipal authorities having or claiming jurisdiction over
the Property. The Real Estate and Improvements constitute a separate tax parcel
or parcels for purposes of ad valorem taxation. The Real Estate and Improvements
do not require any rights over, or restrictions against, other property in order
to comply with any of the aforesaid governmental ordinances, orders or
requirements;

          (l) All utility services necessary and sufficient for the full use,
occupancy, operation and disposition of the Real Estate and the Improvements for
their intended purposes are available to the Property, including water, storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities, through
public rights-of-way or perpetual private easements reflected in the title
insurance policy insuring the lien of this Mortgage and approved by Mortgagee
(the "Title Insurance Policy");

          (m) All streets, roads, highways, bridges and waterways necessary for
access to and full use, occupancy, operation and disposition of the Real Estate
and the Improvements have been completed, have been dedicated to and accepted by
the appropriate municipal authority and are open and available to the Real
Estate and the Improvements without further condition or cost to Mortgagor;

          (n) All curb cuts, driveways and traffic signals shown on the survey
delivered to Mortgagee prior to the execution and delivery of this Mortgage are
existing and have been fully approved by the appropriate governmental authority;

          (o) There are no judicial, administrative, mediation or arbitration
actions, suits or proceedings pending or threatened against or affecting
Mortgagor, (and, if Mortgagor is a partnership, any of its general partners, or
if Mortgagor is a limited liability company, any member of Mortgagor) or the
Property which, if adversely determined, would have a material adverse effect on
(a) the Property, (b) the business, prospects, profits, operations or condition
(financial or otherwise) of Mortgagor, (c) the enforceability, validity,
perfection or priority of the lien of any Loan Document, or (d) the ability of
Mortgagor to perform any obligations under any Loan Document (collectively, a
"Material Adverse Effect");

          (p) As of the date of this Mortgage (i) the Property is free from
delinquent water charges, sewer rents, taxes and assessments, and from
unrepaired damage caused by fire, flood, accident or other casualty, and (ii) no
part of the Real Estate or the Improvements has been taken in condemnation,
eminent domain or like proceeding nor is any such proceeding pending or to
Mortgagor's knowledge and belief, threatened or contemplated,


                                       -7-



          (q) Mortgagor possesses all franchises, patents, copyrights,
trademarks, trade navies, licenses and permits adequate for the conduct of its
business substantially as now conducted;

          (r) Except as set forth in the Title Insurance Policy insuring the
lien of this Mortgage, no improvements on adjoining properties encroach upon the
Property. To the best of Mortgagor's knowledge, the Improvements are
structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto. All major building systems
located within the Improvements, including without limitation the heating and
air conditioning systems and the electrical and plumbing systems, are in working
order and condition;

          (s) Except as disclosed in writing to Mortgagee prior to the date
hereof, there are no security agreements or financing statements affecting any
of the Property other than the security agreements and financing statements
created in favor of Mortgagee;

          (t) Mortgagor has delivered a true, correct and complete schedule (the
"Rent Roll") of all leases affecting the Property (collectively, 'Leases") as of
the date hereof, which accurately and completely sets forth in all material
respects for each such Lease, the following; the name of the tenant, the lease
expiration date, extension and renewal provisions, the base rent payable, and
the Security Deposit held thereunder. Mortgagor is in compliance with all legal
requirements relating to such Security Deposits;

          (u) No tenant under any Lease has, as of the date hereof, paid rent
more than thirty (30) days in advance, and the rents under such Leases have not
been waived, released, or otherwise discharged or compromised;

          (v) The Property is free and clear of any mechanics' or materialmen's
liens or liens in the nature thereof, and no rights are outstanding that under
law would give rise to any such liens, any of which liens are or may be prior
to, or equal with, the lien of this Mortgage, except those which are insured
against by the Title Insurance Policy;

          (w) No Lease or Contract or easement, right of way, permit or
declaration (collectively, "Property Agreements") provides 'any party with the
right to obtain, a lien or encumbrance upon the Property superior to the lien of
this Mortgage;

          (x) Mortgagor has delivered to Mortgagee true, correct and complete
copies of all Property Agreements and no default exists or to Mortgagor's
knowledge would exist, with the passing of time or the giving of notice, or
both, under any Property Agreement which would, in the aggregate, have a
Material Adverse Effect;

          (y) To the best knowledge of Mortgagor, no offset or any right of
offset exists respecting continued contributions to be made by any party to any
Property Agreement except as expressly set forth herein. Except as previously
disclosed to Mortgagee in writing, no material exclusions or restrictions on the
utilization, leasing or improvement of the Property (including non-compete
agreements) exist in any Property Agreement;


                                      -8-



          (z) To the best of Mortgagor's knowledge, all work, if any, to be
performed by Mortgagor under each of the Property Agreements has been
substantially performed, all contributions to be made by Mortgagor to any party
to such Property Agreement have been made, and all other conditions to such
party's obligations thereunder have been satisfied;

               (aa) The Property is taxed separately without regard to any other
real estate and constitutes a legally subdivided lot under all applicable legal
requirements (or, if not subdivided, no subdivision or platting of the Property
is required under applicable legal requirements), and for all purposes may be
mortgaged, conveyed, pledged, hypothecated, assigned or otherwise dealt with as
an independent parcel;

               (bb) The Property forms no part of any property owned, used or
claimed by Mortgagor as a residence or business homestead and is not exempt
from' forced sale under the laws of the State in 'which the Property is located.
Mortgagor hereby disclaims and renounces each and every claim to all or any
portion of the Property as a homestead. The Loan evidenced by the Loan Documents
is made and transacted solely for business, investment, commercial or other
similar purposes;

               (cc) There are no outstanding options or rights of first offer or
refusal to purchase all or any portion of the Property or Mortgagor's interest
therein or ownership thereof;

               (dd)  There are no actions, suits, proceedings or orders of
record or of which Mortgagor has notice, and, to the best of Mortgagor's
knowledge, there are no inquiries or investigations, pending or threatened, in
any such case against, involving or affecting the Property, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau agency or instrumentality, domestic or foreign,
alleging the violation of any federal, state or local law, statute, ordinance,
rule or regulation relating to Environmental Laws. Furthermore, Mortgagor has
not received any written claim, notice or opinion that the ownership or
operation of the Property violates any federal, state or local law, statute,
ordinance, rule, regulation, decree, order, and/or permit relating to
Environmental Laws, and, to the best of Mortgagor's knowledge, no valid basis
for any proceeding, action or claim of such nature exists;

               (ee)  Each Lease constitutes the legal, valid and binding
obligation of Mortgagor and, to the best of Mortgagor's knowledge and belief, is
enforceable against the tenant thereof;

               (ff) All work to be performed by Mortgagor under the Leases has
been substantially performed, all contributions to be made by Mortgagor to the
tenants thereunder have been made and all other conditions precedent to each
such tenant's obligations thereunder have been satisfied;

               (gg) Each tenant under a Lease has entered into occupancy of the
demised premises;

               (hh) To the best of Mortgagor's knowledge and belief, each tenant
is free from bankruptcy, reorganization or arrangement proceedings or a general
assignment for the benefit of creditors;


                                       -9-



               (ii) Except as previously disclosed in writing to Mortgagee,
there are no brokerage fees or commissions payable by Mortgagor with respect to
the leasing of the space at the Property, and there are no management fees
payable by Mortgagor with respect to the management of the Property; and

               (jj) The representations and warranties contained in this
Mortgage, or the review and inquiry made on behalf of Mortgagor therefor, have
all been made by persons having the requisite expertise and knowledge to provide
such representations and warranties. No statement or fact made by or on behalf
of Mortgagor in this Mortgage or in any certificate, document or schedule
furnished to Mortgagee pursuant hereto, contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading (which may be to Mortgagor's best
knowledge where so provided herein)_ (provided, however, that with respect to
certificates, documents and/or schedules prepared by or provided by a party
other than Mortgagor or one of its affiliates, the foregoing representation is
limited to the best of Mortgagor's knowledge). There is no fact presently known
to Mortgagor which has not been disclosed to Mortgagee and which would have a
Material Adverse Effect.

     1.2. Defense of Title. If, while this Mortgage is in force, the title to
the Property or the interest of Mortgagee therein shall be the subject, directly
or indirectly, of any action at law or in equity, or be attached directly or
indirectly, or endangered, clouded or adversely affected in any manner,
Mortgagor, at Mortgagor's expense, shall take all necessary and proper steps for
the defense of said title or interest, including the employment of counsel
reasonably approved by Mortgagee, the prosecution or defense of litigation, and
the compromise or discharge of claims made against said title or interest

     1.3. Performance of Obligations. Mortgagor shall pay when due the principal
of and the interest on the indebtedness secured hereby including all charges,
fees and other sums required to be paid by Mortgagor as provided in the Loan
Documents, and shall observe, perform and discharge all obligations, and
conditions, and comply with all prohibitions, covenants and agreements to be
observed, performed or discharged by Mortgagor set forth in the Loan Documents
in accordance with their terms. In the event that Mortgagee reasonably
determines that Mortgagor, is not adequately performing any of its obligations,
under this Mortgage or under any of the other Loan Documents, Mortgagee may,
without limiting or waiving any other rights or remedies of Mortgagee hereunder,
take such steps with respect thereto as Mortgagee shall deem necessary or
proper, and any and all costs and expenses reasonably incurred by Mortgagee in
connection therewith, together with interest thereon at the Default Interest
Rate (as defined in the Note) from the date incurred by Mortgagee until actually
paid by Mortgagor, shall be immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note.

     1.4. Insurance. Mortgagor shall, at Mortgagor's expense, maintain in force
and effect on the Property at all times while this Mortgage continues in effect
the following insurance:

          (a) "All-risk" coverage insurance against loss or damage to the
     Property from all-risk perils including, without limitation, acts of
     terrorism. The amount of such insurance shall be not less than one hundred
     percent (100%), of the full replacement cost of the


                                      -10-



Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personality or fir fixtures) included in the Property and owned by
Mortgagor from time to time, without reduction for depreciation. The
determination of the replacement cost amount shall be adjusted annually to
comply with the requirements of the insurer issuing such coverage or, at
Mortgagee's election, by reference to such indexes, appraisals or information as
Mortgagee determines in its reasonable discretion. Full replacement cost, as
used herein, means, with respect to the Improvements, the cost of replacing the
Improvements without regard to deduction for depreciation, exclusive of the cost
of excavations, foundations and footings below the lowest basement floor, and
means, with respect to such furniture, furnishings, fixtures, equipment and
other items, the cost of replacing the same. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any coinsurance provisions) or a waiver of any
co-insurance provisions, all subject to Mortgagee's approval.

     (b) Commercial general liability insurance for personal injury, bodily
injury, death and property damage liability in amounts not less than $1,000,000
per occurrence, $2,000,000 aggregate (inclusive of umbrella coverage) or such
lesser amount as Mortgagee in Mortgagee's sole discretion may accept, for bodily
injury, personal injury and property damage. Mortgagee hereby retains the right
to periodically review the amount of said liability insurance being maintained
by Mortgagor and to require an increase in the amount of said liability
insurance should Mortgagee deem an increase to be reasonably prudent under then
existing circumstances.

     (c) Insurance covering the major components of the central heating, air
conditioning and ventilating systems, boilers, other pressure vessels, high
pressure piping and machinery, elevators and escalators, if any, and other
similar equipment installed in the Improvements, in an amount equal to one
hundred percent (100%) of the full replacement cost of the Improvements which
policies shall insure against physical damage to and loss of occupancy and use
of the Improvements arising out of an accident or breakdown covered thereunder.

     (d) If the Real Estate or any part thereof is identified by the Secretary
of Housing and Urban Development as being situated in an area now or
subsequently designated as having special flood hazards (including, without
limitation, those areas designated as Zone A or Zone V), flood insurance in an
amount equal to one hundred percent (100%) of the replacement cost of the
Improvements or the maximum amount of flood insurance available, whichever is
the lesser.

     (e) During the period of any construction on the Real Estate or renovation
or alteration of the Improvements, a so-called "Builder's All Risk Completed
Value" or "Course of Construction" insurance policy in non-reporting form for
any Improvements under construction, renovation or alteration in an amount
approved by Mortgagee and Worker's Compensation Insurance covering all persons
engaged in such construction, renovation or alteration.

     (f) Rental value or rental income insurance in amounts sufficient to
compensate Mortgagor for all Rents during a period of not less than one (1) year
in which the Property may be damaged or destroyed.


                                      -11-



     (g) Law and ordinance coverage in an amount satisfactory to Mortgagee if
the Property; or any part thereof, shall constitute a nonconforming use or
structure under applicable zoning ordinances, sub-division and building codes or
other laws, ordinances, orders and requirements.

     (h) Such other insurance - on the Property or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Mortgagee against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated, due regard
being given to the height and type of buildings, their construction, location,
use and occupancy.

     All such insurance shall (i) be issued by companies approved by Mortgagee
and licensed to do business in the state where the Property is located, with a
claims paying ability rating of "A" or better by Standard & Poor's Rating
Services, a division of The McGraw Hill Companies, Inc., (ii) contain the
complete address of the Real, Estate (or a complete legal description), (iii) be
for a term of at least one (1) year, (iv) contain deductibles no greater than
$10,000.00 or as otherwise required by Mortgagee, and (v) be subject to the
approval of Mortgagee as to insurance companies, amounts, content, forms of
policies, method by which premiums are paid and expiration dates.

     The "all-risk" commercial property and rental income insurance required
under Section 1.4(a) and 1.4(f) above shall cover perils of terrorism and acts
of terrorism and Mortgagor shall maintain commercial property and rental income
insurance for loss resulting from perils and acts of terrorism on terms
(including amounts) consistent with those required under Section 1.4(a) and
1.4(f) above, to the extent such insurance covering terrorism and acts of
terrorism is available at commercially reasonable rates or to the extent
available under the Terrorism Risk Insurance Act of 2002, as same may be
amended, replaced or extended from time to time, at all times during the term of
the Loan, provided, however, Mortgagor's insurance coverage may exclude perils
and acts of terrorism if Mortgagor also obtains, at Mortgagor's sole cost and
expense, a Terrorism Policy (hereinafter defined). The term 'Terrorism Policy",
as used herein, shall mean a separate stand-alone terrorism insurance. policy
obtained by Mortgagor which corresponds to Mortgagor's primary insurance
exclusion relating to acts or perils of terrorism such that there are no gaps in
coverage and being otherwise acceptable to Mortgagee and consistent as to
coverage amounts, ratings and conditions with the requirements of this. Section
1.4 as it relates to other sorts of insurance coverage. Mortgagor shall not
decline or otherwise terminate any terrorism coverage offered under Mortgagor's
all risk policy unless a Terrorism Policy is already in place.

     Mortgagor shall as of the date hereof deliver to Mortgagee evidence that
said insurance policies have been paid current as of the date hereof and
certified copies of such insurance policies and original certificates of
insurance signed by an authorized agent evidencing such insurance satisfactory
to Mortgagee. Mortgagor shall renew all such insurance and deliver to Mortgagee
certificates evidencing such renewals at least thirty (30) days before any such
insurance shall expire. Without limiting the required endorsements to insurance
policies, Mortgagor further agrees that all such policies shall provide that
proceeds thereunder shall be payable to Mortgagee, its successors and assigns,
pursuant and subject to a mortgagee clause (without contribution) of standard
form attached to, or otherwise made a part of, the applicable


                                      -12-



policy and that Mortgagee, its successors and assigns, shall be named as an
additional insured under all liability insurance policies. Mortgagor further
agrees that all such insurance policies: (i) shall provide for at least thirty
(30) days prior written notice to Mortgagee prior to any cancellation or
termination thereof and prior to any modification thereof which affects the
interest of Mortgagee; (ii) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Mortgagee in accordance with the terms
of such policy notwithstanding any act or negligence of Mortgagor which might
otherwise result in forfeiture of such insurance; and (iii) shall either name
Mortgagee as an additional insured or waive all rights of subrogation against
Mortgagee. The delivery to Mortgagee of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance policies by Mortgagor to Mortgagee as
further security for the indebtedness secured hereby. In the, event of
foreclosure of this Mortgage, or other transfer of title to the Property in
extinguishment in whole or in part of the secured indebtedness, all right, title
and interest of Mortgagor in and to all proceeds payable under such policies
then in force concerning the Property shall thereupon vest in the purchaser at
such foreclosure, or in Mortgagee or other transferee in the event of such other
transfer of title. Approval of any insurance by Mortgagee shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance. In the event Mortgagor fails to provide, maintain, keep in force
or deliver and furnish to Mortgagee the policies of insurance required by this
Mortgage or evidence of their renewal as required herein, Mortgagee may, but
shall not be obligated to, procure such insurance and Mortgagor shall pay all
amounts advanced by Mortgagee, together with interest thereon at the Default
Interest Rate (as defined in the Note) from and after the date advanced by
Mortgagee until actually repaid by Mortgagor, promptly upon demand by Mortgagee.
Any amounts so advanced by Mortgagee, together with interest thereon, shall be
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note. Mortgagee shall not be
responsible for nor incur any liability for the insolvency of the insurer or
other failure of the insurer to perform, even though Mortgagee has caused the
insurance to be placed with the insurer after failure of Mortgagor to finish
such insurance.

     1.5. Payment of Taxes. Mortgagor shall pay or cause to be paid, except to
the extent provision is actually made therefore pursuant to Section L6 of this
Mortgage, all taxes and assessments which are or may become a lien on the
Property or which are assessed against or imposed upon the Property. If not
being paid by Mortgagee pursuant to Section 1.6, Mortgagor shall furnish
Mortgagee with receipts (or if receipts are not immediately available, with
copies of canceled checks evidencing payment with receipts to follow promptly
after they become available) showing payment of such taxes and assessments at
least fifteen (15) days prior to the applicable delinquency date therefore.
Notwithstanding the foregoing, Mortgagor may in good faith, by appropriate
proceedings, and upon notice to Mortgagee, contest the validity, applicability
or amount of any asserted tax or assessment so long as (a) such contest is
diligently pursued, (b) Mortgagee determines, in its subjective opinion, that
such contest suspends the obligation to pay the tax or assessment and that
nonpayment of such tax or assessment will not result in the sale, loss,
forfeiture or diminution of the Property or any part thereof or any interest of
Mortgagee therein, and (c) prior to the earlier of the commencement of such
contest or the delinquency date of the asserted tax or assessment, Mortgagor
deposits in the Impound Account (as hereinafter defined) an amount reasonably
determined by Mortgagee to be adequate to cover the payment of such tax or
assessment and a reasonable additional sum to cover possible interest, costs and
penalties; provided, however, that Mortgagor shall promptly cause to be paid any


                                      -13-



amount adjudged by a court of competent jurisdiction to be due, with all
interest, costs and penalties thereon, promptly after such judgment becomes
final; and provided further that in any event each such contest shall be
concluded and the taxes, assessments, interest, costs and penalties shall be
paid prior to the date any writ or order is issued under which the Property may
be sold, lost or forfeited.

     1.6. Tax and Insurance Impound Account. Mortgagor shall establish and
maintain at all times while this Mortgage continues in effect an impound account
(the "Impound Account") with Mortgagee for payment of real estate taxes and
assessments and insurance on the Property as additional security for the
indebtedness secured hereby. Mortgagor shall deposit in the -Impound Account an
amount determined by Mortgagee to be sufficient (when added to the monthly
deposits described herein) to pay the next due annual installment of real estate
taxes and assessments on the Property at least one (1) month prior to the
delinquency date thereof (if paid in one installment) and the next due annual
insurance premiums with respect to the Property at least one (1) month prior to
the due date thereof (if paid in one installment). Commencing on the first
monthly payment date under the Note and continuing thereafter on each monthly
payment date under the Note, Mortgagor shall pay to Mortgagee, concurrently with
the monthly payment due under the Note, deposits in an amount equal to
one-twelfth (1/12) of the amount of the annual real estate taxes and assessments
that will next become due and payable on the Property, plus one-twelfth (1)12)
of the amount of the annual premiums that will next become due and payable on
insurance policies which Mortgagor is required to maintain. hereunder, each as
estimated and determined by Mortgagee, So long as no default hereunder or under
the other Loan Documents has occurred and is continuing, all sums in the Impound
Account shall be held by Mortgagee in the Impound Account to pay said taxes,
assessments and insurance premiums in one installment before the same become
delinquent. Mortgagor shall be responsible for ensuring the receipt by
Mortgagee, at least thirty (30) days prior to the respective due date for
payment thereof, of all bills, invoices and statements for all taxes,
assessments and insurance premiums to be paid from the Impound Account, and so
long as no default hereunder or under the other Loan Documents has occurred and
is continuing, Mortgagee shall pay the governmental authority or other party
entitled thereto directly to the extent funds are available for such purpose in
the Impound Account. In making any payment from the Impound Account, Mortgagee
shall be entitled to rely on any bill, statement or estimate procured from. the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax, assessment,
valuation, sale, forfeiture, tax lien or title or claim thereof. No interest on
funds contained in the Impound Account shall be paid by Mortgagee to Mortgagor

                    on the Impound Account shall be solely for the account of
Mortgagee. If the total funds in the Impound Account shall exceed the amount of
payments actually applied by Mortgagee for the purposes of the Impound Account,
such excess may be credited by Mortgagee on subsequent payments to be made
hereunder or, at the option of Mortgagee, refunded to Mortgagor. If, however,
the Impound Account shall, not contain sufficient funds to pay the sums required
when the same shall become due and payable, Mortgagor shall, within ten (1,0)
days after receipt of written notice thereof, deposit with Mortgagee the full
amount of any such deficiency.

     1.7. Tenant Improvements and Leasing Commissions Reserve.


                                      -14-



     As additional security for the indebtedness secured hereby, Mortgagor shall
establish and main at all times while this Mortgage continues in-effect a
reserve (the "TILC Reserve") with Mortgagee for the payment of costs and
expenses incurred by Mortgagor for Tenant

     Improvements and Leasing Commissions. All such sums, together with any
interest thereon, are hereinafter collectively referred to as the "Funds." As
used herein, the term "Tenant Improvements" shall mean construction or
modification of improvements on or installation of. fixtures or equipment in the
Property as required to be performed by Mortgagor pursuant to the terms of any
lease which is hereafter approved or, if such lease does not require approval by
Mortgagee, is hereafter entered into by Mortgagor and tenant pursuant to Section
1.12 hereof ("Approved Lease"). As used herein, the term "Leasing Commissions"
shall mean reasonable and customary commissions paid to a real estate broker
licensed in the state where the Property is located in connection with an
Approved Lease, pursuant to commission agreements containing such terms and"
provisions including, without limitation, as to the timing of the payment of the
commission, as are then prevailing between third party, unaffiliated owners and
brokers for comparable leases of space at properties similar to the Property in
the market area in which the Property is located.

          (a) Deposits Into the TLLC Reserve/Interest on Funds.

               (i) Mortgagor shall deposit into the TILC Reserve any amounts
          paid to Mortgagor under leases containing lease termination options or
          otherwise paid by tenants in consideration of an early termination of
          any lease, other than amounts paid for rent and other charges with
          respect to periods prior to the lease termination. To the extent a
          portion of the TILC Funds are deposited into the I ILC Reserve
          pursuant to this Section 1.7(a)(i) relative to a lease termination,
          (A) such portion of the TILC Funds shall only be available for
          disbursement after Mortgagor's provision of a Disbursement Request (as
          hereinafter defined) and only to pay Tenant Improvements and/or
          Leasing Commissions for an Approved Lease (or Approved Leases) of the
          space at the Property which was subject to such lease termination, (B)
          Mortgagor shall provide Mortgagee with a fully executed copy of an
          Approved Lease (or Approved Leases) over the space which was
          previously subject to the lease termination arrangement, and (C)
          Mortgagor must satisfy all of the requirements of Section 1.7(b)(i),
          (ii), (iii) and (iv) as to the Approved Lease(s) for which the request
          is made. So long as no default hereunder or under the other Loan
          Documents has occurred and is continuing, all sums in the TILC Reserve
          shall be held by Mortgagee in the TILC Reserve to pay and/or reimburse
          Mortgagor for the costs and expenses of Tenant Improvements and for
          paying Leasing Commissions as herein set forth. Upon retenanting (in
          accordance with the terms of this Mortgage) of all tenant space
          originally subject to the lease that was the subject of the
          termination payment deposited into the TILC Reserve and the receipt by
          Mortgagee of reasonably satisfactory evidence of the commencement of
          the payment of rent by the tenants under the new leases for such
          re-tenanted space(s) (i.e., after the expiration of all. free rent
          periods and rent concessions), provided no Event of Default then
          exists and provided no Express Sweep Period (as defined in the Cash
          Management Agreement) or Borders Sweep Period (as defined in the Cash
          Management Agreement) is then in effect, upon request by Mortgagor,
          all sums on deposit in the 11LC Reserve shall


                                      -15-



          be disbursed to Mortgagor. Interest on the funds contained in the TILC
          Reserve shall be credited to Mortgagor as provided in Section 4.28
          hereof.

