CAPTEC FRANCHISE CAPITAL PARTNERS L P IV, POS AM, 1997-10-23

CAPTEC FRANCHISE CAPITAL PARTNERS L P IV
POS AM, 1997-10-23
REAL ESTATE

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<PAGE> 1

As filed with the Securities and Exchange Commission on October 23, 1997

Registration No. 333-09371
- ----------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

POST-EFFECTIVE AMENDMENT NO. 3

TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
(EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS)

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24 FRANK LLOYD WRIGHT DRIVE
P.O. BOX 544
ANN ARBOR, MICHIGAN 48106-0544
(800) 522-7832
(Address and telephone number of principal executive offices)

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

W. ROSS MARTIN
CHIEF FINANCIAL OFFICER
24 FRANK LLOYD WRIGHT DRIVE
P.O. BOX 544
ANN ARBOR, MICHIGAN 48106-0544
(800) 522-7832
(Name, address and telephone number of agent for service)

---------------
COPIES TO:
JOEL J. MORRIS, ESQ.
JEFFREY L. FORMAN, ESQ.
JAFFE, RAITT, HEUER & WEISS,
PROFESSIONAL CORPORATION
ONE WOODWARD AVENUE, SUITE 2400
DETROIT, MICHIGAN 48226
(313) 961-8380

---------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under The Securities Act
of 1933, check the following box. [X]
---------------------------------

<PAGE> 2

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Item Number and Caption Location or Heading in Prospectus
----------------------- ---------------------------------
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . . Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges . . . . . . . . . Outside Front Cover Page; Summary of the Partnership and
the Offering; Risk Factors
4. Determination of Offering Price . . . . . . . . Not Applicable
5. Dilution . . . . . . . . . . . . . . . . . . . . Not Applicable
6. Selling Security Holders . . . . . . . . . . . . Not Applicable
7. Plan of Distribution . . . . . . . . . . . . . . Plan of Distribution; Distribution Reinvestment Plan Summary
8. Use of Proceeds . . . . . . . . . . . . . . . . Estimated Use of Proceeds
9. Selected Financial Data . . . . . . . . . . . . Not Applicable
10. Management's Discussion and Analysis of
Financial
Condition and Results of Operations . . . . . Management's Discussion and Analysis of Financial Condition
11. General Information as to Registrant . . . . . . Summary of the Partnership and the Offering; Management
12. Policy with Respect to Certain Activities . . . Summary of the Partnership and the Offering; Investment
Objectives and Policies; Reports to Limited Partners
13. Investment Policies of Registrant . . . . . . . Summary of the Partnership and the Offering; Investment
Objectives and Policies
14. Description of Real Estate . . . . . . . . . . . Summary of the Partnership and the Offering; Investment
Objectives and Policies
15. Operating Data . . . . . . . . . . . . . . . . . Not Applicable
16. Tax Treatment of Registrant and its Security
Holders . . . . . . . . . . . . . . . . . . . . Tax Aspects of the Offering
17. Market Price of and Dividends on the
Registrant's
Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . Summary of Partnership Agreement
18. Description of Registrant's Securities . . . . . Summary of the Partnership and the Offering
19. Legal Proceedings . . . . . . . . . . . . . . . Not Applicable
20. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . Not Applicable
21. Directors and Executive Officers . . . . . . . . Management
22. Executive Compensation . . . . . . . . . . . . . Compensation Table
23. Certain Relationships and Related Transactions . Not Applicable
24. Selection, Management and Custody of
Registrant's Investments . . . . . . . . . . . Summary of Partnership and the Offering; Conflicts of
Interest; Management
25. Policies with Respect to Certain Transactions . Investment Objectives and Policies
26. Limitations of Liability . . . . . . . . . . . . Risk Factors; Summary of Partnership Agreement
27. Financial Statements and Information . . . . . . Financial Statements
28. Interests of Named Experts and Counsel . . . . . Not Applicable
29. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities. . . . . . . . . . . . . . . . . . Not Applicable

</TABLE>

<PAGE> 3

SUPPLEMENT NO. 5
DATED OCTOBER 14, 1997
TO THE PROSPECTUS OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
DATED DECEMBER 23, 1996

This Supplement No. 5 is provided for the purpose of supplementing the
prospectus of Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership"), dated December 23, 1996 (the "Prospectus").
This Supplement No. 5 expands upon, supplements, modifies and supersedes
certain information contained in the Prospectus and consolidates and/or
supersedes information in Supplement No. 4 dated August 26, 1997. This
Supplement No. 5 must be read in conjunction with the Prospectus. Unless
otherwise defined, capitalized terms used herein shall have the same meanings
accorded such terms in the Prospectus.

As of October 14, 1997, the Partnership had raised $11,721,709.75
through the sale of 11,721.71 Units. The following material sets forth certain
information regarding (i) the Partnership's purchase of Properties and
Equipment Packages, (ii) revisions to the Partnership Agreement in response to
comments made by certain securities administrators in states in which the
Partnership intends to sell Units, and (iii) events that happened after the
date of the Prospectus.

PROPERTY ACQUISITIONS

REAL ESTATE

<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3/10/97 Boston Market $964,000 Finest Foodservice L.L.C.
Rochester, Minnesota
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7/25/97 Carino's Italian Kitchen $1,600,000 Kona Restaurant Group, Inc.
El Paso, Texas
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7/25/97 Golden Corral Restaurant $550,000 Corral South Store 3, Inc.
Lakeland, Florida
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8/8/97 Blockbuster Video $1,114,286 Blockbuster Videos, Inc.
Riverdale, Georgia
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10/14/97 Hollywood Video $1,386,000 Hollywood Entertainment Corporation
Hamilton, Ohio
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</TABLE>

EQUIPMENT

<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3/31/97 Applebee's Neighborhood $402,000 J.M.C. Limited Partnership
Grill & Bar
Midvale, Utah
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4/3/97 Black-Eyed Pea $350,000 DenAmerica Corporation
Plano, Texas
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5/27/97 Shells Seafood Restaurant $118,658 Shells Seafood Restaurants, Inc.
Jacksonville, Florida
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5/27/97 Shells Seafood Restaurant $93,460 Shells Seafood Restaurants, Inc.
Winter Haven, Florida
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6/4/97 Golden Corral Restaurant $506,198 Corral South Store 4, Inc.
Temple Terrace, Florida
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6/25/97 Arby's $159,471 Girardi-Riva Enterprises, Inc.
Pasco, Washington
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7/9/97 Breckenridge Brewery & Pub $791,000 BBI Acquisition Co.
Breckenridge, Colorado
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7/25/97 Burger King $30,600 Virginia QSC, L.L.C.
Colonia Heights, Virginia
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Boston Market Restaurant Lease (Rochester, Minnesota)

On March 10, 1997 the Partnership acquired the land and 3,035 square
foot building comprising a Boston Market restaurant located at 1201 S.
Broadway, Rochester, Minnesota (the "Minnesota Property"). The Minnesota
Property was constructed for its present use in November of 1995 and was fully
operational at the time of the purchase. The Minnesota Property was purchased
from, and leased back to Finest Foodservice L.L.C., a Delaware limited
liability company ("Finest Foodservice"). Finest Foodservice operates casual
dining restaurants under the

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primary trade name of Boston Market. The Partnership purchased the Minnesota
Property for a purchase price of $964,000.

Finest Foodservice and the Partnership have entered into a lease (the
"Finest Foodservice Lease"), which is an absolute net lease, whereby Finest
Foodservice is responsible for all expenses related to the Minnesota Property,
including real estate taxes, insurance, maintenance and repair costs. The
Finest Foodservice Lease term expires on April 1, 2012 with five renewal
options of five years each. Annual rental (the "Annual Rental") is payable
according to the following schedule:

<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-5 $101,220
Lease Years 6-10 $111,342
Lease Years 11-15 $122,525
Lease Years 16-20 $134,777
Lease Years 21-25 $148,255
Lease Years 26-30 $163,081
Lease Years 31-40 Fair market value determined for each subsequent
five-year period at the beginning of the 31st and
36th Lease Years
</TABLE>

Beginning in the sixth lease year, and in addition to the Annual Rental
provided above, Finest Foodservice will pay percentage rent on an annual basis
equal to the difference between five percent of "gross sales" (as defined in
the Finest Foodservice Lease) during such lease year less the Annual Rental
payable for such lease year.

Boston Chicken, Inc., a Delaware corporation (the "Option Holder"),
has an option to purchase and first right of refusal to purchase the Minnesota
Property. The Option Holder has the right to purchase the Minnesota Property
on the same terms and conditions as set forth in the offer or the Option Holder
may elect an alternate purchase price as follows: (a) during the first and
second lease years, an alternate purchase price equal to the total Annual
Rental payable for the lease year subsequent to the lease year in which the
option is exercised divided by 9.462%; (b) during the third lease year, an
alternate purchase price equal to the total Annual Rental for the third ease
year divided by 9.978%; (c) during the fourth lease year, an alternative
purchase price equal to the Annual Rental for the fourth lease year divided by
9.785%; and (d) during the fifth lease year, an alternative purchase price
equal to the Annual Rental for the fifth lease divided by 9.580%.

The Option Holder has the option to purchase the Minnesota Property at
the following times and option prices:

<TABLE>
<CAPTION>
PERIOD OPTION PRICE
<S> <C>

Lease Years 6-8 Annual Rent payable for the Lease Year subsequent to
the Lease Year in which the option is exercised
divided by ten percent (10%)
Last ninety (90) days of the 15th Lease Year Annual Rent payable for the 16th Lease Year divided
by ten percent (10%)
Last ninety (90) days of the 30th Lease Year The lesser of (i) fair market value or (ii) one
hundred ten percent (110%) of the Annual Rent payable
for the 31st Lease Year divided by ten percent (10%)
Last ninety (90) days of the 40th The lesser of (i) fair market value or (ii) one
Lease Year hundred ten percent (110%) of the Annual Rent payable
for the 40th Lease Year divided by ten percent (10%)
</TABLE>

The current annual rent per square foot for the Minnesota Property is
$33.35 per square foot. The depreciable basis of the Minnesota Property for
federal tax purposes if $614,000 and it will be depreciated using the straight
line method over 39 years, a rate of $15,744 per year.

An Affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $38,560 and expects
to receive an additional fee of $9,640 from the Partnership after leveraging
the Property, as provided for in the Prospectus. As provided in the
Partnership Agreement, these fees are being paid for services rendered in
connection with the selection, evaluation and acquisition of the Minnesota
Property. In addition, Finest Foodservice has paid to the same affiliate a
closing fee equal to $4,820 as provided for in the Partnership Agreement.
Finest Foodservice also paid all of the expenses incident to the closing of the
transaction contemplated by this commitment including, without limitation,
title insurance premiums, recording fees and expenses and transfer taxes.

The Finest Foodservice Lease contains a substitution option that
provides in the event that Finest Foodservice determines the Minnesota Property
is inadequate or unprofitable or is rendered unsuitable by

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condemnation or casualty, Finest Foodservice, subject to the Partnership's
approval, may substitute another property of equal or greater current value
having a Boston Market restaurant located thereon. All obligations under the
Finest Foodservice Lease, including Annual Rental, percentage rent and taxes
attributable to rent and the Minnesota property, are unconditionally guaranteed
by Boston Chicken, Inc., a Delaware corporation.

The Finest Foodservice Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Minnesota Property by Finest Foodservice; (ii) the failure by Finest
Foodservice to make any payment due under the Finest Foodservice Lease;
(iii) the failure by Finest Foodservice to observe or perform any of the
covenants, conditions, or provisions of the Finest Foodservice Lease; and (iv)
Finest Foodservice making any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Finest
Foodservice, the Finest Foodservice Lease contains remedy provisions which are
summarized as follows: (i) the Partnership may terminate the Finest Foodservice
Lease and take possession of the Minnesota Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Finest Foodservice to remain in
possession of the Minnesota Property, in which case the Finest Foodservice
Lease would continue to be in effect; or (iii) the Partnership may pursue any
other legal remedy available.

Carino's Italian Kitchen Lease (El Paso, Texas)

On July 25, 1997 the Partnership acquired the land and 6,257 square
foot building comprising a Carino's Italian Kitchen restaurant located
at 675 Sunland Park Drive, El Paso, Texas (the "Carino's Property"). The
Carino's Property was constructed for its present use in 1995 and was fully
operational at the time of the purchase. The Carino's Property was purchased
from and leased back to Kona Restaurant Group, Inc., a Delaware corporation
("Kona Group"). Kona Group operates casual dining restaurants under the primary
trade names of Carino's Italian Kitchen and Kona Ranch Steak House. The
Partnership purchased a fee simple interest in the Carino's Property for a
purchase price of $1,600,000.

Kona Group and the Partnership have entered into a lease (the "Carino's
Lease"), which is an absolute net lease, whereby Kona Group is responsible for
all expenses related to the Carino's Property including real estate taxes,
insurance, maintenance and repair costs. The Carino's Lease term expires on
July 31, 2014 with one renewal option of six years and one renewal option of
seven years. The initial annual rent is equal to eleven percent (11%) of the
purchase price and will be payable in monthly installments on the first day of
each month. Thus, based on the purchase price of $1,600,000 the rent in the
first year of the Carino's Lease is $176,000 per year, or $14,667 per month. The
annual rent will increase by five percent (5%) on the August 1, 2000 and every
three years thereafter.

Kona Group has an option to purchase the Carino's Property during the
sixty-first (61st) full month of the Carino's Lease. In the event that Kona
Group elects to exercise the option to purchase in the sixty-first full month of
the Carino's Lease, the option price is $1,940,400.

The current annual rent per square foot for the Carino's Property is
$28.13 per square foot. The depreciable basis of the Carino's Property for
federal tax purposes is $500,000 and it will be depreciated using the straight
line method over 39 years, a rate of $12,821 per year.

An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $64,000 and
expects to receive an additional fee of $16,000 from the Partnership after
leveraging the Property, as provided for in the Prospectus. These fees are
being paid for services rendered in connection with the selection, evaluation
and acquisition of the Carino's Property, as provided for in the Partnership
Agreement. In addition, Kona Group has paid to the same affiliate a commitment
fee equal to $16,000 as provided for in the Partnership Agreement. The Tenant
also paid all of the expenses incident to the closing of the transaction
contemplated by this commitment including, without limitation, title insurance
premiums, recording fees and expenses, and transfer taxes.

The Carino's Lease contains material default provisions that include,
but are not limited to: (i) the vacating or abandonment of the Carino's
Property by Kona Group; (ii) the failure by Kona Group to make any payment due
under the Carino's Lease; (iii) the failure by Kona Group to observe or perform
any of the covenants, conditions, or provisions of the Carino's Lease; and (iv)
the making by Kona Group of any general arrangement or general assignment for
the benefit of creditors. In the event of a material default by Kona Group,
the Carino's Lease contains remedy provisions which are summarized as follows:
(i) the Partnership may terminate the Carino's Lease and take possession of the
Carino's Property, in which case the Partnership would be entitled to damages
incurred by reason of the material default; (ii) the Partnership may permit
Kona Group to remain in possession of the Carino's Property, in which case the
Carino's Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.

Golden Corral Restaurant Lease (Lakeland, Florida)

On July 25, 1997, the Partnership acquired an undivided 34.375%
interest as a tenant in common with Captec Franchise Capital Partners L.P. III,
a Delaware limited partnership and affiliate of the Managing General

S-3

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Partner ("Captec III"), in the land and 8,825 square foot building located at
4532 South Florida Avenue, Lakeland, Florida (the "Lakeland Property"). The
Lakeland Property was constructed for its present use in May of 1997 and leased
to Corral South Store 3, Inc., a Florida corporation ("Corral South 3").
Corral South 3 operates casual dining restaurants under the primary trade name
of Golden Corral Restaurants. Captec 3 purchased the Lakeland Property for a
total purchase price of $1,600,000 and sold the 34.375% interest to the
Partnership for $550,000.

Corral South 3 and the Partnership have entered into a lease (the
"Corral South 3 Lease"), which is an absolute net lease, whereby Corral South 3
is responsible for all expenses related to the Lakeland Property including real
estate taxes, insurance, maintenance and repair costs. The Corral South 3
Lease term commenced on June 1, 1997 and expires fifteen years thereafter. The
Corral South 3 Lease has two renewal options of five years each. The initial
annual rent is $174,400, or $14,533 per month, and increases by 8% on the
five-year anniversary of the Corral South 3 Lease and every five years
thereafter (including any renewal options). The Partnership's pro-rata share
of the initial annual rent will be $59,950 or $4,996 per month. The initial
annual rent per square foot on the Lakeland Property is $19.76. The
depreciable basis of the Lakeland Property for federal tax purposes is
$1,080,000 and it will be depreciated using the straight line method over 39
years, a rate of $27,692 per year.

The obligations under the Corral South 3 Lease are guaranteed for the
benefit of the Partnership by David C. Brown, an individual. David C. Brown is
the sole stockholder of Corral South 3. Corral South 3 has an option to
purchase the Lakeland Property commencing on the sixty-first month of the
Corral South 3 Lease. In the event that Corral South 3 elects to exercise the
option to purchase, the option price shall be $1,833,520.

An affiliate of the Managing General Partner has received an
acquisition fee from the Partnership in an amount equal to $22,000 and
expects to receive an additional fee of $5,500 from the Partnership after
leveraging the Lakeland Property as provided for in the Prospectus. These fees
are being paid for services rendered in connection with the selection,
evaluation and acquisition of the Lakeland Property, as provided for in the
Partnership Agreement. In addition, Corral South 3 has paid to the same
affiliate a commitment fee equal to $5,500, as provided for in the Partnership
Agreement. Corral South 3 has paid all of the expenses incident to the closing
of the transaction contemplated by this commitment including, without
limitation, the Partnership's attorney's fees, title insurance premiums,
recording fees and expenses and transfer taxes.

The Corral South 3 Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Lakeland Property by Corral South 3; (ii) the failure by Corral South 3 to make
any payment due under the Corral South 3 Lease; (iii) the failure by Corral
South 3 to observe or perform any of the covenants, conditions, or provisions
of the Corral South 3 Lease; and (iv) the making by Corral South 3 of any
general arrangement or general assignment for the benefit of creditors. In the
event of a material default by Corral South 3, the Corral South 3 Lease
contains remedy provisions which are summarized as follows: (i) the Partnership
may terminate the Corral South 3 Lease and take possession of the Lakeland
Property, in which case the Partnership would be entitled to damages incurred
by reason of the material default; (ii) the Partnership may permit Corral South
3 to remain in possession of the Lakeland Property, in which case the Corral
South 3 Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.

Blockbuster Video Lease (Riverdale, Georgia)

On August 8, 1997 the Partnership acquired the land and 6,500 square
foot building comprising a Blockbuster Video located at 8529 Georgia Highway 85,
Riverdale, Georgia (the "Blockbuster Property"). The Blockbuster Property was
constructed for its present use in 1995 and was fully operational at the time of
the purchase. The Blockbuster Property was purchased from Atlantis Properties,
L.L.C., a Georgia limited liability company ("Atlantis Properties"), for a
purchase price of $1,114,286.

The Partnership purchased the Blockbuster Property subject to a lease
dated April 4, 1997 (the "Blockbuster Lease") between Atlantis Properties and
Blockbuster Videos, Inc., a Texas corporation ("Blockbuster"), which is a net
lease, whereby Blockbuster is responsible for most expenses related to the
Blockbuster Property including real estate taxes, insurance, maintenance and
repair costs, except that the Partnership will be responsible for the repair
and maintenance of the structural systems including the roof, load-bearing
walls and floor slabs and exterior masonry walls and foundations. The
Blockbuster Lease term expires on June 30, 2007 with three renewal options of
five years each. Annual rental is payable according to the following schedule:

PERIOD ANNUAL RENTAL

Lease Years 1-5 $117,975
Lease Years 6-10 $132,145
Lease Years 11-15 $145,360
Lease Years 16-20 $159,900
Lease Years 21-25 $175,890

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The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first five years of the Blockbuster Lease is
$9,831. Viacom International, Inc., a Delaware corporation, unconditionally
and irrevocably guaranteed the full and complete performance of the Blockbuster
Lease.

The current annual rent per square foot for the Blockbuster Property is
$18.15 per square foot. The depreciable basis of the Blockbuster Property for
federal tax purposes is $754,286 and it will be depreciated using the straight
line method over 39 years, a rate of $19,341 per year.

An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $44,571 and
expects to receive an additional fee of $11,143 from the Partnership after
leveraging the Property, as provided for in the Prospectus. These fees are
being paid for services rendered in connection with the selection, evaluation
and acquisition of the Blockbuster Property, as provided for in the Partnership
Agreement. In addition, Blockbuster has paid to the same affiliate a commitment
fee equal to $11,143 as provided for in the Partnership Agreement. The Tenant
also paid all of the expenses incident to the closing of the transaction
contemplated by this commitment including, without limitation, title insurance
premiums, recording fees and expenses and transfer taxes.

The Blockbuster Lease contains material default provisions that
include, but are not limited to: (i) the failure by Blockbuster to make
any payment due under the Blockbuster Lease; (ii) the failure by Blockbuster to
observe or perform any of the covenants, conditions, or provisions of the
Blockbuster Lease; and (iii) the making by Blockbuster of any general
arrangement or general assignment for the benefit of creditors. In the event of
a material default by Blockbuster, the Blockbuster Lease contains remedy
provisions which are summarized as follows: (i) the Partnership may terminate
the Blockbuster Lease and take possession of the Blockbuster Property, in which
case the Partnership would be entitled to damages incurred by reason of the
material default; (ii) the Partnership may permit Blockbuster to remain in
possession of the Blockbuster Property, in which case the Blockbuster Lease
would continue to be in effect; or (iii) the Partnership may pursue any other
legal remedy available; provided, however, that the Partnership may not
accelerate rent and is required to mitigate damages.

Hollywood Video Lease (Hamilton, Ohio)

On October 14, 1997, the Partnership acquired the land and 7,488 square
foot building comprising a Hollywood Video located at 1491 Main Street,
Hamilton, Ohio (the "Hollywood Video Property"). The Hollywood Video Property
was constructed for its present use in 1997 and was fully operational at the
time of the purchase. The Hollywood Video Property was purchased from Blue
Freedom Holdings, LLC, a Kentucky limited liability company, and leased to
Hollywood Entertainment Corporation, an Oregon corporation ("Hollywood
Entertainment"). The Partnership purchased a fee simple interest in the
Hollywood Video Property for a purchase price of $1,386,000

The Partnership purchased the property subject to a lease between Blue
Freedom Holdings, LLC and Hollywood Entertainment which commenced on July 24,
1997 (the "Hollywood Video Lease"). The Hollywood Video Lease is an absolute
net lease, whereby Hollywood Entertainment is responsible for all expenses
related to the Hollywood Video Property including real estate taxes, insurance,
maintenance and repair costs. The Hollywood Video Lease term expires on July
30, 2012 with three renewal options of five years each. The initial annual rent
is equal to eleven percent (11%) of the purchase price and will be payable in
monthly installments on the first day of each month. Thus, based on the
purchase price of $1,386,000 the rent in the first year of the Hollywood Video
Lease is $152,418 per year, or $12,701.50 per month. The annual rent shall be
adjusted on the first day of the sixty-first month and every sixty months
thereafter by the lesser of the Percentage CPI Increase, as defined in the
Hollywood Video Lease, or ten percent (10%).

The current annual rent per square foot for the Hollywood Video
Property is $20.35 per square foot. The depreciable basis of the
Hollywood Video Property for federal tax purposes is $811,000 and it will be
depreciated using the straight line method over 39 years, a rate of $20,795 per
year.

An affiliate of the Managing General Partner has received an
Acquisition Fee from the Partnership in an amount equal to $55,440 and
expects to receive an additional fee of $13,860 from the Partnership after
leveraging the Property, as provided for in the Prospectus. These fees are
being paid for services rendered in connection with the selection, evaluation
and acquisition of the Hollywood Video Property, as provided for in the
Partnership Agreement. In addition, Hollywood Entertainment has paid to the
same affiliate a commitment fee equal to $13,860 as provided for in the
Partnership Agreement. The tenant also paid all of the expenses incident to the
closing of the transaction contemplated by this commitment including, without
limitation, title insurance premiums, recording fees and expenses and transfer
taxes.

The Hollywood Video Lease contains material default provisions that
include, but are not limited to: (i) the failure by Hollywood Entertainment to
make any payment due under the Hollywood Video Lease; (ii) the failure by
Hollywood Entertainment to observe or perform any of the covenants, conditions,
or provisions of the Hollywood Video Lease; and (iii) the making by Hollywood
Entertainment of any general arrangement or general assignment for the benefit
of creditors. In the event of a material default by Hollywood Entertainment,
the Hollywood Video

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Lease contains remedy provisions which are summarized as follows: (i) the
Partnership may terminate the Hollywood Video Lease and take possession of the
Hollywood Video Property, in which case the Partnership would be entitled to
damages incurred by reason of the material default; (ii) the Partnership may
permit Hollywood Entertainment to remain in possession of the Hollywood Video
Property, in which case the Hollywood Video Lease would continue to be in
effect; or (iii) the Partnership may pursue any other legal remedy available.

Applebee's Neighborhood Grill & Bar Equipment Lease (Midvale, Utah)

On March 31, 1997, the Partnership acquired, effective as of February
20, 1997, restaurant equipment (the "Applebee's Equipment") to be used in the
operation of an Applebee's Neighborhood Grill & Bar, located at 7045 South 1300
East, Midvale, Utah for $402,000.00. The Applebee's Equipment was acquired
from Captec Financial Group, Inc. ("Captec"), an affiliate of the General
Partners, which purchased the Applebee's Equipment from various vendors for a
total cost of $402,000 and leased it to J.M.C. Limited Partnership, a Utah
limited partnership, DBA Applebees ( "JMC"), by entering into a lease dated
March 1, 1997 (the "JMC Lease") with JMC on the Partnership's standard form of
equipment lease. JMC owns and operates the Applebee's Neighborhood Grill & Bar
restaurant under a franchise agreement.

On March 31, 1997, Captec assigned the JMC Lease to the Partnership,
effective as of February 20, 1997. Under the terms of the JMC Lease, JMC is
responsible for all expenses related to the Applebee's Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 84 months
and the minimum annual rent is $82,056 payable in monthly installments of
$6,838 on the 1st day of each month. The annual rent remains fixed for the
entire JMC Lease term. The JMC Lease is guaranteed by the following: John B.
Prince, an individual; and William Tell, Inc., a Utah corporation. At the end
of the JMC Lease term, upon at least 90 days prior irrevocable notice to the
Partnership, JMC may purchase all of the Equipment for the lesser of fair
market value or Forty Thousand Two Hundred Dollars ($40,200).

JMC paid the first and last month's rent of $13,676 and interim rent
in the amount of $2,051 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $16,080, and expects to receive an additional fee of $4,020 from the
Partnership after leveraging the Applebee's Equipment, as provided for in the
Partnership Agreement. In addition, JMC paid a commitment fee equal to $4,020
to the same affiliate as provided for in the Partnership Agreement.

Black-Eyed Pea Equipment Lease (Plano, Texas)

On April 3, 1997, the Partnership acquired restaurant equipment (the
"Black-Eyed Pea Equipment") to be used in the operation of a Black-Eyed Pea
restaurant located at 1905 Preston Road, Plano, Texas for $350,000. The
Black-Eyed Pea Equipment was acquired from DenAmerica Corp., which purchased
the Black-Eyed Pea Equipment from various vendors for a total cost of $350,000.
The Partnership leased the Black-Eyed Pea Equipment to DenAmerica Corporation,
a Georgia corporation d/b/a Black-Eyed Pea ("DenAmerica"), by entering into a
lease dated as of April 15, 1997 (the "DenAmerica Lease") with DenAmerica on
the Partnership's standard form of equipment lease. DenAmerica operates and
franchises restaurants under the primary trade names of Denny's and Black-Eyed
Pea.

