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 28, 1997
  
                    Paine Webber Qualified Partners Three L.P.
              (Exact name of registrant as specified in its charter)
  
       Delaware                       0-17147                    04-2798638
  (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 QUALIFIED PARTNERS THREE L.P.
  
  ITEM 2 - Disposition of Assets
  
     Westside Creek Apartments, Little Rock, Arkansas
  
     Disposition Date - March 28, 1997
  
       On March 28, 1997,  Paine Webber  Qualified Plan Property Fund Three,  L.P.
  sold  its  wholly-owned   operating  investment  property,  the  Westside  Creek
  Apartments,  Phase I,  located in Little Rock,  Arkansas to an  unrelated  third
  party for  $6,100,000.  This  amount  compares  favorably  to the  Partnership's
  original net  investment in Westside of  $4,850,000.  As a result of the sale of
  the  Westside  Creek  Apartments,   a  Special   Distribution  of  approximately
  $6,336,000,  or $177 per original $1,000  investment,  will be made on April 15,
  1997,  to unit  holders  of  record  as of  March  28,  1997.  Of  this  amount,
  approximately  $167  represents net proceeds from the sale of the Westside Creek
  Apartments and $10 represents a distribution of Partnership reserves that exceed
  future  requirements.  This  Special  Distribution  is being paid along with the
  regular  quarterly  distribution.  It should be noted  that due to the  Westside
  Creek Special  Distribution,  the annualized  distribution rate will be adjusted
  from 5.5% to 4.5% beginning with the distribution for the quarter ending May 31,
  1997, which will be made on July 15, 1997. The 4.5% annualized rate will be paid
  on a Limited  Partner's  remaining  capital  account of $172 per original $1,000
  investment,  which  reflects  the $177  return  of  capital  resulting  from the
  Westside Creek sale.
  
  ITEM 7 - Financial Statements and Exhibits
  
     (a)   Financial Statements:  None
  
     (b)   Exhibits:
  
        (1)   Closing  Statement  by  and  between  PaineWebber  Qualified  Plan
              Property Fund Three, L.P. and Mid-America Apartments,  L.P., dated
              March 28, 1997.
  
        (2)   Purchase and Sale Agreement by and between  PaineWebber  Qualified
              Partners  Three,  L.P. and  Mid-America  Apartments,  L.P.,  dated
              February 24, 1997.
  
        (3)   Warranty Deed between  PaineWebber  Qualified Partners Three, L.P.
              and Mid-America Apartments, L.P., dated March 28, 1997.
  
        (4)   Assignment  of  Leases  and  Security   Deposits  by   PaineWebber
              Qualified  Partners Three, L.P. to Mid-America  Apartments,  L.P.,
              dated March 28, 1997.
  
        (5)   Bill of Sale by PaineWebber  Qualified  Partners  Three,  L.P. for
              the benefit of Mid-America Apartments, L.P., dated March 28, 1997.
  
  
  
  <PAGE>
  
  
                                     FORM 8-K
  
                                  CURRENT REPORT
  
                    PAINE WEBBER QUALIFIED PARTNERS THREE L.P.
  
  
  
  
                                    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 QUALIFIED PARTNERS THREE L.P.
                                   (Registrant)
  
  
  
  
                              By: /s/ Walter V. Arnold
                                  --------------------
                                  Walter V. Arnold
                                  Senior Vice President and
                                  Chief Financial Officer
  
  
  
  
  
  
  
  Date:  April 14, 1997
  
  
  <PAGE>
  
  
                                CLOSING STATEMENT
  
  SELLERS:                Paine Webber Qualified Plan Property Fund Three, LP
                          Third Qualified Properties,
                          265 Franklin Street, Boston, MA 02110
  
  PURCHASERS:             Mid-America Apartments, L.P.
                          6584 Poplar, Suite 340, Memphis, TN 38138
  
  PROPERTY:               Westside Creek Apartments
  
  CLOSING DATE:           March 28, 1997
  
  *******************************************************************************
                                                     DEBIT            CREDIT
  
  Contract Sales Price                                              6,100,000.00
  
  City Tax Prorations
          1/1/97 to 3/28/97
          $75,267.42,     87 days @ 206.2121        17,940.45
  Rents
           3/28/97 to 3/31/97
           $77,070.81,     3 days @ 2486.1552        7,458.47
  Security Deposit                                  12,791.79
  
  1996 Real Estate Taxes                            75,267.42
  
  Transfer Tax to Clerk of the Court                10,065.00
  
  Document Recording Fee to Clerk of the                10.00
     Court
  
  Settlement Fee to First American Title               150.00
  
  Title Insurance Premium to First American        10,675.00
     Title Insurance
  
  Sub-Totals                                      $134,358.13
  
  Balance due to Seller                        5,965,641.87 **
  
  Total Accepted this 28th day of March 1997    $6,100,000.00      $6,100,000.00
                                                -------------      -------------
  
  
                                            Paine Webber Qualified Plan
                                               Property Fund Three,
                                            by, Third Qualified Properties, *
                                            By: /s/ Rock M. D'Errico
                                               ---------------------
                                            Rock M. D'Errico, Vice President
  
                                            * Third Qualified Properties, Inc.,
                                               its Managing General Partner
  
  
              ** To be wired to Seller's Account No. 9243-604-7 at 
                 State Street Bank, Boston Ma., ABA No. 011 000028, 
                 Attention Debbie Arsenault (617) 654-4648
  
  <PAGE>
  
  
  
                           PURCHASE AND SALE AGREEMENT
                                  BY AND BETWEEN
         PAINEWEBBER QUALIFIED PLAN PROPERTY FUND THREE, L.P. ("SELLER")
                                       AND
                      MID-AMERICA APARTMENTS, L.P. ("BUYER")
  
  
  
  <PAGE>
  
  
  
                                TABLE OF CONTENTS
  
  
  
  
                                                                           Page
  
   ARTICLE  1                                                                4
             DEFINITIONS                                                     4
  
   ARTICLE  2                                                                4
            PURCHASE AND SALE                                                4
  
   ARTICLE  3                                                                2
            PURCHASE PRICE; DEPOSIT; ADJUSTMENTS                             2
  
   ARTICLE  4                                                                4
            PRECLOSING OPERATION                                             4
  
   ARTICLE  5                                                                4
            ACCESS, INSPECTION, DILIGENCE                                    4
  
   ARTICLE  6                                                                7
            TITLE AND SURVEY CONDITIONS                                      7
  
    ARTICLE 7                                                                8
            CLOSING                                                          8
  
    ARTICLE 8                                                               10
            CASUALTY AND CONDEMNATION                                       10
  
    ARTICLE 9                                                               11
            BROKERAGE COMMISSIONS                                           11
  
    ARTICLE 10                                                              11
            DEFAULT, TERMINATION AND REMEDIES                               11
  
    ARTICLE 11                                                              12
            REPRESENTATIONS AND WARRANTIES                                  12
  
    ARTICLE 12                                                              15
            MISCELLANEOUS                                                   15
  
    ARTICLE 13                                                              19
            IRS FORM 1099-S DESIGNATION                                     19
  
  <PAGE>
  
  
  SCHEDULE A  Description of the Real Property
  SCHEDULE B  Description of Personal Property and Intangible Property
  SCHEDULE C  Rent Roll
  SCHEDULE D  Form of Lease
  SCHEDULE E  Form of Warranty Deed
  SCHEDULE F  Form of Bill of Sale 
  SCHEDULE G  Form of Assignment  of Leases
  SCHEDULE H  Form of Assignment of Contracts 
  SCHEDULE I  1099 Designation Agreement
  
  Schedule 4.2      Rental Rates and Other Concessions
  
  
  <PAGE>
  
  
                           Purchase and Sale Agreement
  
        This Purchase and Sale Agreement (this  "Agreement") is entered into as of
  the 24th  day of  February,  1997 by and  between  Seller  and  Buyer,  upon the
  following terms and conditions:
  
                                    ARTICLE 1
  
                                   DEFINITIONS
  
        References  in this  Agreement  to the  following  terms  shall  have  the
  following meanings:
  
  SELLER:            PaineWebber Qualified Plan Property Fund Three, L.P.,
                     a Delaware limited partnership
  
  BUYER:             Mid-America Apartments, L.P., a Tennessee limited partnership
  
  PROPERTY:          The Real Property and Personal Property constituting a
                     portion of Westside Creek Apartments, in Little Rock,
                     Arkansas
  
  REAL PROPERTY:    The land and the buildings, structures, improvements and
                    fixtures (collectively the "Improvements") now located thereon
                    and the rights appurtenant thereto, all as more particularly
                    described in Schedule A attached hereto
  
  PERSONAL PROPERTY: The personal and intangible Property, if any,
                     described in Schedule B attached hereto
  
  PURCHASE PRICE:   $6,100,000
  
  TITLE COMPANY:    First American Title Insurance Company
                    National Accounts
                    1025 Connecticut Ave. N.W.
                    Suite 709
                    Washington, DC  20036
                    Attn: Shirley Fox, Esq., National Division Counsel
  
  
                                    ARTICLE 2
  
                                PURCHASE AND SALE
  
        2.1. In  consideration  of the  undertakings  and mutual  covenants of the
  parties  set  forth  in  this  Agreement,   and  for  other  good  and  valuable
  consideration,   the  receipt  and  legal   sufficiency   of  which  are  hereby
  acknowledged,  Seller  hereby agrees to sell and convey the Property to Buyer or
  its nominee and Buyer hereby  agrees to buy and pay the  Purchase  Price for the
  Property on the terms and conditions contained herein.
  
  
  <PAGE>
  
  
                                    ARTICLE 3
  
                       PURCHASE PRICE; DEPOSIT; ADJUSTMENTS
  
        3.1 Purchase Price.  The Purchase Price shall be as specified in Article 1
  above and shall be paid on the  Closing  Date (as  hereinafter  defined) by wire
  transfer of immediately available federal funds in the amount of Six Million One
  Hundred  Thousand  Dollars  ($6,100,000.00)  subject  to  adjustment  to reflect
  application of the Escrowed Amount and such other adjustments herein contained.
  
        3.2 Deposit. Contemporaneously with the execution of this Agreement, Buyer
  shall  deposit with the Title  Company the sum of One Hundred  Thousand  Dollars
  ($100,000) (the "Deposit") to secure Buyer's  obligations  under this Agreement.
  The Title Company shall hold the Deposit in a segregated  interest bearing money
  market  account  with an FDIC insured bank  reasonably  acceptable  to Buyer and
  Seller, or other investment vehicle selected by Buyer and approved by Seller. On
  or before the Diligence Date (as  hereinafter  defined),  Buyer shall deposit an
  additional Fifty Thousand Dollars ($50,000) (the "Additional  Deposit") with the
  Title Company to secure Buyer's  obligations under this Agreement.  The Deposit,
  the  Additional  Deposit  and  all  interest  accrued  on the  Deposit  and  the
  Additional Deposit (collectively,  the "Escrowed Amount") shall be maintained by
  the Title  Company  in such  account  or  accounts  until the Title  Company  is
  required to cause the Escrowed Amount to be disbursed  pursuant to the terms and
  conditions of this Agreement.
  
        3.3 Proration.  All rents,  other amounts payable by the tenants under the
  Leases,  income,  utilities and all other operating expenses with respect to the
  Property for the month in which the Closing occurs, and real estate and personal
  property taxes and other  assessments  with respect to the Property for the year
  in which the Closing  occurs,  shall be prorated to the Closing Date with Seller
  receiving the benefits and burdens of ownership on the Closing Date.
  
        (a) If the Closing shall occur before rents and all other amounts  payable
  by the  tenants  under the Leases and all other  income from the  Property  have
  actually been paid for the month in which the Closing occurs,  the apportionment
  of such rents and other amounts and other income shall be upon the basis of such
  rents, other amounts and other income actually received by Seller. Subsequent to
  the  Closing,  if any such rents,  other  amounts and other  income are actually
  received by Buyer, all such amounts shall first be applied to post-closing rents
  due to Buyer which are past due and the  balance  shall be  immediately  paid by
  Buyer to Seller. Buyer shall make a good faith effort and attempt to collect any
  such rents and other amounts and other income not apportioned at the Closing for
  the benefit of Seller,  however, Buyer shall not be required to expend any funds
  or institute any litigation in its collection efforts. Nothing in this paragraph
  shall restrict Seller's right to collect delinquent rents directly from a tenant
  by any legal means. At Closing,  prepaid rents and refundable  security deposits
  in the  possession or control of Seller or for which Seller is liable  (together
  with any interest  accrued thereon only if interest is specifically  required to
  be paid thereon under applicable law or under the terms of a specific Lease), at
  Seller's sole option shall either be (i) transferred to Buyer at Closing and not
  subject to adjustment, or (ii) adjusted by way of a credit in favor of Buyer.
  
        (b) If the  Closing  shall  occur  before  the tax  rate  or the  assessed
  valuation of the Property is fixed for the then current year, the  apportionment
  of  taxes  and  assessments  shall  be upon  the  basis  of the tax rate for the
  preceding  year  applied to the latest  assessed  valuation.  Subsequent  to the
  Closing,  when the tax rate and the assessed  valuation of the Property is fixed
  for the year in which the  Closing  occurs,  the  parties  agree to  adjust  the
  proration of taxes and  assessments  and, if necessary,  to refund or repay such
  sums as shall be  necessary  to effect such  adjustment.  If the Property is not
  assessed as a separate  parcel for tax or assessment  purposes,  then such taxes
  and  assessments  attributable  to the Property shall be determined by Buyer and
  Seller. In the event the Property has been assessed for property tax purposes at
  such rates as could  result in  "roll-back"  taxes upon changes in land usage or
  ownership  of the Property  pursuant to Arkansas  Statutes  26-26-407(g),  Buyer
  agrees to pay all such taxes and  indemnify  and save Seller  harmless  from and
  against any and all claims and liabilities for such taxes.
  
        (c) If the Closing  shall occur before the actual  amount of utilities and
  all other operating expenses with respect to the Property for the month in which
  the Closing occurs are determined, the apportionment of such utilities and other
  operating expenses shall be upon the basis of a reasonable estimate by Seller of
  such utilities and other  operating  expenses for such month.  Subsequent to the
  Closing,  when the actual amount of such utilities and other operating  expenses
  with  respect  to the  Property  for the month in which the  Closing  occurs are
  determined,  the parties  agree to adjust the  proration of such  utilities  and
  other  operating  expenses  and, if  necessary,  to refund or repay such sums as
  shall be necessary to effect such adjustment.
  
        (d) If Leases contain obligations ("Lease Obligations") on the part of the
  Tenants for any  adjustments,  pass-throughs  or retroactive  charges payable by
  Tenants  which  have  accrued  as of the  Closing  Date but are not then due and
  payable,  the  amount of such  Lease  Obligations  shall be  prorated  as of the
  Closing  Date upon the basis of a  reasonable  estimate  by Seller of such Lease
  Obligations through the Closing Date. Subsequent to the Closing, when the actual
  amount of such Lease  Obligations  with  respect  to the  Property  through  the
  Closing Date is  determined,  the parties  agree to adjust the proration of such
  Lease  Obligations  and, if necessary,  to refund or repay such sums as shall be
  necessary to effect such adjustment.
  
  The  agreements  of Seller and Buyer set forth in this Section 3.3 shall survive
  the Closing.
  
        3.4  Closing  Costs.  Except  as maybe  otherwise  provided  herein to the
  contrary,  each party hereto shall pay its own legal fees and  expenses.  Seller
  shall pay (a) the premium for Buyer's owner's title insurance policy  (excluding
  the cost of any endorsements for which an extra premium is charged),  (b) 50% of
  the  escrow  fees of the  Escrow  Agent,  and (c) 50% of any  documentary  taxes
  relating  to the  transfer of the  Property to Buyer.  Buyer shall pay all other
  costs  in  carrying  out the  transactions  contemplated  hereunder,  including,
  without limitation, (i) 50% of the escrow fees of the Escrow Agent, (ii) Buyer's
  own  legal  fees and  expenses  and (iii)  the cost of any  endorsements  to the
  owner's title policy for which an extra premium is charged,  and the cost of any
  lender's title insurance policy.
  
        3.5     Survival.  The provisions of this Article 3 shall survive the
  Closing.
  
                                    ARTICLE 4
  
                               PRECLOSING OPERATION
  
        4.1  Existing  Leases.  A  Rent  Roll  Containing  a list  of all  current
  occupants of the Property is attached  hereto as Schedule C. The leases with the
  occupants listed on the Rent Roll, together with leases entered into pursuant to
  this Article 4 are collectively referred to herein as the "Leases".
  
        4.2 New Leases.  During the period between the date hereof and the Closing
  Date,  Seller  agrees to Lease and renew leases on the Property  using the lease
  form attached as Schedule D and at rental rates and other concessions  specified
  in Schedule  4.2,  with such leases being written for terms not greater than one
  (1) year.
  
        4.3  Conduct of  Business.  At all times prior to  Closing,  Seller  shall
  continue (a) to conduct business with respect to the Property in the same manner
  in which  said  business  has been  heretofore  conducted  and (b) to insure the
  Property substantially as currently insured.
  
        4.4  Contracts.  Within five (5)  business  days after  execution  of this
  Agreement,  Seller  shall  provide  copies  to  Buyer  of all  service,  supply,
  equipment   rental,   management  and  leasing  contracts   (collectively,   the
  "Contracts") affecting the Property. On or before the Diligence Date (as defined
  below),  unless Buyer has provided  written notice to Seller of Buyer's election
  to terminate this Agreement, Buyer shall provide written notice to Seller of the
  Contracts  that Buyer  desires to have  terminated  by Seller,  and Seller  will
  terminate the Contracts so identified at or before Closing.  At Closing,  Seller
  shall assign and Buyer shall assume the Contracts,  except those Contracts which
  Buyer has elected not to have  terminated,  as provided above.  Buyer and Seller
  shall indemnify, defend and hold the other harmless from and against any and all
  claims under the Contracts which relate to its respective period of ownership.
  
  
  <PAGE>
  
  
  
                                    ARTICLE 5
  
                          ACCESS, INSPECTION, DILIGENCE
  
        5.1 Seller agrees that Buyer and its authorized agents or  representatives
  shall be entitled to enter upon the Real  Property and the  Improvements  during
  normal  business  hours  upon  advance  written  notice  to  Seller to make such
  reasonable  investigations,  studies and tests  including,  without  limitation,
  surveys, engineering studies, soil and groundwater tests (including test borings
  and pits) as Buyer deems  necessary or advisable.  Seller may require that Buyer
  be accompanied by Seller or its designated  agent during any such  inspection or
  entry.  Seller may also require evidence of satisfactory  insurance prior to any
  physical inspection. Seller also agrees to make available to Buyer during normal
  business hours upon advance written notice to Seller all books, records,  plans,
  building specifications, contracts, agreements or other instruments or documents
  contained  in  Seller's  files  relating  to  the  construction,  operation  and
  maintenance of the Property.
  