               (ii) During any Express Sweep Period (as defined in the Cash
          Management Agreement) and/or any Borders Sweep Period (as defined in
          the Cash Management Agreement), all Excess Cash Flow (as defined in
          the Cash Management Agreement) shall be deposited into the TILC
          Reserve. To the extent a portion of the TILC Funds are deposited into
          the TILC Reserve pursuant to this Section 1.7(a)(ii), (A) such portion
          of the TILC Funds shall only be available for disbursement after
          Mortgagor's provision of a Disbursement Request and only to pay Tenant
          Improvements and/or Leasing Commissions for an Approved Lease (or
          Approved Leases) of the space at the Property previously leased to
          Express, Inc. (the "Express Space") and/or to Borders, Inc. (the
          "Borders Space"), as applicable (to the extent that both an Express
          Sweep Period and a Borders Sweep Period exist at the same time,
          Mortgagee may, at its option, reasonably allocate the Excess Cash Flow
          deposited into the TILC Reserve between the retenanting of the Express
          Space and Borders Space in amounts that Mortgagee shall reasonably
          determine), (B) Mortgagor shall provide Mortgagee with a fully
          executed copy of an Approved Lease (or Approved Leases) over the space
          which was previously subject to the lease termination arrangement, and
          (C) Mortgagor must satisfy all of the requirements of Section
          1.7(b)(i), (ii), (iii) and (iv) as to the Approved Lease(s) for which
          the request is made. Upon re-tenanting of all of the Express Space and
          Borders Space (or, if the Express, Inc. lease or the Borders, Inc.
          lease, as applicable, are extended in accordance with the terms of
          this Mortgage and the other tenant space is re-tenanted) in accordance
          with the terms of this Mortgage and the receipt by Mortgagee of
          reasonably satisfactory evidence of the commencement- of the payment
          of rent by all tenants under the new leases for the re-tenanted
          space(s) (i.e., after the termination of all free rent periods and
          rent concessions), then, provided no Event of Default then exists,
          upon request by Mortgagor, any sums on deposit in the TILC Reserve
          that were deposited into the TILC Reserve pursuant to this Section
          1.7(a)(ii) shall be disbursed to Mortgagor (any sums deposited in the
          TILC Reserve pursuant to Section l.7(a)(i) shall be governed by
          Section 1.07(a)(i)).

          (b) Disbursements from the TILC Reserve. So long as no Event of
     Default hereunder has occurred and is continuing, and to the extent Funds
     are on deposit in the TILC Reserve, Mortgagee shall, within ten (10) days
     after receipt of a written request from Mortgagor specifying the amount
     requested and the applicable Tenant Improvements or Leasing Commissions to
     be paid for with the requested Funds ("Disbursement Request"), release to
     Mortgagor Funds in the amount of the Disbursement Request; subject,
     however, to the provisions of Sections I.07(a)(i) and (ii) above and the
     following conditions precedent. Mortgagee shall not be required to make
     advances from the TILC Reserve more frequently than once in any thirty (30)
     day period. In making any payment from the TILL Reserve, Mortgagee" shall
     be entitled to rely on such request from Mortgagor, and on any bill,
     statement, or estimate from any third party, without any inquiry into the
     accuracy, validity or contestability of any such amount,


                                      -16-



               (i) With respect to a Disbursement Request to pay for Tenant
          Improvements, Mortgagor shall provide evidence reasonably satisfactory
          to Mortgagee (including, if requested by Mortgagee, access to the
          Property by Mortgagee and/or an architect and/or an engineer specified
          by Mortgagee for the purpose of inspecting the work done, at
          Mortgagor's expense) that the Tenant Improvements, or such portion
          thereof, for which the Funds are being requested have been completed
          in accordance with Section 1.7(c) below. Mortgagor shall submit to
          Mortgagee copies of invoices for which Funds are being requested, and
          if required by Mortgagee, shall also submit waivers of lien. Mortgagor
          shall execute and deliver to Mortgagee a certificate (in form and
          substance reasonably satisfactory to Mortgagee) that the Tenant
          Improvements covered by the applicable Disbursement Request comply
          with, and have fully satisfied, the terms and provisions of Section
          1.7(c) below. Mortgagor shall provide such additional documents,
          certificates and affidavits as Mortgagee may reasonably request.

               (ii) With respect to the final Disbursement Request relative to
          any Approved Lease, Mortgagor shall provide Mortgagee with (A) an
          original estoppel certificate executed by the tenant under the
          Approved Lease for which such request relates, stating that such
          tenant has accepted the Tenant Improvements, and has occupied the
          space covered by the Tenant Improvements and that there are no
          defaults under such lease (nor does there exist any event or
          conditions, which with the passage of time or the giving of notice, or
          both, could result in such a default), (B) if required by Mortgagee,
          an original subordination, non-disturbance and attomment agreement in
          form acceptable to Mortgagee executed by the tenant under the Approved
          Lease in favor of Mortgagee, (C) evidence of payment of rent by the
          tenant under the Approved Lease and (D) a copy of any and all
          applicable permanent certificates of occupancy and other governmental
          permits, if any be required, issued by applicable governmental
          authorities with respect to the Tenant Improvements, which
          certificates and permits allow the tenant to open for business as
          contemplated under such lease..

               (iii) With respect to a Disbursement Request to pay any portion
          of the Leasing Commissions, Mortgagor shall provide evidence as
          reasonably requested by Mortgagee that such Leasing Commissions are
          then due and payable or have been properly paid, and such additional
          documents, certificates and affidavits as Mortgagee may reasonably
          request;

               (iv) Notwithstanding any provision of this Section 1.7 to the
          contrary, Funds disbursed with respect to any Approved Lease (i) for
          Tenant Improvements shall be an amount not to exceed, under any
          circumstances, the reasonable costs and expenses actually incurred '
          by Mortgagor therefore; and (ii) for Leasing Commissions shall be an
          amount not to exceed, under any circumstances, the commission actually
          incurred by Mortgagor therefore which is reasonable and customary for
          a licensed real estate broker in the market area in which the Property
          is located.


                                      -17-



          (c) Mortgagor shall construct and complete all Tenant Improvements
within the time periods and as required by, and in accordance with, the
Approved Leases. Mortgagor or tenant shall pay for and obtain or cause to be
paid for and obtained all permits, licenses and approvals required by all
applicable laws with regard to the Tenant Improvements, whether necessary for
commencement, completion, use or otherwise. Mortgagor shall perform or cause to
be performed all work in connection with the Tenant Improvements in a good and
workmanlike manner, in compliance with all applicable laws (including, without
limitation, any and all applicable life safety laws, environmental laws and laws
for the handicapped and/or disabled) and, with respect only to those leases
requiring Mortgagee approval, with the plans and specifications approved (in
writing) by Mortgagee covering the same, which performance by Mortgagor shall be
without regard to the sufficiency of the Funds. Mortgagor covenants and agrees
that Tenant Improvements shall be constructed, installed or completed, as
applicable, free and clear of any and all liens (including mechanic's,
materialman's or other liens), claims and encumbrances whatsoever.

     1.8. Security Interest In Reserves. (a) As additional security for the
payment and performance by Mortgagor of all duties, responsibilities and
obligations under the Note and the other Loan Documents, Mortgagor hereby
unconditionally and irrevocably assigns, conveys, pledges, mortgages, transfers,
delivers, deposits, sets over and confirms unto. Mortgagee, and hereby grants to
Mortgagee a security interest in all sums on deposit or due under this Mortgage
and the other Loan Documents including, without limitation, (i) the Impound
Account, the TILC Reserve, and, to the extent set forth on Exhibit C attached
hereto, any Repair and Remediation Reserve, and any other reserve set forth on
Exhibit C attached hereto (collectively, the "Reserves"), (ii) the accounts into
which the Reserves have been deposited, (iii) all insurance on said accounts,
(iv) all accounts, contract rights and general intangibles or other rights and
interests pertaining thereto, (v). all sums now or hereafter therein or
represented thereby, (vi) all replacements, substitutions or proceeds thereof,
(vii) all instruments and documents now or hereafter evidencing the Reserves or
such accounts, (viii) all powers, options, rights, privileges and immunities
pertaining to the Reserves (including the right to make withdrawals therefrom),
and (ix) all proceeds of the foregoing. Mortgagor hereby authorizes and consents
to the account into which the Reserves have been deposited being held in
Mortgagee's name or the name of any entity servicing the Note for Mortgagee and
hereby acknowledges and agrees that Mortgagee, or at Mortgagee's election, such
servicing agent, shall have exclusive control over said account. Notice of the
assignment and security interest granted to Mortgagee herein may be delivered by
Mortgagee at any time to the financial institution wherein the Reserves have
been established, and Mortgagee, or such servicing entity, shall have possession
of all passbooks or other evidences of such accounts. Mortgagor hereby holds
Mortgagee harmless with respect to all risk of loss regarding amounts on deposit
in the Reserves, except to the extent that any such loss is caused by the gross
negligence or intentional misconduct of Mortgagee. Mortgagor hereby knowingly,
voluntarily and intentionally stipulates, acknowledges and agrees that the
advancement of the funds from the Reserves as set forth herein is at Mortgagor's
direction and is not the exercise by Mortgagee of any right of set off or other
remedy upon a default. If a default shall occur hereunder or under any other of
the Loan Documents which is not cured within any applicable grace or cure
period, then, for so long as such default is continuing, Mortgagee may, without
notice or demand on Mortgagor, at its option: (A) withdraw any or all of the
funds (including, without limitation, interest) then remaining in the Reserves
and apply the same, after deducting all costs and expenses of safekeeping,
collection and delivery (including, but not


                                      -18-



limited to, attorneys fees, costs and expenses) to the indebtedness evidenced
by the Note or any other obligations of Mortgagor under the other Loan Documents
in such manner or as Mortgagee shall deem appropriate in its sole discretion,
and the excess, if any, shall be paid to Mortgagor, (B) exercise any and all
rights and remedies of a secured party under any applicable Uniform Commercial
Code, or (C) exercise any other remedies available at law or in equity. No such
use or application of the funds contained in the Reserves shall be deemed to
cure any Event of Default hereunder.

          (b) The Reserves are solely for the protection of Mortgagee and entail
no responsibility on Mortgagee's part beyond the payment of the respective costs
and expenses in accordance with the terms thereof and beyond the allowing of due
credit for the sums actually received. Upon assignment of this Mortgage by
Mortgagee, any funds in the Reserves shall be turned over to the assignee and
any responsibility of Mortgagee, as assignor, with respect thereto shall
terminate. The Reserves shall not, unless otherwise explicitly required by
applicable law, be or be deemed to be escrow or trust funds, but, at Mortgagee's
option and in Mortgagee's discretion, may either be held in a separate account
or be commingled by Mortgagee with the general funds of Mortgagee. Upon full
payment of the indebtedness secured hereby in accordance with its terms (or if
earlier, the completion of the applicable conditions to release of each Reserve
to Mortgagee's satisfaction) or at such earlier time as Mortgagee may elect, the
balance in the Reserves then in Mortgagee's possession shall be paid over to
Mortgagor and no - other party shall have any right or claim thereto.

          (c) Any amounts received by Mortgagee from Mortgagor may be invested
by Mortgagee (or its servicer) for its benefit, and Mortgagee shall not be
obligated to pay, or credit, any interest earned thereon to Mortgagor except as
may be otherwise specifically provided in this Mortgage.

     1.9. Casualty and Condemnation Mortgagor shall give Mortgagee prompt
written notice of the occurrence of any casualty affecting, or the institution:
of any proceedings for eminent domain or for the condemnation of, the Property
or any portion thereof (collectively, an "Insured Event"). All insurance
proceeds on the Property, and all causes of action, claims, compensation, awards
and recoveries for any damage, condemnation or taking of all or any part of the
Property or for any damage or injury to it for any loss or diminution in value
of the Property, are hereby assigned-to and shall be paid to Mortgagee.
Mortgagee may participate in any suits or proceedings relating to any such
proceeds, causes of action, claims, compensation., awards or recoveries and
Mortgagee is hereby authorized, in its own name or in Mortgagor's name, to
adjust any loss covered by insurance or any condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in connection
therewith, and Mortgagor shall from tune to time deliver to Mortgagee any
instruments required to permit such participation; provided, however, that
Mortgagee shall not have the right to participate in the adjustment of any loss
which is not in excess of the lesser of (i) ten percent (10%) of the then
outstanding principal balance of the Note, and (ii) $400,000.00. Provided no
default is then continuing hereunder or under any of the other Loan Documents
and no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a default hereunder or under any of the other
Loan Documents, Mortgagee shall apply any sums received by it under this Section
first to the payment of all of its costs and expenses (including, but not


                                      -19-



limited to reasonable legal fees and disbursements) incurred in obtaining those
sums, and then, as follows:

          (a) In the event that Mortgagee receives insurance proceeds or
condemnation awards upon the occurrence of an Insured Event in an amount excess
of the lesser of (i) ten percent 10%) of the then outstanding principal balance
of the Note, and (ii) $400.,000.00 (collectively, the "Threshold Amount"),
Mortgagor shall repair or restore the Property, and Mortgagee shall, to the
extent such insurance proceeds or condemnation awards are available for such
purpose under the provisions of this Section 1.09, disburse to Mortgagor the
amount paid or incurred by Mortgagor as a result of any such Insured Event for
costs and expenses incurred by Mortgagor to repair or restore the Property
(collectively the "Repairs") in accordance with, and satisfaction of, the terms
and conditions for disbursement relative to the Replacement Reserve as described
on Exhibit C hereto.

          (b) In the event any proceeds or awards from an Insured Event exceed
the Threshold Amount but less than fifty percent (50%) of the Improvements
located on the Real Estate have been taken or destroyed, then if

               (1) the Property can, in Mortgagee's reasonable judgment, with
     diligent restoration or repair, be returned to a condition at least equal
     to the condition thereof that existed prior to the casualty or partial
     taking causing the loss or damage by the earlier to occur of the following
     dates: (i) six (6) months after the receipt of insurance proceeds or
     condemnation awards by either Mortgagor or Mortgagee, and (ii) six (6)
     months prior to the stated maturity date of the Note, and

               (2) all necessary governmental approvals can be obtained to allow
     the rebuilding and reoccupancy of the Property as described in subsection
     (b)(1) above, and

               (3) there are sufficient sums available (through insurance
     proceeds or condemnation awards and contributions by Mortgagor, the fill,
     amount of which shall at Mortgagee's option have been deposited with
     Mortgagee) for such restoration or repair (including, without limitation,
     for, any reasonable costs and expenses of Mortgagee to incurred in
     administering said restoration or repair) and for payment of principal and
     interest to become due and payable under the Note during such restoration
     or repair, and

               (4) the economic feasibility of the Improvements after such
     restoration or repair will be such that income from their operation is
     reasonably anticipated to be sufficient to pay operating expenses of the
     Property and debt service on the indebtedness secured hereby in full with
     the same coverage ratio considered by Mortgagee in its determination to
     make the Loan, and

               (5) Mortgagor shall have delivered to Mortgagee, at Mortgagor's
     sole cost and expense, an appraisal report from an appraiser, in form and
     substance, satisfactory to Mortgagee appraising the value of the Property
     as proposed to be restored or repaired to be not less than the appraised
     value of the Property considered


                                      -20-



     by Mortgagee in its determination to make the Loan, then, Mortgagee shall,
     solely for the purposes of such restoration or repair, advance so much of
     the remainder of such sums as may be required to facilitate such
     restoration or repair, and any funds deposited by Mortgagor therefor, to
     Mortgagor in the manner and upon such terms and conditions as would be
     required by a prudent interim construction lender, including, but not
     limited to, the prior approval by Mortgagee of plans and specifications,
     contractors and the form of construction contracts and the furnishing to
     Mortgagee of permits, bonds, lien waivers, invoices, receipts and
     affidavits from contractors and subcontractors in form and substance
     reasonably satisfactory to Mortgagee. Any remaining proceeds shall be
     applied by Mortgagee for payment of the indebtedness secured hereby
     (without prepayment penalty or premium) in whatever order as Mortgagee
     directs, or released to Mortgagor, in its absolute discretion. Mortgagor
     shall, in good faith, undertake reasonable efforts to cause the conditions
     described in this Section 1.9(b) to be fully satisfied (e.g., Mortgagor
     shall timely make applications for necessary governmental permits, shall
     order an appropriate appraisal report, etc.). If such conditions are
     satisfied, Mortgagor shall be obligated to undertake restoration and repair
     of the damaged improvements subject to the terms of this Section 1.9.

     Any disbursement pursuant to this clause (b) of sums by Mortgagee shall,
subject to Mortgagor's satisfaction of the provisions hereof, be in a manner to
promptly facilitate the restoration or repair of the Property. In the event
Mortgagor fails to meet the requirements of this clause (b), then Mortgagee may
elect in its absolute discretion and without regard to the adequacy of
Mortgagee's security, to accelerate the maturity date of the Note and declare
any. and all of the indebtedness secured hereby to be immediately due and
payable and apply the remainder of such sums to the payment of the secured
indebtedness (without prepayment penalty or premium) in whatever order Mortgagee
directs in its sole discretion, with any remainder being paid to Mortgagor.

          (c) In all other cases, namely, in the event That fifty percent (50%)
or more of the Improvements located on the Real Estate have been taken or
destroyed and/or the requirements of Section 1.09(b) are not all satisfied,
Mortgagee may elect, in Mortgagee's absolute discretion and without regard to
the adequacy of Mortgagee's security, to (1) accelerate the maturity date of the
Note and declare any and all indebtedness secured hereby to be immediately due
and payable and apply the remainder of such sums received pursuant to this
Section to the payment of the secured indebtedness in whatever order Mortgagee
directs in its absolute discretion (without prepayment penalty or premium), with
any remainder being paid to Mortgagor, or (ii) make insurance or condemnation
proceeds available to Mortgagor for repair or restoration if Mortgagor
establishes to the satisfaction of Mortgagee, in its sole discretion, that
Mortgagor otherwise satisfies the requirements of Section 1.9(b) above. Should
Mortgagee make the election described immediately above in item (ii) of this
Section 1.9(c), Mortgagor shall be obligated to undertake restoration and repair
of the damaged Improvements consistent with the provisions of this Section 1.9.

          (d) Any reduction in the indebtedness secured hereby resulting from
Mortgagee's application of any sums received by it hereunder shall take effect
only when Mortgagee actually receives such sums and elects to apply such sums to
the indebtedness secured hereby and, in any event, the unpaid portion of the
indebtedness secured hereby shall remain in


                                      -21-



full force and effect and Mortgagor shall not be excused in the payment thereof
Partial payments received by Mortgagee, as described in the preceding sentence,
shall be applied as set forth in Section 1.02(c) of the Note. If Mortgagor
undertakes to restore or repair the Property after the occurrence of a casualty
or partial taking of the Property as provided above, Mortgagor shall promptly
and diligently, at Mortgagor's sole cost and expense and regardless of whether
the insurance proceeds or condemnation award, as appropriate, shall be
sufficient for the purpose, restore, repair, replace and rebuild the Property as
nearly as possible to its value, condition and character immediately prior to
such casualty or partial taking in accordance with the foregoing provisions and
Mortgagor shall pay to Mortgagee all costs and expenses of Mortgagee incurred in
administering said rebuilding, restoration or repair, provided that Mortgagee
makes such proceeds or award available for such purpose. Mortgagor agrees to
execute and deliver from time to time such further instruments as may be
requested by Mortgagee to confirm the foregoing assignment to Mortgagee of any
award, damage, insurance proceeds, payment or other compensation. Mortgagor
hereby irrevocably constitutes and appoints Mortgagee the attorney in- fact of
Mortgagor (which power of attorney shall be irrevocable so long as any
indebtedness secured hereby is outstanding, shall be deemed coupled with an
interest, shall survive the voluntary or involuntary dissolution of Mortgagor
and shall not be affected by any disability or incapacity suffered by Mortgagor
subsequent to the date hereof), with full power of substitution, subject to the
terms of this Section, to settle for, collect and receive any such awards,
damages, insurance proceeds, payments or other compensation from the parties or
authorities making the same, to appear in and prosecute any proceedings therefor
and to give receipts and acceptance therefor,

     1.10. Mechanics Liens. Mortgagor shall pay when due all claims and demands
of mechanics, materialman laborers and others for any work performed or
materials delivered for the Real Estate or the Improvements; provided, however,
that Mortgagor shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Mortgagee and provided that neither the Property nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest. In the event Mortgagor shall contest any such claim or
demand, Mortgagor shall promptly notify Mortgagee of such contest and thereafter
shall, upon Mortgagee's request, promptly provide a bond, cash deposit or other
security satisfactory to Mortgagee to protect Mortgagee's interest and security
should the contest be successful. If Mortgagor, shall fail to immediately
discharge or provide security (after the aforementioned request) against any
such claim or demand as aforesaid, Mortgagee may do so and any and all expenses
incurred by Mortgagee, together with interest thereon at the Default Interest
Rate (as defined in the Note) from the date incurred by Mortgagee until actually
paid by Mortgagor, shall be immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note.

     1.11. Assignment of Leases and Rents. Mortgagor acknowledges and confirms
that, as additional collateral security for the payment of the indebtedness
secured hereby, and cumulative of any and all rights and remedies herein
provided, it has executed and delivered to Mortgagee an Assignment of Leases
and Rents of even date herewith (the "Assignment"), intending such Assignment to
create a present, absolute assignment to Mortgagee of the leases and Rents. Upon
the occurrence of a default under this Mortgage which has not been cured within:
any applicable grace or cure period, Mortgagee shall be entitled to exercise any
or all of


                                      -22-



the remedies provided in this Mortgage and in the Assignment, including, without
limitation, the appointment of a receiver. The Assignment shall continue in full
force and effect during any period of foreclosure or redemption with respect to
the Property.

     1.12 Leases and Licenses

     (a) Mortgagor covenants and agrees that it shall not entere into any lease
     affecting 6,000 square feet or more of the Property or having a term
     (including any renewal or extension term) of more than 10 years without the
     prior written approval of the Mortgagee, which approval shall not be
     unreasonably withheld. The request for approval of each such proposed
     Mortgage, failure to approve or disapprove such proposed lease within ten
     (10) business days is deemed approval and Mortgagor shall furnish to
     Mortgagee (and any loan servicer specified from time to time by Mortgagee):
     (i) such biographical and financial information about the proposed tenant
     as Mortgagee may reasonably require in conjunction with its review, (ii) a
     copy of the proposed form: of lease, and (iii) a summary of the material
     terms of such proposed lease (including, without limitation, rental terms
     and the term of the proposed lease and any options). It is acknowledged
     that Mortgagee intends to include among its criteria for approval of any
     such proposed lease the following: (i) such lease shall be with a bona-fide
     arm's-length tenant; (ii) such lease shall not contain any rental or other
     concessions which are not then customary and reasonable for similar
     properties and leases in the market area of the Real Estate; (iii) such
     lease shall provide that the tenant pays for its expenses; (iv) the rental
     shall be at least at the market rate then prevailing for similar properties
     and leases in the market areas of the Real Estate; and (v) such lease shall
     contain subordination and attornment provisions in form and content
     acceptable to Mortgagee. Failure of Mortgagee to approve or disapprove any
     such proposed lease within ten (10) business days after receipt of such
     written request and all the documents and information required to be
     furnished to Mortgagee with such request shall be deemed approval, provided
     that the written request for approval specifically mentioned the same (any
     disapproval by Mortgagee shall contain the reasons, in reasonable detail,
     for such disapproval)

     (b) All other leases shall be written on the standard form lease (without
     any material changes) which Mortgagee has approved and shall be on
     arm's-length terms consistent with the terms for similar leases in the
     market area of the Real Estate, shall provide for free rent only if the
     same is consistent with prevailing market conditions and shall provide for
     market rents then prevailing in the market area of the Real Estate. Such
     leases shall also provide for Security Deposits in reasonable amounts.
     Mortgagor shall also submit to Mortgagee for Mortgagee's approval, which
     approval shall not be unreasonably withheld, prior to the execution
     thereof, any proposed lease, license or occupancy agreement of the
     Improvements or any portion thereof that differs materially and adversely
     from the aforementioned form lease. Mortgagor shall not execute any lease,
     license or occupancy agreement for all or a substantial portion of the
     Property, except for an actual occupancy by the tenant, lessee or licensee
     thereunder, and shall at all times promptly and faithfully perform, or
     cause to be performed, all of the covenants,. conditions and agreements
     contained in all leases, licenses. and occupancy agreements with respect to
     the Property, now or hereafter existing, on the part of the landlord,
     lessor or licensor thereunder to be kept and performed. In addition to the
     requirements set forth in Section 1.18(c) of this Mortgage, Mortgagor shall
     furnish to Mortgagee, within ten (10)'days after a request by Mortgagee to
     do. so (but not more frequently than once per calendar quarter), a current
     rent roll


                                      -23-



certified by Mortgagor as being true and correct containing the names of all
tenants, lessees and licensees with respect to the Property, the terms of their
respective leases, licenses or occupancy agreements, the spaces occupied and
the rentals or fees payable thereunder and the amount of each tenant's security
deposit. Upon the request of Mortgagee, Mortgagor shall deliver to Mortgagee a
copy of each such lease, license and occupancy agreement. Mortgagor shall not do
or suffer to be done any act that might result in a default by the landlord,
lessor or licensor under any such lease, license or occupancy agreement or allow
the tenant, lessee or licensee thereunder to withhold payment or rent and,
except as otherwise expressly permitted by the terms of Section 1.13 hereof,
shall not further assign any such lease, license or occupancy agreement or any
such rents. Mortgagor, at no cost or expense to Mortgagee, shall enforce, short
of termination, the performance and observance of each and every condition and
covenant of each of the parties under such leases. Mortgagor shall not, without
the prior written consent of Mortgagee, modify any of the leases; terminate or
accept the surrender of any leases, waive or release any other party from the
performance or observance of any obligation or condition under such leases
except, with respect only to leases affecting less than 6,000 square feet and
having a term of ten (10) years or less, in the normal course of business in a
manner which is consistent with sound and customary leasing and management
practices for similar properties in the community in which the Property is
located. Mortgagor shall not permit the prepayment of any rents under any of the
leases for more than one (1) month prior to the due date thereof.