Under the terms of the DenAmerica Lease, DenAmerica is responsible for
all expenses related to the Black-Eyed Pea Equipment including taxes,
insurance, maintenance and repair costs. The lease term is 84 months and the
minimum annual rent is $70,392 payable in monthly installments of $5,866 on the
15th day of each month. The annual rent remains fixed for the entire
DenAmerica Lease term. At the end of the DenAmerica Lease term, upon at least
90 days prior irrevocable notice to the Partnership, DenAmerica may purchase
all of the Black-Eyed Equipment for its fair market value at the date of the
exercise of the option.

The Partnership consented to a sublease between DenAmerica and Texas
BEP., LP., a Texas limited partnership, on the same terms and conditions as the
DenAmerica Lease. DenAmerica remains the obligor under the DenAmerica Lease.

DenAmerica paid the first and last month's rent of $11,732 and interim
rent in the amount of $2,346 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $14,000 and expects to receive an additional fee of $3,500 from the
Partnership after leveraging the Black-Eyed Pea Equipment, as provided for in
the Partnership Agreement. In addition, DenAmerica paid a commitment fee equal
to $3,500 to the same affiliate as provided for in the Partnership Agreement.

Jacksonville Shells Seafood Equipment Lease (Jacksonville, Florida)

On May 27,1997, the Partnership acquired restaurant equipment to be
used in the operation of a Shells Seafood Restaurant, located at 9965 San Jose
Blvd., Jacksonville, Florida (the "Jacksonville Shells Equipment"). The
Jacksonville Shells Equipment was purchased from various vendors for a total
cost of $118,658.30 and leased to Shells Seafood Restaurants, Inc., a Delaware
corporation ("Shells Seafood"). Shells Seafood owns and operates Shells
Seafood Restaurants.

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<PAGE> 9

The Partnership and Shells Seafood entered into the Partnership's
standard form of equipment lease commencing on June 1, 1997 (the "Jacksonville
Shells Seafood Lease"). Under the terms of the Jacksonville Shells Seafood
Lease, Shells Seafood is responsible for all expenses related to the
Jacksonville Shells Equipment including taxes, insurance, maintenance and
repair costs. The lease term is 60 months and the minimum annual rent is
$31,781 payable in monthly installments of $2,648 on the 1st day of each month.
The annual rent remains fixed for the entire Jacksonville Shells Lease term.
At the end of the Jacksonville Shells Seafood Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, Shells Seafood may purchase all of
the Jacksonville Shells Equipment for $11,866.

Shells Seafood paid the first and last month's rent of $5,297 and
interim rent in the amount of $441 to the Partnership. An affiliate of the
Managing General Partner received an Acquisition Fee from the Partnership in an
amount equal to $4,746, and expects to receive an additional fee of $1,187 from
the Partnership after leveraging the Jacksonville Shells Equipment, as provided
for in the Partnership Agreement. In addition, Shells Seafood paid a
commitment fee equal to $1,187 to the same affiliate as provided for in the
Partnership Agreement.

Winter Haven Shells Seafood Equipment Lease (Winter Haven, Florida)

On May 27,1997, the Partnership acquired restaurant equipment to be
used in the operation of a Shells Seafood Restaurant, located at 1551 3rd
Street, SW, Winter Haven, Florida (the "Winter Haven Shells Equipment"). The
Winter Haven Shells Equipment was purchased from various vendors for a total
cost of $93,460 and leased to Shells Seafood.

The Partnership and Shells Seafood entered into the Partnership's
standard form of equipment lease commencing on June 1, 1997 (the "Winter Haven
Shells Seafood Lease"). Under the terms of the Winter Haven Shells Seafood
Lease, Shells Seafood is responsible for all expenses related to the Winter
Haven Shells Equipment including taxes, insurance, maintenance and repair
costs. The lease term is 60 months and the minimum annual rent is $25,032
payable in monthly installments of $2,086 on the 1st day of each month. The
annual rent remains fixed for the entire Winter Haven Shells Lease term. At
the end of the Winter Haven Shells Seafood Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, Shells Seafood may purchase all of
the Winter Haven Shells Equipment for $9,346.

Shells Seafood paid the first and last month's rent of $4,172 and
interim rent in the amount of $348 to the Partnership. An affiliate of the
Managing General Partner received an Acquisition Fee from the Partnership in an
amount equal to $3,738, and expect to receive an additional fee of $935 from
the Partnership after leveraging the Winter Haven Shells Equipment, as provided
for in the Partnership Agreement. In addition, Shells Seafood paid a
commitment fee equal to $935 to the same affiliate as provided for in the
Partnership Agreement.

Golden Corral Equipment Lease (Temple Terrace, Florida)

On June 4,1997, the Partnership acquired restaurant equipment to be
used in the operation of a Golden Corral Restaurant located at 11801 56th
Street North, Temple Terrace, Florida (the "Golden Corral Equipment"). The
Golden Corral Equipment was purchased from various vendors for a total cost of
$506,198 and leased to Corral South Store 4, Inc. a Florida corporation dba
Golden Corral Restaurant ("Corral South 4"). Corral South 4 owns and operates
the Golden Corral Restaurant under a franchise agreement.

The Partnership and Corral South 4 entered into the Partnership's
standard form of equipment lease commencing on June 15, 1997 (the "Corral South
4 Lease"). Under the terms of the Corral South 4 Lease, Corral South 4 is
responsible for all expenses related to the Golden Corral Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 60 months
and the annual rent is $131,207 payable in monthly installments of $10,934 on
the 15th day of each month. The annual rent remains fixed for the entire
Golden Corral Lease term. All obligations under the Corral South 4 Lease are
guaranteed by David C. Brown, an individual. At the end of the Corral South 4
Lease term, upon at least 90 days prior irrevocable notice to the Partnership,
Corral South 4 may purchase all of the Golden Corral Equipment for $1.00.

At closing Corral South 4 paid the first and last month's rent of
$21,868 and interim rent in the amount of $4,374 to the Partnership. An
affiliate of the Managing General Partner received an Acquisition Fee from the
Partnership in an amount equal to $20,248, and expects to receive an additional
fee of $5,062 from the Partnership after leveraging the Golden Corral
Equipment, as provided for in the Partnership Agreement. In addition, Corral
South 4 paid a commitment fee equal to $5,500 to the same affiliate as provided
for in the Partnership Agreement.

Arby's Equipment Lease (Pasco, Texas)

On June 25,1997, the Partnership acquired restaurant equipment to be
used in the operation of an Arby's restaurant, located at 2411 West Court,
Pasco, Washington (the "Arby's Equipment"). The Arby's Equipment was acquired
from various vendors for a total cost of $159,470.62 and leased to Girardi-Riva
Enterprises, Inc., an

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<PAGE> 10

Arizona corporation dba Arby's Restaurant ("Girardi-Riva"). Girardi-Riva owns
and operates the Arby's restaurant under a franchise agreement.

The Partnership and Girardi-Riva entered into the Partnership's
standard form of equipment lease (the "Girardi-Riva Lease") commencing July 1,
1997. Under the terms of the Girardi-Riva Lease, Girardi-Riva is responsible
for all expenses related to the Arby's Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $32,724 payable in monthly installments of $2,727 on the 1st day
of each month. The annual rent remains fixed for the entire Girardi-Riva Lease
term. All obligations under the Girardi-Riva Lease are jointly and severally
guaranteed by the following individuals: Richard Riva, Sharri Riva, Thomas
Girardi and Kathy Girardi. At the end of the Girardi-Riva Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Girardi-Riva may
purchase all of the Arby's Equipment for $1.00.

Girardi-Riva paid the first and last month's rent of $5,454 and
interim rent in the amount of $545 to the Partnership. An affiliate of the
Managing General Partner received an acquisition fee from the Partnership in an
amount equal to $6,379, and expects to receive an additional fee of $1,595 from
the Partnership after leveraging the Arby's Equipment, as provided for in the
Partnership Agreement. In addition, Girardi-Riva paid a commitment fee equal
to $1,595 to the same affiliate as provided for in the Partnership Agreement.

Breckenridge Brewery & Pub Equipment Lease (Breckinridge, Colorado)

On July 9, 1997, the Partnership purchased restaurant equipment to be
used in the operation of an Breckenridge Brewery & Pub, located at 600 South
Main, Breckenridge, Colorado (the "Breckenridge Equipment") for $791,000. The
Breckenridge Equipment was acquired from, and leased back to BBI Acquisition
Co., a Colorado corporation dba Breckenridge Brewery & Pub ("BBI").

The Partnership and BBI entered into the Partnership's standard form
of equipment lease ("BBI Lease") commencing August 1, 1997. Under the terms of
the BBI Lease, BBI is responsible for all expenses related to the Breckenridge
Equipment including taxes, insurance, maintenance and repair costs. The lease
term is 84 months and the minimum annual rent is $163,262 payable in monthly
installments of $13,605.20 on the 1st day of each month. The annual rent
remains fixed for the entire BBI Lease term. All obligations under the BBI
Lease are unconditionally guaranteed by Breckenridge Holding Company, a
Colorado corporation. At the end of the BBI Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, BBI may purchase all of the
Breckenridge Equipment for $1.00.

BBI paid the first and last month's rent of $27,210 and interim rent
in the amount of $10,094 to the Partnership. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $31,640, and expects to receive an additional fee of $7,910 from the
Partnership after leveraging the Breckenridge Equipment, as provided for in the
Partnership Agreement. In addition, BBI paid a commitment fee equal to $7,910
to the same affiliate as provided for in the Partnership Agreement.

Burger King Equipment Lease (Colonial Heights, Virginia)

On July 25,1997, the Partnership made an initial disbursement of
$30,600 for restaurant equipment to be used in the operation of a Burger King
restaurant, located at 401 Southpark Blvd., Colonial Heights, Virginia ("Burger
King Equipment"). The Burger King Equipment will be acquired from various
vendors for a total cost of up to $310,000 and leased to Virginia QSC, LLC, a
Delaware limited liability company dba Burger King ("Virginia QSC"). Virginia
QSC owns and operates the Burger King restaurant under a franchise agreement.

The Partnership and Virginia QSC have entered into a Progress Payment
Agreement dated July 15, 1997, ("Agreement") whereby the Partnership shall
provide disbursements of down payments and interim payments to pay approved
costs associated with the purchase of the Burger King Equipment. Under the
terms of the Agreement, it is estimated that all of the Burger King Equipment
will be delivered and installed and all disbursements made on or before October
31, 1997. Virginia QSC shall pay to the Partnership a daily progress rental
payment for each day that any down payment and/or interim payment remains
outstanding. The daily progress payment shall be equal to .00031944 times the
total amount outstanding to the date upon which the last of the following
events shall have occurred: (a) Virginia QSC shall have paid the first
regularly monthly scheduled installment of rent; or (b) all of the Burger King
Equipment had been delivered, installed and accepted by Virginia QSC.

The Partnership and Virginia QSC entered into the Partnership's
standard form of equipment lease (the "Virginia QSC Lease") dated July 15,
1997. Under the terms of the Virginia QSC Lease, Virginia QSC is responsible
for all expenses related to the Burger King Equipment including taxes,
insurance, maintenance and repair costs. The base lease term is 84 months and
will commence on the first or fifteenth of the month following the final
funding under the Agreement. Under the terms of the Virginia QSC Lease, the
minimum annual rent is $64,058 and is payable in monthly installments of
$5,338. The annual rent remains fixed for the entire Virginia QSC Lease term.
All obligations under the Virginia QSC Lease are jointly and severally
unconditionally guaranteed by the following individuals: Justin Hathaway,
Steven Porath and Alan Buford, each of whom is a

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<PAGE> 11

member of Virginia QSC. At the end of the Virginia QSC Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Virginia QSC may
purchase all of the Burger King Equipment for $1.00.

Virginia QSC will pay the first and last month's rent of $5,338 and
interim rent to the Partnership at final funding. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $1,224, and expects to receive an additional acquisition fees of
$11,176 at final funding of the additional $279,400. In addition, an affiliate
of the Managing General Partner will receive $3,100 from the Partnership after
leveraging the Burger King Equipment, as provided for in the Partnership
Agreement. Virginia QSC paid a commitment fee equal to $3,100 to the same
affiliate, as provided for in the Partnership Agreement.

Property and Equipment Acquisitions-General

With respect to each of the Properties, an affiliate of the Managing
General Partner (i) considered factors such as the potential value of the site,
the financial condition and business and operating history of the tenant, and
demographic data for the area in which the Property is located, (ii) analyzed
demographic, geographic and market diversification data for the area in which
each Property is located and reviewed an independent MAI appraisal of each
Property and the analysis regarding comparable properties contained therein,
and (iii) negotiated the purchase price.

The Partnership purchased each Property and Equipment package with
cash from Offering proceeds. It is anticipated that each such Property and
Equipment package will be leveraged as provided for in the Prospectus.
However, the Partnership presently does not have a financing commitment. With
respect to each of the Properties and the Equipment packages, the General
Partners believe that the amount of insurance carried by each tenant is
adequate.

RISK FACTORS

The following paragraph is added to the end of the section of the
Prospectus entitled "Risk Factors - Litigation against General Partner and
Possible Adverse Effect on Net Worth":

On January 31, 1997, the Court's decision was reversed on
appeal by the Michigan Court of Appeals and the case will either be
dismissed or subject to further proceedings if the plaintiffs appeal
the Court of Appeals decision.

PRIOR OFFERINGS

The following text has been added to the first paragraph
of this Section of the Prospectus:

On January 29, 1997, effective as of January 1, 1997, Captec
L.P. II sold all of its equipment packages and real estate properties
to an Affiliate of the Managing General Partner for $2,760,000 in a
transaction that was consented to by a majority in interest of the
limited partners. Simultaneously with such sale, Captec L.P. II paid
all of its expenses and distributed its remaining $2,000,569 to its
limited partners.

PLAN OF DISTRIBUTION

The subsections of this section of the Prospectus titled "General",
"Compensation", and "Indemnification" are amended, effective as of the date of
this Prospectus Supplement, to read in their entirety as follows:

GENERAL

The Offering is being made on a "best efforts, part or none" basis
through broker-dealers who are members of the National Association of
Securities Dealers, Inc. (the "Participating Dealers") and Captec Securities
Corporation, which will act as Dealer-Manager. The individual General Partner
and the corporate General Partner are each an Affiliate of the Dealer-Manager.
The Offering is conditioned upon sale of the Minimum Number of Units prior to
the close of business one year after the effective date of this Prospectus (the
"Termination Date"). Since the Minimum Number of Units was sold on March 5,
1997, prior to the Termination Date, the General Partners may extend the
Offering to a date not later than the earlier to occur: (i) sale of all Units
offered hereby; or (ii) two years after the effective date of this Prospectus
(the "Extended Termination Date"). After the Minimum Number of Units was sold,
the Partnership has and will schedule interim closings at which subscribers
will be admitted as Limited Partners on at least a monthly basis.

The Offering is made pursuant to agreements among the General
Partners, the Partnership, the Dealer-Manager and the Participating Dealers
pursuant to which the Participating Dealers are acting as agents of the
Partnership for the purpose of offering and selling Units. The Units are being
offered on a "best efforts, part or

S-9

<PAGE> 12

none" basis, which means that Participating Dealers are not obligated to
purchase any Units but are required only to use their best efforts to sell
Units to investors.

COMPENSATION

Subject to the provisions for reduced selling commissions, the
Partnership will pay selling commissions equal to 8.0% of Gross Proceeds to the
Dealer-Manager for Units sold by it. The Dealer-Manager may reallow fees of
up to 8% to the Participating Dealers with respect to Units sold by them. The
General Partners also paid an additional selling commission equal to 1% of
Gross Proceeds to Participating Dealers from Units sold until the Minimum
Number of Units was sold. The Dealer-Manager may also receive up to 0.5% of
Gross Proceeds as reimbursement for bona fide due diligence expenses. The
Dealer-Manager may reallow to any Participating Dealer or its registered
representatives all or any portion of this fee based upon the bona fide due
diligence expenses incurred. The General Partners will receive a
Non-Accountable Expense Allowance in an amount equal to 2% of Gross Proceeds to
cover certain expenses relating to the offer and sale of Units (including the
additional 1% selling commission payable until the Minimum Number of Units is
sold). In no event will sales commissions, the Non-Accountable Expense
Allowance, Organization and Offering Expenses, wholesaling salaries and
expenses and expenses of sales seminars, exceed in the aggregate, 13% of Gross
Proceeds.

The General Partners, their Affiliates and Participating Dealers may
purchase up to 10% of the Units, net of any selling commissions but otherwise
on the same terms as purchasers who are not Affiliates. Purchase of Units by
the General Partners and their Affiliates will not be counted for purposes of
reaching the Minimum Number of Units. Any purchases by the General Partners
will be for investment purposes only and not with a view toward resale.
Investors will not have a right to withdraw and receive a return of their
contributions. Neither the General Partners nor any of their Affiliates will
directly or indirectly pay or award any compensation to a third party engaged
as an investment adviser as inducement to advise favorably toward investment in
the Partnership. In addition, the selling commissions to the Dealer-Manager and
Participating Dealers will be reduced on sales of 501 or more Units in
accordance with the following Schedule:

<TABLE>
<CAPTION>
Dollar Amount Purchased Investor's Purchase
----------------------- -------------------
Price Selling Commission Per Unit
----- ---------------------------
Per Unit Percent Dollar Amount
-------- ------- -------------
<S> <C> <C> <C>
$1,000 - $500,000 $1,000 8.0% $80.00
$501,000 - $750,000 $980 6.0% $60.00
$751,000 - $1,000,000 $970 5.0% $50.00
$1,001,000 - $1,500,000 $960 4.0% $40.00
$1,501,000 - $2,000,000 $950 3.0% $30.00
$2,001,000 and above $940 2.0% $20.00
</TABLE>

The purchaser of such Units will be credited with such reduced
commission and the net proceeds to the Partnership will not be affected by the
discount. Subscriptions may be combined for purposes of determining the volume
discounts applicable to subscriptions from a purchaser.

INDEMNIFICATION

The Partnership, General Partners, and Dealer-Manager have agreed to
indemnify the Participating Dealers and the Participating Dealers have agreed
to indemnify the General Partners, Dealer-Manager, and the Partnership against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). In the opinion of the Securities and Exchange Commission,
indemnification for liabilities under the Act is against public policy and
therefore unenforceable. The Participating Dealers may be deemed to be
underwriters as that term is defined in the Act.

AMENDMENT TO THE AGREEMENT OF LIMITED
PARTNERSHIP OF CAPTEC FRANCHISE
CAPITAL PARTNERS IV

Sections 12, 14, and 15 of the Partnership's Agreement of Limited
Partnership included as Exhibit B to the Prospectus (the "Partnership
Agreement"), have been corrected and amended, consistent with the disclosures
in the Prospectus as set forth below:

12. TRANSFERABILITY OF UNITS

Section 12.1.4 of the Partnership Agreement has been amended so as to read in
its entirety as follows:

12.1.4 if the Managing General Partner determines in its sole
discretion that such assignment would prevent the Partnership from being able
to satisfy either the 2% or 5% "safe

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<PAGE> 13

harbors" contained in Service Advance Notice 88-75 or in corresponding
regulations or the Partnership has received an opinion of counsel or a
favorable service ruling that such transfer would result in the Partnership
being classified as a "publicly-traded partnership" for federal income tax
purposes.

14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE
MANAGING GENERAL PARTNER

The first sentence of Section 14.4.5 has been amended so as to permit
the Partnership to only enter into co-tenancy arrangements, joint ventures or
general partnerships with non-affiliates that own one or more Assets, and
Section 14.4.5 now reads in its entirety as follows:

cause the Partnership to invest in any Asset with unaffiliated
parties that own one or more Assets through co-tenancy arrangements,
joint ventures or general partnerships except on substantially the
same terms and conditions (although not necessarily the same
percentage interest) as such unaffiliated parties; provided, however,
that no such investment shall be entered into by the Partnership (i)
if it involves the payment of duplicative property management or
other fees which would have the effect of circumventing any of the
restrictions on and prohibited transactions involving conflicts of
interest contained in this Partnership Agreement, and (ii) unless the
Partnership acquires a controlling interest in such joint venture or
partnership.

15. RIGHTS AND POWERS OF THE LIMITED PARTNERS

The last sentence of Section 15.3 has been revised so as to remove the
General Partners' right to vote the Units of those Limited Partners that do not
submit a vote within a certain time period, and Section 15.3 reads in its
entirety as follows:

FINANCIAL STATEMENTS

The financial statements of the Partnership and Managing Partner set
forth on pages F-1 to F-7 of the Prospectus are replaced in their entirety by
the financial statements on the following pages.

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<PAGE> 14

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

CAPTEC FRANCHISE CAPITAL CORPORATION IV

REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
</TABLE>

F-1

<PAGE> 15

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:

We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of December 31, 1996 and July 30, 1996. This financial
statement is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statement is free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Captec Franchise Capital
Partners L.P. IV as of December 31, 1996 and July 30, 1996, in conformity with
generally accepted accounting principles.

/S/ COOPERS & LYBRAND L.L.P.

Detroit, Michigan
March 14, 1997

F-2

<PAGE> 16

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET

December 31, 1996 and July 30, 1996

<TABLE>
<CAPTION>
DECEMBER JULY
ASSETS 1996 1996
<S> <C> <C> <C>

Cash $ - $ 300
Prepaid expenses 339 -
----- -----

Total assets $ 339 $ 300
===== =====

LIABILITIES & PARTNERS' CAPITAL

Liabilities:
Total liabilities, overdraft $ 39 $ -
----- -----

Partners' Capital:
Limited partners' capital accounts 100 100
General partners' capital account 200 200
----- -----

Total partners' capital 300 300
----- -----

Total liabilities & partners' capital $ 339 $ 300
===== =====
</TABLE>

The accompanying notes are an integral part of the balance sheet.

F-3

<PAGE> 17

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO BALANCE SHEET

1. THE PARTNERSHIP:

Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was organized on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment leased on a
"triple net" or "double net" basis, primarily to operators of national and
regional franchised businesses, principally restaurants, as well as national
and regional retail chains. The Partnership has not commenced operations.

The General Partners of the Partnership are Captec Franchise Capital
Corporation IV (the "Corporation"), a wholly owned subsidiary of Captec
Financial Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
hereinafter collectively referred to as the Sponsors. Patrick L. Beach is also
the Chairman of the Board of Directors, President and Chief Executive Officer
of the Corporation and Captec. The General Partners have each contributed $100
in cash to the Partnership as a Capital Contribution.

The Partnership has undertaken a public offering of limited partnership
interests ("Units") in 1996. A minimum of 2,000 Units and a maximum of 30,000
Units, priced at $1,000 per Unit, Will be offered on a "best efforts, part or
none" basis. As of December 31, 1996, the Partnership had not issued any
Units.

The initial Limited Partner of the Partnership is Patrick L. Beach. Mr. Beach
has contributed $100 to the capital of the Partnership and has received 0.1
Unit. Upon admission to the Partnership of any other Limited Partner, the
initial Limited Partner may withdraw from the Partnership, in which case his
0.1 Unit shall be redeemed for $100.

2. ORGANIZATION AND OFFERING EXPENSES:

Organization and offering expenses, excluding selling commissions, will be paid
initially by the Sponsors and/or their affiliates and reimbursed by the
Partnership in an amount equal to up to three percent (3%) of the gross
proceeds of the offering (less any amounts paid directly by the Partnership).
The Sponsors are liable for all expenses of the offering and for the general
obligations of the Partnership if no Units are sold (i.e., if subscriptions are
not received for the minimum number of Units). In addition, the Sponsors
and/or their affiliates will be paid a non-accountable expense allowance by the
Partnership in an amount equal to two percent (2%) of the gross proceeds of the
offering.

The Sponsors have also guaranteed payment of organization and offering expenses
which exceed 13% of the gross proceeds of the offering.

3. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:

The Partnership was organized in July 1996, but has not commenced operations.
As no revenues or expenses have been incurred, no Statement of Operations,
Statement of Partners' Capital or Statement of Cash Flows are included for the
Partnership.

4. SUBSEQUENT EVENT:

On March 5, 1997, the Partnership accepted subscriptions for 2,015.5 Units, at
which time $2,015,500 of proceeds from the sale of such Units were released
from escrow and the Partnership immediately commenced operations.

F-4

<PAGE> 18

CAPTEC FRANCHISE CAPITAL CORPORATION IV
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Captec Franchise Capital Corporation IV:

We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of December 31, 1996 and July 30, 1996, and the related
statements of cash flows for the period from July 30, 1996 to December 31,
1996. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence support financial statement amounts and disclosures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Corporation IV as of December 31, 1996 and July 30, 1996, and its cash flows
for the period from July 30, 1996 to December 31, 1996, in conformity with
generally accepted accounting principles.

/S/ COOPERS & LYBRAND L.L.P.

Detroit, Michigan
March 14, 1997

F-5

<PAGE> 19

CAPTEC FRANCHISE CAPITAL CORPORATION IV
BALANCE SHEET

December 31, 1996 and July 30, 1996

<TABLE>
<CAPTION>
DECEMBER JULY
ASSETS 1996 1996

<S> <C> <C>
Cash $ 1,407 $ 900
Investment in partnership 100 100
Reimbursable organizational & offering expenses 505,108 -
Receivable from affiliate 1,697 -
Other assets 16,038 -
-------- ------

Total assets $524,350 $1,000
======== ======

LIABILITIES & STOCKHOLDERS' EQUITY

Total liabilities:
Accounts payable $ 37,022 $ -
Payable to affiliates 486,328 -
-------- ------

Total liabilities 523,350 -
-------- ------

Stockholders' equity:

Common stock, no par value; 60,000 shares 1,000 1,000
authorized, 1,000 shares issued and
outstanding
retained earnings (accumulated deficit) - -
-------- ------

Total stockholders' equity 1,000 1,000
-------- ------

Total liabilities & stockholders' equity $524,350 $1,000
======== ======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE> 20

CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996

<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net income $ -
Adjustments to net income:
Other assets (16,038)
Accounts payable 37,022
---------

Net cash provided by operating activities 20,984
---------

Cash flows from investing activities:
Investment in partnership (100)
---------

Net cash used in investing activities (100)
---------

Cash flows from financing activities: -
---------
Issuance of common stock 1,000
Proceeds from borrowings from affiliates 486,328
Payment of reimbursable offering expenses (506,805)
---------

Net cash provided by financing activities (19,477)
---------

Net increase (decrease) in cash 1,407

Cash, beginning of year -
---------

Cash, end of period $ 1,407
---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7

<PAGE> 21

CAPTEC FRANCHISE CAPITAL CORPORATION IV
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION:

Captec Franchise Capital Corporation IV (the "Corporation") is a Michigan
corporation organized on July 22, 1996. The Corporation was formed for the
purpose of serving as the managing general partner of Captec Franchise Capital
Partners L.P. IV (the "Partnership"), a Delaware limited partnership.

The Corporation is a wholly owned subsidiary of Captec Financial Group, Inc.
("Captec"). Captec has paid $1,000 in cash to the Corporation for the purchase
of 1,000 shares of common stock of the Corporation. As a general partner of
the Partnership, the Corporation has contributed $100 to the capital of the
Partnership, Patrick L. Beach is also a general partner of the Partnership and
is the Chairman of the Board of Directors, President and Chief Executive
Officer of the Corporation and Captec. Each general partner has a 0.5 percent
share in the Partnership's net income or loss.

The Partnership anticipates undertaking a public offering of limited
partnership interests ("Units") in 1996. A minimum of 2,000 Units and a
maximum of 30,000 Units, priced at $1,000 per Unit, will be offered on a "best
efforts, part or none" basis. As of December 31, 1996, the Partnership had not
issued any units.

Affiliates of the Corporation are expected to provide various services to the
Partnership and will be paid certain fees for such services as specified in the
Partnership Agreement.