        5.2 To the  extent  Seller  has  any  studies,  or  site  analyses  in its
  possession  including,  without  limitation,  existing title insurance policies,
  existing  surveys,  existing  zoning  analyses,  existing  engineering  reports,
  existing code compliance reports and existing site analyses with respect to oil,
  underground storage tanks or hazardous waste on the Real Property, Seller agrees
  to make the same available for inspection by Buyer or its agents  promptly after
  execution of this Agreement.
  
        Buyer  acknowledges  and agrees that any and all  information,  documents,
  surveys,  studies and reports  provided to Buyer are provided for  informational
  purposes only and do not constitute  representations  or warranties of Seller of
  any kind.
  
        5.3     Buyer shall promptly commence and actively pursue if Buyer so
  elects the following due diligence items:
  
                (a) Review of title and survey matters;
  
                (b) Review of Contracts and operating agreements;
  
                (c) Obtain and review engineering reports on structural
                    condition of the mechanical systems;
  
                (d) Obtain and review environmental reports on oil, hazardous
                    waste, and asbestos;
  
                (e) Review of applicable zoning and other land use controls,
                    and other permits, licenses, permissions, approvals and
                    consents;
  
                (f) Review of all Leases affecting the Property; and
  
                (g) Review of any other matter which Buyer in its reasonable
                    judgment deems to be material.
  
        Buyer  shall have the right,  after the  execution  of the  Agreement,  at
  reasonable  times  and  on  reasonable   notice  to  enter  onto  the  Property,
  accompanied  by a  representative  of Seller if  requested  by  Seller,  for the
  purpose of making a physical  examination of the Property and performing any and
  all studies,  tests,  inspections,  review of records and other  purposes  which
  Buyer in its sole discretion deems necessary. Seller agrees to make available to
  Buyer, for Buyer's review at the Property or the Property  Manager's office, all
  books and records  reasonably  requested by Buyer.  Seller also agrees to permit
  Buyer full access to the  Property,  except  that the right to inspect  premises
  under lease to tenants in  possession  may be  conditioned  on a 24 hour advance
  notice  requirement,  or such other notice as may be required by the  applicable
  lease or by applicable law.
  
        Buyer  shall  complete  its due  diligence  on or before the date which is
  thirty (30) days from the date hereof (the "Diligence  Date"). In the event that
  Buyer's due  diligence  shall  reveal any matters  which are not  acceptable  to
  Buyer, in Buyer's sole discretion, Buyer may elect, by written notice to Seller,
  received by Seller on or before the first business day after the Diligence Date,
  not to  proceed  with  this  purchase,  in  which  event  this  Agreement  shall
  terminate,  the Deposit shall be returned and this  Agreement  shall be null and
  void without recourse to either party hereto (except to the extent such recourse
  arises in  connection  with a provision of this  Agreement  which is intended to
  survive termination).
  
        If such diligence reveals any fact or condition  unacceptable to Buyer, at
  the  option of Buyer,  Buyer may in lieu of  terminating  the  Agreement  notify
  Seller of such defect or condition in writing  prior to the Due  Diligence  Date
  and offer  Seller the option of curing such defect or  condition.  If the Seller
  elects to cure such defect or  condition,  Seller  shall use its best efforts to
  cure such defect or  condition  prior to Closing,  but shall not be obligated to
  expend any funds in doing so.  Seller  agrees to notify  Buyer  within  five (5)
  business  days  after  receipt  of such  notice  of the  specific  objectionable
  conditions  it will  attempt to cure as well as the steps it proposes to take to
  accomplish  such cure, and Seller's cure of such condition  shall be a condition
  to Buyer's  obligations to close under this Agreement.  If Seller notifies Buyer
  that Seller does not elect to exercise  such cure  option,  then the Buyer shall
  have the right to terminate this Agreement by written notice to Seller  provided
  within two (2) business days of receipt of Seller's  notice,  in which event the
  Deposit shall be returned to Buyer in accordance with the provisions  hereof and
  neither  party  shall have any further  liability  to the other party under this
  Agreement.  Otherwise,  such fact or  condition  shall be deemed  acceptable  to
  Buyer.
  
        Buyer  acknowledges that it has had an opportunity to conduct diligence on
  the Property and is acquiring the Property in its current condition based on its
  diligence.  Buyer further  acknowledges  that neither  Seller nor its employees,
  agents or  representatives  have made any  representation  or warranty as to the
  condition of the Property or the presence or absence of any hazardous  materials
  on, in, under or within the Property or a portion  thereof.  At Closing,  Seller
  shall  deliver and Buyer shall  accept the  Property AS IS, WITH ALL FAULTS,  IF
  ANY,  AND WITHOUT  ANY  REPRESENTATIONS  OR  WARRANTIES,  EXPRESSED  OR IMPLIED,
  INCLUDING FITNESS FOR A PARTICULAR PURPOSE.  This immediately preceding sentence
  shall survive Closing.
  
        5.4 Return of Documents.  If this  Agreement is terminated  for any reason
  whatsoever,  Buyer  shall  promptly  deliver  to Seller  all  documents,  plans,
  surveys,  contracts,  Leases and the like delivered to Buyer or Buyer's  agents,
  representatives  or designees by Seller or Seller's agents,  representatives  or
  employees pursuant to this Agreement. In addition,  Buyer shall promptly deliver
  to Seller  copies of all  materials  relating to the  physical  condition of the
  Property obtained in connection with Buyer's diligence.
  
        5.5  Confidentiality.  Each party hereto agrees to maintain in confidence,
  and not to  discuss  with or to  disclose  to any  person or entity who is not a
  party to this  Agreement,  the  existence  of this  Agreement,  any term of this
  Agreement  or any  aspect of the  transactions  contemplated  hereby,  except as
  provided in this Section. Each party hereto may discuss with and disclose to its
  accountants,  attorneys,  existing or prospective  lenders,  investment bankers,
  underwriters,  rating agencies, partners,  consultants and other advisors to the
  extent such parties  reasonably need to know such information and are bound by a
  confidentiality obligation identical in all material respects to the one created
  by this Section. Additionally,  each party may discuss and disclose such matters
  to the extent  necessary to comply with any  requirements of the SEC or in order
  to comply with any  securities  law or  interpretation  thereof.  This provision
  shall survive  termination of this  Agreement but shall  terminate upon Closing.
  Any press  release to be made  regarding  any matter which is the subject of the
  confidentiality  obligation  created  in this  Section  shall be  subject to the
  reasonable  approval  of Buyer and  Seller,  respectively  both as to timing and
  content.
  
        5.6  Indemnity.  If any  inspection  or test disturbs any of the Property,
  Buyer will restore the Property to  substantially  the same condition as existed
  prior to any such  inspection  or test.  Buyer shall keep the Property  free and
  clear of any liens and will indemnify, defend, and hold Seller harmless from all
  losses,  costs and damages  including  reasonable  attorneys'  fees  incurred by
  Seller as a result of such entry or investigation by or on behalf of Buyer. This
  indemnity  obligation of Buyer shall survive the  termination  of this Agreement
  for any reason.
  
  
  
  <PAGE>
  
  
  
                                    ARTICLE 6
  
                           TITLE AND SURVEY CONDITIONS
  
        6.1 In  connection  with  the  execution  of this  Agreement,  Seller  has
  provided Buyer with copies of the following:
  
                (a) An ALTA as-built survey of the Real Property, dated January
        6, 1995 (the "Survey"); and
  
                (b) A  commitment  for an ALTA Owner's  Policy of Title  Insurance
        dated January 23, 1997 (the "Title Commitment").
  
        In the event of controversy  regarding title, title insurance covering the
  Property,  paid for by Seller, issued at regular rates and providing coverage on
  the points at issue  reasonably  satisfactory to Buyer,  shall constitute and be
  accepted by Buyer as conclusive  evidence of good and  merchantable  title.  For
  purposes of this Agreement the term "Permitted Exceptions" means:
  
                (a) All  matters  shown on  Schedule  B,  Section  II of the Title
        Commitment,  as it may have been updated through the Diligence Date, other
        than Monetary  Encumbrances  (as defined below),  and matters which Seller
        has agreed to cure;
  
                (b) All matters would be shown on an ALTA-ACSM survey of the
        Property on the Diligence Date;
  
                (c) All Leases;
  
                (d) All zoning, building and other laws applicable to the
        Property; and
  
                (e) All matters  which arise  after the  Diligence  Date which are
        agreed upon or consented to by Buyer.
  
        For purposes of this Agreement the term "Monetary  Encumbrance"  means any
  mortgage,  or other voluntary lien granted or assumed by Seller  encumbering the
  Property  and any  mechanics or  materialman's  liens  encumbering  the Property
  arising from work  performed and  materials  furnished to or on behalf of Seller
  (specifically excluding services performed by tenants).
  
        6.2 On the  Closing  Date,  Seller  shall  convey  by good and  sufficient
  warranty  deed to  Buyer  or to  Buyer's  nominee  good  and  clear  record  and
  marketable  fee simple title to all of the Real  Property  and the  Improvements
  free and clear of all liens, encumbrances,  conditions,  easements, assessments,
  restrictions and other conditions, except for the following:
  
                (a) The lien, if any, for real estate taxes not yet due and
        payable; and
  
                (b) The Permitted Exceptions.
  
  The  Property  shall  be in  substantially  the  same  condition  as on the  Due
  Diligence  Date,  and there  shall have been no material  adverse  change in the
  Property or the Rent Roll.  A  reduction  of less than 10% in  annualized  gross
  income from leases in effect on the Closing Date shall not be deemed  materially
  adverse.
  
        6.3 At the  Closing,  Seller  shall  assign  the Leases to Buyer and Buyer
  shall  assume  Seller's  obligations  thereunder  and  Seller  shall  convey the
  Personal  Property to Buyer by quitclaim  bill of sale.  Buyer will be deemed to
  have owned the Property as of 12:01 a.m. on the Closing Date.
  
  
                                    ARTICLE 7
  
                                     CLOSING
  
        7.1  The  consummation  of the  purchase  and  sale  contemplated  in this
  Agreement  (the  "Closing")  shall occur at the offices of First  American Title
  Insurance Company,  8114 Contrell Road, Suite 150, Little Rock, Arkansas as soon
  as possible after the Diligence Date on a date (the "Closing Date")  established
  by Buyer by written  notice to Seller and Title  Company given at least five (5)
  business days prior to the proposed Closing Date; provided,  however, that in no
  event  shall  such  notice  establish  a Closing  Date  which is later  than the
  thirtieth  (30th) day after the Diligence  Date; and if no such notice is given,
  the Closing Date shall be on the thirtieth  (30th) day after the Diligence  Date
  unless such day is not a day on which the  registry of deeds in the county where
  the Property is located is open for business,  in which case,  the Closing shall
  take place on the next day on which such  registry  is open.  It is agreed  that
  time is of the essence in this Agreement.
  
        7.2 On the Closing Date Seller  shall  deliver or cause to be delivered at
  its expense each of the following items to the Title Company:
  
                (a) A duly  executed  and  acknowledged  warranty  deed  or  deeds
        conveying the Real Property and the Improvements to Buyer in substantially
        the form attached hereto as Schedule E (the "Deed");
  
                (b) A duly executed  quitclaim bill of sale conveying the Personal
        Property to Buyer in substantially  the form attached hereto as Schedule F
        (the "Bill of Sale");
  
                (c) A  duly  executed  assignment  and  assumption  of  leases  in
        substantially  the form attached hereto as Schedule G (the  "Assignment of
        Leases");
  
                (d) A  duly  executed  assignment  and  assumption  of  contracts,
        licenses, guaranties, warranties, and intangible property in substantially
        the form attached hereto as Schedule H (the "Assignment of Contracts");
  
                (e) A certificate or certificates of non-foreign status from
        Seller reasonably acceptable to Buyer in form and substance;
  
                (f) Customary affidavits and indemnities  sufficient for the Title
        Company to delete any  exceptions for  mechanic's or  materialmen's  liens
        from Buyer's title policy and such other affidavits relating to such title
        policy as the Title Company may reasonably request;
  
                (g) Such other  instruments as Buyer,  Buyer's Lender or the Title
        Company may reasonably request to effectuate the transaction  contemplated
        by this Agreement;
  
                (h) A counterpart  original of the closing statement setting forth
        the Purchase  Price,  the closing  adjustments  and the application of the
        Purchase Price as adjusted; and
  
                (i) A marked up Title  Commitment which complies with the terms of
        this Agreement.
  
        In  addition,  Seller shall  deliver to Buyer all original  Leases and all
  keys in Seller's  possession,  which may be  delivered by Seller to Buyer at the
  Property.
  
        7.3 On the Closing  Date Buyer shall  deliver or cause to be  delivered at
  its expense each of the following to the Title Company:
  
                (a) The Purchase  Price for the Property,  as such Purchase  Price
        may  have  been  further  adjusted  pursuant  to the  provisions  of  this
        Agreement  and  credited  for any portion of the  Escrowed  Amount paid to
        Seller;
  
                (b) Evidence in recordable form reasonably satisfactory to
        Seller of Buyer's authority to purchase the Property pursuant to this
        Agreement;
  
                (c) The Assignment of Leases;
  
                (d) The Assignment of Contracts;
  
                (e) Such other instruments as Seller may reasonably request to
        effectuate the transaction contemplated by this Agreement; and
  
                (f) A counterpart  original of the closing statement setting forth
        the Purchase  Price,  the closing  adjustments and the application of such
        amounts.
  
  
                                    ARTICLE 8
  
                            CASUALTY AND CONDEMNATION
  
        8.1 If the  Improvements  are  materially  damaged  by fire  or any  other
  casualty and are not substantially  restored to the condition  immediately prior
  to such  casualty  before the  Closing  Date,  Buyer  shall  have the  following
  elections:
  
                (a) to purchase  the  Property in its then  condition  and pay the
        Purchase Price, in which event Seller shall pay over or assign to Buyer as
        the case may be, on the Closing Date, all amounts recovered or recoverable
        by  Seller  on  account  of any  insurance  as a result  of such  casualty
        (including  insurance  for loss of  rents),  less any  amounts  reasonably
        expended by Seller for partial restoration; or
  
                (b) if any portion of the Improvements suffers damage in excess of
        $180,000 from fire or any other  casualty to terminate  this  Agreement by
        giving  notice of  termination  to Seller on or before  that date which is
        thirty (30) days after the  occurrence of the fire or other casualty or on
        the Closing Date, whichever occurs first, in which event the Title Company
        shall return the Escrowed Amount to Buyer,  this Agreement shall terminate
        and  neither  Seller nor Buyer shall have any  recourse  against the other
        (except to the extent such recourse  arises in connection with a provision
        of this Agreement which is intended to survive termination).
  
        8.2 If any portion of or interest in the Property  shall be taken or is in
  the process of being taken by exercise of the power of eminent  domain or if any
  governmental  authority  notifies Seller prior to the Closing Date of its intent
  to take or acquire any portion of or interest in the Property  (each an "Eminent
  Domain  Taking"),  Seller shall give notice  promptly to Buyer of such event and
  Buyer shall have the option to terminate this  Agreement by providing  notice to
  Seller to such effect on or before the date which is ten (10) days from Seller's
  notice to Buyer of such Eminent Domain Taking or on the Closing Date,  whichever
  occurs first,  in which event the Title Company shall return the Escrowed Amount
  to Buyer,  this Agreement  shall  terminate,  and neither Seller nor Buyer shall
  have any recourse  against the other.  If Buyer does not timely notify Seller of
  its election to terminate this Agreement,  Buyer shall purchase the Property and
  pay the Purchase Price, and Seller shall pay over or assign to Buyer on delivery
  of the deed all awards  recovered  or  recoverable  by Seller on account of such
  Eminent  Domain  Taking,  less any  amounts  reasonably  expended  by  Seller in
  obtaining such award.
  
  
                                    ARTICLE 9
  
                              BROKERAGE COMMISSIONS
  
        Seller and Buyer each  mutually  represent  and  warrant to the other that
  they  have not  dealt  with  any  broker  in  connection  with  the  transaction
  contemplated by this Agreement  other than  Transwestern  Property  Company (the
  "Broker"), and that they are not obligated to pay any fees or commissions to any
  broker.  Buyer agrees to  indemnify,  defend and hold Seller  harmless  from and
  against all  liabilities,  costs,  damages and  expenses  (including  reasonable
  attorneys'  fees)  arising  from any  claims for  brokerage  or  finder's  fees,
  commissions or other similar fees in connection with the transaction  covered by
  this Agreement other than the Broker, insofar as such claims shall be based upon
  alleged  arrangements or agreements  made by Buyer or on Buyer's behalf.  Seller
  hereby agrees to indemnify, defend and hold Seller harmless from and against all
  liabilities,  costs, damages and expenses (including reasonable attorneys' fees)
  arising from any claims for  brokerage or finders'  fees,  commissions  or other
  similar fees in connection with the transaction  covered by this Agreement other
  than the Broker, insofar as such claims shall be based upon alleged arrangements
  or agreements made by Seller or on Seller's behalf. The covenants and agreements
  contained in this Article shall survive the termination of this Agreement or the
  Closing of the transaction contemplated hereunder.
  
  
                                    ARTICLE 10
  
                        DEFAULT, TERMINATION AND REMEDIES
  
        10.1 Seller's  Default.  In the event that Seller shall have failed in any
  material  respect  adverse to Buyer on the Closing Date to have performed any of
  the  covenants  and  agreements  contained  in this  Agreement  which  are to be
  performed  by Seller  on or  before  the  Closing  Date,  or if there has been a
  material adverse change to the Property as defined in Section 6.2 hereof,  Buyer
  shall  have the  following  remedies:  (i) the  right to take any and all  legal
  actions  necessary to compel Seller's specific  performance  hereunder (it being
  acknowledged  that  damages  at  law  would  be an  inadequate  remedy),  and to
  consummate the transaction contemplated by this Agreement in accordance with the
  provisions of this  Agreement  (such  conveyance  shall be deemed to satisfy and
  waive any  other  remedy)  or (ii) the right to  terminate  this  Agreement  and
  receive the Escrowed  Amount,  whereupon this Agreement shall terminate  without
  further  recourse.  Buyer hereby waives and relinquishes any right to sue Seller
  for any reason  whatsoever,  except as expressly set forth in this Section 10.1,
  and agrees  that Seller  shall not be liable to Buyer for any actual,  punitive,
  speculative,  consequential  or other  damages for breach by Seller prior to the
  Closing, except for payment of the Escrowed Amount.
  
