content: SECURITIES AND EXCHANGE COMMISSION
  
                               Washington, DC  20549
  
  
                                     FORM 8-K
  
                                  CURRENT REPORT
  
  
  
                      Pursuant to Section 13 or 15(d) of the
                        Securities and Exchange Act of 1934
  
  
               Date of Report (Date of earliest event reported) March 13, 1996
  
                            Paine Webber Growth Properties Two LP
                   (Exact name of registrant as specified in its charter)
  
       Delaware                       0-12085                      04-2798594
  (State or other jurisdiction)    (Commission                   (IRS Employer
          of incorporation          File Number)              Identification No.)
  
  
  
  265 Franklin Street, Boston, Massachusetts                            02110
  (Address of principal executive offices)                            (Zip Code)
  
  Registrant's telephone number, including area code (617) 439-8118
  
  
              (Former name or address, if changed since last report)
  
  
  
  
  
  
  
  <PAGE>
  
  
                                          FORM 8-K
                                       CURRENT REPORT
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
  
  ITEM 2 - Disposition of Assets
  
     Walker House Apartments,   Montgomery Village, MD
  
     Disposition Date - March 13,  1996
  
       On March 13, 1996, the Partnership's joint venture investee which owned the
  Walker House Apartments sold the operating  investment property for $10,650,000.
  The existing  mortgage  loan balance of $5,010,817  was paid off in  conjunction
  with the sale, and the venture paid closing costs of approximately $235,000, The
  net proceeds from this sale totalled  approximately  $5.4 million,  of which the
  co-venture partner was entitled to $220,000 under the terms of the joint venture
  agreement.  Paine Webber Growth  Properties Two LP received net sale proceeds of
  approximately $5.2 million.
  
       The current  operations of the Walker House  apartment  complex reflect the
  generally  improving  conditions  in the real estate  markets  for  multi-family
  residential  properties across the country.  Over the past year, average monthly
  rental rates at Walker House have increased by approximately  2.5% to a level of
  $753 per  apartment  unit.  Management  believed  with the  property  performing
  favorably  it was an  appropriate  time to market  the  property  for sale.  The
  Partnership  started formally  marketing the Walker House Apartments for sale in
  September 1995. After receiving  significant  interest from a number of parties,
  the joint venture successfully  consummated the transaction described above. The
  Partnership's  share of the net  proceeds is expected to be  distributed  to the
  Limited Partners as a Special  Distrisbution  paid concurrently with the regular
  quarterly distributon on May 15, 1996.
  
  
  ITEM 7 - Financial Statements and Exhibits
  
     (a)   Financial Statements:  None
  
     (b)   Exhibits:
  
        (1)Purchase   Agreement  between  Montgomery  Village  Associates  (as
           Seller) and Washington Real Estate  Investment Trust (as Purchaser)
           Dated: January 19, 1996
  
        (2)Ratification  of  Purchase  Agreement  between  Montgomery  Village HWH
           Associates ("Seller"), as seller, and Washington Real Estate Investment
           Trust  ("WREIT"),  as  purchaser,  as assigned by WREIT to WRIT Limited
           Partnership,  Seller,  whose  general  partners are Paine Webber Growth
           Properties  Two  LP  (PWGPTLP"),   and   Montgomery   Village   Limited
           Partnership ("MVLP")
  
        (3)Bill  of  Sale by  Montgomery  Village  Associates  HWH  Associates,  a
           Maryland general partnership ("Seller"),  and WRIT Limited Partnership,
           a Delaware limited partnership ("Purchaser")
  
        (4)   Seller's Settlement Statement
  
  
  <PAGE>
  
  
                                      FORM 8-K
  
                                   CURRENT REPORT
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
  
  
  
  
                                     SIGNATURES
  
  
  
        Pursuant to the  requirements  of the Securities and Exchange Act of 1934,
  the  registrant  has duly  caused  this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
                                        (Registrant)
  
  
  
  
  
                                By: /S/ Walter V. Arnold
                                   Walter V. Arnold
                                   Senior Vice President and
                                   Chief Financial Officer
  
  
  
  
  
  
  
  Date:  March 28, 1996
  
  
  <PAGE>
  
  
  
  
  
                                PURCHASE AGREEMENT
  
                                      between
  
                         Montgomery Village HWH Associates
                                    (as Seller)
  
                                        and
  
                      Washington Real Estate Investment Trust
                                  (as Purchaser)
  
                              Dated: January 19, 1996
  
  
  
  
  <PAGE>
  
  
                                     PURCHASE AGREEMENT
  
        THIS AGREEMENT is made and entered into this 19th day of January, 1996, by
  and between  (i)  WASHINGTON  REAL  ESTATE  INVESTMENT  TRUST  ("Purchaser"),  a
  District of Columbia business trust, and (ii) MONTGOMERY  VILLAGE HWH ASSOCIATES
  ("Seller"), a Maryland limited partnership.
  
                                     RECITALS
  
       A.   Seller owns a certain  parcel of land  containing  approximately  6.22
            acres,  and  the  improvements   thereon,   located  in  Gaithersburg,
            Montgomery County, Maryland and known as the Walker House Apartments.
  
       B.   Seller has agreed to sell to  Purchaser,  and  Purchaser has agreed to
            purchase from Seller, all land, improvements,  furniture, furnishings,
            fixtures,  equipment  and other  tangible  and  intangible  assets and
            properties owned by Seller,  located at the property and used by it in
            connection with the management,  operation, promotion, maintenance and
            repair of such land and improvements.
  
        NOW,  THEREFORE,  in consideration of the mutual promises  hereinafter set
  forth and of other good and valuable consideration,  the receipt and sufficiency
  of which are hereby acknowledged, the parties agree as follows:
  
                                     ARTICLE I
  
                                    Definitions
  
   . For  purposes of this  Agreement,  except as otherwise  expressly  provided or
  unless the context  otherwise  requires,  (I) the terms  defined in this Section
  include  the plural as well as the  singular,  and the use of any gender  herein
  shall be  deemed  to  include  the  other  genders;  (ii)  accounting  terms not
  otherwise  defined herein have the meanings  assigned to them in accordance with
  generally accepted accounting principles; (iii) references herein to "Articles,"
  "Sections," "subsections," "paragraphs" and other subdivisions without reference
  to a document are to designated Articles, Sections, subsections,  paragraphs and
  other  subdivisions  of this  Agreement;  (iv) a  reference  to an  Exhibit or a
  Schedule  without a further  reference  to the  document to which the Exhibit or
  Schedule is attached is a reference to an Exhibit or Schedule to this Agreement;
  (v) the words "herein," "hereof,"  "hereunder" and other words of similar import
  refer to this Agreement as a whole and not to any particular provision; and (vi)
  the word "including" means "including, but not limited to."
  
       For all  purposes of this  Agreement,  the  following  terms shall have the
  respective meanings set forth below:
  
        "Additional  Income" shall mean all amounts and charges payable by Tenants
  to Seller,  as  landlord,  under their  Leases,  other than  Apartment  Rent and
  Security  Deposits,  and any income  derived by Seller  from the  ownership  and
  operation of the Property from any source other than Apartment Rents,  including
  but not limited to separate charges for use of the Buildings' amenities (such as
  the swimming pool).
  
        "Affiliate"  shall mean, with respect to any Person, a party  controlling,
  controlled by or under common control with such Person,  and if such Person is a
  partnership or limited partnership,  a partner of such Person, or if such Person
  is a corporation, a shareholder of such Person.
  
        "Agreement"  shall mean this Agreement in its present form or as it may be
  amended from time to time.
  
        "Apartment  Rent"  shall  mean all rent  payable by  Tenants  under  their
  Leases.
  
        "Assignable  Contracts"  shall mean all  Contracts  listed on the Contract
  Schedule  other than the  Contracts  designated  by Purchaser  for  cancellation
  pursuant to Section 8.8.
  
       "Bankruptcy  Law" shall mean Title 11, U.S. Code, and any similar state law
  for  the  relief  of  debtors.
  
       "Billof Sale" shall mean a bill of sale, substantially in the form attached
  as  Exhibit  E,  signed by Seller  and  Purchaser,  sufficient  to  transfer  to
  Purchaser good and indefeasible title to all Personal  Property,  free and clear
  of all liens,  encumbrances  and  security  interests  other than the  Permitted
  Exceptions. 
  
    "Buildings"   shall  mean  the   apartment   buildings  and  other
  improvements situated on or appurtenant to the Land.
  
       "Business Days" shall mean any day of the week other than Saturday,  Sunday
  or a day on which  banking  institutions  in  either  New  York,  New  York,  or
  Washington, D. C., are obligated or authorized by law to close.
  
        "Closing" shall have the meaning set forth in Section 13.1.
  
        "Closing  Date"  shall mean the date which is fifteen  (15) days after the
  end of the Feasibility  Period,  or if such date is not a Business Day, the next
  Business Day after such  fifteenth  (15th) day),  or such earlier date as Seller
  and  Purchaser may mutually  agree upon, as such date may be extended  under the
  provisions of this Agreement.
  
        "Contracts"  shall mean all  contracts  and  agreements,  oral or written,
  providing  for  the  management,   operation,   supply,   maintenance,   repair,
  advertising  or promotion  of the Real  Property to which Seller is a party that
  relate  to  the  Real  Property,   including  service  agreements,   maintenance
  contracts, cleaning contracts,  contracts for the purchase or delivery of labor,
  services,  materials or supplies and equipment rental agreements or leases,  and
  landscaping and lawn maintenance agreements.
  
        "Contract  Schedule"  shall  mean  the  information  concerning  Contracts
  contained in Schedule 1, as described in Section 6.3(b).
  
        "Custodian"  shall  mean a  receiver,  trustee,  assignee,  liquidator  or
  similar official under any Bankruptcy Law.
  
        "Deed"  shall  mean a  special  warranty  deed  substantially  in the form
  attached as Exhibit D, signed by Seller in proper form for recording, sufficient
  to  convey  to  Purchaser  good  and  marketable  fee  simple  title to the Real
  Property,  free  and  clear  of  all  liens,  encumbrances,  Leases,  covenants,
  conditions  and  other  matters   affecting   title  other  than  the  Permitted
  Exceptions.
  
        "Delinquent  Rent" shall mean Rent which is due and payable by a Tenant on
  or before the Closing Date but has not been paid by the Closing Date.
  
        "Deposit"  shall mean the cash  payments  made by  Purchaser to the Escrow
  Agent pursuant to Section 4.1 and the interest earned thereon.
  
        "Easement   Agreements"  shall  mean  any  and  all  easement  agreements,
  reciprocal   easement   agreements,   declarations  of  covenants,   conditions,
  restrictions and easements, party wall agreements, "tie-back" agreements, common
  area agreements, shared maintenance agreements, common use agreements or similar
  agreements or understandings which burden or benefit the Real Property and under
  which Seller has any obligations, and all supplements, amendments, modifications
  and memoranda thereof, relating to the development, use, operation,  management,
  maintenance or occupancy of the Real Property.
  
        "Easement Agreements  Schedule" means the information  concerning Easement
  Agreements contained in Schedule 7, as described in Section 6.3(c).
  
        "Employee  Schedule" shall mean the information  concerning  employees who
  are engaged in the operation and maintenance of the Real Property,  contained in
  Schedule 2.
  
        "Environmental Law" shall mean any federal, state or local law, ordinance,
  rule, regulation,  requirement,  guideline,  code,  resolution,  order or decree
  (including consent decrees and  administrative  orders) in effect on the date of
  this  Agreement  which  regulates  the  use,  generation,   handling,   storage,
  treatment,  transportation,  decontamination,  clean-up, removal, encapsulation,
  enclosure,  abatement  or  disposal of any  Hazardous  Material,  including  the
  Comprehensive Environmental Response,  Compensation and Liability Act, 42 U.S.C.
  Section 9601,  et seq.,  the Resource  Conservation  and Recovery Act, 42 U.S.C.
  Sections  6901, et seq.,  the Toxic  Substance  Control Act, 15 U.S.C.  Sections
  2601,  et seq.,  the Clean  Water  Act,  33 U.S.C.  Sections  1251 et seq.,  the
  Hazardous  Materials  Transportation  Act, 49 U.S.C,  Section 1802,  their state
  analogues,  and any  other  federal,  state or local  statute,  law,  ordinance,
  resolution, code, rule, regulation, order or decree regulating,  relating to, or
  imposing liability or standards of conduct concerning any Hazardous Material.
  
        "Escrow Agent" shall mean Chicago Title Insurance Company.
  
        "Feasibility  Period" shall mean the period  beginning  with the date this
  Agreement is executed and delivered by both Seller and  Purchaser,  and expiring
  on the forty-fifth (45th) day thereafter.
  
        "General Assignment" shall mean an Assignment of Licenses, Intangibles and
  Warranties in the form attached as Exhibit H.
  
        "Governmental  Authorities"  shall  mean any  board,  bureau,  commission,
  department or body of any municipal, county, state or federal governmental unit,
  or any  subdivision  thereof,  having or  acquiring  jurisdiction  over the Real
  Property or the management, operation, use or improvement thereof.
  
        "Hazardous Material" shall mean any flammable,  explosive,  radioactive or
  reactive  materials,   any  asbestos  (whether  friable  or  non-friable),   any
  pollutants,  contaminants  or other  hazardous,  dangerous  or toxic  chemicals,
  materials or  substances,  any  petroleum  products or  substances  or compounds
  containing  petroleum  products,  including  gasoline,  diesel fuel and oil, any
  polychlorinated biphenyls or substances or compounds containing  polychlorinated
  biphenyls,  and  any  other  material  or  substance  defined  as  a  "hazardous
  substance,"   "hazardous   material,"   "hazardous  waste,"  "toxic  materials,"
  "contamination," and/or "pollution" within the meaning of any Environmental Law.
  
        "Intangibles"  shall mean the trade name Walker House Apartments,  as used
  in connection with the ownership,  operation and promotion of the Real Property,
  all logos used in  connection  with the  advertising  and  promotion of the Real
  Property and all local telephone  numbers and listings for the Property,  to the
  extent such items are assignable without cost to Seller.
  
        "Land"  shall mean the  parcels  of land more  particularly  described  in
  Exhibit A.
  
        "Lease and Contract Assignment" shall mean an Assignment and Assumption of
  Certain Leases,  Tenancies and Written Contracts in the form attached as Exhibit
  G, providing for the assignment of all Leases and Assignable Contracts.
  
        "Lease Schedule" shall mean the information  concerning  Tenants contained
  in Schedule 4, as described in Section 6.3(a).
  
        "Leases" shall mean all leases,  licenses or other agreements with Tenants
  including all amendments,  extensions,  modifications  and supplements  thereto,
  pursuant to which any Tenant uses or occupies any part of the Real Property.
  
        "Leasing Guidelines" shall mean the minimum rent figures for categories of
  apartment units in the Buildings as set forth in Exhibit I.
  
        "Legal Requirements" shall mean all laws, ordinances,  rules, regulations,
  orders  and  requirements  of  all  Governmental  Authorities  relating  to,  or
  regulating, the ownership, use, operation, management, maintenance and repair of
  the Real Property, including zoning laws, building, fire, safety and health laws
  and  Environmental  Laws, and any  obligations  imposed on the owner of the Real
  Property in  connection  with any site plan approval of the Real Property or any
  part  thereof,  or zoning  proffers  relating  to the Real  Property or any part
  thereof.
  
       "License Schedule" shall mean the list of Licenses contained in Schedule 5.
  
        "Licenses" shall mean all licenses, authorizations,  approvals and permits
  issued by Governmental  Authorities  relating to Seller's (and not any Tenant's)
  use, operation, ownership or maintenance of the Real Property.
  
        "Litigation  Schedule" shall mean the information  concerning  pending and
  threatened litigation contained in Schedule 6, as described in Section 6.2(m).
  
        "Mortgage" shall mean a mortgage,  deed of trust or other type of security
  instrument  of the type  commonly  given to secure  loans or advances on, or the
  unpaid  purchase price of, real property in the  jurisdiction in which such real
  property is located.
  
        "Operating  Expenses"  shall mean all costs,  expenses,  charges  and fees
  relating to the ownership, management,  operation, maintenance and repair of the
  Real Property,  including electricity,  gas, water and sewer charges,  telephone
  and other public utilities, common area maintenance charges, insurance premiums,
  vault  charges,   personal  property  taxes,  excise  taxes  on  Rent,  business
  occupational  taxes,   periodic  charges  payable  under  Assignable  Contracts,
  periodic fees payable under transferable  Licenses for the operation (as opposed
  to the  construction)  of the Real  Property,  periodic  charges under  Easement
  Agreements,  salaries,  wages, vacation and sick pay, pension, welfare and other
  fringe benefits, employee-related taxes and other labor costs, but not including
  any costs,  expenses,  charges or fees which are the direct  responsibility of a
  Tenant.
  
        "Permitted  Exceptions"  shall  mean (i) the lien of current  real  estate
  taxes not yet due and payable,  (ii) the Leases  described in the Lease Schedule
  and any permitted  additions,  renewals and  replacements  thereof,  recorded or
  unrecorded,  and (iii) the additional exceptions contained in the commitment for
  title insurance obtained by Purchaser pursuant to Section 9.1 (but not including
  the survey  exception;  the exceptions for unfiled  mechanics  liens,  rights of
  parties in possession or Mortgages,  if any,  encumbering the Real Property;  or
  liens, encumbrances,  adverse claims or other matters, if any, created after the
  date of the title  commitment  but prior to the date title to the Real  Property
  vests in Purchaser).
  
        "Person"   shall  mean  an   individual,   estate,   trust,   partnership,
  corporation, Governmental Authority or other legal entity.
  
        "Personal  Property"  shall  mean all  furniture,  furnishings,  fixtures,
  equipment,  vehicles,  tools, and other tangible personal property of every kind
  and  description  owned by Seller  located on, and used or useful in  connection
  with the  management,  leasing,  operation,  maintenance  and repair of the Real
  Property,  including Seller's inventory of spare and replacement parts, Seller's
  inventory  of  consumable  supplies  and the other  tangible  personal  property
  described in Exhibit B.
  
       "Property" shall mean the Real Property, the Personal Property, the Leases,
  the Assignable Contracts, the Licenses, the Intangibles and the Warranties.
  
  
        "Property Documents" shall have the meaning set forth in Section 5.2.
  
        "Purchase  Price" shall mean the purchase price of the Property  specified
  in Section 3.1.
  
        "Real  Property"  shall  mean the Land and the  Buildings  known as Walker
  House Apartments, located in Gaithersburg,  Montgomery County, Maryland, and the
  other rights described in subsections (c), (d) and (e) of Section 2.1.
  
        "Sales Agent" shall mean Cassidy & Pinkard, Inc.
  
        "Rent" shall mean, collectively, Apartment Rent and Additional Income.
  
        "Security  Deposits" shall mean all refundable  security deposits,  access
  card or key deposits,  cleaning fees, pet deposits and other deposits (including
  any  interest  accrued  thereon  in  accordance  with the terms of the  Tenant's
  Leases)  relating to space within the Real  Property  paid by Tenants to Seller,
  its managing agent or any other Person.
  
        "Seller's  knowledge"  or  words of like  import  shall  mean  the  actual
  knowledge of Stephen D. Brady,  and Karen Kopas,  who is the resident manager at
  the Property and an employee of the property  manager of the  Property,  without
  any investigation or other due diligence.
  
        "Tax Schedule" shall mean the information concerning real estate taxes and
  assessed valuation of the Real Property contained in Schedule 8, as described in
  Section 6.2(c).
  
        "Tenants"  shall mean all Persons  leasing or  occupying  space  within or
  appurtenant  to the Real Property  pursuant to written or oral  agreements  with
  Seller or a prior owner of the Real Property.
  
        "Tenant Work Orders"  shall mean all written  requests  received by Seller
  from any Tenant concerning the repair or maintenance of space occupied or leased
  by such Tenant.
  
        "Utility Deposits" shall mean all deposits made by Seller with the Persons
  providing water, sewer, gas,  electricity,  telephone and other public utilities
  to the Real Property.
  
        "Utility  Schedule"  shall  mean  the  information   concerning  utilities
  servicing  the Real  Property  contained in Schedule 10, as described in Section
  6.2(t).
  
        "Warranties" shall mean all assignable  warranties or guaranties presently
  in effect from  contractors,  suppliers or  manufacturers  of personal  property
  installed in or used in connection  with the Real Property or any work performed
  or improvements included as a part of the Real Property.
  
        "Warranties Schedule" shall mean the information concerning the Warranties
  contained in Schedule 9.
  
                                    ARTICLE II
  
                         Purchase and Sale of the Property
  
   . On the Closing Date, and subject to the terms and conditions set forth in this
  Agreement,  Seller agrees to sell to Purchaser, and Purchaser agrees to purchase
  from Seller:
  
                (a)    the Land;
  
                (b)    the Buildings;
  
                (c) all right,  title and interest of Seller,  if any, in any land
  lying in the bed of any street, road, avenue or alley, open or closed,  adjacent
  to or abutting the Land, to the center line thereof;
  
                (d) all Easement  Agreements  and other  easements,  covenants and
  other rights  appurtenant to, and all the estate and rights of Seller in and to,
  the Land and the Buildings,  including  riparian rights  appurtenant to the Land
  and Buildings;
  
                (e) all right, title and interest of Seller in and to the proceeds
  of, or any award made for, a taking of all or any part of the Real  Property  by
  any  Governmental  Authority  pursuant  to the  exercise of its power of eminent
  domain after the end of the Feasibility Period;
  
                (f)    the Personal Property; and
  
                (g) all right,  title and interest of Seller in and to the Leases,
  the Assignable  Contracts,  transferable  Licenses,  assignable  Intangibles and
  Warranties.
  
  Seller shall sell and convey and Purchaser  shall purchase and accept fee simple
  title to the Real  Property  and good title to the  Personal  Property and other
  rights to be transferred to Purchaser as set forth above,  free and clear of all
  liens, encumbrances,  easements, covenants, conditions, Leases and other matters
  affecting title, except for the Permitted Exceptions.
  
   . Except as  expressly  provided  in this  Agreement  or in any  document  to be
  executed and delivered on the Closing Date, Purchaser is not assuming any of the
  debts,  liabilities,  taxes or obligations of, or claims against,  Seller of any
  kind or character,  whether  direct or contingent  and whether known or unknown.
  The only  transactions  contemplated by this Agreement are the sale and purchase
  of the Property.  Seller is not selling a business. Except as expressly provided
  in this Agreement or in any document to be executed and delivered on the Closing
  Date, the parties intend that Purchaser shall not be deemed to be a successor of
  Seller with respect to any of Seller's  liabilities or obligations to Tenants or
  other third  parties  arising  before the Closing Date.  The  provisions of this
  Section  shall not  increase or diminish  Seller's  and  Purchaser's  respective
  indemnification obligations under Article XVI.
  
  
  <PAGE>
  
  
                                    ARTICLE III
  
                        Purchase Price and Terms of Payment
  
   . The purchase price to be paid by Purchaser to Seller for the Property shall be
  $10,650,000.00,  subject to the  adjustments and prorations set forth in Article
  XIV.
  
   . On the  Closing  Date,  and  subject  to the  terms  and  conditions  of  this
  Agreement,  Purchaser  shall pay the  Purchase  Price to, or for the account of,
  Seller in the manner provided in Section 13.1.
  
                                    ARTICLE IV
  
                                      Deposit
  
  
   . Within three Business Days after Seller delivers a fully-signed counterpart of
  this  Agreement  to  Purchaser,  Purchaser  shall  deliver to the Escrow Agent a
  deposit in the amount of  $150,000.00,  to be held by the Escrow Agent as a good
  faith  deposit  under  this  Agreement  (the  "Initial  Deposit").  Unless  this
  Agreement  is  terminated  pursuant to Section 5.6, on or before the last day of
  the  Feasibility  Period,  Purchaser  shall  deliver  to  the  Escrow  Agent  an
  additional  deposit in the amount of  $150,000.00 to be held by the Escrow Agent
  as an  additional  good faith  deposit  under this  Agreement  (the  "Additional
  Deposit").
  
   . The payment of the Deposit shall be in the form of a good check payable to the
  order of, or a wire transfer of federal  funds to, the Escrow Agent.  The Escrow
  Agent shall,  promptly after receipt,  deposit Purchaser's check for collection,
  and thereafter  invest the proceeds of collection in any of the following  types
  of investments  designated by Purchaser:  (i) prime commercial  paper,  banker's
  acceptances  or  certificates  of  deposit  in a  commercial  bank  approved  by
  Purchaser,  in each case  having a  maturity  of not more  than 30 days (or,  if
  earlier,  five (5) days prior to the Closing Date),  or (ii)  obligations of the
  United  States  Government  having a maturity  of not more than 60 days (or,  if
  earlier,  five (5) days prior to the Closing Date),  or (iii) one or more mutual
  funds which invest their assets  primarily in  investments of the type described
  in clauses  (i) and (ii),  or (iv) one or more  interest-bearing  accounts  in a
  commercial bank approved by Purchaser.
  
  If this Agreement is terminated  pursuant to Section 15.1 and thereafter  either
  Seller or Purchaser makes a written demand on the Escrow Agent for the return of
  the  Deposit  (if the  demand is made by  Purchaser)  or for the  payment of the
  Deposit (if the demand is made by Seller),  the Escrow  Agent shall give written
  notice of such demand to the other party. If the Escrow Agent does not receive a
  written  objection from the other party to the proposed payment or return of the
  Deposit  within 10 days after the giving of such notice,  the Escrow Agent shall
  pay the Deposit to the party making the demand.  If the Escrow Agent  receives a
  written  objection  from the other party  within the 10-day  period,  the Escrow
  Agent shall  continue to hold the Deposit  until  otherwise  directed by written
  instructions from Seller and Purchaser or until otherwise  directed by the final
  action of a court of competent jurisdiction.  During the Feasibility Period, the
  provisions of Section 5.6, and not the provisions of this Section, shall control
  the disposition of the Deposit.
  
   . In the event of a dispute  concerning  the  disposition  of the  Deposit,  the
  Escrow  Agent shall have the right at any time to deposit any cash funds held by
  it under this  Agreement  with the clerk of the court having  jurisdiction.  The
  Escrow Agent shall give written  notice of such deposit to Seller and Purchaser.
  Upon such  deposit,  the Escrow  Agent shall be relieved and  discharged  of all
  further obligations and responsibilities hereunder.
  
   .  The  parties  acknowledge  that  the  Escrow  Agent  is  acting  solely  as a
  stakeholder  at their request and for their  convenience;  that the Escrow Agent
  shall not be deemed  to be the  agent of  either  of the  parties;  and that the
  Escrow  Agent  shall  not be liable  to  either  of the  parties  for any act or
  omission on its part unless taken or suffered in bad faith, in willful disregard
  of this  Agreement or involving  gross  negligence.  Seller and Purchaser  shall
  jointly and  severally  indemnify  and hold the Escrow Agent  harmless  from and
  against all costs, claims, and expenses,  including reasonable  attorneys' fees,
  incurred  in  connection  with the  performance  of the  Escrow  Agent's  duties
  hereunder,  except with respect to actions or omissions taken or suffered by the
  Escrow Agent in bad faith,  in willful  disregard of this Agreement or involving
  gross negligence on the part of the Escrow Agent.
  