Following is a summary of the Corporation's significant accounting principles:

a. INCOME TAXES: The Corporation reports its income for federal income
tax purposes in the consolidated tax return of Captec. Income taxes
are allocated by Captec to the Corporation on the separate return
basis. The Corporation's income tax expense reflected in the
statement of operations and that computed by applying the statutory
federal income tax rate are approximately equal. Deferred income
taxes, for financial reporting purposes, are not material.

b. ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.

2. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:

For the period from July 30, 1996 to December 31, 1996, the Corporation had no
sources of revenue or expense, since operations of the Partnership had not
commenced. As no revenues or expenses had been incurred, no Statement of
Operations or Statement of Partners' Capital are included for the Corporation.

3. RELATED PARTY TRANSACTIONS:

Organization and offering expenses related to the offering of Units are prepaid
by the Corporation and reimbursed by the Partnership in an amount equal to up
to three percent (3%) of the gross proceeds of the offering (less any amounts
paid directly by the Partnership). The Corporation is also reimbursed by the
Partnership for a non-accountable expense allowance in an amount equal to two
percent (2%) of the gross proceeds of the offering. The Corporation did not
receive reimbursements from the Partnership in 1996 because the Partnership had
not commenced operations.

The Corporation receives advances from Captec in order to have sufficient funds
for the prepayment of organization and offering and non-accountable expenses
made on behalf of the Partnership. As the Corporation receives reimbursements
of such prepaid expenses, the advances to Captec are repaid.

4. SUBSEQUENT EVENT:

F-8

<PAGE> 22

Prospectus dated December 23, 1996

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
(a Delaware limited partnership)

$2,000,000 Minimum Offering of Units of Limited Partnership Interest
$1,000 per Unit
Minimum Investment - 2 Units
(except as set forth under "Who Should Invest")

Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership"), hereby offers up to 30,000 units (the "Maximum
Number of Units") and a minimum of 2,000 Units (the "Minimum Number of Units")
of limited partnership interest (the "Units") at $1,000 per Unit (the
"Offering"). The Partnership will acquire income-producing commercial real
properties ("Properties") and equipment ("Equipment"), which will be leased
primarily to operators of national chain and nationally franchised fast-food,
family style and dinner house restaurants as well as other franchised or chain
businesses pursuant to leases requiring the lessee to pay all taxes,
assessments, utilities, insurance, maintenance, and repair costs associated with
such Properties (a "Triple Net Lease") or leases differing from Triple Net
Leases only in that the Partnership is responsible for the maintenance of the
exterior walls and roof of the Property (a "Double Net Lease"). No Properties
or Equipment will be acquired by the Partnership unless and until lease
commitments satisfactory to the General Partners are obtained. The General
Partners anticipate that Properties and Equipment will be sold within five to
ten years and five to seven years, respectively, from the date of acquisition.
Of the proceeds from the sale of Units received by the Partnership, not less
than 83% will be used to acquire Properties and Equipment, 9% will be paid in
fees and expense reimbursements to Affiliates of the General Partners for their
services, and the balance will be reallowed to Participating Dealers as selling
commissions.

AN INVESTMENT IN THE PARTNERSHIP INVOLVES SIGNIFICANT RISKS, SOME OF WHICH
ARE SUMMARIZED BELOW. SEE ALSO "RISK FACTORS."

- The Partnership has not yet identified specific Properties
and/or Equipment for investment. See "Risk Factors -
Investment Risks - Possible Lack of Diversification," Real
Estate and Equipment Risks - Unspecified Fund; Blind Pool
Company," and "Real Estate and Equipment Risks - Risks of
Ownership of Properties and Equipment," and "Investment
Objectives and Policies."

- Should the Partnership be funded with less than the maximum
amount of net proceeds from this Offering, the
diversification of the Partnership's portfolio will be
diminished. See "Risk Factors - Investment Risks - Possible
Lack of Diversification." See also "Investment Objectives
and Policies."

- There will be limited ability to resell or liquidate an
investment in the Units and various restrictions on
transfers of Units. See "Risk Factors - Investment Risks -
Lack of Liquidity - Limited Transferability," and "Summary
of Partnership Agreement - Restriction on Transfer of
Units."

- The General Partners and their Affiliates will be subject to
various conflicts of interest in managing the Partnership.
See "Conflicts of Interest."

- Most major decisions regarding the Partnership and its
operation will be made by the General Partners. See "Risk
Factors - Investment Risks - Dependence on General Partners;
Lack of Experience."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
<PAGE> 23

OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

ii
<PAGE> 24

<TABLE>
<CAPTION>
Public Sales Proceeds to the
Offering Price Commission(2) Partnership (3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit (Minimum
Subscription: 2 Units)(1) $1,000 $80 $920

Minimum(1) $2,000,000 $160,000 $1,840,000
Maximum(1) $30,000,000 $2,400,000 $27,600,000
- --------------------------------------------------------------------------------------------------------

</TABLE>
(Footnotes on following pages)

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THERE IS PRESENTLY NO ESTABLISHED MARKET FOR THE UNITS AND THERE ARE
LIMITATIONS ON THE TRANSFERABILITY OF THE UNITS. See "Summary of Partnership
Agreement - Restrictions on Transfer of Units."

The date of this Prospectus is December 23, 1996.

________________________

iii
<PAGE> 25
_____________________
(Footnotes to cover page)
(1) The Offering is being made on a "best efforts, part or none" basis by
selected broker-dealers (the "Participating Dealers") who are members of the
National Association of Securities Dealers, Inc. (the "NASD"). The minimum
subscription is two Units ($2,000). The minimum subscription for Iowa IRAs and
Minnesota and South Carolina investors is two and one-half Units ($2,500). Tax
Exempt Investors (Investors that are described in section 168(h)(2) of the
Internal Revenue Code) who are residents of Minnesota may have minimum
subscriptions of two Units ($2,000). Residents of Nebraska must have minimum
subscriptions of five Units ($5,000). The minimum subscription for Tax Exempt
Investors who are residents of Nebraska is two Units ($2,000). The Offering is
conditioned upon the sale of a minimum of 2,000 Units (the "Minimum Number of
Units") by the close of business one year after the effective date of this
Prospectus (the "Termination Date"). No sales will be made in Pennsylvania
until a minimum of $3,000,000 in sales is reached. If cleared funds
representing subscriptions for the Minimum Number of Units are deposited with
Michigan National Bank in Ann Arbor, Michigan (the "Escrow Agent") by the
Termination Date, the General Partners may extend the Offering to a date no
later than two years after the effective date of this Prospectus (the
"Extended Termination Date"), subject, however, to requalification in certain
states. There can be no assurance that requalification will be granted in all
states.

(2) Subject to sale of the Minimum Number of Units, the Partnership will pay
selling commissions equal to 8% of the gross proceeds (subject to certain
volume purchase adjustments) of the Offering (the "Gross Proceeds") to
Participating Dealers for Units sold by them. In addition, the General
Partners will pay an additional selling commission equal to 1% of Gross
Proceeds to Participating Dealers from Units sold until the Minimum Number of
Units is sold. This additional commission will be paid by the General Partners
out of the Non-Accountable Expense Allowance.

(3) Gross Proceeds to the Partnership are before deducting the reimbursement
to the General Partners from the Partnership for their non-accountable expenses
(the "Non-Accountable Expense Allowance") related to the Offering in an amount
equal to 2% of Gross Proceeds, and other Organization and Offering Expenses,
expected to equal approximately 3% of Gross Proceeds. See "Use of Proceeds,"
"Compensation Table" and "Plan of Distribution." The General Partners may
reimburse Participating Dealers and their registered representatives for
accountable bona fide due diligence expenses including, but not limited to, due
diligence meetings, third party reports, and travel, in an amount of up to 0.5%
of Gross Proceeds from such amounts. In no event will the aggregate amount of
selling commissions, the Non-Accountable Expense Allowance used for
underwriting compensation, and funds paid as underwriting compensation from any
other source be greater than 10% of the Gross Proceeds nor will an amount more
than 0.5% of the Gross Proceeds be paid, by the Partnership or any Affiliate of
the Partnership or the General Partners, as reimbursement for due diligence
expenses.

The General Partners, their Affiliates, and Participating Dealers may
purchase up to 10% of the Units, net of selling commissions, but otherwise on
the same terms as purchasers who are not Affiliates. Purchase of Units by the
General Partners and their Affiliates will not be counted toward sale of the
Minimum Number of Units. Any Units purchased by them will be for investment
purposes only and not with a view toward resale. See "Plan of Distribution."
UNITS PURCHASED BY THE GENERAL PARTNERS OR THEIR AFFILIATES WILL NOT BE VOTED
ON MATTERS PERTAINING TO THE REMOVAL OR ELECTION OF THE GENERAL PARTNERS OR ANY
TRANSACTION BETWEEN THE PARTNERSHIP AND THE GENERAL PARTNERS OR THEIR
AFFILIATES. ON ALL OTHER MATTERS UNITS WILL BE VOTED BY THE GENERAL PARTNERS
OR THEIR AFFILIATES IN THEIR DISCRETION AND MAY, ACCORDINGLY, BE VOTED CONTRARY
TO THE VOTES OF UNAFFILIATED LIMITED PARTNERS

The General Partners will distribute to each Limited Partner: (i) annual
reports containing the Partnership's audited financial statements (within 120
days after the close of each fiscal year); (ii) a quarterly financial highlight
report of the Partnership's performance; and (iii) upon the request of a
Limited Partner, quarterly reports containing the Partnership's unaudited
financial statements (within 60 days after the close of each fiscal quarter).
See "Reports to Limited Partners."

THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR
CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCES WHICH MAY
FLOW FROM AN INVESTMENT IN THE PARTNERSHIP IS PROHIBITED.

iv
<PAGE> 26

UNTIL MARCH 23, 1997 (NINETY DAYS AFTER THE EFFECTIVE DATE OF THE
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

v
<PAGE> 27

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY OF THE PARTNERSHIP AND THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Partnership and the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Terms of the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Who Should Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Partnership Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Partnership Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Compensation to General Partners and their Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Limited Partners' Share of Cash Flow and Net Sale or Refinancing Proceeds . . . . . . . . . . . . . . . . . . . 5
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Depreciation Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Borrowing Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reports to Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Statements of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fiscal Year of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Distribution Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Right to Tender Units for Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Transferability of the Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

vi
<PAGE> 28
<TABLE>
<S> <C>
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Unspecified Fund; Blind Pool Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dependence on General Partners; Lack of Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Litigation against General Partner and Possible Adverse Effect on Net Worth . . . . . . . . . . . . . . . . . 11
Possible Lack of Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Lack of Liquidity - Limited Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Possible Loss of Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Possible Loss of Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Special Tax and Other Risks for Investments by Qualified Pension and Profit-Sharing Trusts . . . . . . . . . . 13
Indemnification of General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lack of Independent Counsel for Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lack of Partnership Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Real Estate and Equipment Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risks of Ownership of Properties and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risks From Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Risk of Single-Use Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Risks Resulting from Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Possible Environmental Liabilities and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Risk of Acquiring Properties Under Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Risks Relating to Creditworthiness of Lessees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Risk of Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Risks Regarding Availability of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Risks as to Delays in Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Resale of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Uninsured Losses; Costs and Availability of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Risk of Recharacterization of Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . 17
Risks Relating to Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Federal Income Tax Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Risk of Loss of Partnership Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Audit Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Limitation of Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Risk of Disallowance of Deductions on Factual or Other Grounds . . . . . . . . . . . . . . . . . . . . . . . 19
Risk of Reclassification of Partnership Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Risk of Federal Income Tax Liability In Excess of Sale or Refinancing Proceeds
or Operating Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Risk of Taxability of Cash Distributions to Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . 20
Risk of Reallocation of Profits or Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Risk of "Dealer" Status of Partnership or Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 20
Risk of Recharacterization of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Risk of Legislative or Other Actions Changing Anticipated Tax Consequences . . . . . . . . . . . . . . . . . 21

ESTIMATED USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

</TABLE>
vii
<PAGE> 29
<TABLE>
<S> <C>
Compensation for the Time and Service of the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . 28
Resolution of Conflicting Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Property and Equipment Management Services Will be Rendered by the General Partners
or their Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Receipt of Fees and Other Compensation by the General Partners and their Affiliates . . . . . . . . . . . . . . 29
Non-Arm's-Length Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Prior Business Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Legal Counsel for the Partnership and the General Partners is the Same Law Firm . . . . . . . . . . . . . . . . 30
Indirect Ownership of Properties and/or Equipment with Affiliates . . . . . . . . . . . . . . . . . . . . . . . 31
Conflicts with Affiliated Lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

FIDUCIARY RESPONSIBILITIES OF THE GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Types of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Investment Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Lessee Creditworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Sale or Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Change in Investment Policies 41
Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Certain Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Return of Uninvested Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Other Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

PRIOR OFFERINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

WHO SHOULD INVEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Foreign Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

HOW TO SUBSCRIBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Escrow and Closing Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

DISTRIBUTION REINVESTMENT PLAN SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

RIGHT TO TENDER UNITS FOR PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

TAX ASPECTS OF THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Partnership Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Taxation of Limited Partners on Profits or Losses of the Partnership . . . . . . . . . . . . . . . . . . . . . . 55

</TABLE>

viii
<PAGE> 30

<TABLE>
<S> <C>
Taxation of Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Limitations on Deductibility of Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Deductibility of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Tax Treatment of the Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Imputed Rental Income Under Section 467 . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Recapture of Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Deductibility of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Allocations of Profits or Losses to Incoming Partners . . . . . . . . . . . . . . . . . . . . 70
Allocations of Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Potential Application of Section 183 of the Code . . . . . . . . . . . . . . . . . . . . . . . 74
Refinancing of Partnership Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Sale or Foreclosure of Partnership Properties or Equipment . . . . . . . . . . . . . . . . . . 75
Sale or Transfer of Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
No Section 754 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Dissolution of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Other Possible Tax Consequences to Investors . . . . . . . . . . . . . . . . . . . . . . . . . 78
Partnership Tax Returns and Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . 79
Registration With the Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Tax Aspects for Foreign Individuals and Corporations . . . . . . . . . . . . . . . . . . . . . 80
Impact on Qualified Tax-Exempt Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Proposed Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
State and Local Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

ERISA CONSIDERATIONS FOR QUALIFIED PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Plan Assets -- Exemption Under the DOL Regulations . . . . . . . . . . . . . . . . . . . . . . 84
Publicly Offered Security Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Other Protective Measures Available to the General Partners . . . . . . . . . . . . . . . . . 85
Plan Asset Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Valuation Reports to Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

SUMMARY OF PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
The Responsibilities of the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . 87
Liability of Limited Partners-Nonassessability of Units . . . . . . . . . . . . . . . . . . . 87
Terms and Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Restrictions on Transfer of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Voting Rights of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Indemnification of the General Partners by the Partnership . . . . . . . . . . . . . . . . . . 91

REPORTS TO LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

SALES LITERATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . 93
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

</TABLE>

ix
<PAGE> 31

<TABLE>
<S> <C>
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-i

LIMITED PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT B

SUBSCRIPTION INSTRUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT C

DISTRIBUTION REINVESTMENT PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT D
</TABLE>

x
<PAGE> 32
SUMMARY OF THE PARTNERSHIP AND THE OFFERING

The following is a summary intended solely to supply, in a non-technical form,
pertinent facts and highlights from the material contained in the body of this
Prospectus. More detailed information may be found in the remainder of this
Prospectus and the Exhibits hereto.

The Partnership and the General Partners Captec Franchise Capital Partners
L.P. IV is a recently formed
Delaware limited partnership. The
General Partners of the Partnership
are Captec Franchise Capital
Corporation IV, a Michigan
corporation, and Patrick L. Beach
(the "General Partners"). The
offices of the Partnership and the
General Partners are located at 24
Frank Lloyd Wright Drive, P.O. Box
544, Ann Arbor, Michigan 48106-0544
(telephone (800) 522-7832). Captec
Franchise Capital Corporation IV
will act as the managing general
partner (the "Managing General
Partner"). Captec Franchise Capital
Corporation IV is a wholly-owned
subsidiary of Captec Financial
Group, Inc. See "Management."

Terms of the Offering The Partnership is offering its
Units for sale on a "best efforts,
part or none" basis, which means
that the broker-dealers
participating in the Offering are
under no obligation to purchase any
Units and, therefore, no specified
amount is guaranteed to be raised.
However, no Units will be sold
unless collected funds representing
subscriptions for at least 2,000
Units (the "Minimum Number of
Units") are received by the close of
business one year after the
effective date of this Prospectus,
at a price of $1,000 per Unit.
Subscribers for Units must purchase
a minimum of two Units ($2,000).
Pennsylvania residents funds will be
held in the escrow account
until subscriptions for 3,000 Units
have been received and accordingly
may not be counted in determining
whether the Minimum Number of Units
have been sold. The minimum
subscription for Iowa IRAs and
Minnesota and South Carolina
investors is two and one-half Units
($2,500). Tax Exempt Investors who
are residents of Minnesota may have
minimum subscriptions of two Units
($2,000). Residents of Nebraska
must have minimum subscriptions of
five Units ($5,000). The minimum
subscription for Tax Exempt
Investors who are residents of
Nebraska is two Units ($2,000). The
Offering is being made by
broker-dealers who are members of
the National Association of
Securities Dealers, Inc.

Pending sale of the Minimum
Number of Units, subscribers' funds
will be forwarded to Michigan
National Bank, 4755 Washtenaw Ave.,
Ann Arbor, Michigan, as escrow agent
(the "Escrow Agent") and will be
held by the Escrow Agent in one or
more interest-bearing accounts.
Interest will be paid to subscribers
if collected funds representing
subscriptions for the Minimum Number
of Units are not deposited with the
Escrow Agent by the Termination
Date; otherwise such amounts will be
paid to the Partnership. See "Plan
of Distribution."

Who Should Invest The section of the Prospectus
entitled "Who Should Invest"
describes minimum income and/or net
worth requirements that various
states impose on investors, as well
as a detailed explanation of other
limitations which investors must
address prior to subscription. See
"Who Should Invest."

1
<PAGE> 33

Risk Factors Investment in the Units involves various risks which are
described in detail in the "Risk Factors" section of the
Prospectus. The following is a summary of what the General
Partners believe are the most significant risks related to
an investment in Units.

Investment Risks:

- Should the Partnership be funded with less than the
maximum amount of Net Offering Proceeds, the
diversification of the Partnership's portfolio will be
diminished; and

- Although the investment objectives and policies for
Partnership investments are described herein, as of the
date of this Prospectus, the Partnership has not yet
identified specific Properties and/or Equipment for
investment;

- There are various restrictions on transfers, including a
requirement that the Managing General Partner consent to
all transfers, and only a limited secondary market for
the Units is expected to develop, if at all;

- Limited Partners must rely on the General Partners to
manage the Partnership and its operations, except in
certain limited situations;

Real Estate and Equipment Risks:

- Ownership of the Properties and Equipment may be affected
by adverse changes in economic or market conditions and
competition, and the Properties may be designed or built
primarily for a particular tenant or a specific type of
use.

Tax Risks:

- The Partnership could be treated as a "corporation" for
tax purposes, which would require the Partnership to pay
tax on its income, thereby decreasing the amount of cash
available for distribution and preventing Partners from
using Partnership losses and/or deductions, if any, to
reduce their taxable income from other sources;

- The income, gain and losses from the Partnership's
Properties and/or Equipment could be recharacterized as
"portfolio" rather than "passive" which would prevent the
Limited Partners from using such income and gain to
offset passive losses from other

2
<PAGE> 34

sources and using such losses to offset
passive income from other sources; and

- Future legislative, judicial or
administrative changes to the tax laws
(or the interpretation thereof) could
adversely affect and could possibly be
applied retroactively to events
occurring before such changes go into
effect.

Conflicts of Interest The General Partners and their Affiliates will
experience conflicts of interest in their
management of the Partnership that will arise
principally from their involvement in other
activities that may conflict with those of the
Partnership. Set forth below are the potential
conflicts of interest that the General Partners
believe are the most significant:

- allocation of Assets and management
time and service between the Partnership
and various partnerships and other
entities;

- provision of property and equipment
management services to the Partnership
by the General Partners and their
Affiliates;

- payment of fees and other
compensation by the Partnership to the
General Partners and their Affiliates;

- the Partnership may purchase Assets
from sellers from whom the General
Partners or their Affiliates have
purchased Assets from in the past and
the General Partners will experience a
conflict between the current interests
of the Partnership and their interest in
preserving the ongoing business
relationship; and

- the Partnership's securities and tax
counsel also serves as securities and
tax counsel for the General Partners and
certain Affiliates of the General
Partners, and the Limited Partners will
not have separate counsel.

Conflict Resolution Procedure With respect to resolving a conflict of
interest regarding the allocation of
Assets, investment opportunities that are
of a character that could be acquired by
the Partnership will be offered first to
Captec Franchise Capital Partners L.P. III
("Captec L.P. III"), until such time as
Captec L.P. III is fully funded and then
offered to the Partnership if the
Partnership has capital to invest at the
time the investment is available.

Use of Proceeds The Partnership will invest 83% of each dollar
raised in Properties and Equipment and will use
the remainder to pay selling commissions, fees
and expenses related to the Offering, the
selection and acquisition of Properties and
Equipment, and costs of organizing the
Partnership. In the event the Partnership sells
only the Minimum Number of Units, it expects to
purchase approximately two Properties and three
Equipment packages, whereas with the Maximum
Number of Units and maximum financing, it
expects to purchase approximately 20
income-producing commercial real estate
properties (the "Properties") and 30 equipment
packages ("Equipment"). However, as higher or
lower prices for individual Properties and
Equipment packages are possible, the
Partnership may acquire greater or lesser
numbers of Properties and/or

3
<PAGE> 35

Equipment packages. See "Estimated Use of
Proceeds" for the Partnership's estimate as to
its uses of the proceeds of this Offering. See
also "Compensation Table" regarding
compensation to be received by the General
Partners and their Affiliates from the
Partnership, including that portion to be paid
from the proceeds of this Offering.

Partnership Business The Partnership will acquire Properties and
Equipment which will be leased primarily to
operators of national chain and nationally
franchised fast-food, family style and dinner
house restaurant, as well as other franchised
or chain business, pursuant to Triple Net
Leases. The Partnership also intends to
acquire Properties that may be leased to
prominent national and regional retail concerns
(the "Retail Concerns") pursuant to Triple Net
Leases or Double Net Leases. The Partnership
expects to use not less than 75%, but not more
than 90%, of Net Offering Proceeds to acquire
Properties and up to 25%, but not less than
10%, to acquire Equipment, but the
Partnership's actual portfolio may differ from
these estimates initially and/or during the
life of the Partnership. The Properties
generally will be leased on terms which provide
for a base minimum annual rent with fixed
increases on specific dates or indexation of
rent to indices such as the Consumer Price
Index and/or percentage rents. The Equipment
will be leased only pursuant to leases
providing that the present value of the rental
payments during the term of the lease is at
least sufficient to permit the Partnership to
recover the purchase price of the Equipment
that is the subject of such lease (a "Full
Payout Lease").

Partnership Objectives The principal investment objectives of the
Partnership will be: (i) preservation and
protection of capital; (ii) distribution of
cash flow generated by the Partnership's
leases; (iii) capital appreciation of
Partnership Properties; (iv) generation of
increased income and protection against
inflation through required escalations of base
rents or participation in gross revenues of
lessees of Partnership Properties; and (v)
deferral of taxation of Partnership cash
distributions for Limited Partners. The
Partnership's overall objectives will be to
maximize long term returns with its Properties
and to enhance short term returns with its
Equipment. There can be no assurance that these
objectives will be attained. See "Investment
Objectives and Policies." These objectives may
not be attained because, among other reasons,
no Properties or Equipment have yet been
identified for purchase, and due to competition
for suitable investments, the Partnership may
not be able to acquire Properties and/or
Equipment meeting its investment criteria. See
"Risk Factors - Competition" and "Risk Factors
- Unspecified Fund."

Compensation to General
Partners and their Affiliates The General Partners and their Affiliates will
receive substantial fees and profits in
connection with the investment, management and
ultimate disposition of the Partnership's
assets. See "Compensation Table" for a detailed
description of the amount of fees that will be
received by the General Partners and their
Affiliates.

4
<PAGE> 36

Limited Partners' Share of
Cash Flow and Net Sale or
Refinancing Proceeds "Cash Flow" will be distributed 99% to
the Limited Partners and 1% to the General
Partners; provided, however, that the General
Partners' 1% of Cash Flow shall not be paid
each year until receipt by the Limited Partners
of aggregate distributions (the "Current
Preferred Return") equal to a 10% per annum
cumulative, non-compounded preferred return on
the amount of cash contributed by the Limited
Partners to the Partnership reduced by certain
prior cash distributions upon the sale or
refinancing of an Asset (the "Adjusted
Investment"). The Current Preferred Return does
not represent a guaranteed return to the
Limited Partners, but simply represents the
amount of Cash Flow that must be distributed to
the Limited Partners prior to the General
Partners having the right to receive
distributions of Cash Flow as the General
Partners are precluded from receiving any
distributions of Cash Flow until the Current
Preferred Return is distributed to the Limited
Partners. Distributions to the Limited Partners
are expected to commence not later than the
15th day after the close of the first calendar
quarter after the first release of funds from
escrow to the Partnership. There can be no
assurance, however, as to the date on which
distributions will commence or the amount of
any distributions. Distributions of Cash Flow
will be made on a quarterly basis and those
Limited Partners holding ten or more Units may
elect to have their distributions made on a
monthly basis. An Investor electing to receive
monthly distributions will receive three
monthly distributions beginning with the
payment date rather than receiving the full
distribution on the payment date. For purposes
of this Prospectus, "Cash Flow" shall mean,
with respect to any period, all cash receipts
derived from payments of all forms of income on
Assets held by the Partnership including all
rents from and other revenues paid in
connection with Partnership Assets (as
distinguished from Original Contributions and
exclusive of any Net Sale or Refinancing
Proceeds (as defined in the following
paragraph)), without deduction for
depreciation, plus amounts, if any, from
reserves attributable to such cash receipts
with respect to any prior period, if no longer
deemed necessary for Partnership operations,
less cash receipts used to pay operating
expenses and to repurchase any Units or set
aside from such cash receipts by the Managing
General Partner for working capital reserves.

"Net Sale or Refinancing Proceeds"
generally will be distributed 90% to the
Limited Partners and 10% to the General
Partners; provided, however, that the General
Partners' 10% of Net Sale or Refinancing
Proceeds shall not be paid until receipt by the
Limited Partners of aggregate distributions of
Cash Flow and Net Sale or Refinancing Proceeds
equal to a 10.5% per annum cumulative,
non-compounded return on their Adjusted
Investment (the "Performance Preferred Return")
plus aggregate distributions of Net Sale or
Refinancing Proceeds in an amount equal to the
Limited Partners' original capital
contributions to the Partnership (the "Original
Contributions"). The Performance Preferred
Return does not represent a guaranteed return
to the Limited Partners, but simply represents
the amount of Net Sale or Refinancing Proceeds
that must be distributed to the Limited
Partners prior to the General Partners having
the right to receive distributions of Net Sale
or Refinancing Proceeds as the General Partners
are precluded from receiving any distributions
of Net Sale or Refinancing Proceeds

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<PAGE> 37

until the Performance Preferred Return is
distributed to the Limited Partners. See
"Compensation Table" for a discussion of
real estate and equipment liquidation fees
which may be paid to the General Partners
or their Affiliates upon the sale of
Partnership Properties and/or Equipment.
Distributions of Cash Flow and
distributions of Net Sale or Refinancing
Proceeds to the extent of the Performance
Preferred Return are expected to constitute
a return on capital whereas additional
distributions of Net Sale or Refinancing
Proceeds are expected to constitute a
return of capital. However, there is no
way of definitively characterizing a
distribution as a return on capital or
return of capital until the Partnership is
liquidated. An investor's Current
Preferred Return and Performance Preferred
Return will be calculated from the first
day of the month following the month in
which such investor is admitted to the
Partnership as a Limited Partner. For
purposes of this Prospectus, "Net Sale or
Refinancing Proceeds" shall mean receipts
from dispositions or refinancing of
Partnership Properties or Equipment plus
amounts, if any, from reserves attributable
to prior dispositions if no longer deemed
necessary for Partnership operations, less
(i) the amount paid or to be paid in
connection with or as an expense of such
disposition or refinancing; (ii) the amount
necessary for the payment of all debts and
obligations of the Partnership including,
but not limited to, fees to the Managing
General Partner or its Affiliates and
amounts, if any, required to be paid to,
arising from or otherwise related to the
particular Disposition or refinancing; and
(iii) any amount set aside by the Managing
General Partner for working capital
reserves from such receipts.