        10.2  Buyer's  Default.  In the event that Buyer  shall have failed in any
  material  respect adverse to Seller on the Closing Date to have performed any of
  the  covenants  and  agreements  contained  in this  Agreement  which  are to be
  performed by Buyer on or before the Closing  Date,  or if Buyer  defaults in its
  obligation to close hereunder,  Seller shall be entitled to receive the Escrowed
  Amount as liquidated  damages, in lieu of all other remedies available to Seller
  at law or in equity for such  default,  and Buyer shall direct the Title Company
  to  release  the  Escrowed  Amount to Seller.  Seller  and Buyer  agree that the
  damages  resulting to Seller as a result of such default by Buyer as of the date
  of this  Agreement are  difficult or impossible to ascertain and the  liquidated
  damages set forth in the  preceding  sentence  constitute  Buyer's and  Seller's
  reasonable estimate of such damages.
  
  
                                    ARTICLE 11
  
                          REPRESENTATIONS AND WARRANTIES
  
        11.1    Buyer's Representations and Warranties.  Buyer represents and
  warrants to Seller that:
  
                (a) Buyer is a limited  partnership,  duly  organized  and in good
  standing  under the laws of the State of Tennessee,  is qualified to do business
  in the State of Arkansas and has the power to enter into this  Agreement  and to
  execute and deliver  this  Agreement  and to perform all duties and  obligations
  imposed  upon it  hereunder,  and Buyer has obtained  all  necessary  corporate,
  partnership or other organizational  authorizations  required in connection with
  the execution,  delivery and  performance of this Agreement and the  transaction
  contemplated  herein and has  obtained  the consent of all  entities and parties
  (whether  private or  governmental)  necessary to bind Buyer to this  Agreement.
  Buyer's General Partner is Mid-America Apartment Communities,  Inc., a Tennessee
  corporation qualified to do business in Arkansas ("Buyer's General Partner");
  
                (b) neither the execution nor the delivery of this Agreement,  nor
  the consummation of the purchase and sale transaction  contemplated  hereby, nor
  the fulfillment of or compliance with the terms and conditions of this Agreement
  conflict  with or will result in the breach of any of the terms,  conditions  or
  provisions of any agreement or  instrument to which Buyer,  or any  shareholder,
  partner or related  entity or affiliate of Buyer,  is a party or by which Buyer,
  any  shareholder,  partner or related  entity or affiliate  of Buyer,  or any of
  Buyer's assets is bound;
  
                (c) Buyer has the financial resources to timely consummate the
  purchase and sale transaction contemplated by this Agreement;
  
                (d) neither  Buyer nor any general  partner of Buyer is in any way
  affiliated with Seller, Paine Webber Incorporated, or any affiliate of either of
  the foregoing;
  
                (e) Buyer is not an "employee  benefit plan" as defined in Section
  3(3)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
  ("ERISA"),  which is  subject to Title 1 of ERISA and (b) the assets of Buyer do
  not constitute  "plan assets" of one or more such plans within the meaning of 29
  C.F.R. Section 2510.3-101.
  
                (f) Buyer is not a  "governmental  plan"  within  the  meaning  of
  Section 3(32) of ERISA or a "plan"  within the meaning of Section  4975(e)(1) of
  the Internal Revenue Code (the "Code").
  
                (g) One or more of the following circumstances is true:
  
                    (i) Equity  interests in Buyer's  General Partner are publicly
  offered securities,  within the meaning of 29 C.F.R.  Section  2510.2-101(b)(2),
  and Buyer's limited  partners are individuals or entities which are not "benefit
  plan investors" within the meaning of 29 C.F.R.
  Section 2510.3-101(f)(2);
  
                    (ii)  Less than 25 percent of all equity interests in Buyer
  are held by "benefit plan investors" within the meaning of 29 C.F.R. Section
  2510.3-101(f)(2); or
  
                    (iii)  Buyer is a  corporation  that  qualifies  as  either an
  "operating  company" or a "real estate operating  company" within the meaning of
  29 C.F.R. Section 2510.3-101(c) and (e).
  
                (h) With  respect to Seller,  Paine  Webber  Incorporated  and any
  affiliate of either of the  foregoing,  Buyer is neither (i) a party in interest
  as defined in Section 3(14) of ERISA, nor (ii) a disqualified  person as defined
  in Section 4975(e)(2) of the Code.
  
                (i) that prior to the Diligence Date, Buyer will have examined and
  investigated  to Buyer's  full  satisfaction  the  physical,  economic and legal
  condition of the Property and made all other inquiries Buyer deemed necessary in
  connection with the transaction herein contemplated; and
  
                (j)  except  to the  limited  extent,  if  any,  specifically  and
  expressly set forth in this  Agreement,  Buyer shall accept the Property "AS IS"
  and "WHERE IS" at Closing, and Buyer has not relied upon and will not rely upon,
  and Seller is not liable for or bound by any,  express or  implied,  warranties,
  guarantees,  statements,   representations  or  information  pertaining  to  the
  Property or relating thereto made or furnished by Seller or any of its advisors,
  or any of their agents,  representatives,  contractors,  employees, attorneys or
  brokers,  to  whomever  made or given,  directly or  indirectly,  verbally or in
  writing, unless specifically and expressly set forth herein.
  
  Buyer's  representations  and  warranties  set forth in this  Section 11.1 shall
  survive the Closing or  termination  of this  Agreement  for a period of six (6)
  months, and no such breach shall be deemed to exist unless Seller provides Buyer
  with notice of an alleged breach prior to the expiration of such 6-month period.
  As a condition  precedent to Seller's  obligation to close the purchase and sale
  transaction   contemplated  in  this  Agreement,   Buyer's  representations  and
  warranties  contained  herein  must  remain  and be true and  correct  as of the
  Closing Date. Prior to the Closing Date, Buyer shall notify Seller in writing of
  any facts,  conditions or circumstances  which render any of the representations
  and warranties set forth in this Section 11.1 in any way inaccurate, incomplete,
  incorrect or misleading.
  
  
  <PAGE>
  
  
  
        11.2    Seller's Representations and Warranties.  Seller represents and
  warrants to Buyer that:
  
                (a) Seller has the full right,  power, and authority,  without the
  joinder of any other person or entity,  to enter into,  execute and deliver this
  Agreement,  and to perform all duties and  obligations  imposed on Seller  under
  this Agreement, except to the limited extent, if any, specifically and expressly
  set forth in this Agreement; and
  
                (b) neither the execution nor the delivery of this Agreement,  nor
  the  consummation  of  the  purchase  and  sale  contemplated  hereby,  nor  the
  fulfillment  of or compliance  with the terms and  conditions of this  Agreement
  conflict with or will result in the breach of any of the terms,  conditions,  or
  provisions of any agreement or instrument to which Seller is a party or by which
  Seller or any of Seller's assets is bound.
  
                (c) to Seller's knowledge (as hereinafter defined), Seller has not
  been served with process in any  litigation  with respect to the Property  which
  would adversely  affect Seller's  ability to perform its obligations  under this
  Agreement. To Seller's knowledge,  Seller has not received written notice of (i)
  any violation of the Property's compliance with applicable health or fire safety
  laws,  building  code  ordinances,  zoning  ordinances,  environmental  laws and
  regulations or any similar statutes,  ordinances, laws, rules or regulations, or
  (ii) any pending or  threatened  condemnation  proceeding  that would affect the
  Property; and
  
                (d) to Seller's  knowledge,  Seller has not  received  any written
  notices of zoning changes or special assessments with respect to the Property.
  
        As used  herein,  the term "to  Seller's  knowledge"  shall  mean only the
  "current actual knowledge  without inquiry" (as defined below) of Rock D'Errico,
  Vice President of PaineWebber Properties Incorporated, who, as portfolio manager
  for the  Seller,  is the  appropriate  person to whom the matters  described  in
  Sections  11.2(c) and (d) would be reported.  As used herein,  the term "current
  actual knowledge without inquiry" shall mean only the actual,  current conscious
  and not constructive,  imputed or implied  knowledge of such designee.  Anything
  herein  to the  contrary  notwithstanding,  such  designee  shall  not  have any
  personal  liability or obligation  whatsoever with respect to any of the matters
  set forth in this Agreement or any of the Seller's  representations herein being
  or becoming untrue, inaccurate or incomplete in any respect.
  
        Seller's  representations  and  warranties  set forth in this Section 11.2
  shall survive the Closing or earlier  termination of this Agreement for a period
  of six (6) months,  and no such  breach  shall be deemed to exist  unless  Buyer
  provides Seller with notice of an alleged breach prior to the expiration of such
  6-month period.
  
        As a condition  precedent to Buyer's  obligation to close the purchase and
  sale transaction  contemplated in this Agreement,  Seller's  representations and
  warranties  contained  herein  must  remain  and be true and  correct  as of the
  Closing Date. Prior to the Closing Date, Seller shall notify Buyer in writing of
  any facts,  conditions or circumstances  which render any of the representations
  and warranties set forth in this Section 11.2 in any way inaccurate, incomplete,
  incorrect or misleading.
  
  
                                    ARTICLE 12
  
                                  MISCELLANEOUS
  
        12.1 Permitted  Successors and Assigns.  Buyer may only assign or transfer
  its rights under this  Agreement to an entity  owned,  or controlled by Buyer or
  which owns or controls  Buyer.  The covenants and  agreements  contained in this
  Agreement  shall extend to and be obligatory  upon the permitted  successors and
  assigns of the respective parties to this Agreement.
  
        12.2 Notices. Except as otherwise specifically provided herein, any notice
  required or permitted to be delivered  under this Agreement  shall be in writing
  and shall be deemed  given if (i)  delivered  by hand  during  regular  business
  hours, (ii) sent by United States Postal Service,  registered or certified mail,
  postage  prepaid,  return  receipt  requested,  or  (iii)  sent  by a  reputable
  overnight  express mail service  that  provides  tracing and proof of receipt or
  refusal of items  mailed,  addressed to Seller or Buyer,  as the case may be, at
  the address or addresses set forth below or such other  addresses as the parties
  may designate in a notice  similarly  sent. Any notice given by a party to Title
  Company shall be simultaneously  given to the other party. Any notice given by a
  party to the other party  relating to its  entitlement  to the  Escrowed  Amount
  shall be simultaneously given to the Title Company.
  <PAGE>
  (1)   If to Seller:
  
                PaineWebber Qualified Plan Property Fund Three, LP
                c/o PaineWebber Properties
                265 Franklin Street
                Boston, MA 02110
                Attn:     Rock M. D'Errico, Vice President
  
                with a copy to:
  
                Goodwin, Procter & Hoar  LLP
                Exchange Place
                Boston, MA 02109
                Attn:     Susan Hall Mygatt, Esq.
  
  (2)   If to Buyer:
  
                Mid-America Apartments, L.P.
                c/o Mid-America Apartment Communities
                6584 Poplar
                Suite 340
                Memphis, TN 38138
                Attn:  Simon R.C. Wadsworth
                with a copy to
  
                Apperson, Crump, Duzane & Maxwell, PLC
                1755 Kirby Parkway
                Suite 100
                Memphis, TN  38120-4376
                Attn:  ________________
  
        (3)     If to the Title Company:
  
                First American Title Insurance Company
                National Accounts
                1025 Connecticut Ave. N.W.
                Suite 709
                Washington, DC  20036
                Attn:  Brian Lobuts, Vice President/Account Executive
  
        12.3  Construction.  Words of any gender used in this  Agreement  shall be
  held and construed to include any other gender,  and words of a singular  number
  shall be held to include the plural and vice versa,  unless the context requires
  otherwise.
  
        12.4 Captions.  The captions used in connection  with the Articles of this
  Agreement are for convenience  only and shall not be deemed to extend,  limit or
  otherwise define or construe the meaning of the language of this Agreement.
  
        12.5 No Other Parties.  Nothing in this Agreement,  express or implied, is
  intended  to confer upon any  person,  other than the  parties  hereto and their
  respective  successors and assigns, any rights or remedies under or by reason of
  this Agreement.
  
        12.6  Amendments.  This  Agreement  may  be  amended  only  by  a  written
  instrument executed by Seller and Buyer (or Buyer's assignee or transferee).
  
        12.7  Entire  Agreement.  This  Agreement  embodies  the entire  agreement
  between Seller and Buyer with respect to the  transaction  contemplated  in this
  Agreement,   and   there   have   been   and  are  no   covenants,   agreements,
  representations, warranties or restrictions between Seller and Buyer with regard
  thereto other than those set forth or provided for in this Agreement.
  
        12.8    Applicable Law.  This Agreement shall be construed under and in
  accordance with the laws of The State of Arkansas.
  
        12.9  Counterparts.  This  Agreement  may be  executed  in two (2) or more
  counterparts,  each of which shall be an original but such counterparts together
  shall constitute one and the same instrument notwithstanding that both Buyer and
  Seller are not signatory to the same counterpart.
  
        12.10 Title  Company.  The Title Company has executed this  Agreement only
  for the  purpose of  agreeing  to perform  the duties  assigned to it under this
  Agreement. The Title Company shall, upon receiving a copy of a notice given by a
  party in accordance with this Agreement claiming entitlement to all or a portion
  of the  Escrowed  Amount,  give a notice to the other  party  that such claim of
  entitlement  has been  made.  The Title  Company  shall not cause or permit  any
  portion of the Escrowed  Amount to be disbursed until the expiration of five (5)
  days of giving such notice whereupon, if the party to whom such notice was given
  has not given the Title  Company  notice of its objection to a  disbursement  in
  accordance  with the claim of  entitlement,  the  Title  Company  shall  cause a
  disbursement of the Escrowed Amount as requested.  If such party timely objects,
  however, the Title Company shall retain the Escrowed Amount and not disburse any
  portion of the same  unless  directed  by the mutual  written  direction  of the
  parties.  The Title Company shall at all times  disburse the Escrowed  Amount as
  required in a mutual written direction of the parties.
  
        12.11 Title Company,  Continued.  In the event of any disagreement between
  the parties,  the Title Company shall retain all deposits  pending  instructions
  mutually  agreed  to by  Seller  and  Buyer.  In the  event  there is no  mutual
  agreement by Seller and Buyer for  disbursements,  the Title  Company shall hold
  said  deposits  pending  a court  order  to  disburse.  The  Title  Company  may
  conclusively rely on the authenticity, validity and effectiveness of any writing
  delivered  to  it,  and  Title  Company  shall  not be  obligated  to  make  any
  investigation or determination, except as provided in the case of disputes as to
  the truth and accuracy of any information  contained  therein.  Buyer and Seller
  agree to defend, indemnify and hold Title Company harmless from any liabilities,
  suits,  claims,  or expenses  arising from or out of or in connection with Title
  Company's acts or failure to act hereunder, unless caused or created as a result
  of  Title  Company's  negligence,   and  Title  Company  shall  be  entitled  to
  reimbursement  by Buyer  and/or  Seller for all  reasonable  costs and  expenses
  incurred  in  the  performance  of  its  duties  hereunder  including,   without
  limitation,  all out-of-pocket expenses and reasonable attorneys fees of counsel
  retained by Title Company. If there is a settlement by Buyer and Seller prior to
  a court order,  Buyer and Seller will share equally in the expenses  incurred by
  the Title  Company.  Otherwise,  the  non-prevailing  party  shall  assume  full
  responsibility for the Title Company's  expenses.  Title Company is not required
  to advance or expend or risk its own funds or otherwise incur personal liability
  in performance of its duties  hereunder and it may require  advancement of funds
  by the parties.  Title Company will hold the Deposit in The First  National Bank
  of  Boston,  State  Street  Bank and  Trust  Company  or Fleet  Bank  (each,  an
  "Acceptable  Bank") in an account as required  by Section 3.2 above.  Except for
  any claim,  action or  proceeding  resulting in a final  determination  that the
  Title Company acted in bad faith,  negligently or engaged in any type of willful
  misconduct  the Title  Company  shall not be  responsible  for any loss or delay
  occasioned by the closure or insolvency  of the  institution  in which any funds
  are invested in  accordance  with this  Agreement;  provided  that Title Company
  deposits the Deposit in an Acceptable Bank as required herein. The Title Company
  shall have no  liability  for  interest  on such funds  provided  that the Title
  Company deposits the Deposit as required herein.
  
        12.12  Financial  Information.  At Buyer's request after the Closing Date,
  Seller agrees to make available to Buyer or Buyer's  designated  representative,
  at no cost to Seller,  upon  reasonable  request within six (6) months after the
  Closing,  such books,  accounts  and records as are in Seller's  possession  and
  which are  necessary for Buyer to conduct an audit of the  Property's  preceding
  fiscal year, and agrees to sign an appropriate disclosure letter prepared by the
  auditors.  Such  audit is to be  conducted  solely at  Buyer's  expense  for the
  purpose of satisfying its requirements as a publicly held entity. The use of any
  such information by Buyer or Buyer's designated  representative shall be subject
  to the  confidentiality  requirements  of Section 5.5, except to the extent such
  information is included in statements required by the SEC Regulations.
  
        12.13   Time of the Essence.  Time is expressly declared to be of the
  essence of this Agreement.
  
        12.14 No Personal Liability.  The obligations of Seller hereunder shall be
  binding only on the Property and neither Buyer nor anyone  claiming by,  through
  or under  Buyer shall be entitled  to obtain any  judgment  extending  liability
  beyond the Property or creating personal  liability on the part of the officers,
  directors,  shareholders,  or agents of Seller or any of their  successors.  The
  obligations of Buyer  hereunder shall be binding only on the assets of Buyer and
  neither Seller nor anyone claiming by, through or under Seller shall be entitled
  to obtain any judgment creating personal  liability on the part of the partners,
  officers, shareholders, or agents of Buyer or any of their successors.
  
        12.15  Survival.  All of the  representations,  warranties,  covenants and
  agreements of Seller and Buyer made in or pursuant to this  Agreement  shall not
  survive  the  Closing,  and  shall  merge  into the deed or  other  document  or
  instrument  executed and delivered in connection  herewith,  except as expressly
  set   forth  to  the   contrary.   Notwithstanding   the   foregoing,   (a)  the
  representations and warranties of Seller and Buyer shall survive the Closing for
  a period of not more than six (6) months from the date  thereof,  provided  that
  the party  alleging a breach of any of the other  parties'  representations  and
  warranties delivers notice to the alleged breaching party within such period.
  