   . The Escrow Agent shall  acknowledge  its  agreement to the  provisions of this
  Section,  Article XIII and Article XV by executing  this  Agreement in the space
  provided below.
  
                                     ARTICLE V
  
                         Inspection and Feasibility Period
  
   . Purchaser  acknowledges and agrees that Seller has delivered to Purchaser (or,
  in the case of the items  described  in Section  5.2(h),  made  available at the
  Property  or at the  offices of the  Property  manager)  copies of all  Property
  Documents,  to the extent  such  Property  Documents  are  available,  i.e.,  in
  Seller's or the  Property  manager's  possession  or  obtainable  by Seller with
  reasonable efforts.
  
   . The Property  Documents consist of the following items, to the extent the same
  are in the possession or control of Seller or Seller's Property manager:
  
                (a)    The latest survey of the Land.
  
                (b)    All site plans for the Real Property.
  
                (c)  All  architectural,  mechanical,  electrical  and  structural
  plans,  specifications  and drawings  relating to the  improvements  on the Real
  Property.
  
                (d)  All Licenses and all certificates of occupancy issued for the
  Buildings.
  
                (e)  Certificates  of insurance  for all  casualty,  liability and
  other insurance policies presently in effect with respect to the Property.
  
                (f) Audited statements of income and expenses of the Real Property
  for calendar years 1990 through 1994, monthly operating  statements for the Real
  Property  for the months of January  through  November  (and if available on the
  date hereof, December), 1995.
  
                (g) All  assessments and bills for real estate and any other taxes
  affecting the Property, and for special assessments affecting the Real Property,
  for the  preceding  three (3) full tax  years,  together  with a summary  of any
  contested tax assessments affecting the Real Property during such three (3)-year
  period and copies of any income and  expense  statements  filed with  Montgomery
  County, Maryland for such three (3)-year period.
  
                (h)  All  Leases,   including  all  amendments  and  modifications
  thereto, all assignments thereof and subleases, if any, and any other agreements
  between Seller,  or an Affiliate of Seller,  and a Tenant,  or an Affiliate of a
  Tenant,  and a rent roll for the Real  Property,  listing  all  Leases in effect
  (with the name of each Tenant),  and for each Tenant,  the Rent currently  being
  paid,  security deposit (and interest accrued on such security deposit, if any),
  any prepaid or Delinquent Rent (including an aging of any such Delinquent Rent),
  apartment  number,  type of unit, size of unit, any assigned  parking spaces and
  parking allowances, and renewal options granted, if any.
  
                (i)    All Contracts.
  
                (j) The most  recent  owner's  title  insurance  policy  issued in
  connection with the Real Property and all amendments,  endorsements and exhibits
  thereto.
  
                (k) A list of all pending and, to the best of Seller's  knowledge,
  threatened claims or lawsuits and a list of all outstanding  judgments  relating
  to the Property,  including  suits for non-payment of rent or for the purpose of
  Tenant eviction.
  
                (l)   All   engineering,   architectural,   physical   inspection,
  maintenance,  geological and environmental reports related to the Real Property,
  including those relating to the presence (or absence) of Hazardous Materials.
  
                (m) All business and  professional  license/tax  returns  filed by
  Seller for the last two (2) fiscal years and copies of any  correspondence  from
  Governmental Authorities related to such returns, and a summary of any contested
  tax assessments.
  
               (n) All warranties and guarantees related to the Property which are
  presently in effect.
  
                (o) Such  other  documents  or data as  Purchaser  may  reasonably
  request, to be delivered at a later date as mutually agreed.
  
  In the event that, during the Feasibility Period, Seller discovers items falling
  within the categories  described above in this Section 5.2, Seller shall deliver
  such  items   promptly  to   Purchaser,   but  the   failure  to  deliver   such
  newly-discovered items prior to the date this Agreement is signed shall not be a
  breach by Seller of its obligations hereunder.
  
   . Seller agrees that Purchaser  shall have the right,  at its own risk, cost and
  expense,  to  enter  upon the Real  Property  at any time or times  prior to the
  Closing Date, during normal business hours and after reasonable  advance notice,
  for purposes of inspecting apartments (in the company of the resident manager of
  the Property) and  conducting  such surveys and  environmental  and  engineering
  tests,  including  inspections,  investigations and studies,  as Purchaser deems
  necessary or desirable to evaluate the Property.  In addition,  Purchaser  shall
  have the right to interview  Tenants in the course of Purchaser's  inspection of
  apartments  and to conduct  separate  interviews of Tenants not in the course of
  apartment  inspections,   provided  not  more  than  fifteen  (15)  Tenants  are
  separately  interviewed  and all such interviews are conducted in the company of
  the resident manager of the Property.  Purchaser may conduct such architectural,
  engineering,  environmental,  economic and other studies of the Real Property as
  Purchaser  may  deem   desirable.   Purchaser  shall  provide  Seller  at  least
  forty-eight  (48) hours'  notice in advance of its entry upon the Real  Property
  for purposes other than outside visual  inspections.  No advance notice shall be
  required for outside visual inspections. Purchaser's access to the Real Property
  shall be subject to the rights of Tenants  under their Leases,  Purchaser  shall
  not  unreasonably  disturb  Seller  or any  of the  Tenants  in  conducting  its
  inspections,  tests  and  studies,  or  in  conducting  interviews  of  Tenants.
  Purchaser  shall not make any  physical  changes to the Real  Property and shall
  indemnify and hold harmless  Seller from and against (i) all physical  damage to
  the Real  Property  caused by its tests  and  investigations  and (ii) all loss,
  liability  or damage  suffered  or  incurred  by Seller or any of its  agents or
  employees  arising out of or resulting  from injury or death to  individuals  or
  damage to property  sustained  on the Real  Property and caused by the tests and
  investigations  conducted  by, or at the direction  of,  Purchaser.  Purchaser's
  obligations  to  indemnify  Seller  pursuant to this Section  shall  survive the
  termination of this Agreement.
  
   . Between the date of this Agreement and the Closing Date,  Purchaser shall have
  the right to inspect all books, records, studies, reports and other documents in
  the  possession  or  control  of Seller  and its  agents  which  pertain  to the
  construction,  ownership, use, operation, occupancy,  maintenance,  operation or
  leasing of the Property ("Seller's Books and Records").  Seller shall allow such
  inspections to be conducted during normal business hours upon reasonable  notice
  to Seller and shall make  Seller's  Books and Records  available to Purchaser at
  the Real  Property or at the offices of Seller or the Property  manager.  Seller
  agrees that it will permit  Purchaser  to inspect the Books and Records in their
  current  state and will not "purge" the Books and Records  prior to their review
  by Purchaser.
  
        Section 5.5     Intentionally Omitted.
  
   . This Agreement  shall  automatically  terminate at the end of the  Feasibility
  Period  unless,  on or  before  the  last  day of the  Feasibility  Period,  (i)
  Purchaser  gives Seller written  notification  (the  "Feasibility  Notice") that
  Purchaser  elects to consummate the purchase of the Property in accordance  with
  the terms of this Agreement,  and (ii) Purchaser delivers the Additional Deposit
  to Escrow Agent. Purchaser shall also have the right to terminate this Agreement
  by notice given to Seller at any time before the end of the Feasibility  Period.
  Purchaser shall have the absolute right, in its sole and absolute discretion, to
  determine whether to give the Feasibility  Notice. If the Feasibility  Notice is
  not timely  given or if a notice of early  termination  is given,  Purchaser  or
  Seller,  or both,  shall so notify the Escrow  Agent,  the  Escrow  Agent  shall
  promptly  return the Initial  Deposit to  Purchaser,  and,  except as  otherwise
  provided in this Section, no party shall have any further liability to any other
  party under this  Agreement.  If this  Agreement is  terminated  pursuant to the
  provisions of this Section, Purchaser agrees to pay the sum of $100 to Seller as
  consideration  for this Agreement and, within fifteen (15) days after the end of
  the Feasibility Period or the earlier termination of this Agreement,  to deliver
  to Seller copies of all surveys,  written engineering tests or studies and other
  data prepared by third parties for Purchaser  during the Feasibility  Period and
  to return to Seller all  Property  Documents  previously  delivered by Seller to
  Purchaser.
  
        Section 5.7  Confidentiality.  In consideration  for and as a condition of
  Seller's  furnishing  to  Purchaser  the items  described  in  Section  5.2 (the
  "Evaluation Material"),  Purchaser acknowledges the confidential and proprietary
  nature  of such  Evaluation  Material  and  agrees  to hold  and  keep  the same
  confidential  as  provided in this  Section.  Purchaser  agrees to exercise  all
  reasonable steps to safeguard the confidentiality of the Evaluation Material and
  not to disclose any part of it to any third person except to such of Purchaser's
  employees and legal, accounting and financial advisors as (i) may require access
  to the Evaluation  Material for the purpose of assisting Purchaser in evaluating
  the purchase of the Property by  Purchaser,  and (ii) who have been  directed to
  preserve the confidentiality of such Evaluation Material.
  
                                    ARTICLE VI
  
                     Representations and Warranties of Seller
  
        Seller makes the following representations and warranties to Purchaser for
  the purpose of inducing  Purchaser to execute and deliver this  Agreement and to
  consummate  the  transactions  contemplated  by this  Agreement,  each of  which
  representations and warranties are true and correct on the date hereof:
  
   .     Section 6.1  Representations and Warranties regarding Authority and Status
  
                (a) Organization.  Seller is a general partnership duly formed and
  validly existing under the laws of the State of Maryland.
  
                (b) Authorization. The partners of Seller have duly authorized the
  execution  and  delivery of this  Agreement  and the  transactions  contemplated
  hereby.
  
                (c) No  Conflicting  Agreements.  The  execution  and  delivery by
  Seller of,  and the  performance  and  compliance  by Seller  with the terms and
  provisions  of, this  Agreement do not violate any of the terms,  conditions  or
  provisions of (i) Seller's  partnership  agreement,  (ii) to Seller's knowledge,
  any judgment,  order, injunction,  decree,  regulation or ruling of any court or
  other Governmental  Authority to which Seller is subject, or (iii) any agreement
  or contract  listed on any Schedule to this Agreement or any other  agreement or
  contract to which  Seller is a party or to which it or the  Property is subject,
  nor shall such  execution,  delivery,  performance  or  compliance  constitute a
  material default thereunder or give to others any material rights of termination
  or cancellation in or with respect to the Property.
  
                (d) Approvals. To Seller's knowledge,  no authorization,  consent,
  order,  approval or license from,  filing with, or other act by any Governmental
  Authority or other Person is or will be necessary to permit the valid  execution
  and  delivery by Seller of this  Agreement or the  performance  by Seller of the
  obligations to be performed by it under this Agreement.
  
       (e) United States  Person.  Seller is a "United  States  person" within the
  meaning of Sections  1445(f)(3) and 7701(a)(30) of the Internal  Revenue Code of
  1986, as amended.
  
                (f) Absence of  Bankruptcy.  Neither  Seller nor any  Affiliate of
  Seller has  commenced  (within  the meaning of any  Bankruptcy  Law) a voluntary
  case, consented to the entry of an order for relief against it in an involuntary
  case,  or  consented to the  appointment  of a Custodian of it or for all or any
  substantial  part of its  property,  nor has a court of  competent  jurisdiction
  entered an order or decree under any  Bankruptcy  Law that is for relief against
  Seller or any of its Affiliates in an  involuntary  case or appoints a Custodian
  of Seller or any of its Affiliates or for all or any substantial  part of its or
  their property.
  
                (g)  Management  of Real  Property.  Stephen  Brady  has  been the
  individual who has served as the asset manager for the Real Property,  on behalf
  of Seller,  since 1989, and since such date has been the individual  principally
  responsible for the operation of the Property within Seller's organization.
  
      Section 6.2  Representations and Warranties regarding Real Estate and Legal
  Matters.
  
                (a)  Operating  Statements.  Seller has delivered to Purchaser (i)
  audited statements of income and expense of the Real Property for calendar years
  1990 through 1994,  and (ii) monthly  operating  statements of the Real Property
  for the months of January through November (and if available on the date hereof,
  December),  1995.  The monthly  operating  statements  were prepared by Seller's
  property manager. To Seller's  knowledge,  such statements of income and expense
  present  fairly the income and expenses of the Real Property for the  respective
  periods covered thereby in all material respects.  Such statements have not been
  modified for review by Purchaser.
  
                (b)    Intentionally Omitted.
  
                (c) Real Estate  Taxes.  Except as otherwise  set forth in the Tax
  Schedule,  (i) to Seller's  knowledge  there are no tax abatements or exemptions
  affecting the Real Property, and (ii) Seller has not received any written notice
  of (x) any increase in the  assessed  valuation  of the Real  Property,  (y) any
  pending or threatened special assessments affecting the Real Property or (z) any
  contemplated improvements affecting the Real Property that may result in special
  assessments affecting the Real Property.
  
                (d) No Default of  Permitted  Exceptions.  To Seller's  knowledge,
  Seller is not in default in complying  with the terms and  provisions  of any of
  the covenants, conditions, restrictions, rights-of-way or easements constituting
  one or more of the  Permitted  Exceptions  which are to be performed or complied
  with by the owner of the Real Property.
  
       (e)  Condemnation.  Seller has no knowledge of any pending or  contemplated
  condemnation proceedings affecting the Real Property, or any part thereof.
  
                (f)    Intentionally Omitted.
  
                (g) Title to  Personal  Property.  Seller has good and  marketable
  title to, and owns outright,  the Personal Property listed in Exhibit B, if any,
  free and clear of all liens, encumbrances, security interests and adverse claims
  of any kind or  character,  other  than  liens  which  will be  released  at the
  Closing.
  
                (h)    Intentionally Omitted.
  
                (i)    Intentionally Omitted.
  
                (j)    Intentionally Omitted.
  
       (k) Labor Unions.  Seller is not a party to any contract or agreement  with
  any labor union.
  
                (l) Mechanics' Liens. All bills and claims for labor performed and
  materials  furnished to or for the benefit of the Real  Property for all periods
  prior to the Closing  Date have been (or prior to the Closing Date will be) paid
  in  full,  and on the  Closing  Date  there  shall  be no  mechanics'  liens  or
  materialmen's  liens  (whether  or  not  perfected)  on or  affecting  the  Real
  Property.
  
                (m) Litigation.  The Litigation  Schedule  contains a complete and
  correct list of all actions, suits, proceedings or written claims pending or, to
  Seller's  knowledge,  threatened in writing  against or affecting  Seller or the
  Real Property, at law or in equity or before or by any federal, state, municipal
  or other governmental department,  commission, board, agency or instrumentality,
  domestic or foreign (collectively,  "Litigation"),  and sets forth, with respect
  to each such Litigation,  the parties to such Litigation,  the amount claimed as
  damages (or other remedies  sought) and the status of such  Litigation as of the
  date  hereof.  Except  as set  forth on the  Litigation  Schedule,  to  Seller's
  knowledge there is no Litigation. To Seller's knowledge, Seller is not operating
  under or subject to, and is not in default  with  respect  to, any order,  writ,
  injunction  or  decree  of any  court  or  federal,  state,  municipal  or other
  governmental agency or department, commission, board, agency or instrumentality,
  domestic  or  foreign,  applicable  specifically  to the  Property  or any  part
  thereof,  as opposed to properties  generally in Montgomery  County or any other
  jurisdiction in which the Property may be situated.
  
                (n) Compliance with Laws. Seller has not received a written notice
  that the Buildings  (including  all adjoining  streets,  roads,  parking  areas,
  curbs, sidewalks,  sewers and other utilities within the boundaries of the Land)
  have not been constructed,  the Personal Property has not been installed and the
  Real Property is not presently being used and operated in all material  respects
  in compliance  with (i) all Legal  Requirements,  (ii) all building or occupancy
  permits,  and (iii) all  easements,  conditions,  rights-of-way,  covenants  and
  restrictions of record affecting or otherwise relating to the Real Property.
  
                (o)    Intentionally Omitted.
  
                (p)    Intentionally Omitted.
  
                (q)    Intentionally Omitted.
  
                (r)    Environmental Matters.
  
                 (1)    To Seller's knowledge, the Real Property does not contain,
  and there is not located on or about the Real Property, any Hazardous Materials,
  except for  prepackaged  supplies,  cleaning  materials or other items which are
  sold for consumer use or typically used in the operation, maintenance and repair
  of buildings  containing  residential  space.  Seller is not currently using the
  Real Property, nor to Seller's knowledge is any other Person currently using the
  Real Property,  nor to Seller's knowledge has the Real Property  previously been
  used, for the use,  storage,  treatment,  production,  manufacture,  generation,
  transportation,  release or disposal of Hazardous Materials, except as otherwise
  provided in the  preceding  sentence.  Seller has not  received  any  complaint,
  order, summons, citation, notice of violation, directive letter or other written
  communication from any Governmental Authority or other Person with regard to air
  emissions,  water  discharges,  noise emissions or Hazardous  Materials,  or any
  other  environmental,  health or safety matters affecting the Real Property,  or
  any  portion  thereof.  To  Seller's  knowledge,  Seller has  complied  with all
  Environmental   Laws  affecting  the  Real  Property,   including   notification
  requirements relating to the release of Hazardous Materials.
  
                    (2)    There are no claims pending or, to Seller's knowledge,
  threatened  in  writing,  against  Seller or the Real  Property,  or any portion
  thereof, by any Governmental Authority or other Person relating to any Hazardous
  Material  or  pursuant  to  any  Environmental  Law,  whether  for  enforcement,
  clean-up,   removal,   remediation,   assertion  of  liability,  cost  recovery,
  compensation,  contribution,  recovery of damages, injunction or other equitable
  relief or otherwise.
  
               (3)    To Seller's knowledge, Seller has not undertaken, permitted,
  authorized or suffered the presence,  or suspected presence,  use,  manufacture,
  handling, generation, storage, treatment, discharge, release, burial or disposal
  on,  under or about  the Real  Property  of any  Hazardous  Material,  except in
  compliance with  Environmental  Laws, or the  transportation to or from the Real
  Property, of any Hazardous Material in violation of any Environmental Laws.
  
                (s)    Intentionally Omitted.
  
                (t) Utilities. A list of all utilities servicing the Real Property
  and the account  numbers of such  utilities is set forth on Schedule 10 attached
  hereto.
  
       (u)  Underground  Storage  Tanks.  Seller has not removed,  or caused to be
  removed, any underground storage tanks from the Real Property.
  
                (v) No Unrecorded  Liens. No lender claiming  through Seller has a
  right to encumber the Real Property or Personal  Property,  or any part thereof,
  except for such liens or  security  interests  as may be  disclosed  in the land
  records or financing statement records of Montgomery County, Maryland.
  
                (w)  Appliances.  Each of the  apartments  units in the  Buildings
  contains,  and  will  contain  on  the  Closing  Date,  a  refrigerator,  stove,
  dishwasher and garbage disposal,  but Seller makes no representation or warranty
  regarding the condition of such items.
  
        Section 6.3  Representations and Warranties regarding Leases, Contracts,
   .nsurance and Other Documents
  
                (a) Leases. To Seller's  knowledge,  the Lease Schedule contains a
  description,  which is true, correct and complete in all material  respects,  of
  all Leases now in effect,  including  the name of each Tenant,  the date of each
  Tenant's Lease and all amendments,  if any,  thereto,  the apartment unit number
  and unit type  under  each  Lease,  rent  waivers  and other  lease  concessions
  (originally granted and any remaining to be applied at a future date), the gross
  monthly Rent (stated as gross Rent and/or plus utilities,  etc.) payable by each
  Tenant  under its Lease,  Rent paid for more than  thirty  (30) days in advance,
  Rent  delinquencies,  the expiration  date of each Lease,  and the amount of any
  Security  Deposit paid by the Tenant under each Lease plus interest due thereon.
  The Lease Schedule has been prepared by Seller's  Property  manager and attached
  hereto  without  change.  To  Seller's  knowledge,  there are no Leases or other
  tenancies for any space in the Real  Property  other than those set forth on the
  Lease  Schedule.  Seller has delivered or made  available to Purchaser  true and
  complete  copies of each Lease  described  in the Lease  Schedule.  To  Seller's
  knowledge,  except as otherwise  disclosed on the Lease Schedule or elsewhere in
  this Agreement:
  
                       (1)    each of the Leases is in full force and effect;
  
       (2) no  written  renewal  or  extension  options  have been  granted to any
  Tenant, except as set forth in such Tenant's Lease;
  
  
       (3) no Tenant  has an option to  purchase  the Real  Property,  or any part
  thereof;
  
  
       (4) no Tenant is entitled (pursuant to a written instrument) to any rebate,
  concession, deduction or offset, except as set forth in such Tenant's Lease;
  
       (5) no  Tenant  has paid any  Rent  for a  period  of more  than 60 days in
  advance; and
  
       (6) Seller  has the sole  right to  collect  rent under each Lease and such
  right has not been  assigned,  pledged,  hypothecated,  or otherwise  encumbered
  other than pursuant to a Mortgage to be released at the Closing.
  
                (b)  Contracts.  The  Contract  Schedule  contains a complete  and
  accurate list of all Contracts,  including  expirations  dates, a description of
  termination  provisions  (including  any  payment due on  termination),  amounts
  payable by Seller  thereunder  and a description  of services or materials to be
  provided.  Seller has delivered to Purchaser true and complete copies of each of
  the Contracts  described on the Contract Schedule.  Each of such Contracts is in
  full force and effect and has not been modified or amended,  except as indicated
  on the  Contract  Schedule.  Seller  is not in  default  of any of its  monetary
  obligations  or any of its material  non-monetary  obligations  under any of the
  Contracts described on the Contract Schedule and knows of no material default on
  the part of the other parties thereto.  The Contracts  described on the Contract
  Schedule  represent the complete agreement between Seller and such other parties
  as to the services to be performed  or materials to be provided  thereunder  and
  the compensation to be paid for such services or materials, as applicable.
  
                (c) Easement Agreements. The Easement Agreements Schedule contains
  a description of the gross monthly,  quarterly or annual amount (if any) payable
  by the  owner of the Real  Property  to any other  Person  who is a party to the
  Easement  Agreement and the gross  monthly,  quarterly or annual amount (if any)
  payable by any other  Person  who is a party to the  Easement  Agreement  to the
  owner of the Real  Property.  Except  as  otherwise  disclosed  on the  Easement
  Agreements Schedule or elsewhere in this Agreement:
  
       (1) each of the Easement  Agreements  is in full force and effect,  and has
  not been modified, amended or extended; and
  
       (2) neither Seller nor any of the other parties to the Easement  Agreements
  is in default (beyond any grace period  provided by such Easement  Agreement) in
  the  payment  of any  amount  payable by it under the  Easement  Agreement,  and
  neither  Seller nor any of such  parties is in  default  in the  performance  or
  observance of any of the other  covenants or conditions to be kept,  observed or
  performed by it under the Easement Agreement.
  
  
                (d)  Management Agreement.  On the Closing Date, there will be no
  contract or agreement in effect for the management of the Real Property.
  
                (e) Leasing Commissions.  No commission, fee or other compensation
  is payable  (or will,  with the  passage of time or  occurrence  of any event or
  both,  be  payable),  with  respect  to any  Lease,  and  there  are no  leasing
  commissions,  fees or other  compensation  payable in respect of renewals of the
  Leases.  There does not currently  exist any exclusive or continuing  leasing or
  brokerage  agreements  as to any of the  Leases  for  which  Purchaser  will  be
  responsible after Closing.
  
                (f)    Intentionally Omitted.
  
                (g)    Intentionally Omitted.
  
        Section 6.4 Certain Schedules. To Seller's knowledge,  the information set
  forth in the Employee Schedule,  the License Schedule,  the Warranties  Schedule
  and the Utility Schedule is true, correct and complete in all material respects.
  
   . Except as  expressly  set forth in this  Agreement,  (i) the Property is being
  sold in its  condition  on the  Closing  Date "as is",  "where is" and "with all
  faults", without any representation or warranty,  express or implied, by Seller,
  including,  without  limitation,  any  implied  warranty of  merchantability  or
  fitness for a particular purpose,  and (ii) Seller has not made any agreement to
  alter, repair or improve the Property.
  
    All representations and warranties contained in this Article shall survive the
  Closing,  and the execution  and delivery of the Deed,  for a period of one year
  after the Closing Date, and shall not be merged in the Deed at Closing.
  
  
  <PAGE>
  
  
                                    ARTICLE VII
  
                    Representations and Warranties of Purchaser
  
    Purchaser makes the following representations and warranties to Seller for the
  purpose  of  inducing  Seller to  execute  and  deliver  this  Agreement  and to
  consummate the transactions contemplated by this Agreement:
  
                (a)  Organization.  Purchaser is a business trust duly formed and
  validly existing under the laws of the District of Columbia.
  
                (b)  Authorization.  The Board of Trustees of  Purchaser  has duly
  authorized the signer of this Agreement to execute and deliver this Agreement on
  Purchaser's behalf.
  
                (c) No  Conflicting  Agreements.  The  execution  and  delivery by
  Purchaser of, and the performance and compliance by Purchaser with the terms and
  provisions  of, this  Agreement do not violate any of the terms,  conditions  or
  provisions  of (i)  Purchaser's  organizational  documents,  (ii) any  judgment,
  order,  injunction,   decree,  regulation  or  ruling  of  any  court  or  other
  Governmental  Authority to which Purchaser is subject, or (iii) any agreement or
  contract to which Purchaser is a party or to which it is subject.
  
                                   ARTICLE VIII
  
                         Additional Obligations of Seller
  
   . Seller  agrees to  surrender  full,  complete  and  actual  possession  of the
  Property to Purchaser on the Closing Date, subject only to the rights of Tenants
  under the  Leases  described  in the Lease  Schedule  and  permitted  additions,
  renewals and replacements  thereof.  Seller agrees to cooperate  reasonably with
  Purchaser  to ensure that the transfer of  possession  on the Closing Date takes
  place with the least  possible  disruption  in the normal  operation of the Real
  Property and the duties of the employees.
  
   . On the Closing Date, Seller shall also turn over to Purchaser, or leave at the
  Real Property, all books, records,  operating reports, files and other materials
  necessary to a complete  continuity in the operation of the business,  or copies
  thereof.  Purchaser shall permit Seller to have access to such records and files
  at all reasonable times after the Closing Date.
  