     1.13. Alienation and Further Encumbrances.

          (a) Mortgagor acknowledges that Mortgagee has relied upon the
principals of Mortgagor and their experience in owning and operating properties
similar to the Property in connection with the closing of - the Loan.
Accordingly, except as specifically allowed hereinbelow in this Section and
notwithstanding anything to the contrary contained in Section 4.5 hereof, in the
event that the Property or any part thereof or interest therein shall be sold
(including any installment sales agreement), conveyed, disposed of, alienated,
hypothecated, leased (except to tenants of space in the Improvements in
accordance with the provisions of Section 1.12 hereof), assigned, pledged,
mortgaged, further encumbered or otherwise transferred or Mortgagor shall be
divested of its title to the Property or any interest therein, in my manner or
way, whether voluntarily or involuntarily, without the prior written consent of
Mortgagee being first obtained, which consent may be withheld in Mortgagee's
sole discretion, then the same shall constitute a default hereunder and
Mortgagee sill have the right, at its option, to declare any or all of the
indebtedness secured hereby, irrespective of the maturity date specified in the
Note, immediately due and payable and to otherwise exercise any of its other
rights and remedies contained in Article III hereof If such acceleration is
during any period when a prepayment fee is payable pursuant to the provisions
set forth in the Note, then, in addition to all of the foregoing, such
prepayment fee shall also then be immediately due and payable to the same end as
though Mortgagor were prepaying the entire indebtedness secured hereby on the
date of such acceleration. For the purposes of this Section, the sale,
conveyance, transfer, disposition, alienation, hypothecation, pledge or
encumbering (whether voluntarily or involuntarily) of all or any portion of the
ownership interest in (or, directly or indirectly through constituent parties,
any of the ultimate beneficial ownership interest in) Mortgagor shall be deemed
to be a transfer of an interest in the Property. Notwithstanding the foregoing,
however, transfers or assignments of ownership interests in Mortgagor (or its
constituent parties) may be undertaken without the consent of Mortgagee in the
following circumstances:


                                      -24-



     (1) In the case of a Mortgagor which is a limited partnership, up to 49% of
     the limited partnership interests in Mortgagor shall be freely transferable
     so long as those persons responsible for the management and control of
     Mortgagor and the Property remain unchanged following such transfer.

     (2) In the case of a Mortgagor which constitutes a limited liability
     company, up to 49% of the non-managing membership interests in Mortgagor
     shall be freely transferable so long as those persons responsible for the
     management and control of Mortgagor and the Property remain unchanged
     following such transfer.

     (3) In the case of a Mortgagor which constitutes a corporation, up to 49%
     of the aggregate of the issued and outstanding capital stock of Mortgagor
     may be sold or assigned, taking into account (i) any prior sales or
     assignments, and (ii) the effective change in ownership resulting from any
     issuance of new shares of capital stock in Mortgagor or its constituent
     party.

     (4) Gifts for estate planning purposes of any individual's interests in
     Mortgagor or in any of Mortgagor's general partners, members or joint
     venturers to the spouse or any lineal descendant of such individual, or to
     a trust for the benefit of any one or more of such individual, spouse or
     lineal descendant, shall not be a default under this Mortgage so long as
     Mortgagor is reconstituted, if required, following such gift and so long as
     those persons responsible for the management of the Property and Mortgagor
     remain unchanged following such gift or any replacement management is
     approved by Mortgagee.

     (5) Involuntary assignments or transfers caused by the death, incompetence
     or dissolution of Mortgagor, one of its constituent parties or the owner of
     one of its constituent parties are permitted if: (i) Mortgagor is
     reconstituted, if required, following such death, incompetence or
     dissolution, and (ii) those persons responsible for the management and
     control of Mortgagor and the Property remain unchanged as a result of such
     death, incompetence or dissolution or any replacement management is
     approved by Mortgagee,

Notwithstanding the foregoing, for so long as Thor Chestnut Hill Equity, LP, a
Delaware limited partnership ("Thor Equity") is a limited partner in Thor
Chestnut Hill, LP and/or Thor Chestnut. Hill II, LP, the following provision
shall apply with respect to Thor Chestnut Hill, LP and interests in such entity
and with respect to Than Chestnut Hill II, LP and interests in such entity:
limited partnership interests in Thor Equity may be freely transferred (and
limited partnership interests in. one or both of the entities comprising
Mortgagor may thereby be indirectly transferred) in excess of the limitations
established in Section 1.13(x)(1) above so long as, following each such
transfer, all of the following conditions are satisfied:

          (x) at all times, Joseph J. Sift shall own, directly or indirectly, at
     least twenty five percent (25%) of the ownership interests in each of the
     entities comprising Mortgagor;


                                      -25-



          (y) at all times, Joseph I Sitt shall possess, directly or indirectly,
     the power to direct or cause the direction of the management, operations
     and policies of each of the entities comprising Mortgagor and of the
     Property; and

          (z) (A) no person, together with its affiliates, shall acquire more
     than a twenty-two percent (22%) direct and/or indirect interest in either
     or both of the entities comprising Mortgagor without Mortgagee's prior
     written consent and (B) no person, together with its affiliates, shall
     acquire more than a forty-nine percent (49%) direct and/or indirect
     interest in either or both of the entities comprising Mortgagor without
     both (1) Mortgagee's prior written consent and (II) if required under the
     operative documents with respect to a Secondary Market Transaction (as
     hereinafter defined), Mortgagee shall have received evidence in writing
     from the Rating Agency to the effect that the proposed transfer will not
     result in a re-qualification, reduction, downgrade or withdrawal of any
     rating initially assigned or to be assigned in a Secondary Market
     Transaction or, if no such rating has been issued, in Mortgagee's good
     faith judgment, such transfer shall not have an adverse effect on the level
     of rating obtainable in connection with the loan secured hereby.

     In all cases where assignment of ownership interests is allowed pursuant to
     this Section 1.13 (a), the proportionate ownership which is proposed to be
     transferred shall be calculated so as to take into account prior transfers
     or assignments. Furthermore, the sale, conveyance, transfer, disposition,
     alienation, hypothecation, pledge or encumbering (whether voluntarily or
     involuntarily) of all or any portion of the ownership interest in (or,
     directly or indirectly through constituent parties, any of the ultimate
     beneficial ownership interest in) any guarantor of Mortgagor's obligation
     hereunder or under any of the other Loan Documents shall constitute a
     default hereunder and Mortgagee shall have the right to exercise its
     various remedies described hereinabove; provided, however, ownership
     interests in any such guarantor may be transferred in a manner consistent
     with the allowable transfers of ownership interests in Mortgagor described
     hereinabove.

     (b) Notwithstanding the foregoing provisions of this Section, Mortgagee
     shall consent to a sale, conveyance or transfer of the Property in its
     entirety (hereinafter, a "Sale") to any person or entity provided that each
     of the following terms and conditions are satisfied (by way of
     clarification, transfers permitted under Section 1.13(a) above are not
     subject to the requirement of this Section 1.13(b)):

          (1) No defaults then continuing hereunder or under any of the other
     Loan Documents;

          (2) Mortgagor gives Mortgagee written notice of the terms of such
     prospective Sale not less than forty-five (45) days before the date on
     which such Sale is scheduled to close and, concurrently therewith, gives
     Mortgagee all reasonable information concerning the proposed transferee of
     the Property (hereinafter, a "Buyer") as Mortgagee would require in
     evaluating an initial extension of credit to a borrower and pays to the
     Mortgagee a non-refundable application fee in the amount of $5,000.00 (the
     "Application Fee"). Mortgagee shall have the right, in its reasonable
     discretion, to approve or disapprove the proposed Buyer. In determining
     whether to give or withhold its approval of the proposed Buyer, Mortgagee
     shall consider, among other things, the Buyer's experience and track record
     in owning and operating facilities similar to the Property, the Buyer's
     entity structure, the Buyer's financial strength, the Buyer's general
     business standing and the Buyer's relationships and experience with
     contractors, vendors, tenants, lenders and other business entities;


                                      -26-



          (3) Morgagor pays Mortgagee, concurrently with the closing of such
     Sale, a non-refundable assumption fee (the "Assumption fee") in an amount
     equal to one quarter of one percent (1/4%) of the then outstanding
     principal balance of the Note. The Application Fee shall be used to pay
     Mortgagee's reasonable and customary out-of-pocket costs and expenses,
     including, without limitation, reasonable attorneys fees incurred by
     Mortgagee in connection with the Sales. Mortgagor's obligation to pay such
     out-of-picket costs and expenses and attorneys fees of Mortgagee in
     connection with such Sale shall not exceed the Application Fee;

          (4) The Buyer assumes and agrees to pay the indebtedness secured
     hereby subject to the provisions of Section 4.23 hereof and to perform the
     covenants of Mortgagor under the Loan Documents, and, prior to or
     concurrently with the closing of such Sale, the Buyer executes, without any
     cost or expense to Mortgagee, such documents and agreements as Mortgagee
     shall reasonable require to evidence and effectuate said assumption and
     delivers such legal opinions as Mortgagee may require;

          (5) Mortgagor and the Buyer execute, without any cost or expense to
     Mortgagee, new financing statements or financing statement amendments and
     any additional documents reasonably requested by Mortgagee;

          (6) Mortgagor delivers to Mortgagee, without any cost or expense to
     Mortgagee, such endorsements to Mortgagee's Title Insurance Policy, hazard
     insurance endoresments or certificates and other similar materials as
     Mortgagee may deem necessary at the time of the Sale, all in form and
     substance satisfactory to Mortgagee, including, without limitation, an
     endorsement or endorsements to Mortgagee's Title Insurance Policy insuring
     the lien of this mortgage, extending the effective date of such policy to
     the date of execution and delivery (or, if late, of recording) of the
     assumption agreement referenced above in subparagraph (4) of this Section
     1.13(b) with no additional exceptions added to such policy and insuring
     that fee simple title to the Property is vested in the Buyer;

          (7) Mortgagor executes and delivers to Mortgagee, without any cost or
     expense to Mortgagee, a, release of Mortgagee, its officers, directors,
     employees and agents, from all claims and liability relating to the
     transactions evidenced by the Loan Documents through and including the date
     of the closing of the Sale, which agreement shall be in form and substance
     satisfactory to Mortgagee and shall be binding upon the Buyer;

          (8) Subject to the provisions of Section 4.23 hereof, such Sale is not
     construed so as to relieve Mortgagor of any personal liability under the
     Note or any of the other Loan Documents for any acts or events occurring or
     obligations arising prior to or simultaneously with the closing of such
     Sale and Mortgagor executes, without any cost or expense to the Mortgagee,
     such documents and agreements as Mortgagee shall reasonable require to
     evidence and effectuate the ratification of said personal liability.


                                      -27-



          (9) Such Sale is not construed so as to relieve any current guarantor
     or indemnitor of its obligations under any guaranty or indemnity agreement
     executed in connection with the loan secured hereby and each such current
     guarantor and indemnitor executes, without any cost or expense to
     Mortgagee, such documents and agreements as Mortgagee shall reasonably
     require to evidence and effectuate the ratification of each such guaranty
     and indemnity agreement, provided that if the Buyer or a party associated
     with the Buyer approved by Mortgagee in its sole discretion assumes the
     obligations of the current guarantor or indemnitor under its guaranty or
     indemnity agreement and the Buyer or such party associated with the Buyer,
     as applicable, executes, without any cost or expense to Mortgagee, a new
     guaranty or indemnity agreement in form and substance satisfactory to
     Mortgagee, then Mortgagee shall released the current guarantor or
     indemnitor from all obligations arising under its guaranty or indemnity
     agreement after the closing of such Sale;

          (10) The Buyer shall furnish, if the Buyer is a corporation,
     partnership or other entity, all documents evidencing the Buyer's capacity
     and good standing, and the qualification of the signets to execute the
     assumption of the indebtedness secured hereby, which documents shall
     include; but not in any way be limited to, certified copies of all
     documents relating to the organization and formation of the Buyer and of
     the entities, if any, which are partners or members of the Buyer. The Buyer
     and such constituent partners, members or shareholders of Buyer (as the
     case may be), as Mortgagee may require, shall be single-purpose,
     single-asset "bankruptcy remote" entities, whose formation documents shall
     be approved by counsel to Mortgagee;

          (11) The Buyer, if required by Mortgagee, shall finish an opinion of
     counsel satisfactory to Mortgagee and its counsel (i) that the Buyer's
     formation documents provide for the matters described in subparagraph (10)
     of this Section 1,13(b), (ii) that the assumption of the indebtedness
     evidenced hereby has been duly authorized, executed and delivered, and that
     the Loan Documents are valid, binding and enforceable against the Buyer in
     accordance with their terms, (iii) that the Buyer and any entity which is a
     controlling stockholder, member or general partner of Buyer, have been duly
     organized, and are in existence and good standing, and (iv) with respect to
     such other matters, as Mortgagee may request;

          (12) If the Buyer is a single-member limited liability company, Buyer
     must be formed in the state of Delaware, and the Buyer's operating
     agreement must provide for the continued existence of the Buyer in the
     event of the bankruptcy or dissolution of the sole member. The Buyer, if
     required by Mortgagee, shall also furnish an opinion of counsel
     satisfactory to Mortgagee and its counsel that if the Buyer is a
     single-member limited liability company, that (i) the Buyer is a separate
     legal entity formed in the state of Delaware, (ii) that the separate
     existence of the Buyer shall continue until the cancellation of the
     certificate of organization, (iii) that


                                      -28-



     the Buyer's operating agreement provides for the continued existence of the
     Buyer in the event of the bankruptcy or dissolution of the sole member, and
     that such provisions would be enforceable notwithstanding the bankruptcy of
     the sole member, and (iv) that any judgment creditor of the sole member may
     not satisfy its claims against the sole member by asserting a claim against
     the Property or any other assets of the Buyer;

          (13) If required under the operative documents with respect to a
     Secondary Market Transaction (as hereinafter defined), Mortgagee shall have
     received evidence in writing from the Rating Agency to the effect that the
     proposed transfer will not result in a re-qualification, reduction,
     downgrade or withdrawal of any rating initially assigned or to be assigned
     in a Secondary Market Transaction (as hereinafter defined) or, if no such
     rating has been issued, in Mortgagee's good faith judgment, such transfer
     shall not have an, adverse effect on the level of rating obtainable in
     connection with the loan secured hereby; and

          (14) Mortgagor's obligations under the contract of sale pursuant to
     which such Sale, conveyance or transfer is proposed to occur tall expressly
     be subject to the satisfaction of the terms and conditions of this Section
     1.13(b).

     1.14. Payment of Utilities, Assessments. Charges, Etc. Mortgagor shall pay
when due all utility charges which axe incurred by Mortgagor or which may become
a charge or lien against any portion of the Property for gas, electricity, water
and sewer services furnished to the Real Estate and/or the Improvements and all
other assessments or charges of a similar nature, or assessments payable
pursuant to any restrictive covenants, whether public or private, affecting the
Real Estate and/or the Improvements or any portion thereof, whether or not such
assessments or charges are or may become liens thereon.

     1.15. Access Privileges and Inspections. Mortgagee and the agents,
representatives and employees of Mortgagee shall, subject to the rights of
tenants, have fall and free access to the Real Estate and the Improvements and
any other-location where books and records concerning the Property are kept at
all reasonable times and upon reasonable notice for the purposes of inspecting
the Property and of examining, copying and making extracts from the books and
records of Mortgagor relating to the Property. Mortgagor shall lend assistance
to all such agents, representatives and employees of Mortgagee.

     1.16. Waste; Alteration of the Property. Mortgagor shall not commit, suffer
or permit any waste on the Property nor take any actions that might invalidate
any insurance carried on the Property. Mortgagor shall maintain the Property in
good condition, and repair. No part of the Improvements may be removed,
demolished or materially altered, without the prior written consent of
Mortgagee. Without the prior written consent of Mortgagee, Mortgagor shall not
commence construction of any improvements on the Real Estate other than
improvements required for the maintenance or repair of the Property.

     1.17. Zoning; Use. Without the prior written consent of Mortgaged,
Mortgagor shall not seek, make, suffer, consent to or acquiesce in any change in
the zoning or conditions of use of the Real Estate or the Improvements.
Mortgagor shall comply with and make all payments required under the provisions
of any covenants, conditions or restrictions affecting the Real


                                      -29-



Estate or the Improvements. Mortgagor shall comply with all existing and future
requirements of all governmental authorities having jurisdiction over the
Property. Mortgagor shall keep all licenses, permits, franchises, certificates
of occupancy, consents, and other approvals necessary for the operation of the
Property in full force and effect. Mortgagor shall operate the Property as a
retail shopping center for so long as the indebtedness secured hereby is
outstanding. If, under applicable zoning provisions, the use of all or any part
of the Real Estate or the Improvements is or becomes a nonconforming use,
Mortgagor shall not cause or permit such use to be discontinued or abandoned
without the prior written consent of Mortgagee. Further, without Mortgagee's
prior written consent, Mortgagor shall not file or subject any part of the Real
Estate or the Improvements to any declaration of condominium or cooperative or
convert any part of the Real Estate or the Improvements to a condominium,
cooperative or other form of multiple ownership and governance.

     1.18. Financial Statements and Books and Records. Mortgagor shall keep
accurate books and records of account of the Property and its own financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with generally accepted accounting principles. Mortgagee and its
duly authorized representatives shall have the right to examine, copy and audit
Mortgagor's records and books of account at all reasonable times and upon
reasonable notice. So long as this Mortgage continues in effect, Mortgagor shall
provide to Mortgagee, in addition to any other financial statements required
hereunder or under any of the other Loan Documents, the following financial
statements and information, all of which must be certified to Mortgagee as being
true and correct by Mortgagor or the entity to which they pertain, as
applicable, be prepared in accordance with generally accepted accounting
principles consistently applied and be in form and substance acceptable to
Mortgagee:

     (a) copies of all tax returns filed by Mortgagor, within thirty (30) days
after the date of filing;

     (b) quarterly operating statements for the Property, within fifteen (15)
days after the end of each March, June, September and December;

     (c) current rent rolls for the Property, within fifteen (15) days after the
end of

     (d) annual balance sheets for the Property and annual financial statements
for Mortgagor, each principal or general partner in Mortgagor, and each
indenmitor and guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby within ninety (90) days after the end of each
calendar year; and

     (e) such other information with respect to the Property, Mortgagor, the
principals, members or general partners in Mortgagor, and each indenmitor and
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby, which may be reasonably requested from time to time by
Mortgagee, within a reasonable time after the applicable request.

If any of the aforementioned materials are not furnished to Mortgagee within the
applicable time periods, Mortgagor shall pay to Mortgagee a late fee of $250.00.
Further, if any of the


                                      -30-



aforementioned materials are not furnished to Mortgagee within the applicable
time periods set forth above and thereafter within an additional fifteen (15)
days after written request by Mortgagee, or if Mortgagee is dissatisfied with
the contents of any of the foregoing, in addition to any other rights and
remedies of Mortgagee contained herein, Mortgagee shall have the right, but not
the obligation, to obtain the same by means of an audit by an independent
certified public accountant selected by Mortgagee, in which event Mortgagor
agrees to pay, or to reimburse Mortgagee for, any expense of such audit and
further agrees to provide all necessary information to said accountant and to
otherwise cooperate in the making of such audit. Mortgagor agrees that any and
all materials furnished hereunder are the property of Mortgagee (and Mortgagee's
servicer) and may be released and made available to such parties as Mortgagee or
its servicer deems appropriate, including any Rating Agency responsible for
rating securities issued in any Secondary Market Transaction (as hereinafter
defined).

     1.19. Further Documentation. Mortgagor shall, on the request of Mortgagee
in its reasonable discretion and at the expense of Mortgagor, promptly correct
any defect, error or omission which may be discovered in the contents of this
Mortgage or in any of the other Loan Documents and promptly execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and the other Loan Documents or as I
ray be deemed advisable by Mortgagee to protect, continue or preserve the liens
and security interests hereunder including, without limitation, security
instruments, financing statements and continuation statements.

     1.20. (a) Payment of Costs. Mortgagor shall pay all reasonable costs and
expenses of every character incurred in connection with the closing of the Loan
or otherwise attributable or chargeable to Mortgagor as the owner of the
Property, including, without limitation, appraisal fees, recording fees,
documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform commercial
code/tax hen/litigation search fees, escrow fees and reasonable attorneys fees.

          (b) Advances to protect Property: Without limiting or waiving any
other rights and remedies of Mortgagee hereunder, if Mortgagee reasonably
determines that Mortgagor is not adequately performing or has failed to perform
any of its obligations,. covenants or agreements contained in this Mortgage or
in any of the other Loan Documents and such inadequacy or failure is riot cured
within any applicable grace or cure period, or if any action or proceeding of
any kind (including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is commenced
which might affect Mortgagee's interest in the Property or Mortgagee's right to
enforce its security, then Mortgagee may, at its option, with or without notice
to Mortgagor, make any appearances, disburse or advance any sums and take any
actions as may be necessary or desirable to protect or enforce the security of
this Mortgage or to remedy the failure of Mortgagor to perform its covenants and
agreements (without, however, waiving any default of Mortgagor). Mortgagor
agrees to pay on demand all expenses of Mortgagee reasonably incurred with
respect to the foregoing (including, but not limited to, fees and disbursements
of counsel), together with interest thereon at the Default Interest Rate (as
defined in the Note) from and after the date on which Mortgagee incurs such
expenses until reimbursement thereof by Mortgagor. Any such expenses so incurred
by Mortgagee, together with interest thereon as provided above, shall be
additional indebtedness of


                                      -31-



Mortgagor secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note. The
necessity for any such actions and of the amounts to be paid shall be determined
by Mortgagee in its sole and absolute discretion. Mortgagee is hereby empowered
to enter and to authorize others to enter upon the Property or any part thereof
for the purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Mortgagor or any person in
possession holding under Mortgagor. Mortgagor hereby acknowledges and agrees
that the remedies set forth in this Section 1.20(b) shall be exercisable by
Mortgagee, and any and all payments made or costs or expenses incurred by
Mortgagee in connection therewith shall be secured hereby and shall be, without
demand, immediately repaid by Mortgagor with interest thereon at the Default
Interest Rate (as defined in the Note), notwithstanding the fact that such
remedies were exercised and such payments made and costs incurred by Mortgagee
after the filing by Mortgagor of a voluntary case or the filing against
Mortgagor of an involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended (the "Act"), Title 11 U.S.C., or after
any similar action pursuant to any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable to Mortgagor, Mortgagee,
any guarantor or indemnitor, the secured indebtedness or any of the Loan
Documents, This indemnity shall survive payment in full of the indebtedness
secured hereby. This Section 1.20(b) shall not be construed to require Mortgagee
to incur any expenses, make any appearances or take any actions.

     1.21. Security Interest. This Mortgage is also intended to encumber and
create a security interest in, and Mortgagor hereby grants to Mortgagee a
security interest in, all Reserves (as hereinabove defined), fixtures, chattels,
accounts, equipment, inventory, contract rights, general intangibles and other
personal property included within the Property, all renewals, replacements of
any of the aforementioned items, or articles in substitution therefor or in
addition thereto or the proceeds thereof (said property is hereinafter referred
to collectively as the "Collateral"), whether or not the same shall be attached
to the Real Estate or the Improvements in any manner. It is hereby agreed that
to the extent permitted by law, all of the foregoing property is to be deemed
and held to be a part of and affixed to the Real Estate and the Improvements.
The foregoing security interest shall also cover Mortgagor's leasehold interest
in any of the foregoing property which is leased by Mortgagor. Notwithstanding
the foregoing, all of the foregoing property shall be owned by Mortgagor and no
leasing or installment sales or other financing or title retention agreement in
connection therewith shall be permitted without the prior written approval of
Mortgagee. Mortgagor shall promptly replace all of the Collateral subject to the
lien or security interest of this Mortgage when worn out or obsolete with
Collateral comparable to the worn out or obsolete Collateral when new and will
not, without the prior written consent of Mortgagee, remove from the Real Estate
or the Improvements any of the Collateral subject to the lien or security
interest of this Mortgage except such as is replaced by an article of equal
suitability and value as above provided, owned by Mortgagor free and clear of
any lien or security interest except that created by this Mortgage and the other
Loan Documents and except as otherwise expressly permitted by the terms of
Section 1.13 of this Mortgage. All of the Collateral shall be kept at the
location of the Real Estate except as otherwise required by the terms of the
Loan Documents. Mortgagor shall not use any of the Collateral in violation of
any applicable statute, ordinance or insurance policy.