                                    ARTICLE 13
  
                           IRS FORM 1099-S DESIGNATION
  
        13.1 In order to comply with information reporting requirements of Section
  6045(e) of the  Internal  Revenue  Code of 1986,  as amended,  and the  Treasury
  Regulations  thereunder,  the  parties  agree (1) to execute an IRS Form  1099-S
  Designation  Agreement in the form attached  hereto as Schedule F at or prior to
  the Closing to designate  the Title  Company (the  "Designee")  as the party who
  shall be responsible for reporting the contemplated  sale of the Property to the
  Internal  Revenue  Service  (the "IRS") on IRS Form  1099-S;  (2) to provide the
  Designee with the  information  necessary to complete Form 1099-S;  (3) that the
  Designee shall not be liable for the actions taken under this Agreement,  or for
  the  consequences  of those  actions,  except as they may be the result of gross
  negligence or willful  misconduct on the part of the Designee;  and (4) that the
  Designee shall be indemnified by the parties for any costs or expenses  incurred
  as a result of the actions taken hereunder,  except as they may be the result of
  gross negligence or willful misconduct on the part of the Designee. The Designee
  shall  provide  all  parties to this  transaction  with  copies of the IRS Forms
  1099-S filed with the IRS and with any other documents used to complete IRS Form
  1099-S.
  
  
        IN WITNESS  WHEREOF,  the parties have executed this  instrument as of the
  day and year first set forth above.
  
                                SELLER:
  
                           PaineWebber Qualified Plan Property Fund Three, LP
                           a Delaware limited partnership
  
                                By:  Third Qualified Properties, Inc.,
                                     its Managing General Partner
  
                                       By: /s/ Rock M. D'Errico
                                           --------------------
                                       Name: Rock M. D'Errico
                                       Title: Vice President
  
                                BUYER:
  
                             Mid-America Apartments, LP
  
                                By:   Mid-America Apartment Communities, Inc., a
                                      Tennessee corporation
  
  
                                      By: /s/ Simon R.C. Wadsworth
                                          ------------------------
                                      Name: Simon R.C. Wadsworth
                                      Title: Executive Vice President
  
  
                                TITLE COMPANY:
  
                                FIRST AMERICAN TITLE INSURANCE COMPANY
  
  
                             By:_______________________
                              
                                     National Division Counsel
  
  
  
  <PAGE>
  
  
                                    SCHEDULE A
  
                           Description of Real Property
  
  Part of the SW1/4 NE1/4,  Section 20, Township 2 North,  Range 13 West,  Pulaski
  County, Arkansas, being more particularly described as follows:  Starting at the
  Southwest corner of the NE1/4 of said Section 20; thence along the South line of
  said  NE1/4,  North 89 degrees 30 minutes 53 seconds  East,  544.08  feet to the
  point of beginning; thence leaving the South line of said NE1/4, North 1 degrees
  02 minutes 18 seconds  West,  1030.09  feet to a point on the North line of a 50
  foot Little Rock  Municipal  Water Works  easement;  thence  South 60 degrees 48
  minutes 48 seconds  East  along the North line of said 50 foot  easement  827.42
  feet to a point on the West right of way line of Sam Peck Road;  thence  South 2
  degrees 36 minutes 45 seconds East along said West right of way line 367.73 feet
  to the Northeast  corner of Lot 1, Tennis Club Addition (Plat book 35, page 54);
  thence  North 89 degrees 08 minutes 30 seconds West 299.40 feet  (platted  300.0
  feet) to the  Northwest  corner of Lot 1, Tennis Club  Addition;  thence South 0
  degrees 02 minutes  00  seconds  West along the West line of said Lot 1,  Tennis
  Club  Addition  260.00  feet to a point on the  South  line of the NE1/4 of said
  Section 20;  thence South 89 degrees 30 minutes 53 seconds West along said South
  line  (said  line also  being the North  line of  Woodlawn  Farm Acre  Tracts as
  recorded in Plat book 1, page 118) 420.96 feet to the point of beginning.
  
  TOGETHER  WITH the benefits of a 50 foot Little Rock Water works  easement  over
  the  Northern  portion  of the above  described  property  as shown by  Exchange
  Easement executed May 1, 1978, filed May 8, 1978, as Instrument Number
  78-18252, records of Pulaski County, Arkansas.
  
  
  <PAGE>
  
  
  
                                    SCHEDULE B
  
             Description of Personal Property and Intangible Property
             --------------------------------------------------------
  
  Seller's rights to use the name "Westside Creek"
  
  Any intangible property owned by Seller and directly related to the Property.
  
  
  
  <PAGE>
  
  
                                   BILL OF SALE
  
        THIS  INSTRUMENT  made and  executed as of the 28th day of March,  1997 by
  Paine  Webber  Qualified  Plan  Property  Fund  Three,  LP, a  Delaware  limited
  partnership,  ("Seller")  for the benefit of  Mid-America  Apartments,  L.P.,  a
  Tennessee limited partnership, ("Buyer").
        WHEREAS,  Seller and Buyer are parties to that Purchase and Sale Agreement
  (the "Agreement") relating to the apartment development in Little Rock, Arkansas
  known as Westside  Creek  Apartments,  Phase I, and more fully  described in the
  Agreement (the "Property") and
        WHEREAS,  the Agreement requires the delivery by Seller to Buyer of a Bill
  of Sale conveying  personal property owned by Seller located at, or relating to,
  the Property.
        NOW,  THEREFORE,  in  consideration  of the  premises,  and other good and
  valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
  acknowledged, it is agreed:
        1. Seller hereby bargains, sells, transfers,  assigns and conveys to Buyer
  all of the  personal  property  owned by Seller  located on, or relating to, the
  Property (the "Personal Property"),  including, but not limited to, the specific
  articles of tangible personal property listed on Exhibit A attached hereto.
        2. Seller warrants to Buyer that it owns the property listed on Exhibit A,
  that it is authorized to execute this Bill of Sale,  that the property listed on
  Exhibit A is unencumbered.  Seller agrees upon the request of and at the expense
  of Buyer, do, execute,  acknowledge and deliver, or cause to be done,  executed,
  acknowledged  and  delivered,   all  such  further  acts,  deeds,   instruments,
  transfers,  powers  of  attorney  or  assurances  as may  be  required  for  the
  assigning, transferring, granting, conveying, assuring and confirming unto Buyer
  any of the Personal Property.
        3. Buyer has inspected  the Personal  Property.  The Personal  Property is
  conveyed strictly "as is", "where is" and "with all faults",  without warranties
  of any kind or nature whatsoever,  express or implied, except as such warranties
  as to title are expressly set forth herein or in the Agreement. Without limiting
  the generality of the foregoing, no warranty of merchantability or fitness for a
  particular purpose is made with respect to any of the Personal Property.
        The  provisions  of this Bill of Sale shall inure to the benefit of and be
  binding upon the successors and assigns of Seller and Buyer.
  
  
  <PAGE>
  
  
        IN WITNESS  WHEREOF,  Seller has executed this Bill of Sale as of the date
  first above written.
  
  
                                      Paine Webber Qualified Plan Property Fund
                                          Three, LP,
                                      a Delaware limited partnership
  
                                      By: Third Qualified Properties, Inc.,
                                             its Managing General Partner
  
                                            By: /s/ Rock M. D'Errico
                                                --------------------
                                                Rock M. D'Errico, Vice President
  
  
  
  <PAGE>
  
  
                                  WARRANTY DEED
  KNOW ALL MEN BY THESE PRESENTS:
  
  
        That,  Paine Webber  Qualified Plan Property Fund Three,  LP  ("Grantor"),
  organized  under and by virtue  of the laws of the State of  Delaware,  by Third
  Qualified  Properties,  Inc., its Managing General Partner, for consideration of
  Six  Million  One  Hundred  Thousand  Dollars  ($6,100,000.00),  in hand paid by
  Mid-America Apartments,  L.P., a Tennessee limited partnership ("Grantee"),  the
  receipt of which is hereby acknowledged,  does hereby grant,  bargain,  sell and
  convey unto the said Grantee, and assigns forever, the following described land,
  situated in the County of Pulaski and State of Arkansas, to wit:
  
              Part of the SW1/4  NE1/4,  Section  20,  Township 2 North,  Range 13
              West, Pulaski County, Arkansas, being more particularly described as
              follows:  Starting  at the  Southwest  corner  of the  NE1/4 of said
              Section  20;  thence  along the South line of said  NE1/4,  North 89
              degrees  30 minutes 53  seconds  East,  544.08  feet to the point of
              beginning;  thence  leaving  the South line of said  NE1/4,  North 1
              degrees 02 minutes 18 seconds  West,  1030.09 feet to a point on the
              North line of a 50 foot Little Rock Municipal  Water Works easement;
              thence  South 60 degrees 48 minutes 48 seconds  East along the North
              line of said 50 foot  easement  827.42  feet to a point  on the West
              right  of way line of Sam  Peck  Road;  thence  South 2  degrees  36
              minutes  45 seconds  East  along said West right of way line  367.73
              feet to the Northeast  corner of Lot 1, Tennis Club  Addition  (Plat
              book 35,  page 54);  thence  North 89  degrees 08 minutes 30 seconds
              West 299.40 feet (platted 300.0 feet) to the Northwest corner of Lot
              1,  Tennis  Club  Addition;  thence  South 0 degrees  02  minutes 00
              seconds West along the West line of said Lot 1, Tennis Club Addition
              260.00  feet to a point  on the  South  line  of the  NE1/4  of said
              Section 20; thence South 89 degrees 30 minutes 53 seconds West along
              said South  line  (said  line also being the North line of  Woodlawn
              Farm Acre  Tracts as  recorded in Plat book 1, page 118) 420.96 feet
              to the point of beginning.
  
              TOGETHER  WITH the  benefit of a 50 foot  Little  Rock  Water  works
              easement over the Northern  portion of the above described  property
              as shown by Exchange  Easement  executed  May 1, 1978,  filed May 8,
              1978, as Instrument Number 78-18252, records of Pulaski
              County, Arkansas.
  
        TO HAVE AND TO HOLD, the same unto the said Grantee,  and assigns forever,
  with all appurtances thereunto belonging.  And the Grantor hereby covenants with
  the said Grantee,  that it will forever warrant and defend the title to the said
  lands against all claim whatever.
  
  
  
  <PAGE>
  
  
  
        WITNESS my hand and seal this 28th day of March, 1997.
  
                                      PAINEWEBBER QUALIFIED PLAN PROPERTY FUND
                                      THREE, LP, a Delaware Limited Partnership
  
                                      By:   Third Qualified Partners, Inc., its
                                            Managing General Partner
  
                                                  By:  /s/ Rock M. D'Errico
                                                      ---------------------
                                                  Name: Rock M. D'Errico
                                                  Title:   Vice President
  
                                  ACKNOWLEDGMENT
  
  COMMONWEALTH OF MASSACHUSETTS )
                                      )     SS
  COUNTY OF SUFFOLK             )
  
        On this 25th day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and  State,  appeared  in person the within  named Rock M.  D'Errico  to me well
  known,  who stated that he is the Vice  President of Third  Qualified  Partners,
  Inc., the Managing  General Partner of Paine Webber Qualified Plan Property Fund
  Three,  LP, and is duly  authorized  in that  capacity to execute the  foregoing
  instrument for and in the name and behalf of the said  partnership,  and further
  stated and  acknowledged  that he had so signed,  executed  and  delivered  said
  foregoing instrument for the consideration,  uses and purposes therein mentioned
  and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  25th day of March, 1997.
  
                                      /s/ Susan Hall Mygatt
                                      ---------------------
                                          Notary Public
                                          My Commission Expires: February 26, 1999
                                                                 -----------------
  
  
  <PAGE>
  
  
  
                    ASSIGNMENT OF LEASES AND SECURITY DEPOSITS
  
  
        Paine Webber  Qualified Plan Property Fund Three,  LP, a Delaware  limited
  partnership ("Assignor"),  in consideration of the sum of Ten and No/100 Dollars
  ($10.00) in hand paid and other good and valuable consideration,  the receipt of
  which is hereby acknowledged,  hereby assigns,  transfers, sets over and conveys
  to Mid-America Apartments,  L.P., a Tennessee limited partnership  ("Assignee"),
  all  interest  as  Lessor in and to all  leases  in effect at the real  property
  described  on  Exhibit A  attached  hereto,  commonly  known as  Westside  Creek
  Apartments, in Little Rock, Arkansas ("Existing Leases").
  
        Assignor represents and warrants that:
  
        (a)   Assignor is the sole owner of all of the landlord's right, title
  and interest in and to the Existing Leases; and
  
        (b) No part of the rents in the  Existing  Leases are  pledged or assigned
  and no part of such rents for any period  subsequent to the date hereof has been
  collected  in  advance  of the due  date  hereof,  except  as  disclosed  on the
  certified  Rent Roll  delivered by Assignor to Assignee in  connection  herewith
  (the "Rent Roll"); and
  
        (c) The amount of deposits  collected  from tenants is correctly  shown on
  the Rent Roll.
  
        Assignee  hereby  accepts the  foregoing  Assignment  and agrees to assume
  fulfill,  perform and discharge  all the various  commitments,  obligations  and
  liabilities  of  Assignor  under  and by virtue of the  Existing  Leases  hereby
  assigned,  which arise on or after the  effective  date  hereof,  including  the
  return of security deposits, and does hereby agree to defend, indemnify and hold
  harmless  Assignor  from any and all claims or losses  incurred  by  Assignor by
  reason of the failure of Assignee  from and after the  effective  date hereof to
  fulfill,  perform and discharge all of the various commitments,  obligations and
  liabilities  of Assignor  under and by virtue of the  Existing  Leases  assigned
  hereunder,  including the return of security  deposits,  which arise on or after
  the date hereof,  including  losses  relating to reasonable  attorney's fees and
  expenses incurred to resolve such claims or losses. Assignor shall remain liable
  for performing and  discharging  all  obligations  and  liabilities  relating to
  Existing  Leases for which it was  responsible and which arose prior to the date
  hereof,  with the exception of obligations or liabilities related to the payment
  of money for which a  proration  credit  has been  given to  Assignee  (in which
  instance such payment  obligation  shall be Assignee's  and is hereby assumed by
  Assignee) and Assignor shall defend,  indemnify and hold harmless  Assignee from
  any and all  claims or losses  arising on or before the  effective  date  hereof
  being related to its obligations  under the Existing  Leases,  including  losses
  relating to  reasonable  attorney's  fees and expenses  incurred to resolve such
  claims or losses.
  
  
  
  
  <PAGE>
  
  
        IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
  of the 28th day of March, 1997, which Assignment is effective on that date.
  
                                      ASSIGNOR:
  
                                      PAINE WEBBER QUALIFIED PLAN PROPERTY FUND
                                           THREE, LP
  
                                      By:   Third Qualified Properties, Inc.,
                                            its Managing General Partner
  
                                            By: /s/ Rock M. D'Errico
                                                --------------------
                                                Rock M. D'Errico, Vice President
  
  
                                  ACKNOWLEDGMENT
  
  COMMONWEALTH OF MASSACHUSETTS )
                                 )     SS
  COUNTY OF SUFFOLK             )
  
        On this 25th day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and  State,  appeared  in person the within  named Rock M.  D'Errico  to me well
  known,  who stated that he is the Vice  President of Third  Qualified  Partners,
  Inc., the Managing  General Partner of Paine Webber Qualified Plan Property Fund
  Three,  LP, and is duly  authorized  in that  capacity to execute the  foregoing
  instrument for and in the name and behalf of the said  partnership,  and further
  stated and  acknowledged  that he had so signed,  executed  and  delivered  said
  foregoing instrument for the consideration,  uses and purposes therein mentioned
  and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  25th day of March, 1997.
  
                                      /s/ Susan Hall Mygatt
                                      ---------------------
                                          Notary Public
                                          My Commission Expires: February 26, 1999
  
  
  
  <PAGE>
  
  
                                      ASSIGNEE:
  
                                      MID-AMERICA APARTMENTS, L.P.
  
                                      By:   Mid-America Apartment Communities,
                                            Inc., a Tennessee corporation, sole
                                            General Partner
  
                                            By: /s/ Simon R.C. Wadsworth
                                                ------------------------
                                               Simon R.C. Wadsworth,
                                               Executive Vice President
  
                                  ACKNOWLEDGMENT
  
  STATE OF Tennessee     )
           ----------
                         )
  COUNTY OF Shelby       )
            ------
  
        On this ____ day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and State, appeared in person the within named to me well known, who stated that
  he is the Executive Vice President of Mid-America Apartment  Communities,  Inc.,
  the General Partner of Mid-America  Apartments,  L.P., and is duly authorized in
  that capacity to execute the foregoing instrument for and in the name and behalf
  of the said  partnership,  and further  stated and  acknowledged  that he had so
  signed,  executed and delivered said foregoing instrument for the consideration,
  uses and purposes therein mentioned and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  26th day of March, 1997.
  
                                            /s/ Sarah C. Hodges
                                            -------------------
                                                Notary Public
  
                                            My Commission Expires: 2-23-2000
  
  
  
  
  <PAGE>
  
  
                                    SCHEDULE A
  
                           Description of Real Property
  
  Part of the SW1/4 NE1/4,  Section 20, Township 2 North,  Range 13 West,  Pulaski
  County, Arkansas, being more particularly described as follows:  Starting at the
  Southwest corner of the NE1/4 of said Section 20; thence along the South line of
  said  NE1/4,  North 89 degrees 30 minutes 53 seconds  East,  544.08  feet to the
  point of beginning; thence leaving the South line of said NE1/4, North 1 degrees
  02 minutes 18 seconds  West,  1030.09  feet to a point on the North line of a 50
  foot Little Rock  Municipal  Water Works  easement;  thence  South 60 degrees 48
  minutes 48 seconds  East  along the North line of said 50 foot  easement  827.42
  feet to a point on the West right of way line of Sam Peck Road;  thence  South 2
  degrees 36 minutes 45 seconds East along said West right of way line 367.73 feet
  to the Northeast  corner of Lot 1, Tennis Club Addition (Plat book 35, page 54);
  thence  North 89 degrees 08 minutes 30 seconds West 299.40 feet  (platted  300.0
  feet) to the  Northwest  corner of Lot 1, Tennis Club  Addition;  thence South 0
  degrees 02 minutes  00  seconds  West along the West line of said Lot 1,  Tennis
  Club  Addition  260.00  feet to a point on the  South  line of the NE1/4 of said
  Section 20;  thence South 89 degrees 30 minutes 53 seconds West along said South
  line  (said  line also  being the North  line of  Woodlawn  Farm Acre  Tracts as
  recorded in Plat book 1, page 118) 420.96 feet to the point of beginning.
  