Acquisitions No Properties or Equipment have yet been
acquired or identified for possible
acquisition. At such time during the
Offering as the General Partners believe a
reasonable probability exists that
specified Properties or Equipment will be
acquired, this Prospectus will be
supplemented to disclose the pending
acquisition. The General Partners believe
that a reasonable probability that the
Partnership will acquire a Property or
Equipment package normally will occur as of
the date on which (i) a commitment letter
is executed by a proposed lessee, (ii) a
satisfactory credit underwriting for the
proposed lessee has been completed, and
(iii) a satisfactory site inspection has
been completed. See "Estimated Use of
Proceeds," "Risk Factors" and "Investment
Objectives and Policies."

Depreciation Method For Properties, generally straight-line
over 39.0 years under the modified
Accelerated Cost Recovery System. For
Equipment, generally the 200% declining
balance method over three, five or seven
years under the modified Accelerated Cost
Recovery System. See "Investment Objectives
and Policies" and "Tax Aspects of the
Offering-Depreciation."

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<PAGE> 38

Borrowing Policy The Partnership intends to incur mortgage
or secured indebtedness to acquire
Properties and Equipment using leverage, on
a portfolio basis, by borrowing from banks,
other institutional lenders or private
lenders and may in the future, borrow funds
to finance improvements to existing
Properties. Although the Partnership does
not intend to utilize financing that does
not provide for the amortization of all or
substantially all of the principal amount
thereof prior to maturity, it is possible
that such "balloon" financing may be used.
In no event will aggregate mortgage or
other secured indebtedness exceed an amount
equal to 35% of the sum of Gross Proceeds
plus the aggregate amount of Partnership
indebtedness secured by Partnership Assets
(approximately 40% of the aggregate
purchase prices of all Properties and
Equipment) when incurred. Notwithstanding
the foregoing, the Partnership may incur
indebtedness on single Properties or
Equipment packages equal to up to 80% of
the purchase price thereof so long as
aggregate portfolio indebtedness does not
exceed the above-referenced amount.
Borrowings for acquisition or improvement
will cause Tax-Exempt Investors to
recognize unrelated business taxable
income, although they will be allowed to
offset such income with deductions related
thereto. See "Investment Objectives and
Policies-Borrowing" and "Tax Aspects of the
Offering-Impact on Qualified Tax-Exempt
Investors."

Reports to Limited Partners The General Partners will submit annual
reports to the Limited Partners containing
audited financial information, as well as
quarterly financial highlight reports
concerning the Partnership's operations.

Tax Matters The Partnership has received an opinion of
counsel from Jaffe, Raitt, Heuer & Weiss,
P.C. as to its status as a partnership for
federal income tax purposes and certain
other federal income tax matters, but such
opinions are not binding upon the Internal
Revenue Service (the "Service" or the
"IRS"). The Partnership will not apply for
a ruling from the Service that it will be
classified as a partnership rather than an
association taxable as a corporation for
federal income tax purposes. AN INVESTMENT
IN THE PARTNERSHIP WILL GENERATE UNRELATED
BUSINESS TAXABLE INCOME FOR TAX-EXEMPT
INVESTORS. See "Tax Aspects of the
Offering."

Termination of Partnership The Partnership intends to dispose of its
Properties between approximately the
seventh and tenth years after the
Partnership sells the Minimum Number of
Units and commences operations, with a view
toward the sale of all of the Partnership
Properties and Equipment (collectively, the
"Assets"). Potential purchasers will
include franchisees and franchisers
pursuant to the terms of their leases,
pension funds, insurance companies, wealthy
individuals, REITs, and other real estate
investors pursuant to Internal Revenue Code
Section 1031 exchanges. As Equipment will
be leased under Full Payout Leases with
average terms of five to seven years and is
expected to have limited residual value
(approximately 10% of original contract
purchase prices) at the end of such leases,
it is anticipated that Equipment generally
will be sold to the lessee at the end of
the lease term for fair market value, which
is expected to be minimal. The Partnership
Agreement provides that the Partnership
shall terminate December 31, 2026, unless
sooner terminated.

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<PAGE> 39
Statements of Value Limited Partners will receive a report of
the estimated current value of the Units
prepared annually by the Managing General
Partner based upon the Managing General
Partner's estimate of the amount which
would be received if the Partnership's
Properties and Equipment were sold as of
the close of the Partnership's fiscal year
and if such proceeds (without reduction
for selling expenses), together with other
Partnership funds, were distributed in
liquidation of the Partnership. Absent
significant increases or decreases in the
value of assets, the net asset value of
each Unit will be reported at cost and
deemed to be $1,000 (although the fair
market value of the Unit may differ at
such times) for the first three annual
statements of value following termination
of the Offering; thereafter, the value of
the Units will be based on an annual
valuation, subject to quarterly adjustment
in the General Partners' discretion. See
"ERISA Considerations for Qualified Plans
- Valuation Reports to Qualified Plans."
See "Reports to Limited Partners."

Fiscal Year of Partnership The Partnership's fiscal year will be a
calendar year.

Distribution Reinvestment Plan A distribution reinvestment plan will be
available for those Limited Partners who
may wish to participate, pursuant to which
Limited Partners may cause distributions
from the Partnership, other affiliates of
the General Partners, and other sources to
be automatically reinvested in Units. See
"Distribution Reinvestment Plan Summary"
and "Tax Aspects of the Offering."

Right to Tender Units for Purchase Beginning in calendar year 1998, but in no
event prior to the closing of the
Offering, Limited Partners shall have the
right to tender their Units to the
Partnership for repurchase. The
Partnership's obligation to redeem Units
is subject to certain limitations,
including the following:

- during 1998, no more than 1/2% of the
outstanding Units (as of January 1,
1998) will be redeemed during either
of the semi-annual redemption periods,
and for years after 1998, no more than
1% of the outstanding Units (as of
January 1 for the relevant year) will
be redeemed during any such redemption
period; and

- the Partnership is not obligated to
repurchase any Units(s) if the
annualized Net Cash Flow for the three
(3) months prior to such redemption
period is less than 10% per annum of
the Adjusted Investment or such
repurchases would impair the capital
of the Partnership.

See "Right to Tender Units for Purchase."

Partnership Agreement Investors should particularly be aware of
the following contained in the
Partnership Agreement:

- Voting rights: Limited Partners
owning a majority of the outstanding
Units have the right to: (i) amend
the Partnership Agreement, subject to
certain limitations; (ii) dissolve the
Partnership; (iii) remove the General
Partners with or without cause and
approve admission of replacement
General Partners; and (iv) approve or
disapprove the sale of all or
substantially

8
<PAGE> 40

all of the assets of the Partnership
other than in connection with a
dissolution of the Partnership.
Limited Partners owning 10% of the
outstanding Units may request the
General Partners to call a meeting for
the purpose of voting on any of the
foregoing matters. All Limited
Partners will be bound by the vote of
Limited Partners owning a majority of
the outstanding Units, even if they do
not vote with the majority.

- Changes in investment objectives and
policies: The General Partners cannot
change the investment objectives
(regarding income and capital
preservation goals) of the Partnership
unless an amendment to the Agreement
is made, which would require the
approval of the Limited Partners
owning a majority of the outstanding
Units. The General Partners may,
however, change investment policies
(the types of Properties the
Partnership will acquire and the terms
under which such Properties will be
leased) if deemed to be in the best
interest of the Partnership.

- Partnership Books and Records: The
books and records of the Partnership
will be kept at the principal office
of the Partnership (24 Frank Lloyd
Wright Drive, P.O. Box 544, Ann Arbor,
Michigan 48106-0544) and will be
available for examination by any
Limited Partner or his representative
during reasonable business hours. The
Partnership Agreement also states that
any Limited Partner or his
representative is entitled to receive
a copy of the list of names and
addresses of all Limited Partners in
the Partnership upon the payment of
the cost of duplication and mailing.

Transferability of the Units Limited Partners may be able to sell Units
in a limited secondary market, subject to
various restrictions, including the
consent of the General Partners. There is
no assurance that any secondary market
will develop.

See "Summary of Partnership Agreement -
Restrictions on Transfer of the Units" and
"Reports to Limited Partners."

Glossary of Terms For definitions of terms used in this
Prospectus, see "Definitions".

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<PAGE> 41

RISK FACTORS

Purchase of the Units offered hereby involves various substantial Risk
Factors set forth elsewhere herein. Prospective purchasers should consider,
among others, the following factors:

INVESTMENT RISKS

Unspecified Fund; Blind Pool Company. Since the Partnership has no
specified investments, it presents increased risks and uncertainties to
investors. An investor has no information to assist him in his investment
decision as to the identification or location of specific Properties or
Equipment, operating histories of assets or leases, lease terms or other
relevant economic and financial data of the assets to be purchased by the
Partnership. Since the Partnership has not yet determined the specific
Properties or Equipment it will acquire, a delay in time may occur between the
purchase of a Unit and the Partnership's investment in Properties and Equipment
which could result in a delay in receipt of benefits, if any, to the investors.

If, during the Offering, the General Partners believe a reasonable
probability exists that the Partnership will acquire Properties or Equipment
(i.e., an agreement in principle is negotiated or a letter of intent is
signed), the Partnership will issue a supplement to this Prospectus setting
forth certain details concerning such proposed acquisition. Acquisitions of
Properties and/or Equipment subject only to agreements in principle or letters
of intent require negotiation of final binding agreements, and there can be no
assurance that any such Properties and/or Equipment will be acquired on the
same terms as described in the agreements in principle or letters of intent. In
addition, Properties and/or Equipment which are acquired by the Partnership
prior to the termination of the Offering may not be retained unless sufficient
Units in excess of the required Minimum Number of Units are sold. In the event
any Properties and/or Equipment which are subject only to agreements in
principle or letters of intent are not acquired, or any Properties and/or
Equipment which the Partnership acquires prior to the termination of the
Offering are not retained, other Properties and/or Equipment acquired in
substitution therefor may be materially different in a number of respects.

Dependence on General Partners; Lack of Experience. The success of the
Partnership will depend to a large extent on the quality of the management
provided by the General Partners and the management agent. In addition, the
General Partners will have sole control over virtually all aspects of the
Partnership's operations, and the Limited Partners will have no right to
participate in the management of the Partnership. The Limited Partners have no
voting rights, except that a majority of the Limited Partners may amend certain
aspects of the Partnership Agreement, dissolve the Partnership, remove the
General Partners, elect a new General Partner or approve or disapprove of the
sale of all or substantially all of the Partnership's Assets. See "Summary of
Partnership Agreement." Although Mr. Patrick L. Beach, the President of the
Managing General Partner, and his Affiliates individually or with others, have
sponsored prior private programs and two prior public programs, only two of
those programs had investment objectives similar to those of the Partnership
and have become operational. See "Prior Offerings" and the "Prior Performance
Tables". The General Partners and their Affiliates believe, but can provide no
assurances, that they have amassed sufficient expertise to allow them to
successfully complete this Offering and operate the Partnership.

The Managing General Partner is recently formed and has a minimal net
worth. Patrick L. Beach, the individual General Partner, had a net worth at
December 31, 1994 in excess of $2,800,000, a significant portion of which was
illiquid. Substantially all of Mr. Beach"s net worth is derived from his
ownership interest in shares of common stock of Captec Financial Group, Inc.
According to an accountants' review report, Mr. Beach's investment in Captec
Financial Group, Inc., amounting to $3,283,000 (70% of his total assets) as of
December 31, 1994 has been recorded at estimated current value as determined by
management of Captec Financial Group, Inc. in the absence of a readily
ascertainable current market value for Captec Financial Group, Inc.'s common
stock. Because of the inherent subjectivity of the assumptions used in the
valuation, the estimated current value may differ significantly from the amount
that would have been used had a ready market for the investment existed at
December 31, 1994, and the difference could be material. Mr. Beach believes
that he could borrow funds secured by his assets without having to liquidate
them, to meet his Partnership obligations if any were to arise.

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<PAGE> 42

Litigation against General Partner and Possible Adverse Effect on Net
Worth. Mr. Beach is currently involved as a defendant in a lawsuit filed in
the Circuit Court for the County of Washtenaw, Michigan. The suit was filed by
guarantors of a defaulted loan made to City Centre Partners Limited Partnership
("City Centre") and by limited partners of City Centre against Mr. Beach by
virtue of Mr. Beach being a General Partner of City Centre. Mr. Beach
believes the lawsuit to be without merit and intends to vigorously defend this
lawsuit.

Plaintiffs instituted the action against Mr. Beach in July, 1993. The
action arose out of the following circumstances: In 1988, Mr. Beach was a
co-owner of the City Centre office building in Ann Arbor, Michigan. During
1988, City Centre entered into an agreement with Mr. Beach and the other
owners for the purchase of the City Centre Building. City Centre was unable to
obtain financing in time to close the purchase according to schedule. At City
Centre's request Mr. Breach agreed to extend the deadline for closing the
purchase and to help City Centre obtain the necessary financing. In return,
City Centre agreed to pay Mr. Beach an additional $50,000 and to make him a
general partner in City Centre, which would enable him to have greater control
in collecting the sums due him under the parties' purchase agreement. Mr.
Beach was a general partner in City Centre from 1988 through July 20, 1990. As
the result of Mr. Beach's intervention, Comerica Bank ("Comerica") loaned City
Centre $600,000 for the purchase of the City Centre Building. As security for
the loan, Comerica required City Centre to execute a mortgage note and required
the limited partners and general partners, including Mr. Beach, to guarantee
the note. On July 20 1990, Mr. Beach withdrew from City Centre and assigned
his partnership interest to BRG Management, Inc. The Assignment of Partnership
Interest Agreement (the "Assignment Agreement") provided that Mr. Beach would
not be liable for any partnership obligations arising after July 20, 1990, the
date of the Assignment Agreement. Specifically, the uncontroverted affidavit
of Mr. Beach states that the parties understood the Assignment Agreement to
mean that Mr. Beach would not be responsible for any default on the mortgage
note which occurred after his withdrawal from City Centre.

At the time that Mr. Beach withdrew from City Centre, the limited
partnership was current in its payment of the mortgage note. Under the terms
of the mortgage note, City Centre had no obligation to repay the note prior to
maturity unless two events occurred: (1) City Centre defaulted on the note and
(2) Comerica exercised its option to accelerate the sums due under the note.
Over one year after Mr. Beach withdrew from City Centre, City Centre defaulted
in payment of the mortgage note. Comerica subsequently elected to accelerate
all sums due under the note and collected all amounts owing under the note from
the plaintiffs, who were guarantors under the note. After plaintiffs had paid
off the note, Comerica stamped the note "PAID". Four months after Comerica
received full payment, it assigned the note to plaintiffs. Comerica's rights
to recover under the note, in the opinion of Mr. Beach, were extinguished by
full payment prior to the assignment, so that the assignment could not and did
not transfer any rights to the plaintiffs.

Count I of plaintiff's complaint alleges that as assignees of the
mortgage note, they are entitled to recover the full amount of the note from
Mr. Beach. Count II of the complaint alleges that plaintiffs are entitled to
recover from Mr. Beach under the theories of indemnification and contribution.
Based on the above facts, Mr. Beach moved for summary disposition on August 25,
1994. Plaintiffs likewise filed a motion for summary disposition. After
advising the parties that the Court had not read their briefs, the Court
allowed the parties five minutes for oral argument. The Court subsequently
issued a written opinion granting plaintiffs' motion for summary disposition,
asserting that (i) despite the payoff of the note, the subsequent assignment
was a valid assignment and created a contribution or indemnity obligation of
Mr. Beach; and (ii) the payments made by the plaintiffs as guarantors of the
note were not solely guaranty obligations subject to contract claims outside
the Partnership, but rather, were payments for the benefit of the Partnership,
creating an indemnity obligation by Mr. Beach. Mr. Beach has filed a claim of
appeal and the trial court has granted Mr. Beach's motion to stay the judgment
during the pendency of his appeal. Mr. Beach believes that the decision will
be reversed on appeal. The Court's stay precludes the plaintiffs from taking
action to collect the judgment during the pendency of the appeal. Briefings on
the issues have been filed by both parties, who are awaiting a decision of the
appellate court.

Should the plaintiffs prevail in such action, it could have a material,
adverse impact upon Mr. Beach's net worth. However, Mr. Beach is of the
opinion that even if the plaintiffs were to prevail and obtain final judgment,

11
<PAGE> 43

that his current assets can be applied in such a manner as to satisfy the
judgment and still retain a net worth of in excess of $1,000,000.

Possible Lack of Diversification. The Partnership may commence operations
upon sale of 2,000 Units ($2,000,000). The potential profitability of the
Partnership and its ability to diversify its investments could be adversely
affected by sale of less than the Maximum Number of Units. Specifically, in the
event the Partnership sells only the Minimum Number of Units, it expects to
purchase approximately two Properties and three Equipment packages, whereas
with the Maximum Number of Units and maximum financing, it expects to purchase
approximately 20 Properties and 30 Equipment packages. However, as higher or
lower prices for individual Properties and Equipment packages are possible, the
Partnership may acquire greater or lesser numbers of Properties and/or
Equipment packages. In the event that only the Minimum Number of Units is sold,
the success of the Partnership will be based upon the performance of a more
limited number of Properties and/or Equipment packages, operating in
potentially fewer markets. Generally, lessees of Partnership Properties will
provide at their own expense, all furniture, fixtures and equipment, although
in some cases the Partnership may lease some or all of such furniture, fixtures
and equipment to the lessee. In such event, the Equipment would have to be
leased under a separate lease with an unrelated third party or an Affiliate of
the General Partners.

Lack of Liquidity - Limited Transferability. There is no established
market for the Units, and because there are expected to be only a limited
number of investors and significant restrictions on the transferability of
Units, it is not likely that a market in the Units will develop. The Units
cannot be transferred or assigned to persons who fail to meet the minimum
purchase requirements and suitability standards imposed by certain states on
transferees. See "Summary of the Partnership and the Offering - Who Should
Invest." Accordingly, a Purchaser of Units must be willing to bear the
economic risk of investment in the Units for an indefinite period of time.
Units may be transferred only pursuant to a written assignment and the assignee
may be substituted as a Limited Partner only after the consent of the General
Partners have been given. In order to facilitate transfers to the extent
possible, however, the General Partners may, within the limit of applicable
laws and regulations, either purchase the Units directly or assist investors in
locating purchasers. The General Partners and the Partnership are not
obligated, but reserve the right, to purchase Units from the Limited Partners.
See "Summary of Partnership Agreement."

Possible Conflicts of Interest. As discussed in detail in "Conflicts
of Interest", the Partnership will be subject to conflicts of interest arising
out of its relationship to the General Partners and their Affiliates, including
conflicts related to allocation of management and allocation of properties
between the Partnership and various other entities as to which the General
Partners and their Affiliates have management responsibilities. See "Conflicts
of Interest".

Possible Loss of Limited Liability. The Partnership Agreement provides
certain rights for the holders of a majority of the Units to remove and replace
the General Partners, amend the Partnership Agreement in certain respects,
approve the sale of all or substantially all of the Partnership's Assets and
dissolve the Partnership. There is some uncertainty under present law as to
whether the exercise of these rights under certain circumstances could cause
the Limited Partners to be deemed to be general partners of the Partnership
under applicable laws, with a resulting loss of limited liability. It should be
noted that due to present and possible future uncertainties in this area of
partnership law, it may be difficult or impossible to obtain an opinion of
counsel to the effect that the Limited Partners may conduct certain activities
or exercise certain rights without jeopardizing their status as Limited
Partners. If the Limited Partners were deemed to be general partners of the
Partnership, they would be generally liable for Partnership obligations which
could be satisfied out of their personal assets. See "Summary of Partnership
Agreement."

In addition, the General Partners will seek to minimize the risks
presented by the possibility of general liability by, for example, attempting
to maintain adequate umbrella insurance coverage against liability for personal
injury and property damage occasioned by activities of the Partnership to the
extent not covered by policies carried by lessees for the benefit of the
Partnership. In connection with Property and Equipment acquisitions, the
Partnership will attempt to utilize security arrangements, such as mortgages or
deeds of trust, providing recourse only against the Properties or Equipment
constituting the security.

Obligation to return distributions. The Delaware Act provides that the
Partnership shall not make any distribution to any Limited Partner to the
extent that, at the time of the distribution and after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to the
General Partners and the Limited Partners on account of their Partnership
interests and liabilities for which the recourse of creditors is limited to
specified assets of the Partnership, exceed the fair value of the Partnership's
assets, except that the fair value of assets that are subject to a liability
for which the recourse of creditors is limited shall be included in the assets
of the Partnership only to the extent that the fair value of those assets
exceeds that liability. A Limited Partner who receives a distribution in
violation of the Delaware Act prohibition may be liable to the Partnership for
the amount of the distribution. See "Summary of Partnership Agreement."

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<PAGE> 44

Special Tax and Other Risks for Investments by Qualified Pension and
Profit-Sharing Trusts. In considering an investment in the Partnership with a
portion of the assets of a trust or a pension or profit-sharing plan qualified
under Section 401(a) of the Internal Revenue Code (the "Code") and exempt from
tax under Section 501(a), a fiduciary should consider: (i) whether the
investment satisfies the diversification requirements of Section 404(a)(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"); and (ii) whether
the investment is prudent, since Units are not freely transferable and there
will not be a market in which he can sell or otherwise dispose of the Units.
The General Partners have not, and will not, evaluate whether an investment in
the Partnership is suitable for any particular plan, but, subject to the
disclosure included therein, will accept such entities as Limited Partners if
an entity meets the suitability standards.

An investment in the Partnership is expected to produce some income that
may be classified as unrelated business taxable income ("UBTI") under the Code
which may cause a Limited Partner that is a tax-exempt entity to pay a tax on
the income it is allocated by the Partnership if the total UBTI of such
tax-exempt Limited Partner exceeds $1,000. In addition, if the Partnership
incurs indebtedness to acquire or improve properties, it is likely that the
tax-exempt Limited Partners would recognize UBTI. See "Tax Aspects of the
Offering - Impact on Qualified Tax-Exempt Investors."

Limited Partners will be provided with an annual statement of value
reporting the value of each Unit based upon an estimated amount they would
receive if Partnership Properties and Equipment were sold as of the close of
the Partnership's fiscal year and if such proceeds (without reduction for
selling expenses), together with the other funds of the Partnership were
distributed in liquidation of the Partnership. Notwithstanding the foregoing,
absent significant increases or decreases in the value of assets, it is
anticipated that the net asset value of each Unit will be deemed to be $1,000
for the first three annual statements of value following termination of the
Offering.

Finally, fiduciaries of tax-exempt Limited Partners should be aware that
the Department of Labor has adopted final regulations (the "DOL Regulations")
under 29 C.F.R. Part 2550 at Section 2550.401(b)-1 pursuant to ERISA, which
provide that an investment in a partnership by a Qualified Plan may be deemed
an investment by a Qualified Plan in the underlying assets of the Partnership
(the "Plan Assets"). If the Partnership were subject to these rules, an
investment by a Qualified Plan in the Partnership could result in a violation
by the fiduciary of several provisions of ERISA, including an improper
delegation of the duty of the fiduciary to manage the Plan Assets and a failure
to hold the Plan Assets in trust. However, the DOL Regulations contain
exemptions from the treatment of limited partnership assets as Plan Assets.
Although there can be no absolute assurance that the Partnership Agreement and
the terms of the Offering have been structured so that the exemptions contained
in the DOL Regulations would apply to the Partnership, the General Partners
will use their best efforts to structure the sales of the Units and the
operations of the Partnership to attempt to qualify under at least one of the
various exemptions. Accordingly, an investment by a Qualified Plan in Units
should not be deemed an investment in the assets of the Partnership. See "ERISA
Considerations for Qualified Plans."

Indemnification of General Partners. The General Partners shall have no
liability to, and are held harmless and indemnified by, the Partnership for
certain actions taken by it in good faith and without negligence or misconduct.
As a result, the Partnership and the Limited Partners may have more limited
rights against the General Partners than they would otherwise have under common
law and, furthermore, may be obligated to fund the defense of the General
Partners in certain cases. See "Fiduciary Responsibilities of the General
Partners" and "Summary of Partnership Agreement - Indemnification of the
General Partners by the Partnership."

Lack of Independent Counsel for Investors. The investors in this Offering
have not been separately represented by independent counsel in the formulation
of this program. The attorneys, accountants and other experts who have
performed services for the Partnership have also performed the same or similar
services for some of the General Partners and their Affiliates. See "Conflicts
of Interest."

Lack of Partnership Reserves. The General Partners do not intend to
initially establish working capital reserves. Thus, if amounts are required to
meet any unanticipated cash needs of the Partnership, the General Partners

13
<PAGE> 45

would have to obtain financing from either affiliated or unaffiliated sources
to service such cash needs. However, there is no assurance that such sums would
be available when needed.

REAL ESTATE AND EQUIPMENT RISKS

Risks of Ownership of Properties and Equipment. Investment in Properties
and Equipment leased to Retail Concerns and chain and franchised restaurants,
may be affected by adverse changes in general or local economic or market
conditions, increased costs of energy or products, competitive factors, fuel
shortages, quality of management, ability of a franchisor to support the
operators of its franchises, limited alternative uses for buildings and
equipment (if any), changing consumer habits, condemnation or uninsured losses,
changing demographics and traffic patterns, inability to remodel outmoded
Properties as required by the franchise or lease agreement, voluntary
termination by a lessee of its obligations under a lease, and other factors.
Both the ability of the lessees to pay rent on a timely basis and the amount of
the rent (which is the principal source of the Partnership's income and which,
with respect to Properties, may be partially dependent on the lessee's gross
sales) are affected by general economic conditions within the franchise
restaurant, chain restaurant, and retail industries. These conditions include
those described above, as well as possible changes in consumer preferences and
increases in the number and location of restaurants, service type businesses
and competing retail businesses in the area where Partnership Properties or
Equipment are located. The failure of a particular franchise concept or a
franchisor's inability to support its franchisees could materially affect the
ability of a number of franchisees to make lease payments and might result in a
decrease in Partnership net income. This in turn would affect the ability of
the Partnership to service its debt obligations, the amount of Cash Flow
available for distribution to the Limited Partners, and could ultimately affect
the Partnership's ability to sell a Property. In the event of termination of a
lease or of a franchise agreement between a lessee and a particular franchisor,
the Partnership may not be able to lease that Property or Equipment on the same
terms and may, as a result, incur a loss. The Partnership will not be a party
to any franchise agreement between a franchisor and a lessee and such agreement
could therefore be modified or cancelled without notice to, or the prior
consent of, the Partnership. Further, although the Partnership intends, in
general, to dispose of Partnership Properties between approximately the seventh
and tenth years after the Partnership commences operations, lessees have no
obligation to purchase the Property they lease and there can be no assurance
that the Partnership will be able to sell such Properties at all or for a
profit. Laws regulating the franchise industry in various states may adversely
affect the ability of the Partnership to enforce contractual agreements or
obtain remedies on default which might otherwise be available.