   . Between the date of this Agreement and the Closing Date, Seller agrees that it
  will:
                (a) manage and operate the Real  Property only in the ordinary and
  usual  manner,  maintain  in full force and effect  until the  Closing  Date the
  insurance  policies in force on the date hereof,  and use all reasonable efforts
  to keep available the services of the management  agent's employees and preserve
  its relations with Tenants;
  
                (b) at its  expense,  maintain  the Real  Property  in its present
  order and condition,  make all necessary  repairs and replacements in accordance
  with Seller's past practices,  and deliver the Real Property on the Closing Date
  in  substantially  the same  condition  it is in on the date of this  Agreement,
  reasonable wear and tear and damage by fire or other casualty excepted;
  
              (c)  give prompt notice of any fire or other casualty affecting the
  Property after the date of this Agreement;
  
                (d)  deliver to  Purchaser,  (i)  promptly  after the  preparation
  thereof by Seller in a manner consistent with its past practice (but at least as
  often as monthly), a summary showing leasing activity at the Property, including
  new rentals and eviction  notices sent by Seller or its managing agent, and (ii)
  promptly after its receipt by Seller, (A) any notice from a Tenant claiming that
  Seller is in  default  under such  Tenant's  Lease or that such  Tenant  will be
  vacating  its  apartment  unit,  and (B)  any  notice  of  violation  issued  by
  Governmental Authorities with respect to the Real Property; Seller shall, at its
  sole cost and expense,  remedy  before the Closing Date all  violations of Legal
  Requirements affecting or relating to the Real Property and any outstanding work
  orders and  requirements  of any  company  insuring  the Real  Property  against
  casualty;
  
                (e) enter into new Leases or  amendments  to Leases only for rents
  in excess of those set forth in the Leasing Guidelines for the type of apartment
  unit involved, and for terms not in excess of one year;
  
                (f) notify  Purchaser in writing,  promptly after Seller  acquires
  knowledge  thereof,  of any facts or events  which  would  cause any of Seller's
  representations and warranties to be untrue or incorrect;
  
                (g) perform,  observe and comply with all terms and  provisions of
  all Easement Agreements to be performed,  observed or complied with by Seller as
  owner of the Real Property;
  
                (h) maintain in full force and effect all  Licenses  listed on the
  License Schedule and timely apply for renewals of all Licenses which will expire
  before the Closing Date;
  
                (i) on the Closing Date  terminate  all employees of Seller listed
  on the Employee  Schedule,  except for those  employees  designated by Purchaser
  prior to the end of the Feasibility Period; and
  
                (i) promptly  deliver to Purchaser  any Property  Document  coming
  into the  possession  of Seller which was not available  during the  Feasibility
  Period.
  
   . Between the date of this  Agreement and the Closing Date,  Seller agrees that,
  without Purchaser's written consent in each case, it will not:
  
                (a)  voluntarily  grant,  create,  assume  or  permit to exist any
  Mortgage,  lien, encumbrance,  easement,  covenant,  condition,  right-of-way or
  restriction  upon  the  Property  other  than  the  Permitted   Exceptions,   or
  voluntarily  take or permit  any  action  adversely  affecting  the title to the
  Property  as it  exists  on the date of this  Agreement,  unless  terminable  at
  Closing;
  
            (b) agree to any commitment or incur any liability to any labor union;
  
  
                (c) alter or amend  any of the  Assignable  Contracts  or become a
  party to any new Contract unless the new Contract is terminable  without penalty
  to the then-owner of the Buildings upon not more than 30 days' notice;
  
                (d) increase the salaries of the employees  listed on the Employee
  Schedule or hire additional employees for the management,  operation, promotion,
  maintenance or repair of the Real  Property,  unless any such increases or hires
  are terminable at Closing;
  
                (e) enter into a new Lease, or alter,  amend,  renew or extend any
  Lease,  providing for a monthly rent below the minimum monthly rent for the type
  of apartment unit  involved,  as set forth in the Leasing  Guidelines,  or for a
  term in excess of one year;
  
                (f)    terminate any Lease except for non-payment of Rent or other
  default;
  
                (g) remove any Personal  Property  from the  Buildings  unless the
  same is  replaced  with  similar  items of equal or better  quality  before  the
  Closing Date; or
  
                (h) enter into a contract for the sale of the Real Property to any
  other Person,  whether or not such contract is contingent on the  termination of
  this  Agreement,  except  as may be  required  by  Chapters  11A  and 53A of the
  Montgomery County, Maryland Code.
  
   . Each of Seller and Purchaser agrees that it will, at any time and from time to
  time within  three (3) months  after the  Closing  Date,  upon  request of other
  party, do, execute, acknowledge and deliver, or will cause to be done, executed,
  acknowledged  and  delivered,   all  such  further   reasonable   acts,   deeds,
  assignments, transfers, conveyances and assurances as may reasonably be required
  for the completion of the transactions contemplated by this Agreement.
  
        Section 8.6  Intentionally Omitted.
  
   . Seller  agrees  to pay all  expenses  incurred  by it in  connection  with the
  negotiation,  execution and  performance of this Agreement and the  transactions
  contemplated hereby, including the fees and expenses of its legal counsel.
  
        Section 8.8  Cancellation  of Contracts.  Seller shall  cancel,  as of the
  Closing  Date,  all  Contracts  designated  for  cancellation  by Purchaser in a
  written notice given to Seller prior to the end of the Feasibility  Period. If a
  Contract cannot be cancelled as of the Closing Date, Seller shall  nevertheless,
  at the  request of  Purchaser,  prior to Closing  notify the other party to such
  Contract of its  cancellation in accordance with the terms of such Contract.  In
  such event,  such  Contract will be assigned to Purchaser at Closing and will be
  cancelled after the Closing pursuant to Seller's notice.
  
        Section 8.9  Title Defects.
  
                (a) If the title  examination  performed by  Purchaser  during the
  Feasibility  Period (as provided in Section 9.1) discloses a defect in the title
  to the Real  Property  such that the  condition of title to the Real Property is
  not (or will not be on the Closing Date) as required by Section 11.3,  Purchaser
  shall so notify  Seller not later than fifteen (15) days prior to the end of the
  Feasibility  Period.  Within ten (10) days after receipt of such notice,  Seller
  shall send a notice to Purchaser  stating  whether or not Seller  elects to cure
  such  defect.  Failure by Seller to send such a notice  within such ten (10)-day
  period shall be deemed an election not to cure such defect.  If Seller elects to
  cure such defect, it shall do so prior to the Closing Date;  provided,  however,
  if such defect is of a nature that it cannot be cured prior to the Closing Date,
  the Closing Date may be extended, at Purchaser's option, for any period required
  to accomplish such cure.
  
                (b) If a defect in the  title to the Real  Property  is  disclosed
  after the end of the Feasibility  Period such that the condition of title to the
  Real Property is not (or will not be on the Closing Date) as required by Section
  11.3,  Purchaser shall so notify Seller.  Seller shall be obligated to cure such
  defect if the  defect  was  caused by  Seller  after the end of the  Feasibility
  Period.  If the defect was not caused by Seller after the end of the Feasibility
  Period,  then Seller shall have the right,  but not the obligation,  to elect to
  cure such  defect  prior to the Closing  Date.  If Seller does not elect to cure
  such  defect,  Purchaser  shall  have the right  either  (i) to  terminate  this
  Agreement or (ii) waive the defect and proceed to Closing  hereunder.  If Seller
  is required or elects to cure a defect in title under this Section 8.9(b) but is
  not able to accomplish such cure prior to the Closing Date, the Closing Date may
  be extended,  at Purchaser's  option, for any period required to accomplish such
  cure.
  
        Section  8.10.  Pay-Off  Letter.  Seller shall obtain from any holder of a
  mortgage on the Real Property, and deliver to the Escrow Agent a reasonable time
  prior to the Closing Date, a letter from such  mortgagee  specifying the amounts
  necessary to pay off such mortgage.
  
       Section  8.11.  Tenant  Work  Orders.  Seller  shall  perform,  and pay all
  expenses  incurred in connection  with,  all Tenant Work Orders in existence two
  (2) days' prior to the Closing Date.
  
  <PAGE>
  
  
  
                                    ARTICLE IX
  
                        Additional Obligations of Purchaser
  
   .  Promptly  after  the date of this  Agreement,  Purchaser  agrees  to order an
  examination  of the title to the Real  Property and to obtain a  commitment  for
  issuance to Purchaser of an ALTA Form B owner's title insurance  policy insuring
  the fee simple  title to the Real  Property,  in an amount equal to the Purchase
  Price,  subject  to such  exceptions  to title as may be  disclosed  by the Land
  Records or otherwise.  If Purchaser does not terminate this Agreement within the
  Feasibility Period, Purchaser shall be deemed to have accepted all exceptions to
  title noted in Schedule B to the commitment (other than the survey exception and
  the exception for unfiled  mechanics'  liens; the exception for defects,  liens,
  encumbrances, adverse claims or other matters, if any, created after the date of
  the  commitment  (not earlier than the date of this  Agreement) but prior to the
  date title to the Real Property vests in Purchaser;  the exception for rights of
  parties in possession other than Tenants under the Leases; and the exception for
  Mortgages encumbering the Real Property).
  
   . Purchaser  agrees to pay all expenses  incurred by it in  connection  with the
  negotiation,  execution and  performance of this Agreement and the  transactions
  contemplated hereby, including the fees and expenses of its legal counsel.
  
                                     ARTICLE X
  
                   Conditions Precedent to Seller's Obligations
  
        The obligations of Seller to sell the Property to Purchaser and to perform
  the other  covenants and  obligations  to be performed by it on the Closing Date
  shall be subject to the following conditions (all or any of which may be waived,
  in whole or in part, by Seller):
  
   . The  representations  and warranties made by Purchaser in Article VII shall be
  true and correct on and as of the Closing Date with the same force and effect as
  though such representations and warranties had been made on and as of such date,
  and Purchaser  shall have executed and delivered to Seller a certificate,  dated
  as of the Closing Date, to the foregoing effect.
  
       . Purchaser shall have performed all obligations required by this Agreement
  to be performed by it on or before the Closing Date.
  
        Section 10.3 Montgomery  County Right of First Refusal.  Seller shall have
  received  prior  to the  end of the  Feasibility  Period  (i) a  Certificate  of
  Compliance from Montgomery County,  Maryland,  in form and substance  reasonably
  acceptable to Seller,  to the effect that Montgomery County has waived its right
  of first refusal under Chapters 11A and 53A of the  Montgomery  County Code, and
  (ii)  a  copy  of a  three  (3)-year  rental  agreement  between  Purchaser  and
  Montgomery County (the "Rental Agreement") upon which such Certificate is based.
  The terms  and  provisions  of the  Rental  Agreement  shall be  subject  to the
  approval of  Purchaser,  in its sole  discretion.  If the condition set forth in
  this  Section  10.3 has not been  satisfied  on or  prior to the  Closing  Date,
  Purchaser shall have the right, at its option, to extend the Closing Date for up
  to sixty (60) days in order to allow  sufficient  time for this  condition to be
  satisfied.
  
                                    ARTICLE XI
  
                  Conditions Precedent to Purchaser's Obligations
  
        The  obligations  of Purchaser to purchase the Property from Seller and to
  perform the other covenants and obligations to be performed by it on the Closing
  Date shall be subject to the  following  conditions  (all or any of which may be
  waived, in whole or in part, by Purchaser):
  
   . The  representations and warranties made by Seller in Article VI shall be true
  and correct in every material respect on the date of this Agreement and shall be
  true and correct in every  material  respect on and as of the Closing  Date with
  the same force and effect as if such  representations had been made on and as of
  such  date,  and  Seller  shall have  executed  and  delivered  to  Purchaser  a
  certificate, dated as of the Closing Date, to the foregoing effect.
  
   . Seller  shall have  performed  in all  material  respects  all  covenants  and
  obligations  required by this  Agreement  to be performed by it on or before the
  Closing Date.
  
   . On the  Closing  Date,  (i) Seller  shall have cured any title  defects it has
  elected to cure or is required to cure under the  provisions of Section 8.9, and
  (ii) subject to the payment by Purchaser of the  applicable  premium,  Purchaser
  shall be entitled to receive,  at its expense,  from the title insurance company
  issuing the commitment  obtained by Purchaser  during the  Feasibility  Period a
  current ALTA Form B owner's policy of title  insurance,  in a total amount equal
  to the Purchase  Price,  dated,  or updated to, the Closing Date,  insuring,  or
  committing to insure, at standard rates, Purchaser's marketable fee simple title
  to the Real Property subject only to the Permitted Exceptions.
  
  Seller  shall have  received  prior to the end of the  Feasibility  Period (i) a
  Certificate  of  Compliance  from  Montgomery  County,  Maryland,  in  form  and
  substance reasonably  acceptable to Seller, to the effect that Montgomery County
  has  waived  its  right  of  first  refusal  under  Chapters  11A and 53A of the
  Montgomery  County Code,  and (ii) a copy of a three (3)-year  rental  agreement
  between Purchaser and Montgomery County (the "Rental Agreement") upon which such
  Certificate is based.  The terms and provisions of the Rental Agreement shall be
  subject to the approval of Purchaser,  in its sole discretion.  If the condition
  set forth in this Section 11.4 has not been satisfied on or prior to the Closing
  Date,  Purchaser shall have the right, at its option, to extend the Closing Date
  for up to sixty (60) days in order to allow  sufficient  time for this condition
  to be satisfied.
  
   . On the Closing  Date, no action or  proceeding  shall have been  instituted or
  threatened  against Seller by a party other than  Purchaser  before any court to
  restrain or prohibit,  or to obtain substantial  damages in respect of, or which
  is  related  to or arises  out of, the  transfer  of the  Property  by Seller to
  Purchaser  under the  provisions  of this  Agreement  or  environmental  matters
  respecting the Property.
  
        Section  11.6  Condemnation.  On the  Closing  Date,  no part of the  Real
  Property shall be about to be acquired,  or shall previously have been acquired,
  by authority of any governmental  agency in the exercise of its power of eminent
  domain or by private  purchase in lieu  thereof,  nor on the Closing  Date shall
  there be any threat or imminence of any such acquisition or purchase.
                                    ARTICLE XII
  
                         Damage by Fire or Other Casualty
  
   . On the  Closing  Date,  and as a  condition  precedent  to the  obligation  of
  Purchaser to purchase the Property pursuant to this Agreement, there shall be no
  unrepaired  damage by fire or other casualty to any portion of the Real Property
  the estimated cost of repair of which is more than $100,000.
  
   . If (i) any portion of the  Property  is damaged by fire or casualty  after the
  date of this  Agreement  and is not repaired and restored  substantially  to its
  original  condition  prior to Closing and (ii) the estimated  cost of repairs is
  $100,000  or less,  Purchaser  shall be required  to  purchase  the  Property in
  accordance with the terms of this Agreement and, at Closing, Seller shall assign
  to Purchaser  all insurance  claims and proceeds with respect  thereto and shall
  pay or credit to Purchaser the amount of any  deductible or uninsured  loss with
  respect to such casualty. If the estimated cost of repairing such damage is more
  than $100,000,  Purchaser may, at its sole option: (i) terminate this Agreement,
  in which case the Escrow  Agent  shall  return the Deposit to  Purchaser  and no
  party shall have any further  liability or  obligation  to any other party under
  this  Agreement,  except as  otherwise  provided  in Article V; or (ii) elect to
  proceed  with the Closing,  in which case Seller  shall assign to Purchaser  all
  insurance  claims and  proceeds  (other than claims and  proceeds  for rent loss
  insurance for periods prior to the Closing Date) with respect to such damage and
  shall pay or credit to Purchaser the amount of any  deductible or uninsured loss
  with  respect to such  casualty.  If a casualty to any part of the  Property has
  occurred  and  Purchaser  is required or elects to complete  the purchase of the
  Property,  Seller shall  reasonably  cooperate with Purchaser in prosecuting all
  insurance claims assigned to Purchaser at Closing.
  
   . For purposes of this Article XII, an architect selected by Seller and approved
  in writing by Purchaser (such approval not to be unreasonably withheld,  delayed
  or  conditioned),  shall determine the estimated cost to repair damage caused by
  fire or other casualty.
  
                                   ARTICLE XIII
  
                                      Closing
  
   . The closing of the purchase and sale of the Property (the "Closing")  shall be
  held at the office of Arent Fox Kintner Plotkin & Kahn, 1050 Connecticut Avenue,
  Washington, D. C. 20036, on the Closing Date. On the Closing Date, (i) Purchaser
  shall  effect a wire  transfer  of Federal  funds to the Escrow  Agent's  escrow
  account  in an  amount  equal to the sum of (A) the  Purchase  Price  (less  the
  Deposit) and (B) the net amount (if any) of the costs, expenses,  prorations and
  adjustments  payable by Purchaser  under this  Agreement,  and (ii) Escrow Agent
  shall record the Deed (in  accordance  with  reasonable  and  customary  closing
  escrow  instructions  of Seller and Purchaser  not contrary to this  Agreement).
  After the Escrow Agent's  receipt of the wire transfer of funds and  immediately
  following  the  recordation  of the Deed  vesting  fee simple  title in the Real
  Property in Purchaser or its  designee,  (i) the Escrow Agent shall  disburse to
  Seller  an  amount  equal to the  Purchase  Price  (including,  as a part of the
  Purchase Price, the Deposit)  reduced by the net amount of the costs,  expenses,
  prorations and adjustments  payable by Seller under this Agreement (as evidenced
  by the Closing Statement signed by Seller);  (ii) the Escrow Agent shall deliver
  to  Purchaser  all other  documents  and  instruments  received by it which,  in
  accordance  with the terms of this  Agreement,  are to be delivered by Seller to
  Purchaser at the Closing; and (iii) the Escrow Agent shall deliver to Seller all
  other  documents and  instruments  received by it which,  in accordance with the
  terms of this  Agreement,  are to be  delivered  by  Purchaser  to Seller at the
  Closing.
  
   .  At the Closing, Seller shall deliver to Purchaser the following:
  
       (a) the Deed of the  Property  to  Purchaser  or its  designee,  signed  by
  Seller;
                (b)    the Bill of Sale, signed by Seller;
  
                (c)    the Leases and Contract Assignment, signed by Seller;
                (d)    the General Assignment, signed by Seller;
  
       (e) a letter  in the form of  Exhibit  F signed  by  Seller,  advising  the
  Tenants of the change in ownership of the Real Property;
  
                (f) An updated Employee  Schedule,  License  Schedule,  Warranties
  Schedule and Utility  Schedule,  showing any change in such Schedules  since the
  date of this Agreement;
  
                (g)  a  certification  as to  Seller's  non-foreign  status  which
  complies with the provisions of Section  1445(b)(2) of the Internal Revenue Code
  of 1986, as amended, signed by Seller;
  
                (h) an Owner's Affidavit signed by Seller,  addressed to the title
  insurance company designated by Purchaser, with respect to the absence of claims
  which would give rise to mechanics'  liens, the absence of parties in possession
  of the Real  Property  other  than  Tenants  under the  Leases  (and  other than
  subtenants  of  Tenants)  and the  absence of  unrecorded  easements  granted by
  Seller,  in the form  reasonably  required  by the title  insurance  company  to
  eliminate the  exceptions  for those matters from  Purchaser's  title  insurance
  policy;
  
       (i) the Closing Statement referred to in Section 14.1, signed by Seller;
  
       (j) an original executed  counterpart of each Lease and assignable Contract
  then in effect (or a certified copy thereof);
  
       (k) all keys to the Real Property and the Personal Property,  if any, which
  are in Seller's possession;
  
                (l) a schedule  updating the Lease  Schedule and setting forth all
  past due and uncollected  Rent owed by Tenants,  all prepayments of Rent and all
  Security  Deposits and interest due, if any, held by Seller,  its managing agent
  or any other Person under all Leases;
  
       (m) all existing  books,  records,  papers and  agreements  relating to the
  Property which are in Seller's possession; and
  
                (n) a certificate,  signed by Seller, that all the representations
  and warranties  made by Seller in Article VI are true and correct on the Closing
  Date with the same force and effect as if such  representations  and  warranties
  had been made on and as of such date;
  
   .  At the Closing, Purchaser shall deliver to Seller the following:
  
                (a) an  assumption  agreement  in the form of  Exhibit G signed by
  Purchaser,  whereby Purchaser assumes certain  liabilities and agrees to perform
  certain obligations of Seller under the Leases and the Assignable Contracts;
  
                (b)  the Closing Statement referred to in Section 14.1, signed by
  Purchaser; and
  
                (c)  a   certificate,   signed   by   Purchaser,   that   all  the
  representations  and  warranties  made by  Purchaser in Article VII are true and
  correct  on the  Closing  Date  with  the  same  force  and  effect  as if  such
  representations and warranties had been made on and as of such date;
  
   . The delivery to the Escrow Agent of the Purchase Price,  the executed Deed and
  Bill of Sale and all other documents and instruments required to be delivered by
  either party to the other by the terms of this  Agreement  (in  accordance  with
  reasonable and customary closing escrow instructions of Seller and Purchaser not
  contrary to this Agreement)  shall be deemed to be a good and sufficient  tender
  of  performance of the terms hereof.  The Escrow Agent shall have the right,  at
  the Closing,  to apply the Purchase Price to pay off and discharge  encumbrances
  or  other  obligations  affecting  the Real  Property  which  are not  Permitted
  Exceptions, so that title to the Real Property shall be insurable as required by
  Section 11.3.
  
                                    ARTICLE XIV
  
                        Closing Adjustments and Prorations
  
    All rentals,  revenues and other income generated by the Real Property and all
  utilities,  real estate taxes,  maintenance charges and other Operating Expenses
  incurred in connection with the ownership,  management and operation of the Real
  Property  shall be paid or shall be prorated  between  Seller and  Purchaser  in
  accordance  with the provisions of this Article.  For purposes of the prorations
  and  adjustments to be made pursuant to this Article,  Purchaser shall be deemed
  to own the Real  Property  and  therefore  be  entitled to any  revenues  and be
  responsible  for any expenses for the entire day upon which the Closing  occurs.
  Any  apportionments  and prorations which are not expressly provided for in this
  Article  shall  be  made  in  accordance  with  the  customary  practice  in the
  Metropolitan  Washington  D.C.  area.  Seller and  Purchaser  shall  cause their
  accountants  to prepare a schedule  of  adjustments  (the  "Closing  Statement")
  before the Closing  Date.  Any net  adjustment  in favor of  Purchaser  shall be
  credited against the Purchase Price at the Closing.  Any net adjustment in favor
  of Seller shall be paid in cash at the Closing by Purchaser to Seller. A copy of
  the Closing  Statement agreed upon by Seller and Purchaser shall be initialed by
  Seller and Purchaser and delivered to the Escrow Agent at the Closing.
  
       . Rent shall be prorated at the Closing in  accordance  with the  following
  provisions:
  
  
                (a) Apartment  Rent.  Subject to Section  14.2(c),  Apartment Rent
  shall be prorated  between  Seller and  Purchaser  as of the Closing  Date on an
  accrual  basis based on the actual  number of days in the month during which the
  Closing  Date  occurs.  Seller  shall be  entitled to all  Apartment  Rent which
  accrues before the Closing Date and Purchaser shall be entitled to all Apartment
  Rent which accrues on and after the Closing Date.
  
                (b)  Additional  Income.  Subject  to  Section  14.2(c),  items of
  Additional  Income  shall be prorated  between  Seller and  Purchaser  as of the
  Closing  Date on an  accrual  basis  based on the  actual  number of days in the
  monthly or other period to which such item of Additional  Income  relates.  Such
  proration shall be made separately for each item of Additional Income.
  
                (c) Delinquent  Rent.  Delinquent  Rent shall be prorated  between
  Seller  and  Purchaser  as of the  Closing  Date but not  until  it is  actually
  collected by Purchaser  after the Closing,  it being  understood and agreed that
  Purchaser  shall  have no  obligation  to collect  Delinquent  Rent on behalf of
  Seller. Purchaser shall pay to Seller all Delinquent Rent collected by Purchaser
  after  the  Closing  Date.  As a  part  of the  Final  Closing  Adjustment,  any
  Delinquent Rent which has not as yet been paid shall be assigned to Seller,  but
  after the Closing and continuing through and after the Final Closing Adjustment,
  without the express  written  consent of  Purchaser,  Seller  shall not take any
  action against a Tenant owing  Delinquent  Rent which would affect such Tenant's
  right to occupy the premises leased under its Lease. Rent collected by Purchaser
  after  the  Closing,  net of  the  costs  of  collection  (including  reasonable
  attorneys'  fees and costs),  shall be applied first to unpaid Rent then due and
  payable and accruing after the Closing Date, and then to Delinquent Rent.
  
   .     Section 14.3  Taxes and Assessments
  
                (a) Proration of Taxes at Closing.  All non-delinquent real estate
  taxes assessed  against the Real Property  shall be prorated  between Seller and
  Purchaser on an accrual  basis,  based upon the actual  current tax bill. If the
  most  recent tax bill  received  by Seller  before the  Closing  Date is not the
  actual current tax bill, then Seller and Purchaser  shall initially  prorate the
  real estate taxes at the Closing by applying  110% of the tax rate  indicated on
  the most recent tax bill  received by Seller to the latest  assessed  valuation,
  and shall  reprorate  the real estate taxes  retroactively  at the Final Closing
  Adjustment.  All real estate taxes accruing before the Closing Date shall be the
  obligation of Seller and all real estate taxes accruing on and after the Closing
  Date shall be the  obligation of  Purchaser.  Any  delinquent  real estate taxes
  assessed against the Real Property shall be paid (together with any interest and
  penalties) by Seller at the Closing from the Purchase Price.
  
                (b) Post-Closing  Supplemental  Taxes. If, after the Closing Date,
  any additional or supplemental  real estate taxes are assessed  against the Real
  Property by reason of back  assessments,  corrections  of previous  tax bills or
  other events  occurring  before the Closing  Date,  Seller and  Purchaser  shall
  reprorate the real estate taxes at the Final  Closing  Adjustment to provide the
  appropriate credit to Purchaser.
  
                (c)  Post-Closing  Refunds of Taxes.  Any  refunds of real  estate
  taxes made after the Closing  shall be held by  Purchaser  (and,  if received by
  Seller,  shall be delivered  immediately  to Purchaser to be held in  accordance
  with this Section) and shall first be applied to the unreimbursed costs incurred
  in obtaining the refund,  and the balance,  if any, shall be paid to Seller (for
  the  period  prior  to the  Closing  Date)  and to  Purchaser  (for  the  period
  commencing on and after the Closing Date).
  
                (d) Pending Tax  Proceedings.  If any  proceeding to determine the
  assessed  value of the Real  Property  or the real  estate  taxes  payable  with
  respect  to the  Real  Property  has  been  commenced  before  the  date of this
  Agreement and shall be continuing  as of the Closing  Date,  Purchaser  shall be
  entitled  to control  the  prosecution  of such  proceeding  or  proceedings  to
  completion  and to settle or  compromise  any claim  therein.  Seller  agrees to
  cooperate  reasonably  with  Purchaser  and to  execute  any and  all  documents
  reasonably requested by Purchaser in furtherance of the foregoing.
  
   . All Operating  Expenses  shall be prorated  between Seller and Purchaser as of
  the Closing Date on an accrual basis,  based on the actual number of days in the
  month during which the Closing Date occurs for monthly expenses,  and based on a
  365-day year for annual expenses.  Seller shall be responsible for all Operating
  Expenses  attributable to the period before the Closing Date and Purchaser shall
  be  responsible  for all Operating  Expenses  attributable  to the period on and
  after the Closing Date. To the extent  commercially  reasonable and practicable,
  Seller and Purchaser shall obtain billings and meter readings as of the Business
  Day  preceding  the  Closing  Date to aid in the  proration  of charges for gas,
  electricity and other utility  services which are not the direct  responsibility
  of Tenants.  If billings or meter  readings as of the Business Day preceding the
  Closing Date are obtained,  adjustments of any costs, expenses,  charges or fees
  shown thereon shall be made in accordance  with such billings or meter readings.
  If billings or meter  readings as of the Business Day preceding the Closing Date
  are not  available  for any  utility  service,  the  charges  therefor  shall be
  adjusted at the Closing on the basis of the per diem charges for the most recent
  prior  period for which bills were  issued and shall be further  adjusted at the
  Final  Closing  Adjustment  on the basis of the  actual  bills  for the  current
  period.
  