  TOGETHER  WITH the benefits of a 50 foot Little Rock Water works  easement  over
  the  Northern  portion  of the above  described  property  as shown by  Exchange
  Easement executed May 1, 1978, filed May 8, 1978, as Instrument Number
  78-18252, records of Pulaski County, Arkansas.
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "THIS IS AN 8-K FOR WESTSIDE CREEK", "secsgml_size_bytes": 85617}]
metadata_filer: {"company-data": {"conformed-name": "PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE LP", "cik": "0000724136", "assigned-sic": "6798", "irs-number": "042798638", "state-of-incorporation": "DE", "fiscal-year-end": "0831"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-17147", "film-number": "97579549"}, "business-address": {"street1": "265 FRANKLIN ST 15TH FLR", "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 28, 1997
  
                    Paine Webber Qualified Partners Three L.P.
              (Exact name of registrant as specified in its charter)
  
       Delaware                       0-17147                    04-2798638
  (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 QUALIFIED PARTNERS THREE L.P.
  
  ITEM 2 - Disposition of Assets
  
     Westside Creek Apartments, Little Rock, Arkansas
  
     Disposition Date - March 28, 1997
  
       On March 28, 1997,  Paine Webber  Qualified Plan Property Fund Three,  L.P.
  sold  its  wholly-owned   operating  investment  property,  the  Westside  Creek
  Apartments,  Phase I,  located in Little Rock,  Arkansas to an  unrelated  third
  party for  $6,100,000.  This  amount  compares  favorably  to the  Partnership's
  original net  investment in Westside of  $4,850,000.  As a result of the sale of
  the  Westside  Creek  Apartments,   a  Special   Distribution  of  approximately
  $6,336,000,  or $177 per original $1,000  investment,  will be made on April 15,
  1997,  to unit  holders  of  record  as of  March  28,  1997.  Of  this  amount,
  approximately  $167  represents net proceeds from the sale of the Westside Creek
  Apartments and $10 represents a distribution of Partnership reserves that exceed
  future  requirements.  This  Special  Distribution  is being paid along with the
  regular  quarterly  distribution.  It should be noted  that due to the  Westside
  Creek Special  Distribution,  the annualized  distribution rate will be adjusted
  from 5.5% to 4.5% beginning with the distribution for the quarter ending May 31,
  1997, which will be made on July 15, 1997. The 4.5% annualized rate will be paid
  on a Limited  Partner's  remaining  capital  account of $172 per original $1,000
  investment,  which  reflects  the $177  return  of  capital  resulting  from the
  Westside Creek sale.
  
  ITEM 7 - Financial Statements and Exhibits
  
     (a)   Financial Statements:  None
  
     (b)   Exhibits:
  
        (1)   Closing  Statement  by  and  between  PaineWebber  Qualified  Plan
              Property Fund Three, L.P. and Mid-America Apartments,  L.P., dated
              March 28, 1997.
  
        (2)   Purchase and Sale Agreement by and between  PaineWebber  Qualified
              Partners  Three,  L.P. and  Mid-America  Apartments,  L.P.,  dated
              February 24, 1997.
  
        (3)   Warranty Deed between  PaineWebber  Qualified Partners Three, L.P.
              and Mid-America Apartments, L.P., dated March 28, 1997.
  
        (4)   Assignment  of  Leases  and  Security   Deposits  by   PaineWebber
              Qualified  Partners Three, L.P. to Mid-America  Apartments,  L.P.,
              dated March 28, 1997.
  
        (5)   Bill of Sale by PaineWebber  Qualified  Partners  Three,  L.P. for
              the benefit of Mid-America Apartments, L.P., dated March 28, 1997.
  FORM 8-K
  
                                  CURRENT REPORT
  
                    PAINE WEBBER QUALIFIED PARTNERS THREE L.P.
  
                                    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 QUALIFIED PARTNERS THREE L.P.
                                   (Registrant)
  
                              By: /s/ Walter V. Arnold
                                  --------------------
                                  Walter V. Arnold
                                  Senior Vice President and
                                  Chief Financial Officer
  
  Date:  April 14, 1997
  CLOSING STATEMENT
  
  SELLERS:                Paine Webber Qualified Plan Property Fund Three, LP
                          Third Qualified Properties,
                          265 Franklin Street, Boston, MA 02110
  
  PURCHASERS:             Mid-America Apartments, L.P.
                          6584 Poplar, Suite 340, Memphis, TN 38138
  
  PROPERTY:               Westside Creek Apartments
  
  CLOSING DATE:           March 28, 1997
  
  *******************************************************************************
                                                     DEBIT            CREDIT
  
  Contract Sales Price                                              6,100,000.00
  
  City Tax Prorations
          1/1/97 to 3/28/97
          $75,267.42,     87 days @ 206.2121        17,940.45
  Rents
           3/28/97 to 3/31/97
           $77,070.81,     3 days @ 2486.1552        7,458.47
  Security Deposit                                  12,791.79
  
  1996 Real Estate Taxes                            75,267.42
  
  Transfer Tax to Clerk of the Court                10,065.00
  
  Document Recording Fee to Clerk of the                10.00
     Court
  
  Settlement Fee to First American Title               150.00
  
  Title Insurance Premium to First American        10,675.00
     Title Insurance
  
  Sub-Totals                                      $134,358.13
  
  Balance due to Seller                        5,965,641.87 **
  
  Total Accepted this 28th day of March 1997    $6,100,000.00      $6,100,000.00
                                                -------------      -------------
  
                                            Paine Webber Qualified Plan
                                               Property Fund Three,
                                            by, Third Qualified Properties, *
                                            By: /s/ Rock M. D'Errico
                                               ---------------------
                                            Rock M. D'Errico, Vice President
  
                                            * Third Qualified Properties, Inc.,
                                               its Managing General Partner
  
              ** To be wired to Seller's Account No. 9243-604-7 at 
                 State Street Bank, Boston Ma., ABA No. 011 000028, 
                 Attention Debbie Arsenault (617) 654-4648
  PURCHASE AND SALE AGREEMENT
                                  BY AND BETWEEN
         PAINEWEBBER QUALIFIED PLAN PROPERTY FUND THREE, L.P. ("SELLER")
                                       AND
                      MID-AMERICA APARTMENTS, L.P. ("BUYER")
  TABLE OF CONTENTS
  
                                                                           Page
  
   ARTICLE  1                                                                4
             DEFINITIONS                                                     4
  
   ARTICLE  2                                                                4
            PURCHASE AND SALE                                                4
  
   ARTICLE  3                                                                2
            PURCHASE PRICE; DEPOSIT; ADJUSTMENTS                             2
  
   ARTICLE  4                                                                4
            PRECLOSING OPERATION                                             4
  
   ARTICLE  5                                                                4
            ACCESS, INSPECTION, DILIGENCE                                    4
  
   ARTICLE  6                                                                7
            TITLE AND SURVEY CONDITIONS                                      7
  
    ARTICLE 7                                                                8
            CLOSING                                                          8
  
    ARTICLE 8                                                               10
            CASUALTY AND CONDEMNATION                                       10
  
    ARTICLE 9                                                               11
            BROKERAGE COMMISSIONS                                           11
  
    ARTICLE 10                                                              11
            DEFAULT, TERMINATION AND REMEDIES                               11
  
    ARTICLE 11                                                              12
            REPRESENTATIONS AND WARRANTIES                                  12
  
    ARTICLE 12                                                              15
            MISCELLANEOUS                                                   15
  
    ARTICLE 13                                                              19
            IRS FORM 1099-S DESIGNATION                                     19
  SCHEDULE A  Description of the Real Property
  SCHEDULE B  Description of Personal Property and Intangible Property
  SCHEDULE C  Rent Roll
  SCHEDULE D  Form of Lease
  SCHEDULE E  Form of Warranty Deed
  SCHEDULE F  Form of Bill of Sale 
  SCHEDULE G  Form of Assignment  of Leases
  SCHEDULE H  Form of Assignment of Contracts 
  SCHEDULE I  1099 Designation Agreement
  
  Schedule 4.2      Rental Rates and Other Concessions
  Purchase and Sale Agreement
  
        This Purchase and Sale Agreement (this  "Agreement") is entered into as of
  the 24th  day of  February,  1997 by and  between  Seller  and  Buyer,  upon the
  following terms and conditions:
  
                                    ARTICLE 1
  
                                   DEFINITIONS
  
        References  in this  Agreement  to the  following  terms  shall  have  the
  following meanings:
  
  SELLER:            PaineWebber Qualified Plan Property Fund Three, L.P.,
                     a Delaware limited partnership
  
  BUYER:             Mid-America Apartments, L.P., a Tennessee limited partnership
  
  PROPERTY:          The Real Property and Personal Property constituting a
                     portion of Westside Creek Apartments, in Little Rock,
                     Arkansas
  
  REAL PROPERTY:    The land and the buildings, structures, improvements and
                    fixtures (collectively the "Improvements") now located thereon
                    and the rights appurtenant thereto, all as more particularly
                    described in Schedule A attached hereto
  
  PERSONAL PROPERTY: The personal and intangible Property, if any,
                     described in Schedule B attached hereto
  
  PURCHASE PRICE:   $6,100,000
  
  TITLE COMPANY:    First American Title Insurance Company
                    National Accounts
                    1025 Connecticut Ave. N.W.
                    Suite 709
                    Washington, DC  20036
                    Attn: Shirley Fox, Esq., National Division Counsel
  
                                    ARTICLE 2
  
                                PURCHASE AND SALE
  
        2.1. In  consideration  of the  undertakings  and mutual  covenants of the
  parties  set  forth  in  this  Agreement,   and  for  other  good  and  valuable
  consideration,   the  receipt  and  legal   sufficiency   of  which  are  hereby
  acknowledged,  Seller  hereby agrees to sell and convey the Property to Buyer or
  its nominee and Buyer hereby  agrees to buy and pay the  Purchase  Price for the
  Property on the terms and conditions contained herein.
  ARTICLE 3
  
                       PURCHASE PRICE; DEPOSIT; ADJUSTMENTS
  
        3.1 Purchase Price.  The Purchase Price shall be as specified in Article 1
  above and shall be paid on the  Closing  Date (as  hereinafter  defined) by wire
  transfer of immediately available federal funds in the amount of Six Million One
  Hundred  Thousand  Dollars  ($6,100,000.00)  subject  to  adjustment  to reflect
  application of the Escrowed Amount and such other adjustments herein contained.
  
        3.2 Deposit. Contemporaneously with the execution of this Agreement, Buyer
  shall  deposit with the Title  Company the sum of One Hundred  Thousand  Dollars
  ($100,000) (the "Deposit") to secure Buyer's  obligations  under this Agreement.
  The Title Company shall hold the Deposit in a segregated  interest bearing money
  market  account  with an FDIC insured bank  reasonably  acceptable  to Buyer and
  Seller, or other investment vehicle selected by Buyer and approved by Seller. On
  or before the Diligence Date (as  hereinafter  defined),  Buyer shall deposit an
  additional Fifty Thousand Dollars ($50,000) (the "Additional  Deposit") with the
  Title Company to secure Buyer's  obligations under this Agreement.  The Deposit,
  the  Additional  Deposit  and  all  interest  accrued  on the  Deposit  and  the
  Additional Deposit (collectively,  the "Escrowed Amount") shall be maintained by
  the Title  Company  in such  account  or  accounts  until the Title  Company  is
  required to cause the Escrowed Amount to be disbursed  pursuant to the terms and
  conditions of this Agreement.
  
        3.3 Proration.  All rents,  other amounts payable by the tenants under the
  Leases,  income,  utilities and all other operating expenses with respect to the
  Property for the month in which the Closing occurs, and real estate and personal
  property taxes and other  assessments  with respect to the Property for the year
  in which the Closing  occurs,  shall be prorated to the Closing Date with Seller
  receiving the benefits and burdens of ownership on the Closing Date.
  
        (a) If the Closing shall occur before rents and all other amounts  payable
  by the  tenants  under the Leases and all other  income from the  Property  have
  actually been paid for the month in which the Closing occurs,  the apportionment
  of such rents and other amounts and other income shall be upon the basis of such
  rents, other amounts and other income actually received by Seller. Subsequent to
  the  Closing,  if any such rents,  other  amounts and other  income are actually
  received by Buyer, all such amounts shall first be applied to post-closing rents
  due to Buyer which are past due and the  balance  shall be  immediately  paid by
  Buyer to Seller. Buyer shall make a good faith effort and attempt to collect any
  such rents and other amounts and other income not apportioned at the Closing for
  the benefit of Seller,  however, Buyer shall not be required to expend any funds
  or institute any litigation in its collection efforts. Nothing in this paragraph
  shall restrict Seller's right to collect delinquent rents directly from a tenant
  by any legal means. At Closing,  prepaid rents and refundable  security deposits
  in the  possession or control of Seller or for which Seller is liable  (together
  with any interest  accrued thereon only if interest is specifically  required to
  be paid thereon under applicable law or under the terms of a specific Lease), at
  Seller's sole option shall either be (i) transferred to Buyer at Closing and not
  subject to adjustment, or (ii) adjusted by way of a credit in favor of Buyer.
  
        (b) If the  Closing  shall  occur  before  the tax  rate  or the  assessed
  valuation of the Property is fixed for the then current year, the  apportionment
  of  taxes  and  assessments  shall  be upon  the  basis  of the tax rate for the
  preceding  year  applied to the latest  assessed  valuation.  Subsequent  to the
  Closing,  when the tax rate and the assessed  valuation of the Property is fixed
  for the year in which the  Closing  occurs,  the  parties  agree to  adjust  the
  proration of taxes and  assessments  and, if necessary,  to refund or repay such
  sums as shall be  necessary  to effect such  adjustment.  If the Property is not
  assessed as a separate  parcel for tax or assessment  purposes,  then such taxes
  and  assessments  attributable  to the Property shall be determined by Buyer and
  Seller. In the event the Property has been assessed for property tax purposes at
  such rates as could  result in  "roll-back"  taxes upon changes in land usage or
  ownership  of the Property  pursuant to Arkansas  Statutes  26-26-407(g),  Buyer
  agrees to pay all such taxes and  indemnify  and save Seller  harmless  from and
  against any and all claims and liabilities for such taxes.
  
        (c) If the Closing  shall occur before the actual  amount of utilities and
  all other operating expenses with respect to the Property for the month in which
  the Closing occurs are determined, the apportionment of such utilities and other
  operating expenses shall be upon the basis of a reasonable estimate by Seller of
  such utilities and other  operating  expenses for such month.  Subsequent to the
  Closing,  when the actual amount of such utilities and other operating  expenses
  with  respect  to the  Property  for the month in which the  Closing  occurs are
  determined,  the parties  agree to adjust the  proration of such  utilities  and
  other  operating  expenses  and, if  necessary,  to refund or repay such sums as
  shall be necessary to effect such adjustment.
  
        (d) If Leases contain obligations ("Lease Obligations") on the part of the
  Tenants for any  adjustments,  pass-throughs  or retroactive  charges payable by
  Tenants  which  have  accrued  as of the  Closing  Date but are not then due and
  payable,  the  amount of such  Lease  Obligations  shall be  prorated  as of the
  Closing  Date upon the basis of a  reasonable  estimate  by Seller of such Lease
  Obligations through the Closing Date. Subsequent to the Closing, when the actual
  amount of such Lease  Obligations  with  respect  to the  Property  through  the
  Closing Date is  determined,  the parties  agree to adjust the proration of such
  Lease  Obligations  and, if necessary,  to refund or repay such sums as shall be
  necessary to effect such adjustment.
  
  The  agreements  of Seller and Buyer set forth in this Section 3.3 shall survive
  the Closing.
  
        3.4  Closing  Costs.  Except  as maybe  otherwise  provided  herein to the
  contrary,  each party hereto shall pay its own legal fees and  expenses.  Seller
  shall pay (a) the premium for Buyer's owner's title insurance policy  (excluding
  the cost of any endorsements for which an extra premium is charged),  (b) 50% of
  the  escrow  fees of the  Escrow  Agent,  and (c) 50% of any  documentary  taxes
  relating  to the  transfer of the  Property to Buyer.  Buyer shall pay all other
  costs  in  carrying  out the  transactions  contemplated  hereunder,  including,
  without limitation, (i) 50% of the escrow fees of the Escrow Agent, (ii) Buyer's
  own  legal  fees and  expenses  and (iii)  the cost of any  endorsements  to the
  owner's title policy for which an extra premium is charged,  and the cost of any
  lender's title insurance policy.
  
        3.5     Survival.  The provisions of this Article 3 shall survive the
  Closing.
  
                                    ARTICLE 4
  
                               PRECLOSING OPERATION
  
        4.1  Existing  Leases.  A  Rent  Roll  Containing  a list  of all  current
  occupants of the Property is attached  hereto as Schedule C. The leases with the
  occupants listed on the Rent Roll, together with leases entered into pursuant to
  this Article 4 are collectively referred to herein as the "Leases".
  
        4.2 New Leases.  During the period between the date hereof and the Closing
  Date,  Seller  agrees to Lease and renew leases on the Property  using the lease
  form attached as Schedule D and at rental rates and other concessions  specified
  in Schedule  4.2,  with such leases being written for terms not greater than one
  (1) year.
  
        4.3  Conduct of  Business.  At all times prior to  Closing,  Seller  shall
  continue (a) to conduct business with respect to the Property in the same manner
  in which  said  business  has been  heretofore  conducted  and (b) to insure the
  Property substantially as currently insured.
  
        4.4  Contracts.  Within five (5)  business  days after  execution  of this
  Agreement,  Seller  shall  provide  copies  to  Buyer  of all  service,  supply,
  equipment   rental,   management  and  leasing  contracts   (collectively,   the
  "Contracts") affecting the Property. On or before the Diligence Date (as defined
  below),  unless Buyer has provided  written notice to Seller of Buyer's election
  to terminate this Agreement, Buyer shall provide written notice to Seller of the
  Contracts  that Buyer  desires to have  terminated  by Seller,  and Seller  will
  terminate the Contracts so identified at or before Closing.  At Closing,  Seller
  shall assign and Buyer shall assume the Contracts,  except those Contracts which
  Buyer has elected not to have  terminated,  as provided above.  Buyer and Seller
  shall indemnify, defend and hold the other harmless from and against any and all
  claims under the Contracts which relate to its respective period of ownership.
  ARTICLE 5
  
                          ACCESS, INSPECTION, DILIGENCE
  
        5.1 Seller agrees that Buyer and its authorized agents or  representatives
  shall be entitled to enter upon the Real  Property and the  Improvements  during
  normal  business  hours  upon  advance  written  notice  to  Seller to make such
  reasonable  investigations,  studies and tests  including,  without  limitation,
  surveys, engineering studies, soil and groundwater tests (including test borings
  and pits) as Buyer deems  necessary or advisable.  Seller may require that Buyer
  be accompanied by Seller or its designated  agent during any such  inspection or
  entry.  Seller may also require evidence of satisfactory  insurance prior to any
  physical inspection. Seller also agrees to make available to Buyer during normal
  business hours upon advance written notice to Seller all books, records,  plans,
  building specifications, contracts, agreements or other instruments or documents
  contained  in  Seller's  files  relating  to  the  construction,  operation  and
  maintenance of the Property.
  