                                      -32-



     1.22. Security Agreement. This Mortgage constitutes a mortgage and a
"security agreement" between Mortgagor and Mortgagee with respect to the
Collateral in which Mortgagee is granted a security interest hereunder, and,
cumulative of all other rights and remedies of Mortgagee hereunder, Mortgagee
shall have all of the rights and remedies of a secured party tinder any
applicable Uniform Commercial Code. Mortgagor hereby agrees to execute and
deliver on demand and hereby irrevocably constitutes and appoints Mortgagee the
attorney-in fact of Mortgagor to execute and deliver and, if appropriate, to
file with the appropriate filing officer or office such security agreements,
financing statements, continuation statements or other instruments as Mortgagee
may request or require in order to impose, perfect or continue the perfection of
the lien or security interest created hereby. Expenses of retaking, holding,
preparing for sale, selling or the like (including, without limitation,
Mortgagee's reasonable attorneys' fees and legal expenses), together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be paid by Mortgagor on demand
and shall be secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note. If notice is
required by law, Mortgagee shall give Mortgagor at least ten (10) days prior
written notice of the time and place of any public sale of such property or of
the time of or after which any private sale or any other intended disposition
thereof is to be made, and if such notice is sent to Mortgagor, as the same is
provided for the mailing of notices herein, it is hereby deemed that such notice
shall be and is reasonable notice to Mortgagor. No such notice is necessary for
any such property which is perishable, threatens to decline speedily in value or
is of a type customarily sold on a recognized market. Any sale made pursuant to
the provisions of this Section 1.22 shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held contemporaneously with the
foreclosure sale as provided in Section 3.1(e) hereof upon giving the same
notice with respect to the sale of the property hereunder as is required under
said Section 3.1(e). Furthermore, to the extent permitted by law, in conjunction
with, in addition to or in substitution for the rights and remedies available to
Mortgagee pursuant to any applicable Uniform Commercial Code:

          (a) hi the event of a foreclosure sale, the Property may, at the
option of Mortgagee, be sold as a whole; and

               It shall not be necessary that Mortgagee take possession of the
aforementioned Collateral, or any part thereof, prior to the time that any safe
pursuant to the provisions of this Section 1.22 is conducted and it shall not be
necessary that said Collateral, or any part thereof, be present at the location
of such sale; and

          (c) Mortgagee may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Mortgagee,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Mortgagee.

     Mortgagor will not change the principal place of business or chief
executive office set forth below, or change the state of its organization or
registration, or change its name, without in each instance the prior written
consent of Mortgagee, which consent shall not be unreasonably withheld, delayed
or conditioned. Mortgagee's consent will, however, be conditioned upon, among
other things, the execution and delivery(,) of additional- financing statements,
security agreements and other instruments which may be necessary to effectively
evidence or perfect


                                      -33-



Mortgagee's security interest in the Collateral as a result of such changes. The
name, principal pla of business and chief executive office of Mortgagor (as
Debtor under any applicable Uniform Commercial Code), as of the date hereof,
are:

               Thor Chestnut Hill, L.P.
               c/o Thor Equities, LLC
               139 Fifth Avenue
               New York, New York 10010
               Attn: Joseph J. Sitt and Kurt Reich

               Thor Chestnut Hill H, L.P.
               c/o Thor Equities, LLC
               139 Fifth Avenue
               New York, New York 10010
               Attn: Joseph J. Sitt and Kurt Reich,

The name and address of Mortgagee (as Secured Party under any applicable Uniform
Commercial Code), as of the date hereof, are:

               Column Financial, Inc.
               Eleven Madison Avenue
               9th Floor
               New York, New York 10010-3629
               Attn: Edmund Taylor.

     1.23. Easements and Rights-of-Way. Mortgagor shall not grant any easement
or right of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Mortgagee, which shall not be
unreasonably withheld. The purchaser at any foreclosure sale hereunder may, at
its discretion, disaffirm any easement or right-of-way granted in violation of
any of the provisions of this Mortgage and may take immediate possession of the
Property free from, and despite the terms of, such grant of easement or right-of
way. If Mortgagee consents to the grant of an easement or right-of-way,
Mortgagee agrees to grant such consent without charge to Mortgagor other than
reasonable expenses, including, without limitation, reasonable attorneys' fees,
incurred by Mortgagee in the review of Mortgagor's request and, if applicable,
in the preparation of documents relating to the subordination of this Mortgage
to such easement or right-of-way.

     1.24. Compliance with Laws. (a) Mortgagor shall at all times comply with
all statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter relating
to the ownership, construction, use or operation of the Property, including, but
not limited to, those concerning employment and compensation of persons engaged
in operation and maintenance bf the Property and any environmental or ecological
requirements, even if such compliance shall require structural changes to the
Property; provided, however, that Mortgagor may, upon providing Mortgagee with
security satisfactory to Mortgagee, proceed diligently. and in good faith to
contest the validity or applicability of any


                                      -34-



such statute, ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge, fine or other
liability and shall not be in danger of being forfeited, lost or closed.
Mortgagor shall not use or occupy, or allow the use or occupancy of, the
Property in any manner which violates any lease of or any other agreement
applicable to the Property or any applicable law, rule, regulation or order or
which constitutes a public or private nuisance or which makes void, voidable or
cancelable, or increases the premium of, any insurance then in force with
respect thereto.

          (b) Mortgagor agrees that the Property shall at all times comply to
the extent applicable with the requirements of the Americans with Disabilities
Act of 1990, the Fair Housing Amendments Act of 1988 and all other state and
local laws and ordinances related to handicapped access and all rules,
regulations,, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities ("Access Laws"). Mortgagor agrees to give prompt notice to Mortgagee
of the receipt by Mortgagor of any complaints related to violations of any
Access Laws and of the commencement of any proceedings or investigations which
relate to compliance with applicable Access Laws.

     1.25. Additional Taxes. In the event of the enactment after this date of
any law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Mortgagee the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Mortgagor, or changing in any way the laws relating to
the taxation of mortgages or security agreements or debts secured by mortgages
or security agreements or the interest of the mortgagee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
adversely affect this Mortgage or the indebtedness secured hereby or Mortgagee,
then, and in any such event, Mortgagor, upon demand by Mortgagee, shall pay such
taxes, assessments, charges or liens, or reimburse Mortgagee therefor; provided,
however, that if in the opinion of counsel for Mortgagee (a) it might be
unlawful to require Mortgagor to make such payment, or (b) the making of such
payment might result in the imposition of interest beyond the maximum amount
permitted by law, then and in either such event, Mortgagee may elect, by notice
in writing given to Mortgagor, to declare all of the indebtedness secured
hereby to be and become due and payable in full, thirty (30) days from the
giving of such notice.

     1.26. Mortgagor's Waivers. To the full extent permitted by law, Mortgagor
agrees that Mortgagor shall not at any time insist upon, plead, claim or take
the benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold. To the full extent permitted by law,
Mortgagor shall not have or assert any right under any statute or rule of law
pertaining to the exemption of homestead or other exemption under any federal,
state or local law now or hereafter in effect, the administration of estates of
decedents or, any other matters whatsoever to defeat, reduce or affect the right
of Mortgagee under the terms of this Mortgage to a sale of the Property, for the
collection of the secured indebtedness without


                                      -35-



any nor or different resort for collection, or the right of Mortgagee under the
terms of this M gage to the payment of the indebtedness secured hereby out of
the proceeds of sale of the Property in preference to every other claimant
whatever. Mortgagor, for Mortgagor and Mortgagor's successors and assigns, and
for any and all persons ever claiming any interest in the Property, to the full
extent permitted by law, hereby knowingly, intentionally and voluntarily with
and upon the advice of competent counsel waives, releases, relinquishes and
forever forgoes: (a) all rights of valuation, appraisement, stay of execution,
reinstatement and notice of election or intention to mature or declare due the
secured indebtedness (except such notices as are specifically provided for
herein); (b) all right to a marshaling of the assets of Mortgagor, including the
Property, to a sale in the inverse order of alienation, or to direct the order
in which any of the Property shall be sold in the event of foreclosure of the
liens and security interests hereby created and agrees that any court having
jurisdiction to foreclose such hens and security interests may order the
Property sold as an entirety; (c) all rights and periods of redemption provided
under applicable law; and (d) all present and future statutes of limitations as
a defense to any action to enforce the provisions of this Mortgage or to collect
any of the indebtedness secured hereby to the fullest extent permitted by law
and agrees that it shall not solicit or aid the solicitation of the filing of
any Petition (as hereinafter defined) against Mortgagor, whether acting on its
own behalf or on behalf of any other party. Without limiting the generality of
the foregoing, Mortgagor shall not (i) provide information regarding the
identity of creditors or the nature of creditors claims to any third party
unless compelled to do so by order of a court of competent jurisdiction or by
regulation promulgated by a governmental agency; or (ii) pay the legal fees or
expenses of any creditor of or interest holder in Mortgagor with respect to any
matter whatsoever.

     1.27. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

          (a) MORTGAGOR, TO 'I HJ,' FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (z) SUBMTTS TO PERSONAL JURISDICTION IN THE COMMONWEALTH OF
PENNSYLVANIA OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THE NOTE, THIS MORTGAGE OR ANY OTHER OF THE LOAN DOCUMENTS, (I3)
AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING. MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN PHILADELPHIA COUNTY,
PENNSYLVANIA, (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (IV) AGREES
THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT
NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM). MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW,
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER I.FGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S.
MAIL, POSTAGE PREPAID, TO MORTGAGOR AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 4.4 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE


                                       -36-



VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERATTED BY
LAW).

          (b) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON TJTE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE
INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF MORTGAGEE OR
MORTGAGOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MANAGERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH MORTGAGEE
OR MORTGAGOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE.

     1.28. Contractual Statute of Limitations. Mortgagor hereby agrees that any
claim or cause of action by Mortgagor against Mortgagee, or any of Mortgagee's
directors, officers, employees, agents, accountants or attorneys, based upon,
arising from or relating to the indebtedness secured hereby, or any other
matter, cause or thing whatsoever, whether or not relating thereto, occurred,
done, omitted or suffered to be done by Mortgagee or by Mortgagee's directors,
officers, employees, agents, accountants or attorneys, whether sounding in
contract or in tort or otherwise, shall be barred unless asserted by Mortgagor
by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one (1) year after Mortgagor
first acquires or reasonably should have acquired knowledge of the first act,
occurrence or omission upon- which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an officer of
Mortgagee or any other person authorized to accept service of process on behalf
of Mortgagee, within thirty (30) days thereafter. Mortgagor. agrees that such
one (1) year period of time is reasonable and sufficient time for a borrower to
investigate and act upon any such claim or cause of action. The one (1) year
period provided herein shall not be waived, tolled or extended except by the
specific written agreement of Mortgagee. This provision shall survive any
termination of this Mortgage or any of the other Loan Documents.

     1.29. Management. The management of the Property shall be by either: (a)
Mortgagor or an entity affiliated with Mortgagor approved by Mortgagee for so
long as Mortgagor or said affiliated entity is managing the Property in a first
class manner; or (b) a professional property management company approved by
Mortgagee. Such management by an affiliated entity or a professional property
management. company shall be pursuant to a written agreement approved by
Mortgagee. Thor Equities LLC has been approved by Mortgagee as an acceptable
property manager and the Asset Management Agreement dated on or about the date
hereof between Thor Equities, LLC has been approved by Mortgagee. In no event
shall any manager be removed or replaced or the terms of any management
agreement modified or amended without the prior written consent of Mortgagee. In
the event of default hereunder or under any management contract then in effect,
which default is not cured within any applicable grace or cure period, Mortgagee
shall have the right to terminate, or to direct Mortgagor to terminate, such
management contract upon thirty (30) days' notice and to retain, or to direct
Mortgagor to retain, a new management agent approved by Mortgagee. All Rents and
Profits generated by or derived


                                      -37-



From the Property shall first be utilized solely for current expenses directly
attributable to the own hip and operation of the Property, including, without
limitation, current expenses relating to Mortgagor's liabilities and obligations
with respect to this Mortgage and the other Loan Documents, and none of the
Rents and Profits generated by or derived from the Property shall be diverted by
Mortgagor and utilized for any other purposes unless all such current expenses
attributable to the ownership and operation of the Property have been fully paid
and satisfied.

     1.30. Hazardous Materials and Environmental Concerns.

          (a) Mortgagor hereby represents and warrants to Mortgagee, after due
inquiry and investigation, that, as of the date hereof, except as disclosed iii
that certain Phase I Environmental Site Assessment prepared by ConTech Services,
Inc. dated April 24, 2003 and that certain review of same prepared by Certified
Environments, Inc. and dated May 1, 2003 (the foregoing are, collectively, the
"Environmental Report"): (1) the Property is in full compliance with, and to the
best of Mortgagor's knowledge, information and belief, the Property has been in
full compliance with all local, state or federal laws, rules and regulations
pertaining to environmental regulation, contamination, remediation or human
health or safety (including the regulation or remediation of Hazardous
Substances as defined below) (collectively, "Environmental Laws"), all as
amended; (ii) no hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, radon, lead-based paint,
flammable explosives, radioactive materials, infectious substances or raw
materials which may include hazardous constituents) or any other substances or
materials which are included under or regulated by Environmental Laws
(collectively, "Hazardous Substances") are located on or have been handled,
manufactured, generated, stored, processed, transported to or from, or disposed
of on or Released or discharged from the Property (including soil and
groundwater beneath the Property) except for those substances used by Mortgagor
in the ordinary course of its business and in compliance with all Environmental
Laws; (iii) the Property is not subject to any private or governmental lien or
judicial, administrative or other notice or action relating to Hazardous
Substances or noncompliance with Environmental Laws, nor is Mortgagor aware of
any basis for such lien,(,) notice or action; (iv) there are no underground
storage tanks or other underground storage receptacles (whether active or
abandoned) used to store Hazardous Substances on the Property; (v) Mortgagor has
received no notice of, and to the best of Mortgagor's knowledge and belief,
there does not exist any investigation, action, proceeding or claim by any
agency, authority or unit of government or by any third party which could
result in any liability, penalty, sanction or judgment under any Environmental
Laws with respect to any condition, use or operation of the Property, nor does
Mortgagor know of any basis for such investigation, action, proceeding or claim;
(vi) Mortgagor has received no notice that, and to the best of Mortgagor's
knowledge and belief, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance, trespass or any
other liability or adverse condition on any other property, nor does Mortgagor
know of any basis for such notice or claim; and (vii) there are no present
environmental conditions or events or, to the best of Mortgagor's knowledge,
past environmental conditions or events on or near the Property that could be
reasonably anticipated to materially adversely affect the value of the Property.

          (b) Mortgagor shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances used by Mortgagor in the ordinary
course of its business and


                                      -38-



in compliance with all Environmental Laws) and in fall compliance with all
Environmental Laws, shall not install or use any underground storage tanks,
shall expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all tenants (except those
substances used by tenants in the ordinary course of their activities and in
compliance with all Environmental Laws), invitees and trespassers, and, without
limiting the generality of the foregoing, during the term of this Mortgage,
shall not install in the Improvements or permit to be installed in the
Improvements asbestos or any substance containing asbestos. If required by
Mortgagee or under any Environmental Law, Mortgagor shall maintain an Operations
and Maintenance Program ("O&M Program") for the management of asbestos,
lead-based paint, radon or any other Hazardous Substances at the Property.

          (c) Mortgagor shall promptly notify Mortgagee if Mortgagor shall
become aware of (i) any Release or threatened. Release of Hazardous Substances
at, on, under, from, or affecting or threatening to affect the Property (except
those substances used by Mortgagor or tenants in the ordinary course of their
business or activities, respectively, and in compliance with all Environmental
Laws), (ii) any lien or filing of lien, action or notice affecting or
threatening to affect the Property or Mortgagor resulting from any violation or
alleged violation of Environmental Law, (iii) any investigation, inquiry or
proceeding concerning Mortgagor or the Property pursuant to any Environmental
Law; or otherwise relating to Hazardous Substances, or (iv) any occurrence,
condition or state of facts which would render any representation or warranty in
this Section incorrect in any respect if made at the time of such discovery.
Further, immediately upon receipt of the same, Mortgagor shall deliver to
Mortgagee copies of any and all orders, notices, permits, applications, reports,
and other communications, documents and instruments pertaining to the actual,
alleged or potential non-compliance with any Environmental Laws in connection
with the Property or presence or existence of any Hazardous Substances at, on,
about, under, within, near or in connection with the Property (except those
substances used in the ordinary course of its business and in compliance with
all Environmental Laws). Mortgagor shall, promptly and when and as required, at
Mortgagor's sole cost and expense, take all actions as shall be necessary or
advisable for compliance with the terms of this Section 1.30 or for the
remediation of any and all portions of the Property or other affected property,
including, without limitation, all investigative, monitoring, removal,
containment, remedial and response actions in accordance with all applicable
Environmental Laws (and in all events in a manner satisfactory to Mortgagee),
and shall further pay or cause to be paid, at no expense to Mortgagee, all
remediation, response, administrative and enforcement costs of applicable
governmental agencies which may be asserted against the Property. In the event
Mortgagor fails to do so (i) Mortgagee may, but shall not be obligated to,
undertake rem ediation at the Property or other affected property necessary to
bring the Property into conformance with the terms of Environmental Laws, and
(ii) Mortgagor hereby grants to Mortgagee and its agents and employees access to
the Property and a license to do all things Mortgagee shall deem necessary to
bring the Property into conformance with Environmental Laws. Any and all costs
and expenses reasonably incurred by Mortgagee in connection therewith, together
with interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note. MORTGAGOR COVENANTS AND AGREES, AT MORTGAGOR'S SOLE COST AND EXPENSE,
TO INDEMNIFY, DEFEND (AT TRIAL AND APPELLATE LEVELS, AND WITH ATTORNEYS,
CONSULTANTS AND


                                      -39-



EXPERTS ACCEPTABLE TO MORTGAGEE), AND HOLD MORTGAGEE HARMLESS FROM AND AGAINST
ANY AND ALL LIENS, DAMAGES, LOSSES, LIABILITIES, OBLIGATIONS, SETTLEMENT
PAYMENTS, PENALTIES, ASSESSMENTS, CITATIONS, DIRECTIVES, CLAIMS, LITIGATION,
DEMANDS, DEFENSES, JUDGMENTS, SUITS, PROCEEDINGS, COSTS, DISBURSEMENTS AND
EXPENSES OF ANY KIND OR OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS', CONSULTANTS' AND EXPERTS' FEES AND DISBURSEMENTS ACTUALLY
INCURRED IN INVESTIGATING, DEFENDING, SETTLING OR PROSECUTING ANY CLAIM,
LITIGATION OR PROCEEDING) WHICH MAY AT ANY TIME BE IMPOSED UPON, INCURRED BY OR
ASSERTED OR AWARDED AGAINST MORTGAGEE OR THE PROPERTY, AND ARISING DIRECTLY OR
INDIRECTLY FROM OR OUT OF: (i) THE PRESENCE, RELEASE OR THREAT OF RELEASE OF ANY
HAZARDOUS SUBSTANCES ON, IN, UNDER, AFFECTING OR THREATENING TO AFFECT ALL OR
ANY PORTION OF THE PROPERTY OR ANY SURROUNDING AREAS, REGARDLESS OF WHETHER OR
NOT CAUSED BY OR WITHIN THE CONTROL OF MORTGAGOR; (ii) THE VIOLATION OF ANY
ENVIRONMENTAL LAWS RELATING TO, AFFECTING OR THREATENING TO AFFECT THE PROPERTY,
WHETHER OR NOT CAUSED BY OR WITHIN THE CONTROL OF MORTGAGOR; (iii) THE FAILURE
BY MORTGAGOR TO COMPLY FULLY WITH THE TERMS AND CONDITIONS OF THIS SECTION 1_30;
(iv) THE BREACH OF ANY REPRESENTATION OR WARRANTY CONTAINED IN THIS SECTION
1.30; OR (v) THE ENFORCEMENT OF THIS, SECTION 1.30, INCLUDING, WITHOUT
LIMITATION, THE COST OF ASSESSMENT, CONTAINMENT AND/OR REMOVAL OF ANY AND ALL
HAZARDOUS SUBSTANCES ON AND/OR FROM ALL OR ANY PORTION OF THE PROPERTY OR ANY
SURROUNDING AREAS, THE COST OF ANY ACTIONS TAKEN IN RESPONSE TO THE PRESENCE,
RELEASE OR THREAT OF RELEASE OF ANY HAZARDOUS SUBSTANCES ON, IN, UNDER OR
AFFECTING ANY PORTION OF THE PROPERTY OR ANY SURROUNDING AREAS -TO PREVENT OR
MINIMIZE SUCH RELEASE OR THREAT OF RELEASE SO THAT IT DOES NOT MIGRATE OR
OTHERWISE CAUSE OR THREATEN DANGER TO PRESENT OR FUTURE PUBLIC HEALTH, SAFETY,
WELFARE OR THE ENVIRONMENT, AND COSTS INCURRED TO COMPLY WITH THE ENVIRONMENTAL
LAWS IN CONNECTION WITH ALL OR ANY PORTION OF THE PROPERTY OR ANY SURROUNDING
AREAS. THE INDEMNITY SET FORTH-INN THIS SECTION 1.30(c) SHALL ALSO INCLUDE ANY
DIMINUTION IN THE VALUE OF THE SECURITY AFFORDED BY THE PROPERTY OR ANY FUTURE
REDUCTION IN THE SALES PRICE OF THE PROPERTY BY REASON OF ANY MATTER SET FORTH
IN THIS SECTION 1.30(c), AND ANY AND ALL LIENS, DAMAGES, LOSSES, LIABILITIES,
OBLIGATIONS, SETTLEMENT PAYMENTS, PENALTIES, ASSESSMENTS, CITATIONS, DIRECTIVES,
CLAIMS, LITIGATION, DEMANDS, DEFENSES, JUDGMENTS, SUITS, PROCEEDINGS, COSTS,
DISBURSEMENTS OR EXPENSES OF ANY KIND OR OF ANY NATURE WHATSOEVER ARISING OUT OF
OR RELATING TO INJURY OR DEATH DUE TO EXPOSURE FROM HAZARDOUS SUBSTANCES THAT
MAY BE PRESENT OR RELEASED AT, ON, UNDER OR FROM THE PROPERTY. MORTGAGEE'S
RIGHTS UNDER THIS SECTION SHALL SURVIVE PAYMENT IN FULL OF THE INDEBTEDNESS
SECURED HEREBY AND SHALL BE IN ADDITION TO ALL OTHER RIGHTS OF


                                      -40-



MORTGAGEE UNDER THIS MORTGAGE, THE NOTE AND THE OTHER LOAN DOC ENTS.

          (d) Upon Mortgagee's request, at any time after the occurrence of a
default hereunder or at such other time as Mortgagee has reasonable grounds to
believe that Hazardous Substances are or have been handled, generated, stored,
processed, transported to or from, or released or discharged from or disposed of
on or around the Property (other than in the normal course of Mortgagor's or the
tenants' business or activities, respectively, and in compliance with all
Environmental Laws and other than items disclosed in the Environmental Report)
or that Mortgagor, any tenant or the Property may be in violation of
Environmental Laws, Mortgagor shall provide, at Mortgagor's sole cost and
expense, an environmental site assessment or environmental compliance audit of
the Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Mortgagee to determine whether there has been
a Release or threatened Release of Hazardous Substances at, on, under or from
the Property onto adjoining properties, and if the Property is in full
compliance with Environmental Laws (including asbestos-containing material or
lead-based paint). If Mortgagor fails to provide such assessment or audit within
thirty (30) days after such request, Mortgagee may order the same, and Mortgagor
hereby grants to Mortgagee and its employees and agents access to the Property
and a license to undertake such assessment or audit. The cost of such assessment
or audit, together with interest thereon at the Default Interest Rate (as
defined in the Note) from the date incurred by Mortgagee until actually paid by
Mortgagor, shall be immediately paid by Mortgagor on demand and shall be secured
by this Mortgage and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the. Note.

          (e) Without limiting the foregoing, Mortgagee and its authorized
representatives may, during normal business hours and at its own expense,
inspect the Property and Mortgagor's records related thereto for the purpose of
determining compliance with Environmental Laws and the terms and conditions of
this Section 1.30.

          (f) As used herein, the term "Release" shall include, without
limitation, any intentional or unintentional placing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, discarding or abandoning of any Hazardous
Substance.

          (g) Prior to any demolition or renovation being performed at the
Property, Mortgagor shall cause a comprehensive survey of asbestos-containing
materials to be conducted by a reputable environmental consultant and shall
follow and observe all recommendations of such consultant with respect to the
handling of such materials.