   .  Purchaser  shall be credited  with and Seller shall be charged with an amount
  equal to the sum of (i) all  Security  Deposits  being held by Seller,  Seller's
  managing agent or any other Person under the Leases,  and (ii) the amount of any
  other credits due to Tenants as of the Closing Date in accordance with the terms
  of the Leases, including prepaid rent and interest.  Seller shall be entitled to
  retain all Security  Deposits or other such credits due. To the extent Purchaser
  receives the Security  Deposits at the Closing (or receives a credit against the
  Purchase  Price in an  amount  equal to the  same),  Purchaser  shall,  and does
  hereby,  indemnify  and hold  Seller  harmless  from and  against  any claims by
  Tenants for the return of Security Deposits placed by such Tenants.
  
   .  Purchaser  shall  not be  entitled  to a credit  for an  amount  equal to the
  abatement of Rent for any period on and after the Closing Date to which  Tenants
  are entitled under Leases in effect on the Closing Date.
  
   . Seller shall be entitled to retain all Utility Deposits. If any of the Utility
  Deposits is not refundable to Seller without replacement by Purchaser, Purchaser
  shall  either:  (i) deliver the  requisite  replacement  Utility  Deposit to the
  utility  company on or before  the  Closing  Date,  or (ii) pay to Seller at the
  Closing  the  amount of such  Utility  Deposit,  against  a good and  sufficient
  transfer  by Seller  to  Purchaser  of all  interest  of  Seller in the  Utility
  Deposit.
  
   . No later than 120 days following the Closing Date,  Seller and Purchaser shall
  make a final  adjustment  to the  prorations  made pursuant to this Article (the
  "Final Closing  Adjustment").  The Final Closing Adjustment shall be made in the
  following manner:
  
                (a) General.  All  adjustments  or  prorations  which could not be
  determined  at the Closing  because of the lack of actual  statements,  bills or
  invoices for the current period or any other reason,  shall be made as a part of
  the Final Closing Adjustment.  Any net adjustment in favor of Purchaser shall be
  paid in cash or cash  equivalent  by Seller to  Purchaser  no later than 30 days
  after the Final Closing Adjustment.  Any net adjustment in favor of Seller shall
  be paid in cash or cash  equivalent by Purchaser to Seller no later than 30 days
  after the Final Closing Adjustment. The parties shall correct any manifest error
  in the prorations and adjustments  made at Closing  promptly after such error is
  discovered.
  
                (b)  No  Further  Adjustments.   Except  for:  (i)  additional  or
  supplemental  real estate  taxes,  real estate tax credits or rebates,  or other
  adjustments  to real  estate  taxes  due to  back  assessments,  corrections  to
  previous tax bills or real estate tax appeals or contests, (ii) manifest errors,
  the Final Closing  Adjustment  shall be  conclusive  and binding upon Seller and
  Purchaser,  and Seller and Purchaser hereby waive any right to contest after the
  Final Closing  Adjustment any  prorations,  apportionments  or adjustments to be
  made pursuant to this Section.
  
   . All  State  and  County  transfer  taxes  and  recording  charges  payable  in
  connection  with the  recording  of the  Deed  (whether  imposed  in the form of
  transfer taxes,  revenue stamps or otherwise)  shall be paid fifty percent (50%)
  by Seller and fifty  percent  (50%) by  Purchaser.  Purchaser  shall pay for all
  expenses of examinations of title, survey, all fees, charges and expenses of the
  Escrow Agent,  and all other  recording  fees and Closing  expenses.  Each party
  shall pay its own legal fees and other expenses incurred by it prior to Closing.
  
   .  Notwithstanding  any other  provision of this Agreement to the contrary,  all
  federal,  state or local income or gross  receipts taxes payable with respect to
  Seller or the Property,  if any,  accruing  before the Closing Date, or any such
  income or gross receipts tax assessed with respect to the transaction  described
  in this  Agreement,  if any,  shall be the  obligation of and for the account of
  Seller,  and Purchaser  shall have no obligation  or liability  whatsoever  with
  respect thereto.
  
                                    ARTICLE XV
  
                                    Termination
  
       . This Agreement may be terminated  upon written notice given to the Escrow
  Agent and the other party by:
  
       (a)  Purchaser at the Closing,  if any one of the  conditions  set forth in
  Article XI or Article XII is not satisfied on the Closing Date; or
  
       (b)  Seller  at the  Closing,  if any one of the  conditions  set  forth in
  Article X is not satisfied on the Closing Date.
  
   . If Purchaser  terminates  this  Agreement  pursuant to Section  15.1(a),  this
  Agreement  shall become null and void, the Escrow Agent shall return the Deposit
  to Purchaser and no party shall have any further  liability or obligation to any
  other party under this Agreement,  except as otherwise  provided in Article V or
  the next sentence.  If Purchaser  terminates this Agreement  pursuant to Section
  15.1(a)  because  of a  breach  by  Seller  of  any of  the  representations  or
  warranties  made by it in this Agreement or the failure of Seller to perform any
  of the  covenants or  agreements  to be  performed  by it under this  Agreement,
  Purchaser shall have the right to sue to recover its damages arising out of such
  breach or nonperformance in an amount not to exceed $300,000.
  
   . If  Seller  terminates  this  Agreement  pursuant  to  Section  15.1(b),  this
  Agreement  shall become null and void, the Escrow Agent shall return the Deposit
  to Purchaser and no party shall have any further  liability or obligation to any
  other party under this Agreement,  except as otherwise  provided in Article V or
  the next  sentence.  If Seller  terminates  this  Agreement  pursuant to Section
  15.1(b)  because  of a breach  by  Purchaser  of any of the  representations  or
  warranties  made by it in this  Agreement or the failure of Purchaser to perform
  any of the covenants or  agreements to be performed by it under this  Agreement,
  the Escrow Agent shall pay the Deposit to Seller.  Seller's  sole and  exclusive
  remedy for Purchaser's misrepresentation, breach of warranty or default shall be
  to  receive  the  Deposit  as  liquidated  damages.  In no  event  and  under no
  circumstances  shall  Seller be  entitled  to receive  more than the  Deposit as
  damages  for  Purchaser's  misrepresentation,  breach of  warranty  or  default.
  Purchaser shall promptly return to Seller all engineering studies, Leases, Lease
  files  and other  written  material  relating  to the Real  Property  previously
  delivered by Seller to Purchaser.  Notwithstanding  the foregoing  provisions of
  this  Section  15.3,  Seller shall have the right to sue  Purchaser  for damages
  arising out of  Purchaser's  liability  under the  indemnities  of Purchaser set
  forth in Sections 5.3, 14.5, 16.2 and 16.4 hereof.
  
   . If Seller  defaults in  performing  any of the  covenants or  agreements to be
  performed by it under this Agreement, Purchaser shall have the right, instead of
  terminating  this  Agreement  pursuant to Section  15.1, to elect to permit this
  Agreement to remain in effect and to sue for specific performance.
  
                                    ARTICLE XVI
  
                                  Indemnification
  
   . Subject to the provisions of Section 16.3, if Closing occurs, Seller agrees to
  indemnify, hold harmless and defend Purchaser from and against:
  
                (a) all debts,  liabilities and obligations  arising from business
  done,  transactions  entered into or other events  occurring  before the Closing
  Date with  respect to the  ownership,  management,  operation,  maintenance  and
  repair of the Property,  other than the debts, liabilities and obligations which
  are being adjusted between Seller and Purchaser pursuant to this Agreement;
  
                (b)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser  arising out of or resulting  from injury or death to  individuals  or
  damage to property  sustained on the Real Property before the Closing and caused
  by the willful or negligent act or omission (where applicable law imposes a duty
  to act) of Seller;
  
                (c)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser  because any  representation or warranty made by Seller in Article VI,
  or in any document  furnished to Purchaser in  connection  with the Closing,  is
  false or misleading in any material respect;
  
                (d)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser because of the nonfulfillment of any covenant or agreement on the part
  of Seller under this Agreement;
  
                (e)  all  reasonable  costs  and  expenses  (including  reasonable
  attorneys'  fees)  incurred by Purchaser in  connection  with any action,  suit,
  proceeding,  demand,  assessment  or  judgment  incident  to any of the  matters
  indemnified against in this Section.
  
   . Subject to the provisions of Section 16.3, if Closing occurs, Purchaser agrees
  to indemnify, hold harmless and defend Seller from and against:
  
                (a) all debts,  liabilities and obligations  arising from business
  done,  transactions  entered  into or other  events  occurring  on and after the
  Closing with respect to the ownership,  management,  operation,  maintenance and
  repair of the Property,  other than the debts, liabilities and obligations which
  are being adjusted between Seller and Purchaser pursuant to this Agreement;
  
                (b) any loss,  liability or damage  suffered or incurred by Seller
  arising out of or  resulting  from injury or death to  individuals  or damage to
  property  sustained  on the Real  Property on or after the Closing and caused by
  the willful or negligent act or omission (where applicable law imposes a duty to
  act) of Purchaser;
  
                (c) any loss,  liability or damage  suffered or incurred by Seller
  because any  representation  or warranty made by Purchaser in Article VII, or in
  any document furnished to Seller in connection with the Closing,  shall be false
  or misleading in any material respect;
  
                (d) any loss,  liability or damage  suffered or incurred by Seller
  because  of the  nonfulfillment  of any  covenant  or  agreement  on the part of
  Purchaser under this Agreement;
  
                (e) any loss,  liability or damage  suffered or incurred by Seller
  with respect to the  Security  Deposits  collected by Seller  before the Closing
  Date which are paid or credited to Purchaser at the Closing; and
  
                (f)  all  reasonable  costs  and  expenses  (including  reasonable
  attorneys'  fees)  incurred  by  Seller in  connection  with any  action,  suit,
  proceeding,  demand,  assessment  or  judgment  incident  to any of the  matters
  indemnified against in this Section.
  
   . The obligations of Seller to indemnify  Purchaser pursuant to Section 16.1 and
  the  obligations of Purchaser to indemnify  Seller  pursuant to Section 16.2 are
  limited as follows:
  
                (a) Limit on Seller's  Obligation after Closing. If the Closing is
  consummated,  Seller  shall not have any  liability or  obligation  to Purchaser
  pursuant  to Section  16.1 with  respect to any  misrepresentation  or breach of
  warranty  unless Seller  receives  written notice of such  misrepresentation  or
  breach of warranty before the expiration of one year after the Closing Date.
  
                (b) Limit on Purchaser's  Obligation after Closing. If the Closing
  is  consummated,  Purchaser shall not have any liability or obligation to Seller
  pursuant  to Section  16.2 with  respect to any  misrepresentation  or breach of
  warranty unless Purchaser receives written notice of such  misrepresentation  or
  breach of warranty within one year after the Closing Date.
  
        Section 16.4 No Brokers.  Seller and Purchaser  acknowledge and agree that
  the Sales Agent has acted as the broker on behalf of Seller in  connection  with
  the transaction contemplated hereby, and that Seller shall be solely responsible
  for the payment of any fee or commission that may be due the Sales Agent. Except
  for the Sales Agent, Seller represents and warrants to Purchaser that Seller has
  not engaged any broker,  agent or finder to act on its behalf in connection with
  this transaction,  and that Purchaser shall not be liable for the payment of any
  fee or  commission  to the  Sales  Agent or any  other  broker,  agent or finder
  purporting  to act on behalf of  Seller.  Similarly,  Purchaser  represents  and
  warrants to Seller that Purchaser has not engaged any broker, agent or finder to
  act on its behalf in connection with this transaction, and that Seller shall not
  be liable  for the  payment of any fee or  commission  to any  broker,  agent or
  finder  purporting  to act on  behalf  of  Purchaser  in  connection  with  this
  transaction.  Each of Seller and  Purchaser  does hereby agree to indemnify  and
  hold harmless the other party from any loss, damage, cost or expense incurred by
  such other party and arising out of a breach of the  representation and warranty
  made by the indemnifying party as set forth in this Section 16.4.
  
                                   ARTICLE XVII
  
                             Miscellaneous Provisions
  
   . This Agreement,  together with the Exhibits and Schedules hereto, contains the
  entire  agreement  between the parties  relating to the purchase and sale of the
  Property,  all prior negotiations between the parties,  (including the letter of
  intent dated  November 13, 1995),  are merged by this Agreement and there are no
  promises, agreements, conditions,  undertakings,  warranties or representations,
  oral or  written,  express  or  implied,  between  them other than as herein set
  forth.  No change or  modification  of this Agreement  shall be valid unless the
  same is in writing  and signed by the  parties  hereto.  No waiver of any of the
  provisions of this Agreement,  or any other agreement referred to herein,  shall
  be valid unless in writing and signed by the party  against whom it is sought to
  be enforced.
  
   . The agreements and indemnities set forth in Article XIV,  Article XVI and this
  Article shall  survive the Closing under this  Agreement for a period of one (1)
  year.
  
   . This Agreement may be executed in any number of counterparts  and it shall not
  be necessary that each party to this Agreement execute each counterpart.
  
   . All terms of this Agreement shall be binding upon, and inure to the benefit of
  and be  enforceable  by, the parties  hereto and their  successors  and assigns.
  Purchaser  shall have the right,  without the  consent of Seller,  to assign its
  rights,  and  delegate its duties,  under this  Agreement,  to any  Affiliate of
  Purchaser.
  
   . This  Agreement is intended to be performed in the State of Maryland and shall
  be construed and enforced in accordance with the laws of the State of Maryland.
  
   .     Section 17.6  Notices
  
                (a)  Manner  of  Giving  Notice.  Each  notice,  request,  demand,
  consent,  approval or other communication (hereafter in this Section referred to
  collectively  as "notices" and referred to singly as a "notice") which Seller or
  Purchaser is required or  permitted to give to the other party  pursuant to this
  Agreement  shall be in  writing  and shall be deemed to have been duly  given if
  hand  delivered  with  receipt  therefor  or sent by  Federal  Express  or other
  overnight  courier service.  Any such notice shall be deemed given when received
  or when delivery is refused.
  
                (b) Addresses for Notices.  All notices shall be addressed to the
  parties at the following addresses:
  
                       (1)    if to Seller:
  
                              PaineWebber Properties, Inc.
                              265 Franklin Street
                              16th Floor
                              Boston, Massachusetts  02110
                              Attention: Mr. Stephen D. Brady
  
                              with a copy to:
  
                              Hunton & Williams
                              Suite 1700
                              1751 Pinnacle Drive
                              McLean, Virginia  22101
                              Attention: Gerald R. Best, Esq.
  
                       (2)    if to Purchaser:
  
                              10400 Connecticut Avenue
                              Concourse Level
                              Kensington, Maryland 20895
                              Attention:   Larry E. Finger, Senior Vice President
                              and Chief Financial Officer
  
                              and also, for any pre-Closing notices
  
                              Attention:    Mary Beth Avedesian, Vice-President,
                                     Investments
  
                              with a copy to:
  
                              Michael H. Leahy, Esq.
                              Arent Fox Kintner Plotkin & Kahn
                              1050 Connecticut Avenue
                              Washington, D. C. 20036
  
  Either party may, by notice given pursuant to this Section, change the person or
  persons  and/or  address or  addresses,  or  designate an  additional  person or
  persons or an additional address or addresses, for its notices.
  
   . Seller and  Purchaser  each agrees  that  before the Closing  Date it will not
  issue  any press  release,  advertisement  or other  public  communication  with
  respect to this Agreement or the  transactions  contemplated  hereby without the
  prior written  consent of the other party hereto,  except to the extent required
  by law. If Seller or Purchaser is required by law to issue such a press  release
  or other public communication before the Closing Date, at least one Business Day
  before the issuance of the same such party shall  deliver a copy of the proposed
  press  release or other public  communication  to the other party hereto for its
  review and  approval,  which  approval  shall not be  unreasonably  withheld  or
  delayed.
  
   . If any term or provision of this Agreement or the  application  thereof to any
  persons or circumstances shall, to any extent, be invalid or unenforceable,  the
  remainder  of this  Agreement  or the  application  of such term or provision to
  persons or  circumstances  other  than  those as to which it is held  invalid or
  unenforceable shall not be affected thereby, and each term and provision of this
  Agreement shall be valid and enforceable to the fullest extent permitted by law.
  
   .  Seller  and  Purchaser  waive  trial  by jury in any  action,  proceeding  or
  counterclaim  brought by either of them against the other on any matter  arising
  out of or in any way connected with this Agreement.
  
        Section 17.10 Purchaser's  Trustees Not Liable.  Purchaser is a common law
  trust organized  under District of Columbia law on November 18, 1960.  Under the
  terms of the Declaration of Trust, all persons dealing with the trust shall look
  solely to the trust property for  satisfaction  of claims of any nature,  and no
  trustee,  officer or agent of the trust shall be held to any personal  liability
  whatsoever, in tort, contract or otherwise.
  
        Section 17.11 SEC Requirements. If required by rules of the Securities and
  Exchange  Commission,  Seller grants  Purchaser the right,  at Purchaser's  sole
  expense,  to prepare an audited  income  statement  of the Property for the most
  recent  fiscal  year(s) as  specified by Rule 3-14 of  Regulation  S-X under the
  Securities Act of 1933 and the Securities Exchange Act of 1934, and Seller shall
  provide  and/or fully  cooperate  in  obtaining  any and all such other data and
  financial  information  which shall be available to Seller  (including,  without
  limitation,  data and information  obtainable from Seller's management agent for
  the  Property)  and as  advisable  in  connection  with  fulfilling  Purchaser's
  disclosure  obligations as a public company subject to the rules and regulations
  of the Securities and Exchange Commission.
  
        IN WITNESS  WHEREOF,  the parties have duly executed this  Agreement as of
  the day and year first above stated.
  
  
                                     SELLER
  
                                     Montgomery Village HWH Associates
  
                                     By: PaineWebber Growth Properties Two L.P.,
                                         General Partner
  
                                      By:     Second PW Growth Properties, Inc.,
                                              General Partner
  
                                              By:  /s/ Stephen D. Brady
  
                                     By: Montgomery Village Limited Partnership,
                                            General Partner
                                     By:    Earl G. Glover, General Partner
  
                                            By:  /s/ Earl G. Glover
  
                                     PURCHASER
  
                                     Washington Real Estate Investment Trust
  
                                     By: /s/ Edmund B. Cronin, Jr.
                                        Edmund B. Cronin, Jr.
                                        President and Chief Executive Officer
  
        The  undersigned  Escrow  Agent  executes  this  Agreement  solely for the
  purpose of evidencing  its agreement to perform its  obligations as set forth in
  Articles IV, XII, XIII and XV of the foregoing and annexed  Purchase  Agreement,
  it being  understood  and agreed that  Escrow  Agent  shall have  absolutely  no
  liability for the performance by Seller or Purchaser of their  obligations under
  the Purchase Agreement.
  
                                     Chicago Title Insurance Company
  
                                     By: /s/ Craig A. Johnson
  
  
  
  <PAGE>
  
  
                             RATIFICATION OF PURCHASE AGREEMENT
  
  
  A. By Purchase Agreement, dates as of January 19, 1996 (the "Contract"), between
  Montgomery  Village HWH Associates  ("Seller"),  as seller,  and Washington Real
  Estate  Investment Trust ("WREIT"),  as purchaser,  as assigned by WREIT to WRIT
  Limited  Partnership,  Seller,  whole  general  partners are Paine Webber Growth
  Properties  Two LP  ("PWGPTLP"),  and  Montgomery  Village  Limited  Partnership
  ("MVLP"),  agreed to sell to WREIT,  and WREIT agreed to buy,  certain  improved
  real property known as Walker House Apartments.
  
       B. Because there is a scrivener's error as to the execution of the Contract
  on behalf of Seller, PWGPTLP and MVLP wish to ratify the Contract. Accordingly,
  
       1. PWGPTLP and MVLP, the sole general partners of Seller and acting in such
  capacities, ratify and confirm the execution of the contract on behalf of Seller
  by PWGPTLP and Mr. Earl Glover,
  
  
       2. This  ratification,  made this 11th date of March, 1996, is effective as
  of January 19, 1996.
  
                                      PWGPTLP:
  
                                      Paine Webber Growth Properties Two LP
  
                                      By:  Second PW Growth Properties, Inc.
  
                                      By: /s/ Rock M. D'Errico
                                              Rock M. D'Errico
                                              Vice President
  
  
                                      MVLP:
  
                                      Montgomery Village Limited Partnership
  
                                      By:  General American Real Estate and
                                             Development, Inc.
  
                                      By: /s/ Earl G. Glover
                                          Earl G. Glover
                                          President
  
  
  <PAGE>
  
  
                                   BILL OF SALE
  
        THIS BILL OF SALE (this  "Bill of Sale") is  executed  on this 13th day of
  March,  1996,  by  Montgomery   Village  HWH  Associates,   a  Maryland  general
  partnership  ("Seller"),  and  WRIT  Limited  Partnership,  a  Delaware  limited
  partnership ("Purchaser").
  
       1. Real Property.  The "Real Property" shall mean the real property located
  in Gaithersburg,  Montgomery  County,  Maryland  legally  described in Exhibit A
  attached to this Bill of Sale, and known as Walker House Apartments.
  
  
        2. Personal  Property.  The "Personal  Property" shall mean all furniture,
  furnishings,  fixtures, equipment, tools and other tangible personal property of
  every kind and  description  owned by Seller and  attached  or  appurtenant  to,
  located  on or used or  useful in  connection  with the  management,  operation,
  maintenance  and repair of the Real  Property,  including,  but not  limited to,
  Seller's  inventory  of spare  and  replacement  parts,  Seller's  inventory  of
  consumable supplies and the articles of personal property which are described in
  Exhibit B attached to this Bill of Sale.
  
        3. Sale.  For good and  valuable  consideration  received  by Seller,  the
  receipt and sufficiency of which are hereby  acknowledged,  Seller hereby sells,
  assigns and transfers the Personal  Property to Purchaser.  Seller covenants and
  agrees to  warrant  and  forever  defend  title to the  Personal  Property  unto
  Purchaser  against  all and every  person or persons  claiming  through  Seller.
  Except as set  forth in the  immediately  preceding  sentence,  Seller  makes no
  express or implied warranties or representations as to the Personal Property.
  
        IN WITNESS  WHEREOF,  Seller and Purchaser have executed this Bill of Sale
  the day and year first above written.
  
                              SELLER:
  
                              Montgomery Village HWH Associates
  
                              By: PaineWebber Growth Properties Two L.P., 
                                   General Partner
  
                              By: Second PW Growth Properties, Inc., 
                                   General Partner
  
                               By: /s/ Rock M. D'Errico
                               Name:  Rock M. D'Errico
                               Title:    Vice President
  
                              By:General American Real Estate & Development, Inc.,
                                 General Partner
  
                                            By:/s/ Earl G. Glover
                                            Name:  Earl G. Glover
                                            Title:    President
  
  
  <PAGE>
  
  
                                   WALKER HOUSE APARTMENTS
                                   GAITHERSBURG, MARYLAND
                                      PURCHASE AND SALE
                                           3/13/96
  
  
  
     PURCHASER:                                    TITLE COMPANY:
     WRIT LIMITED PARTNERSHIP                     Chicago Title Insurance Company
                                                        Case No. 9588-30030
     SELLER:
     Montgomery Village HWH Associates
  
                                SELLER'S SETTLEMENT STATEMENT
  
    CONTRACT SALES PRICE                                           $10,650,000.00
  
  CREDITS TO SELLER:
  
     TAXES & ASSESSMENTS:
     Real Estate Taxes                                    34,743.66
     South Village Homes Assessment                           14.40
     Montgomery Village Foundation Assessment                657.34
  
  SERVICE CONTRACTS REIMBURSED BY/(REFUNDED TO) BUYER:
     Western Termite                                         186.10
     Solon (Income)                                         (858.06)
  
  UTILITIES REIMBURSED BY BUYER:
     Oil      16,866 gals. @  $0.68427                    11,541.00
                                                        -----------
  
  TOTAL CREDITS TO SELLER                                               46,284.44
  
  CHARGES TO SELLER:
     1/2 TRANSFER & RECORDATION CHARGES:
     County Transfer Tax                                  53,250.00
     State Transfer Tax                                   26,625.00
     State Recordation Fee                                23,430.00
  
     EXISTING MORTGAGE PAYOFF:  
       Mellon Mortgage/Fannie Mae                      5,010,817.48
  
     MORTGAGE RELEASE RECORDING FEE                          125.00 EST
  
     BROKERAGE COMMISSION:  Cassidy & Pinkard            106,500.00
  
     CAPITAL EXPENDITURES REIMBURSEMENT                   25,000.00
  
     MINIMUM RENT (3/13/96 thru 3/31/96)                  89,456.59
  
  SERVICE CONTRACTS DISBURSED BY ESCROW AGENT:
     Boland Services                                         251.61
     Otis Elevator                                           280.75
     Metropolitan Termite                                     40.26
     Waste Management                                        449.03
  
  
  <PAGE>
  
  
     UTILITIES DISBURSED BY ESCROW AGENT:
       Washington Suburban Sanitary Commission
        (thru 3/8/96 reading)                            11,644.26
  
     UTILITIES REIMBURSED BY SELLER:
       Washington Suburban Sanitary Commission 
       (3/8/96 thru 3/12/96)                             1,240.00 est
  
     TENANT SECURITY DEPOSITS                           65,336.00
  
     INTEREST DUE ON TENANT SECURITY DEPOSITS            7,997.23
                                                      -----------
  
  TOTAL CHARGES TO SELLER                                          (5,422,443.21)
                                                                   -------------
  
  NET DUE TO SELLER                                               $ 5,273,841.23
                                                                  ==============
  
  SELLER:                                   SELLER:
  Montgomery Village HWH Associates         Montgomery Village HWH Associates
  By: PaineWebber Growth Properties Two LP,  By:  Montgomery Village Limited
      General Partner                             Partnership
                                                  General Partner
  
   By:  Second PW Growth Properties, Inc.        By:General American Real Estate
        General Partner                          and Development, Inc.
                                                 General Partner
  
  By:  /s/ Rock M. D'Errico  3/13/96        By:  /s/ Earl G. Glover   3/13/96
       Rock M. D'Errico, Vice President          Earl G. Glover, CEO
  
  TITLE COMPANY:
    Chicago Title Insurance Company
  
  By:  /s/ Craig A. Johnson
      Craig A. Johnson, Assistant Vice President
  
  Title  Company is  signing  this  settlement  statement  solely to  confirm  its
  agreement  to disburse  funds in  accordance  herewith,  subject to the attached
  General Conditions of Escrow
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "SALE OF WALKER HOUSE APARTMENTS 8-K", "secsgml_size_bytes": 122012}]
metadata_filer: {"company-data": {"conformed-name": "PAINEWEBBER GROWTH PROPERTIES TWO LP", "cik": "0000722569", "assigned-sic": "6798", "irs-number": "042798594", "state-of-incorporation": "DE", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-12085", "film-number": "96540256"}, "business-address": {"street1": "265 FRANKLIN ST 15TH FL", "city": "BOSTON", "state": "MA", "zip": "02110", "phone": "6174398118"}}
text: SECURITIES AND EXCHANGE COMMISSION
  
                               Washington, DC  20549
  
                                     FORM 8-K
  
                                  CURRENT REPORT
  
                      Pursuant to Section 13 or 15(d) of the
                        Securities and Exchange Act of 1934
  
               Date of Report (Date of earliest event reported) March 13, 1996
  
                            Paine Webber Growth Properties Two LP
                   (Exact name of registrant as specified in its charter)
  
       Delaware                       0-12085                      04-2798594
  (State or other jurisdiction)    (Commission                   (IRS Employer
          of incorporation          File Number)              Identification No.)
  