Except for some Property leases with Retail Concerns, the Partnership
intends to acquire Properties and Equipment under long-term "triple net" lease
agreements to lessees and would, therefore, be subject to the risk that lessees
may be unable to meet their lease payments. A default by the lessee or other
premature termination of a lease agreement could, depending on the size of the
Property and/or Equipment and the General Partners' ability to successfully
find a substitute tenant or obtain lease insurance, have an adverse effect on
the financial position of the Partnership and particularly on distributions of
Cash Flow. See "-Risks Relating to Creditworthiness of Lessees" in this
Section. Should the Partnership acquire a leasehold interest in a Property, and
the lessee were to default on its obligations pursuant to the lease agreement,
the Partnership may be responsible for the payment of rent due to the owner of
the leasehold interest, which rental payments would reduce Cash Flow.

The Partnership anticipates that some Properties leased to the Retail
Concerns may be leased on a "double net" basis that will provide that the
Partnership will be responsible for the maintenance of the roof and/or exterior
walls of the Property. Thus, the Partnership bears the risk that the cost of
such maintenance may be higher than anticipated. This increased cost would
have an adverse effect on the financial position of the Partnership and
particularly on distributions of Cash Flow.

Risks From Leverage. The General Partners anticipate that a portion of
the Partnership's Assets will be acquired by using leverage. The use of
leverage, while intended to provide a greater rate of return to the Limited
Partners by permitting the Partnership to acquire Properties and Equipment of
greater aggregate cost than would acquisition on an all-cash basis, also
increases the Partnership's exposure to loss, since such borrowings generally
will be secured by liens on Partnership Properties and Equipment, collateral
assignments of the leases of the

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respective Properties or Equipment and the rents therefrom. In particular, if
the lessee of Partnership Property or Equipment fails to promptly pay the rent
due under the lease of such Property and/or Equipment or if the Managing
General Partner or an Affiliate acting as remarketing agent for the
Partnership, subsequent to a default, is unable to re-lease Property or
Equipment for a term concomitant with the remaining term of the borrowing, or
for an aggregate rent which is sufficient to amortize such borrowing, the
Partnership may be unable to service such borrowing, which could result in a
foreclosure or levy on such Property and/or Equipment, a loss to the
Partnership and a substantial reduction of the return to the Limited Partners
on their investment in the Units. Although the Partnership does not intend to
utilize financing that does not provide for the amortization of all or
substantially all of the principal amount thereof prior to maturity, it is
possible that such "balloon" financing may be used. These "balloon" loans
involve greater risks than mortgage loans where the principal amount is fully
amortized over the term of the loan since the ability of the Partnership to
repay at maturity the outstanding principal of a balloon loan may be dependent
upon the Partnership's ability to obtain adequate refinancing, which ability
would in turn be dependent upon economic conditions in general and the value of
the underlying properties in particular. There is no assurance that the
Partnership would be able to refinance such balloon loans at maturity. Further,
a significant decrease in the value of underlying property could result in the
inability to obtain sufficient refinancing at maturity and loss of a property
by the Partnership through foreclosure. To the extent that the Partnership uses
balloon loans, the Partnership's ability to build up equity through the
reduction of loan principal will be more difficult. Lenders could also require
restrictions on future borrowings, distributions and operating policies after
such an event, as well as cross-collateralization of Partnership indebtedness.
Loans may also be made on a recourse basis which would entitle the lender to
look to the Partnership for payment. See also "Tax Aspects of the Offering -
Impact on Qualified Tax-Exempt Investors."

Risk of Single-Use Properties. Certain of the Properties may be designed
or built primarily for a particular tenant or a specific type of use. If the
Partnership is holding such a Property upon the termination of the lease and
the tenant fails to renew, or such tenant otherwise defaults on its lease
obligations, the Property may not be readily marketable to a new tenant without
substantial capital improvements or remodeling. Such improvements might require
expenditure of Partnership funds otherwise available for distribution or
require the sale of such Property at a below-market price. Additionally, even
if a market for the Property exists, it may remain vacant until a new lessee is
located. There can be no assurance that franchised restaurants and/or
businesses will not experience adverse changes in the future. Such adverse
changes could occur as a result of greater consolidation, increased
competition, possible oversupply within a franchise segment or other factors
not presently foreseeable. It is also possible that such factors could cause
adverse changes in the business of the Retail Concerns.

Risks Relating to Equipment Packages. The Partnership may purchase
Equipment packages that will be used in properties that may be owned by another
landlord. In the event of a default by the tenant under such Equipment lease,
it is highly likely that the tenant will also be in default under its property
lease. In such event, it is likely that the Partnership will have little
control of the subsequent workout since the used Equipment package will have
little value if it cannot be used at the original location in which it has been
installed.

Risks Resulting from Competition. The Partnership will compete in the
acquisition of Property and Equipment with many other entities engaged in real
estate and equipment investment activities, some of which have greater assets
than the Partnership. In addition, the number of entities and the amount of
funds available for investment in Properties of a type suitable for investment
by the Partnership may increase, resulting in increased competition for such
investments and possible increases in the prices paid therefore. As it is
anticipated that some of the Partnership's Property leases may entitle the
Partnership to participate in gross receipts of lessees above fixed minimum
amounts, the success of the Partnership may depend in part on the ability of
those lessees to compete with similar businesses in the vicinity.

Possible Environmental Liabilities and Liens. Recent federal and state
statutes impose liability on property owners or operators for the clean-up or
removal of hazardous substances found on their property. Additionally, such
statutes allow the government to place liens for such liabilities against
affected properties, which liens will be senior in priority to other liens.
State and federal laws in this area are constantly evolving, and the
Partnership intends to monitor such laws and take commercially reasonable steps
to protect itself from the impact thereof, including obtaining environmental
audits of each Property acquired. However, there can be no assurance that the
Partnership will be fully protected from the impact of such laws, or that such
environmental audits will disclose the presence of all hazardous wastes
actually present at the Property.

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<PAGE> 47

Risk of Acquiring Properties Under Construction. The Partnership intends
primarily to acquire existing Properties but under certain circumstances may
acquire the site on which a particular Property is to be built prior to
commencement of construction of the Property. It is intended that investments
in such Properties shall not exceed 10% of the Gross Proceeds of the offering
at any point in time. To the extent that the Partnership acquires Property on
which improvements are to be constructed or completed, the Partnership may be
subject to certain risks in connection with the builder's ability to control
construction costs or to build in conformity with plans, specifications, and
timetables. The builder's failure to perform may necessitate legal action by
the Partnership to rescind its purchase of a Property (which may not be
possible in the case of certain Property where the site is purchased prior to
completion), to compel performance, or to sue for damages. Any such legal
action may result in increased costs to the Partnership. The Partnership may,
however, obtain either a payment and performance bond or a guarantee of
performance for any Property which has not been constructed at the time the
Partnership acquires a particular Property. Furthermore, in any case in which
improvements are to be constructed or completed, or in which a Property is not
yet in operation, the Partnership will be subject to the additional risks of
such Properties, including the risks of delays in completion and the resulting
delay in receipt of rental income and the risk that the franchise will not be
as successful as existing franchises in established locations or a store
operated by a Retail Concern will not be as successful as existing stores of
such Retail Concern in established locations.

Risks Relating to Creditworthiness of Lessees. The Partnership will
require prospective lessees to demonstrate either: (i) that they meet the
Partnership's financial stability and credit requirements, or (ii) that an
entity which does meet those requirements guarantees the lease. The Partnership
may also lease Properties to certain lessees who do not meet such requirements,
but only if they can insure a negotiated portion of their rental obligations
(generally expected to be 80%) for a portion of the lease term if the lessee
defaults during a specified time period. The Partnership will not acquire
Properties or Equipment unless the lessee has either satisfied the conditions
set forth in (i) or (ii) above, or obtained a satisfactory commitment for such
insurance. See "Investment Objectives and Policies-Lessee Creditworthiness."
However, certain risks to the Partnership will remain notwithstanding these
requirements. For example, the financial condition of a lessees or a guarantor
may deteriorate over time to a degree which causes it to default on its
obligation to maintain Property and/or Equipment and pay requisite taxes and
insurance premiums and/or default on its payment obligations to the
Partnership. Additionally, there can be no assurance, even if a commitment for
rent insurance were obtained, that the insurance policy would be issued when
the lease obligations are incurred, or that insurance from another carrier
would be available in such case. In addition, typical policies provide for
various conditions, contingencies and limitations that could impair the
Partnership's right to receive insurance proceeds in the event of a default
under the lease, and some policies may be cancelled or rendered unenforceable
during their term, or the insurer could become financially incapable of paying
claims. As a result, prospective investors should not regard such insurance as
a complete indemnity against damage or loss connected with defaults under the
subject leases. The General Partners have been advised that no insurers were
issuing such policies as of the date of this Prospectus. Accordingly, no
assurance can be given that such insurance could be obtained, even if the
Partnership were willing to accept it in lieu of satisfaction of its
creditworthiness standards. It is anticipated that all lessees will meet the
creditworthiness or guaranty requirements, and that no Partnership leases will
be covered by rent insurance.

Risk of Joint Ventures. Some of the Partnership's investments may be
owned by joint venture partnerships between the Partnership and another
partnership sponsored by Affiliates of the General Partners. In such joint
venture partnerships, there will be the potential risk of impasse in certain
joint venture decisions since the approval of each venturer is required for
certain decisions. In any joint venture arrangement with an Affiliate,
however, the Partnership will have the right to buy the other co-venturer's
interest. However, it is possible that the Partnership will not have the funds
necessary to consummate the transaction.

Investments in joint venture partnerships which own properties may
involve risks not otherwise present, including, for example, the risk that the
Partnership's co-venturer might become bankrupt, that such co-venturer may at
any time have economic or business interests or goals which are inconsistent
with the interests or goals of the Partnership or that such co-venturer may be
in a position to take action contrary to the Partnership's instructions,
requests, policies or objectives. Among other things, actions by such
co-venturer might subject property owned by the joint venture

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<PAGE> 48

to liabilities in excess of those contemplated by the terms of the joint
venture or other adverse consequences. See "Investment Objectives and
Policies-Joint Ventures."

Risks Regarding Availability of Financing. Fluctuations in interest
rates may adversely affect the availability and cost of borrowings related to
Properties and/or Equipment. The Partnership may attempt to acquire Properties
and/or Equipment using leverage during periods when interest rates are high,
making an acquisition using indebtedness relatively unattractive. Many loans
become immediately due upon the sale of a property, thus making it impossible
for the Partnership to acquire Properties using a seller's financing. In such
cases, it may be necessary to renegotiate the terms of any such financing with
the seller's lenders on terms less favorable than those given the seller, to
obtain new financing if available, refrain from purchasing additional
properties pending sale of additional Units or to forego acquisition.

Risks as to Delays in Delivery. Acquisition or delivery of individual
Equipment packages to be acquired by the Partnership may be delayed due to
labor problems, strikes, work stoppages, the unavailability to the manufacturer
of parts or raw materials, or other delays in the shipment, transport or
installation of such Equipment. Any such delay could result in a delay in the
commencement of income from such Equipment. Delay in the delivery of Equipment
could also result in the Partnership's losing a favorable lease or borrowing
terms for such Equipment.

Resale of Properties. The General Partners intend to use their best
efforts to sell Partnership Properties for cash and either subject to, or upon
assumption of, the then outstanding mortgages. Alternatively, the Partnership
may provide financing to purchasers. In the event the Partnership finds it
necessary or desirable to provide such financing, liquidation of the
Partnership may be delayed beyond the time of disposition of its Properties
until any such loans are repaid or otherwise liquidated, and there can be no
assurance that any purchaser receiving purchase money financing from the
Partnership will be able to meet his or its obligations to the Partnership. In
the event of a dissolution or termination of the Partnership, the proceeds
realized from the liquidation of assets, if any, will be distributed to Limited
Partners, but only after the satisfaction of claims of creditors. Accordingly,
a Limited Partner's ability to recover all of his investment under such
circumstances will depend on the amount of funds so realized and claims to be
satisfied therefrom. See "Investment Objectives and Policies-Sale or
Disposition of Assets."

Uninsured Losses; Costs and Availability of Insurance. Each lessee shall
be responsible for arranging for or acquiring comprehensive insurance for
Properties and Equipment acquired by the Partnership, including casualty,
liability, fire and extended coverage as is customarily obtained for similar
Properties and Equipment in amounts which the General Partners determine are
sufficient to cover reasonably foreseeable losses. However, there are certain
types of losses (generally of a catastrophic nature, such as earthquakes,
floods and wars) which are either uninsurable or not economically insurable.
Should such a disaster impact, or cause the destruction of, Property and/or
Equipment owned by the Partnership, the Partnership could lose both its
invested capital and anticipated profits from such property. See "Investment
Objectives and Policies-Investment Standards."

Risk of Recharacterization of Sale and Leaseback Transactions. The
Partnership intends to enter into sale and leaseback transactions, pursuant to
which the Partnership may purchase a Property and/or Equipment from an entity
and lease such Property and/or Equipment to such entity. In the event of the
bankruptcy of such a lessee, a transaction structured as a sale and leaseback
may be recharacterized as either a financing or as a joint venture, which may
result in adverse consequences to the Partnership. For example, if the
transaction is recharacterized as a loan, the lessor can be forced to take a
repayment of its principal, thereby losing the benefit of any rent
participation payments it would otherwise be entitled to receive. Similar
adverse consequences can result if the transaction is recharacterized as a
joint venture between the lessor and lessee. As this is an evolving area of the
law, the Partnership intends to monitor such laws and take commercially
reasonable steps to protect itself from any potential adverse impact thereof.

Risks Relating to Usury Laws. Triple net leases have on occasion been
held by the courts to be loans subject to state usury laws. Penalties,
including loss of interest and treble damages, may be imposed upon persons who
violate such usury laws. The Partnership will structure leases and re-leases of
its Properties and Equipment in such a manner as intended to avoid application
of usury laws of the applicable states. However, a transaction which the

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Partnership believes to be exempt from the usury laws could be found to be a
loan which violates a usury law in a judicial forum.

FEDERAL INCOME TAX RISKS

There are various federal income tax risks associated with an investment
in the Partnership. In addition to continuing Internal Revenue Service (the
"Service") re-examination of the tax treatment of partnerships and real estate
investments, substantial changes have been made to the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder in recent years.
Many of these changes substantially affect the tax treatment traditionally
available from real estate investments. Although the provisions of the Code
relevant to an investment in the Partnership are generally described in "Tax
Aspects of the Offering," each potential investor is strongly encouraged to
consult his own tax advisor concerning the effects of federal income tax law on
an investment in the Partnership and on his individual tax situation.

Among the various risks associated with the federal income tax aspects of
the Offering of which investors should be aware are:

Risk of Loss of Partnership Status. The Partnership will not apply
for a ruling from the Service that it will be treated as a partnership for
federal income tax purposes. Although Jaffe, Raitt, Heuer & Weiss, P.C.,
counsel to the Partnership, has rendered its opinion that the Partnership will
more likely than not be treated as a partnership for federal income tax
purposes, such opinion is not binding on the Service.

Investors should recognize that many of the advantages and economic
benefits of an investment in the Partnership depend upon the continued
classification of the Partnership as a partnership (rather than as an
association taxable as a corporation) for federal income tax purposes, and a
change in this classification would require the Partnership to pay a corporate
level tax on its income which would reduce Cash Flow, prevent the flow-through
of tax benefits, if any, for use on Limited Partners' tax returns and require
that distributions be treated as dividends, which would together reduce the
yield from an investment in the Partnership. In addition, such a change in the
Partnership's tax status during the life of the Partnership could be treated by
the Service as a taxable event, in which event the Limited Partners could have
tax liability without receiving a cash distribution from the Partnership to
enable them to pay such tax liability. The continued treatment of the
Partnership as a partnership is dependent on the present law and regulations,
which are subject to change, and on the Partnership's ability to continue to
satisfy a variety of criteria.

Audit Risks. The Service is giving substantial attention to the
audit of limited partnerships. An audit of the Partnership's income tax
information returns may result in an audit of the returns of the Limited
Partners. Such an examination could result in adjustments to items that are
both related and unrelated to an investment in the Partnership, which could
result in the imposition of various penalties and interest on the deficiency.
Interest rates on tax deficiencies are determined four times each year at the
average adjusted prime rate for the preceding three month period and the rate
is 9% per annum for the period from July 1, 1996 through September 30, 1996.
In addition, there is an increased interest rate on tax deficiencies
attributable to "tax motivated transactions," which may include an investment
in the Partnership.

The Code also provides various rules governing adjustments to partnership
items. These rules provide for a unified proceeding at the partnership level
for both administrative and judicial proceedings. The determination resulting
from the unified proceeding will be binding on all Limited Partners. See "Tax
Aspects of the Offering - Other Possible Tax Consequences to Investors" and
"Tax Aspects of the Offering - Partnership Tax Returns and Tax Information."

Limitation of Opinion of Counsel. Jaffe, Raitt, Heuer & Weiss,
P.C., having considered all of the material federal tax issues, has given its
opinion confirming as accurate the opinions attributed to it in "Tax Aspects of
the Offering - Opinion of Counsel," regarding the likely favorable outcome on
the merits of issues if such issues are challenged by the Service. An opinion
of counsel involves an application of the federal income tax law in effect on

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<PAGE> 50

the date of the Prospectus to the facts known by such counsel from existing
documents, further investigation or representations of the General Partners. In
addition, at the time the Partnership acquires Properties, Jaffe, Raitt, Heuer
& Weiss, P.C. will issue its opinion as to material tax issues associated with
such acquisitions.

For the reasons described in greater detail below, Jaffe, Raitt, Heuer &
Weiss, P.C. is of the view that it is not now possible, nor will it become
possible prior to the termination of the Offering, for it to reach a judgment
as to the probable outcome on the merits (either favorable or unfavorable) of
the following federal income tax issues and, accordingly, it expresses no
opinion with respect to: (a) whether the Partnership will be deemed a "dealer"
in real estate or equipment at the time of the sale or other disposition of the
Partnership's Properties or Equipment, thereby resulting in the entire gain
from such sale or other disposition being treated as ordinary income, rather
than capital gain, and causing Limited Partners that are tax-exempt entities to
recognize unrelated business taxable income; (b) whether a Limited Partner will
be deemed a "dealer" in limited partnership interests at the time of sale or
other disposition of his Units thereby resulting in the entire gain from such
sale or other disposition being treated as ordinary income; (c) whether the
amount of the Partnership's allocation between land and depreciable
improvements will be substantiated for depreciation or cost recovery purposes,
which could reduce the depreciation deductions of the Partnership; (d) whether
any of the Properties will constitute "tax-exempt use properties" due to the
leasing of space in the Properties to tax-exempt entities or the admission of
Limited Partners that are tax-exempt entities, which would require the
Partnership to depreciate all or a portion of its properties over 40 years
using the straight-line method; and (e) whether the Partnership could qualify
for the "90% of gross income" exception if the Partnership were characterized
as publicly traded. In addition, please review "Tax Aspects of the Offering"
for a complete discussion of these and other limitations to, and restrictions
on, the opinions of Jaffe, Raitt, Heuer & Weiss, P.C.

Risk of Disallowance of Deductions on Factual or Other Grounds. The
availability, timing and amount of various deductions taken by the Partnership
will depend not only upon general legal principles but also upon various
determinations relating to particular real property investments, which are
subject to potential controversy on factual or other grounds. See "Tax Aspects
of the Offering - Opinion of Counsel," "Tax Aspects of the Offering -
Limitations on Deductibility of Losses," "Tax Aspects of the
Offering-Deductibility of Fees" and "Tax Aspects of the Offering -
Depreciation." There can be no assurance, therefore, that some of the
deductions claimed by the Partnership will not be challenged by the Service. If
the Service successfully challenges a substantial portion of the deductions to
be taken by the Partnership, the tax benefits of an investment in the
Partnership may be adversely affected.

Risk of Reclassification of Partnership Income. The 1986 Act
created Section 469 of the Code which allows a partner to deduct losses from
"passive activities" only against income from "passive activities." Based on
the language of Section 469 of the Code, the legislative history thereof and
the proposed and temporary Regulations issued to date, Jaffe, Raitt, Heuer &
Weiss, P.C. is of the opinion that it is more likely than not that the income
or loss attributable to owning the Properties and Equipment will be
characterized as "passive" rather than "portfolio". However, because Congress
granted the Service broad authority to promulgate legislative Regulations in
this area, and because of the "triple net" nature of the leases the Partnership
will enter into, there is a possibility that the Partnership's income or loss
from the Properties and Equipment could be characterized as portfolio. Under
Section 469 of the Code the Partnership's investment income from sources other
than the Properties and Equipment will be characterized as portfolio and
passive losses cannot be used to offset portfolio income. Therefore, it is
possible that a Limited Partner could be allocated portfolio income and passive
loss from the Partnership in the same year, and that the loss could not be used
to offset the income. The ability of a Limited Partner to use losses from a
passive activity is dependent upon such Limited Partner's other items of income
or loss and, therefore, the benefit of such items will depend on each Partner's
tax situation. Finally, if the Partnership is characterized as publicly traded,
but is taxed as a partnership because it qualifies for an exemption, its income
cannot be used to offset passive losses from other partnerships, but the
precise characterization and use of such income or loss is uncertain. See "Tax
Aspects of the Offering - Taxation of Cash Distributions."

Risk of Federal Income Tax Liability In Excess of Sale or
Refinancing Proceeds or Operating Cash Flow. Investors should be aware that the
federal income tax on a Limited Partner's allocable share of the Partnership's
taxable income may exceed the Cash Flow or Net Sale or Refinancing Proceeds
distributed to such Limited Partner

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from the Partnership. Therefore, it is possible that the Partners may have to
use funds from sources other than the Partnership to pay their tax liability.
In addition, the gain from a Limited Partner's sale of his Units may exceed the
cash proceeds from the sale. See "Tax Aspects of the Offering - Sale or
Foreclosure of Partnership Properties or Equipment."

Risk of Taxability of Cash Distributions to Limited Partners. A
Limited Partner's share of Partnership cash distributions is subject to federal
income taxation only to the extent such distributions exceed a Limited
Partner's tax basis in his Units at the time of the distribution. Additionally,
cash distributions which exceed the amount to which a Limited Partner is
considered "at-risk" with respect to the activity will cause a recapture of
previous losses, if any. There is a risk that a Limited Partner may not have
sufficient basis or amounts "at-risk" to prevent cash distributions from being
taxable. See "Tax Aspects of the Offering - Taxation of Cash Distributions."

Risk of Reallocation of Profits or Losses. The Service could
challenge the allocation among the General Partners and Limited Partners of
income, gains, losses, deductions and credits in the Partnership Agreement as
lacking substantial economic effect or as not being allocated in accordance
with the Partners' interests in the Partnership and, therefore, possibly
allocate a different share of such items to the Limited Partners. To the extent
that such challenges to the allocation of various items were upheld, the tax
treatment of the investment for such Limited Partner could be adversely
affected. In addition, such a reallocation during the life of the Partnership
could result in the understatement of income for taxable Limited Partners which
could result in the imposition of interest and penalties. Due to the complex
rules in the Regulations, each acquisition of a Partnership Property could
affect the validity of the Partnership's allocations. Although Jaffe, Raitt,
Heuer & Weiss, P.C. has provided its opinion that it is more likely than not
that substantially all of the allocations of profits and losses provided in the
Partnership Agreement either have economic effect or are in accordance with the
Limited Partners' interests in the Partnership, an opinion of counsel is not
binding on the Service. See "Tax Aspects of the Offering - Allocations of
Profits and Losses."

Risk of "Dealer" Status of Partnership or Limited Partners. Because
the Partnership has not been organized to operate as a "dealer" in real
property or equipment, any gains from the sale or other disposition of
Partnership Properties or Equipment are anticipated to be treated as long-term
capital gains to the extent the gain exceeds any required recapture of
previously taken depreciation deductions. If the Partnership were deemed to be
a "dealer" in real property or equipment at the time of a sale or other
disposition of Partnership Properties or Equipment, any gain or loss on the
sale or other disposition of such property would be treated as ordinary income
or loss. There are several distinctions between capital gain and ordinary
income, including: (i) a maximum rate of 28% on long term capital gains as
opposed to a maximum rate of 39.6% on other income or gains and; (ii) that the
characterization of the Partnership as a "dealer" could have an adverse impact
on Limited Partners that are tax-exempt entities by causing such gain to be
characterized as unrelated business taxable income ("UBTI"). See "Tax Aspects
of the Offering - Impact on Qualified Tax-Exempt Investors." Also, if a
Limited Partner is a "dealer" in real estate or equipment, there is a
possibility that his share of any gain or loss could be treated as ordinary
income or loss, even if the Partnership were not deemed to be a "dealer."
Because the determination of "dealer" status is based upon the facts existing
at the time of sale of the specific property, Jaffe, Raitt, Heuer & Weiss, P.C.
is unable to render an opinion (either favorable or unfavorable) as to the
probable outcome on this issue. However, the General Partners intend to
operate the Partnership so as to minimize the possibility of dealer treatment.
See "Tax Aspects of the Offering - Sale or Foreclosure of Partnership
Properties or Equipment."

Risk of Recharacterization of Leases. Due to the "triple net"
nature of most of the leases the Partnership intends to enter into and the
other terms of the sales agreements, the Service may assert that the
Partnership is not the owner of its Properties and Equipment for federal income
tax purposes, which would result in a disallowance of depreciation and interest
deductions and a corresponding increase in income or decrease in losses
allocated to the Limited Partners. The Partnership intends to utilize lease
agreements under which it will be deemed to be the owner of the Properties and
Equipment for federal income tax purposes, and based on the anticipated terms
of the leases, Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that the
Partnership will more likely than not be considered the owner of the Properties
and Equipment, although this opinion could vary based on the actual terms of
the leases. See "Tax Aspects of the Offering - Tax Treatment of the Leases."

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Alternative Minimum Tax. Prospective investors are cautioned to
evaluate the effect of the deductions resulting from their investment in the
Partnership, particularly the special allocation of depreciation deductions, on
the total amount of their tax preference items. The Limited Partners must
include their distributive share of the Partnership's items of tax preference,
if any, in their total items of tax preference for purposes of computing the
alternative minimum tax.

Risk of Legislative or Other Actions Changing Anticipated Tax
Consequences. Prospective investors should recognize that the present federal
income tax treatment of an investment in a limited partnership may be modified
by legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously entered into before
such change. The rules dealing with federal income taxation are constantly
under review by the Service, resulting in revisions of its Regulations and
revised interpretations of established concepts. Recent legislation granted the
Service the right to promulgate legislative and/or interpretive Regulations in
many areas. In addition, the Service is paying increased attention to the
proper application of the tax laws to partnerships, including partnerships
investing in real estate and equipment.

IN VIEW OF THE COMPLEXITY OF THE TAX ASPECTS OF THE OFFERING,
PARTICULARLY IN LIGHT OF THE FACT THAT CERTAIN OF THE TAX ASPECTS OF THE
OFFERING WILL NOT BE THE SAME FOR ALL INVESTORS, PROSPECTIVE INVESTORS ARE
STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS WITH SPECIFIC REFERENCE TO
THEIR OWN TAX SITUATION PRIOR TO INVESTMENT IN THE PARTNERSHIP.

21
<PAGE> 53

ESTIMATED USE OF PROCEEDS

The following table sets forth the estimated use of Gross Proceeds.(1)

<TABLE>
<CAPTION>
Minimum Maximum
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C>
Gross Proceeds: $2,000,000 100.00% $30,000,000 100.00%
---------- ------- ----------- ------
Organization and Offering Expenses:
Selling Commissions(2) 160,000 8.00 2,400,000 8.00
Non-Accountable Expense
Allowance(3) 40,000 2.00 600,000 2.00
Other Organization and
Offering Expenses(4) 60,000 3.00 900,000 3.00
---------- ------ ------- ------

$ 260,000 13.00% $3,900,000 13.00%
---------- ------ ---------- ------

Amount Available for
Investment $1,740,000 87.00% $26,100,000 87.00%
---------- ------ ----------- ------
Acquisition Fees and
Expenses (5) 80,000 4.00% 1,200,000 4.00%
Working Capital
Reserves (6) -- -- -- --

Organization and Offering
Expenses (4) 260,000 13.00 3,900,000 13.00
Cash Payments for
Purchase of Assets(7) $1,660,000 83.00 $24,900,000 83.00
--------- ------ ---------- ------

Total Application of
Gross Proceeds $2,000,000 100.00% $30,000,000 100.00%
--------- ------ ---------- ------
</TABLE>

___________________________

(1) These figures represent the Partnership's current estimates concerning
the use of proceeds of the Offering. All proceeds of the Offering will be held
in trust by the Partnership for the benefit of the Limited Partners, to be used
only for the purposes set forth above and will not be commingled with any other
funds.