        5.2 To the  extent  Seller  has  any  studies,  or  site  analyses  in its
  possession  including,  without  limitation,  existing title insurance policies,
  existing  surveys,  existing  zoning  analyses,  existing  engineering  reports,
  existing code compliance reports and existing site analyses with respect to oil,
  underground storage tanks or hazardous waste on the Real Property, Seller agrees
  to make the same available for inspection by Buyer or its agents  promptly after
  execution of this Agreement.
  
        Buyer  acknowledges  and agrees that any and all  information,  documents,
  surveys,  studies and reports  provided to Buyer are provided for  informational
  purposes only and do not constitute  representations  or warranties of Seller of
  any kind.
  
        5.3     Buyer shall promptly commence and actively pursue if Buyer so
  elects the following due diligence items:
  
                (a) Review of title and survey matters;
  
                (b) Review of Contracts and operating agreements;
  
                (c) Obtain and review engineering reports on structural
                    condition of the mechanical systems;
  
                (d) Obtain and review environmental reports on oil, hazardous
                    waste, and asbestos;
  
                (e) Review of applicable zoning and other land use controls,
                    and other permits, licenses, permissions, approvals and
                    consents;
  
                (f) Review of all Leases affecting the Property; and
  
                (g) Review of any other matter which Buyer in its reasonable
                    judgment deems to be material.
  
        Buyer  shall have the right,  after the  execution  of the  Agreement,  at
  reasonable  times  and  on  reasonable   notice  to  enter  onto  the  Property,
  accompanied  by a  representative  of Seller if  requested  by  Seller,  for the
  purpose of making a physical  examination of the Property and performing any and
  all studies,  tests,  inspections,  review of records and other  purposes  which
  Buyer in its sole discretion deems necessary. Seller agrees to make available to
  Buyer, for Buyer's review at the Property or the Property  Manager's office, all
  books and records  reasonably  requested by Buyer.  Seller also agrees to permit
  Buyer full access to the  Property,  except  that the right to inspect  premises
  under lease to tenants in  possession  may be  conditioned  on a 24 hour advance
  notice  requirement,  or such other notice as may be required by the  applicable
  lease or by applicable law.
  
        Buyer  shall  complete  its due  diligence  on or before the date which is
  thirty (30) days from the date hereof (the "Diligence  Date"). In the event that
  Buyer's due  diligence  shall  reveal any matters  which are not  acceptable  to
  Buyer, in Buyer's sole discretion, Buyer may elect, by written notice to Seller,
  received by Seller on or before the first business day after the Diligence Date,
  not to  proceed  with  this  purchase,  in  which  event  this  Agreement  shall
  terminate,  the Deposit shall be returned and this  Agreement  shall be null and
  void without recourse to either party hereto (except to the extent such recourse
  arises in  connection  with a provision of this  Agreement  which is intended to
  survive termination).
  
        If such diligence reveals any fact or condition  unacceptable to Buyer, at
  the  option of Buyer,  Buyer may in lieu of  terminating  the  Agreement  notify
  Seller of such defect or condition in writing  prior to the Due  Diligence  Date
  and offer  Seller the option of curing such defect or  condition.  If the Seller
  elects to cure such defect or  condition,  Seller  shall use its best efforts to
  cure such defect or  condition  prior to Closing,  but shall not be obligated to
  expend any funds in doing so.  Seller  agrees to notify  Buyer  within  five (5)
  business  days  after  receipt  of such  notice  of the  specific  objectionable
  conditions  it will  attempt to cure as well as the steps it proposes to take to
  accomplish  such cure, and Seller's cure of such condition  shall be a condition
  to Buyer's  obligations to close under this Agreement.  If Seller notifies Buyer
  that Seller does not elect to exercise  such cure  option,  then the Buyer shall
  have the right to terminate this Agreement by written notice to Seller  provided
  within two (2) business days of receipt of Seller's  notice,  in which event the
  Deposit shall be returned to Buyer in accordance with the provisions  hereof and
  neither  party  shall have any further  liability  to the other party under this
  Agreement.  Otherwise,  such fact or  condition  shall be deemed  acceptable  to
  Buyer.
  
        Buyer  acknowledges that it has had an opportunity to conduct diligence on
  the Property and is acquiring the Property in its current condition based on its
  diligence.  Buyer further  acknowledges  that neither  Seller nor its employees,
  agents or  representatives  have made any  representation  or warranty as to the
  condition of the Property or the presence or absence of any hazardous  materials
  on, in, under or within the Property or a portion  thereof.  At Closing,  Seller
  shall  deliver and Buyer shall  accept the  Property AS IS, WITH ALL FAULTS,  IF
  ANY,  AND WITHOUT  ANY  REPRESENTATIONS  OR  WARRANTIES,  EXPRESSED  OR IMPLIED,
  INCLUDING FITNESS FOR A PARTICULAR PURPOSE.  This immediately preceding sentence
  shall survive Closing.
  
        5.4 Return of Documents.  If this  Agreement is terminated  for any reason
  whatsoever,  Buyer  shall  promptly  deliver  to Seller  all  documents,  plans,
  surveys,  contracts,  Leases and the like delivered to Buyer or Buyer's  agents,
  representatives  or designees by Seller or Seller's agents,  representatives  or
  employees pursuant to this Agreement. In addition,  Buyer shall promptly deliver
  to Seller  copies of all  materials  relating to the  physical  condition of the
  Property obtained in connection with Buyer's diligence.
  
        5.5  Confidentiality.  Each party hereto agrees to maintain in confidence,
  and not to  discuss  with or to  disclose  to any  person or entity who is not a
  party to this  Agreement,  the  existence  of this  Agreement,  any term of this
  Agreement  or any  aspect of the  transactions  contemplated  hereby,  except as
  provided in this Section. Each party hereto may discuss with and disclose to its
  accountants,  attorneys,  existing or prospective  lenders,  investment bankers,
  underwriters,  rating agencies, partners,  consultants and other advisors to the
  extent such parties  reasonably need to know such information and are bound by a
  confidentiality obligation identical in all material respects to the one created
  by this Section. Additionally,  each party may discuss and disclose such matters
  to the extent  necessary to comply with any  requirements of the SEC or in order
  to comply with any  securities  law or  interpretation  thereof.  This provision
  shall survive  termination of this  Agreement but shall  terminate upon Closing.
  Any press  release to be made  regarding  any matter which is the subject of the
  confidentiality  obligation  created  in this  Section  shall be  subject to the
  reasonable  approval  of Buyer and  Seller,  respectively  both as to timing and
  content.
  
        5.6  Indemnity.  If any  inspection  or test disturbs any of the Property,
  Buyer will restore the Property to  substantially  the same condition as existed
  prior to any such  inspection  or test.  Buyer shall keep the Property  free and
  clear of any liens and will indemnify, defend, and hold Seller harmless from all
  losses,  costs and damages  including  reasonable  attorneys'  fees  incurred by
  Seller as a result of such entry or investigation by or on behalf of Buyer. This
  indemnity  obligation of Buyer shall survive the  termination  of this Agreement
  for any reason.
  ARTICLE 6
  
                           TITLE AND SURVEY CONDITIONS
  
        6.1 In  connection  with  the  execution  of this  Agreement,  Seller  has
  provided Buyer with copies of the following:
  
                (a) An ALTA as-built survey of the Real Property, dated January
        6, 1995 (the "Survey"); and
  
                (b) A  commitment  for an ALTA Owner's  Policy of Title  Insurance
        dated January 23, 1997 (the "Title Commitment").
  
        In the event of controversy  regarding title, title insurance covering the
  Property,  paid for by Seller, issued at regular rates and providing coverage on
  the points at issue  reasonably  satisfactory to Buyer,  shall constitute and be
  accepted by Buyer as conclusive  evidence of good and  merchantable  title.  For
  purposes of this Agreement the term "Permitted Exceptions" means:
  
                (a) All  matters  shown on  Schedule  B,  Section  II of the Title
        Commitment,  as it may have been updated through the Diligence Date, other
        than Monetary  Encumbrances  (as defined below),  and matters which Seller
        has agreed to cure;
  
                (b) All matters would be shown on an ALTA-ACSM survey of the
        Property on the Diligence Date;
  
                (c) All Leases;
  
                (d) All zoning, building and other laws applicable to the
        Property; and
  
                (e) All matters  which arise  after the  Diligence  Date which are
        agreed upon or consented to by Buyer.
  
        For purposes of this Agreement the term "Monetary  Encumbrance"  means any
  mortgage,  or other voluntary lien granted or assumed by Seller  encumbering the
  Property  and any  mechanics or  materialman's  liens  encumbering  the Property
  arising from work  performed and  materials  furnished to or on behalf of Seller
  (specifically excluding services performed by tenants).
  
        6.2 On the  Closing  Date,  Seller  shall  convey  by good and  sufficient
  warranty  deed to  Buyer  or to  Buyer's  nominee  good  and  clear  record  and
  marketable  fee simple title to all of the Real  Property  and the  Improvements
  free and clear of all liens, encumbrances,  conditions,  easements, assessments,
  restrictions and other conditions, except for the following:
  
                (a) The lien, if any, for real estate taxes not yet due and
        payable; and
  
                (b) The Permitted Exceptions.
  
  The  Property  shall  be in  substantially  the  same  condition  as on the  Due
  Diligence  Date,  and there  shall have been no material  adverse  change in the
  Property or the Rent Roll.  A  reduction  of less than 10% in  annualized  gross
  income from leases in effect on the Closing Date shall not be deemed  materially
  adverse.
  
        6.3 At the  Closing,  Seller  shall  assign  the Leases to Buyer and Buyer
  shall  assume  Seller's  obligations  thereunder  and  Seller  shall  convey the
  Personal  Property to Buyer by quitclaim  bill of sale.  Buyer will be deemed to
  have owned the Property as of 12:01 a.m. on the Closing Date.
  
                                    ARTICLE 7
  
                                     CLOSING
  
        7.1  The  consummation  of the  purchase  and  sale  contemplated  in this
  Agreement  (the  "Closing")  shall occur at the offices of First  American Title
  Insurance Company,  8114 Contrell Road, Suite 150, Little Rock, Arkansas as soon
  as possible after the Diligence Date on a date (the "Closing Date")  established
  by Buyer by written  notice to Seller and Title  Company given at least five (5)
  business days prior to the proposed Closing Date; provided,  however, that in no
  event  shall  such  notice  establish  a Closing  Date  which is later  than the
  thirtieth  (30th) day after the Diligence  Date; and if no such notice is given,
  the Closing Date shall be on the thirtieth  (30th) day after the Diligence  Date
  unless such day is not a day on which the  registry of deeds in the county where
  the Property is located is open for business,  in which case,  the Closing shall
  take place on the next day on which such  registry  is open.  It is agreed  that
  time is of the essence in this Agreement.
  
        7.2 On the Closing Date Seller  shall  deliver or cause to be delivered at
  its expense each of the following items to the Title Company:
  
                (a) A duly  executed  and  acknowledged  warranty  deed  or  deeds
        conveying the Real Property and the Improvements to Buyer in substantially
        the form attached hereto as Schedule E (the "Deed");
  
                (b) A duly executed  quitclaim bill of sale conveying the Personal
        Property to Buyer in substantially  the form attached hereto as Schedule F
        (the "Bill of Sale");
  
                (c) A  duly  executed  assignment  and  assumption  of  leases  in
        substantially  the form attached hereto as Schedule G (the  "Assignment of
        Leases");
  
                (d) A  duly  executed  assignment  and  assumption  of  contracts,
        licenses, guaranties, warranties, and intangible property in substantially
        the form attached hereto as Schedule H (the "Assignment of Contracts");
  
                (e) A certificate or certificates of non-foreign status from
        Seller reasonably acceptable to Buyer in form and substance;
  
                (f) Customary affidavits and indemnities  sufficient for the Title
        Company to delete any  exceptions for  mechanic's or  materialmen's  liens
        from Buyer's title policy and such other affidavits relating to such title
        policy as the Title Company may reasonably request;
  
                (g) Such other  instruments as Buyer,  Buyer's Lender or the Title
        Company may reasonably request to effectuate the transaction  contemplated
        by this Agreement;
  
                (h) A counterpart  original of the closing statement setting forth
        the Purchase  Price,  the closing  adjustments  and the application of the
        Purchase Price as adjusted; and
  
                (i) A marked up Title  Commitment which complies with the terms of
        this Agreement.
  
        In  addition,  Seller shall  deliver to Buyer all original  Leases and all
  keys in Seller's  possession,  which may be  delivered by Seller to Buyer at the
  Property.
  
        7.3 On the Closing  Date Buyer shall  deliver or cause to be  delivered at
  its expense each of the following to the Title Company:
  
                (a) The Purchase  Price for the Property,  as such Purchase  Price
        may  have  been  further  adjusted  pursuant  to the  provisions  of  this
        Agreement  and  credited  for any portion of the  Escrowed  Amount paid to
        Seller;
  
                (b) Evidence in recordable form reasonably satisfactory to
        Seller of Buyer's authority to purchase the Property pursuant to this
        Agreement;
  
                (c) The Assignment of Leases;
  
                (d) The Assignment of Contracts;
  
                (e) Such other instruments as Seller may reasonably request to
        effectuate the transaction contemplated by this Agreement; and
  
                (f) A counterpart  original of the closing statement setting forth
        the Purchase  Price,  the closing  adjustments and the application of such
        amounts.
  
                                    ARTICLE 8
  
                            CASUALTY AND CONDEMNATION
  
        8.1 If the  Improvements  are  materially  damaged  by fire  or any  other
  casualty and are not substantially  restored to the condition  immediately prior
  to such  casualty  before the  Closing  Date,  Buyer  shall  have the  following
  elections:
  
                (a) to purchase  the  Property in its then  condition  and pay the
        Purchase Price, in which event Seller shall pay over or assign to Buyer as
        the case may be, on the Closing Date, all amounts recovered or recoverable
        by  Seller  on  account  of any  insurance  as a result  of such  casualty
        (including  insurance  for loss of  rents),  less any  amounts  reasonably
        expended by Seller for partial restoration; or
  
                (b) if any portion of the Improvements suffers damage in excess of
        $180,000 from fire or any other  casualty to terminate  this  Agreement by
        giving  notice of  termination  to Seller on or before  that date which is
        thirty (30) days after the  occurrence of the fire or other casualty or on
        the Closing Date, whichever occurs first, in which event the Title Company
        shall return the Escrowed Amount to Buyer,  this Agreement shall terminate
        and  neither  Seller nor Buyer shall have any  recourse  against the other
        (except to the extent such recourse  arises in connection with a provision
        of this Agreement which is intended to survive termination).
  
        8.2 If any portion of or interest in the Property  shall be taken or is in
  the process of being taken by exercise of the power of eminent  domain or if any
  governmental  authority  notifies Seller prior to the Closing Date of its intent
  to take or acquire any portion of or interest in the Property  (each an "Eminent
  Domain  Taking"),  Seller shall give notice  promptly to Buyer of such event and
  Buyer shall have the option to terminate this  Agreement by providing  notice to
  Seller to such effect on or before the date which is ten (10) days from Seller's
  notice to Buyer of such Eminent Domain Taking or on the Closing Date,  whichever
  occurs first,  in which event the Title Company shall return the Escrowed Amount
  to Buyer,  this Agreement  shall  terminate,  and neither Seller nor Buyer shall
  have any recourse  against the other.  If Buyer does not timely notify Seller of
  its election to terminate this Agreement,  Buyer shall purchase the Property and
  pay the Purchase Price, and Seller shall pay over or assign to Buyer on delivery
  of the deed all awards  recovered  or  recoverable  by Seller on account of such
  Eminent  Domain  Taking,  less any  amounts  reasonably  expended  by  Seller in
  obtaining such award.
  
                                    ARTICLE 9
  
                              BROKERAGE COMMISSIONS
  
        Seller and Buyer each  mutually  represent  and  warrant to the other that
  they  have not  dealt  with  any  broker  in  connection  with  the  transaction
  contemplated by this Agreement  other than  Transwestern  Property  Company (the
  "Broker"), and that they are not obligated to pay any fees or commissions to any
  broker.  Buyer agrees to  indemnify,  defend and hold Seller  harmless  from and
  against all  liabilities,  costs,  damages and  expenses  (including  reasonable
  attorneys'  fees)  arising  from any  claims for  brokerage  or  finder's  fees,
  commissions or other similar fees in connection with the transaction  covered by
  this Agreement other than the Broker, insofar as such claims shall be based upon
  alleged  arrangements or agreements  made by Buyer or on Buyer's behalf.  Seller
  hereby agrees to indemnify, defend and hold Seller harmless from and against all
  liabilities,  costs, damages and expenses (including reasonable attorneys' fees)
  arising from any claims for  brokerage or finders'  fees,  commissions  or other
  similar fees in connection with the transaction  covered by this Agreement other
  than the Broker, insofar as such claims shall be based upon alleged arrangements
  or agreements made by Seller or on Seller's behalf. The covenants and agreements
  contained in this Article shall survive the termination of this Agreement or the
  Closing of the transaction contemplated hereunder.
  
                                    ARTICLE 10
  
                        DEFAULT, TERMINATION AND REMEDIES
  
        10.1 Seller's  Default.  In the event that Seller shall have failed in any
  material  respect  adverse to Buyer on the Closing Date to have performed any of
  the  covenants  and  agreements  contained  in this  Agreement  which  are to be
  performed  by Seller  on or  before  the  Closing  Date,  or if there has been a
  material adverse change to the Property as defined in Section 6.2 hereof,  Buyer
  shall  have the  following  remedies:  (i) the  right to take any and all  legal
  actions  necessary to compel Seller's specific  performance  hereunder (it being
  acknowledged  that  damages  at  law  would  be an  inadequate  remedy),  and to
  consummate the transaction contemplated by this Agreement in accordance with the
  provisions of this  Agreement  (such  conveyance  shall be deemed to satisfy and
  waive any  other  remedy)  or (ii) the right to  terminate  this  Agreement  and
  receive the Escrowed  Amount,  whereupon this Agreement shall terminate  without
  further  recourse.  Buyer hereby waives and relinquishes any right to sue Seller
  for any reason  whatsoever,  except as expressly set forth in this Section 10.1,
  and agrees  that Seller  shall not be liable to Buyer for any actual,  punitive,
  speculative,  consequential  or other  damages for breach by Seller prior to the
  Closing, except for payment of the Escrowed Amount.
  