  265 Franklin Street, Boston, Massachusetts                            02110
  (Address of principal executive offices)                            (Zip Code)
  
  Registrant's telephone number, including area code (617) 439-8118
  
              (Former name or address, if changed since last report)
  FORM 8-K
                                       CURRENT REPORT
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
  
  ITEM 2 - Disposition of Assets
  
     Walker House Apartments,   Montgomery Village, MD
  
     Disposition Date - March 13,  1996
  
       On March 13, 1996, the Partnership's joint venture investee which owned the
  Walker House Apartments sold the operating  investment property for $10,650,000.
  The existing  mortgage  loan balance of $5,010,817  was paid off in  conjunction
  with the sale, and the venture paid closing costs of approximately $235,000, The
  net proceeds from this sale totalled  approximately  $5.4 million,  of which the
  co-venture partner was entitled to $220,000 under the terms of the joint venture
  agreement.  Paine Webber Growth  Properties Two LP received net sale proceeds of
  approximately $5.2 million.
  
       The current  operations of the Walker House  apartment  complex reflect the
  generally  improving  conditions  in the real estate  markets  for  multi-family
  residential  properties across the country.  Over the past year, average monthly
  rental rates at Walker House have increased by approximately  2.5% to a level of
  $753 per  apartment  unit.  Management  believed  with the  property  performing
  favorably  it was an  appropriate  time to market  the  property  for sale.  The
  Partnership  started formally  marketing the Walker House Apartments for sale in
  September 1995. After receiving  significant  interest from a number of parties,
  the joint venture successfully  consummated the transaction described above. The
  Partnership's  share of the net  proceeds is expected to be  distributed  to the
  Limited Partners as a Special  Distrisbution  paid concurrently with the regular
  quarterly distributon on May 15, 1996.
  
  ITEM 7 - Financial Statements and Exhibits
  
     (a)   Financial Statements:  None
  
     (b)   Exhibits:
  
        (1)Purchase   Agreement  between  Montgomery  Village  Associates  (as
           Seller) and Washington Real Estate  Investment Trust (as Purchaser)
           Dated: January 19, 1996
  
        (2)Ratification  of  Purchase  Agreement  between  Montgomery  Village HWH
           Associates ("Seller"), as seller, and Washington Real Estate Investment
           Trust  ("WREIT"),  as  purchaser,  as assigned by WREIT to WRIT Limited
           Partnership,  Seller,  whose  general  partners are Paine Webber Growth
           Properties  Two  LP  (PWGPTLP"),   and   Montgomery   Village   Limited
           Partnership ("MVLP")
  
        (3)Bill  of  Sale by  Montgomery  Village  Associates  HWH  Associates,  a
           Maryland general partnership ("Seller"),  and WRIT Limited Partnership,
           a Delaware limited partnership ("Purchaser")
  
        (4)   Seller's Settlement Statement
  FORM 8-K
  
                                   CURRENT REPORT
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
  
                                     SIGNATURES
  
        Pursuant to the  requirements  of the Securities and Exchange Act of 1934,
  the  registrant  has duly  caused  this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
                            PAINE WEBBER GROWTH PROPERTIES TWO LP
                                        (Registrant)
  
                                By: /S/ Walter V. Arnold
                                   Walter V. Arnold
                                   Senior Vice President and
                                   Chief Financial Officer
  
  Date:  March 28, 1996
  PURCHASE AGREEMENT
  
                                      between
  
                         Montgomery Village HWH Associates
                                    (as Seller)
  
                                        and
  
                      Washington Real Estate Investment Trust
                                  (as Purchaser)
  
                              Dated: January 19, 1996
  PURCHASE AGREEMENT
  
        THIS AGREEMENT is made and entered into this 19th day of January, 1996, by
  and between  (i)  WASHINGTON  REAL  ESTATE  INVESTMENT  TRUST  ("Purchaser"),  a
  District of Columbia business trust, and (ii) MONTGOMERY  VILLAGE HWH ASSOCIATES
  ("Seller"), a Maryland limited partnership.
  
                                     RECITALS
  
       A.   Seller owns a certain  parcel of land  containing  approximately  6.22
            acres,  and  the  improvements   thereon,   located  in  Gaithersburg,
            Montgomery County, Maryland and known as the Walker House Apartments.
  
       B.   Seller has agreed to sell to  Purchaser,  and  Purchaser has agreed to
            purchase from Seller, all land, improvements,  furniture, furnishings,
            fixtures,  equipment  and other  tangible  and  intangible  assets and
            properties owned by Seller,  located at the property and used by it in
            connection with the management,  operation, promotion, maintenance and
            repair of such land and improvements.
  
        NOW,  THEREFORE,  in consideration of the mutual promises  hereinafter set
  forth and of other good and valuable consideration,  the receipt and sufficiency
  of which are hereby acknowledged, the parties agree as follows:
  
                                     ARTICLE I
  
                                    Definitions
  
   . For  purposes of this  Agreement,  except as otherwise  expressly  provided or
  unless the context  otherwise  requires,  (I) the terms  defined in this Section
  include  the plural as well as the  singular,  and the use of any gender  herein
  shall be  deemed  to  include  the  other  genders;  (ii)  accounting  terms not
  otherwise  defined herein have the meanings  assigned to them in accordance with
  generally accepted accounting principles; (iii) references herein to "Articles,"
  "Sections," "subsections," "paragraphs" and other subdivisions without reference
  to a document are to designated Articles, Sections, subsections,  paragraphs and
  other  subdivisions  of this  Agreement;  (iv) a  reference  to an  Exhibit or a
  Schedule  without a further  reference  to the  document to which the Exhibit or
  Schedule is attached is a reference to an Exhibit or Schedule to this Agreement;
  (v) the words "herein," "hereof,"  "hereunder" and other words of similar import
  refer to this Agreement as a whole and not to any particular provision; and (vi)
  the word "including" means "including, but not limited to."
  
       For all  purposes of this  Agreement,  the  following  terms shall have the
  respective meanings set forth below:
  
        "Additional  Income" shall mean all amounts and charges payable by Tenants
  to Seller,  as  landlord,  under their  Leases,  other than  Apartment  Rent and
  Security  Deposits,  and any income  derived by Seller  from the  ownership  and
  operation of the Property from any source other than Apartment Rents,  including
  but not limited to separate charges for use of the Buildings' amenities (such as
  the swimming pool).
  
        "Affiliate"  shall mean, with respect to any Person, a party  controlling,
  controlled by or under common control with such Person,  and if such Person is a
  partnership or limited partnership,  a partner of such Person, or if such Person
  is a corporation, a shareholder of such Person.
  
        "Agreement"  shall mean this Agreement in its present form or as it may be
  amended from time to time.
  
        "Apartment  Rent"  shall  mean all rent  payable by  Tenants  under  their
  Leases.
  
        "Assignable  Contracts"  shall mean all  Contracts  listed on the Contract
  Schedule  other than the  Contracts  designated  by Purchaser  for  cancellation
  pursuant to Section 8.8.
  
       "Bankruptcy  Law" shall mean Title 11, U.S. Code, and any similar state law
  for  the  relief  of  debtors.
  
       "Billof Sale" shall mean a bill of sale, substantially in the form attached
  as  Exhibit  E,  signed by Seller  and  Purchaser,  sufficient  to  transfer  to
  Purchaser good and indefeasible title to all Personal  Property,  free and clear
  of all liens,  encumbrances  and  security  interests  other than the  Permitted
  Exceptions. 
  
    "Buildings"   shall  mean  the   apartment   buildings  and  other
  improvements situated on or appurtenant to the Land.
  
       "Business Days" shall mean any day of the week other than Saturday,  Sunday
  or a day on which  banking  institutions  in  either  New  York,  New  York,  or
  Washington, D. C., are obligated or authorized by law to close.
  
        "Closing" shall have the meaning set forth in Section 13.1.
  
        "Closing  Date"  shall mean the date which is fifteen  (15) days after the
  end of the Feasibility  Period,  or if such date is not a Business Day, the next
  Business Day after such  fifteenth  (15th) day),  or such earlier date as Seller
  and  Purchaser may mutually  agree upon, as such date may be extended  under the
  provisions of this Agreement.
  
        "Contracts"  shall mean all  contracts  and  agreements,  oral or written,
  providing  for  the  management,   operation,   supply,   maintenance,   repair,
  advertising  or promotion  of the Real  Property to which Seller is a party that
  relate  to  the  Real  Property,   including  service  agreements,   maintenance
  contracts, cleaning contracts,  contracts for the purchase or delivery of labor,
  services,  materials or supplies and equipment rental agreements or leases,  and
  landscaping and lawn maintenance agreements.
  
        "Contract  Schedule"  shall  mean  the  information  concerning  Contracts
  contained in Schedule 1, as described in Section 6.3(b).
  
        "Custodian"  shall  mean a  receiver,  trustee,  assignee,  liquidator  or
  similar official under any Bankruptcy Law.
  
        "Deed"  shall  mean a  special  warranty  deed  substantially  in the form
  attached as Exhibit D, signed by Seller in proper form for recording, sufficient
  to  convey  to  Purchaser  good  and  marketable  fee  simple  title to the Real
  Property,  free  and  clear  of  all  liens,  encumbrances,  Leases,  covenants,
  conditions  and  other  matters   affecting   title  other  than  the  Permitted
  Exceptions.
  
        "Delinquent  Rent" shall mean Rent which is due and payable by a Tenant on
  or before the Closing Date but has not been paid by the Closing Date.
  
        "Deposit"  shall mean the cash  payments  made by  Purchaser to the Escrow
  Agent pursuant to Section 4.1 and the interest earned thereon.
  
        "Easement   Agreements"  shall  mean  any  and  all  easement  agreements,
  reciprocal   easement   agreements,   declarations  of  covenants,   conditions,
  restrictions and easements, party wall agreements, "tie-back" agreements, common
  area agreements, shared maintenance agreements, common use agreements or similar
  agreements or understandings which burden or benefit the Real Property and under
  which Seller has any obligations, and all supplements, amendments, modifications
  and memoranda thereof, relating to the development, use, operation,  management,
  maintenance or occupancy of the Real Property.
  
        "Easement Agreements  Schedule" means the information  concerning Easement
  Agreements contained in Schedule 7, as described in Section 6.3(c).
  
        "Employee  Schedule" shall mean the information  concerning  employees who
  are engaged in the operation and maintenance of the Real Property,  contained in
  Schedule 2.
  
        "Environmental Law" shall mean any federal, state or local law, ordinance,
  rule, regulation,  requirement,  guideline,  code,  resolution,  order or decree
  (including consent decrees and  administrative  orders) in effect on the date of
  this  Agreement  which  regulates  the  use,  generation,   handling,   storage,
  treatment,  transportation,  decontamination,  clean-up, removal, encapsulation,
  enclosure,  abatement  or  disposal of any  Hazardous  Material,  including  the
  Comprehensive Environmental Response,  Compensation and Liability Act, 42 U.S.C.
  Section 9601,  et seq.,  the Resource  Conservation  and Recovery Act, 42 U.S.C.
  Sections  6901, et seq.,  the Toxic  Substance  Control Act, 15 U.S.C.  Sections
  2601,  et seq.,  the Clean  Water  Act,  33 U.S.C.  Sections  1251 et seq.,  the
  Hazardous  Materials  Transportation  Act, 49 U.S.C,  Section 1802,  their state
  analogues,  and any  other  federal,  state or local  statute,  law,  ordinance,
  resolution, code, rule, regulation, order or decree regulating,  relating to, or
  imposing liability or standards of conduct concerning any Hazardous Material.
  
        "Escrow Agent" shall mean Chicago Title Insurance Company.
  
        "Feasibility  Period" shall mean the period  beginning  with the date this
  Agreement is executed and delivered by both Seller and  Purchaser,  and expiring
  on the forty-fifth (45th) day thereafter.
  
        "General Assignment" shall mean an Assignment of Licenses, Intangibles and
  Warranties in the form attached as Exhibit H.
  
        "Governmental  Authorities"  shall  mean any  board,  bureau,  commission,
  department or body of any municipal, county, state or federal governmental unit,
  or any  subdivision  thereof,  having or  acquiring  jurisdiction  over the Real
  Property or the management, operation, use or improvement thereof.
  
        "Hazardous Material" shall mean any flammable,  explosive,  radioactive or
  reactive  materials,   any  asbestos  (whether  friable  or  non-friable),   any
  pollutants,  contaminants  or other  hazardous,  dangerous  or toxic  chemicals,
  materials or  substances,  any  petroleum  products or  substances  or compounds
  containing  petroleum  products,  including  gasoline,  diesel fuel and oil, any
  polychlorinated biphenyls or substances or compounds containing  polychlorinated
  biphenyls,  and  any  other  material  or  substance  defined  as  a  "hazardous
  substance,"   "hazardous   material,"   "hazardous  waste,"  "toxic  materials,"
  "contamination," and/or "pollution" within the meaning of any Environmental Law.
  
        "Intangibles"  shall mean the trade name Walker House Apartments,  as used
  in connection with the ownership,  operation and promotion of the Real Property,
  all logos used in  connection  with the  advertising  and  promotion of the Real
  Property and all local telephone  numbers and listings for the Property,  to the
  extent such items are assignable without cost to Seller.
  
        "Land"  shall mean the  parcels  of land more  particularly  described  in
  Exhibit A.
  
        "Lease and Contract Assignment" shall mean an Assignment and Assumption of
  Certain Leases,  Tenancies and Written Contracts in the form attached as Exhibit
  G, providing for the assignment of all Leases and Assignable Contracts.
  
        "Lease Schedule" shall mean the information  concerning  Tenants contained
  in Schedule 4, as described in Section 6.3(a).
  
        "Leases" shall mean all leases,  licenses or other agreements with Tenants
  including all amendments,  extensions,  modifications  and supplements  thereto,
  pursuant to which any Tenant uses or occupies any part of the Real Property.
  
        "Leasing Guidelines" shall mean the minimum rent figures for categories of
  apartment units in the Buildings as set forth in Exhibit I.
  
        "Legal Requirements" shall mean all laws, ordinances,  rules, regulations,
  orders  and  requirements  of  all  Governmental  Authorities  relating  to,  or
  regulating, the ownership, use, operation, management, maintenance and repair of
  the Real Property, including zoning laws, building, fire, safety and health laws
  and  Environmental  Laws, and any  obligations  imposed on the owner of the Real
  Property in  connection  with any site plan approval of the Real Property or any
  part  thereof,  or zoning  proffers  relating  to the Real  Property or any part
  thereof.
  
       "License Schedule" shall mean the list of Licenses contained in Schedule 5.
  
        "Licenses" shall mean all licenses, authorizations,  approvals and permits
  issued by Governmental  Authorities  relating to Seller's (and not any Tenant's)
  use, operation, ownership or maintenance of the Real Property.
  
        "Litigation  Schedule" shall mean the information  concerning  pending and
  threatened litigation contained in Schedule 6, as described in Section 6.2(m).
  
        "Mortgage" shall mean a mortgage,  deed of trust or other type of security
  instrument  of the type  commonly  given to secure  loans or advances on, or the
  unpaid  purchase price of, real property in the  jurisdiction in which such real
  property is located.
  
        "Operating  Expenses"  shall mean all costs,  expenses,  charges  and fees
  relating to the ownership, management,  operation, maintenance and repair of the
  Real Property,  including electricity,  gas, water and sewer charges,  telephone
  and other public utilities, common area maintenance charges, insurance premiums,
  vault  charges,   personal  property  taxes,  excise  taxes  on  Rent,  business
  occupational  taxes,   periodic  charges  payable  under  Assignable  Contracts,
  periodic fees payable under transferable  Licenses for the operation (as opposed
  to the  construction)  of the Real  Property,  periodic  charges under  Easement
  Agreements,  salaries,  wages, vacation and sick pay, pension, welfare and other
  fringe benefits, employee-related taxes and other labor costs, but not including
  any costs,  expenses,  charges or fees which are the direct  responsibility of a
  Tenant.
  
        "Permitted  Exceptions"  shall  mean (i) the lien of current  real  estate
  taxes not yet due and payable,  (ii) the Leases  described in the Lease Schedule
  and any permitted  additions,  renewals and  replacements  thereof,  recorded or
  unrecorded,  and (iii) the additional exceptions contained in the commitment for
  title insurance obtained by Purchaser pursuant to Section 9.1 (but not including
  the survey  exception;  the exceptions for unfiled  mechanics  liens,  rights of
  parties in possession or Mortgages,  if any,  encumbering the Real Property;  or
  liens, encumbrances,  adverse claims or other matters, if any, created after the
  date of the title  commitment  but prior to the date title to the Real  Property
  vests in Purchaser).
  
        "Person"   shall  mean  an   individual,   estate,   trust,   partnership,
  corporation, Governmental Authority or other legal entity.
  
        "Personal  Property"  shall  mean all  furniture,  furnishings,  fixtures,
  equipment,  vehicles,  tools, and other tangible personal property of every kind
  and  description  owned by Seller  located on, and used or useful in  connection
  with the  management,  leasing,  operation,  maintenance  and repair of the Real
  Property,  including Seller's inventory of spare and replacement parts, Seller's
  inventory  of  consumable  supplies  and the other  tangible  personal  property
  described in Exhibit B.
  
       "Property" shall mean the Real Property, the Personal Property, the Leases,
  the Assignable Contracts, the Licenses, the Intangibles and the Warranties.
  
        "Property Documents" shall have the meaning set forth in Section 5.2.
  
        "Purchase  Price" shall mean the purchase price of the Property  specified
  in Section 3.1.
  
        "Real  Property"  shall  mean the Land and the  Buildings  known as Walker
  House Apartments, located in Gaithersburg,  Montgomery County, Maryland, and the
  other rights described in subsections (c), (d) and (e) of Section 2.1.
  
        "Sales Agent" shall mean Cassidy & Pinkard, Inc.
  
        "Rent" shall mean, collectively, Apartment Rent and Additional Income.
  
        "Security  Deposits" shall mean all refundable  security deposits,  access
  card or key deposits,  cleaning fees, pet deposits and other deposits (including
  any  interest  accrued  thereon  in  accordance  with the terms of the  Tenant's
  Leases)  relating to space within the Real  Property  paid by Tenants to Seller,
  its managing agent or any other Person.
  
        "Seller's  knowledge"  or  words of like  import  shall  mean  the  actual
  knowledge of Stephen D. Brady,  and Karen Kopas,  who is the resident manager at
  the Property and an employee of the property  manager of the  Property,  without
  any investigation or other due diligence.
  
        "Tax Schedule" shall mean the information concerning real estate taxes and
  assessed valuation of the Real Property contained in Schedule 8, as described in
  Section 6.2(c).
  
        "Tenants"  shall mean all Persons  leasing or  occupying  space  within or
  appurtenant  to the Real Property  pursuant to written or oral  agreements  with
  Seller or a prior owner of the Real Property.
  
        "Tenant Work Orders"  shall mean all written  requests  received by Seller
  from any Tenant concerning the repair or maintenance of space occupied or leased
  by such Tenant.
  
        "Utility Deposits" shall mean all deposits made by Seller with the Persons
  providing water, sewer, gas,  electricity,  telephone and other public utilities
  to the Real Property.
  
        "Utility  Schedule"  shall  mean  the  information   concerning  utilities
  servicing  the Real  Property  contained in Schedule 10, as described in Section
  6.2(t).
  
        "Warranties" shall mean all assignable  warranties or guaranties presently
  in effect from  contractors,  suppliers or  manufacturers  of personal  property
  installed in or used in connection  with the Real Property or any work performed
  or improvements included as a part of the Real Property.
  
        "Warranties Schedule" shall mean the information concerning the Warranties
  contained in Schedule 9.
  
                                    ARTICLE II
  
                         Purchase and Sale of the Property
  
   . On the Closing Date, and subject to the terms and conditions set forth in this
  Agreement,  Seller agrees to sell to Purchaser, and Purchaser agrees to purchase
  from Seller:
  
                (a)    the Land;
  
                (b)    the Buildings;
  
                (c) all right,  title and interest of Seller,  if any, in any land
  lying in the bed of any street, road, avenue or alley, open or closed,  adjacent
  to or abutting the Land, to the center line thereof;
  
                (d) all Easement  Agreements  and other  easements,  covenants and
  other rights  appurtenant to, and all the estate and rights of Seller in and to,
  the Land and the Buildings,  including  riparian rights  appurtenant to the Land
  and Buildings;
  
                (e) all right, title and interest of Seller in and to the proceeds
  of, or any award made for, a taking of all or any part of the Real  Property  by
  any  Governmental  Authority  pursuant  to the  exercise of its power of eminent
  domain after the end of the Feasibility Period;
  
                (f)    the Personal Property; and
  
                (g) all right,  title and interest of Seller in and to the Leases,
  the Assignable  Contracts,  transferable  Licenses,  assignable  Intangibles and
  Warranties.
  
  Seller shall sell and convey and Purchaser  shall purchase and accept fee simple
  title to the Real  Property  and good title to the  Personal  Property and other
  rights to be transferred to Purchaser as set forth above,  free and clear of all
  liens, encumbrances,  easements, covenants, conditions, Leases and other matters
  affecting title, except for the Permitted Exceptions.
  
   . Except as  expressly  provided  in this  Agreement  or in any  document  to be
  executed and delivered on the Closing Date, Purchaser is not assuming any of the
  debts,  liabilities,  taxes or obligations of, or claims against,  Seller of any
  kind or character,  whether  direct or contingent  and whether known or unknown.
  The only  transactions  contemplated by this Agreement are the sale and purchase
  of the Property.  Seller is not selling a business. Except as expressly provided
  in this Agreement or in any document to be executed and delivered on the Closing
  Date, the parties intend that Purchaser shall not be deemed to be a successor of
  Seller with respect to any of Seller's  liabilities or obligations to Tenants or
  other third  parties  arising  before the Closing Date.  The  provisions of this
  Section  shall not  increase or diminish  Seller's  and  Purchaser's  respective
  indemnification obligations under Article XVI.
  ARTICLE III
  
                        Purchase Price and Terms of Payment
  
   . The purchase price to be paid by Purchaser to Seller for the Property shall be
  $10,650,000.00,  subject to the  adjustments and prorations set forth in Article
  XIV.
  
   . On the  Closing  Date,  and  subject  to the  terms  and  conditions  of  this
  Agreement,  Purchaser  shall pay the  Purchase  Price to, or for the account of,
  Seller in the manner provided in Section 13.1.
  
                                    ARTICLE IV
  
                                      Deposit
  
   . Within three Business Days after Seller delivers a fully-signed counterpart of
  this  Agreement  to  Purchaser,  Purchaser  shall  deliver to the Escrow Agent a
  deposit in the amount of  $150,000.00,  to be held by the Escrow Agent as a good
  faith  deposit  under  this  Agreement  (the  "Initial  Deposit").  Unless  this
  Agreement  is  terminated  pursuant to Section 5.6, on or before the last day of
  the  Feasibility  Period,  Purchaser  shall  deliver  to  the  Escrow  Agent  an
  additional  deposit in the amount of  $150,000.00 to be held by the Escrow Agent
  as an  additional  good faith  deposit  under this  Agreement  (the  "Additional
  Deposit").
  
   . The payment of the Deposit shall be in the form of a good check payable to the
  order of, or a wire transfer of federal  funds to, the Escrow Agent.  The Escrow
  Agent shall,  promptly after receipt,  deposit Purchaser's check for collection,
  and thereafter  invest the proceeds of collection in any of the following  types
  of investments  designated by Purchaser:  (i) prime commercial  paper,  banker's
  acceptances  or  certificates  of  deposit  in a  commercial  bank  approved  by
  Purchaser,  in each case  having a  maturity  of not more  than 30 days (or,  if
  earlier,  five (5) days prior to the Closing Date),  or (ii)  obligations of the
  United  States  Government  having a maturity  of not more than 60 days (or,  if
  earlier,  five (5) days prior to the Closing Date),  or (iii) one or more mutual
  funds which invest their assets  primarily in  investments of the type described
  in clauses  (i) and (ii),  or (iv) one or more  interest-bearing  accounts  in a
  commercial bank approved by Purchaser.
  
  If this Agreement is terminated  pursuant to Section 15.1 and thereafter  either
  Seller or Purchaser makes a written demand on the Escrow Agent for the return of
  the  Deposit  (if the  demand is made by  Purchaser)  or for the  payment of the
  Deposit (if the demand is made by Seller),  the Escrow  Agent shall give written
  notice of such demand to the other party. If the Escrow Agent does not receive a
  written  objection from the other party to the proposed payment or return of the
  Deposit  within 10 days after the giving of such notice,  the Escrow Agent shall
  pay the Deposit to the party making the demand.  If the Escrow Agent  receives a
  written  objection  from the other party  within the 10-day  period,  the Escrow
  Agent shall  continue to hold the Deposit  until  otherwise  directed by written
  instructions from Seller and Purchaser or until otherwise  directed by the final
  action of a court of competent jurisdiction.  During the Feasibility Period, the
  provisions of Section 5.6, and not the provisions of this Section, shall control
  the disposition of the Deposit.
  
   . In the event of a dispute  concerning  the  disposition  of the  Deposit,  the
  Escrow  Agent shall have the right at any time to deposit any cash funds held by
  it under this  Agreement  with the clerk of the court having  jurisdiction.  The
  Escrow Agent shall give written  notice of such deposit to Seller and Purchaser.
  Upon such  deposit,  the Escrow  Agent shall be relieved and  discharged  of all
  further obligations and responsibilities hereunder.
  
   .  The  parties  acknowledge  that  the  Escrow  Agent  is  acting  solely  as a
  stakeholder  at their request and for their  convenience;  that the Escrow Agent
  shall not be deemed  to be the  agent of  either  of the  parties;  and that the
  Escrow  Agent  shall  not be liable  to  either  of the  parties  for any act or
  omission on its part unless taken or suffered in bad faith, in willful disregard
  of this  Agreement or involving  gross  negligence.  Seller and Purchaser  shall
  jointly and  severally  indemnify  and hold the Escrow Agent  harmless  from and
  against all costs, claims, and expenses,  including reasonable  attorneys' fees,
  incurred  in  connection  with the  performance  of the  Escrow  Agent's  duties
  hereunder,  except with respect to actions or omissions taken or suffered by the
  Escrow Agent in bad faith,  in willful  disregard of this Agreement or involving
  gross negligence on the part of the Escrow Agent.
  