          (h) Mortgagor shall not make and shall not permit any modifications to
be made to that certain Agreement dated April. 29, 1992 made by and between
Mobil Oil corporation ("Mobil") and The Shops Partnership, Ltd. (the "Mobil
Indemnity") without Mortgagee's prior written consent, which consent Mortgagee
shall not unreasonably withhold.

          (i) Mortgagor shall not sign the "Release" (as such term is defined in
the Mobil Indemnity) without Mortgagee's prior written consent, which consent
Mortgagee shall not unreasonably withhold.


                                      -41-



          (j) Mortgagor covenants and agrees that it shall use commercially
reasonable efforts to cause Mobil to timely submit to the Pennsylvania
Department of Environmental Protection (the PADEP,") a Remedial Action
Completion Report (and any amendments thereto requested by the PAEDP) and obtain
the approval by the PADEP of such Remedial Action Completion Report within
ninety (90) days after the date hereof (but, as long as Mortgagor is using
commercially reasonable efforts to cause Mobil to take such actions, the failure
to obtain such final approval by the PADEP shall not constitute an Event of
Default hereunder). Mortgagor shall use commercially reasonable efforts to
obtain and provide to Mortgagee a copy of the final Remedial Action Completion
Report and a copy of the final approval by the PADEP of same.

     1.31. INDEMNIFICATION; SUBROGATION.

          (a) MORTGAGOR SHALL INDEMNIFY, DEFEND AND HOLD MORTGAGEE HARMLESS
AGAINST: (i) ANY AND ALL CLAIMS FOR BROKERAGE, LEASING, FINDER'S OR SIMILAR FEES
WHICH MAY BE MADE RELATING TO THE PROPERTY OR THE SECURED INDEBTEDNESS, (ii) ANY
AND ALL LIABILITY, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
SUITS, LIENS, CHARGES, ENCUMBRANCES, COSTS AND EXPENSES (INCLUDING MORTGAGEE'S
ATTORNEYS' FEES, TOGETHER WITH APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER KIND
OR NATURE WHICH MAY BE ASSERTED AGAINST, IMPOSED ON OR INCURRED BY MORTGAGEE
UNDER ANY LEASE OR OCCUPANCY AGREEMENT, FOR ANY LOSS ARISING FROM A FAILURE OR
INABILITY TO COLLECT RENTS AND PROFITS OR IN CONNECTION WITH THE SECURED
INDEBTEDNESS, THIS MORTGAGE, THE PROPERTY, OR ANY PART THEREOF, OR THE EXERCISE
BY MORTGAGEE OF ANY RIGHTS OR REMEDIES GRANTED TO IT UNDER THIS MORTGAGE, AND
ANY DEFAULT UNDER THIS MORTGAGE, (iii) ANY LIENS (WHETHER JUDGMENTS, MECHANICS',
MATERIALMEN'S OR OTHERWISE), CHARGES AND ENCUMBRANCES FILED AGAINST THE
PROPERTY, AND (iv) ANY CLAIMS AND DEMANDS FOR DAMAGES OR INJURY, INCLUDING
CLAIMS FOR PROPERTY DAMAGE, PERSONAL INJURY OR WRONGFUL DEATH, ARISING OUT OF OR
IN CONNECTION WITH ANY ACCIDENT OR FIRE OR OTHER CASUALTY ON THE REAL ESTATE OR
THE IMPROVEMENTS OR ANY NUISANCE OR TRESPASS MADE OR SUFFERED THEREON,
INCLUDING, IN ANY CASE, ATTORNEY'S FEES, COSTS AND EXPENSES AS AFORESAID,
WHETHER AT PRETRIAL, TRIAL OR APPELLATE LEVEL FOR ANY CIVIL, CRIMINAL OR
ADMINISTRATIVE PROCEEDINGS. SHOULD MORTGAGEE INCUR ANY LIABILITY UNDER THIS
MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS, THE AMOUNT THEREOF, INCLUDING,
WITHOUT LIMITATION, COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, TOGETHER
WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE FROM THE DATE INCURRED BY
MORTGAGEE UNTIL ACTUALLY PAID BY MORTGAGOR, SHALL BE IMMEDIATELY DUE AND PAYABLE
TO MORTGAGEE BY MORTGAGOR ON DEMAND AND SHALL BE SECURED HEREBY AND BY ALL OF
THE OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED
BY THE NOTE. HOWEVER, NOTHING HEREIN SHALL BE CONSTRUED TO OBLIGATE MORTGAGOR TO
INDEMNIFY, DEFEND AND HOLD HARMLESS MORTGAGEE FROM AND - AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS.


                                      -42-



LOSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS, COSTS AND EXPENSES ENACTED
AGAINST, IMPOSED ON OR INCURRED BY MORTGAGEE BY REASON OF MORTGAGEE'S WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE. THIS INDEMNITY SHALL SURVIVE PAYMENT IN FULL OF
THE INDEBTEDNESS SECURED HEREBY.

          (b) MORTGAGEE MAY ENGAGE THE SERVICES OF ATTORNEYS IF IT IS MADE A
PARTY DEFENDANT TO ANY LITIGATION (OR THREATENED ACTION OR CLAIM) OR TO ENFORCE
THE TERMS OF THIS MORTGAGE OR TO PROTECT ITS RIGHTS HEREUNDER, AND IN THE EVENT
OF ANY SUCH ENGAGEMENT, MORTGAGOR SHALL PAY MORTGAGEE'S ATTORNEYS' FEES
(TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES, IF ANY), CONSULTANTS' FEES,
EXPERTS' FEES, AND EXPENSES REASONABLY. INCURRED BY MORTGAGEE, WHETHER OR NOT
SUCH ACTION IS ACTUALLY COMMENCED AGAINST MORTGAGOR. ALL REFERENCES TO
"ATTORNEYS" IN THIS SUBSECTION AND ELSEWHERE IN THIS MORTGAGE SHALL INCLUDE
WITHOUT LIMITATION ANY ATTORNEY OR LAW FIRM ENGAGED BY MORTGAGEE AND MORTGAGEE'S
INHOUSE COUNSEL, AND ALL REFERENCES TO "FEES AND EXPENSES" IN THIS SUBSECTION
AND ELSEWHERE IN THIS MORTGAGE SHALL INCLUDE WITHOUT LIMITATION ANY FEES OF SUCH
ATTORNEY OR LAW FIRM AND ANY ALLOCATION CHARGES AND ALLOCATION COSTS OF
MORTGAGEE'S IN-HOUSE COUNSEL.

          (c) A WAIVER OF SUBROGATION SHALL BE OBTAINED BY MORTGAGOR FROM ITS
INSURANCE CARRIER AND, CONSEQUENTLY, MORTGAGOR WAIVES ANY AND ALL RIGHT TO CLAIM
OR RECOVER AGAINST MORTGAGEE, ITS OFFICERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES, FOR LOSS OF OR DAMAGE TO MORTGAGOR, THE PROPERTY, MORTGAGOR'S
PROPERTY OR THE PROPERTY OF OTHERS UNDER MORTGAGOR'S CONTROL FROM ANY CAUSE
INSURED AGAINST OR REQUIRED TO BE INSURED AGAINST BY THE PROVISIONS OF THIS
MORTGAGE.

     1.32. Covenants with Respect to Indebtedness; Operations and Fundamental
Changes of Mortgagor. Mortgagor represents, warrants and covenants as of the
date hereof and until such time as the indebtedness secured hereby is paid in
full, that Mortgagor:

          (a) does not own and will not own any encumbered asset other than (1)
the Property, and (ii) incidental personal property necessary for the operation
of the Property;

          (b) is not engaged and will not engage in any business other than the
ownership, management and operation of the Property;

          (c) will not enter into any contract or agreement with any general
partner, principal, member, manager or affiliate of Mortgagor or any affiliate
of any such general partner, principal, manager or member of Mortgagor, except
upon terms and conditions that are intrinsically fair and substantially similar
to those that would be available on an arms-length basis with third parties
other than an affiliate;


                                      -43-



          (d) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the secured indebtedness, and (ii) unsecured trade and operational debt
incurred in the ordinary course of business not outstanding for more than sixty
(60) days with trade creditors and in amounts as are normal and reasonable under
the circumstances, but, in no event, to exceed $315,000.00 in the aggregate; no
debt whatsoever may be secured (senior, subordinate or pari passu) by the
Property, except the Indebtedness;

          (e) has not made and will not make any loans or advances to any third
party (including any general partner, principal, member, manager or affiliate of
Mortgagor, or any guarantor);

          (f) is and will be solvent and pay its debts from its assets as the
same shall become due;

          (g) has done or caused to be done and will do all things necessary to
preserve its existence and corporate, limited liability company and partnership
formalities (as applicable), and will not, nor will any partner, limited or
general, or member or shareholder thereof, amend, modify or otherwise change its
partnership certificate, partnership agreement, certificate or articles of
incorporation or organization, or by- laws or operating agreement or
regulations, in a manner which adversely affects Mortgagor's, or any such
partner's, member's or shareholder's existence as a single-purpose, single-asset
"bankruptcy remote" entity;

          (h) will conduct and operate its business as presently conducted and
operated;

          (i) will maintain books and records and bank accounts separate from
those of its affiliates, including its general partners, principals and members;

          (j) will be, and at all, times will hold itself out to the public as,
a legal entity separate and distinct from any other entity (including any
affiliate of Mortgagor, any constituent party of Mortgagor, any guarantor, or
any affiliate of any constituent party or guarantor), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its affiliates as
a division or part of the other, and shall maintain and utilize a separate
telephone number and separate stationery, invoices and checks from any other
entity;

          (k) will file its own tax returns;

          (1) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

          (m) will not, nor will any shareholder, principal, partner, member,
manager or affiliate, seek the dissolution or winding up, in whole or in part,
of Mortgagor;

          (n) will not enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially al of the business or
assets of, or any stock or beneficial ownership of, any entity;


                                      -44-



          (o) will not commingle the funds and other assets of Mortgagor with
those of any general partner, principal, member, manager or affiliate, or any
other person;

          (p) has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other person;

          (q) has, and any general partner or managing member of Mortgagor has,
at all times since its formation, observed all legal and customary formalities
regarding its formation and will continue to observe all legal and customary
formalities;

          (r) does not and will not hold itself out to be responsible for the
debts or obligations of any other person; and -

          (s) upon the commencement of a voluntary or involuntary bankruptcy
proceeding by or against Mortgagor, Mortgagor shall not seek a supplemental stay
or otherwise pursuant to 11 U.S.C. 105 or any other provision of the Act, or
any other debtor relief law (whether statutory, common law, case law, or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may
be or become applicable, to stay, interdict, condition, reduce or inhibit the
ability of Mortgagee to enforce any rights of Mortgagee against any guarantor or
indemnitor of the secured obligations or any other party liable with respect
thereto by virtue of any indemnity, guaranty or otherwise.

     1.33. Litigation. Mortgagor will give prompt written notice to Mortgagee of
any litigation or governmental proceedings pending or threatened (in writing)
against Mortgagor which might have a Material Adverse Effect

     1.34. ERISA. (a) Mortgagor shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Mortgagee of any of its rights under the Note, this Mortgage or any of the
other Loan Documents) to be a nonexempt (under a statutory or administrative
class exemption) prohibited transaction under ERISA.

          (b) Mortgagor further covenants and agrees to deliver to Mortgagee
such certifications or other evidence from time to time throughout the term -of
this Mortgage, as requested by Mortgagee in its sole discretion, that (i)
Mortgagor is not an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (ii) Mortgagor is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:

          (x) Equity interests in Mortgagor are publicly offered securities
     within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);

          (y) Less than 25 percent of each outstanding class of equity interests
     in Mortgagor are held by "benefit plan investors" within the meaning of 29
     C.F.R Section 2510.3-101(1)(2); or


                                      -45-



          (z) Mortgagor qualifies as an "operating company" or a "real estate
     operating company" within the meaning of 29 C.F.R Section 2510.3-101-(c) or
     (e) or an investment company registered under the Investment Company Act of
     1940.

          (c) MORTGAGOR SHALL INDEMNIFY MORTGAGEE AND DEFEND AND HOLD MORTGAGEE
HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST
DAMAGE AND EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND DISBURSEMENTS AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND
SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED
TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL
PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN
MORTGAGEE'S SOLE DISCRETION) THAT MORTGAGEE MAY INCUR, DIRECTLY OR INDIRECTLY,
AS A RESULT OF A DEFAULT UNDER THIS SECTION. THIS INDEMNITY SHALL SURVIVE ANY
TERMINATION, SATISFACTION OR FORECLOSURE OF THIS MORTGAGE.

     1.35. Defeasance.

          (a) Notwithstanding anything to the contrary contained Mortgage or the
other Loan Documents, at any time after the earlier of anniversary of the date
that is the "startup day," within the meaning of Section 860G(a)(9) of the
Internal Revenue Code of 1986, as amended from time to time or any successor
statute (the "Code"), of a "real estate mortgage investment conduit," (a
"REMIC") within the meaning of Section 860D of the Code, that holds the Note and
this Mortgage and (ii) four (4) years after the date hereof) (such date that is
the earlier of (i) and (ii), the "Defeasance Lockout Expiration Date") and
provided (unless Mortgagee shall otherwise consent, in its sole discretion) no
default or Event. of Default has occurred and is continuing hereunder or under
any of the other Loan Documents, Mortgagor shall have the right to obtain the
release of the Property (or, for a Partial Release (as defined below), the
Individual Property (as defined below)) from the lien of this Mortgage and the
other Loan Documents (the "Defeasance") upon the satisfaction of each of the
following conditions precedent,

          i)   not less than thirty (30) days prior written notice to Mortgagee
               specifying a regular Payment Date under the Note (the "Defeasance
               Election Date") on which the Defeasance Deposit (hereinafter
               defined) is to be made;

          ii)  the remittance to Mortgagee on the related Defeasance Election
               Date of interest accrued and unpaid on the outstanding principal
               amount of the Note (or, for a Partial Release, the Adjusted
               Release Amount (as defined below)) to and including the
               Defeasance Election Date and the scheduled amortization payment
               due on such Defeasance Election Date, together with all other
               amounts then due and payable under the Note, this Mortgage and
               the other Loan Documents;

          iii) the irrevocable deposit with Mortgagee of an amount (the
               "Defeasance Deposit") of U.S. Government Securities (hereinafter
               defined) which


                                       -46-



               through the scheduled payment of principal and interest in
               respect thereof in accordance with their terms will provide, not
               later than the due date of any payment, cash in an amount
               sufficient, without reinvestment, in the opinion of a nationally
               recognized firm of independent certified public accountants
               expressed in a written certification thereof delivered to
               Mortgagee, to pay and discharge the Scheduled Defeasance Payments
               (hereinafter defined); the delivery on or prior to the Defeasance
               Election Date to Mortgagee of:

               (A) a security agreement, in form and substance satisfactory to
     Mortgagee, creating a first priority lien on the Defeasance Deposit (the
     "Defeasance Security Agreement"), which Defeasance Security Agreement shall
     be included within the definition of "Mortgage" for purposes of each Loan
     Document from and after the date of its execution;

               (B) a release of the Property (or, for a Partial Release, the
     Individual Property) from this Mortgage, the Assignment and any TJCC
     Financing Statements relating thereto (for execution by Mortgagee) in a
     form appropriate for cancellation of such documents in the jurisdiction in
     which the Property (or, fox a Partial Release, Individual Property) is
     located;

               (C) a certificate of an authorized representative of Mortgagor
     certifying that the requirements set forth in this subparagraph (a) have
     been satisfied;

               (D) an opinion of counsel for Mortgagor in form and substance
     satisfactory to Mortgagee to the effect that the Mortgagee has a perfected
     first priority security interest in the Defeasance Deposit;

               (E) an opinion of counsel for Mortgagee, prepared and delivered
     by the servicer at. Mortgagor's reasonable expense, stating that any trust
     formed as a REMIC in connection with any Secondary Market Transaction (as
     hereinafter defined) will not fail to maintain its status as a REMIC as a
     result of such Defeasance;

               (F) in the event of a Partial Release (as defined below),
     Mortgagee, at Mortgagor's expense, shall prepare all necessary additional
     documents to modify this Mortgage (if deemed necessary by Mortgagee or if
     required by the law of the state in which the Property is located) and
     issue two substitute notes for the Note, one executed by the Released Party
     (as defined below) having a principal balance equal to the defeased portion
     of the original Note (the "Defeased Note") and the other note executed by
     the other entity comprising Mortgage and. having a principal balance equal
     to the undefeased portion of the original Note (the


                                      -47-



     "Undefeased Note"). The Defeased Note and the Undefeased Note shall have
     identical terms as the Note except for the principal balance and the
     splitting of the two makers of the original Note, as set forth above. The
     principal balance of the Defeased Note shall equal the Adjusted Release
     Amount (as defined below) for the Individual Property, that is the subject
     of the Partial Release; and

               (G) such other certificates, documents or instruments as
     Mortgagee may reasonably request; and

          v)   the payment by Mortgagor to Mortgagee of all reasonable
               out-of-pocket costs and expenses (including, without limitation,
               reasonable attorneys' fees and disbursements) incurred or
               anticipated to be incurred by Mortgagee in connection with the
               release of the Property (or, for a Partial Release, the
               Individual Property) from the lien of this Mortgage and the other
               Loan Documents pursuant to this Section 1.35 including, without
               limitation, Mortgagee's determination of whether Mortgagor has
               satisfied all of the related conditions and requirements set
               forth in this Section 1.35.

          (b) Upon compliance with the requirements of subparagraph (a) above,
the Property (or, for a Partial Release, the Individual Property) shall be
released from the lien of this Mortgage, the Assignment and any UCC Financing
Statements related thereto, the obligations hereunder and under the other Loan
Documents with respect to the Property (or, for a Partial Release, the
Individual Property) shall no longer be applicable and the Defeasance Deposit
shall be the sole source of collateral securing the Note (or, for a Partial
Release, the Defeased Note), Mortgagee shall apply the Defeasance Deposit and
tie payments received therefrom to the payment of all scheduled principal and
interest payments (the "Scheduled Defeasance Payments") due on all successive
Payment Dates under the Note (or, for a Partial Release, the Defeased Note)
after the Defeasance Election Date and the payment due on the final maturity
date of the Note (or, for a partial release, the Defeased Note). Mortgagor (or
for a partial release, the Released Parry), pursuant too the Defeasance Security
Agreement or other appropriate document, shall direct that the payments received
from the Defeasance Deposit shall be made directly to Mortgagee and applied to
satisfy the obligations of Mortgagor (or, for a Partial Release, the Released
Party) under the Note (or, for a Partial Release, the Defeased Note). In
connection with such release, if Mortgagor shall continue to own any assets
other than the Defeasance Deposit, and in all events in the case of a Partial
Release, Mortgagor (or, for a Partial Release, the Released Party) shall
establish or designate a single-purpose, bankruptcy-remote successor entity
acceptable to Mortgagee (the "Successor Trustor"), with respect to which a
nonconsolidation opinion satisfactory in form and substance to Mortgagee has
been delivered to Mortgagee (if such a nonconsolidation opinion was required of
Mortgagor in connection with the origination of the indebtedness secured hereby)
in which case Mortgagor (or, for a Partial Release, the Released Party) shall
transfer and assign to the Successor Trustor all obligations, rights and duties
under the Note (or, for a Partial Release, the Defeased Note) and the Defeasance
Security Agreement, together with the pledged Defeasance Deposit. The Successor
Trustor shall assume the obligations of Mortgagor (or, for a Partial Release,
the Released Party) under the Note (or, for a Partial Release, the Defeased
Note) and the. Defeasance Security Agreement, and Mortgagor (or, fat a Partial
Release, the Released Party) shall be relieved of its


                                      -48-



obligations hereunder and thereunder. Mortgagor (or, for a Partial Release, the
Released Party) shall pay One Thousand and No/100 Dollars ($1,000.00) to the
Successor Trustor as consideration for assuming such Mortgagor obligations.

          (c) As used herein, the term "U.S. Government Securities" shall mean
securities that are direct obligations of the United States of America for the
full and timely payment of which its full faith and credit is pledged.

          (d) On and after the Defeasance Lockout Expiration Date, Mortgagor may
obtain the release of either (but not both) the 8400 Germantown parcel or the
8625 Germantown parcel (each, an "Individual Property") from the lien of this
Mortgage and the other Loan Documents and the release of either (but not both)
Thor Chestnut Hill, LP's or Thor Chestnut Hill II, LP's obligations (whichever
is the owner of the released parcel, the "Released Party") under the Loan
Documents (other than those expressly stated to survive) (collectively, a
"Partial Release") upon the satisfaction of each of the following conditions:

               (i) No Event of Default shall have occurred and be continuing;

               (ii) Mortgagor shall submit, or cause to be submitted, to
          Mortgagee, not less than twenty (20) days prior to the date requested
          for such release, a release of lien (and related Loan Documents) for
          such Individual Property for execution by Mortgagee. Such release
          shall be in a form appropriate in each jurisdiction in which the
          Individual Property is located and that contains standard provisions,
          if any, protecting the rights of the releasing lender. In addition,
          Mortgagor shall provide all other documentation Mortgagee reasonably
          requires to be delivered by Mortgagor in connection with such release,
          together with an Officer's Certificate (as defined below) certifying
          that such documentation (i) is in compliance with all Legal
          Requirements (as defined below), (ii) will effect such release in
          accordance with the terms of this Mortgage. and (iii) will not impair
          or otherwise adversely affect the liens, security interests and other
          rights of Lender under the Loan Documents not being released (as to
          the party to the Loan Documents and Property subject to the Loan
          Documents not being released);

               (iii) After giving effect to such release, the Debt Service
          Coverage Ratio (as defined in the Cash Management Agreement) for the
          Individual Property that will remain subject to the lien of this
          Mortgage shall be equal to or greater than 1.60 to 1.0, such
          calculation to be based on pro-forma Gross Income from Operations (as
          defined in the Cash Management Agreement) on an annualized basis and
          Underwritten. Operating Expenses (as defined in the Cash Management
          Agreement) for the twelve (12) full calendar months immediately
          preceding the release of the Individual Property (for purposes of this
          calculation, pro-form Gross Income from Operations shall be based on
          the then-current rent roll for the Property and, in addition to the
          normal limitations contained within Gross Income from Operations,
          shall only include income from tenants that are in place and will
          remain in place and paying rent during the entire succeeding twelve
          (12) month period and Underwritten Operating Expenses shall be the
          Underwritten Operating Expenses for the prior twelve full calendar
          months but


                                      -49-



          reduced to reflect cost reductions after release of the Individual
          Property, all of the foregoing in this parenthetical as reasonably
          underwritten and determined by Mortgagee);

               (iv) The Individual Property to be released shall be conveyed to
          a person other than Mortgagor or any of its affiliates;

               (v) On or before the date that is twenty (20) days prior to the
          requested release date, Mortgagor shall provide Mortgagee with all
          information reasonably required to calculate the Debt Service Coverage
          Ratio; and

               (vi) The Loan shall be defeased in accordance with the provisions
          above in the amount of the Adjusted Release Amount (as defined below)
          and Mortgagor shall pay to Mortgagee all other sutras due and payable
          under this Mortgage in connection with such Defeasance.

               (vii) As used herein, the following terms shall have the
          following meanings-,

               "Officer's Certificate" shall mean a certificate delivered to
               Mortgagee by Mortgagor which is signed by an authorized senior
               officer of the general partner or managing member of each entity
               comprising Mortgagor, as applicable.

               "Legal Requirements" shall mean shall mean, with respect to each
               Individual Property, all federal, state, county, municipal and
               other governmental statutes, laws, rules, orders, regulations,
               ordinances, judgments, decrees and injunctions of governmental
               authorities affecting such Individual Property or any part
               thereof, or the construction, use, alteration or operation
               thereof, or any part thereof, whether now or hereafter enacted
               and in force, and all permits, licenses and authorizations and
               regulations relating thereto, and all covenants, agreements,
               restrictions and encumbrances contained in any instruments,
               either of record or known to Mortgagor, at any time in. force
               affecting such Individual Property or any part thereof,
               incl-Ming, without limitation, any which may (a) require repairs,
               modifications or alterations in or to such Individual Property or
               any part thereof, or (b) in any way limit the use and enjoyment
               thereof.

               "Adjusted Release Amount" shall mean (i) for 8400 Germantown,
               $8,062,500.00 and (ii) for 8625 Germantown, $5,062,500.00.

                         [NO FURTHER TEXT ON THIS PAGE]


                                      -50-



                                   ARTICLE II

                                EVENTS OF DEFAULT

     2.1. Events of Default. The occurrence of any of the following events shall
be a default hereunder (each, an "Event of Default"):

          (a) Mortgagor fails to make any payment under the Note when due,
subject to any grace period set forth therein.

          (b) Mortgagor fails to punctually perform any covenant, agreement,
obligation, term or condition hereof which requires payment of any money to
Mortgagee (except those regarding payments to be made under the Note, which
failure is subject to any grace periods set forth in the Note).