        10.2  Buyer's  Default.  In the event that Buyer  shall have failed in any
  material  respect adverse to Seller on the Closing Date to have performed any of
  the  covenants  and  agreements  contained  in this  Agreement  which  are to be
  performed by Buyer on or before the Closing  Date,  or if Buyer  defaults in its
  obligation to close hereunder,  Seller shall be entitled to receive the Escrowed
  Amount as liquidated  damages, in lieu of all other remedies available to Seller
  at law or in equity for such  default,  and Buyer shall direct the Title Company
  to  release  the  Escrowed  Amount to Seller.  Seller  and Buyer  agree that the
  damages  resulting to Seller as a result of such default by Buyer as of the date
  of this  Agreement are  difficult or impossible to ascertain and the  liquidated
  damages set forth in the  preceding  sentence  constitute  Buyer's and  Seller's
  reasonable estimate of such damages.
  
                                    ARTICLE 11
  
                          REPRESENTATIONS AND WARRANTIES
  
        11.1    Buyer's Representations and Warranties.  Buyer represents and
  warrants to Seller that:
  
                (a) Buyer is a limited  partnership,  duly  organized  and in good
  standing  under the laws of the State of Tennessee,  is qualified to do business
  in the State of Arkansas and has the power to enter into this  Agreement  and to
  execute and deliver  this  Agreement  and to perform all duties and  obligations
  imposed  upon it  hereunder,  and Buyer has obtained  all  necessary  corporate,
  partnership or other organizational  authorizations  required in connection with
  the execution,  delivery and  performance of this Agreement and the  transaction
  contemplated  herein and has  obtained  the consent of all  entities and parties
  (whether  private or  governmental)  necessary to bind Buyer to this  Agreement.
  Buyer's General Partner is Mid-America Apartment Communities,  Inc., a Tennessee
  corporation qualified to do business in Arkansas ("Buyer's General Partner");
  
                (b) neither the execution nor the delivery of this Agreement,  nor
  the consummation of the purchase and sale transaction  contemplated  hereby, nor
  the fulfillment of or compliance with the terms and conditions of this Agreement
  conflict  with or will result in the breach of any of the terms,  conditions  or
  provisions of any agreement or  instrument to which Buyer,  or any  shareholder,
  partner or related  entity or affiliate of Buyer,  is a party or by which Buyer,
  any  shareholder,  partner or related  entity or affiliate  of Buyer,  or any of
  Buyer's assets is bound;
  
                (c) Buyer has the financial resources to timely consummate the
  purchase and sale transaction contemplated by this Agreement;
  
                (d) neither  Buyer nor any general  partner of Buyer is in any way
  affiliated with Seller, Paine Webber Incorporated, or any affiliate of either of
  the foregoing;
  
                (e) Buyer is not an "employee  benefit plan" as defined in Section
  3(3)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
  ("ERISA"),  which is  subject to Title 1 of ERISA and (b) the assets of Buyer do
  not constitute  "plan assets" of one or more such plans within the meaning of 29
  C.F.R. Section 2510.3-101.
  
                (f) Buyer is not a  "governmental  plan"  within  the  meaning  of
  Section 3(32) of ERISA or a "plan"  within the meaning of Section  4975(e)(1) of
  the Internal Revenue Code (the "Code").
  
                (g) One or more of the following circumstances is true:
  
                    (i) Equity  interests in Buyer's  General Partner are publicly
  offered securities,  within the meaning of 29 C.F.R.  Section  2510.2-101(b)(2),
  and Buyer's limited  partners are individuals or entities which are not "benefit
  plan investors" within the meaning of 29 C.F.R.
  Section 2510.3-101(f)(2);
  
                    (ii)  Less than 25 percent of all equity interests in Buyer
  are held by "benefit plan investors" within the meaning of 29 C.F.R. Section
  2510.3-101(f)(2); or
  
                    (iii)  Buyer is a  corporation  that  qualifies  as  either an
  "operating  company" or a "real estate operating  company" within the meaning of
  29 C.F.R. Section 2510.3-101(c) and (e).
  
                (h) With  respect to Seller,  Paine  Webber  Incorporated  and any
  affiliate of either of the  foregoing,  Buyer is neither (i) a party in interest
  as defined in Section 3(14) of ERISA, nor (ii) a disqualified  person as defined
  in Section 4975(e)(2) of the Code.
  
                (i) that prior to the Diligence Date, Buyer will have examined and
  investigated  to Buyer's  full  satisfaction  the  physical,  economic and legal
  condition of the Property and made all other inquiries Buyer deemed necessary in
  connection with the transaction herein contemplated; and
  
                (j)  except  to the  limited  extent,  if  any,  specifically  and
  expressly set forth in this  Agreement,  Buyer shall accept the Property "AS IS"
  and "WHERE IS" at Closing, and Buyer has not relied upon and will not rely upon,
  and Seller is not liable for or bound by any,  express or  implied,  warranties,
  guarantees,  statements,   representations  or  information  pertaining  to  the
  Property or relating thereto made or furnished by Seller or any of its advisors,
  or any of their agents,  representatives,  contractors,  employees, attorneys or
  brokers,  to  whomever  made or given,  directly or  indirectly,  verbally or in
  writing, unless specifically and expressly set forth herein.
  
  Buyer's  representations  and  warranties  set forth in this  Section 11.1 shall
  survive the Closing or  termination  of this  Agreement  for a period of six (6)
  months, and no such breach shall be deemed to exist unless Seller provides Buyer
  with notice of an alleged breach prior to the expiration of such 6-month period.
  As a condition  precedent to Seller's  obligation to close the purchase and sale
  transaction   contemplated  in  this  Agreement,   Buyer's  representations  and
  warranties  contained  herein  must  remain  and be true and  correct  as of the
  Closing Date. Prior to the Closing Date, Buyer shall notify Seller in writing of
  any facts,  conditions or circumstances  which render any of the representations
  and warranties set forth in this Section 11.1 in any way inaccurate, incomplete,
  incorrect or misleading.
  11.2    Seller's Representations and Warranties.  Seller represents and
  warrants to Buyer that:
  
                (a) Seller has the full right,  power, and authority,  without the
  joinder of any other person or entity,  to enter into,  execute and deliver this
  Agreement,  and to perform all duties and  obligations  imposed on Seller  under
  this Agreement, except to the limited extent, if any, specifically and expressly
  set forth in this Agreement; and
  
                (b) neither the execution nor the delivery of this Agreement,  nor
  the  consummation  of  the  purchase  and  sale  contemplated  hereby,  nor  the
  fulfillment  of or compliance  with the terms and  conditions of this  Agreement
  conflict with or will result in the breach of any of the terms,  conditions,  or
  provisions of any agreement or instrument to which Seller is a party or by which
  Seller or any of Seller's assets is bound.
  
                (c) to Seller's knowledge (as hereinafter defined), Seller has not
  been served with process in any  litigation  with respect to the Property  which
  would adversely  affect Seller's  ability to perform its obligations  under this
  Agreement. To Seller's knowledge,  Seller has not received written notice of (i)
  any violation of the Property's compliance with applicable health or fire safety
  laws,  building  code  ordinances,  zoning  ordinances,  environmental  laws and
  regulations or any similar statutes,  ordinances, laws, rules or regulations, or
  (ii) any pending or  threatened  condemnation  proceeding  that would affect the
  Property; and
  
                (d) to Seller's  knowledge,  Seller has not  received  any written
  notices of zoning changes or special assessments with respect to the Property.
  
        As used  herein,  the term "to  Seller's  knowledge"  shall  mean only the
  "current actual knowledge  without inquiry" (as defined below) of Rock D'Errico,
  Vice President of PaineWebber Properties Incorporated, who, as portfolio manager
  for the  Seller,  is the  appropriate  person to whom the matters  described  in
  Sections  11.2(c) and (d) would be reported.  As used herein,  the term "current
  actual knowledge without inquiry" shall mean only the actual,  current conscious
  and not constructive,  imputed or implied  knowledge of such designee.  Anything
  herein  to the  contrary  notwithstanding,  such  designee  shall  not  have any
  personal  liability or obligation  whatsoever with respect to any of the matters
  set forth in this Agreement or any of the Seller's  representations herein being
  or becoming untrue, inaccurate or incomplete in any respect.
  
        Seller's  representations  and  warranties  set forth in this Section 11.2
  shall survive the Closing or earlier  termination of this Agreement for a period
  of six (6) months,  and no such  breach  shall be deemed to exist  unless  Buyer
  provides Seller with notice of an alleged breach prior to the expiration of such
  6-month period.
  
        As a condition  precedent to Buyer's  obligation to close the purchase and
  sale transaction  contemplated in this Agreement,  Seller's  representations and
  warranties  contained  herein  must  remain  and be true and  correct  as of the
  Closing Date. Prior to the Closing Date, Seller shall notify Buyer in writing of
  any facts,  conditions or circumstances  which render any of the representations
  and warranties set forth in this Section 11.2 in any way inaccurate, incomplete,
  incorrect or misleading.
  
                                    ARTICLE 12
  
                                  MISCELLANEOUS
  
        12.1 Permitted  Successors and Assigns.  Buyer may only assign or transfer
  its rights under this  Agreement to an entity  owned,  or controlled by Buyer or
  which owns or controls  Buyer.  The covenants and  agreements  contained in this
  Agreement  shall extend to and be obligatory  upon the permitted  successors and
  assigns of the respective parties to this Agreement.
  
        12.2 Notices. Except as otherwise specifically provided herein, any notice
  required or permitted to be delivered  under this Agreement  shall be in writing
  and shall be deemed  given if (i)  delivered  by hand  during  regular  business
  hours, (ii) sent by United States Postal Service,  registered or certified mail,
  postage  prepaid,  return  receipt  requested,  or  (iii)  sent  by a  reputable
  overnight  express mail service  that  provides  tracing and proof of receipt or
  refusal of items  mailed,  addressed to Seller or Buyer,  as the case may be, at
  the address or addresses set forth below or such other  addresses as the parties
  may designate in a notice  similarly  sent. Any notice given by a party to Title
  Company shall be simultaneously  given to the other party. Any notice given by a
  party to the other party  relating to its  entitlement  to the  Escrowed  Amount
  shall be simultaneously given to the Title Company.
  (1)   If to Seller:
  
                PaineWebber Qualified Plan Property Fund Three, LP
                c/o PaineWebber Properties
                265 Franklin Street
                Boston, MA 02110
                Attn:     Rock M. D'Errico, Vice President
  
                with a copy to:
  
                Goodwin, Procter & Hoar  LLP
                Exchange Place
                Boston, MA 02109
                Attn:     Susan Hall Mygatt, Esq.
  
  (2)   If to Buyer:
  
                Mid-America Apartments, L.P.
                c/o Mid-America Apartment Communities
                6584 Poplar
                Suite 340
                Memphis, TN 38138
                Attn:  Simon R.C. Wadsworth
                with a copy to
  
                Apperson, Crump, Duzane & Maxwell, PLC
                1755 Kirby Parkway
                Suite 100
                Memphis, TN  38120-4376
                Attn:  ________________
  
        (3)     If to the Title Company:
  
                First American Title Insurance Company
                National Accounts
                1025 Connecticut Ave. N.W.
                Suite 709
                Washington, DC  20036
                Attn:  Brian Lobuts, Vice President/Account Executive
  
        12.3  Construction.  Words of any gender used in this  Agreement  shall be
  held and construed to include any other gender,  and words of a singular  number
  shall be held to include the plural and vice versa,  unless the context requires
  otherwise.
  
        12.4 Captions.  The captions used in connection  with the Articles of this
  Agreement are for convenience  only and shall not be deemed to extend,  limit or
  otherwise define or construe the meaning of the language of this Agreement.
  
        12.5 No Other Parties.  Nothing in this Agreement,  express or implied, is
  intended  to confer upon any  person,  other than the  parties  hereto and their
  respective  successors and assigns, any rights or remedies under or by reason of
  this Agreement.
  
        12.6  Amendments.  This  Agreement  may  be  amended  only  by  a  written
  instrument executed by Seller and Buyer (or Buyer's assignee or transferee).
  
        12.7  Entire  Agreement.  This  Agreement  embodies  the entire  agreement
  between Seller and Buyer with respect to the  transaction  contemplated  in this
  Agreement,   and   there   have   been   and  are  no   covenants,   agreements,
  representations, warranties or restrictions between Seller and Buyer with regard
  thereto other than those set forth or provided for in this Agreement.
  
        12.8    Applicable Law.  This Agreement shall be construed under and in
  accordance with the laws of The State of Arkansas.
  
        12.9  Counterparts.  This  Agreement  may be  executed  in two (2) or more
  counterparts,  each of which shall be an original but such counterparts together
  shall constitute one and the same instrument notwithstanding that both Buyer and
  Seller are not signatory to the same counterpart.
  
        12.10 Title  Company.  The Title Company has executed this  Agreement only
  for the  purpose of  agreeing  to perform  the duties  assigned to it under this
  Agreement. The Title Company shall, upon receiving a copy of a notice given by a
  party in accordance with this Agreement claiming entitlement to all or a portion
  of the  Escrowed  Amount,  give a notice to the other  party  that such claim of
  entitlement  has been  made.  The Title  Company  shall not cause or permit  any
  portion of the Escrowed  Amount to be disbursed until the expiration of five (5)
  days of giving such notice whereupon, if the party to whom such notice was given
  has not given the Title  Company  notice of its objection to a  disbursement  in
  accordance  with the claim of  entitlement,  the  Title  Company  shall  cause a
  disbursement of the Escrowed Amount as requested.  If such party timely objects,
  however, the Title Company shall retain the Escrowed Amount and not disburse any
  portion of the same  unless  directed  by the mutual  written  direction  of the
  parties.  The Title Company shall at all times  disburse the Escrowed  Amount as
  required in a mutual written direction of the parties.
  
        12.11 Title Company,  Continued.  In the event of any disagreement between
  the parties,  the Title Company shall retain all deposits  pending  instructions
  mutually  agreed  to by  Seller  and  Buyer.  In the  event  there is no  mutual
  agreement by Seller and Buyer for  disbursements,  the Title  Company shall hold
  said  deposits  pending  a court  order  to  disburse.  The  Title  Company  may
  conclusively rely on the authenticity, validity and effectiveness of any writing
  delivered  to  it,  and  Title  Company  shall  not be  obligated  to  make  any
  investigation or determination, except as provided in the case of disputes as to
  the truth and accuracy of any information  contained  therein.  Buyer and Seller
  agree to defend, indemnify and hold Title Company harmless from any liabilities,
  suits,  claims,  or expenses  arising from or out of or in connection with Title
  Company's acts or failure to act hereunder, unless caused or created as a result
  of  Title  Company's  negligence,   and  Title  Company  shall  be  entitled  to
  reimbursement  by Buyer  and/or  Seller for all  reasonable  costs and  expenses
  incurred  in  the  performance  of  its  duties  hereunder  including,   without
  limitation,  all out-of-pocket expenses and reasonable attorneys fees of counsel
  retained by Title Company. If there is a settlement by Buyer and Seller prior to
  a court order,  Buyer and Seller will share equally in the expenses  incurred by
  the Title  Company.  Otherwise,  the  non-prevailing  party  shall  assume  full
  responsibility for the Title Company's  expenses.  Title Company is not required
  to advance or expend or risk its own funds or otherwise incur personal liability
  in performance of its duties  hereunder and it may require  advancement of funds
  by the parties.  Title Company will hold the Deposit in The First  National Bank
  of  Boston,  State  Street  Bank and  Trust  Company  or Fleet  Bank  (each,  an
  "Acceptable  Bank") in an account as required  by Section 3.2 above.  Except for
  any claim,  action or  proceeding  resulting in a final  determination  that the
  Title Company acted in bad faith,  negligently or engaged in any type of willful
  misconduct  the Title  Company  shall not be  responsible  for any loss or delay
  occasioned by the closure or insolvency  of the  institution  in which any funds
  are invested in  accordance  with this  Agreement;  provided  that Title Company
  deposits the Deposit in an Acceptable Bank as required herein. The Title Company
  shall have no  liability  for  interest  on such funds  provided  that the Title
  Company deposits the Deposit as required herein.
  
        12.12  Financial  Information.  At Buyer's request after the Closing Date,
  Seller agrees to make available to Buyer or Buyer's  designated  representative,
  at no cost to Seller,  upon  reasonable  request within six (6) months after the
  Closing,  such books,  accounts  and records as are in Seller's  possession  and
  which are  necessary for Buyer to conduct an audit of the  Property's  preceding
  fiscal year, and agrees to sign an appropriate disclosure letter prepared by the
  auditors.  Such  audit is to be  conducted  solely at  Buyer's  expense  for the
  purpose of satisfying its requirements as a publicly held entity. The use of any
  such information by Buyer or Buyer's designated  representative shall be subject
  to the  confidentiality  requirements  of Section 5.5, except to the extent such
  information is included in statements required by the SEC Regulations.
  
        12.13   Time of the Essence.  Time is expressly declared to be of the
  essence of this Agreement.
  
        12.14 No Personal Liability.  The obligations of Seller hereunder shall be
  binding only on the Property and neither Buyer nor anyone  claiming by,  through
  or under  Buyer shall be entitled  to obtain any  judgment  extending  liability
  beyond the Property or creating personal  liability on the part of the officers,
  directors,  shareholders,  or agents of Seller or any of their  successors.  The
  obligations of Buyer  hereunder shall be binding only on the assets of Buyer and
  neither Seller nor anyone claiming by, through or under Seller shall be entitled
  to obtain any judgment creating personal  liability on the part of the partners,
  officers, shareholders, or agents of Buyer or any of their successors.
  
        12.15  Survival.  All of the  representations,  warranties,  covenants and
  agreements of Seller and Buyer made in or pursuant to this  Agreement  shall not
  survive  the  Closing,  and  shall  merge  into the deed or  other  document  or
  instrument  executed and delivered in connection  herewith,  except as expressly
  set   forth  to  the   contrary.   Notwithstanding   the   foregoing,   (a)  the
  representations and warranties of Seller and Buyer shall survive the Closing for
  a period of not more than six (6) months from the date  thereof,  provided  that
  the party  alleging a breach of any of the other  parties'  representations  and
  warranties delivers notice to the alleged breaching party within such period.
  