   . The Escrow Agent shall  acknowledge  its  agreement to the  provisions of this
  Section,  Article XIII and Article XV by executing  this  Agreement in the space
  provided below.
  
                                     ARTICLE V
  
                         Inspection and Feasibility Period
  
   . Purchaser  acknowledges and agrees that Seller has delivered to Purchaser (or,
  in the case of the items  described  in Section  5.2(h),  made  available at the
  Property  or at the  offices of the  Property  manager)  copies of all  Property
  Documents,  to the extent  such  Property  Documents  are  available,  i.e.,  in
  Seller's or the  Property  manager's  possession  or  obtainable  by Seller with
  reasonable efforts.
  
   . The Property  Documents consist of the following items, to the extent the same
  are in the possession or control of Seller or Seller's Property manager:
  
                (a)    The latest survey of the Land.
  
                (b)    All site plans for the Real Property.
  
                (c)  All  architectural,  mechanical,  electrical  and  structural
  plans,  specifications  and drawings  relating to the  improvements  on the Real
  Property.
  
                (d)  All Licenses and all certificates of occupancy issued for the
  Buildings.
  
                (e)  Certificates  of insurance  for all  casualty,  liability and
  other insurance policies presently in effect with respect to the Property.
  
                (f) Audited statements of income and expenses of the Real Property
  for calendar years 1990 through 1994, monthly operating  statements for the Real
  Property  for the months of January  through  November  (and if available on the
  date hereof, December), 1995.
  
                (g) All  assessments and bills for real estate and any other taxes
  affecting the Property, and for special assessments affecting the Real Property,
  for the  preceding  three (3) full tax  years,  together  with a summary  of any
  contested tax assessments affecting the Real Property during such three (3)-year
  period and copies of any income and  expense  statements  filed with  Montgomery
  County, Maryland for such three (3)-year period.
  
                (h)  All  Leases,   including  all  amendments  and  modifications
  thereto, all assignments thereof and subleases, if any, and any other agreements
  between Seller,  or an Affiliate of Seller,  and a Tenant,  or an Affiliate of a
  Tenant,  and a rent roll for the Real  Property,  listing  all  Leases in effect
  (with the name of each Tenant),  and for each Tenant,  the Rent currently  being
  paid,  security deposit (and interest accrued on such security deposit, if any),
  any prepaid or Delinquent Rent (including an aging of any such Delinquent Rent),
  apartment  number,  type of unit, size of unit, any assigned  parking spaces and
  parking allowances, and renewal options granted, if any.
  
                (i)    All Contracts.
  
                (j) The most  recent  owner's  title  insurance  policy  issued in
  connection with the Real Property and all amendments,  endorsements and exhibits
  thereto.
  
                (k) A list of all pending and, to the best of Seller's  knowledge,
  threatened claims or lawsuits and a list of all outstanding  judgments  relating
  to the Property,  including  suits for non-payment of rent or for the purpose of
  Tenant eviction.
  
                (l)   All   engineering,   architectural,   physical   inspection,
  maintenance,  geological and environmental reports related to the Real Property,
  including those relating to the presence (or absence) of Hazardous Materials.
  
                (m) All business and  professional  license/tax  returns  filed by
  Seller for the last two (2) fiscal years and copies of any  correspondence  from
  Governmental Authorities related to such returns, and a summary of any contested
  tax assessments.
  
               (n) All warranties and guarantees related to the Property which are
  presently in effect.
  
                (o) Such  other  documents  or data as  Purchaser  may  reasonably
  request, to be delivered at a later date as mutually agreed.
  
  In the event that, during the Feasibility Period, Seller discovers items falling
  within the categories  described above in this Section 5.2, Seller shall deliver
  such  items   promptly  to   Purchaser,   but  the   failure  to  deliver   such
  newly-discovered items prior to the date this Agreement is signed shall not be a
  breach by Seller of its obligations hereunder.
  
   . Seller agrees that Purchaser  shall have the right,  at its own risk, cost and
  expense,  to  enter  upon the Real  Property  at any time or times  prior to the
  Closing Date, during normal business hours and after reasonable  advance notice,
  for purposes of inspecting apartments (in the company of the resident manager of
  the Property) and  conducting  such surveys and  environmental  and  engineering
  tests,  including  inspections,  investigations and studies,  as Purchaser deems
  necessary or desirable to evaluate the Property.  In addition,  Purchaser  shall
  have the right to interview  Tenants in the course of Purchaser's  inspection of
  apartments  and to conduct  separate  interviews of Tenants not in the course of
  apartment  inspections,   provided  not  more  than  fifteen  (15)  Tenants  are
  separately  interviewed  and all such interviews are conducted in the company of
  the resident manager of the Property.  Purchaser may conduct such architectural,
  engineering,  environmental,  economic and other studies of the Real Property as
  Purchaser  may  deem   desirable.   Purchaser  shall  provide  Seller  at  least
  forty-eight  (48) hours'  notice in advance of its entry upon the Real  Property
  for purposes other than outside visual  inspections.  No advance notice shall be
  required for outside visual inspections. Purchaser's access to the Real Property
  shall be subject to the rights of Tenants  under their Leases,  Purchaser  shall
  not  unreasonably  disturb  Seller  or any  of the  Tenants  in  conducting  its
  inspections,  tests  and  studies,  or  in  conducting  interviews  of  Tenants.
  Purchaser  shall not make any  physical  changes to the Real  Property and shall
  indemnify and hold harmless  Seller from and against (i) all physical  damage to
  the Real  Property  caused by its tests  and  investigations  and (ii) all loss,
  liability  or damage  suffered  or  incurred  by Seller or any of its  agents or
  employees  arising out of or resulting  from injury or death to  individuals  or
  damage to property  sustained  on the Real  Property and caused by the tests and
  investigations  conducted  by, or at the direction  of,  Purchaser.  Purchaser's
  obligations  to  indemnify  Seller  pursuant to this Section  shall  survive the
  termination of this Agreement.
  
   . Between the date of this Agreement and the Closing Date,  Purchaser shall have
  the right to inspect all books, records, studies, reports and other documents in
  the  possession  or  control  of Seller  and its  agents  which  pertain  to the
  construction,  ownership, use, operation, occupancy,  maintenance,  operation or
  leasing of the Property ("Seller's Books and Records").  Seller shall allow such
  inspections to be conducted during normal business hours upon reasonable  notice
  to Seller and shall make  Seller's  Books and Records  available to Purchaser at
  the Real  Property or at the offices of Seller or the Property  manager.  Seller
  agrees that it will permit  Purchaser  to inspect the Books and Records in their
  current  state and will not "purge" the Books and Records  prior to their review
  by Purchaser.
  
        Section 5.5     Intentionally Omitted.
  
   . This Agreement  shall  automatically  terminate at the end of the  Feasibility
  Period  unless,  on or  before  the  last  day of the  Feasibility  Period,  (i)
  Purchaser  gives Seller written  notification  (the  "Feasibility  Notice") that
  Purchaser  elects to consummate the purchase of the Property in accordance  with
  the terms of this Agreement,  and (ii) Purchaser delivers the Additional Deposit
  to Escrow Agent. Purchaser shall also have the right to terminate this Agreement
  by notice given to Seller at any time before the end of the Feasibility  Period.
  Purchaser shall have the absolute right, in its sole and absolute discretion, to
  determine whether to give the Feasibility  Notice. If the Feasibility  Notice is
  not timely  given or if a notice of early  termination  is given,  Purchaser  or
  Seller,  or both,  shall so notify the Escrow  Agent,  the  Escrow  Agent  shall
  promptly  return the Initial  Deposit to  Purchaser,  and,  except as  otherwise
  provided in this Section, no party shall have any further liability to any other
  party under this  Agreement.  If this  Agreement is  terminated  pursuant to the
  provisions of this Section, Purchaser agrees to pay the sum of $100 to Seller as
  consideration  for this Agreement and, within fifteen (15) days after the end of
  the Feasibility Period or the earlier termination of this Agreement,  to deliver
  to Seller copies of all surveys,  written engineering tests or studies and other
  data prepared by third parties for Purchaser  during the Feasibility  Period and
  to return to Seller all  Property  Documents  previously  delivered by Seller to
  Purchaser.
  
        Section 5.7  Confidentiality.  In consideration  for and as a condition of
  Seller's  furnishing  to  Purchaser  the items  described  in  Section  5.2 (the
  "Evaluation Material"),  Purchaser acknowledges the confidential and proprietary
  nature  of such  Evaluation  Material  and  agrees  to hold  and  keep  the same
  confidential  as  provided in this  Section.  Purchaser  agrees to exercise  all
  reasonable steps to safeguard the confidentiality of the Evaluation Material and
  not to disclose any part of it to any third person except to such of Purchaser's
  employees and legal, accounting and financial advisors as (i) may require access
  to the Evaluation  Material for the purpose of assisting Purchaser in evaluating
  the purchase of the Property by  Purchaser,  and (ii) who have been  directed to
  preserve the confidentiality of such Evaluation Material.
  
                                    ARTICLE VI
  
                     Representations and Warranties of Seller
  
        Seller makes the following representations and warranties to Purchaser for
  the purpose of inducing  Purchaser to execute and deliver this  Agreement and to
  consummate  the  transactions  contemplated  by this  Agreement,  each of  which
  representations and warranties are true and correct on the date hereof:
  
   .     Section 6.1  Representations and Warranties regarding Authority and Status
  
                (a) Organization.  Seller is a general partnership duly formed and
  validly existing under the laws of the State of Maryland.
  
                (b) Authorization. The partners of Seller have duly authorized the
  execution  and  delivery of this  Agreement  and the  transactions  contemplated
  hereby.
  
                (c) No  Conflicting  Agreements.  The  execution  and  delivery by
  Seller of,  and the  performance  and  compliance  by Seller  with the terms and
  provisions  of, this  Agreement do not violate any of the terms,  conditions  or
  provisions of (i) Seller's  partnership  agreement,  (ii) to Seller's knowledge,
  any judgment,  order, injunction,  decree,  regulation or ruling of any court or
  other Governmental  Authority to which Seller is subject, or (iii) any agreement
  or contract  listed on any Schedule to this Agreement or any other  agreement or
  contract to which  Seller is a party or to which it or the  Property is subject,
  nor shall such  execution,  delivery,  performance  or  compliance  constitute a
  material default thereunder or give to others any material rights of termination
  or cancellation in or with respect to the Property.
  
                (d) Approvals. To Seller's knowledge,  no authorization,  consent,
  order,  approval or license from,  filing with, or other act by any Governmental
  Authority or other Person is or will be necessary to permit the valid  execution
  and  delivery by Seller of this  Agreement or the  performance  by Seller of the
  obligations to be performed by it under this Agreement.
  
       (e) United States  Person.  Seller is a "United  States  person" within the
  meaning of Sections  1445(f)(3) and 7701(a)(30) of the Internal  Revenue Code of
  1986, as amended.
  
                (f) Absence of  Bankruptcy.  Neither  Seller nor any  Affiliate of
  Seller has  commenced  (within  the meaning of any  Bankruptcy  Law) a voluntary
  case, consented to the entry of an order for relief against it in an involuntary
  case,  or  consented to the  appointment  of a Custodian of it or for all or any
  substantial  part of its  property,  nor has a court of  competent  jurisdiction
  entered an order or decree under any  Bankruptcy  Law that is for relief against
  Seller or any of its Affiliates in an  involuntary  case or appoints a Custodian
  of Seller or any of its Affiliates or for all or any substantial  part of its or
  their property.
  
                (g)  Management  of Real  Property.  Stephen  Brady  has  been the
  individual who has served as the asset manager for the Real Property,  on behalf
  of Seller,  since 1989, and since such date has been the individual  principally
  responsible for the operation of the Property within Seller's organization.
  
      Section 6.2  Representations and Warranties regarding Real Estate and Legal
  Matters.
  
                (a)  Operating  Statements.  Seller has delivered to Purchaser (i)
  audited statements of income and expense of the Real Property for calendar years
  1990 through 1994,  and (ii) monthly  operating  statements of the Real Property
  for the months of January through November (and if available on the date hereof,
  December),  1995.  The monthly  operating  statements  were prepared by Seller's
  property manager. To Seller's  knowledge,  such statements of income and expense
  present  fairly the income and expenses of the Real Property for the  respective
  periods covered thereby in all material respects.  Such statements have not been
  modified for review by Purchaser.
  
                (b)    Intentionally Omitted.
  
                (c) Real Estate  Taxes.  Except as otherwise  set forth in the Tax
  Schedule,  (i) to Seller's  knowledge  there are no tax abatements or exemptions
  affecting the Real Property, and (ii) Seller has not received any written notice
  of (x) any increase in the  assessed  valuation  of the Real  Property,  (y) any
  pending or threatened special assessments affecting the Real Property or (z) any
  contemplated improvements affecting the Real Property that may result in special
  assessments affecting the Real Property.
  
                (d) No Default of  Permitted  Exceptions.  To Seller's  knowledge,
  Seller is not in default in complying  with the terms and  provisions  of any of
  the covenants, conditions, restrictions, rights-of-way or easements constituting
  one or more of the  Permitted  Exceptions  which are to be performed or complied
  with by the owner of the Real Property.
  
       (e)  Condemnation.  Seller has no knowledge of any pending or  contemplated
  condemnation proceedings affecting the Real Property, or any part thereof.
  
                (f)    Intentionally Omitted.
  
                (g) Title to  Personal  Property.  Seller has good and  marketable
  title to, and owns outright,  the Personal Property listed in Exhibit B, if any,
  free and clear of all liens, encumbrances, security interests and adverse claims
  of any kind or  character,  other  than  liens  which  will be  released  at the
  Closing.
  
                (h)    Intentionally Omitted.
  
                (i)    Intentionally Omitted.
  
                (j)    Intentionally Omitted.
  
       (k) Labor Unions.  Seller is not a party to any contract or agreement  with
  any labor union.
  
                (l) Mechanics' Liens. All bills and claims for labor performed and
  materials  furnished to or for the benefit of the Real  Property for all periods
  prior to the Closing  Date have been (or prior to the Closing Date will be) paid
  in  full,  and on the  Closing  Date  there  shall  be no  mechanics'  liens  or
  materialmen's  liens  (whether  or  not  perfected)  on or  affecting  the  Real
  Property.
  
                (m) Litigation.  The Litigation  Schedule  contains a complete and
  correct list of all actions, suits, proceedings or written claims pending or, to
  Seller's  knowledge,  threatened in writing  against or affecting  Seller or the
  Real Property, at law or in equity or before or by any federal, state, municipal
  or other governmental department,  commission, board, agency or instrumentality,
  domestic or foreign (collectively,  "Litigation"),  and sets forth, with respect
  to each such Litigation,  the parties to such Litigation,  the amount claimed as
  damages (or other remedies  sought) and the status of such  Litigation as of the
  date  hereof.  Except  as set  forth on the  Litigation  Schedule,  to  Seller's
  knowledge there is no Litigation. To Seller's knowledge, Seller is not operating
  under or subject to, and is not in default  with  respect  to, any order,  writ,
  injunction  or  decree  of any  court  or  federal,  state,  municipal  or other
  governmental agency or department, commission, board, agency or instrumentality,
  domestic  or  foreign,  applicable  specifically  to the  Property  or any  part
  thereof,  as opposed to properties  generally in Montgomery  County or any other
  jurisdiction in which the Property may be situated.
  
                (n) Compliance with Laws. Seller has not received a written notice
  that the Buildings  (including  all adjoining  streets,  roads,  parking  areas,
  curbs, sidewalks,  sewers and other utilities within the boundaries of the Land)
  have not been constructed,  the Personal Property has not been installed and the
  Real Property is not presently being used and operated in all material  respects
  in compliance  with (i) all Legal  Requirements,  (ii) all building or occupancy
  permits,  and (iii) all  easements,  conditions,  rights-of-way,  covenants  and
  restrictions of record affecting or otherwise relating to the Real Property.
  
                (o)    Intentionally Omitted.
  
                (p)    Intentionally Omitted.
  
                (q)    Intentionally Omitted.
  
                (r)    Environmental Matters.
  
                 (1)    To Seller's knowledge, the Real Property does not contain,
  and there is not located on or about the Real Property, any Hazardous Materials,
  except for  prepackaged  supplies,  cleaning  materials or other items which are
  sold for consumer use or typically used in the operation, maintenance and repair
  of buildings  containing  residential  space.  Seller is not currently using the
  Real Property, nor to Seller's knowledge is any other Person currently using the
  Real Property,  nor to Seller's knowledge has the Real Property  previously been
  used, for the use,  storage,  treatment,  production,  manufacture,  generation,
  transportation,  release or disposal of Hazardous Materials, except as otherwise
  provided in the  preceding  sentence.  Seller has not  received  any  complaint,
  order, summons, citation, notice of violation, directive letter or other written
  communication from any Governmental Authority or other Person with regard to air
  emissions,  water  discharges,  noise emissions or Hazardous  Materials,  or any
  other  environmental,  health or safety matters affecting the Real Property,  or
  any  portion  thereof.  To  Seller's  knowledge,  Seller has  complied  with all
  Environmental   Laws  affecting  the  Real  Property,   including   notification
  requirements relating to the release of Hazardous Materials.
  
                    (2)    There are no claims pending or, to Seller's knowledge,
  threatened  in  writing,  against  Seller or the Real  Property,  or any portion
  thereof, by any Governmental Authority or other Person relating to any Hazardous
  Material  or  pursuant  to  any  Environmental  Law,  whether  for  enforcement,
  clean-up,   removal,   remediation,   assertion  of  liability,  cost  recovery,
  compensation,  contribution,  recovery of damages, injunction or other equitable
  relief or otherwise.
  
               (3)    To Seller's knowledge, Seller has not undertaken, permitted,
  authorized or suffered the presence,  or suspected presence,  use,  manufacture,
  handling, generation, storage, treatment, discharge, release, burial or disposal
  on,  under or about  the Real  Property  of any  Hazardous  Material,  except in
  compliance with  Environmental  Laws, or the  transportation to or from the Real
  Property, of any Hazardous Material in violation of any Environmental Laws.
  
                (s)    Intentionally Omitted.
  
                (t) Utilities. A list of all utilities servicing the Real Property
  and the account  numbers of such  utilities is set forth on Schedule 10 attached
  hereto.
  
       (u)  Underground  Storage  Tanks.  Seller has not removed,  or caused to be
  removed, any underground storage tanks from the Real Property.
  
                (v) No Unrecorded  Liens. No lender claiming  through Seller has a
  right to encumber the Real Property or Personal  Property,  or any part thereof,
  except for such liens or  security  interests  as may be  disclosed  in the land
  records or financing statement records of Montgomery County, Maryland.
  
                (w)  Appliances.  Each of the  apartments  units in the  Buildings
  contains,  and  will  contain  on  the  Closing  Date,  a  refrigerator,  stove,
  dishwasher and garbage disposal,  but Seller makes no representation or warranty
  regarding the condition of such items.
  
        Section 6.3  Representations and Warranties regarding Leases, Contracts,
   .nsurance and Other Documents
  
                (a) Leases. To Seller's  knowledge,  the Lease Schedule contains a
  description,  which is true, correct and complete in all material  respects,  of
  all Leases now in effect,  including  the name of each Tenant,  the date of each
  Tenant's Lease and all amendments,  if any,  thereto,  the apartment unit number
  and unit type  under  each  Lease,  rent  waivers  and other  lease  concessions
  (originally granted and any remaining to be applied at a future date), the gross
  monthly Rent (stated as gross Rent and/or plus utilities,  etc.) payable by each
  Tenant  under its Lease,  Rent paid for more than  thirty  (30) days in advance,
  Rent  delinquencies,  the expiration  date of each Lease,  and the amount of any
  Security  Deposit paid by the Tenant under each Lease plus interest due thereon.
  The Lease Schedule has been prepared by Seller's  Property  manager and attached
  hereto  without  change.  To  Seller's  knowledge,  there are no Leases or other
  tenancies for any space in the Real  Property  other than those set forth on the
  Lease  Schedule.  Seller has delivered or made  available to Purchaser  true and
  complete  copies of each Lease  described  in the Lease  Schedule.  To  Seller's
  knowledge,  except as otherwise  disclosed on the Lease Schedule or elsewhere in
  this Agreement:
  
                       (1)    each of the Leases is in full force and effect;
  
       (2) no  written  renewal  or  extension  options  have been  granted to any
  Tenant, except as set forth in such Tenant's Lease;
  
       (3) no Tenant  has an option to  purchase  the Real  Property,  or any part
  thereof;
  
       (4) no Tenant is entitled (pursuant to a written instrument) to any rebate,
  concession, deduction or offset, except as set forth in such Tenant's Lease;
  
       (5) no  Tenant  has paid any  Rent  for a  period  of more  than 60 days in
  advance; and
  
       (6) Seller  has the sole  right to  collect  rent under each Lease and such
  right has not been  assigned,  pledged,  hypothecated,  or otherwise  encumbered
  other than pursuant to a Mortgage to be released at the Closing.
  
                (b)  Contracts.  The  Contract  Schedule  contains a complete  and
  accurate list of all Contracts,  including  expirations  dates, a description of
  termination  provisions  (including  any  payment due on  termination),  amounts
  payable by Seller  thereunder  and a description  of services or materials to be
  provided.  Seller has delivered to Purchaser true and complete copies of each of
  the Contracts  described on the Contract Schedule.  Each of such Contracts is in
  full force and effect and has not been modified or amended,  except as indicated
  on the  Contract  Schedule.  Seller  is not in  default  of any of its  monetary
  obligations  or any of its material  non-monetary  obligations  under any of the
  Contracts described on the Contract Schedule and knows of no material default on
  the part of the other parties thereto.  The Contracts  described on the Contract
  Schedule  represent the complete agreement between Seller and such other parties
  as to the services to be performed  or materials to be provided  thereunder  and
  the compensation to be paid for such services or materials, as applicable.
  
                (c) Easement Agreements. The Easement Agreements Schedule contains
  a description of the gross monthly,  quarterly or annual amount (if any) payable
  by the  owner of the Real  Property  to any other  Person  who is a party to the
  Easement  Agreement and the gross  monthly,  quarterly or annual amount (if any)
  payable by any other  Person  who is a party to the  Easement  Agreement  to the
  owner of the Real  Property.  Except  as  otherwise  disclosed  on the  Easement
  Agreements Schedule or elsewhere in this Agreement:
  
       (1) each of the Easement  Agreements  is in full force and effect,  and has
  not been modified, amended or extended; and
  
       (2) neither Seller nor any of the other parties to the Easement  Agreements
  is in default (beyond any grace period  provided by such Easement  Agreement) in
  the  payment  of any  amount  payable by it under the  Easement  Agreement,  and
  neither  Seller nor any of such  parties is in  default  in the  performance  or
  observance of any of the other  covenants or conditions to be kept,  observed or
  performed by it under the Easement Agreement.
  
                (d)  Management Agreement.  On the Closing Date, there will be no
  contract or agreement in effect for the management of the Real Property.
  
                (e) Leasing Commissions.  No commission, fee or other compensation
  is payable  (or will,  with the  passage of time or  occurrence  of any event or
  both,  be  payable),  with  respect  to any  Lease,  and  there  are no  leasing
  commissions,  fees or other  compensation  payable in respect of renewals of the
  Leases.  There does not currently  exist any exclusive or continuing  leasing or
  brokerage  agreements  as to any of the  Leases  for  which  Purchaser  will  be
  responsible after Closing.
  
                (f)    Intentionally Omitted.
  
                (g)    Intentionally Omitted.
  
        Section 6.4 Certain Schedules. To Seller's knowledge,  the information set
  forth in the Employee Schedule,  the License Schedule,  the Warranties  Schedule
  and the Utility Schedule is true, correct and complete in all material respects.
  
   . Except as  expressly  set forth in this  Agreement,  (i) the Property is being
  sold in its  condition  on the  Closing  Date "as is",  "where is" and "with all
  faults", without any representation or warranty,  express or implied, by Seller,
  including,  without  limitation,  any  implied  warranty of  merchantability  or
  fitness for a particular purpose,  and (ii) Seller has not made any agreement to
  alter, repair or improve the Property.
  
    All representations and warranties contained in this Article shall survive the
  Closing,  and the execution  and delivery of the Deed,  for a period of one year
  after the Closing Date, and shall not be merged in the Deed at Closing.
  ARTICLE VII
  
                    Representations and Warranties of Purchaser
  
    Purchaser makes the following representations and warranties to Seller for the
  purpose  of  inducing  Seller to  execute  and  deliver  this  Agreement  and to
  consummate the transactions contemplated by this Agreement:
  
                (a)  Organization.  Purchaser is a business trust duly formed and
  validly existing under the laws of the District of Columbia.
  
                (b)  Authorization.  The Board of Trustees of  Purchaser  has duly
  authorized the signer of this Agreement to execute and deliver this Agreement on
  Purchaser's behalf.
  
                (c) No  Conflicting  Agreements.  The  execution  and  delivery by
  Purchaser of, and the performance and compliance by Purchaser with the terms and
  provisions  of, this  Agreement do not violate any of the terms,  conditions  or
  provisions  of (i)  Purchaser's  organizational  documents,  (ii) any  judgment,
  order,  injunction,   decree,  regulation  or  ruling  of  any  court  or  other
  Governmental  Authority to which Purchaser is subject, or (iii) any agreement or
  contract to which Purchaser is a party or to which it is subject.
  
                                   ARTICLE VIII
  
                         Additional Obligations of Seller
  
   . Seller  agrees to  surrender  full,  complete  and  actual  possession  of the
  Property to Purchaser on the Closing Date, subject only to the rights of Tenants
  under the  Leases  described  in the Lease  Schedule  and  permitted  additions,
  renewals and replacements  thereof.  Seller agrees to cooperate  reasonably with
  Purchaser  to ensure that the transfer of  possession  on the Closing Date takes
  place with the least  possible  disruption  in the normal  operation of the Real
  Property and the duties of the employees.
  
   . On the Closing Date, Seller shall also turn over to Purchaser, or leave at the
  Real Property, all books, records,  operating reports, files and other materials
  necessary to a complete  continuity in the operation of the business,  or copies
  thereof.  Purchaser shall permit Seller to have access to such records and files
  at all reasonable times after the Closing Date.
  