          (c) Mortgagor fails to provide insurance as required by Section 1.4
hereof or fails to perform any covenant, agreement obligation, term or condition
set forth in Section 1.16 or Section 1.30 hereof.

          (d) Mortgagor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein other than those otherwise
described in this Section 2.1 and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Mortgagee to Mortgagor;
provided, however that if such default is susceptible of cure but such cure
cannot be accomplished with reasonable diligence within said period of time, and
if Mortgagor commences to cure such default promptly after receipt of notice
thereof from Mortgagee, and thereafter prosecutes the curing of such default
with reasonable diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable diligence, but
not to exceed an additional ninety (90) days.

          (e) Any representation or warranty made herein, in or in connection
with any application or commitment relating to the loan evidenced by the Note,
or in any of the other Loan Documents to Mortgagee by Mortgagor, by any
principal, managing member or general partner in Mortgagor or by any indemnitor
or guarantor under any indemnity or guaranty executed in connection with the
loan secured hereby is determined by Mortgagee to have been false or misleading
in any material respect at the time made.

          (f) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer or further encumbrancing of the Property,
Mortgagor or its owners, or any portion thereof or any interest therein, in
violation of Section 1.13 hereof.

          (g) A default occurs under any of the other Loan Documents which has
not been cured within any applicable grace or cure period therein provided,

          (h) Mortgagor, any principal, general partner or managing member (as
applicable) in Mortgagor or any indemnitor or guarantor under any indenuity or
guaranty


                                      -51-



executed in connection with the loan secured hereby becomes insolvent, or shall
make a transfer in fraud of creditors, or shall make an assignment for the
benefit of creditors, shall file a petition in bankruptcy, shall voluntarily be
adjudicated insolvent or bankrupt or shall admit in writing the inability to pay
debts as they mature, shall petition or apply to any tribunal for or shall
consent to or shall not contest the appointment of a receiver, trustee,
custodian or similar officer for Mortgagor, for any such principal, general
partner or managing member (as applicable) of Mortgagor or Br any such
indemnitor or guarantor or for a substantial part of the assets of Mortgagor, of
any such principal or general partner or managing member of Mortgagor or of any
such indemnitor or guarantor, or shall commence any case, proceeding or other
action under any bankruptcy, reorganization, arrangement, readjustment or debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect.

          (f) A petition ("Petition") is filed or any ease, proceeding or other
action is commenced against Mortgagor, against any principal, general partner or
managing member of Mortgagor or against any indemnitor or guarantor under any
indemnity or guaranty executed in connection with the loan secured hereby
seeking to have an order for relief entered against it as debtor or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts or other relief under any law relating to bankruptcy,
insolvency, arrangement, reorganization, receivership or other debtor relief
under any law or statute of any jurisdiction, whether now or hereafter in
effect, or a court of competent jurisdiction enters an order for relief against
Mortgagor, against any principal or general partner or managing member of
Mortgagor or against any indemnitor or guarantor under any indemnity or guaranty
executed in connection with the loan secured hereby, as debtor, or an order,
judgment or decree is entered appointing, with or without the consent of
Mortgagor, of any such principal or general partner or managing member of
Mortgagor or of any such indemnitor or guarantor, a receiver, trustee, custodian
or similar officer for Mortgagor, for any such principal or general partner or
managing member of Mortgagor or for any such indemnitor or guarantor, or for any
substantial part of any of the properties of Mortgagor, of any such principal,
general partner or managing member of Mortgagor or of any such indemnitor or
guarantor, and if any such event shall occur, such petition, case, proceeding,
action, order, judgment or decree shall not be dismissed within sixty (60) days
after being commenced.

          (j) Mortgagor solicits or aids the solicitation of the filing of any
Petition against Mortgagor including, without limitation: (i) providing
information regarding the identity of creditors or the nature of creditors'
claims to any third party unless compelled to do so by order of a court of
competent jurisdiction or by regulation promulgated by a governmental agency; or
(ii) paying the legal fees or expenses of any creditor of or interest holder in
Mortgagor with respect to any matter whatsoever.

          (k) The Property or any part thereof shall be taken on execution or
other process of law in any action against Mortgagor.

          (l) Mortgagor abandons all or a portion of the Property.

          (m) The holder of any lien or security interest on the Property
(without implying the consent of Mortgagee to the existence or creation of any
such lien or security interest), whether superior or subordinate to this
Mortgage or any of the other Loan Documents,


                                      -52-



declares a default and such default is not cured within any applicable grace or
cure period set forth in the applicable document or such holder institutes
foreclosure or other proceedings for the enforcement of its remedies thereunder.

          (n) The Property, or any part thereof, is subjected to actual or
threatened waste or to removal, demolition or material alteration so that the
value of the Property is materially diminished thereby and Mortgagee determines
(in its subjective determination) that it is not adequately protected from any
loss, damage or risk associated therewith.

          (o) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Mortgagor, any of its principals, members, or general
partners.

                                   ARTICLE III
                                    REMEDIES

     3.1. Remedies Available. If there shall occur a default under this
Mortgage, and such default has not been cured within any applicable grace or
cure period, then this Mortgage is subject to foreclosure as provided by law and
Mortgagee may, at its option and by or through a trustee, nominee, assignee or
otherwise, to the fullest extent permitted by law, exercise any or all of the
following rights, remedies and recourses, either successively or concurrently.

          (a) Acceleration Accelerate the maturity date of the Note and declare
any or all of the indebtedness secured hereby to be immediately due and payable
without any presentment, demand, protest, notice or action of any kind whatever
(each of which is hereby expressly waived. by Mortgagor), whereupon the same
shall become immediately due and payable. Upon any such acceleration, payment of
such accelerated amount shall constitute a prepayment of the principal balance
of the Note and any applicable prepayment fee provided for in the Note shall
then be immediately due and payable.

          (b) Entry an the Property. Without in any way curing or waiving any
default of Mortgagor, either in person, by agent or by court appointed receiver,
with or without bringing any action or proceeding, or by a receiver appointed by
a court and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, in its own name, without force
or with such force as is permitted by law and without notice or process or with
such notice or process as is required by law unless such notice and process is
waivable, in which case Mortgagor hereby waives such notice and process, and do
any and all acts and perform any and all work which may be desirable or
necessary in Mortgagee's judgment to complete any unfinished construction on the
Real Estate, to preserve and/or enhance the value, marketability or rentability
of the Property, to increase the income therefrom, to manage and operate the
Property or to protect the security hereof and all sums expended by Mortgagee
therefor, together with interest thereon at the Default Interest Rate (as
defined in the Note), shall be immediately due and payable to Mortgagee by
Mortgagor on demand and shall be secured hereby and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.

          (c) Collect Rents and Profits. With or without taking possession of
the Property, sue for or otherwise collect the Rents and Profits, including
those past due and unpaid,


                                      -53-



and apply the same, less costs and expenses of operation and collection,
including reasonable attorney's fees, upon any indebtedness secured hereby, all
in such order as Mortgagee in its discretion may determine.

          (d) Appointment of Receiver. Upon, or at any time prior or after,
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application, ex parte, to a court of competent jurisdiction for appointment of a
receiver for all or any part of the Property, as a matter of strict right and
without notice to Mortgagor and without regard to the adequacy of the Property
for the repayment of the indebtedness secured hereby or the solvency of
Mortgagor or any person or persons liable for the payment of the indebtedness
secured hereby, and Mortgagor does hereby irrevocably consent to such
appointment, waives any and all notices of and defenses to such appointment and
agrees not to oppose any application therefor by Mortgagee, but nothing herein
is to be construed to deprive Mortgagee of any other right, remedy or privilege
Mortgagee may now have under the law to have a receiver appointed, provided,
however, that the appointment of such receiver, trustee or other appointee by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Mortgagee to receive payment of the Rents and
Profits pursuant to other terms and provisions of this Mortgage or the
Assignment. Any such receiver shall have all of the usual powers and duties of
receivers in similar cases, including, without limitation, the full power to
hold, develop, rent, lease, manage, maintains operate and otherwise use or
permit the use of the Property upon such terms and conditions as said receiver
may deem to be prudent and reasonable under the circumstances as more fully set
forth in Section 3.3 below. Such receivership shall, at the option of Mortgagee,
continue until full payment of all of the indebtedness secured hereby or until
title to the Property shall have passed by foreclosure sale under this Mortgage
or deed in Lien of foreclosure.

          (e) Foreclosure. Immediately commence an action to foreclose this
Mortgage or to specifically enforce its provisions or any of the indebtedness
secured hereby pursuant to the statutes in such case made and provided and sell
the Property or cause. the Property to be sold in accordance with the
requirements and procedures provided by said statutes in a single parcel or in
several parcels at the option of Mortgagee. In the event foreclosure proceedings
are filed by Mortgagee, all expenses incident to such proceedings, including,
but not limited to, attorneys fees and costs, shall be paid by Mortgagor and
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Note, The secured indebtedness and
all other obligations secured by this Mortgage, including, without limitation,
interest at the Default Interest Rate, any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys fees and any other amounts
due and unpaid to Mortgagee under the Loan Documents, may be bid by Mortgagee in
the event of a foreclosure sale hereunder. In the event of a judicial sale
pursuant to a foreclosure decree, it is understood and agreed that Mortgagee or
its assigns may become the purchaser of the Property or any part thereof

          (a) Confession of Judgment. FOR THE PURPOSE OF PROCURING POSSESSION OF
THE PROPERTY IN THE EVENT OF ANY DEFAULT HEREUNDER OR UNDER THE NOTE, MORTGAGOR
HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF


                                      -54-



PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING
UNDER OR THROUGH MORTGAGOR, AND TO APPEAR FOR AND CONFESS JUDGMENT AGAINST
MORTGAGOR, AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, FOR THE
RECOVERY BY MORTGAGEE OF POSSESSION OF THE PROPERTY, WITHOUT ANY STAY OF
EXECUTION, FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT,
SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY BE ISSUED
FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER MORTGAGOR HEREBY
RELEASES MORTGAGEE FROM ALL PROCEDURAL ERRORS AND DEFECTS WHATSOEVER IN ENTERING
SUCH ACTION AND JUDGMENT AND IN CAUSING SUCH WRIT OR WRITS TO BE ISSUED, AND
HEREBY AGREES THAT NO WRIT OF PROCEDURAL ERROR OR APPEAL SHALL BE FILED OR MADE
WITH RESPECT THERETO. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED THE
SAME SHALL BE DISCONTINUED OR POSSESSION OF THE PROPERTY SHALL REMAIN IN OR BE
RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR
ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS- AS ABOVE PROVIDED
TO RECOVER POSSESSION OF THE PROPERTY. MORTGAGEE MAY BRING SUCH ACTION IN
EJECTMENT BEFORE OR AFTER THE INSTITUTION OF FORECLOSURE PROCEEDINGS UPON THIS
MORTGAGE, OR AFTER JUDGMENT HEREON OR ON THE NOTE, OR AFTER A SALE OF THE
PROPERTY BY THE SHERIFF.

     MORTGAGOR CONFIRMS TO MORTGAGEE THAT (I) MORTGAGOR IS A BUSINESS ENTITY AND
THAT ITS PRINCIPALS ARE KNOWLEDGEABLE IN BUSINESS MATTERS; (II) THE TERMS OF
THIS MORTGAGE, INCLUDING THE FOREGOING WARRANT OF ATTORNEY TO CONFESS JUDGMENT,
HAVE BEEN NEGOTIATED AND AGREED UPON IN A COMMERCIAL CONTEXT; AND (III) IT HAS
FULLY REVIEWED THE AFORESAID WARRANT OF ATTORNEY TO CONFESS JUDGMENT WITH ITS
OWN COUNSEL AND IS KNOWINGLY AND VOLUNTARILY WAIVING CERTAIN RIGHTS IT WOULD
OTHERWISE POSSESS, INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO ANY NOTICE OR A
HEARING PRIOR TO THE ENTRY OF JUDGMENT BY MORTGAGEE PURSUANT TO THE AFORESAID
WARRANT OF ATTOY.

          Initials: /s/ XXX
                    -----------------

          (f) Other. Exercise any other right or remedy available hereunder,
under any of the other Loan Documents or at law or in equity.

     3.2. Application of Proceeds. To the fullest extent permitted by law, the
proceeds of any sale under this Mortgage shall be applied to the extent funds
are so available to the following items in such order as Mortgagee in its
discretion may determine:

          (a) To payment of the costs, expenses and fees of taking possession of
the Property, and of holding, operating, maintaining, using, leasing, repairing,
improving, marketing and selling the same and of otherwise enforcing Mortgagee's
right and remedies hereunder and


                                      -55-



and the other Loan Documents, including, but not limited to, receivers fees,
court costs, attorneys, accountants, appraisers, auctioneers, managers and
other professional fees, title charges and transfer taxes.

          (b) To payment of all sums expended by Mortgagee under the terms of
any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Interest Rate (as defined in the Note).

          (c) To payment of the secured indebtedness and all other obligations
secured by this Mortgage, including, without limitation, interest at the Default
Interest Rate (as defined in the Note) and, to the extent permitted by
applicable law, any prepayment fee, charge or premium required to be paid under
the Note in order to prepay principal, in any order that Mortgagee chooses in
its sole discretion.

          (d) The remainder, if any, of such funds shall be disbursed to
Mortgagor or to the person or persons legally entitled thereto.

     3.3. Right and Authority of Receiver or Mortgagee in the Event of Default:
Power, of Attorney. Upon the occurrence of a default hereunder, which
default is not cured within any applicable grace or cure period, and entry upon
the Property pursuant to Section 3.1(b) hereof or appointment of a receiver
pursuant to Section 3.1(d) hereof, and under such terms and conditions as may be
prudent and reasonable under the circumstances in Mortgagee's or the receiver's
sole discretion, all at Mortgagor's expense, Mortgagee or said receiver, or such
other persons or entities as they shall hire, direct or engage, as the case may
be, may do or permit one or more of the following, successively or concurrently:
(a) enter upon and take possession and control of any and all of the Property;
(b) take and maintain possession of all documents, books, records, papers and
accounts relating to the Property; (c) exclude Mortgagor and its agents,
servants and employees wholly from the Property; (d) manage and operate the
Property; (e) preserve and maintain the Property; (f) make repairs and
alterations to the Property; (g) complete any construction or repair of the
Improvements, with such changes, additions or modifications of the plans and
specifications or intended disposition and use of the Improvements as Mortgagee
may in its sole discretion deem appropriate or desirable to place the Property
in such condition as will, in Mortgagee's sole discretion, make it or any part
thereof readily marketable or rentable; (h) conduct a marketing or leasing
program with respect to the Property, or employ a marketing or leasing agent or
agents to do so, directed to the leasing or sale of the Property under such
terms and conditions as Mortgagee may in its sole discretion deem appropriate or
desirable; (i) employ such contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, marketing agents, or other employees,
agents, independent contractors or professionals, as Mortgagee may in its sole
discretion deem appropriate or desirable to implement and effectuate the rights
and powers herein granted; (j) execute and deliver, in the name of Mortgagee as
attorney- in- fact and agent of Mortgagor or in its own name as Mortgagee, such
documents and instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter into such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as Mortgagee
may in its sole discretion deem appropriate or desirable; (l) collect and
receive the Rents and Profits from the Property; (m) eject tenants or repossess
personal property, as provided by law, for breaches of the conditions of their
leases or other agreements; (n) sue for unpaid Rents and Profits, payments,
income or proceeds


                                      -56-



in the name of Mortgagor or Mortgagee; (o) maintain actions in forcible entry
and detainer, ejectment for possession and actions in distress for rent; (p)
compromise or give acquittance for Rents and Profits, payments, income or
proceeds that may become due; (q) delegate or assign any and all rights and
powers given to Mortgagee by this Mortgage; and (r) do any acts which Mortgagee
in its sole discretion deems appropriate or desirable to protect the security
hereof and use such measures, legal or equitable, as Mortgagee may in its sole
discretion deem appropriate or desirable to implement and effectuate the
provisions of this Mortgage. This Mortgage shall constitute a direction to and
full authority to any lessee, or other third party who has heretofore dealt or
contracted or may hereafter deal or contract with Mortgagor or Mortgagee, at the
request of Mortgagee, to pay all amounts owing under any lease, contract,
concession, license or other agreement to Mortgagee without proof of the default
relied upon. Any such lessee or third party is hereby irrevocably authorized to
rely upon and comply with (and shall be fully protected by Mortgagor in so
doing) any request, notice or demand by Mortgagee for the payment to Mortgagee
of any Rents and Profits or other sums which may be or thereafter become due
under its lease, contract, concession, license or other agreement, or for the
performance of any undertakings under any such lease, contract, concession,
license or other agreement, and shall have no right or duty to inquire whether
any default under this Mortgage or under any of the other Loan Documents has
actually occurred or is then existing. Mortgagor hereby constitutes and appoints
Mortgagee, its assignees, successors, transferees and nominees, as Mortgagor's
true and lawful attorney-in fact and agent, with full power of substitution in
the Property, in Mortgagor's name, place and stead, to do or permit any one or
more of the foregoing described rights, remedies, powers and authorities,
successively or concurrently, and said power of attorney shall be deemed a power
coupled with an interest and irrevocable so long as any indebtedness secured
hereby is outstanding. Any money advanced by Mortgagee in connection with any
action taken under this Section 3_3, together with interest thereon at the
Default Interest Rate (as defined in the Note) from the date of making such
advancement by Mortgagee until actually paid by Mortgagor, shall be a demand
obligation owing by Mortgagor to Mortgagee and shall be secured by this Mortgage
and by every other instrument securing the secured indebtedness.

     3.4. Occupancy After Foreclosure. In the event there is a sale or sales
pursuant to Section 3.1 hereof and at the time of such sale or sales, Mortgagor
or Mortgagor's representatives, successors or assigns, or any other persons
claiming any interest in the Property by, through or under Mortgagor (except
tenants of space in the Improvements subject to leases entered into prior to the
date hereof), are occupying or using the Property, or any part thereof, then, to
the extent not prohibited by applicable law, each and all shall, at the option
of Mortgagee or the purchaser at such sale, as the case may be, immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day-to-day, terminable at the will of either landlord or tenant, at
a reasonable rental per day based upon the value of the Property occupied or
used, such rental to be due daily to the purchaser. Further, to the extent
permitted by applicable law, in the event the tenant fails to surrender
possession of the Property upon the termination of such tenancy, the purchaser
shall be entitled to institute and maintain an action for unlawful detainer of
the Property in the appropriate court of the county in which the Real Estate is
located.

     3.5. Notice to Account Debtors. Mortgagee may, at any time after a default
hereunder, which default is not cured within any applicable grace or cure
period, notify the account debtors and obligors of any accounts, chattel paper,
negotiable instruments or other


                                      -57-



evidences of indebtedness to Mortgagor included in the Property to pay Mortgagee
directly. Mortgagor shall at any time or from time to time upon the request of
Mortgagee provide to Mortgagee a current list of all such account debtors and
obligors and their addresses.

     3.6. Cumulative Remedies. All remedies contained in this Mortgage are
cumulative and Mortgagee shall also have all other remedies provided at law and
in equity or in any other Loan Documents. Such remedies may be pursued
separately, successively or concurrently at the sole subjective direction of
Mortgagee and may be exercised in any order and as often as occasion therefor
shall arise. No act of Mortgagee shall be construed as an election to proceed
under any particular provisions of this Mortgage to the exclusion of any other
provision of this Mortgage or as an election of remedies to the exclusion of any
other remedy which may then or thereafter be available to Mortgagee. No delay or
failure by Mortgagee to exercise any right or remedy under this Mortgage shall
be construed to be a waiver of that right or remedy or of any default hereunder.
Mortgagee may exercise any one or more of its rights and remedies at its option
without regard to the adequacy of its security.

     3.7. Payment of Expenses. Mortgagor shall pay on demand all of Mortgagee's
expenses reasonably incurred in any efforts to enforce any terms of this
Mortgage, whether or not any lawsuit is filed and whether or not foreclosure is
commenced but not completed, including, but not limited to, reasonable legal
fees and disbursements, foreclosure costs and title charges, together with
interest thereon from and after the date incurred by Mortgagee until actually
paid by Mortgagor at the Default Interest Rate (as defined in, the Note), and
the same shall be secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.

                                   ARTICLE IV

                       MISCELLANEOUS TERMS AND CONDITIONS

     4.1. Time of Essence. Time is of the essence with respect to all provisions
of this Mortgage.

     4.2. Release of Mortgage. This instrument is granted upon express condition
that if Mortgagor punctually pays and performs all of the obligations under and
in accordance with thee terms of the Loan Documents and the terms hereof, then
this Mortgage and the estate granted hereby shall cease and become void, except
for those provisions hereof which by their terms survive, and the Property shall
become wholly clear of the liens, security interests, conveyances and
assignments evidenced hereby, which shall be released by Mortgagee in due form
at. Mortgagor's cost. No release of this Mortgage or the lien hereof shall be
valid unless executed

     4.3. Action by Mortgagee. Without affecting Mortgagor's liability for the
payment of any of the indebtedness secured hereby, Mortgagee may from time to
time and without notice to Mortgagor: (a) release any person liable for the
payment of the indebtedness secured hereby; (b) extend or modify the terms of
payment of the indebtedness secured hereby; (c) accept additional real or
personal property of any kind as security or alter, substitute or release any
property securing the indebtedness secured hereby; (d) recover any part of the
Property; (e) consent in writing to the making of any subdivision map or plat
thereof; (f) join in granting any easement


                                      -58-



therein; bb(g) join in any extension agreement of this Mortgage or any agreement
subordinating the lien hereof.

     4.4. Notices. Any notice, report, demand or other instrument authorized or
required to be given or furnished hereunder or as required by law ("Notices")
shall be in writing and shall be given as follows: (a) by band delivery; (b) by
deposit in the United States mail as first class certified mail, return receipt
requested, postage paid; (c) by overnight nationwide commercial courier service;
or (d) by telecopy transmission (other than for notices of default) with a
confirmation copy to be delivered by duplicate notice in accordance with any of
clauses (a)-(c) above, in each case, addressed to the party intended to receive
the same at the following address(es):

          Mortgagee:        Column Financial, Inc.
                            Eleven Madison Avenue
                            9th Floor
                            New York, New York 10010-3629
                            Attention: Edmund Taylor
                            Telecopier: (212) 325-8106
                            Re: Thor / Chestnut, Philadelphia, Pennsylvania
                                Loan Amount: $10,500,000
                                Column Loan Number: 271089

          with copies to:   Credit Suisse First Boston Mortgage Capital LLC
                            Legal & Compliance Department One Madison
                            Avenue New York, New York 10010
                            Attention: Pamela L. McCormack, Esq.
                                       Vice President and Counsel
                            Telecopier: (917) 326-7805
                            Re: Thor I Chestnut, Philadelphia, Pennsylvania
                                Loan Amount: $10,500,000
                                Column Loan Number: 271089

          Servicer:         KeyCorp Real Estate Capital Markets, Inc.
                            dlb/a Key Commercial Mortgage
                            911 Main Street, Suite 1500 Kansas
                            City, Missouri 64105
                            Attention: Diane Haislip
                            Telecopier: 216-357-6543
                            or any successor servicer of the Loan.
                            Re: Thor / Chestnut, Philadelphia, Pennsylvania
                                Loan Amount: 510,500,000
                                Column Loan Number: 271089

          Mortgagor:        Thor Chestnut Hill, L.P.


                                      -59-



                            Thor Chestnut Hill II, L.P.
                            c/o Thor Equities, LLC
                            139 Fifth Avenue
                            New York, New York 10010
                            Attention: Joseph J. Sitt and Kurt Reich
                            Telecopier: (212) 460-9200 and (212) 460-9630

                            with a copy to:

                            Morris Missry, Esq.
                            Wachtel & Masyr, LLP
                            110 E. 59th Street
                            New York, New York 10022
                            Telecopier: (212) 371-0320

     Any party may change the address to which any such Notice is to be
delivered to any other address within the United States of America, by
furnishing ten (10) days written notice of such change to the other parties in
accordance with the provisions of this Section 4.4. All notices, demands and
requests shall be effective upon personal delivery, or one (1) business day
after being deposited with the private courier service, or two (2) business days
after being deposited in the United States mail as required above. The inability
to deliver Notices because of a changed address of which no Notice was given, or
rejection or refusal to accept any Notice offered for delivery shall be deemed
to be receipt of the Notice as of the date of such inability to deliver or
rejection or refusal to accept delivery, Notice for either party may be given by
its respective counsel. Additionally, notice from Mortgagee may also be given by
the Servicer.

     4.5. Successors and Assigns. The terms, provisions, indemnities, covenants
and conditions hereof shall be binding upon Mortgagor and the successors and
assigns of Mortgagor, including all successors in interest in and to all or any
part of the Property, and shall inure to the benefit of Mortgagee, and its
successors and assigns and shall constitute covenants running with the land. If
Mortgagor consists of more than one person or entity, each will be jointly and
severally liable to perform the obligations of Mortgagor.