(2) The Partnership will pay selling commissions equal to 8% of Gross
Proceeds (subject to certain volume purchase discounts) to Participating
Dealers for Units sold by such Participating Dealers. The General Partners and
their Affiliates may purchase Units at prices which are net of selling
commissions, but otherwise on the same terms as other investors. Units
purchased by the General Partners or their Affiliates will be for investment
purposes only and not with a view toward resale. The General Partners will
receive the Non-Accountable Expense Allowance (as defined in Footnote 3 below)
to cover other Offering Expenses, including but not limited to, indirect
expenses such as travel to broker/dealer conferences, marketing staff overhead,
and an additional selling commission equal to 1% of Gross Proceeds that will be
paid to Participating Dealers for all Units sold prior to the sale of the
Minimum Number of Units. See "Conflicts of Interest" and "Plan of
Distribution."

(3) "Non-Accountable Expense Allowance" shall mean reimbursement to the
General Partners in an amount equal to 2% of the Gross Proceeds to cover
certain non-accountable expenses related to the offering.

(4) In addition to selling commissions and the Non-Accountable Expense
Allowance, Organization and Offering Expenses include: (a) legal, accounting,
escrow, filing and other fees incurred in connection with the organization and
formation of the Partnership and Offering; and (b) reimbursements to the
General Partners and their Affiliates for the salaries and direct expenses of
their officers and employees while directly engaged in organizing the
Partnership and marketing the Units. (See "Compensation Table.") Organization
and Offering Expenses may include certain expenses that are not characterized
as organizational expenses for tax purposes. (See "Tax Aspects of the Offering
- - Deductibility of Fees.") The General Partners will receive reimbursement for
actual Organization and Offering Expenses which, when added to Organization and
Offering Expenses paid by the Partnership, may not exceed an amount equal to 3%
of Gross Proceeds (excluding selling commissions and the Non-Accountable
Expense Allowance, but

22
<PAGE> 54

including up to 0.5% for accountable bona fide due diligence expenses of
Participating Dealers and their registered representatives). In no event will
the aggregate amount of selling commissions, Non-Accountable Expense Allowance
used for underwriting compensation, and funds paid as underwriting compensation
from any other source be greater than 10% of the Gross Proceeds nor will an
amount more than 0.5% of the Gross Proceeds be paid, by the Partnership or any
Affiliate of the Partnership or the General Partners, as reimbursement for due
diligence expenses.

The General Partners have guaranteed payment of Organization and
Offering Expenses (including selling commissions and the Non-Accountable
Expense Allowance) which exceed 13% of Gross Proceeds. Payment of expenses
pursuant to this guarantee will be without recourse to, or reimbursement by,
the Partnership.

(5) Acquisition Fees include: all fees and commissions paid or payable to
any person by any person (whether designated as real estate commissions,
finder's fees or similar fees) in connection with the Partnership's acquisition
of Properties and Equipment. The General Partners or Affiliates will receive
Acquisition Fees equal to the lesser of: (a) 4% of Gross Proceeds plus an
additional .0677% (the "Debt Fee") for each 1% of indebtedness (calculated as
the aggregate amount of Partnership indebtedness secured by Partnership Assets
as a percentage of the aggregate "Purchase Prices" of such Assets) incurred in
acquiring Properties and/or Equipment, but in no event will Acquisition Fees
exceed 5% of the aggregate Purchase Prices of Properties and Equipment; or (b)
compensation customarily charged in arm's-length transactions by others
rendering similar services as an on-going activity in the same geographic
location and for comparable property or equipment. Although the Debt Fee is
included within the definition of Acquisition Fees for purposes of calculating
the 5% limitation, the Debt Fee will be paid out of the proceeds received from
such indebtedness rather than from Gross Proceeds. The General Partners will
pay all Acquisition Expenses from amounts received as Acquisition Fees.
Acquisition Expenses include: surveys, appraisals, title and escrow fees,
legal and accounting fees and expenses, computer use related expenses,
environmental and asbestos audits and travel and communication expenses
incurred in the selection and acquisition of Properties and Equipment. Based on
previous experience, the General Partners believe that the Acquisition Expenses
will approximate 1% of Gross Proceeds. For purposes of this Prospectus,
"Purchase Price" shall mean shall mean (i) the invoice price or contract price
at which the Partnership acquired Property and/or Equipment from the
manufacturer or a third party seller, or an amount no greater than the invoice
price or contract price, at which an Affiliate of the Partnership, acquired
Property and/or Equipment. The Purchase Price shall include Acquisition Fees
(except for purpose of the calculation of such Fees) and all debt secured by
liens and security interests on the Property and/or Equipment, but shall
exclude points and prepaid interest.

Lessees will generally be required to pay Affiliates of the General
Partners for certain costs incurred in connection with lease transactions,
including commitment fees, which typically approximate 1% to 2% of the
transaction amount. Although such costs are not paid by the Partnership, they
will be included in the limitations on fees and expenses paid by any party for
any services rendered in connection with and during the Partnership's
organizational or acquisition phase including Organizational and Offering
Expenses, Acquisition Fees, Acquisition Expenses and any other similar fees
("Front-End Fees").

(6) Since most of the Partnership's leases will be on a "triple net" basis,
it is not anticipated that a permanent reserve for maintenance and repairs will
be established. However, to the extent the Partnership has insufficient funds
for such purposes, the General Partners will advance to the Partnership an
aggregate amount of up to 1% of the Gross Proceeds for maintenance and repairs.
See "Investment Objectives and Policies - Investment Standards."

(7) The Partnership intends to use 75%-90% of the Net Offering Proceeds to
acquire Properties and 10%-25% of the Net Offering Proceeds to acquire
Equipment. If the Partnership sells only the Minimum Number of Units, it
expects to purchase approximately two Properties and three Equipment packages,
whereas with the Maximum Number of Units and maximum financing, it expects to
purchase approximately 20 Properties and 30 Equipment packages. However, as
higher or lower prices for individual Properties and Equipment packages are
possible, the Partnership may acquire greater or lesser numbers of Properties
and/or Equipment packages.

23
<PAGE> 55

COMPENSATION TABLE

The agreements and arrangements as to compensation and sharing of
profits, losses and distributions among the General Partners, their Affiliates
and the Partnership were not determined by arm's-length negotiations, although
the General Partners believe that such agreements and arrangements approximate
those which would be arrived at through arm's length negotiations. See
"Conflicts of Interest." The following table discloses all compensation which
may be received from the Partnership, directly or indirectly, by the General
Partners and their Affiliates.

<TABLE>
<CAPTION>
TYPE OF ESTIMATED MINIMUM AND
COMPENSATION COMPENSATION MAXIMUM DOLLAR AMOUNT
------------ ------------ ---------------------
<S> <C> <C>
Offering Stage
- --------------
Non-Accountable Expense An amount equal to 2% of Actual amount depends on number
Allowance (payable to the Gross Proceeds. of Units sold. Minimum: $40,000
General Partners and/or their (assuming sale of Minimum Number
Affiliates) of Units); Maximum: $600,000
(assuming sale of Maximum Number
of Units).

Other Organization and An amount equal to up to 3% Actual amount depends on number
Offering Expenses of Gross Proceeds, as of Units sold. Minimum: $60,000
(reimbursable to the General reimbursement for actual (assuming sale of Minimum Number
Partners and/or their Organization and Offering of Units); Maximum: $900,000
Affiliates) Expenses paid by the General (assuming sale of Maximum Number
Partners and their Affiliates of Units).
(excluding selling
commissions and the Non-
Accountable Expense
Allowance, but including up
to 0.5% of Gross Proceeds as
reimbursement for accountable
bona fide due diligence
expenses of Participating
Dealers and their registered
representatives) in an amount
equal to up to 3% of Gross
Proceeds less amounts paid by
the Partnership.

Selling Commissions An amount equal to 8% per Actual amount depends on
Unit, subject to reduction number of Units sold:
for volume discounts. In Minimum: $180,000
addition, an additional 1% (assuming sale of Minimum
selling commission will be Number of Units);
paid until the Minimum Maximum: $2,420,000
Number of Units is sold. (assuming sale of
Such additional 1% selling Maximum Number of
commission will be paid by Units).
the General Partners out of
the Non-Accountable
Expense Allowance. In no
event will selling
commissions, the Non-
Accountable Expense
Allowance, and
Organizational and Offering
Expenses exceed in the
aggregate, 13% of Gross
Proceeds.

</TABLE>

24
<PAGE> 56
<TABLE>
<CAPTION>
TYPE OF ESTIMATED MINIMUM AND
COMPENSATION COMPENSATION MAXIMUM DOLLAR AMOUNT
------------ ------------ ---------------------
<S> <C> <C>
Acquisition Stage:
- -----------------
Acquisition Fees and Expenses An amount equal to the lesser Actual amount depends on number
(payable to the General of: (i) 4.00% of Gross of Units sold, indebtedness
Partners or an Affiliate) Proceeds plus an additional incurred and Acquisition
.0677% for each 1% of Expenses. Minimum: $80,000
indebtedness incurred in (assuming sale of Minimum Number
acquiring Properties and/or of Units); Maximum: $1,200,000
Equipment (such additional (assuming sale of Maximum Number
.0677% fee to be paid out of of Units) (in each case not
the proceeds from such including the additional .0677%
indebtedness, and such fee paid from loan proceeds and
indebtedness to be limited to before reduction for payment of
an amount equal to 35% of the Acquisition Expenses).
sum of Gross Proceeds and the
aggregate amount of Partnership
indebtedness secured by
Partnership Assets), but in no
event will Acquisition Fees
exceed 5% of the aggregate
Purchase Prices of Properties
and Equipment; or (ii)
compensation customarily
charged in arm's-length
transactions by others
rendering similar services as
an on-going activity in the
same geographical location
and for comparable property
and/or equipment. The
General Partners have agreed
to pay all Acquisition
Expenses out of amounts
received by them as payment
for Acquisition Fees. The
Partnership will commit
not less than 83% of Gross
Proceeds to Investments in
Assets. The Partnership
will also pay the Debt Fee
(.0677% for each 1% of
indebtedness (calculated
as the aggregate amount of
Partnership indebtedness
secured by Partnership Assets
as a percentage of the
aggregate Purchase Prices of
such Assets)) to the General
Partners or their Affiliates,
but such fee shall be paid
out of the proceeds received
from such indebtedness (as
opposed to out of Gross
Proceeds). However, the
Acquisition Fees (which
include the Debt Fee) may not
exceed 5% of the aggregate
Purchase Prices of Properties
and/or Equipment and the
Acquisition Fees payable to
the General Partners or their
Affiliates will be reduced if
and to the extent required to
comply with the foregoing
requirement.

Lessees will generally be
required to pay Affiliates of
the General Partners for
certain costs incurred in
connection with lease
transactions, including
commitment fees and
construction fees which
typically approximate 1% to
2% of the transaction amount.
Although such costs are not
paid by the Partnership, they
will be included in the
limitations on Front-End
Fees. connection

Operational Stage:
- -----------------

Subordinated Asset Management Subordinated asset management Actual amount depends on results
Fee (payable to General fee for managing Properties of operations and, therefore,
Partners or an Affiliate) and Equipment subject to cannot be determined at the
"triple net" and "double net" present time.
leases not to exceed the
lesser of:

</TABLE>

25
<PAGE> 57
<TABLE>
<CAPTION>
TYPE OF ESTIMATED MINIMUM AND
COMPENSATION COMPENSATION MAXIMUM DOLLAR AMOUNT
------------ ------------ ---------------------
<S> <C> <C>
(i) fees which are
competitive for similar
services in the geographical
location where the Properties
and/or Equipment are located;
or (ii) 1% of the gross
rental revenues derived from
Partnership Properties and/or
Equipment. Payment of such
fees shall be subordinated to
receipt by the Limited
Partners of their 10% Current
Preferred Return. In the
event of a default under a
Triple Net Lease or Double
Net Lease which requires the
Partnership to assume
operations of a Property
and/or Equipment, such
operation will be managed by
an Affiliate of the General
Partners. In such event,
provided the Affiliate is
responsible for providing
leasing services for such
Property or Equipment, the
Affiliate would be entitled
to an unsubordinated
management fee equal to 3% of
gross revenues generated by
the Property and/or Equipment
plus reimbursement for
on-site expenses.

Interest in Profits, Losses The Limited Partners will Actual amount depends on results
and Cash Flow (payable to the receive 99% and the General of operations and, therefore,
General Partners) Partners will receive 1% of cannot be determined at the
Cash Flow; provided, however, present time.(1)
that the General Partners' 1%
of Cash Flow shall be
subordinated to receipt by
the Limited Partners of their
10% Current Preferred Return.
Profits and losses from
operations are allocated in
accordance with the ratio of
distributions of Cash Flow
attributable to such year,
although in no event will the
General Partners be allocated
less than 1% of profits and
losses in any year.

Reimbursable Expenses Certain expenses incurred by Actual amounts cannot be
(payable to the General the General Partners and determined at the present
Partners and their their Affiliates will be time.(2)(3)
Affiliates) reimbursed by the
Partnership.

Liquidation Stage:
- -----------------
Interest in Net Sale or Limited Partners will receive Actual amounts to be received
Refinancing Proceeds (payable 90% and the General Partners depend upon the sale price of
to General Partners) will receive 10% of the Net Partnership Properties and
Sale or Refinancing Proceeds; Equipment and, therefore, cannot
provided, however, that the be determined at the present
General Partners' 10% of Net time.(1)
Sale or Refinancing Proceeds
shall be subordinated to
receipt by the Limited
Partners of aggregate
distributions from all
sources equal to the sum of the
10.5% Performance Preferred
Return and 100% of their
Original Contributions.

</TABLE>

<PAGE> 58
<TABLE>
<CAPTION>
TYPE OF ESTIMATED MINIMUM AND
COMPENSATION COMPENSATION MAXIMUM DOLLAR AMOUNT
------------ ------------ ---------------------
<S> <C> <C>
Real Estate Liquidation Fees The lesser of: (i) 3% of the Actual amounts to be received
(payable to an Affiliate) sale price of the Property; depend upon the sale price of
or (ii) 50% of the real Partnership Properties and,
estate commission customarily therefore, cannot be determined
charged for similar services at the present time.
in the locale of the Property
being sold, provided however
that payment of said
Liquidation Fee shall be
subordinated to receipt by
the Limited Partners of
aggregate distributions from
all sources equal to the
sum of the 10.5% Performance
Preferred Return and 100% of
their Original Contributions.

Equipment Liquidation Fee Fees for the resale of Actual amounts depend on sale
(payable to an Affiliate) Equipment equal to the lesser price of Partnership Equipment
of (i) 3% of the sale price and, therefore, cannot be
of Equipment; or (ii) Fees determined at the present time.
customarily charged for
similar services in the
locale of the Equipment being
sold.

</TABLE>

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

(1) The Current Preferred Return is defined as aggregate
distributions of Cash Flow equal to a cumulative, non-compounded 10% per annum
return on Limited Partners' Adjusted Investment. The Performance Preferred
Return is defined as aggregate distributions of Cash Flow and Net Sale or
Refinancing Proceeds equal to a cumulative, non-compounded 10.5% per annum
return on the Limited Partners' Adjusted Investment.

(2) (a) The General Partners also will receive reimbursement
for: (i) the actual cost to the General Partners or their Affiliates of goods
and materials used for and by the Partnership if obtained from unaffiliated
parties; and (ii) "Administrative Services" (as hereinafter defined) necessary
for the prudent operation of the Partnership. The amounts charged to the
Partnership for services performed pursuant to clause (ii) above will not
exceed the lesser of: (1) the actual cost of such services; or (2) 90% of the
amount which the Partnership would be required to pay to unaffiliated parties
for comparable services. The Partnership's annual report to the Limited
Partners, will include an itemized breakdown of the services performed and the
amount reimbursed to the General Partners or their Affiliates pursuant to
clause (ii) above, which information shall be verified by the independent
public accountants retained by the Partnership. "Administrative Services"
include services such as typing, record keeping, preparation and dissemination
of Partnership reports, preparation and maintenance of records regarding
Limited Partners, preparation and dissemination of responses to investor
inquiries and other communications with investors and any other record keeping
required for Partnership purposes. However, in no event shall the General
Partners be entitled to collect any fees not requested within one year of the
date they were earned.

(b) In extraordinary circumstances, the General Partners
and their Affiliates may provide other goods and services to the Partnership if
all of the following criteria are met: (i) the goods or services must be
necessary to the prudent operation of the Partnership and provision therefore
must be set forth in a written contract which may only be modified in any
material respect by the vote of a majority in interest of Limited Partners and
shall be terminable upon 60 days notice; (ii) the compensation, price or fee
must be equal to the lesser of (A) 90% of the compensation, price or fee the
Partnership would be required to pay to unaffiliated parties who are rendering
comparable services or selling or leasing comparable goods on competitive terms
in the same geographic location, or (B) 90%

27
<PAGE> 59

of the compensation, price, or fee charged by the General Partners or their
Affiliates for rendering comparable services or selling or leasing comparable
goods on competitive terms; or (iii) if at least 95% of gross revenues
attributable to the business of rendering such services or selling or leasing
such goods are derived from persons other than Affiliates, the compensation,
price or fee charged by an unaffiliated person who is rendering comparable
services or selling or leasing comparable goods on competitive terms in the
same geographic location. In addition, any such payment will be subject to the
further limitation described in paragraph (c) below. Extraordinary
circumstances shall be presumed only when in the good faith belief of the
General Partners there is an emergency situation requiring immediate action by
the General Partners or their Affiliates and the goods or services are not
immediately available from unaffiliated parties. Services which may be
performed in such extraordinary circumstances include emergency maintenance of
Partnership assets, janitorial and other related services due to strikes or
lock-outs, emergency tenant evictions and repair services which require
immediate action. Notwithstanding the foregoing, the General Partners and their
Affiliates also may be reimbursed for actual expenses incurred when
extraordinary on site action is required.

(c) No reimbursement will be permitted to the General
Partners or their Affiliates for items such as rent, depreciation, utilities,
capital equipment and other administrative items; and the salaries, fringe
benefits, travel expenses and other administrative items allocated to any
controlling persons of the General Partners, their Affiliates or any other
supervisory personnel. Permitted reimbursements include salaries and related
salary expenses for personnel, other than controlling persons, which could be
performed directly for the Partnership by unaffiliated parties such as legal,
accounting, transfer agent, data processing and duplication. Controlling
persons, for purposes of this section, include, but are not limited to,
persons, irrespective of their title, who perform functions for the General
Partners similar to those of: (1) chairman or member of the board of
directors; (2) president; (3) executive vice president; or (4) those entities
or individuals holding 5% or more of the stock of the Managing General Partner
or (5) a person having the power to direct or cause the direction of the
Managing General Partner, whether through ownership of voting securities, by
contract or otherwise. The General Partners believe that the employees of the
General Partners, their Affiliates and controlling persons who will perform
services for the Partnership for which reimbursement is allowed pursuant to
clause (b)(iii) above, have the experience and educational background, in their
respective fields of expertise, appropriate for the performance of such
services.

(3) The General Partners will not be compensated by the
Partnership for services other than those which have been disclosed in this
Compensation Table. In addition, the General Partners shall not be entitled to
collect any fees or reimbursements not requested within one year of the date
they were earned.

CONFLICTS OF INTEREST

The Partnership will be subject to various conflicts of interest
arising out of its relationship with the General Partners and their Affiliates.
The agreements and arrangements, including those relating to compensation,
between the Partnership and the General Partners and their Affiliates are not
the result of arm's-length negotiations. Where conflicts arise from anticipated
transactions with the General Partners or their Affiliates, the policies and
limitations described below have been adopted. With respect to the conflicts of
interest described herein, the General Partners and their Affiliates will
endeavor to balance the interests of the Partnership with the interests of the
General Partners and their Affiliates in making any determination.

1. Compensation for the Time and Service of the General Partners.
The Partnership will rely on the General Partners and their Affiliates for the
daily operation of the Partnership and the management of its assets. The
General Partners and their Affiliates will have conflicts of interest in
allocating management time, services and functions between various future
partnerships which they may organize or serve, as well as other business
ventures in which they are, or may in the future, be involved. The General
Partners and their Affiliates believe they have and, with respect to future
entities will have, sufficient personnel to be fully capable of discharging
their responsibility to all partnerships and entities to which they are
responsible.

28
<PAGE> 60

2. Resolution of Conflicting Opportunities. The officers and
directors of the Managing General Partner are also officers and directors of
one or more entities which engage in the brokerage, sale, operation or
management of real estate and/or equipment. The General Partners and their
Affiliates may engage in other business ventures of various types for their own
accounts or for the accounts of others, including other limited partnerships,
and neither the Partnership nor any Limited Partner shall be entitled to any
interest in these ventures; however, the General Partners and their Affiliates
will be obligated to present to the Partnership any investment opportunity
which comes to their attention if such opportunity is of a character which
might be suitable for the Partnership, subject to consideration of the factors
hereinafter set forth. Some of these entities have or with respect to future
entities, may have, investment objectives similar or substantially identical to
those of the Partnership. In determining whether a particular property or
equipment package is suitable for acquisition by an entity or by the
Partnership, the Managing General Partner will consider various factors,
including: (i) whether the cash required for a particular acquisition is more
or less than the amount that would be appropriate for the entity to commit to
an investment; (ii) whether the nature of the potential cash flow to be derived
from the particular property or equipment package will conform with the
entity's investment objectives; (iii) whether that entity already owns
properties or equipment purchased from the same seller or involving the same
franchise; (iv) whether the property or equipment would satisfy that entity's
objective of geographic diversification; (v) whether the method of acquiring
the property or equipment can be structured to meet the Partnership's principal
investment objectives; (vi) whether the property is being acquired in a
transaction together with other properties not suitable for acquisition by that
entity; (vii) the estimated income tax effects of the purchase on each entity;
and (viii) the length of time since that entity has made an investment. Such
conflicts will be resolved in the best judgment of the Managing General
Partner. Investment opportunities that are of a character that could be
acquired by the Partnership will be offered first to Captec Franchise Capital
Partners L.P. III ("Captec L.P. III"), and if Captec L.P. III does not have
funds available for investment or does not elect to make such investment,
then offered to the Partnership if the Partnership has capital to invest at the
time the investment is available. The foregoing provisions are not intended to
relieve the General Partners of their fiduciary obligations to the Partnership.
See "Prior Offerings," regarding one prior program which had funds available
for acquisitions as of the date of this Prospectus.

It is believed that the aforementioned factors, together with the
obligation of the General Partners and their Affiliates to present to the
Partnership any investment opportunity which could be suitable for the
Partnership, should limit any competition or conflicts with respect to the
purchase of properties by other partnerships and the Partnership.

3. Property and Equipment Management Services Will be Rendered by
the General Partners or their Affiliates. It is anticipated that Captec
Financial Group, Inc. ("Captec"), the parent of the Managing General Partner
and of which Mr. Beach is a director, officer and majority shareholder, may
provide property and equipment management services for the Partnership. In such
case, the General Partners believe that Captec would render management services
to the Partnership on a competitive basis in a manner consistent with customary
business practices. See "Compensation Table." The General Partners believe
that Captec has sufficient personnel and other required resources to discharge
all responsibilities to the various properties that Captec manages and will
manage in the future.

The property management agreement to be entered into between the
Partnership and Captec will be on terms no less favorable to the Partnership
than those customary for similar services by independent firms in the relevant
geographic area. See "Compensation Table." The property management agreement
will provide for termination by a majority vote of the Limited Partners,
without penalty, upon 60 days prior written notice.

4. Receipt of Fees and Other Compensation by the General Partners
and their Affiliates. In connection with this Offering and throughout all
stages of the Partnership, the General Partners and their

29
<PAGE> 61

Affiliates will receive the compensation as described in "Compensation Table."
All of the General Partners' fees with the exception of Acquisition Fees have
been subordinated to receipt by the Limited Partners of preferential
distributions. Acquisition Fees will be payable whether or not funds are
available for distribution to the Limited Partners. The General Partners may,
under certain circumstances, benefit from the continued holding of Partnership
Properties and/or Equipment, while investors may be better served by a sale or
other disposition of such Properties and/or Equipment. Furthermore, the receipt
of certain fees and reimbursements is dependent upon the ability of the General
Partners to timely invest Net Offering Proceeds. In addition, the General
Partners and their Affiliates will benefit to the extent indebtedness is
incurred by the Partnership since the Debt Fee is based upon such amount of
indebtedness, whereas it may not be in the best interests of the Limited
Partners for such indebtedness to be incurred. Therefore, the interest of the
General Partners in receiving such fees may conflict with the interest of the
Limited Partners. The General Partners and their Affiliates believe that their
actions and decisions will be made in a manner consistent with their fiduciary
duty to the Partnership. See "Compensation Table."

5. Non-Arm's-Length Agreements. The agreements and arrangements,
including those relating to compensation, between the Partnership and the
General Partners or any of their Affiliates will not be the result of
arm's-length negotiations, although the General Partners believe that such
agreements and arrangements will approximate those which would be arrived at
through arm's-length negotiations. While the Partnership will make no loans to
the General Partners or their Affiliates, the Partnership may borrow money from
the General Partners or their Affiliates, but only on such terms as to interest
rate, security, fees and other charges at least as favorable to the Partnership
as are charged by unaffiliated lending institutions in the same locality on
comparable loans for the same purpose. The General Partners and their
Affiliates are not prohibited from providing services to, and otherwise dealing
or doing business with, persons (for example, franchisees), who may deal with
the Partnership, although there are no present arrangements with respect
thereto. However, the Partnership Agreement prohibits receipt of rebates or
participation in any reciprocal business arrangements which would have the
effect of circumventing any of the provisions of the Partnership Agreement.

6. Prior Business Relationships. The Partnership may purchase
Properties and/or Equipment from certain sellers from whom the General Partners
or their Affiliates have purchased Properties and/or Equipment in the past and
from whom they may purchase Properties and/or Equipment in the future.
Additionally, the General Partners and their Affiliates may have engaged in, or
in the future may engage in, transactions with franchisors of franchisees who
will lease Partnership Properties and/or Equipment, and/or with the franchisees
themselves. In the event the Partnership enters into transactions with such
persons, the General Partners will experience a conflict between the current
interests of the Partnership and their interests in preserving the ongoing
business relationship. In all such matters, the General Partners must act in a
manner consistent with their fiduciary obligations to the Partnership. See
"-Resolution of Conflicting Opportunities" in this Section and "Management."

7. Legal Counsel for the Partnership and the General Partners is
the Same Law Firm. Jaffe, Raitt, Heuer & Weiss, P.C. is acting as general
counsel to the Partnership and as special counsel to the General Partners and
certain of their Affiliates with respect to all matters relating to the
Offering and federal and state securities laws and federal income tax laws.
Such firm is not acting as counsel for the Limited Partners or any potential
investor; therefore, such persons are urged to consult their own counsel.

There is a possibility that in the future the interests of the various
parties may become adverse. Under the Code of Professional Responsibility of
the legal profession, such counsel may be precluded from representing any one
or all of said parties in such case. If any situation arises in which the
interests of the Partnership appear to be in conflict with those of the General
Partners or their Affiliates, additional counsel may be retained by one or more
of the parties to assure that their interests are adequately protected.
Moreover, should such a conflict not be readily apparent, counsel may
inadvertently act in derogation of the interest of certain parties.