   . Between the date of this Agreement and the Closing Date, Seller agrees that it
  will:
                (a) manage and operate the Real  Property only in the ordinary and
  usual  manner,  maintain  in full force and effect  until the  Closing  Date the
  insurance  policies in force on the date hereof,  and use all reasonable efforts
  to keep available the services of the management  agent's employees and preserve
  its relations with Tenants;
  
                (b) at its  expense,  maintain  the Real  Property  in its present
  order and condition,  make all necessary  repairs and replacements in accordance
  with Seller's past practices,  and deliver the Real Property on the Closing Date
  in  substantially  the same  condition  it is in on the date of this  Agreement,
  reasonable wear and tear and damage by fire or other casualty excepted;
  
              (c)  give prompt notice of any fire or other casualty affecting the
  Property after the date of this Agreement;
  
                (d)  deliver to  Purchaser,  (i)  promptly  after the  preparation
  thereof by Seller in a manner consistent with its past practice (but at least as
  often as monthly), a summary showing leasing activity at the Property, including
  new rentals and eviction  notices sent by Seller or its managing agent, and (ii)
  promptly after its receipt by Seller, (A) any notice from a Tenant claiming that
  Seller is in  default  under such  Tenant's  Lease or that such  Tenant  will be
  vacating  its  apartment  unit,  and (B)  any  notice  of  violation  issued  by
  Governmental Authorities with respect to the Real Property; Seller shall, at its
  sole cost and expense,  remedy  before the Closing Date all  violations of Legal
  Requirements affecting or relating to the Real Property and any outstanding work
  orders and  requirements  of any  company  insuring  the Real  Property  against
  casualty;
  
                (e) enter into new Leases or  amendments  to Leases only for rents
  in excess of those set forth in the Leasing Guidelines for the type of apartment
  unit involved, and for terms not in excess of one year;
  
                (f) notify  Purchaser in writing,  promptly after Seller  acquires
  knowledge  thereof,  of any facts or events  which  would  cause any of Seller's
  representations and warranties to be untrue or incorrect;
  
                (g) perform,  observe and comply with all terms and  provisions of
  all Easement Agreements to be performed,  observed or complied with by Seller as
  owner of the Real Property;
  
                (h) maintain in full force and effect all  Licenses  listed on the
  License Schedule and timely apply for renewals of all Licenses which will expire
  before the Closing Date;
  
                (i) on the Closing Date  terminate  all employees of Seller listed
  on the Employee  Schedule,  except for those  employees  designated by Purchaser
  prior to the end of the Feasibility Period; and
  
                (i) promptly  deliver to Purchaser  any Property  Document  coming
  into the  possession  of Seller which was not available  during the  Feasibility
  Period.
  
   . Between the date of this  Agreement and the Closing Date,  Seller agrees that,
  without Purchaser's written consent in each case, it will not:
  
                (a)  voluntarily  grant,  create,  assume  or  permit to exist any
  Mortgage,  lien, encumbrance,  easement,  covenant,  condition,  right-of-way or
  restriction  upon  the  Property  other  than  the  Permitted   Exceptions,   or
  voluntarily  take or permit  any  action  adversely  affecting  the title to the
  Property  as it  exists  on the date of this  Agreement,  unless  terminable  at
  Closing;
  
            (b) agree to any commitment or incur any liability to any labor union;
  
                (c) alter or amend  any of the  Assignable  Contracts  or become a
  party to any new Contract unless the new Contract is terminable  without penalty
  to the then-owner of the Buildings upon not more than 30 days' notice;
  
                (d) increase the salaries of the employees  listed on the Employee
  Schedule or hire additional employees for the management,  operation, promotion,
  maintenance or repair of the Real  Property,  unless any such increases or hires
  are terminable at Closing;
  
                (e) enter into a new Lease, or alter,  amend,  renew or extend any
  Lease,  providing for a monthly rent below the minimum monthly rent for the type
  of apartment unit  involved,  as set forth in the Leasing  Guidelines,  or for a
  term in excess of one year;
  
                (f)    terminate any Lease except for non-payment of Rent or other
  default;
  
                (g) remove any Personal  Property  from the  Buildings  unless the
  same is  replaced  with  similar  items of equal or better  quality  before  the
  Closing Date; or
  
                (h) enter into a contract for the sale of the Real Property to any
  other Person,  whether or not such contract is contingent on the  termination of
  this  Agreement,  except  as may be  required  by  Chapters  11A  and 53A of the
  Montgomery County, Maryland Code.
  
   . Each of Seller and Purchaser agrees that it will, at any time and from time to
  time within  three (3) months  after the  Closing  Date,  upon  request of other
  party, do, execute, acknowledge and deliver, or will cause to be done, executed,
  acknowledged  and  delivered,   all  such  further   reasonable   acts,   deeds,
  assignments, transfers, conveyances and assurances as may reasonably be required
  for the completion of the transactions contemplated by this Agreement.
  
        Section 8.6  Intentionally Omitted.
  
   . Seller  agrees  to pay all  expenses  incurred  by it in  connection  with the
  negotiation,  execution and  performance of this Agreement and the  transactions
  contemplated hereby, including the fees and expenses of its legal counsel.
  
        Section 8.8  Cancellation  of Contracts.  Seller shall  cancel,  as of the
  Closing  Date,  all  Contracts  designated  for  cancellation  by Purchaser in a
  written notice given to Seller prior to the end of the Feasibility  Period. If a
  Contract cannot be cancelled as of the Closing Date, Seller shall  nevertheless,
  at the  request of  Purchaser,  prior to Closing  notify the other party to such
  Contract of its  cancellation in accordance with the terms of such Contract.  In
  such event,  such  Contract will be assigned to Purchaser at Closing and will be
  cancelled after the Closing pursuant to Seller's notice.
  
        Section 8.9  Title Defects.
  
                (a) If the title  examination  performed by  Purchaser  during the
  Feasibility  Period (as provided in Section 9.1) discloses a defect in the title
  to the Real  Property  such that the  condition of title to the Real Property is
  not (or will not be on the Closing Date) as required by Section 11.3,  Purchaser
  shall so notify  Seller not later than fifteen (15) days prior to the end of the
  Feasibility  Period.  Within ten (10) days after receipt of such notice,  Seller
  shall send a notice to Purchaser  stating  whether or not Seller  elects to cure
  such  defect.  Failure by Seller to send such a notice  within such ten (10)-day
  period shall be deemed an election not to cure such defect.  If Seller elects to
  cure such defect, it shall do so prior to the Closing Date;  provided,  however,
  if such defect is of a nature that it cannot be cured prior to the Closing Date,
  the Closing Date may be extended, at Purchaser's option, for any period required
  to accomplish such cure.
  
                (b) If a defect in the  title to the Real  Property  is  disclosed
  after the end of the Feasibility  Period such that the condition of title to the
  Real Property is not (or will not be on the Closing Date) as required by Section
  11.3,  Purchaser shall so notify Seller.  Seller shall be obligated to cure such
  defect if the  defect  was  caused by  Seller  after the end of the  Feasibility
  Period.  If the defect was not caused by Seller after the end of the Feasibility
  Period,  then Seller shall have the right,  but not the obligation,  to elect to
  cure such  defect  prior to the Closing  Date.  If Seller does not elect to cure
  such  defect,  Purchaser  shall  have the right  either  (i) to  terminate  this
  Agreement or (ii) waive the defect and proceed to Closing  hereunder.  If Seller
  is required or elects to cure a defect in title under this Section 8.9(b) but is
  not able to accomplish such cure prior to the Closing Date, the Closing Date may
  be extended,  at Purchaser's  option, for any period required to accomplish such
  cure.
  
        Section  8.10.  Pay-Off  Letter.  Seller shall obtain from any holder of a
  mortgage on the Real Property, and deliver to the Escrow Agent a reasonable time
  prior to the Closing Date, a letter from such  mortgagee  specifying the amounts
  necessary to pay off such mortgage.
  
       Section  8.11.  Tenant  Work  Orders.  Seller  shall  perform,  and pay all
  expenses  incurred in connection  with,  all Tenant Work Orders in existence two
  (2) days' prior to the Closing Date.
  ARTICLE IX
  
                        Additional Obligations of Purchaser
  
   .  Promptly  after  the date of this  Agreement,  Purchaser  agrees  to order an
  examination  of the title to the Real  Property and to obtain a  commitment  for
  issuance to Purchaser of an ALTA Form B owner's title insurance  policy insuring
  the fee simple  title to the Real  Property,  in an amount equal to the Purchase
  Price,  subject  to such  exceptions  to title as may be  disclosed  by the Land
  Records or otherwise.  If Purchaser does not terminate this Agreement within the
  Feasibility Period, Purchaser shall be deemed to have accepted all exceptions to
  title noted in Schedule B to the commitment (other than the survey exception and
  the exception for unfiled  mechanics'  liens; the exception for defects,  liens,
  encumbrances, adverse claims or other matters, if any, created after the date of
  the  commitment  (not earlier than the date of this  Agreement) but prior to the
  date title to the Real Property vests in Purchaser;  the exception for rights of
  parties in possession other than Tenants under the Leases; and the exception for
  Mortgages encumbering the Real Property).
  
   . Purchaser  agrees to pay all expenses  incurred by it in  connection  with the
  negotiation,  execution and  performance of this Agreement and the  transactions
  contemplated hereby, including the fees and expenses of its legal counsel.
  
                                     ARTICLE X
  
                   Conditions Precedent to Seller's Obligations
  
        The obligations of Seller to sell the Property to Purchaser and to perform
  the other  covenants and  obligations  to be performed by it on the Closing Date
  shall be subject to the following conditions (all or any of which may be waived,
  in whole or in part, by Seller):
  
   . The  representations  and warranties made by Purchaser in Article VII shall be
  true and correct on and as of the Closing Date with the same force and effect as
  though such representations and warranties had been made on and as of such date,
  and Purchaser  shall have executed and delivered to Seller a certificate,  dated
  as of the Closing Date, to the foregoing effect.
  
       . Purchaser shall have performed all obligations required by this Agreement
  to be performed by it on or before the Closing Date.
  
        Section 10.3 Montgomery  County Right of First Refusal.  Seller shall have
  received  prior  to the  end of the  Feasibility  Period  (i) a  Certificate  of
  Compliance from Montgomery County,  Maryland,  in form and substance  reasonably
  acceptable to Seller,  to the effect that Montgomery County has waived its right
  of first refusal under Chapters 11A and 53A of the  Montgomery  County Code, and
  (ii)  a  copy  of a  three  (3)-year  rental  agreement  between  Purchaser  and
  Montgomery County (the "Rental Agreement") upon which such Certificate is based.
  The terms  and  provisions  of the  Rental  Agreement  shall be  subject  to the
  approval of  Purchaser,  in its sole  discretion.  If the condition set forth in
  this  Section  10.3 has not been  satisfied  on or  prior to the  Closing  Date,
  Purchaser shall have the right, at its option, to extend the Closing Date for up
  to sixty (60) days in order to allow  sufficient  time for this  condition to be
  satisfied.
  
                                    ARTICLE XI
  
                  Conditions Precedent to Purchaser's Obligations
  
        The  obligations  of Purchaser to purchase the Property from Seller and to
  perform the other covenants and obligations to be performed by it on the Closing
  Date shall be subject to the  following  conditions  (all or any of which may be
  waived, in whole or in part, by Purchaser):
  
   . The  representations and warranties made by Seller in Article VI shall be true
  and correct in every material respect on the date of this Agreement and shall be
  true and correct in every  material  respect on and as of the Closing  Date with
  the same force and effect as if such  representations had been made on and as of
  such  date,  and  Seller  shall have  executed  and  delivered  to  Purchaser  a
  certificate, dated as of the Closing Date, to the foregoing effect.
  
   . Seller  shall have  performed  in all  material  respects  all  covenants  and
  obligations  required by this  Agreement  to be performed by it on or before the
  Closing Date.
  
   . On the  Closing  Date,  (i) Seller  shall have cured any title  defects it has
  elected to cure or is required to cure under the  provisions of Section 8.9, and
  (ii) subject to the payment by Purchaser of the  applicable  premium,  Purchaser
  shall be entitled to receive,  at its expense,  from the title insurance company
  issuing the commitment  obtained by Purchaser  during the  Feasibility  Period a
  current ALTA Form B owner's policy of title  insurance,  in a total amount equal
  to the Purchase  Price,  dated,  or updated to, the Closing Date,  insuring,  or
  committing to insure, at standard rates, Purchaser's marketable fee simple title
  to the Real Property subject only to the Permitted Exceptions.
  
  Seller  shall have  received  prior to the end of the  Feasibility  Period (i) a
  Certificate  of  Compliance  from  Montgomery  County,  Maryland,  in  form  and
  substance reasonably  acceptable to Seller, to the effect that Montgomery County
  has  waived  its  right  of  first  refusal  under  Chapters  11A and 53A of the
  Montgomery  County Code,  and (ii) a copy of a three (3)-year  rental  agreement
  between Purchaser and Montgomery County (the "Rental Agreement") upon which such
  Certificate is based.  The terms and provisions of the Rental Agreement shall be
  subject to the approval of Purchaser,  in its sole discretion.  If the condition
  set forth in this Section 11.4 has not been satisfied on or prior to the Closing
  Date,  Purchaser shall have the right, at its option, to extend the Closing Date
  for up to sixty (60) days in order to allow  sufficient  time for this condition
  to be satisfied.
  
   . On the Closing  Date, no action or  proceeding  shall have been  instituted or
  threatened  against Seller by a party other than  Purchaser  before any court to
  restrain or prohibit,  or to obtain substantial  damages in respect of, or which
  is  related  to or arises  out of, the  transfer  of the  Property  by Seller to
  Purchaser  under the  provisions  of this  Agreement  or  environmental  matters
  respecting the Property.
  
        Section  11.6  Condemnation.  On the  Closing  Date,  no part of the  Real
  Property shall be about to be acquired,  or shall previously have been acquired,
  by authority of any governmental  agency in the exercise of its power of eminent
  domain or by private  purchase in lieu  thereof,  nor on the Closing  Date shall
  there be any threat or imminence of any such acquisition or purchase.
                                    ARTICLE XII
  
                         Damage by Fire or Other Casualty
  
   . On the  Closing  Date,  and as a  condition  precedent  to the  obligation  of
  Purchaser to purchase the Property pursuant to this Agreement, there shall be no
  unrepaired  damage by fire or other casualty to any portion of the Real Property
  the estimated cost of repair of which is more than $100,000.
  
   . If (i) any portion of the  Property  is damaged by fire or casualty  after the
  date of this  Agreement  and is not repaired and restored  substantially  to its
  original  condition  prior to Closing and (ii) the estimated  cost of repairs is
  $100,000  or less,  Purchaser  shall be required  to  purchase  the  Property in
  accordance with the terms of this Agreement and, at Closing, Seller shall assign
  to Purchaser  all insurance  claims and proceeds with respect  thereto and shall
  pay or credit to Purchaser the amount of any  deductible or uninsured  loss with
  respect to such casualty. If the estimated cost of repairing such damage is more
  than $100,000,  Purchaser may, at its sole option: (i) terminate this Agreement,
  in which case the Escrow  Agent  shall  return the Deposit to  Purchaser  and no
  party shall have any further  liability or  obligation  to any other party under
  this  Agreement,  except as  otherwise  provided  in Article V; or (ii) elect to
  proceed  with the Closing,  in which case Seller  shall assign to Purchaser  all
  insurance  claims and  proceeds  (other than claims and  proceeds  for rent loss
  insurance for periods prior to the Closing Date) with respect to such damage and
  shall pay or credit to Purchaser the amount of any  deductible or uninsured loss
  with  respect to such  casualty.  If a casualty to any part of the  Property has
  occurred  and  Purchaser  is required or elects to complete  the purchase of the
  Property,  Seller shall  reasonably  cooperate with Purchaser in prosecuting all
  insurance claims assigned to Purchaser at Closing.
  
   . For purposes of this Article XII, an architect selected by Seller and approved
  in writing by Purchaser (such approval not to be unreasonably withheld,  delayed
  or  conditioned),  shall determine the estimated cost to repair damage caused by
  fire or other casualty.
  
                                   ARTICLE XIII
  
                                      Closing
  
   . The closing of the purchase and sale of the Property (the "Closing")  shall be
  held at the office of Arent Fox Kintner Plotkin & Kahn, 1050 Connecticut Avenue,
  Washington, D. C. 20036, on the Closing Date. On the Closing Date, (i) Purchaser
  shall  effect a wire  transfer  of Federal  funds to the Escrow  Agent's  escrow
  account  in an  amount  equal to the sum of (A) the  Purchase  Price  (less  the
  Deposit) and (B) the net amount (if any) of the costs, expenses,  prorations and
  adjustments  payable by Purchaser  under this  Agreement,  and (ii) Escrow Agent
  shall record the Deed (in  accordance  with  reasonable  and  customary  closing
  escrow  instructions  of Seller and Purchaser  not contrary to this  Agreement).
  After the Escrow Agent's  receipt of the wire transfer of funds and  immediately
  following  the  recordation  of the Deed  vesting  fee simple  title in the Real
  Property in Purchaser or its  designee,  (i) the Escrow Agent shall  disburse to
  Seller  an  amount  equal to the  Purchase  Price  (including,  as a part of the
  Purchase Price, the Deposit)  reduced by the net amount of the costs,  expenses,
  prorations and adjustments  payable by Seller under this Agreement (as evidenced
  by the Closing Statement signed by Seller);  (ii) the Escrow Agent shall deliver
  to  Purchaser  all other  documents  and  instruments  received by it which,  in
  accordance  with the terms of this  Agreement,  are to be delivered by Seller to
  Purchaser at the Closing; and (iii) the Escrow Agent shall deliver to Seller all
  other  documents and  instruments  received by it which,  in accordance with the
  terms of this  Agreement,  are to be  delivered  by  Purchaser  to Seller at the
  Closing.
  
   .  At the Closing, Seller shall deliver to Purchaser the following:
  
       (a) the Deed of the  Property  to  Purchaser  or its  designee,  signed  by
  Seller;
                (b)    the Bill of Sale, signed by Seller;
  
                (c)    the Leases and Contract Assignment, signed by Seller;
                (d)    the General Assignment, signed by Seller;
  
       (e) a letter  in the form of  Exhibit  F signed  by  Seller,  advising  the
  Tenants of the change in ownership of the Real Property;
  
                (f) An updated Employee  Schedule,  License  Schedule,  Warranties
  Schedule and Utility  Schedule,  showing any change in such Schedules  since the
  date of this Agreement;
  
                (g)  a  certification  as to  Seller's  non-foreign  status  which
  complies with the provisions of Section  1445(b)(2) of the Internal Revenue Code
  of 1986, as amended, signed by Seller;
  
                (h) an Owner's Affidavit signed by Seller,  addressed to the title
  insurance company designated by Purchaser, with respect to the absence of claims
  which would give rise to mechanics'  liens, the absence of parties in possession
  of the Real  Property  other  than  Tenants  under the  Leases  (and  other than
  subtenants  of  Tenants)  and the  absence of  unrecorded  easements  granted by
  Seller,  in the form  reasonably  required  by the title  insurance  company  to
  eliminate the  exceptions  for those matters from  Purchaser's  title  insurance
  policy;
  
       (i) the Closing Statement referred to in Section 14.1, signed by Seller;
  
       (j) an original executed  counterpart of each Lease and assignable Contract
  then in effect (or a certified copy thereof);
  
       (k) all keys to the Real Property and the Personal Property,  if any, which
  are in Seller's possession;
  
                (l) a schedule  updating the Lease  Schedule and setting forth all
  past due and uncollected  Rent owed by Tenants,  all prepayments of Rent and all
  Security  Deposits and interest due, if any, held by Seller,  its managing agent
  or any other Person under all Leases;
  
       (m) all existing  books,  records,  papers and  agreements  relating to the
  Property which are in Seller's possession; and
  
                (n) a certificate,  signed by Seller, that all the representations
  and warranties  made by Seller in Article VI are true and correct on the Closing
  Date with the same force and effect as if such  representations  and  warranties
  had been made on and as of such date;
  
   .  At the Closing, Purchaser shall deliver to Seller the following:
  
                (a) an  assumption  agreement  in the form of  Exhibit G signed by
  Purchaser,  whereby Purchaser assumes certain  liabilities and agrees to perform
  certain obligations of Seller under the Leases and the Assignable Contracts;
  
                (b)  the Closing Statement referred to in Section 14.1, signed by
  Purchaser; and
  
                (c)  a   certificate,   signed   by   Purchaser,   that   all  the
  representations  and  warranties  made by  Purchaser in Article VII are true and
  correct  on the  Closing  Date  with  the  same  force  and  effect  as if  such
  representations and warranties had been made on and as of such date;
  
   . The delivery to the Escrow Agent of the Purchase Price,  the executed Deed and
  Bill of Sale and all other documents and instruments required to be delivered by
  either party to the other by the terms of this  Agreement  (in  accordance  with
  reasonable and customary closing escrow instructions of Seller and Purchaser not
  contrary to this Agreement)  shall be deemed to be a good and sufficient  tender
  of  performance of the terms hereof.  The Escrow Agent shall have the right,  at
  the Closing,  to apply the Purchase Price to pay off and discharge  encumbrances
  or  other  obligations  affecting  the Real  Property  which  are not  Permitted
  Exceptions, so that title to the Real Property shall be insurable as required by
  Section 11.3.
  
                                    ARTICLE XIV
  
                        Closing Adjustments and Prorations
  
    All rentals,  revenues and other income generated by the Real Property and all
  utilities,  real estate taxes,  maintenance charges and other Operating Expenses
  incurred in connection with the ownership,  management and operation of the Real
  Property  shall be paid or shall be prorated  between  Seller and  Purchaser  in
  accordance  with the provisions of this Article.  For purposes of the prorations
  and  adjustments to be made pursuant to this Article,  Purchaser shall be deemed
  to own the Real  Property  and  therefore  be  entitled to any  revenues  and be
  responsible  for any expenses for the entire day upon which the Closing  occurs.
  Any  apportionments  and prorations which are not expressly provided for in this
  Article  shall  be  made  in  accordance  with  the  customary  practice  in the
  Metropolitan  Washington  D.C.  area.  Seller and  Purchaser  shall  cause their
  accountants  to prepare a schedule  of  adjustments  (the  "Closing  Statement")
  before the Closing  Date.  Any net  adjustment  in favor of  Purchaser  shall be
  credited against the Purchase Price at the Closing.  Any net adjustment in favor
  of Seller shall be paid in cash at the Closing by Purchaser to Seller. A copy of
  the Closing  Statement agreed upon by Seller and Purchaser shall be initialed by
  Seller and Purchaser and delivered to the Escrow Agent at the Closing.
  
       . Rent shall be prorated at the Closing in  accordance  with the  following
  provisions:
  
                (a) Apartment  Rent.  Subject to Section  14.2(c),  Apartment Rent
  shall be prorated  between  Seller and  Purchaser  as of the Closing  Date on an
  accrual  basis based on the actual  number of days in the month during which the
  Closing  Date  occurs.  Seller  shall be  entitled to all  Apartment  Rent which
  accrues before the Closing Date and Purchaser shall be entitled to all Apartment
  Rent which accrues on and after the Closing Date.
  
                (b)  Additional  Income.  Subject  to  Section  14.2(c),  items of
  Additional  Income  shall be prorated  between  Seller and  Purchaser  as of the
  Closing  Date on an  accrual  basis  based on the  actual  number of days in the
  monthly or other period to which such item of Additional  Income  relates.  Such
  proration shall be made separately for each item of Additional Income.
  
                (c) Delinquent  Rent.  Delinquent  Rent shall be prorated  between
  Seller  and  Purchaser  as of the  Closing  Date but not  until  it is  actually
  collected by Purchaser  after the Closing,  it being  understood and agreed that
  Purchaser  shall  have no  obligation  to collect  Delinquent  Rent on behalf of
  Seller. Purchaser shall pay to Seller all Delinquent Rent collected by Purchaser
  after  the  Closing  Date.  As a  part  of the  Final  Closing  Adjustment,  any
  Delinquent Rent which has not as yet been paid shall be assigned to Seller,  but
  after the Closing and continuing through and after the Final Closing Adjustment,
  without the express  written  consent of  Purchaser,  Seller  shall not take any
  action against a Tenant owing  Delinquent  Rent which would affect such Tenant's
  right to occupy the premises leased under its Lease. Rent collected by Purchaser
  after  the  Closing,  net of  the  costs  of  collection  (including  reasonable
  attorneys'  fees and costs),  shall be applied first to unpaid Rent then due and
  payable and accruing after the Closing Date, and then to Delinquent Rent.
  
   .     Section 14.3  Taxes and Assessments
  
                (a) Proration of Taxes at Closing.  All non-delinquent real estate
  taxes assessed  against the Real Property  shall be prorated  between Seller and
  Purchaser on an accrual  basis,  based upon the actual  current tax bill. If the
  most  recent tax bill  received  by Seller  before the  Closing  Date is not the
  actual current tax bill, then Seller and Purchaser  shall initially  prorate the
  real estate taxes at the Closing by applying  110% of the tax rate  indicated on
  the most recent tax bill  received by Seller to the latest  assessed  valuation,
  and shall  reprorate  the real estate taxes  retroactively  at the Final Closing
  Adjustment.  All real estate taxes accruing before the Closing Date shall be the
  obligation of Seller and all real estate taxes accruing on and after the Closing
  Date shall be the  obligation of  Purchaser.  Any  delinquent  real estate taxes
  assessed against the Real Property shall be paid (together with any interest and
  penalties) by Seller at the Closing from the Purchase Price.
  
                (b) Post-Closing  Supplemental  Taxes. If, after the Closing Date,
  any additional or supplemental  real estate taxes are assessed  against the Real
  Property by reason of back  assessments,  corrections  of previous  tax bills or
  other events  occurring  before the Closing  Date,  Seller and  Purchaser  shall
  reprorate the real estate taxes at the Final  Closing  Adjustment to provide the
  appropriate credit to Purchaser.
  
                (c)  Post-Closing  Refunds of Taxes.  Any  refunds of real  estate
  taxes made after the Closing  shall be held by  Purchaser  (and,  if received by
  Seller,  shall be delivered  immediately  to Purchaser to be held in  accordance
  with this Section) and shall first be applied to the unreimbursed costs incurred
  in obtaining the refund,  and the balance,  if any, shall be paid to Seller (for
  the  period  prior  to the  Closing  Date)  and to  Purchaser  (for  the  period
  commencing on and after the Closing Date).
  
                (d) Pending Tax  Proceedings.  If any  proceeding to determine the
  assessed  value of the Real  Property  or the real  estate  taxes  payable  with
  respect  to the  Real  Property  has  been  commenced  before  the  date of this
  Agreement and shall be continuing  as of the Closing  Date,  Purchaser  shall be
  entitled  to control  the  prosecution  of such  proceeding  or  proceedings  to
  completion  and to settle or  compromise  any claim  therein.  Seller  agrees to
  cooperate  reasonably  with  Purchaser  and to  execute  any and  all  documents
  reasonably requested by Purchaser in furtherance of the foregoing.
  