     4.6. Severability, A determination that any provision of this Mortgage is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision.

     4.7. Gender. Within this Mortgage, words of any gender shall be, held and
construed to include any other gender, and words in the singular shall be held
and construed to include the plural, and vice versa, unless the context
otherwise requires.

     4.8. Waiver, Discontinuance of Proceedings. Mortgagee may waive any single
default by Mortgagor hereunder without waiving any other prior or subsequent
default, and may remedy any default by Mortgagor hereunder without waiving the
default remedied. Neither the failure or delay by Mortgagee in exercising, any
right, power or remedy upon any default by Mortgagor hereunder shall be
construed as a waiver of such default or as a waiver of the right to exercise
any such right, power or remedy at a later date. No single or partial exercise
by Mortgagee of any right, power or remedy hereunder shall exhaust the same or
shall preclude any other or


                                      -60-



Further exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Mortgagor therefrom shall in
any event be effective unless the same shall be in writing and signed by
Mortgagee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose given. No notice to nor demand on
Mortgagor in any case shall of itself entitle Mortgagor to any other or further
notice or demand in similar or other circumstances. Acceptance by Mortgagee of
any payment in an amount less than the amount. then due on any of the secured
indebtedness shall be deemed an acceptance on account only and shall not in any
way affect the existence of a default hereunder.

     4.9. Section Headings. The headings of the sections and paragraphs of this
Mortgage are for convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect any of the terms hereof.

     4.10. GOVERNING LAW, THIS MORTGAGE WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, PROVIDED HOWEVER
THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY
FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.

     4.11. Counting of Days. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business day. The terra
"Business Day" or "Business Day" when used herein shall mean a weekday, Monday
through Friday, except a legal holiday or a day on which banking institutions in
New York, New York are authorized by law to be closed.

     4.12. Application of the Proceeds of the Note. To the extent that proceeds
of the Note are used to pay indebtedness secured by any outstanding lien,
security interest, charged or prior encumbrance against the Property, such
proceeds have been advanced by Mortgagee at Mortgagor's request and Mortgagee
shall be subrogated to any and all rights, security interests and liens owned by
any owner or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges or
encumbrances are released.

     4.13. Unsecured Portion of Indebtedness. If any part of the secured
indebtedness cannot be lawfully secured by this Mortgage or if any part of the
Property cannot be lawfully subject to the lien and security interest hereof to
the full extent of such indebtedness, then all payments made shall be applied on
said indebtedness first in discharge of that portion thereof which is unsecured
by this Mortgage.

     4.14. Cross Default. A default hereunder which has not been cured within
any applicable grace or cure period shall be a default under each of the other
Loan Documents.

     4.15. Interest After Sale. In the event the Property or any part thereof
shall be sold upon foreclosure as provided hereunder, to the extent permitted by
law, the sure for which the


                                      -61-



same shall have been sold shall, for purposes of redemption (pursuant to the
laws of the state in which the Property is located), bear interest at the
Default Interest Rate.

     4.16. Construction of this Document. This document may be construed as a
mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.

     4.17. No Merger. It is the desire and intention of the parties hereto that
this Mortgage and the lien hereof do not merge in fee simple title to the
Property.

     4.18. Rights With Respect to Junior Encumbrances. Any person or entity
purporting to have or to take a junior mortgage or other lien upon the Property
or any interest therein shall be subject to the rights of Mortgagee to amend,
modify, increase, vary, alter or supplement this Mortgage, the Note or any of
the other Loan Documents and to extend the maturity date of the indebtedness
secured hereby and to increase the amount of the indebtedness secured hereby and
to waive or forebear the exercise of any of its rights and remedies hereunder or
under any of the other Loan Documents and to release any collateral or security
for the indebtedness secured hereby, in each and every case without obtaining
the consent of the holder of such junior lien and without the lien or security
interest of this Mortgage losing its priority over the rights of any such junior
lien.

     4.19. Mortgagee May File Proofs of Claim. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Mortgagor or the principals, members or general
partners in Mortgagor, or their respective creditors or property, Mortgagee, to
the extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Mortgagee allowed in such proceedings for the entire secured indebtedness at the
date of the institution of such proceedings and for any additional amount which
may become due and payable by Mortgagor hereunder after such date.

     4.20. After-Acquired Property. All property acquired by Mortgagor after the
date of this Mortgage which by the terms of this Mortgage shall be subject to
the lien and the security interest created hereby, shall immediately upon the
acquisition thereof by Mortgagor and without further deed, conveyance or
assignment become subject to the lien and security interest created by this
Mortgage.

     4.21. No Representation By accepting delivery of any item required to be
observed, performed or fulfilled or to be given to Mortgagee pursuant to the
Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Mortgagee shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Mortgagee.


                                      -62-



     4.22. Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page.

     4.23. Personal Liability. Notwithstanding anything to the contrary
contained in this Mortgage, the liability of Mortgagor and its general partners
for the indebtedness secured hereby and for the performance of the other
agreements, covenants and obligations contained herein and in the Loan Documents
shall be limited as set forth in Section 1.05 of the Note; provided, however,
that nothing herein shall be deemed to be a waiver of any right which Mortgagee
may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the
U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness
secured hereby or to require that all collateral shall continue to secure all
indebtedness owing to Mortgagee in accordance with the Note, this Mortgage and
the other Loan Documents,

     4.24. Recording and Filing. Mortgagor will cause the Loan Documents and all
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such manner and in such places as Mortgagee
shall reasonably request, and will pay on demand all such recording, filing,
re-recording and re-filing taxes, fees and other charges. Mortgagor shall
reimburse Mortgagee, or its servicing agent, for the costs incurred in obtaining
a tax service company to verify the status of payment of taxes and assessments
on the Property.

     4.25. Entire Agreement and Modifications,. This Mortgage and the other Loan
Documents contain the entire agreements between the parties and supersede any
prior agreements (oral or written), and may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the amendment,
revision, waiver, discharge, release or termination is asserted.

     4.26. Maximum Interest. The provisions of this Mortgage and of all
agreements between Mortgagor and Mortgagee, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid; or agreed to be
paid ("Interest"), to Mortgagee for the use, forbearance or retention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Mortgagor and Mortgagee
shall, at the time performance or fulfillment of such provision shall be due,
exceed the limit for Interest prescribed by law or otherwise transcend the limit
of validity prescribed by applicable law, then ipso facto the obligation to be
performed or fulfilled shall be reduced to such limit and if, from any
circumstance whatsoever, Mortgagee shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Mortgagee be paid over to
Mortgagor, and not to the payment of Interest. All Interest (including any
amounts or payments judicially or otherwise under law deemed to be Interest)
contracted for, charged, taken, reserved, paid or agreed to be paid to Mortgagee
shall, to the extent permitted by applicable law,


                                      -63-



be, amortized, prorated, allocated and spread throughout the full term of the
Note, including any extensions and renewal thereof, until payment in full of the
principal balance of the Note so that the Interest thereon for such full term
will not at any time exceed the maximum amount permitted by applicable law. This
Section 4.26 will control all agreements between Mortgagor and Mortgagee.

     4.27. Application of Default Interest Rate Not a Waiver. Application of the
Default Interest Rate shall not be deemed to constitute a waiver of any default
or any rights or remedies of Mortgagee under this Mortgage, any other Loan
Document or applicable legal requirements, or a consent to any extension of time
for the payment or performance of any obligation with respect to which the
Default Interest Rate may be invoked.

     4.28. Interest Payable by Mortgagee. Mortgagee shall cause funds in the
Replacement Reserve and TIC Reserve (the "Funds") to be deposited into interest
bearing accounts of the type customarily maintained by Mortgagee or its
servicing agent for the investment of similar reserves, which accounts may not
yield the highest interest rate then available. The Funds shall be held in an
account in Mortgagee's name (or such other account name as Mortgagee may elect)
at a financial institution or other depository selected by Mortgagee (or its
servicer) in its sole discretion (collectively, the "Depository Institution").
Mortgagor shall earn no more than an amount of interest on the Funds equal to an
amount determined by applying to the average monthly balance of such Funds the
quoted interest rate for the Depository Institution's money market savings
account, as such rate is determined from time to time (such allocated amount
being referred to as "Mortgagor's Interest"). Mortgagee or its Depository
Institution shall be entitled to report under Mortgagor's Federal tax
identification number, Mortgagor's Interest on the Funds. If the Depository
Institution does not have an established money market savings account (or if an
interest rate for such account cannot otherwise be determined in connection with
the deposit of such Funds), a comparable interest rate quoted by the Depository
Institution and acceptable to Mortgagee (or its servicer) in its reasonable
discretion shall be used. The amount of Mortgagor's Interest allocated to Funds
shall be added to the balance in the applicable Reserve, and shall be disbursed
for payment of the items for which other Funds in the applicable Reserve axe to
be disbursed.

     4.29. Further Stipulations. The additional covenants, agreements and
provisions set forth in Exhibit. C attached hereto, if any, shall be a part of
this Mortgage and shall, in the event of any conflict between such further
stipulations and any of the other provisions of this Mortgage, be deemed to
control.

     4.30. Relationship of the Parties. The relationship between Mortgagor and
Mortgagee is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.

     4.31. Fixture Filing. This Mortgage shall be effective from the date of its
recording as a financing statement filed as a fixture filing with respect to all
goods constituting part of the Property which are or are to become fixtures. The
mailing address of Mortgagor and the address of Mortgagee from which information
concerning the security interests may be obtained are set forth in Section 1.22
above.


                                      -64-



     4.32. Cooperation With Rating Agencies and Investors. Mortgagor covenants
and agrees that in the event Mortgagee decides to include the Loan as an asset
of a Secondary Market Transaction (as defined herein), Mortgagor shall (a) at
Mortgagee's request, meet with representatives of the Rating Agencies and/or
investors to discuss the business and operations of the Property, and (b) permit
Mortgagee or its representatives to provide related information to the Rating
Agencies and/or investors, and (c) cooperate with the reasonable requests of the
Rating Agencies and/or investors in connection with all of the foregoing. For
purposes hereof, a "Secondary Market Transaction" shall be (a) any sale or
assignment of this Mortgage, Note and other Loan Documents to one or more
investors as a whole loan; (b) a participation of the Loan to one or more
investors, (c) any deposit of this Mortgage, the Note and the other Loan
Documents with a trust or other entity which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or other entity, or (d) any other sale, assignment or transfer of the Loan
or any interest therein to one or more investors. If at any time during which
the Loan is an asset of a securitization or is otherwise an asset of any rated
transaction, "Rating Agency" shall mean the rating agency or rating agencies
that from time to time rate the securities, certificates or other instruments
issued in connection with such securitization or other transaction.

     4.33. Pennsylvania Provisions. Pursuant to 42 Pa. C.S.A. Section 8144, this
Mortgage secures the unpaid balance of advances made, with respect to the
Property, for the payment of taxes, assessments, maintenance charges, insurance
premiums or costs incurred by Mortgagee for the protection of the Property or
the lien of this Mortgage, and expenses incurred by Mortgagee by reason of an
Event of Default, and the priority of the lien of such advances shall relate
back to the date of the recording of this Mortgage.

                         [NO FURTHER TEXT ON THIS PAGE]


                                      -65-



     In WITNESS WHEREOF, Mortgagor, intending to be legally bound hereby, has
duly executed this Mortgage under seal as of the day and year first above
written.

                                        MORTGAGOR:

                                        THOR CHESTNUT HILL, LP,
                                        a Delaware limited partnership

                                        By: Thor GP Chestnut Hill, LLC,
                                        a Delaware limited liability company,
                                        its general partner


                                        By: /s/ XXX
                                            ------------------------------------
                                        Name: XXX
                                        Title: Managing Member


                                        THOR CHESTNUT HILL II, LP,
                                        a Delaware limited partnership


                                        By: Thor GP Chestnut Hill II, LLC,
                                        a Delaware limited liability company,
                                        its general partner


                                        By: /s/ XXX
                                            ------------------------------------
                                        Name: XXX
                                        Title: Managing Member

The address of the within Mortgagee is:

Column Financial, Inc.
11 Madison Avenue Ninth Floor
New York, New York 10010

- -------------------------------------
On behalf of the Mortgagee


                                      -66-



State/ Commonwealth of New York
County of New York

On this, the 5th day of June, 2003, before me Courtney Mitchell, the undersigned
officer, personally appeared Joseph J. Sitt- known to me (or satisfactorily
proven) to be the managing member of Thor GP Chestnut Hill, LLC, a Delaware
limited liability company, which is the general partner of Thor Chestnut Hill,
LP, a Delaware limited partnership, and acknowledged that he as such managing
member being duly authorized to do so, executed the foregoing instrument on
behalf of such limited liability company manager of such limited partnership,
for the purposes therein contained,

In witness whereof, I hereunto set may hand and official seal.


                                        /s/ COURTNEY P. MITCHELL
                                        ----------------------------------------
                                        Notary Public  is
                                        COURTNEY P. MITCHELL
                                        Notary Public, State of New York
                                        No. 01 MI6082687
(Seal)                                  Qualified in New York County
                                        Commission Expires November 04, 2006

STATE/COMMONWEALTH OF NEW YORK
COUNTY OF NEW YORK

On this, the 5th day of June, 2003, before me Courtney Mitchell, the undersigned
officer, personally appeared Joseph J. Sitt- known to me (or satisfactorily
proven) to be the, managing member of Thor GP Chestnut Hill II, LLC, a Delaware
limited liability company, which is the general partner of Thor Chestnut Hill
II, LP, a Delaware limited partnership, and acknowledged that HE as such
managing member being duly authorized to do so, executed the foregoing
instrument on behalf of such limited liability company, as manager of such
limited partnership, for the purposes therein contained.

In witness whereof, I hereunto set may hand and official seal.


                                        /s/ COURTNEY P. MITCHELL
                                        ----------------------------------------
                                        Notary Public
                                        COURTNEY P. MITCHELL
                                        Notary Public, State of New York
                                        No. 0lMI602687
                                        Qualified in New York County
                                        Commission Expires November 04, 2006



                                    EXHIBIT A

                                LEGAL DESCRIPTION



                                    EXHIBIT B

                              PERMITTED EXCEPTIONS



                                    EXHIBIT C

                             ADDITIONAL STIPULATIONS

     C-1 Repair and Remediation Reserve. Prior to the execution of this
Mortgage, Mortgagee has caused the Property to be inspected and such inspection
has revealed that the Property is in need of certain maintenance, repairs and/or
remedial or corrective work. Contemporaneously with the execution hereof,
Mortgagor has established with the Mortgagee a reserve in the amount of
$6,875.00 (the "Repair and Remediation Reserve"), which amount represents 125%
of the estimated cost to complete such items of Deferred Maintenance (as defined
herein), by depositing such amount with Mortgagee. Mortgagor shall cause each of
the items described in that certain engineering report dated April 24, 2003 and
prepared by ComTech Services, Inc. ComTech Services, Inc. as reviewed and
commented on by a desktop review prepared by Certified Environments, Inc. dated
April 29, 2003 (all of the foregoing, the "Engineering Report"), relative to the
Property, a copy of which has been provided to, and receipt of which is hereby
acknowledged by, Mortgagor (the "Deferred Maintenance") to be completed,
performed, remediated and corrected to the satisfaction of Mortgagee and as
necessary to bring the Property into compliance with all applicable laws,
ordinances, rules and regulations on or before one year from the date hereof, as
such time period may be extended by Mortgagee in its sole discretion. So long as
no default hereunder or under the other Loan Documents has occurred and is
continuing (i) all sums in the Repair and Remediation Reserve shall be held by
Mortgagee in the Repair and Remediation Reserve to pay the costs and expenses of
completing the Deferred Maintenance, and (ii) Mortgagee shall, to the extent
funds are available for such purpose in the Repair and Remediation Reserve,
disburse to Mortgagor the amount paid or incurred by Mortgagor in completing,
performing, remediating or correcting the Deferred Maintenance upon (a) the
receipt by Mortgagee of a written request from Mortgagor for disbursement from
the Repair' and Remediation Reserve which shall include a certification by
Mortgagor that the applicable item of Deferred Maintenance has been completed in
accordance with the terms of this Mortgage, (b) delivery to Mortgagee of
invoices, receipts or other evidence satisfactory to Mortgagee verifying the
costs of the Deferred Maintenance to be reimbursed, (c) for any single Deferred
Maintenance item in excess of $20,000.00 (or for any Deferred Maintenance item
structural in nature), and prior to disbursement of the final $20,000.00,
delivery to Mortgagee of a certification from an inspecting architect, engineer
or other consultant reasonably acceptable to Mortgagee describing the completed
work, verifying the completion of the work and the value of the completed work
and, if applicable, certifying that the Property is, as a result of such work,
in compliance with all applicable laws, ordinances, rules and regulations
relating to the Deferred Maintenance so performed, and (d) delivery to Mortgagee
of affidavits, lien waivers or other evidence reasonably satisfactory to
Mortgagee showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished materials or labor to the Property have been paid
all amounts due for such labor and materials furnished to the Property,
Mortgagee shall not. be required to make advances from the Repair and
Remediation Reserve more frequently than one time in any calendar month. In
making any payment from the Repair and Remediation Reserve, Mortgagee shall be
entitled to rely on such request from Mortgagor without any inquiry into the
accuracy, validity or contestability of any such amount No interest or other
earnings on. the funds contained in the Repair and Remediation Reserve shall be
paid to



Mortgagor and any interest or other earnings on funds deposited into the Repair
and Remediation Reserve shall be solely for the account of Mortgagee, In the
event that the amounts on deposit or available in the Repair and Remediation
Reserve are inadequate to pay the costs of the Deferred Maintenance, Mortgagor
shall pay the amount of such deficiency.

     C-2 Replacement Reserve. As additional security for the indebtedness
secured hereby, Mortgagor shall establish and maintain at all times while this
Mortgage continues in effect a repair reserve (the "Replacement Reserve"), with
Mortgagee for payment of costs and expenses incurred by Mortgagor in connection
with capital improvements, repairs and replacements, including the performance
of work to the roofs, chimneys, gutters, downspouts, paving, curbs, ramps,
driveways, balconies, porches, patios, exterior walls, exterior doors and
doorways, windows, carpets, appliances, fixtures, elevators and mechanical and
HVAC equipment (collectively the "Repairs). Commencing on the first monthly
payment date under the Note and continuing thereafter on each monthly payment
date under the Note, Mortgagor shall pay to Mortgagee, concurrently with the
monthly payment due under the Note, a deposit to the Replacement Reserve in an
amount equal to $517.83. So long as no default here under or under the other
Loan Documents has occurred and is continuing, (i) all sums in the Replacement
Reserve shall be held by Mortgagee in the Replacement Reserve to pay the costs
and expense of Repairs, and (ii) Mortgagee shall, to the extent funds are
available for such purpose in the Replacement Reserve, disburse to Mortgagor the
amount paid or incurred by Mortgagor in performing such Repairs within ten (10)
days following: (a) the receipt by Mortgagee of a written request from Mortgagor
for disbursement from the Replacement Reserve and a certification by Mortgagor
to Mortgagee that the applicable item of Repair has been completed; (b) the
delivery to Mortgagee of invoices, receipts or other evidence verifying the cost
of performing the Repairs; and (c) for disbursement requests (i) in excess of
$20,000.00 with respect to any single Repair, or (ii) for any single Repair that
is structural in nature, delivery to Mortgagee of (I) affidavits, lien waivers
or other evidence reasonably satisfactory to Mortgagee showing that all
materialmen, laborers, subcontractors and any other parties who might or could
claim statutory or common law Liens and are furnishing or have furnished
material or labor to the Property have been paid all amounts due for labor and
materials furnished to the Property; (2) a certification from an inspecting
architect or other third party acceptable to Mortgagee describing the completed
Repairs and verifying the completion of the Repairs and the value of the
completed Repairs; and (3) a new (or amended) certificate of occupancy for the
portion of the Improvements covered by such Repairs, if said new certificate of
occupancy was required by law, or a certification by Mortgagor that no new
certificate of occupancy was required by law. Mortgagee shall not be required to
make advances from the Replacement Reserve more frequently than one time in any
calendar month. In malting any payment from the Replacement Reserve, Mortgagee
shall be entitled to rely on such request from Mortgagor without any inquiry
into the accuracy, validity or contestability of any such amount. Mortgagee may,
at Mortgagor's expense (not to exceed $2,500.00 annually), make or cause to be
made during the term of this Mortgage an annual inspection of the Property to
determine the need, as determined by Mortgagee in its reasonable judgment, for
further Repairs of the Property. In the event that such inspection reveals that
further Repairs of the Property are required, Mortgagee shall provide Mortgagor
with a written description of the required Repairs and Mortgagor shall complete
such Repairs to the reasonable satisfaction of Mortgagee within ninety (90) days
(subject to force maj eure) after the receipt of such description from
Mortgagee, or such later date as may be approved by Mortgagee in its reasonable
discretion. Interest or other earnings on the funds



contained in the Replacement Reserve shall be credited to Mortgagor as provided
in Section 4.28 hereof in the event that the amounts on deposit or available in
the Replacement Reserve are inadequate to pay the cost of the Repairs, Mortgagor
shall pay the amount of such deficiency.



ARTICLE I COVENANTS OF MORTGAGOR                                               5
   1.1.       Warranties of Mortgagor                                          5
   1.2.       Defense of Title                                                10
   1.3.       Performance of Obligations                                      10
   1.4.       Insurance                                                       10
   1.5.       Payment of Taxes                                                13
   1.6.       Tax and Insurance Impound Account                               14
   1.7.       Tenant Improvements and Leasing Commissions Reserve.            14
   1.8.       Security Interest In Reserves                                   18
   1.9.       Casualty and Condemnation                                       19
   1.10.      Mechanics' Liens                                                22
   1.11.      Assignment of Leases and Rents                                  22
   1.12.      Leases and Licenses.                                            23
   1.13.      Alienation and Further Encumbrances.                            24
   1.14.      Payment of Utilities, Assessments, Charges, Etc                 29
   1.15.      Access Privileges and Inspections                               29
   1.16.      Waste; Alteration of the Property                               29
   1.17.      Zoning; Use                                                     29
   1,18.      Financial Statements and Books and Records                      30
   1.19.      Further Documentation                                           31
   1.20.(a)   Payment of Costs                                                31
   1.21.      Security Interest                                               32
   1.22.      Security Agreement                                              33
   1.23,      Easements and Rights-of-Way                                     34
   1.24.      Compliance with Laws                                            34
   1.25.      Additional Taxes                                                35
   1.26.      Mortgagor's Waivers                                             35
   1.27.      SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.               36
   1.28.      Contractual Statute of Limitations                              37
   1.29.      Management                                                      37
   1.30.      Hazardous Materials and Environmental Concerns.                 38
   1.31.      INDEMNIFICATION; SUBROGATION.                                   42
   1.32.      Covenants with Respect to Indebtedness; Operations
                 and Fundamental. Changes of Mortgagor 43
   1.33.      Litigation                                                      45
   1.34.      ERISA                                                           45
   1.35.      Defeasance.                                                     46
ARTICLE II EVENTS OF DEFAULT 51. 2.1. Events of Default                       51
ARTICLE III REMEDIES'                                                         53
    3.1.      Remedies Available                                              53
    3.2.      Application of Proceeds                                         55
    3.3.      Right and Authority of Receiver or Mortgagee in the Event of
                 Default; Power of Attorney                                   56
    3.4.      Occupancy After Foreclosure                                     57
    3.5.      Notice to Account Debtors                                       57



    3.6.      Cumulative Remedies                                             58
    3.7.      Payment of Expenses                                             58

ARTICLE IV MISCELLANEOUS TERMS AND CONDITIONS                                 58
    4.1.      Time of Essence                                                 58
    4.2.      Release of Mortgage                                             58
    4.3.      Action by Mortgagee                                             58
    4.4.      Notices                                                         59
    4.5.      Successors and Assigns                                          60
    4.6.      Severability                                                    60
    4.7.      Gender                                                          60
    4.8.      Waiver; Discontinuance of Proceedings                           60
    4.9.      Section Headings                                                61
   4.10.      GOVERNING LAW                                                   61
   4.11.      Counting of Days                                                61
   4.12.      Application of the Proceeds of the Note                         61
   4.13.      Unsecured Portion of Indebtedness                               61
   4.14.      Cross Default                                                   61
   4.15.      Interest After Sale                                             61
   4.16.      Construction of this Document                                   62
   4.17.      No Merger                                                       62
   4.18.      Rights With Respect to Junior Encumbrances                      62
   4.19.      Mortgagee May File Proofs of Claim                              62
   4.20.      After-Acquired Property                                         62
   4.21.      No Representation                                               62
   4.22.      Counterparts                                                    63
   4.23.      Personal Liability                                              63
   4.24.      Recording and Filing                                            63
   4.25.      Entire Agreement and Modifications                              63
   4.26.      Maximum Interest                                                63
   4.27.      Application of Default Interest Rate Not a Waiver               64
   4.28:      Interest Payable by Mortgagee                                   64
   4.29.      Further Stipulations                                            64
   4.30.      Relationship of the Parties                                     64
   4.31.      Fixture Filing                                                  64
   4.32.      Cooperation With Rating Agencies and Investors                  65



                           THOR CHESTNUT HILL, LP and
                            THOR CHESTNUT HILL II, LP
                            (collectively, Borrower)

                                       to

                             COLUMN FINANCIAL, INC.,
                                    (Lender)

                         ASSIGNMENT OF LEASES AND RENTS

Dated: As of June_____, 2003

Location: Philadelphia County, Pennsylvania

PREPARED BY AND UPON
RECORDATION RETURN TO:

Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: David M. Traitel, Esq.