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8. Indirect Ownership of Properties and/or Equipment with Affiliates. The
General Partners may cause the Partnership to acquire an interest in Properties
and/or Equipment through a joint venture or general partnership with an entity
affiliated with the General Partners. In such instance, the General Partners or
their Affiliates will have a fiduciary duty to both the Partnership and the
other entity which participates in the joint venture. This may result in an
impasse in decision-making since generally none of the Affiliated joint
venturers would have full control over the joint venture. In addition, there is
a potential risk that while one joint venturer may have the right to purchase
the other joint venturer's interest in the event of a proposed sale, it may not
have the resources to do so. In order to minimize the likelihood of a conflict
between these fiduciary duties, the Partnership Agreement provides guidelines
for investments in such joint ventures in various respects. See "Investment
Objectives and Policies - Joint Ventures."

9. Conflicts with Affiliated Lessors. For the purpose of providing further
geographic and market diversity, the Partnership will not invest in both
Properties and Equipment to be leased at the same location. Thus, if the
Partnership invests in a Property, the lessee will be required to lease
Equipment from another party; and if the Partnership invests in Equipment, the
lessee will be required to lease its Property from another party. In some
cases, Affiliates of the General Partners may provide this additional financing
for the lessee under a separate lease with the lessee. This may create a
conflict of interest should the lessee have limited funds to satisfy its
obligations.

10. Tax Matters Partner. Pursuant to the Partnership Agreement, the
Managing General Partner will be the "tax matters partner" and, as a result,
may make various determinations which are binding on all of the Partners. As
"tax matters partner", the Managing General Partner will be responsible for
causing the Partnership to furnish annually to the Limited Partners (but not to
assignees of Limited Partners unless they become substituted Limited Partners)
sufficient information from the Partnership's tax return for the Limited
Partners to prepare their own federal, state, and local tax returns. Audits of
items of partnership income, gain, loss, deduction, or credit will be
determined by a unified administrative proceeding at the partnership level, in
which all of the partners have a right to participate. As a general rule, the
administrative proceeding is managed by the tax matters partner. Certain
settlements entered into by the tax matters partner may be binding upon all
Limited Partners who do not file a statement to the contrary with the Secretary
of the Treasury. It is possible that issues could arise in which the General
Partners or their Affiliates might benefit if the Managing General Partner were
to take positions as "tax matters partner" that were not in the best interest
of the Limited Partners. Since the impact of such determinations on the General
Partners and their Affiliates may be substantially different in certain
circumstances from the impact on the Limited Partners, the Managing General
Partner may be subject to a conflict of interest in acting as the "tax matters
partner." Although the Managing General Partner has absolute discretion with
respect to its decisions as the "tax matters partner," it will attempt to
resolve the conflict by utilizing its best judgment so as to protect the
interests of all Partners.

FIDUCIARY RESPONSIBILITIES OF THE GENERAL PARTNERS

The General Partners are accountable to the Partnership and to the Limited
Partners as fiduciaries and consequently must exercise good faith and
integrity in handling Partnership affairs. Where the question has arisen,
courts have held that a limited partner may institute legal action on behalf of
himself and all other similarly situated limited partners (a class action) to
recover damages for a breach by a general partner of his fiduciary duty or on
behalf of the limited partnership (a derivative action) to recover damages for
the partnership from third parties or from general partners. Moreover, the
Delaware Revised Uniform Limited Partnership Act specifically permits limited
partners to bring such derivative actions under certain circumstances. In
addition: (i) limited partners may have the right, subject to procedural and
jurisdictional requirements, to bring a partnership class action in federal
courts to enforce their rights under the federal securities laws; and (ii)
limited partners who have suffered losses in connection with the purchase or
sale of their limited partnership interests may be able to recover such losses
from a general partner where the losses result from a violation by the general
partner of the anti-fraud provisions of the federal securities

<PAGE> 63

laws. Since this area of the law is rapidly developing and changing, investors
who have questions concerning the duties of the General Partners should consult
with their own counsel.

Neither the General Partners nor any of their Affiliates have the
authority to permit receipt of rebates or permit the General Partners or any
Affiliate to participate in any reciprocal business arrangements which would
have the effect of circumventing any of the provisions of the Partnership
Agreement.

Under applicable Delaware law, the General Partners are accountable to the
limited partners as fiduciaries and, consequently, are required to exercise
good faith and integrity in handling the affairs of the Partnership. However,
the Partnership Agreement provides that the General Partners and their
Affiliates shall have no liability to the Partnership or the limited partners
for any action or inaction performed or omitted by the General Partners or
their Affiliates in good faith and in the best interest of the Partnership,
except for conduct constituting negligence or misconduct. Furthermore, the
Partnership Agreement provides that there shall be no liability because any
taxing authority disallows or adjusts any income, nor shall there be any
liability for any action or inaction taken or omitted in accordance with the
Partnership Agreement, provided that the same were not the result of
negligence, misconduct or breach of contract on the part of the General
Partners or their Affiliates. The General Partners and their Affiliates are
also indemnified by the Partnership against and for loss, liability or damages
(including all judgments, expenses and amounts expended in the settlement of
any claim of liability or damages) incurred by them in good faith and in a
manner reasonably believed by them to be in the Partnership's best interests,
provided that the course of conduct which caused the loss or liability is not
attributable to negligence or misconduct on the part of the General Partners or
their Affiliates. Such indemnifications are recoverable only out of the assets
of the Partnership and not from the limited partners. As a result of the above
arrangements, a purchaser of Units offered hereby may be entitled to a more
limited right of action than he would otherwise have had absent the limitation
in the Partnership Agreement. A successful claim for such indemnification could
deplete the Partnership's assets by the amount paid.

The Partnership Agreement provides that neither the General Partners,
their Affiliates, nor any person acting as a broker-dealer shall be indemnified
against such liabilities arising from or out of an alleged violation of federal
or state securities laws, rules or regulations, unless (a) there has been a
successful adjudication on the merits of each count involving alleged
securities violations as to the particular indemnitee, or (b) such claims have
been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (c) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made. IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION,
INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (THE "ACT"), IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE, UNENFORCEABLE.

Limited Partners should also be aware that the General Partners could have
various defenses available to them if the Limited Partners were to bring an
action for breach of the General Partner's fiduciary duty. Such defenses could
include technical defenses such as those based on statutes of limitations
(if for example, the suit is not brought within the applicable time
limitations). Also, a General Partner could attempt to establish that even
though it made an error in judgment, it had, in good faith attempted to act in
the best interest of the Partnership. General Partners are presumed to
exercise business judgement. In other words, a mere mistake in judgment may not
constitute a breach of fiduciary duty.

Section 17 of the Partnership Agreement provides that the General Partners
and their Affiliates may engage in or possess an interest in any other business
or venture of every nature and description. However, see "Conflicts of
Interest-Resolution of Conflicting Opportunities."

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MANAGEMENT

1. General Partners

The General Partners of the Partnership are Captec Franchise Capital
Corporation IV, a Michigan corporation formed in July of 1996 (the "Managing
General Partner") and PatrickEL. Beach, an individual. Captec Franchise
Capital Corporation IV will serve as the Managing General Partner. The
Managing General Partner intends to commence operations concurrently with
commencement of Partnership operations. The Managing General Partner is a
wholly-owned subsidiary of Captec Financial Group, Inc. ("Captec") (for
additional information regarding Captec, see "-Parent Company" in this
Section).

The principal officers and directors of the Managing General Partner
are:

Patrick L. Beach Chairman of the Board of Directors, President
and Chief Executive Officer

W. Ross Martin Director, Senior Vice President, Treasurer,
Secretary and Chief Financial Officer

The offices of the Partnership and the General Partners are located
at 24 Frank Lloyd Wright Drive, P.O. Box 544, Ann Arbor, Michigan 48108-0544,
telephone (800) 522-7832. Biographies for the officers and directors of the
Managing General Partner and Mr. Beach (who is also an officer and director of
the Managing General Partner) are set forth below.

Patrick L. Beach (age 40) is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Managing General Partner, Captec,
Captec Franchise Capital Corporation II ("Captec II") and Captec Franchise
Capital Corporation III ("Captec III"). Mr. Beach is the President of Captec
Acceptance Leasing Corporation, a Michigan corporation which serves as the
originator of leases for Captec Franchise Leasing N.V. See also "- Parent
Company" in this Section regarding services provided by Captec to Captec
Franchise Leasing N.V. Mr. Beach attended the University of Michigan and
graduated from its School of Business Administration in 1977 with a Bachelor of
Business Administration degree. From 1977 until 1980 he was employed by the
HydraMatic Division of General Motors Corp., where he served in various
manufacturing related positions including process engineering and production
supervision. From March 1980 until February 1981 he served as Production
Manager for Quick Industries, Inc. of Jackson, Michigan with responsibility for
purchasing and production management for five plastics manufacturing plants in
five states. In February 1981, Mr. Beach resigned from his previous position to
found Captec. He is responsible for the day to day management of Captec and its
Affiliates. Mr. Beach also served as Chairman and President of Illiana
Printing, Inc., the master franchisor for American Speedy Printing Centers,
Inc. in the states of Illinois and Indiana, from 1989 until it was sold in
1991. He also served as Chairman of Wendy's of San Diego, Inc., a 27 - unit
franchisee of Wendy's International, from 1986 until it was sold in 1990. See -
"Risk Factors - Dependence on General Partners; Lack of Experience."

Mr. Beach is currently involved as a defendant in a lawsuit filed in
the Circuit Court for the County of Washtenaw, Michigan. The suit was filed by
guarantors of a defaulted loan made to City Centre Partners

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Limited Partnership ("City Centre") and by limited partners of City Centre
against Mr. Beach by virtue of Mr. Beach being a general partner of City
Centre. Mr. Beach believes the lawsuit to be without merit and intends to
vigorously defend this lawsuit. See "Risk Factors - Dependence on General
Partners; Lack of Experience."

W. Ross Martin (age 36) is a Director, Senior Vice President, Treasurer,
Secretary and Chief Financial Officer of the Managing General Partner, a
Director, Vice President, Treasurer and Chief Financial Officer of Captec II
and Captec III, and a Director, Senior Vice President, and Chief Financial
Officer of Captec. Mr. Martin graduated in 1982 from the University of Michigan
School of Business Administration with a Bachelor of Business Administration
degree. He is also a Certified Public Accountant. From 1982 until 1985, he was
employed by Deloitte Haskins & Sells, most recently as senior consultant in
that firm's Emerging Business Services practice. Mr. Martin joined Captec in
1985 as Controller and was promoted to Vice President - Finance in 1986 and
Chief Financial Officer in 1994. He is responsible for the treasury, corporate
finance and strategic planning duties of Captec as well as overseeing the
Accounting and Finance Departments.

2. Parent Company.

Captec Financial Group, Inc. ("Captec") was founded in 1981 and its
headquarters are located in Ann Arbor, Michigan. During the early years,
Captec was a general equipment lessor. Since that time, Captec has
increasingly focused its efforts on the franchise, chain restaurant and retail
customers. Captec currently provides equipment lease financing, real estate
net lease financing, mortgage loan financing and construction financing.
Captec currently has 54 employees and is managed by its President and senior
officers who have aggregate leasing experience of nearly 50 years.

As of September 30, 1996, Captec had an over $200 million portfolio under
management consisting of approximately 40% equipment leases, 35% net leased
real estate and 25% mortgage loans.

The principal officers of Captec are:

Patrick L. Beach Chairman, President and Chief Executive Officer

George R. Beach Director and Senior Vice President

W. Ross Martin Director and Senior Vice President - Finance, and Chief
Financial Officer

Gary A. Bruder Director and Senior Vice President - Administration

H. Reid Sherard Director, and Senior Vice President - Sales and
Marketing

Thomas B. Jahncke Senior Vice President - Securities, National Sales
Director

Biographical information for Messrs. Beach (Patrick), and Martin is set
forth above. Biographical information for the other officers of Captec is set
forth below.

George R. Beach (age 71) is a Director and Senior Vice President of
Captec. Mr. Beach received a Juris Doctorate from the University of Detroit in
1952, and was engaged in the private practice of law through 1970 in Jackson,
Michigan. From 1970 through 1975, he was employed as Vice President and General
Counsel of a national credit life insurance operation, and served as a director
of a related company based in the United Kingdom during this time. From 1975
until joining Captec in 1981, Mr. Beach was

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engaged in the private practice of law in Burlingame, California. Mr. Beach is
responsible for managing Captec's Portfolio Management Department as well as
serving as general counsel to Captec. Mr. Beach is Patrick L. Beach's father.

Gary A. Bruder (age 42) joined Captec in May of 1995 as Senior Vice
President-Administration. Mr. Bruder manages Captec's Documentation
Department and co-manages its Credit Department. In addition, he is
responsible for office management functions. In this role, he is responsible
for day-to-day back office operations of the Company, particularly overseeing
the processing of new financing transactions. Prior to joining Captec, Mr.
Bruder practiced law for fifteen years as a principal of the 250 person law
firm of Miller, Canfield, Paddock & Stone, P.L.C. and served as the Resident
Director of the Ann Arbor office of this law firm. Mr. Bruder holds a Juris
Doctorate from Wayne State University Law School and a Bachelor of Architecture
Degree from the University of Michigan School of Architecture.

H. Reid Sherard (age 48) joined Captec in July 1994 as Senior Vice
President - Sales and Marketing. He manages the sales & marketing department
which is responsible for the origination and acquisition activities related to
Captec's equipment and real estate financing products. Mr. Sherard was
previously employed by Franchise Finance Corporation of America from 1986 to
1994, holding several positions including Vice President, Acquisitions. In
that capacity, he directed the real estate marketing and closing activities of
that company and was responsible for the acquisition of over one half billion
dollars of net leased restaurant properties. Prior to that, he was employed
for five years by the National Bank of Georgia, most recently as Group Vice
President, Regional Manager, for eight years prior by the South Carolina
National Bank, and for three prior years at American Lease Plans, Inc. Mr.
Sherard graduated from Charleston Southern University in 1970 with a Bachelor
of Science in Business Administration degree.

Thomas B. Jahncke (age 50) joined Captec in May 1995 as Senior Vice
President - Securities, National Sales Director. He manages the securities
department and is also responsible for wholesaling the Northeast territory.
Mr. Jahncke has been involved in the real estate and finance industry for over
25 years. Most recently he was employed by Search Capital Group, Inc. from
1992 to 1995 with primary responsibility of national marketing. Prior to that,
Mr. Jahncke worked in various positions with the Hall Financial Group from 1977
to 1991, including Principal and Chief Executive Officer of Hall Securities
Corporation, an NASD Broker/Dealer. Mr. Jahncke's initial employment was with
the Detroit Bank & Trust (now Comerica Bank) from 1971 to 1977 where he became
a Mortgage Loan Officer. Mr. Jahncke received a BS from Cornell University in
1969 and an MBA - Finance/Real Estate from the University of Michigan Business
School in 1971.

INVESTMENT OBJECTIVES AND POLICIES

1. General. The Partnership intends to acquire income-producing commercial
Properties and Equipment which will be leased on a "triple net" basis primarily
to operators of national chain and nationally franchised fast-food, family
style and dinner house restaurants as well as other franchised and chain
businesses. The Partnership also intends to acquire Properties that will be
leased on a "double net" (the Partnership being responsible for the maintenance
of the roof and/or exterior walls for such Properties) or "triple net" basis to
various Retail Concerns. The Partnership intends to use not less than 75%, but
not more than 90%, of Net Offering Proceeds, to acquire Properties and up to
25%, but not less than 10%, to acquire Equipment. Of the 75% of Net
Offering Proceeds that the Company intends to use to acquire Properties, the
Company does not intend to use more than 25% of such proceeds to acquire
Properties to be leased to Retail Concerns. The Partnership's actual portfolio
may differ from these estimates initially and/or during the life of the
Partnership. The principal investment objectives of the Partnership, with
respect to such Properties and Equipment are:

(i) preservation and protection of capital;

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<PAGE> 67

(ii) distribution of current cash flow from the Partnership's
leases;

(iii) capital appreciation of Partnership Properties;

(iv) generation of increased income and protection against
inflation through escalations in the base rent or
participation in gross revenues of the lessees of
Partnership Properties; and

(v) deferral of the taxation of a portion of Partnership
cash distributions for Limited Partners.

The Partnership intends to lease a majority of its Properties and
Equipment to franchisees of major and national chains as the Partnership
believes franchisees have the following advantages over non-franchised
operations:

- Use of trademark and logo

- Franchisor assistance with site selection

- Research on market preferances

- Site selection and development

- Training

- Advertising and marketing

- Product supply

The franchise industry is playing a major role in small business growth,
accounting for $803.2 billion, or 40% of all retail sales during 1992. Total
franchise sales could reach $1 trillion by the year 2000. (Source: June, 1995
Franchise Fact Sheet, International Franchise Association) Franchises in the
aggregate have enjoyed a high success rate and steady growth in sales and
popularity. However, not all franchises have experienced this success rate and
growth.

The Properties will be leased primarily to franchisors of major national
and regional restaurant companies and their franchisees. The Partnership
believes that the restaurant industry is one of the largest and fastest growing
segments of our national economy due to the following factors:

- - By the year 2000, it is anticipated that food service will claim nearly
half of every food dollar (June, 1995 Franchise Fact Sheet, Interational
Franchise Association).

- - The Partnership believes that restaurants affiliated with a national chain
(franchises) will continue to be some of the largest and most established
retailers in the country.

- - Franchise restaurants have the market power to bring in more customers
with media advertisement than smaller, local restaurants.

The Partnership believes that Captec's commitment to franchise financing and
its demonstrated experience offer a tremendous advantage to the investor.
However, there can be no assurances that the stated investment objectives of
the Partnership will be attained. Investors should note that the Partnership
intends to lease Properties and Equipment to franchisees rather than actually
investing in franchises.

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The Partnership's objectives with respect to Properties will be to
maximize long term returns, with Equipment intended to enhance short term
returns. There can be no assurances these objectives will be attained. See
"Risk Factors - Real Estate and Equipment Risks - Unspecified Fund; Blind Pool
Company, - Risks of Ownership of Properties and Equipment, and - Risks
Resulting from Competition", and "Risk Factors - Investment Risks - Dependence
on General Partners; Lack of Experience."

2. Types of Investments. Although no franchises have been selected for
investment and no agreements to purchase Properties or Equipment will be
entered into until after the date of this Prospectus, the Partnership expects
to acquire Properties primarily for lease to franchisors and/or franchisees of
national fast food, dinner house and family-style restaurant franchises such as
Applebee's, Arby's, Boston Market, Burger King, KFC (formerly known as Kentucky
Fried Chicken), Chili's, Denny's, Golden Corral Family Steakhouses, Hardees,
Pizza Hut, Taco Bell, T.G.I. Friday's and Wendy's. The Partnership expects to
acquire Equipment for lease to major national and regional retail concerns and
franchisors and/or franchisees of the above-referenced restaurant franchises as
well as franchisors, franchisees, and operators of other franchised or chain
businesses. In selecting specific franchises, the General Partners will
consider the following:

- - Franchisor's Operating History--including a review of the franchise
offering circular, the financial condition of the franchisor, a study of
the historical failure rates experienced by the franchise, and
consideration of the number of years in the business of franchising;

- - Evaluation & Survey of "Average" Franchisees - A review of selected
"average" franchisee financial statements and a survey of franchisees;

- - Evaluation of Franchisor's Ability to Compete - A review of the direct
competition of the franchisor with regard to the ability of the franchisor
to remain competitive in the market;

- - Number of Franchise Locations & Growth Plans.

Again, although no Retail Concerns have been selected for investment and
no agreements to purchase Properties will be entered into until after the date
of this Prospectus, the Partnership expects to acquire Properties for lease to
national and regional Retail Concerns. The Partnership anticipates that these
leases will be for 10-25 year terms. The Partnership expects to enter into
leasing arrangements with Retail Concerns such as Blockbuster Video, Hollywood
Video, Borders Books, Office Max, Staples, Pier 1 Imports, and Michaels.

The Property leases are expected to provide for a base minimum annual
rent, with provisions for fixed increases on specific dates or indexation of
rent to indices such as the Consumer Price Index and/or percentage rents.
Equipment will be leased pursuant to Full Payout Leases. The General Partners
estimate that with respect to Properties, approximately 30% to 50% of the
Partnership's investment will be allocated to the cost of land and
approximately 50% to 70% will be allocated to the cost of the building. The
success of a particular franchise concept, as well as the franchisor's ability
to support its franchisees, or the success of a particular Retail Concern
concept will affect the income which the Partnership derives from its
Properties and Equipment. See "Risk Factors - Real Estate and Equipment Risks
Risks of Ownership of Properties and Equipment, and - Risks Resulting from
Competition."

Acquisition of a Property to be used as a restaurant franchise typically
involves an investment of between $500,000 and $3,500,000, while the cost of a
Property for a Retail Concern typically involves an investment of $1.5 million
to $4.0 million. Acquisition of Equipment for a franchised restaurant typically
involves an investment of approximately $200,000 to $750,000. The Partnership
therefore expects to purchase approximately 20 Properties and 30 Equipment
packages, assuming that the Maximum Number of Units is sold, 80% of Net
Offering Proceeds are allocated to purchase Properties and leverage equal to
35% of the sum of Gross Proceeds and the aggregate amount of Partnership
indebtedness secured by Partnership Assets (approximately 40% of the aggregate
Purchase Prices of Partnership Assets) is used to

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acquire Properties and/or Equipment. Under the same assumptions, if only the
Minimum Number of Units is purchased, the Partnership expects only to purchase
approximately two Properties and three Equipment packages. As higher or lower
prices for individual Properties and Equipment packages are possible, the
Partnership may acquire greater or lesser numbers of Properties and/or
Equipment packages. See "Risk Factors - Subscription for Less Than the Maximum
Number of Units."

The Partnership will invest not less than 83.0% of the Gross Proceeds in
Assets. The Partnership will also pay the Debt Fee (.0677% for each 1% of
indebtedness (calculated as the aggregate amount of Partnership indebtedness
secured by Partnership Assets as a percentage of the aggregate Purchase Prices
of such Assets)) to the General Partners or their Affiliates, but such fee
shall be paid out of the proceeds received from such indebtedness (as opposed
to out of Gross Proceeds). However, the Acquisition Fees (which include the
Debt Fee) may not exceed 5% of the aggregate Purchase Prices of Properties
and/or Equipment and the Acquisition Fees payable to the General Partners will
be reduced if and to the extent required to comply with the foregoing
requirement.

Properties will be selected for acquisition based on an examination and
evaluation by the General Partners or an Affiliate of the potential value of
the site, the financial condition and business history of the proposed lessee,
the demographics of the area in which the Property is located or to be located,
the proposed purchase price and lease terms, geographic and market
diversification, and potential operating results. See "-Investment Standards"
in this Section. Similar analyses will be utilized in selecting Equipment. In
certain cases, the Partnership may become a co-venturer or general partner in a
joint venture or general partnership which will own a Property or Equipment.
The Partnership may also acquire Property through the acquisition of
substantially all of the interests of an entity which in turn owns a Property.
The Partnership may participate in sale-leaseback transactions, but expects to
do so only with respect to Properties and then only when the Property has an
established track record. The Partnership anticipates that only fee interests
in real property will be acquired, although other interests (including
acquisitions of buildings, with the underlying land being subject to a
long-term ground lease) may be acquired if it is deemed to be advantageous to
the Partnership. See "-Joint Ventures" in this Section. In each such case, the
Partnership's cost to purchase an interest in such Property and/or Equipment
would decrease and the total number of Properties and/or Equipment which the
Partnership would be able to acquire will increase. See "Risk Factors - Risk of
Joint Ventures."

The General Partners or an Affiliate will negotiate a lease agreement with
the lessee before a Property or Equipment package is acquired. For the purpose
of providing further geographic and market diversity, the Partnership will not
invest in both Properties and Equipment to be leased at the same location.
Thus, if the Partnership invests in Property, the lessee will be required to
lease Equipment from another party; and if the Partnership invests in
Equipment, the lessee will be required to lease its Property from another
party. In some cases, affiliates of the General Partners may provide this
additional financing for the lessee under a separate lease with the lessee.
Some lease agreements may be negotiated to provide the lessee with the
opportunity to purchase the Property and/or Equipment under certain conditions,
either at fair market value or through a right of first refusal to purchase the
Property and/or Equipment at a bona fide price offered by a third party. See
"Conflicts of Interest - Resolution of Conflicting Opportunities."

The Partnership intends primarily to acquire existing Properties but under
certain circumstances may acquire the site on which a particular Property is to
be built prior to commencement of construction of the Property. Investments in
such Properties shall not exceed 10% of the Gross Proceeds of the offering at
any point in time. The Partnership may also participate in the construction or
development of Properties or render services in connection with such
development or construction, but expects to do so only in the case of Retail
Concerns or when the franchisee is operating other existing franchises. Where
remodeling is required for a building occupied by a lessee, the Partnership
typically will pay a negotiated maximum amount, based on the lessee's estimate
of the cost of remodeling, either upon completion or in installments commencing
prior to completion. In such instances, the Partnership will also have the
right to review the lessee's books during and following completion of the
remodeling to verify actual costs. In the event of substantial disparity
between estimated and actual costs, an adjustment in purchase price may be
negotiated.

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The General Partners and their Affiliates may purchase Property and
Equipment in their own name, and assume loans in connection therewith and
temporarily hold title thereto for the purpose of facilitating the acquisition
of such Property and/or Equipment, borrowing money or obtaining financing for
the Partnership, or any other purpose related to the business of the
Partnership, in accordance with the terms set forth in the Partnership
Agreement. For purposes hereof, such temporary holding period will not,
however, exceed 12 months measured from the date of acquisition by the General
Partners or their Affiliates.

3. Investment Standards. In making investments, the General Partners will
consider relevant factors, including the condition and proposed use of the
Property and/or Equipment, income-producing capacity, the financial condition
of the lessee, and with respect to Properties, the prospects for long-term
appreciation. In no event will Property or Equipment be acquired unless a
satisfactory lease commitment has been obtained from a suitable lessee as
further described below.

In selecting specific Properties and lessees, the General Partners
typically will require the following:

(i) Base annual rent will provide a specified minimum return on the
contract purchase price of the Property; the majority of the leases will
provide for fixed increases on specific dates or indexation of rents to indices
such as the Consumer Price Index. Leases may also provide for percentage rents
calculated to provide rents equal to a percentage of the lessee's gross sales
if greater than the base rent; and

(ii) The initial lease will have a term of between seven and twenty
years.

In selecting specific Equipment, the General Partners typically will
require the following:

(i) Full Payout Leases providing for fixed rents structured to return
100% of the cost of the Equipment plus yield a return equivalent to market
interest rates over the lease term; and

(ii) The leases are expected to have terms of five to seven years with
residual values of Equipment at the end of such terms expected to be minimal
(approximately 10% of original cost).

The terms and conditions of any lease entered into by the Partnership with
regard to a tenant may vary substantially from those described herein. However,
predominantly all of the leases for franchise Properties are expected to be
"triple net" Leases, which means that the lessees will be required to pay all
real estate and other taxes and assessments, utilities, insurance and costs of
maintenance and repairs. Leases for Retail Concerns may be on a "double net"
basis that will require the Partnership to be responsible for the maintenance
of the roof and/or exterior walls for such Properties.

The standard purchase agreement under which a Property will be acquired by
the Partnership will provide, in most instances, as a contingency to closing,
that: (i) the lessee has demonstrated that it satisfies the Partnership's
credit worthiness and other criteria; or (ii) the lease is guaranteed by an
entity meeting certain net worth and credit criteria determined solely by the
General Partners. The Partnership also may lease Properties to certain lessees
who do not meet such criteria if they obtain a commitment for the issuance of
a policy of rental guaranty insurance satisfactory to the Partnership by a
reputable and financially stable carrier. No Properties or Equipment will be
purchased by the Partnership unless a satisfactory lease commitment has been
obtained from a lessee who meets one of the alternatives discussed above. See
"-Lessee Creditworthiness" in this Section.