   . All Operating  Expenses  shall be prorated  between Seller and Purchaser as of
  the Closing Date on an accrual basis,  based on the actual number of days in the
  month during which the Closing Date occurs for monthly expenses,  and based on a
  365-day year for annual expenses.  Seller shall be responsible for all Operating
  Expenses  attributable to the period before the Closing Date and Purchaser shall
  be  responsible  for all Operating  Expenses  attributable  to the period on and
  after the Closing Date. To the extent  commercially  reasonable and practicable,
  Seller and Purchaser shall obtain billings and meter readings as of the Business
  Day  preceding  the  Closing  Date to aid in the  proration  of charges for gas,
  electricity and other utility  services which are not the direct  responsibility
  of Tenants.  If billings or meter  readings as of the Business Day preceding the
  Closing Date are obtained,  adjustments of any costs, expenses,  charges or fees
  shown thereon shall be made in accordance  with such billings or meter readings.
  If billings or meter  readings as of the Business Day preceding the Closing Date
  are not  available  for any  utility  service,  the  charges  therefor  shall be
  adjusted at the Closing on the basis of the per diem charges for the most recent
  prior  period for which bills were  issued and shall be further  adjusted at the
  Final  Closing  Adjustment  on the basis of the  actual  bills  for the  current
  period.
  
   .  Purchaser  shall be credited  with and Seller shall be charged with an amount
  equal to the sum of (i) all  Security  Deposits  being held by Seller,  Seller's
  managing agent or any other Person under the Leases,  and (ii) the amount of any
  other credits due to Tenants as of the Closing Date in accordance with the terms
  of the Leases, including prepaid rent and interest.  Seller shall be entitled to
  retain all Security  Deposits or other such credits due. To the extent Purchaser
  receives the Security  Deposits at the Closing (or receives a credit against the
  Purchase  Price in an  amount  equal to the  same),  Purchaser  shall,  and does
  hereby,  indemnify  and hold  Seller  harmless  from and  against  any claims by
  Tenants for the return of Security Deposits placed by such Tenants.
  
   .  Purchaser  shall  not be  entitled  to a credit  for an  amount  equal to the
  abatement of Rent for any period on and after the Closing Date to which  Tenants
  are entitled under Leases in effect on the Closing Date.
  
   . Seller shall be entitled to retain all Utility Deposits. If any of the Utility
  Deposits is not refundable to Seller without replacement by Purchaser, Purchaser
  shall  either:  (i) deliver the  requisite  replacement  Utility  Deposit to the
  utility  company on or before  the  Closing  Date,  or (ii) pay to Seller at the
  Closing  the  amount of such  Utility  Deposit,  against  a good and  sufficient
  transfer  by Seller  to  Purchaser  of all  interest  of  Seller in the  Utility
  Deposit.
  
   . No later than 120 days following the Closing Date,  Seller and Purchaser shall
  make a final  adjustment  to the  prorations  made pursuant to this Article (the
  "Final Closing  Adjustment").  The Final Closing Adjustment shall be made in the
  following manner:
  
                (a) General.  All  adjustments  or  prorations  which could not be
  determined  at the Closing  because of the lack of actual  statements,  bills or
  invoices for the current period or any other reason,  shall be made as a part of
  the Final Closing Adjustment.  Any net adjustment in favor of Purchaser shall be
  paid in cash or cash  equivalent  by Seller to  Purchaser  no later than 30 days
  after the Final Closing Adjustment.  Any net adjustment in favor of Seller shall
  be paid in cash or cash  equivalent by Purchaser to Seller no later than 30 days
  after the Final Closing Adjustment. The parties shall correct any manifest error
  in the prorations and adjustments  made at Closing  promptly after such error is
  discovered.
  
                (b)  No  Further  Adjustments.   Except  for:  (i)  additional  or
  supplemental  real estate  taxes,  real estate tax credits or rebates,  or other
  adjustments  to real  estate  taxes  due to  back  assessments,  corrections  to
  previous tax bills or real estate tax appeals or contests, (ii) manifest errors,
  the Final Closing  Adjustment  shall be  conclusive  and binding upon Seller and
  Purchaser,  and Seller and Purchaser hereby waive any right to contest after the
  Final Closing  Adjustment any  prorations,  apportionments  or adjustments to be
  made pursuant to this Section.
  
   . All  State  and  County  transfer  taxes  and  recording  charges  payable  in
  connection  with the  recording  of the  Deed  (whether  imposed  in the form of
  transfer taxes,  revenue stamps or otherwise)  shall be paid fifty percent (50%)
  by Seller and fifty  percent  (50%) by  Purchaser.  Purchaser  shall pay for all
  expenses of examinations of title, survey, all fees, charges and expenses of the
  Escrow Agent,  and all other  recording  fees and Closing  expenses.  Each party
  shall pay its own legal fees and other expenses incurred by it prior to Closing.
  
   .  Notwithstanding  any other  provision of this Agreement to the contrary,  all
  federal,  state or local income or gross  receipts taxes payable with respect to
  Seller or the Property,  if any,  accruing  before the Closing Date, or any such
  income or gross receipts tax assessed with respect to the transaction  described
  in this  Agreement,  if any,  shall be the  obligation of and for the account of
  Seller,  and Purchaser  shall have no obligation  or liability  whatsoever  with
  respect thereto.
  
                                    ARTICLE XV
  
                                    Termination
  
       . This Agreement may be terminated  upon written notice given to the Escrow
  Agent and the other party by:
  
       (a)  Purchaser at the Closing,  if any one of the  conditions  set forth in
  Article XI or Article XII is not satisfied on the Closing Date; or
  
       (b)  Seller  at the  Closing,  if any one of the  conditions  set  forth in
  Article X is not satisfied on the Closing Date.
  
   . If Purchaser  terminates  this  Agreement  pursuant to Section  15.1(a),  this
  Agreement  shall become null and void, the Escrow Agent shall return the Deposit
  to Purchaser and no party shall have any further  liability or obligation to any
  other party under this Agreement,  except as otherwise  provided in Article V or
  the next sentence.  If Purchaser  terminates this Agreement  pursuant to Section
  15.1(a)  because  of a  breach  by  Seller  of  any of  the  representations  or
  warranties  made by it in this Agreement or the failure of Seller to perform any
  of the  covenants or  agreements  to be  performed  by it under this  Agreement,
  Purchaser shall have the right to sue to recover its damages arising out of such
  breach or nonperformance in an amount not to exceed $300,000.
  
   . If  Seller  terminates  this  Agreement  pursuant  to  Section  15.1(b),  this
  Agreement  shall become null and void, the Escrow Agent shall return the Deposit
  to Purchaser and no party shall have any further  liability or obligation to any
  other party under this Agreement,  except as otherwise  provided in Article V or
  the next  sentence.  If Seller  terminates  this  Agreement  pursuant to Section
  15.1(b)  because  of a breach  by  Purchaser  of any of the  representations  or
  warranties  made by it in this  Agreement or the failure of Purchaser to perform
  any of the covenants or  agreements to be performed by it under this  Agreement,
  the Escrow Agent shall pay the Deposit to Seller.  Seller's  sole and  exclusive
  remedy for Purchaser's misrepresentation, breach of warranty or default shall be
  to  receive  the  Deposit  as  liquidated  damages.  In no  event  and  under no
  circumstances  shall  Seller be  entitled  to receive  more than the  Deposit as
  damages  for  Purchaser's  misrepresentation,  breach of  warranty  or  default.
  Purchaser shall promptly return to Seller all engineering studies, Leases, Lease
  files  and other  written  material  relating  to the Real  Property  previously
  delivered by Seller to Purchaser.  Notwithstanding  the foregoing  provisions of
  this  Section  15.3,  Seller shall have the right to sue  Purchaser  for damages
  arising out of  Purchaser's  liability  under the  indemnities  of Purchaser set
  forth in Sections 5.3, 14.5, 16.2 and 16.4 hereof.
  
   . If Seller  defaults in  performing  any of the  covenants or  agreements to be
  performed by it under this Agreement, Purchaser shall have the right, instead of
  terminating  this  Agreement  pursuant to Section  15.1, to elect to permit this
  Agreement to remain in effect and to sue for specific performance.
  
                                    ARTICLE XVI
  
                                  Indemnification
  
   . Subject to the provisions of Section 16.3, if Closing occurs, Seller agrees to
  indemnify, hold harmless and defend Purchaser from and against:
  
                (a) all debts,  liabilities and obligations  arising from business
  done,  transactions  entered into or other events  occurring  before the Closing
  Date with  respect to the  ownership,  management,  operation,  maintenance  and
  repair of the Property,  other than the debts, liabilities and obligations which
  are being adjusted between Seller and Purchaser pursuant to this Agreement;
  
                (b)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser  arising out of or resulting  from injury or death to  individuals  or
  damage to property  sustained on the Real Property before the Closing and caused
  by the willful or negligent act or omission (where applicable law imposes a duty
  to act) of Seller;
  
                (c)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser  because any  representation or warranty made by Seller in Article VI,
  or in any document  furnished to Purchaser in  connection  with the Closing,  is
  false or misleading in any material respect;
  
                (d)  any  loss,  liability  or  damage  suffered  or  incurred  by
  Purchaser because of the nonfulfillment of any covenant or agreement on the part
  of Seller under this Agreement;
  
                (e)  all  reasonable  costs  and  expenses  (including  reasonable
  attorneys'  fees)  incurred by Purchaser in  connection  with any action,  suit,
  proceeding,  demand,  assessment  or  judgment  incident  to any of the  matters
  indemnified against in this Section.
  
   . Subject to the provisions of Section 16.3, if Closing occurs, Purchaser agrees
  to indemnify, hold harmless and defend Seller from and against:
  
                (a) all debts,  liabilities and obligations  arising from business
  done,  transactions  entered  into or other  events  occurring  on and after the
  Closing with respect to the ownership,  management,  operation,  maintenance and
  repair of the Property,  other than the debts, liabilities and obligations which
  are being adjusted between Seller and Purchaser pursuant to this Agreement;
  
                (b) any loss,  liability or damage  suffered or incurred by Seller
  arising out of or  resulting  from injury or death to  individuals  or damage to
  property  sustained  on the Real  Property on or after the Closing and caused by
  the willful or negligent act or omission (where applicable law imposes a duty to
  act) of Purchaser;
  
                (c) any loss,  liability or damage  suffered or incurred by Seller
  because any  representation  or warranty made by Purchaser in Article VII, or in
  any document furnished to Seller in connection with the Closing,  shall be false
  or misleading in any material respect;
  
                (d) any loss,  liability or damage  suffered or incurred by Seller
  because  of the  nonfulfillment  of any  covenant  or  agreement  on the part of
  Purchaser under this Agreement;
  
                (e) any loss,  liability or damage  suffered or incurred by Seller
  with respect to the  Security  Deposits  collected by Seller  before the Closing
  Date which are paid or credited to Purchaser at the Closing; and
  
                (f)  all  reasonable  costs  and  expenses  (including  reasonable
  attorneys'  fees)  incurred  by  Seller in  connection  with any  action,  suit,
  proceeding,  demand,  assessment  or  judgment  incident  to any of the  matters
  indemnified against in this Section.
  
   . The obligations of Seller to indemnify  Purchaser pursuant to Section 16.1 and
  the  obligations of Purchaser to indemnify  Seller  pursuant to Section 16.2 are
  limited as follows:
  
                (a) Limit on Seller's  Obligation after Closing. If the Closing is
  consummated,  Seller  shall not have any  liability or  obligation  to Purchaser
  pursuant  to Section  16.1 with  respect to any  misrepresentation  or breach of
  warranty  unless Seller  receives  written notice of such  misrepresentation  or
  breach of warranty before the expiration of one year after the Closing Date.
  
                (b) Limit on Purchaser's  Obligation after Closing. If the Closing
  is  consummated,  Purchaser shall not have any liability or obligation to Seller
  pursuant  to Section  16.2 with  respect to any  misrepresentation  or breach of
  warranty unless Purchaser receives written notice of such  misrepresentation  or
  breach of warranty within one year after the Closing Date.
  
        Section 16.4 No Brokers.  Seller and Purchaser  acknowledge and agree that
  the Sales Agent has acted as the broker on behalf of Seller in  connection  with
  the transaction contemplated hereby, and that Seller shall be solely responsible
  for the payment of any fee or commission that may be due the Sales Agent. Except
  for the Sales Agent, Seller represents and warrants to Purchaser that Seller has
  not engaged any broker,  agent or finder to act on its behalf in connection with
  this transaction,  and that Purchaser shall not be liable for the payment of any
  fee or  commission  to the  Sales  Agent or any  other  broker,  agent or finder
  purporting  to act on behalf of  Seller.  Similarly,  Purchaser  represents  and
  warrants to Seller that Purchaser has not engaged any broker, agent or finder to
  act on its behalf in connection with this transaction, and that Seller shall not
  be liable  for the  payment of any fee or  commission  to any  broker,  agent or
  finder  purporting  to act on  behalf  of  Purchaser  in  connection  with  this
  transaction.  Each of Seller and  Purchaser  does hereby agree to indemnify  and
  hold harmless the other party from any loss, damage, cost or expense incurred by
  such other party and arising out of a breach of the  representation and warranty
  made by the indemnifying party as set forth in this Section 16.4.
  
                                   ARTICLE XVII
  
                             Miscellaneous Provisions
  
   . This Agreement,  together with the Exhibits and Schedules hereto, contains the
  entire  agreement  between the parties  relating to the purchase and sale of the
  Property,  all prior negotiations between the parties,  (including the letter of
  intent dated  November 13, 1995),  are merged by this Agreement and there are no
  promises, agreements, conditions,  undertakings,  warranties or representations,
  oral or  written,  express  or  implied,  between  them other than as herein set
  forth.  No change or  modification  of this Agreement  shall be valid unless the
  same is in writing  and signed by the  parties  hereto.  No waiver of any of the
  provisions of this Agreement,  or any other agreement referred to herein,  shall
  be valid unless in writing and signed by the party  against whom it is sought to
  be enforced.
  
   . The agreements and indemnities set forth in Article XIV,  Article XVI and this
  Article shall  survive the Closing under this  Agreement for a period of one (1)
  year.
  
   . This Agreement may be executed in any number of counterparts  and it shall not
  be necessary that each party to this Agreement execute each counterpart.
  
   . All terms of this Agreement shall be binding upon, and inure to the benefit of
  and be  enforceable  by, the parties  hereto and their  successors  and assigns.
  Purchaser  shall have the right,  without the  consent of Seller,  to assign its
  rights,  and  delegate its duties,  under this  Agreement,  to any  Affiliate of
  Purchaser.
  
   . This  Agreement is intended to be performed in the State of Maryland and shall
  be construed and enforced in accordance with the laws of the State of Maryland.
  
   .     Section 17.6  Notices
  
                (a)  Manner  of  Giving  Notice.  Each  notice,  request,  demand,
  consent,  approval or other communication (hereafter in this Section referred to
  collectively  as "notices" and referred to singly as a "notice") which Seller or
  Purchaser is required or  permitted to give to the other party  pursuant to this
  Agreement  shall be in  writing  and shall be deemed to have been duly  given if
  hand  delivered  with  receipt  therefor  or sent by  Federal  Express  or other
  overnight  courier service.  Any such notice shall be deemed given when received
  or when delivery is refused.
  
                (b) Addresses for Notices.  All notices shall be addressed to the
  parties at the following addresses:
  
                       (1)    if to Seller:
  
                              PaineWebber Properties, Inc.
                              265 Franklin Street
                              16th Floor
                              Boston, Massachusetts  02110
                              Attention: Mr. Stephen D. Brady
  
                              with a copy to:
  
                              Hunton & Williams
                              Suite 1700
                              1751 Pinnacle Drive
                              McLean, Virginia  22101
                              Attention: Gerald R. Best, Esq.
  
                       (2)    if to Purchaser:
  
                              10400 Connecticut Avenue
                              Concourse Level
                              Kensington, Maryland 20895
                              Attention:   Larry E. Finger, Senior Vice President
                              and Chief Financial Officer
  
                              and also, for any pre-Closing notices
  
                              Attention:    Mary Beth Avedesian, Vice-President,
                                     Investments
  
                              with a copy to:
  
                              Michael H. Leahy, Esq.
                              Arent Fox Kintner Plotkin & Kahn
                              1050 Connecticut Avenue
                              Washington, D. C. 20036
  
  Either party may, by notice given pursuant to this Section, change the person or
  persons  and/or  address or  addresses,  or  designate an  additional  person or
  persons or an additional address or addresses, for its notices.
  
   . Seller and  Purchaser  each agrees  that  before the Closing  Date it will not
  issue  any press  release,  advertisement  or other  public  communication  with
  respect to this Agreement or the  transactions  contemplated  hereby without the
  prior written  consent of the other party hereto,  except to the extent required
  by law. If Seller or Purchaser is required by law to issue such a press  release
  or other public communication before the Closing Date, at least one Business Day
  before the issuance of the same such party shall  deliver a copy of the proposed
  press  release or other public  communication  to the other party hereto for its
  review and  approval,  which  approval  shall not be  unreasonably  withheld  or
  delayed.
  
   . If any term or provision of this Agreement or the  application  thereof to any
  persons or circumstances shall, to any extent, be invalid or unenforceable,  the
  remainder  of this  Agreement  or the  application  of such term or provision to
  persons or  circumstances  other  than  those as to which it is held  invalid or
  unenforceable shall not be affected thereby, and each term and provision of this
  Agreement shall be valid and enforceable to the fullest extent permitted by law.
  
   .  Seller  and  Purchaser  waive  trial  by jury in any  action,  proceeding  or
  counterclaim  brought by either of them against the other on any matter  arising
  out of or in any way connected with this Agreement.
  
        Section 17.10 Purchaser's  Trustees Not Liable.  Purchaser is a common law
  trust organized  under District of Columbia law on November 18, 1960.  Under the
  terms of the Declaration of Trust, all persons dealing with the trust shall look
  solely to the trust property for  satisfaction  of claims of any nature,  and no
  trustee,  officer or agent of the trust shall be held to any personal  liability
  whatsoever, in tort, contract or otherwise.
  
        Section 17.11 SEC Requirements. If required by rules of the Securities and
  Exchange  Commission,  Seller grants  Purchaser the right,  at Purchaser's  sole
  expense,  to prepare an audited  income  statement  of the Property for the most
  recent  fiscal  year(s) as  specified by Rule 3-14 of  Regulation  S-X under the
  Securities Act of 1933 and the Securities Exchange Act of 1934, and Seller shall
  provide  and/or fully  cooperate  in  obtaining  any and all such other data and
  financial  information  which shall be available to Seller  (including,  without
  limitation,  data and information  obtainable from Seller's management agent for
  the  Property)  and as  advisable  in  connection  with  fulfilling  Purchaser's
  disclosure  obligations as a public company subject to the rules and regulations
  of the Securities and Exchange Commission.
  
        IN WITNESS  WHEREOF,  the parties have duly executed this  Agreement as of
  the day and year first above stated.
  
                                     SELLER
  
                                     Montgomery Village HWH Associates
  
                                     By: PaineWebber Growth Properties Two L.P.,
                                         General Partner
  
                                      By:     Second PW Growth Properties, Inc.,
                                              General Partner
  
                                              By:  /s/ Stephen D. Brady
  
                                     By: Montgomery Village Limited Partnership,
                                            General Partner
                                     By:    Earl G. Glover, General Partner
  
                                            By:  /s/ Earl G. Glover
  
                                     PURCHASER
  
                                     Washington Real Estate Investment Trust
  
                                     By: /s/ Edmund B. Cronin, Jr.
                                        Edmund B. Cronin, Jr.
                                        President and Chief Executive Officer
  
        The  undersigned  Escrow  Agent  executes  this  Agreement  solely for the
  purpose of evidencing  its agreement to perform its  obligations as set forth in
  Articles IV, XII, XIII and XV of the foregoing and annexed  Purchase  Agreement,
  it being  understood  and agreed that  Escrow  Agent  shall have  absolutely  no
  liability for the performance by Seller or Purchaser of their  obligations under
  the Purchase Agreement.
  
                                     Chicago Title Insurance Company
  
                                     By: /s/ Craig A. Johnson
  RATIFICATION OF PURCHASE AGREEMENT
  
  A. By Purchase Agreement, dates as of January 19, 1996 (the "Contract"), between
  Montgomery  Village HWH Associates  ("Seller"),  as seller,  and Washington Real
  Estate  Investment Trust ("WREIT"),  as purchaser,  as assigned by WREIT to WRIT
  Limited  Partnership,  Seller,  whole  general  partners are Paine Webber Growth
  Properties  Two LP  ("PWGPTLP"),  and  Montgomery  Village  Limited  Partnership
  ("MVLP"),  agreed to sell to WREIT,  and WREIT agreed to buy,  certain  improved
  real property known as Walker House Apartments.
  
       B. Because there is a scrivener's error as to the execution of the Contract
  on behalf of Seller, PWGPTLP and MVLP wish to ratify the Contract. Accordingly,
  
       1. PWGPTLP and MVLP, the sole general partners of Seller and acting in such
  capacities, ratify and confirm the execution of the contract on behalf of Seller
  by PWGPTLP and Mr. Earl Glover,
  
       2. This  ratification,  made this 11th date of March, 1996, is effective as
  of January 19, 1996.
  
                                      PWGPTLP:
  
                                      Paine Webber Growth Properties Two LP
  
                                      By:  Second PW Growth Properties, Inc.
  
                                      By: /s/ Rock M. D'Errico
                                              Rock M. D'Errico
                                              Vice President
  
                                      MVLP:
  
                                      Montgomery Village Limited Partnership
  
                                      By:  General American Real Estate and
                                             Development, Inc.
  
                                      By: /s/ Earl G. Glover
                                          Earl G. Glover
                                          President
  BILL OF SALE
  
        THIS BILL OF SALE (this  "Bill of Sale") is  executed  on this 13th day of
  March,  1996,  by  Montgomery   Village  HWH  Associates,   a  Maryland  general
  partnership  ("Seller"),  and  WRIT  Limited  Partnership,  a  Delaware  limited
  partnership ("Purchaser").
  
       1. Real Property.  The "Real Property" shall mean the real property located
  in Gaithersburg,  Montgomery  County,  Maryland  legally  described in Exhibit A
  attached to this Bill of Sale, and known as Walker House Apartments.
  
        2. Personal  Property.  The "Personal  Property" shall mean all furniture,
  furnishings,  fixtures, equipment, tools and other tangible personal property of
  every kind and  description  owned by Seller and  attached  or  appurtenant  to,
  located  on or used or  useful in  connection  with the  management,  operation,
  maintenance  and repair of the Real  Property,  including,  but not  limited to,
  Seller's  inventory  of spare  and  replacement  parts,  Seller's  inventory  of
  consumable supplies and the articles of personal property which are described in
  Exhibit B attached to this Bill of Sale.
  
        3. Sale.  For good and  valuable  consideration  received  by Seller,  the
  receipt and sufficiency of which are hereby  acknowledged,  Seller hereby sells,
  assigns and transfers the Personal  Property to Purchaser.  Seller covenants and
  agrees to  warrant  and  forever  defend  title to the  Personal  Property  unto
  Purchaser  against  all and every  person or persons  claiming  through  Seller.
  Except as set  forth in the  immediately  preceding  sentence,  Seller  makes no
  express or implied warranties or representations as to the Personal Property.
  
        IN WITNESS  WHEREOF,  Seller and Purchaser have executed this Bill of Sale
  the day and year first above written.
  
                              SELLER:
  
                              Montgomery Village HWH Associates
  
                              By: PaineWebber Growth Properties Two L.P., 
                                   General Partner
  
                              By: Second PW Growth Properties, Inc., 
                                   General Partner
  
                               By: /s/ Rock M. D'Errico
                               Name:  Rock M. D'Errico
                               Title:    Vice President
  
                              By:General American Real Estate & Development, Inc.,
                                 General Partner
  
                                            By:/s/ Earl G. Glover
                                            Name:  Earl G. Glover
                                            Title:    President
  WALKER HOUSE APARTMENTS
                                   GAITHERSBURG, MARYLAND
                                      PURCHASE AND SALE
                                           3/13/96
  
     PURCHASER:                                    TITLE COMPANY:
     WRIT LIMITED PARTNERSHIP                     Chicago Title Insurance Company
                                                        Case No. 9588-30030
     SELLER:
     Montgomery Village HWH Associates
  
                                SELLER'S SETTLEMENT STATEMENT
  
    CONTRACT SALES PRICE                                           $10,650,000.00
  
  CREDITS TO SELLER:
  
     TAXES & ASSESSMENTS:
     Real Estate Taxes                                    34,743.66
     South Village Homes Assessment                           14.40
     Montgomery Village Foundation Assessment                657.34
  
  SERVICE CONTRACTS REIMBURSED BY/(REFUNDED TO) BUYER:
     Western Termite                                         186.10
     Solon (Income)                                         (858.06)
  
  UTILITIES REIMBURSED BY BUYER:
     Oil      16,866 gals. @  $0.68427                    11,541.00
                                                        -----------
  
  TOTAL CREDITS TO SELLER                                               46,284.44
  
  CHARGES TO SELLER:
     1/2 TRANSFER & RECORDATION CHARGES:
     County Transfer Tax                                  53,250.00
     State Transfer Tax                                   26,625.00
     State Recordation Fee                                23,430.00
  
     EXISTING MORTGAGE PAYOFF:  
       Mellon Mortgage/Fannie Mae                      5,010,817.48
  
     MORTGAGE RELEASE RECORDING FEE                          125.00 EST
  
     BROKERAGE COMMISSION:  Cassidy & Pinkard            106,500.00
  
     CAPITAL EXPENDITURES REIMBURSEMENT                   25,000.00
  
     MINIMUM RENT (3/13/96 thru 3/31/96)                  89,456.59
  
  SERVICE CONTRACTS DISBURSED BY ESCROW AGENT:
     Boland Services                                         251.61
     Otis Elevator                                           280.75
     Metropolitan Termite                                     40.26
     Waste Management                                        449.03
  UTILITIES DISBURSED BY ESCROW AGENT:
       Washington Suburban Sanitary Commission
        (thru 3/8/96 reading)                            11,644.26
  
     UTILITIES REIMBURSED BY SELLER:
       Washington Suburban Sanitary Commission 
       (3/8/96 thru 3/12/96)                             1,240.00 est
  
     TENANT SECURITY DEPOSITS                           65,336.00
  
     INTEREST DUE ON TENANT SECURITY DEPOSITS            7,997.23
                                                      -----------
  
  TOTAL CHARGES TO SELLER                                          (5,422,443.21)
                                                                   -------------
  
  NET DUE TO SELLER                                               $ 5,273,841.23
                                                                  ==============
  
  SELLER:                                   SELLER:
  Montgomery Village HWH Associates         Montgomery Village HWH Associates
  By: PaineWebber Growth Properties Two LP,  By:  Montgomery Village Limited
      General Partner                             Partnership
                                                  General Partner
  
   By:  Second PW Growth Properties, Inc.        By:General American Real Estate
        General Partner                          and Development, Inc.
                                                 General Partner
  
  By:  /s/ Rock M. D'Errico  3/13/96        By:  /s/ Earl G. Glover   3/13/96
       Rock M. D'Errico, Vice President          Earl G. Glover, CEO
  
  TITLE COMPANY:
    Chicago Title Insurance Company
  
  By:  /s/ Craig A. Johnson
      Craig A. Johnson, Assistant Vice President
  
  Title  Company is  signing  this  settlement  statement  solely to  confirm  its
  agreement  to disburse  funds in  accordance  herewith,  subject to the attached
  General Conditions of Escrow