                         ASSIGNMENT OF LEASES AND RENTS

                                 Loan No. 271089

     THIS ASSIGNMENT OF LEASES AND RENTS (this "Assignment") made as of
June______, 2003, is by THOR CHESTNUT HILL, LP, a Delaware limited partnership
("Chestnut I") and THOR CHESTNUT HILL II, LP, a Delaware limited partnership
(Chestnut II"), each having an address do Thor Equities, LLC, 139 Fifth Avenue,
New York, New York 10010, (Chestnut I and Chestnut are, collectively,
"Borrower"), jointly and severally, to and in favor of COLUMN FINANCIAL, INC., a
Delaware corporation ("Lender"), whose address is 11 Madison Avenue, 9th Floor,
New York, New York 10010, Att: Edmund Taylor.

                                   WITNESSETH:

     THAT, WHEREAS, Borrower has executed a certain Promissory Note dated of
even date herewith (the "Note"), payable to the order of Lender in the stated
principal amount of TEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($10,500,000.00) (the "Loan"); and

     WHEREAS, the Note is secured by, among other things, that certain Mortgage
and Security Agreement dated of even date herewith (the "Security Instrument"),
from Borrower, as mortgagor, encumbering that certain real property situated in
the County of Philadelphia, Commonwealth of' Pennsylvania, as is more
particularly described on Exhibit A attached hereto and incorporated herein by
this reference, and together with all buildings and other improvements now or
hereafter located thereon (collectively, the 'Improvements) (said real property
and the Improvements are hereinafter sometimes collectively referred to as the
'Property'); and

     WHEREAS, Borrower is desirous of further securing to Lender the performance
of the terms, covenants and agreements hereof and of the Note, the Security
Instrument and each other document and agreement evidencing, securing,
guaranteeing or otherwise relating to the indebtedness evidenced by the Note
(the Note, the Security Instrument and such other documents and agreements, as
each of the foregoing may from time to time be amended, consolidated, renewed or
replaced, being collectively referred to herein as the "Loan Documents").

     NOW, THEREFORE, in consideration of the making of the Loan evidenced by the
Note by Lender to Borrower and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower does hereby
irrevocably, absolutely and unconditionally transfer, sell, assign, pledge and
convey to Lender, its successors and assigns, all of the right, title and
interest of Borrower in and to:

     (a) any and all leases, licenses, rental agreements and occupancy
agreements of whatever form now or hereafter affecting all or any part of the
Property and any and all guarantees, extensions, renewals, replacements and
modifications thereof (collectively, the "Leases"); and



     (b) all deposits (whether for security or otherwise), rents, issues,
profits, revenues, royalties, accounts, rights, benefits, and income of every
nature of and from the Property, including, without limitation, minimum rents,
additional rents, termination payments, forfeited security deposits, liquidated
damages following default and all proceeds payable under any policy of insurance
covering loss of rents resulting from untenantability due to destruction or
damage to the Property, together with- the immediate and continuing right to
collect and receive the same, whether now due or hereafter becoming due, and
together with all rights and claims of any kind that Borrower may have against
any tenant, lessee or licensee under the Leases or against any other occupant of
the Property (collectively, the "Rents").

     TO HAVE AND TO HOLD the same unto Lender, its successors and assigns.

     IT IS AGREED that, notwithstanding that this instrument is a present,
absolute and executed assignment of the Rents and of the Leases arid a present,
absolute and executed grant of the powers herein granted to Lender, Borrower is
hereby permitted, at the sufferance of Lender and at its discretion, and is
hereby granted a license by Lender, to retain possession of the Leases and to
collect and retain the Rents unless and until there shall be a default under the
terms of any of the Loan Documents, which default has not been cured within any
applicable grace or cure period. In the event of such uncured default, the
aforementioned license granted to Borrower shall automatically terminate without
notice to Borrower, and Lender may thereafter, without taking possession of the
Property, demand, collect (by suit or otherwise), receive and give valid and
sufficient receipts for any and all of the Rents or take possession of the
Leases, for which purpose Borrower does hereby irrevocably make, constitute and
appoint Lender its attorney in fact with full power to appoint substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable
so long as any portion of the Loan is outstanding shall be deemed to be coupled
with an interest, shall survive the voluntary or involuntary dissolution of
Borrower and shall not be affected by any disability or incapacity suffered by
Borrower subsequent to the date hereof). Further, from and after such
termination, Borrower shall be the agent of Lender in collection of the Rents,
and any Rents so collected by Borrower shall be held in trust by Borrower for
the sole and exclusive benefit of Lender and Borrower shall, within one (I)
business thy after receipt of any Rents, pay the same to Lender to be applied by
Lender as hereinafter set forth. Further, from and after such uncured default
and termination of the aforementioned license, Lender shall have the right and
authority, without any notice whatsoever to Borrower and without regard to the
adequacy of the security therefore, to: (a) manage and operate the Property,
with full power to employ agents to manage the same; (b) demand, collect,
receive and sue for the Rents, including those past due and unpaid; and (c) do
all acts relating to such management of the Property, including, but not limited
to, negotiation of new Leases, making adjustments of existing Leases,
contracting and paying for repairs and replacements to the Improvements and to
the fixtures, equipment and personal property located in the Improvements or
used in any way in the operation, use and occupancy of the Property as in the
sole subjective judgment and discretion of Lender may be necessary to maintain
the same in a tenantable condition, purchasing and paying for such additional
furniture arid equipment as in the sole subjective judgment of Lender may be
necessary to maintain a proper rental income from the Property, employing
necessary managers and other employees, purchasing fuel, providing utilities and
paying for all other expenses incurred in the operation of the Property,
maintaining adequate insurance coverage over hazards customarily insured against
and paying the premiums therefore. Lender may apply the Rents received by Lender
from the Property, after deducting the



costs of collection thereof, including, without limitation, attorneys' fees and
a management fee for any management agent so employed, against amounts expended
for repairs, upkeep, maintenance, service, fuel, utilities, taxes, assessments,
insurance premiums and such other expenses as Lender incurs in connection with
the operation of the Property and against interest, principal, required escrow
deposits and other sums which have or which may become due, from time to time,
under the terms of the Loan Documents, in such order or priority as to any of
the items so mentioned as Lender, in its sole subjective discretion, may
determine. The exercise by Lender of the rights granted Lender in this
paragraph, and the collection of the Rents and the application thereof as herein
provided, shall not be considered a waiver by Lender of any default under the
Loan Documents or prevent foreclosure of any liens on the Property nor shall
such exercise make Lender liable under any of the Leases, Lender hereby
expressly reserving all of its rights and privileges under the Security
Instrument and the other Loan Documents as fully as though this Assignment had
not been entered into.

     Without limiting the rights granted hereinabove, in the event Borrower
shall fall to make any payment or to perform any act required under the terms
hereof and such failure shall not be cured within any applicable grace or cure
period, then Lender may, but shall not be obligated to, without prior notice to
or demand on Borrower, and without releasing Borrower from any obligation
hereof, make or perform the same in such manner and to such extent as Lender may
deem necessary to protect the security hereof, including specifically, without
limitation, appearing in and defending any action or proceeding purporting to
affect the security hereof or the rights or powers of Lender, performing or
discharging any obligation, covenant or agreement of Borrower under any of the
Leases, and, in exercising any of such powers, paying all necessary costs and
expenses, employing counsel and incurring and paying attorneys' fees. Any sum
advanced or paid by Lender for any such purpose, including, without limitation,
attorneys' fees, together with interest thereon at the Default Interest Rate (as
defined in the Note) from the date paid or advanced by Lender until repaid by
Borrower, shall immediately be due and payable to Lender by Borrower on demand
and shall be secured by the Security Instrument and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.

     IT IS FURTHER AGREED that this Assignment is made upon the following terms,
covenants and conditions:

     I. This Assignment shall not operate to place responsibility for the
control, care, management or repair of the Property upon Lender, nor for the
performance of any of the terms and conditions of any of the Leases, nor shall
it operate to make Lender responsible or liable for any waste committed on the
Property by the tenants or any other party or for any dangerous or defective
condition of the Property or for any negligence in the management, upkeep,
repair or control of the Property. Lender shall not be liable for any loss
sustained by Borrower resulting from Lender's failure or inability to collect
Rents, proceeds or other payments, or to let the Property, or from any other act
or omission of Lender in managing the Property. BORROWER SHALL AND DOES HEREBY
INDEMNIFY AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL LIABILITY, LOSS,
CLAIM, DEMAND OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY REASON OF THIS
ASSIGNMENT, INCLUDING, WITHOUT LIMITATION, CLAIMS OR DEMANDS FOR SECURITY
DEPOSITS PROM TENANTS OF SPACE IN THE IMPROVEMENTS DEPOSITED WITH BORROWER, AND
FROM AND. AGAINST ANY AND ALL CLAIMS AND DEMANDS



WHATSOEVER WHICH MAY BE ASSERTED AGAINST LENDER BY REASON OF ANY ALLEGED
OBLIGATIONS OR UNDERTAKING ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS,
COVENANTS OR AGREEMENTS CONTAINED IN ANY OF THE LEASES. SHOULD LENDER INCUR ANY
LIABILITY BY REASON OF THIS ASSIGNMENT OR IN DEFENSE OF ANY CLAIM OR DEMAND FOR
LOSS OR DAMAGE AS PROVIDED ABOVE, THE AMOUNT THEREOF, INCLUDING, WITHOUT
LIMITATION, COSTS, EXPENSES AND ATTORNEYS' FEES, TOGETHER WITH INTEREST THEREOF
AT THE DEFAULT INTEREST RATE FROM THE DATE PAID OR INCURRED BY LENDER UNTIL
REPAID BY BORROWER, SHALL BE IMMEDIATELY DUE AND PAYABLE TO LENDER BY BORROWER
UPON DEMAND AND SHALL BE SECURED BY THE SECURITY INSTRUMENT AND BY ALL OF THE
OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE INDEBTEDNESS EVIDENCED BY
THE NOTE.

     2. This Assignment shall not be construed as making Lender a mortgagee in
possession.

     3. Lender is obligated to account to Borrower only for such Rents as are
actually collected or received by Lender.

     4. Borrower hereby further presently and absolutely assigns to Lender
subject to the terms and provisions of this Assignment: (a) any award or other
payment which Borrower may hereafter become entitled to receive with respect to
any of the Leases as a result of or pursuant to any bankruptcy, insolvency or
reorganization or similar proceedings involving the tenants under such Leases;
and (b) any and all payments made by or on behalf of any tenant of any part of
the Property in lieu of Rent. Borrower hereby irrevocably appoints Lender as its
attorney- in fact to, from and after the occurrence of a default by Borrower
hereunder or under any of the other Loan Documents which has not been cured
within any applicable grace or cure period, appear in any such proceeding and to
collect any such award or payment, which power of attorney is coupled with an
interest by virtue of this Assignment and is irrevocable so long as any sums are
outstanding under the loan evidenced by the Note.

     5. Borrower represents, warrants and covenants to and for the benefit of
Lender: (a) that Borrower now is (or with respect to any Leases not yet in
existence, will be immediately upon the execution thereof) the absolute owner of
the landlord's interest in the Leases, with full right and title to assign the
same and the Rents due or to become due thereunder; (b) that, other than this
Assignment and those assignments if any, specifically permitted in the Security
Instrument, there are no outstanding pledges or assignments of the Leases or
Rents; (c) that no Rents have been anticipated, discounted, released, waived,
compromised or otherwise discharged except for prepayment of rent of not more
than one (1) month prior to the accrual thereof; (d) that there are no material
defaults now existing under any of the Leases by the landlord or tenant; and, to
the best of Borrowers knowledge, there exists no state of facts which, with the
giving of notice or lapse of time or both, would constitute a default under any
of the Leases by the landlord or tenant; except as disclosed in writing to
Lender; (e) that Borrower has and shall duly and punctually observe and perform
all covenants, conditions and agreements in the Leases on the part of the
landlord to be observed and performed thereunder; and (f) the Leases are in full
force



and effect and are the valid and binding obligations of Borrower, and, to the
knowledge of Borrower, are the valid and binding obligations of the tenants
thereto.

     6. Borrower covenants and agrees that Borrower shall not, without the prior
written consent of Lender: (a) exclusive of security deposits, accept any
payment of Rent or installments of Rent for more than one (I) month in advance;
(b) enter into any Lease having a term of less than six (6) months or in excess
of ten (10) years or in excess of 6,000 square feet (c) cancel or terminate any
Lease (other than for - non-payment of Rent or any other material default
thereunder) or amend or modify any Lease; (d) take or omit to take any action or
exercise any right or option which would permit the tenant under any Lease to
cancel or terminate said Lease; (e) anticipate, discount, release, waive,
compromise or otherwise discharge any Rents payable or other obligations under
the Leases; (0 further pledge, transfer, mortgage or otherwise encumber or
assign the Leases or future payments of Rents except as otherwise expressly
permitted by the terms of the Security Instrument or incur any material
indebtedness, liability or other obligation to any tenant, lessee or licensee
under the Leases; or (g) permit any Lease to become subordinate to any lien
other than the lien of the Security Instrument provided, however, that Borrower
may take any of the actions described in subsection (c) or (e) above so long as
such actions are taken by Borrower in tie ordinary course of business and are
consistent with sound customary leasing and management practices for similar
properties.

     7. Borrower covenants and agrees that Borrower shall, at its sole cost and
expense, appear in and defend any action or proceeding arising under, growing
out of, or in any manner connected with the Leases or the obligations, duties or
liabilities of the landlord or tenant thereunder, and shall pay on demand all
costs and expenses, including, without limitation, attorneys' fees, which Lender
may incur in connection with Lender's appearance, voluntary or otherwise, in any
such action or proceeding, together with interest thereon at the Default
Interest Rate from the date incurred by Lender until repaid by Borrower.

     8. At any time, Lender may, at its option, notify any tenants or other
parties of the existence of this Assignment. Borrower does hereby specifically
authorize, instruct and direct each and every present and future tenant, lessee
and licensee of the whole or any part of the Property to pay all unpaid and
future Rents to Lender upon receipt of demand from Lender to so pay the sane and
Borrower hereby agrees that each such present and future tenant, lessee and
licensee may rely upon such written demand from Lender to so pay said Rents
without any inquiry into whether there exists a default hereunder or under the
other Loan Documents or whether Lender is otherwise entitled to said Rents,
Borrower hereby waives any right, claim or demand which Borrower may now or
hereafter have against any present or future tenant lessee or licensee by reason
of such payment of Rents to Lender, and any such payment shall discharge such
tenant's, lessee's or licensee's obligation to make such payment to Borrower.

     9. Lender may take or release any security for the indebtedness evidenced
by the Note, may release any party primarily or secondarily liable for the
indebtedness evidenced by the Note, may grant extensions, renewals or
indulgences with respect to the indebtedness evidenced by the Note and may apply
any other security therefore held by it to the satisfaction of any indebtedness
evidenced by the Note without prejudice to any of its rights hereunder.



     10. The acceptance of this Assignment and the collection of the Rents in
the event Borrower's license is terminated, as referred to above, shall be
without prejudice to Lender. The rights of Lender hereunder are cumulative and
concurrent, may be pursued separately, successively or together and may be
exercised as often as occasion therefore shall arise, it being agreed by
Borrower that the exercise of any one or more of the rights provided for herein
shall not be construed as a waiver of any of the other rights or remedies of
Lender, at law or in equity or otherwise, so long as any obligation under the
Loan Documents remains unsatisfied.

     11. All rights of Lender hereunder shall inure to the benefit of its
successors and assigns, and all obligations of Borrower shall bind its
successors and assigns and any subsequent owner of the Property. All rights of
Lender in, to and under this Assignment shall pass to and may be exercised by
any assignee of such rights of Lender. Borrower hereby agrees that if Lender
gives notice to Borrower of an assignment of said rights, upon such notice the
liability of Borrower to the assignee of the Lender shall be immediate and
absolute. Borrower will not set up any claim against Lender or any intervening
assignee as a defense, counterclaim or set-off to any action brought by Lender
or any intervening assignee for any amounts due hereunder or for possession of
or the exercise of rights with respect to the Leases or the Rents.

     12. It shall be a default hereunder (a) if any representation or warranty
made herein by Borrower is determined by Lender to have been false or misleading
in any material respect at the time made, or (b) upon any failure by Borrower to
comply with the provisions of Paragraph 6 above or (c) upon any failure by
Borrower in the performance or observance of any other covenant or condition
hereof and, to the extent such failure described in this subsection (c) is
susceptible of being cured, the continuance of such failure for thirty (30) days
after written notice thereof from Lender to Borrower; provided, however, that if
such default is susceptible of cure but such cure cannot be accomplished with
reasonable diligence within said period of time, and if Borrower commences to
cure such default promptly after receipt of notice thereof from Lender, and
thereafter prosecutes the curing of such default with reasonable diligence, such
period of time shall be extended for such period of time as may be necessary to
cure such default with reasonable diligence, but not to exceed an additional
ninety (90) days. Any such default not so cured shall be a default under each of
the other Loan Documents, entitling Lender to exercise any or all rights and
remedies available to Lender under the terms hereof or of any or all of the
other Loan Documents, and any default under any other Loan Document which is not
cured within any applicable grace or cure period shall be deemed a default
hereunder subject to no grace or cure period, entitling Lender to exercise any
or all rights provided for herein, -

     13. Failure by Lender to exercise any right which it may have hereunder
shall not be deemed a waiver thereof unless so agreed in writing by Lender, and
the waiver by Lender of any default hereunder shall not constitute a continuing
waiver or a waiver of any other default or of the same default on any future
occasion, No collection by Lender of any Rents pursuant to this Assignment shall
constitute or result in a waiver of any default then existing hereunder or under
any of the other Loan Documents.

     14. If any provision under this Assignment or the application thereof to
any entity, person or circumstance shall be invalid, illegal or unenforceable to
any extent, the remainder of this Assignment and the application of the
provisions hereof to other entities, persons or



circumstances shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.

     15. This Assignment may not be amended, modified or otherwise changed
except by a written instrument duly executed by Borrower and Lender.

     16. This Assignment shall be in full force and effect continuously front
the date hereof to and until the Security Instrument shall be released of
record, and the release of the Security Instrument shall, for all purposes,
automatically terminate this Assignment and render this Assignment null and void
and of no effect whatsoever.

     17. All notices, demands, requests or other communications to be sent by
one party to the other hereunder or required by law shall be given and become
effective as provided in the Security Instrument.

     18. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OP PENNSYLVANIA, EXCEPT TO THE EXTENT THAT ANY OF
SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH
FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING; PROVIDED HOWEVER THAT THE LAWS
OF THE STATE IN WHICH THE REAL PROPERTY ON EXHIBIT A ATTACHED HERETO IS LOCATED
SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF LIENS AND SECURITY
INTERESTS IN PROPERTY LOCATED IN SUCH STATE.

     19. This Assignment may be executed in any number of counterparts, each of
which shall be effective only upon delivery and thereafter shall be deemed an
original, and all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature page. Any
signature page of this Assignment may be detached front any counterpart of this
Assignment without impairing the legal effect of any signatures thereon and may
be attached to another counterpart of this Assignment identical in form hereto
but having attached to it one or more additional signature pages.

     20. In addition to, but not in lieu of, any other rights hereunder, Lender
shall have the right to institute suit and obtain a protective or mandatory
injunction against Borrower to prevent a breach or default, or to enforce the
observance, of the agreements, covenants, terms and conditions contained herein,
as well as the right to damages occasioned by any breach or default This
Assignment shall continue and remain in full force and effect during any period
of foreclosure with respect to the Property.

     21. Borrower hereby covenants and agrees that Lender shall be entitled to
all of the rights, remedies and benefits available by statute, at law, in equity
or as a matter of practice for the enforcement and perfection of the intents and
purposes hereof. Lender shall, as a matter of absolute right, be entitled, upon
application to a court of applicable jurisdiction, to the appointment of a
receiver to obtain and secure the rights of Lender hereunder and the benefits
intended to be provided to Lender hereunder.

     22. Notwithstanding anything to the contrary contained in this Assignment,
the liability of Borrower and its general partners for the indebtedness secured
hereby and for the



performance of the other agreements, covenants and obligations contained herein
and in the Loan Documents shall be limited as set forth in Section 1.05 of the
Note; provided, however, that nothing herein shall be deemed to be a waiver of
any right which Assignee may have under Sections 506(a), 506(b), 1111(b) or any
other provisions of the U.S. Bankruptcy Code to file a claim for the full amount
of the indebtedness secured hereby or to require that all collateral shall
continue to secure all indebtedness owing to Lender in accordance with the Note,
this Assignment and the other Loan Documents.

                         [NO FURTHER TEXT ON THIS PAGE]



     IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
executed this Assignment as of the day and year first above written.

                                        THOR CHESTNUT HILL, LP,
                                        a Delaware limited partnership

                                        By: Thor GP Chestnut Hill, LLC,
                                            a Delaware limited liability
                                            company, its general partner


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


                                        THOR CHESTNUT HILL II, LP,
                                        a Delaware limited partnership

                                        By: Thor GP Chestnut Hill II, LLC, a
                                            Delaware limited liability company,
                                            its general partner


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



State/Commonwealth of New York County of New York

On this, the __________ day of June, 2003 before me _____________________, the
undersigned officer, personally appeared_______________________________- known
to me (or satisfactorily proven) to be the ______________________ of Thor GP
Chestnut Hill, LLC, a Delaware limited liability company, which is the general
partner of Thor Chestnut Hill, LP, a Delaware limited duly authorized to do so
partnership, and acknowledged that he/she as such _______________being duly
authorized to do so, executed the foregoing instrument on behalf of such
___________________________ as manager of such limited partnership, for the
purposes therein contained.

In witness whereof, I hereunto set may hand and official seal.

(Seal)

                                        ----------------------------------------
                                        Notary Public
                                        COURTNEY P. MITCHELL
                                        Notary Public, State of New York
                                        No. 01M16082687
                                        Qualified in New York County
                                        Commission Expires November 04, 2006

State/Commonwealth of New York
County of New York

On this, the ______ day of June 2003, before me _________________the undersigned
officer, personally appeared ___________________________- known to me (or
satisfactorily proven) to be the________________________ of Thor GP Chestnut
Hill II, LLC, a Delaware limited liability company, which is the general partner
of Thor Chestnut Hill II, LP, a Delaware limited partnership, and acknowledged
instrument on behalf of such __________________, as manager of such limited
partnership, for the purposes therein contained.

In witness whereof, I hereunto set may hand and official seal.

(Seal)
                                        ----------------------------------------
                                        Notary Public
                                        COURTNEY P. MITCHELL
                                        Notary Public, State of New York
                                        No. 01M16082657
                                        Qualified in New York County
                                        Commission Expires November 04, 2006



                                    EXHIBIT A

                              PROPERTY DESCRIPTION

EX-31.1

                                                                    EXHIBIT 31.1

    CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a - 14(a)
                 (SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Kenneth F. Bernstein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acadia Realty Trust;

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 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)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we 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) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

(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 year 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 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 registrant's board of directors
(or persons performing the equivalent function);

(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.


                                          /s/ Kenneth F. Bernstein
                                          -------------------------------------
                                          Kenneth F. Bernstein
                                          President and Chief Executive Officer
                                          August 9, 2006

EX-31.2

                                                                    EXHIBIT 31.2

    CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a - 14(a)
                 (SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Michael Nelsen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acadia Realty Trust;

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 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)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we 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) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

(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 year 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 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 registrant's board of directors
(or persons performing the equivalent function);

(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.


                                                /s/ Michael Nelsen
                                                -------------------------------
                                                Michael Nelsen
                                                Senior Vice President and
                                                Chief Financial Officer
                                                August 9, 2006

EX-32.1

                                                                    EXHIBIT 32.1

 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
                 (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the Quarterly Report of Acadia Realty Trust (the "Company")
on Form 10-Q for the quarter ended June 30, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Kenneth F.
Bernstein, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) 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.

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


                                           /s/ Kenneth F. Bernstein
                                           -------------------------------------
                                           Kenneth F. Bernstein
                                           President and Chief Executive Officer
                                           August 9, 2006

EX-32.2

                                                                    EXHIBIT 32.2

 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
                 (SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the Quarterly Report of Acadia Realty Trust (the "Company")
on Form 10-Q for the quarter ended June 30, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Michael Nelsen,
Sr. Vice President and Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) 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.

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


                                                /s/ Michael Nelsen
                                                --------------------------------
                                                Michael Nelsen
                                                Senior Vice President and
                                                Chief Financial Officer
                                                August 9, 2006