                                    ARTICLE 13
  
                           IRS FORM 1099-S DESIGNATION
  
        13.1 In order to comply with information reporting requirements of Section
  6045(e) of the  Internal  Revenue  Code of 1986,  as amended,  and the  Treasury
  Regulations  thereunder,  the  parties  agree (1) to execute an IRS Form  1099-S
  Designation  Agreement in the form attached  hereto as Schedule F at or prior to
  the Closing to designate  the Title  Company (the  "Designee")  as the party who
  shall be responsible for reporting the contemplated  sale of the Property to the
  Internal  Revenue  Service  (the "IRS") on IRS Form  1099-S;  (2) to provide the
  Designee with the  information  necessary to complete Form 1099-S;  (3) that the
  Designee shall not be liable for the actions taken under this Agreement,  or for
  the  consequences  of those  actions,  except as they may be the result of gross
  negligence or willful  misconduct on the part of the Designee;  and (4) that the
  Designee shall be indemnified by the parties for any costs or expenses  incurred
  as a result of the actions taken hereunder,  except as they may be the result of
  gross negligence or willful misconduct on the part of the Designee. The Designee
  shall  provide  all  parties to this  transaction  with  copies of the IRS Forms
  1099-S filed with the IRS and with any other documents used to complete IRS Form
  1099-S.
  
        IN WITNESS  WHEREOF,  the parties have executed this  instrument as of the
  day and year first set forth above.
  
                                SELLER:
  
                           PaineWebber Qualified Plan Property Fund Three, LP
                           a Delaware limited partnership
  
                                By:  Third Qualified Properties, Inc.,
                                     its Managing General Partner
  
                                       By: /s/ Rock M. D'Errico
                                           --------------------
                                       Name: Rock M. D'Errico
                                       Title: Vice President
  
                                BUYER:
  
                             Mid-America Apartments, LP
  
                                By:   Mid-America Apartment Communities, Inc., a
                                      Tennessee corporation
  
                                      By: /s/ Simon R.C. Wadsworth
                                          ------------------------
                                      Name: Simon R.C. Wadsworth
                                      Title: Executive Vice President
  
                                TITLE COMPANY:
  
                                FIRST AMERICAN TITLE INSURANCE COMPANY
  
                             By:_______________________
                              
                                     National Division Counsel
  SCHEDULE A
  
                           Description of Real Property
  
  Part of the SW1/4 NE1/4,  Section 20, Township 2 North,  Range 13 West,  Pulaski
  County, Arkansas, being more particularly described as follows:  Starting at the
  Southwest corner of the NE1/4 of said Section 20; thence along the South line of
  said  NE1/4,  North 89 degrees 30 minutes 53 seconds  East,  544.08  feet to the
  point of beginning; thence leaving the South line of said NE1/4, North 1 degrees
  02 minutes 18 seconds  West,  1030.09  feet to a point on the North line of a 50
  foot Little Rock  Municipal  Water Works  easement;  thence  South 60 degrees 48
  minutes 48 seconds  East  along the North line of said 50 foot  easement  827.42
  feet to a point on the West right of way line of Sam Peck Road;  thence  South 2
  degrees 36 minutes 45 seconds East along said West right of way line 367.73 feet
  to the Northeast  corner of Lot 1, Tennis Club Addition (Plat book 35, page 54);
  thence  North 89 degrees 08 minutes 30 seconds West 299.40 feet  (platted  300.0
  feet) to the  Northwest  corner of Lot 1, Tennis Club  Addition;  thence South 0
  degrees 02 minutes  00  seconds  West along the West line of said Lot 1,  Tennis
  Club  Addition  260.00  feet to a point on the  South  line of the NE1/4 of said
  Section 20;  thence South 89 degrees 30 minutes 53 seconds West along said South
  line  (said  line also  being the North  line of  Woodlawn  Farm Acre  Tracts as
  recorded in Plat book 1, page 118) 420.96 feet to the point of beginning.
  
  TOGETHER  WITH the benefits of a 50 foot Little Rock Water works  easement  over
  the  Northern  portion  of the above  described  property  as shown by  Exchange
  Easement executed May 1, 1978, filed May 8, 1978, as Instrument Number
  78-18252, records of Pulaski County, Arkansas.
  SCHEDULE B
  
             Description of Personal Property and Intangible Property
             --------------------------------------------------------
  
  Seller's rights to use the name "Westside Creek"
  
  Any intangible property owned by Seller and directly related to the Property.
  BILL OF SALE
  
        THIS  INSTRUMENT  made and  executed as of the 28th day of March,  1997 by
  Paine  Webber  Qualified  Plan  Property  Fund  Three,  LP, a  Delaware  limited
  partnership,  ("Seller")  for the benefit of  Mid-America  Apartments,  L.P.,  a
  Tennessee limited partnership, ("Buyer").
        WHEREAS,  Seller and Buyer are parties to that Purchase and Sale Agreement
  (the "Agreement") relating to the apartment development in Little Rock, Arkansas
  known as Westside  Creek  Apartments,  Phase I, and more fully  described in the
  Agreement (the "Property") and
        WHEREAS,  the Agreement requires the delivery by Seller to Buyer of a Bill
  of Sale conveying  personal property owned by Seller located at, or relating to,
  the Property.
        NOW,  THEREFORE,  in  consideration  of the  premises,  and other good and
  valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
  acknowledged, it is agreed:
        1. Seller hereby bargains, sells, transfers,  assigns and conveys to Buyer
  all of the  personal  property  owned by Seller  located on, or relating to, the
  Property (the "Personal Property"),  including, but not limited to, the specific
  articles of tangible personal property listed on Exhibit A attached hereto.
        2. Seller warrants to Buyer that it owns the property listed on Exhibit A,
  that it is authorized to execute this Bill of Sale,  that the property listed on
  Exhibit A is unencumbered.  Seller agrees upon the request of and at the expense
  of Buyer, do, execute,  acknowledge and deliver, or cause to be done,  executed,
  acknowledged  and  delivered,   all  such  further  acts,  deeds,   instruments,
  transfers,  powers  of  attorney  or  assurances  as may  be  required  for  the
  assigning, transferring, granting, conveying, assuring and confirming unto Buyer
  any of the Personal Property.
        3. Buyer has inspected  the Personal  Property.  The Personal  Property is
  conveyed strictly "as is", "where is" and "with all faults",  without warranties
  of any kind or nature whatsoever,  express or implied, except as such warranties
  as to title are expressly set forth herein or in the Agreement. Without limiting
  the generality of the foregoing, no warranty of merchantability or fitness for a
  particular purpose is made with respect to any of the Personal Property.
        The  provisions  of this Bill of Sale shall inure to the benefit of and be
  binding upon the successors and assigns of Seller and Buyer.
  IN WITNESS  WHEREOF,  Seller has executed this Bill of Sale as of the date
  first above written.
  
                                      Paine Webber Qualified Plan Property Fund
                                          Three, LP,
                                      a Delaware limited partnership
  
                                      By: Third Qualified Properties, Inc.,
                                             its Managing General Partner
  
                                            By: /s/ Rock M. D'Errico
                                                --------------------
                                                Rock M. D'Errico, Vice President
  WARRANTY DEED
  KNOW ALL MEN BY THESE PRESENTS:
  
        That,  Paine Webber  Qualified Plan Property Fund Three,  LP  ("Grantor"),
  organized  under and by virtue  of the laws of the State of  Delaware,  by Third
  Qualified  Properties,  Inc., its Managing General Partner, for consideration of
  Six  Million  One  Hundred  Thousand  Dollars  ($6,100,000.00),  in hand paid by
  Mid-America Apartments,  L.P., a Tennessee limited partnership ("Grantee"),  the
  receipt of which is hereby acknowledged,  does hereby grant,  bargain,  sell and
  convey unto the said Grantee, and assigns forever, the following described land,
  situated in the County of Pulaski and State of Arkansas, to wit:
  
              Part of the SW1/4  NE1/4,  Section  20,  Township 2 North,  Range 13
              West, Pulaski County, Arkansas, being more particularly described as
              follows:  Starting  at the  Southwest  corner  of the  NE1/4 of said
              Section  20;  thence  along the South line of said  NE1/4,  North 89
              degrees  30 minutes 53  seconds  East,  544.08  feet to the point of
              beginning;  thence  leaving  the South line of said  NE1/4,  North 1
              degrees 02 minutes 18 seconds  West,  1030.09 feet to a point on the
              North line of a 50 foot Little Rock Municipal  Water Works easement;
              thence  South 60 degrees 48 minutes 48 seconds  East along the North
              line of said 50 foot  easement  827.42  feet to a point  on the West
              right  of way line of Sam  Peck  Road;  thence  South 2  degrees  36
              minutes  45 seconds  East  along said West right of way line  367.73
              feet to the Northeast  corner of Lot 1, Tennis Club  Addition  (Plat
              book 35,  page 54);  thence  North 89  degrees 08 minutes 30 seconds
              West 299.40 feet (platted 300.0 feet) to the Northwest corner of Lot
              1,  Tennis  Club  Addition;  thence  South 0 degrees  02  minutes 00
              seconds West along the West line of said Lot 1, Tennis Club Addition
              260.00  feet to a point  on the  South  line  of the  NE1/4  of said
              Section 20; thence South 89 degrees 30 minutes 53 seconds West along
              said South  line  (said  line also being the North line of  Woodlawn
              Farm Acre  Tracts as  recorded in Plat book 1, page 118) 420.96 feet
              to the point of beginning.
  
              TOGETHER  WITH the  benefit of a 50 foot  Little  Rock  Water  works
              easement over the Northern  portion of the above described  property
              as shown by Exchange  Easement  executed  May 1, 1978,  filed May 8,
              1978, as Instrument Number 78-18252, records of Pulaski
              County, Arkansas.
  
        TO HAVE AND TO HOLD, the same unto the said Grantee,  and assigns forever,
  with all appurtances thereunto belonging.  And the Grantor hereby covenants with
  the said Grantee,  that it will forever warrant and defend the title to the said
  lands against all claim whatever.
  WITNESS my hand and seal this 28th day of March, 1997.
  
                                      PAINEWEBBER QUALIFIED PLAN PROPERTY FUND
                                      THREE, LP, a Delaware Limited Partnership
  
                                      By:   Third Qualified Partners, Inc., its
                                            Managing General Partner
  
                                                  By:  /s/ Rock M. D'Errico
                                                      ---------------------
                                                  Name: Rock M. D'Errico
                                                  Title:   Vice President
  
                                  ACKNOWLEDGMENT
  
  COMMONWEALTH OF MASSACHUSETTS )
                                      )     SS
  COUNTY OF SUFFOLK             )
  
        On this 25th day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and  State,  appeared  in person the within  named Rock M.  D'Errico  to me well
  known,  who stated that he is the Vice  President of Third  Qualified  Partners,
  Inc., the Managing  General Partner of Paine Webber Qualified Plan Property Fund
  Three,  LP, and is duly  authorized  in that  capacity to execute the  foregoing
  instrument for and in the name and behalf of the said  partnership,  and further
  stated and  acknowledged  that he had so signed,  executed  and  delivered  said
  foregoing instrument for the consideration,  uses and purposes therein mentioned
  and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  25th day of March, 1997.
  
                                      /s/ Susan Hall Mygatt
                                      ---------------------
                                          Notary Public
                                          My Commission Expires: February 26, 1999
                                                                 -----------------
  ASSIGNMENT OF LEASES AND SECURITY DEPOSITS
  
        Paine Webber  Qualified Plan Property Fund Three,  LP, a Delaware  limited
  partnership ("Assignor"),  in consideration of the sum of Ten and No/100 Dollars
  ($10.00) in hand paid and other good and valuable consideration,  the receipt of
  which is hereby acknowledged,  hereby assigns,  transfers, sets over and conveys
  to Mid-America Apartments,  L.P., a Tennessee limited partnership  ("Assignee"),
  all  interest  as  Lessor in and to all  leases  in effect at the real  property
  described  on  Exhibit A  attached  hereto,  commonly  known as  Westside  Creek
  Apartments, in Little Rock, Arkansas ("Existing Leases").
  
        Assignor represents and warrants that:
  
        (a)   Assignor is the sole owner of all of the landlord's right, title
  and interest in and to the Existing Leases; and
  
        (b) No part of the rents in the  Existing  Leases are  pledged or assigned
  and no part of such rents for any period  subsequent to the date hereof has been
  collected  in  advance  of the due  date  hereof,  except  as  disclosed  on the
  certified  Rent Roll  delivered by Assignor to Assignee in  connection  herewith
  (the "Rent Roll"); and
  
        (c) The amount of deposits  collected  from tenants is correctly  shown on
  the Rent Roll.
  
        Assignee  hereby  accepts the  foregoing  Assignment  and agrees to assume
  fulfill,  perform and discharge  all the various  commitments,  obligations  and
  liabilities  of  Assignor  under  and by virtue of the  Existing  Leases  hereby
  assigned,  which arise on or after the  effective  date  hereof,  including  the
  return of security deposits, and does hereby agree to defend, indemnify and hold
  harmless  Assignor  from any and all claims or losses  incurred  by  Assignor by
  reason of the failure of Assignee  from and after the  effective  date hereof to
  fulfill,  perform and discharge all of the various commitments,  obligations and
  liabilities  of Assignor  under and by virtue of the  Existing  Leases  assigned
  hereunder,  including the return of security  deposits,  which arise on or after
  the date hereof,  including  losses  relating to reasonable  attorney's fees and
  expenses incurred to resolve such claims or losses. Assignor shall remain liable
  for performing and  discharging  all  obligations  and  liabilities  relating to
  Existing  Leases for which it was  responsible and which arose prior to the date
  hereof,  with the exception of obligations or liabilities related to the payment
  of money for which a  proration  credit  has been  given to  Assignee  (in which
  instance such payment  obligation  shall be Assignee's  and is hereby assumed by
  Assignee) and Assignor shall defend,  indemnify and hold harmless  Assignee from
  any and all  claims or losses  arising on or before the  effective  date  hereof
  being related to its obligations  under the Existing  Leases,  including  losses
  relating to  reasonable  attorney's  fees and expenses  incurred to resolve such
  claims or losses.
  IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
  of the 28th day of March, 1997, which Assignment is effective on that date.
  
                                      ASSIGNOR:
  
                                      PAINE WEBBER QUALIFIED PLAN PROPERTY FUND
                                           THREE, LP
  
                                      By:   Third Qualified Properties, Inc.,
                                            its Managing General Partner
  
                                            By: /s/ Rock M. D'Errico
                                                --------------------
                                                Rock M. D'Errico, Vice President
  
                                  ACKNOWLEDGMENT
  
  COMMONWEALTH OF MASSACHUSETTS )
                                 )     SS
  COUNTY OF SUFFOLK             )
  
        On this 25th day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and  State,  appeared  in person the within  named Rock M.  D'Errico  to me well
  known,  who stated that he is the Vice  President of Third  Qualified  Partners,
  Inc., the Managing  General Partner of Paine Webber Qualified Plan Property Fund
  Three,  LP, and is duly  authorized  in that  capacity to execute the  foregoing
  instrument for and in the name and behalf of the said  partnership,  and further
  stated and  acknowledged  that he had so signed,  executed  and  delivered  said
  foregoing instrument for the consideration,  uses and purposes therein mentioned
  and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  25th day of March, 1997.
  
                                      /s/ Susan Hall Mygatt
                                      ---------------------
                                          Notary Public
                                          My Commission Expires: February 26, 1999
  ASSIGNEE:
  
                                      MID-AMERICA APARTMENTS, L.P.
  
                                      By:   Mid-America Apartment Communities,
                                            Inc., a Tennessee corporation, sole
                                            General Partner
  
                                            By: /s/ Simon R.C. Wadsworth
                                                ------------------------
                                               Simon R.C. Wadsworth,
                                               Executive Vice President
  
                                  ACKNOWLEDGMENT
  
  STATE OF Tennessee     )
           ----------
                         )
  COUNTY OF Shelby       )
            ------
  
        On this ____ day of March,  1997,  before  me, the  undersigned,  a Notary
  Public, duly commissioned,  qualified and acting, within and for the said County
  and State, appeared in person the within named to me well known, who stated that
  he is the Executive Vice President of Mid-America Apartment  Communities,  Inc.,
  the General Partner of Mid-America  Apartments,  L.P., and is duly authorized in
  that capacity to execute the foregoing instrument for and in the name and behalf
  of the said  partnership,  and further  stated and  acknowledged  that he had so
  signed,  executed and delivered said foregoing instrument for the consideration,
  uses and purposes therein mentioned and set forth.
  
        IN TESTIMONY  WHEREOF,  I have hereunto set my hand and official seal this
  26th day of March, 1997.
  
                                            /s/ Sarah C. Hodges
                                            -------------------
                                                Notary Public
  
                                            My Commission Expires: 2-23-2000
  SCHEDULE A
  
                           Description of Real Property
  
  Part of the SW1/4 NE1/4,  Section 20, Township 2 North,  Range 13 West,  Pulaski
  County, Arkansas, being more particularly described as follows:  Starting at the
  Southwest corner of the NE1/4 of said Section 20; thence along the South line of
  said  NE1/4,  North 89 degrees 30 minutes 53 seconds  East,  544.08  feet to the
  point of beginning; thence leaving the South line of said NE1/4, North 1 degrees
  02 minutes 18 seconds  West,  1030.09  feet to a point on the North line of a 50
  foot Little Rock  Municipal  Water Works  easement;  thence  South 60 degrees 48
  minutes 48 seconds  East  along the North line of said 50 foot  easement  827.42
  feet to a point on the West right of way line of Sam Peck Road;  thence  South 2
  degrees 36 minutes 45 seconds East along said West right of way line 367.73 feet
  to the Northeast  corner of Lot 1, Tennis Club Addition (Plat book 35, page 54);
  thence  North 89 degrees 08 minutes 30 seconds West 299.40 feet  (platted  300.0
  feet) to the  Northwest  corner of Lot 1, Tennis Club  Addition;  thence South 0
  degrees 02 minutes  00  seconds  West along the West line of said Lot 1,  Tennis
  Club  Addition  260.00  feet to a point on the  South  line of the NE1/4 of said
  Section 20;  thence South 89 degrees 30 minutes 53 seconds West along said South
  line  (said  line also  being the North  line of  Woodlawn  Farm Acre  Tracts as
  recorded in Plat book 1, page 118) 420.96 feet to the point of beginning.
  
  TOGETHER  WITH the benefits of a 50 foot Little Rock Water works  easement  over
  the  Northern  portion  of the above  described  property  as shown by  Exchange
  Easement executed May 1, 1978, filed May 8, 1978, as Instrument Number
  78-18252, records of Pulaski County, Arkansas.