Lessees will be required to maintain liability insurance covering the
Property leased. The third party liability coverage will insure, among others,
the Partnership and the General Partners. Additionally, lessees will be
required to maintain property insurance naming the Partnership as the insured
for fire and other casualty losses in an amount equal to the full value of the
Property subject to the lease. In general, leases

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<PAGE> 71

will permit assignment or subleasing with the Partnership's prior written
consent, but the original lessee will remain fully liable under the lease
unless the assignee meets certain income and net worth tests.

If the Partnership desires to sell Property or Equipment pursuant to a
bona fide offer, the lessee of that Property or Equipment may have the right to
purchase such Property or Equipment for the same price, and on the same terms
and conditions, as contained in the offer. In certain cases, the lessee may
also have the right to repurchase Property or Equipment from the Partnership at
specific times during the lease term at a purchase price equal to appraised
value at the time of sale. The Partnership does not anticipate entering into
purchase agreements or leases which allow the seller or lessee to acquire
Property or Equipment at any price below its fair market value. Although
capital appreciation of Partnership Properties is an investment objective,
Partnership Equipment is expected to have minimal residual value (approximately
10% of the original cost) at the end of the lease terms.

The leases are generally expected to provide that the following events
will, among others, constitute a default under the Lease:

(i) Insolvency or bankruptcy of the lessee, provided the lessee will have
the right, under certain circumstances, to cure such default;

(ii) Failure by the lessee to make timely payment of rent or other charges
due and payable under the Lease, if such failure continues for a specified
period of time after notice from the Partnership of such failure;

(iii) Failure by the lessee to pay all applicable taxes and assessments,
maintenance, repair, utility and insurance costs; and to maintain all Property
and/or Equipment in good order and repair; and

(iv) Failure by the lessee to comply with any of its other obligations
under the lease if such failure (for example, the discontinuance of operations
of a leased Property) continues for a specified period of time.

Upon default by the lessee, the Partnership would have the right under the
lease and under most state laws to evict the lessee and/or repossess Equipment,
re-lease the Property or Equipment to others and hold the lessee responsible
for any deficiency in the minimum lease payments. Similarly, if the Partnership
determines not to re-lease the Property or Equipment, it could sell the
Property or Equipment, although it is not anticipated the Partnership will sell
any Property prior to seven to ten years after the commencement of the Lease on
such Property. In general, the lessee will remain liable for all rent due under
the Lease to the extent not paid by a new lessee.

A discontinuance of operations and, therefore, a default, may occur even
if the particular location is profitable because even profitable locations are
occasionally converted to alternative or more profitable uses.

4. Lessee Creditworthiness. The General Partners and their Affiliates have
developed specific standards for determining the creditworthiness of potential
lessees of Partnership Properties and Equipment. The Partnership will
condition the purchase of each Property and/or Equipment package upon the
lessee's ability to demonstrate that it satisfies the Partnership's
creditworthiness standards and other criteria or the lease is guaranteed by an
entity meeting certain net worth and credit criteria determined by the General
Partners. In addition, franchisees to whom the Partnership leases Properties
must be established multi-unit operators having a minimum of three existing
units. Although all lessees of the Properties and Equipment must satisfy the
Partnership's creditworthiness standards, no assurance can be given that they
will make the required lease payments. See "Risk Factors - Real Estate and
Equipment Risks - Risks Relating to Creditworthiness of Lessees."

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<PAGE> 72

5. Borrowing. The Partnership intends to incur mortgage or secured
indebtedness to acquire Properties and/or Equipment by borrowing from banks,
other institutional lenders or private lenders and may, in the future, borrow
funds to finance improvements to existing Properties. The Partnership Agreement
limits the amount of mortgage or other secured indebtedness which may be
incurred with respect to acquisition of any single Property or Equipment
package to 80% of its Purchase Price and with respect to subsequent financing
or refinancing to 80% of appraised value provided, however, that in no event
will aggregate mortgage or other secured indebtedness exceed an amount equal to
35% of the sum of Gross Proceeds and the aggregate amount of Partnership
indebtedness secured by Partnership Assets (approximately 40% of the aggregate
Purchase Prices of Partnership Assets) when incurred. The Partnership will
endeavor to obtain level payment financing, meaning that the amount of debt
service payable would be substantially the same each year, although some
financing may provide for a so-called "balloon" payment. It is anticipated that
such financing may be obtainable only on a recourse basis and that in some
instances cross-collateralization of Partnership Assets may be required. As
with non-recourse financing, the Limited Partners would have no personal
liability for such indebtedness. Although such borrowing may increase the
Partnership's rate of return, it also increases the Partnership's exposure to
loss. See "Risk Factors - Real Estate and Equipment Risks - Risks from
Leverage and - Risks Regarding Availability of Financing."

The Partnership's borrowing policy was established to limit borrowing to a
level which is believed to be generally beneficial for all Limited Partners
when comparing the potential economic and tax benefits against the increased
risks associated with leverage. See "-Sale or Disposition of Assets" in this
Section. However, such indebtedness may cause the income or gain allocated to
tax-exempt Limited Partners to be taxed as unrelated business taxable income.
See "Tax Aspects of the Offering - Impact on Qualified Tax-Exempt Investors."

6. Sale or Disposition of Assets. The General Partners anticipate that if
market conditions permit, they will commence sale of Partnership Properties
within seven to ten years after acquisition. As Equipment will be leased under
Full Payout Leases with average terms of five to seven years and is expected to
have limited residual value at the end of such lease terms, it is anticipated
that Equipment generally will be sold to the lessee at the end of lease terms
for minimal amounts (approximately 10% of original cost). In no event will the
Partnership reinvest Net Sale or Refinancing Proceeds received commencing four
years after the date on which the Partnership terminates this Offering. It is
expected that leases of certain Properties may give the lessee the right to
purchase the Property five to ten years after the date of the lease at the
Property's fair market value as determined by an independent appraisal at the
time of sale. Additionally, certain leases may grant the lessee an option to
purchase a percentage interest in the Property at a price based on the fair
market value as determined by an independent appraisal at the time the option
is exercised. See "-Investment Standards" in this Section. The determination of
whether particular Properties or Equipment should be sold or otherwise disposed
of will be made after consideration of relevant factors, including performance
or projected performance of the Property or Equipment and market conditions,
with a view toward achieving the principal investment objectives of the
Partnership.

The Partnership's general policy will be to sell Properties and/or
Equipment on an all cash basis. However, under certain circumstances a purchase
money obligation secured by a lien on the Property or Equipment may be taken
as part payment and there are no limitations or restrictions on the
Partnership taking such purchase money obligations. The terms of payment to the
Partnership will be affected by custom in the area in which the Property or
Equipment is located and the then prevailing economic conditions. To the extent
the Partnership receives notes and other property in lieu of cash, such proceeds
(other than any interest payable thereon) will be excluded from Net Sale or
Refinancing Proceeds until and to the extent the notes or other property are
actually paid, sold, refinanced or otherwise disposed of and, therefore, the
distribution of the proceeds of a sale to the Limited Partners may be delayed
until such time. In some cases, the Partnership may receive payments (cash and
other property) in the year of sale in an amount less than the selling price,
with subsequent payments being spread over a number of years. It is possible
that such purchase money obligations would be structured to provide for a
"balloon" payment of the entire balance

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<PAGE> 73

of principal at maturity. The timing and terms of such sales will impact a
Limited Partner's ability to recover all of his investment. See "Risk Factors
- - Real Estate and Equipment Risks - Resale of Properties."

7. Change in Investment Policies. The Limited Partners have no voting
rights with respect to the establishment or implementation of the investment
objectives and policies of the Partnership, all of which are the responsibility
of the General Partners. However, the General Partners cannot modify the
principal investment objectives (regarding income and capital preservation
goals) described herein under the caption "Investment Objectives and Policies"
without first obtaining the written consent or approval of the Limited Partners
controlling a majority of the Units.

8. Joint Ventures. The Partnership may invest in partnerships or joint
venture arrangements with persons formed by the General Partners or any of
their Affiliates if all of the following conditions are met: (i) the two
partnerships or entities have substantially identical investment objectives;
(ii) the Partnership will not incur any duplicate property management or other
fees; (iii) the compensation to the General Partners and their Affiliates must
be substantially identical in both partnerships or entities; (iv) the
Partnership must have a right of first refusal to buy the interest of the other
joint venture partner if said other partner wishes to sell the property held by
such joint venture; and (v) the investment by each such joint venture partner
must be on substantially the same terms and conditions. The Partnership's
ability to enter into such a joint venture with another person formed by the
General Partners or their Affiliates may be important if the Partnership wishes
to acquire an interest in a specified property but does not have sufficient
funds (or, at the time it enters into a commitment to acquire a specified
property, cannot determine whether it will have sufficient funds) to acquire
the entire property.

The Partnership may invest in partnerships, co-tenancy arrangements or
joint venture arrangements with persons other than Affiliated partnerships only
under the following conditions: (a) there are no duplicate property management
or other fees; (b) the investment of each entity is on substantially the same
terms and conditions; (c) the Partnership obtains a controlling interest in the
partnership or joint venture; and (d) the Partnership must have a right of
first refusal to buy if its co-venturer or co-tenant wishes to sell the
Property or Equipment held in such venture.

It should be noted that except when the Partnership has a controlling
interest in a joint venture, there is a potential risk of an impasse on joint
venture decisions and there can be no assurance that the Partnership will have
sufficient financial resources to exercise its right of first refusal. See
"Risk Factors - Real Estate and Equipment Risks - Risk of Joint Ventures."

9. Certain Investment Limitations. The Partnership will not: (i) issue
Units in exchange for Property or Equipment or in ways other than pursuant to
the terms of the Offering; (ii) issue senior securities except notes to banks
or financial institutions; (iii) make loans to the General Partners, their
Affiliates or other persons; (iv) invest in or underwrite the securities of
other issuers (provided, however, that the Partnership may temporarily invest
Partnership funds in short-term, highly liquid investments, where there is
appropriate safety of principal); (v) operate in such a manner as to be
classified as an "investment company" for purposes of the Investment Company
Act of 1940; (vi) invest in real estate mortgages except in connection
with the disposition of one or more of the Properties; (vii) purchase or lease
any Property or Equipment from the General Partners or their Affiliates except
for a purchase of Property or Equipment which such persons have temporarily
purchased and held title to on behalf of the Partnership, and then only at their
cost (including their cost of carrying the Property and/or Equipment during such
interim period); (viii) sell or lease Property or Equipment to the General
Partners or their Affiliates; (ix) engage in the purchase and sale (or turnover)
of investments other than as set forth in this Prospectus; or (x) repurchase the
Units other than as described in "Right to Tender Units for Purchase."

10. Appraisals. All Property acquisitions made by the Partnership will be
supported by an appraisal prepared by a competent, independent appraiser who is
a member in good standing of the American Institute of Real Estate Appraisers
prior to the purchase of the Property. The contract purchase price of each
Property will not exceed its appraised value. It should be noted, however, that
appraisals are

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<PAGE> 74

estimates of value and should not be relied on as measures of true worth
or realizable value. The appraisal will be maintained in the Partnership's
records for at least five years and copies of such appraisals will be available
for review and duplication (at the Limited Partner's expense) by Limited
Partners upon their request.

11. Return of Uninvested Proceeds. Any proceeds of this Offering which
have not been invested in Property or Equipment (or committed to investment
pursuant to written agreements) or held as reasonable working capital reserves
within the later of: (i) 24 months after the original effective date of this
Prospectus; or (ii) 12 months after the termination of the Offering, will be
returned to the Limited Partners. All funds released to the Partnership from
the escrow account after sale of the Minimum Number of Units will be available
for the general use of the Partnership until the expiration of the period
discussed above. Funds will not be segregated or held separate from other funds
of the Partnership pending investment.

Prior to sale of the Minimum Number of Units, subscription proceeds will
be held in escrow and invested in federally insured bank accounts (e.g., money
market deposit accounts), short-term certificates of deposit, short-term
government securities and any other investments permitted under Rule 15c2-4 of
the Securities Exchange Act of 1934, as amended. Pending investment in
suitable Properties and/or Equipment, the Partnership will invest Net Offering
Proceeds in United States government securities, certificates of deposit of
banks having assets in excess of $100,000,000, bank repurchase agreements
covering the securities of the United States government or governmental
agencies, bankers' acceptances, commercial paper rated A or better by Moody's
Investors Service, Inc. and/or money market funds having assets in excess of
$100,000,000 or any combination of the same or similar investments.

12. Other Policies. In determining whether to purchase a particular
Property or Equipment package, the Partnership may first obtain an option to
purchase such Property or Equipment. The amount paid for the option, if any,
usually would be subject to forfeiture unless the Property or Equipment were
purchased and normally would be credited against the purchase price if the
Property were purchased.

The Partnership is not a real estate investment trust and, therefore, is
not subject to the restrictions on its activities imposed on real estate
investment trusts qualified under the Code.

PRIOR OFFERINGS

The information in the section of this Prospectus entitled Prior
Performance Tables contains summary information concerning operations on two
prior public programs, Captec Franchise Capital Partners L.P. II ("Captec L.P.
II") and Captec Franchise Capital Partners L.P. III ("Captec L.P. III"), which
had investment objectives that were substantially similar to those of the
Partnership. These programs were sponsored by Captec Franchise Capital
Corporation II and Captec Franchise Capital Corporation III, respectively, each
an affiliate of Captec Financial Group, Inc. which is the parent of Captec
Franchise Capital Corporation IV and certain of its Affiliates. Captec L.P. II
terminated its offering on May 6, 1994. A total of $1,940,500 was raised from
194 investors in Captec L.P. II. As of July 31, 1996, Captec L.P. II had
invested its net capital from the sale of limited partnership units together
with proceeds from issuance of a note payable, in two net leased real estate
properties for a total cost of $1,852,202 and four equipment packages for a
total cost of $547,069. Captec L.P. II purchased the land and building
comprising a Taco Cabana restaurant located in Las Vegas, Nevada and acquired a
partial interest through a joint venture in the land and building comprising a
Kenny Rogers Roasters restaurant located in Tampa, Florida. Equipment packages
were purchased to be used in the following franchised restaurants: Checkers
Drive-In Restaurant located in Kissimmee, Florida; Popeye's Restaurant located
in Savannah, Georgia; Schlotzsky Deli located in Huntsville, Alabama; and
Italian Oven located in Ashland, Kentucky.

Captec L.P. III commenced the offering of up to 20,000 Units on August 12,
1994 and broke impound with the minimum number of units on January 24, 1995.
Captec L.P. III has accepted

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<PAGE> 75
subscriptions for 20,000 Units and funds totaling $20,000,000 from 1,391
investors. As of November 22, 1996, Captec L.P. III has invested in the
following land and buildings: Boston Market, Raleigh, North Carolina; Applebee's
Neighborhood Grill & Bar, Mt. Vernon, Illinois; Church's Chicken, San Antonio,
Texas; Red Robin Burger & Spirits Emporium, Grapevine, Texas; Boston Market,
Ewing Township, New Jersey, Hollywood Video, Enid, Oklahoma; Kettle Restaurant,
Virginia Beach, Virginia; Golden Corral Restaurant, Lakeland, Florida (new
construction); Boston Market, S. Kent, Washington; Jack-in-the-Box, Hurst,
Texas; and Black-Eyed Pea, Plano, Texas. All of the property purchased is
leased on a "triple-net" basis. Captec L.P. III has purchased Equipment as
of November 22, 1996 at the following locations: Red Robin Burger & Spirits
Emporium, Ft. Collins, Colorado; Kenny Rogers Roasters, Chattanooga, Tennessee;
Checkers Drive-In Restaurant, Marlow Heights, Maryland; Kenny Rogers Roasters,
Phoenix, Arizona; Arby's Restaurant, Greenville, North Carolina; Denny's
Restaurant, Lakeland, Florida; Checkers Drive-In Restaurant, N. Palm Harbor,
Florida; Denny's Restaurant, Crystal River, Florida; Denny's Restaurants in
various locations in the state of Oregon and Applebee's Neighborhood Grill &
Bar, Orem, Utah.

It should be noted that although Captec Financial Group, Inc. and its
affiliates have had significant experience in and related to the franchise
industry, only two of these programs had investment objectives similar to those
of the Partnership and neither involved the leasing of Properties to Retail
Concerns as opposed to franchisees. See "Management." Captec Franchise Capital
Partners L.P. I, a private limited partnership with investment objectives
similar to those of the Partnership, withdrew its offering upon commencement of
the offering by Captec L.P. II. Investors should note that by acquiring Units
in the Partnership, they will not be acquiring any interest in the prior
program referenced in the Prior Performance Tables.

WHO SHOULD INVEST

GENERAL
An investment in Units involves certain risks and is suitable only as a
long-term investment for persons of adequate financial means who have no
immediate need for liquidity in their investment. Units will be sold only to
persons who represent in writing: (i) that they have a net worth (excluding
home, home furnishings and automobiles) of at least $45,000 and that (without
regard to their investment herein) they have an annual income of at least
$45,000 or that they have a net worth (excluding home, home furnishings and
automobiles) of at least $150,000 or (ii) that they are purchasing in a
fiduciary capacity for a person who meets such conditions. In addition to
meeting the net worth requirements outlined above, Pennsylvania residents'
purchase of Units may not exceed 10% of the greater of his/her net worth or
annual gross income (lower of current or estimated), and Ohio residents'
purchase of Units may not exceed 10% of his/her net worth (excluding home, home
furnishings and automobiles). Missouri and Iowa have established suitability
standards different from those established by the Partnership and any resident
of those states must have either (i) a net worth (exclusive of home, home
furnishings, and automobiles) of at least $60,000 and annual gross income of at
least $60,000 or (ii) a net worth (exclusive of home, home furnishings, and
automobiles) of at least $225,000.

All investors, including Tax-Exempt Investors such as Individual
Retirement Accounts ("IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "Code"), and qualified employee pension
or profit-sharing trusts, Keogh Plan Trusts and other entities generally exempt
from federal income taxation (such as charitable, religious, scientific or
educational organizations), must purchase a minimum of two Units ($2,000). The
minimum subscription for Iowa IRAs and Minnesota and South Carolina investors
is two and one-half Units ($2,500). Residents of Nebraska must have minimum
subscriptions of five Units ($5,000). The minimum subscriptions for Tax Exempt
Investors who are residents of Nebraska is two Units ($2,000). In the case of
sales to fiduciary accounts, the suitability standards set forth above must be
met by either the beneficiary, the fiduciary account or the person who directly
or indirectly supplied the funds for the purchase of the Units. An investment
in the Partnership may generate unrelated business taxable income for
Tax-Exempt Investors.

The Participating Dealer Sales Agreements between the Partnership and
Participating Dealers require such broker-dealers to make diligent inquiries as
required by law of all prospective purchasers in

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<PAGE> 76

order to ascertain whether a purchase of Units is suitable for such person
and to transmit promptly to the Partnership the fully completed subscription
documentation and any other supporting documentation reasonably required by the
General Partners. By executing the subscription agreement (the "Subscription
Agreement"), tendering payment for Units and by acceptance of the confirmation
of purchase or delivery of the Units, an investor represents that it satisfies
any applicable suitability standards. The General Partners and each
Participating Dealer who sells Units on behalf of the Partnership have the
responsibility to make every reasonable effort to determine that the purchase
of Units is a suitable and appropriate investment for an investor. In making
this determination, the Participating Dealers will rely on relevant information
provided by such investor regarding the investor's financial situation and
investment objectives. Each investor should be aware that determining
suitability is the responsibility of the Participating Dealer. The General
Partners and each Participating Dealer will maintain records of the information
used to determine that an investment in the Units is suitable and appropriate
for each investor for at least six (6) years.

In addition, each broker-dealer will, by completing the Subscription
Agreement, acknowledge its determination that the Units are a suitable
investment for the investor, and will be required to represent and warrant its
compliance with applicable laws requiring the determination of the suitability
of the Units as an investment for the subscriber. The Partnership and/or any
Participating Dealer may not complete a sale of Units to an investor until at
least five business days after the date the investor receives a final
Prospectus and an investor may receive a refund of his or her subscription
amount by notifying the Partnership of such election within five business days
of receiving the final prospectus if the investor first received a final
prospectus only at the time of subscription. The Partnership will, in addition
to the foregoing, coordinate the processes and procedures utilized by the
Participating Dealers and, where necessary, implement such additional
reviews and procedures deemed necessary to assure the adherence by investors to
the suitability standards set forth herein.

The Partnership will use its best efforts to structure the acquisition of
Properties and Equipment so as to minimize the risk that Tax-Exempt Investors
will realize unrelated business taxable income. Nevertheless, there can be no
assurance that the Partnership will successfully acquire Properties and
Equipment or structure particular activities so as to minimize the risk of
unrelated business taxable income.

FOREIGN INVESTORS

The anticipated activities of the Partnership will likely constitute a
United States trade or business and a permanent establishment within the
meaning of the Internal Revenue Code (the "Code") and income tax treaties
between the United States and foreign jurisdictions (the "Tax Treaties"). A
foreign investor who qualifies will be required to file a United States tax
return and pay United States taxes at regular United States rates on his share
of any Partnership net income. However, a foreign investor will be subject to
tax and withholding on the Partnership's rental income from the ownership of
Properties and Equipment. Tax treaties between the United States and the
foreign investor's country could eliminate or reduce the withholding
requirement. See "Tax Aspects of the Offering - Tax Aspects for Foreign
Individuals and Corporations."

HOW TO SUBSCRIBE

Except as described below, an investor who meets the qualifications set
forth above may subscribe for Units by completing and executing (or in the case
of fiduciary accounts, the person authorized to sign on such investors behalf)
the Subscription Agreement, a copy of which is included herein as Exhibit B and
delivering it to the Participating Dealer whose name appears thereon, together
with a check payable to "Michigan National Bank, Escrow Agent for Captec
Franchise Capital Partners L.P. IV" prior to the sale of the Minimum Number of
Units, or "Captec Franchise Capital Partners L.P. IV" after the sale of the
Minimum Number of Units, in the amount of the full purchase price of the Units
for which he wishes to subscribe. Complete instructions are included in this
Prospectus on page I-1. For additional information, see "Plan of Distribution."

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<PAGE> 77

PLAN OF DISTRIBUTION

GENERAL

The Offering is being made on a "best efforts, part or none" basis through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. (the "Participating Dealers"). The Offering is conditioned upon
sale of the Minimum Number of Units prior to the close of business one year
after the effective date of this Prospectus (the "Termination Date"). Should
the Minimum Number of Units be sold by the Termination Date, the General
Partners may extend the Offering to a date not later than the earlier to occur:
(i) sale of all Units offered hereby; or (ii) two years after the effective
date of this Prospectus (the "Extended Termination Date"). After the Minimum
Number of Units is sold, the Partnership will schedule interim closings at
which subscribers will be admitted as Limited Partners on at least a monthly
basis.
The Offering is made pursuant to agreements among the General Partners,
the Partnership and the Participating Dealers pursuant to which the
Participating Dealers are acting as agents of the Partnership for the
purpose of offering and selling Units. The Units are being offered on a "best
efforts, part or none" basis, which means that Participating Dealers are not
obligated to purchase any Units but are required only to use their best efforts
to sell Units to investors.

COMPENSATION

The Partnership will pay selling commissions equal to 8% of Gross Proceeds
to Participating Dealers for Units sold by them. The General Partners also will
pay an additional selling commission equal to 1% of Gross Proceeds to
Participating Dealers from Units sold until the Minimum Number of Units is
sold. Participating Dealers and their registered representatives may also
receive up to 0.5% of Gross Proceeds as reimbursement for bona fide due
diligence expenses. The General Partners will receive a Non-Accountable Expense
Allowance in an amount equal to 2% of Gross Proceeds to cover certain expenses
relating to the offer and sale of Units (including the additional 1% selling
commission payable until the Minimum Number of Units is sold). In no event will
sales commissions, the Non-Accountable Expense Allowance, Organization and
Offering Expenses, wholesaling salaries and expenses and expenses of sales
seminars, exceed in the aggregate, 13% of Gross Proceeds. Furthermore, the
aggregate amount of selling commissions, Non-Accountable Expense Allowance used
for underwriting compensation, and funds paid as underwriting compensation from
any other source will not be greater than 10% of the Gross Proceeds, and no
more than 0.5% of the Gross Proceeds will be paid, by the Partnership or any
Affiliate of the Partnership or the General Partners, as reimbursement for due
diligence expenses.

The General Partners, their Affiliates, and Participating Dealers may
purchase up to 10% of the Units, net of any selling commissions but otherwise
on the same terms as purchasers who are not Affiliates. Purchase of Units by
the General Partners and their Affiliates will not be counted for purposes of
reaching the Minimum Number of Units. Any purchases by the General Partners
will be for investment purposes only and not with a view toward resale.
Investors will not have a right to withdraw and receive a return of their
contributions. Neither the General Partners nor any of their Affiliates will
directly or indirectly pay or award any compensation to a third party engaged
as an investment adviser as inducement to advise favorably toward investment in
the Partnership. In addition, the selling commissions to Participating Dealers
will be reduced on sales of 501 or more Units in accordance with the following
Schedule:

<TABLE>
<CAPTION>
Investor's Purchase
Dollar Amount Purchased Price Selling Commission Per Unit
- ----------------------- ---------------------- ------------------------------
Per Unit Percent Dollar Amount
---------------------- -------------- --------------
<S> <C> <C> <C>
$1,000 - $500,000 $1,000 8.0% $80.00
$501,000 - $750,000 $980 6.0% $60.00
$751,000 - $1,000,000 $970 5.0% $50.00
$1,001,000 - $1,500,000 $960 4.0% $40.00
$1,501,000 - $2,000,000 $950 3.0% $30.00
$2,001,000 and above $940 2.0% $20.00
</TABLE>

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<PAGE> 78

The purchaser of such Units will be credited with such reduced commission
and the net proceeds to the Partnership will not be affected by the discount.
Subscriptions may be combined for purposes of determining the volume discounts
applicable to subscriptions from a purchaser.

INDEMNIFICATION

The Partnership has agreed to indemnify the Participating Dealers and the
Participating Dealers have agreed to indemnify the General Partners and the
Partnership against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act") In the opinion of the Securities
and Exchange Commission, indemnification for liabilities under the Act is
against public policy and therefore unenforceable. The Participating Dealers
may be deemed to be underwriters as that term is defined in the Act.

ESCROW AND CLOSING ARRANGEMENTS

Persons desiring to purchase Units will be required to complete, in full,
and execute the Subscription Agreement and other related subscription
documents, (collectively referred to as the "Subscription Documents") which are
included with this Prospectus and deliver such Subscription Documents, together
with a check made payable to "Michigan National Bank, Escrow Agent for Captec
Franchise Capital Partners L.P. IV" for the full purchase price of the Units
for which they are subscribing to their Participating Dealers who will then
promptly forward such documents to the Escrow Agent. Each subscriber will be
required to comply with his state's requirements, if any, as to Minimum Number
of Units purchased and/or financial qualifications of purchasers. See "Who
Should Invest."

Subscription proceeds will be held by the Escrow Agent in federally
insured bank accounts, short-term certificates of deposit, short-term
government securities and any other investments permitted under Rule 15c2-4 of
the Securities Exchange Act of 1934, as amended, pending the sale of the
Minimum Number of Units.

Prior to the sale of the Minimum Number of Units, the Escrow Agent will
concurrently forward a copy of all Subscription Documents to the General
Partners. After receipt of the Subscription Documents from the Escrow Agent
(prior to the sale of the Minimum Number of Units) or directly from a proposed
investor (after the sale of the Minimum Number of Units), the General Partners
will promptly determine whether they accept or reject each subscription. The
General Partners have the unconditional right to accept or reject any
subscription within ten days after receipt by the General Partners of a copy of
the Subscription Documents. Subject to such right, subscriptions will be
accepted by the General Partners in the chronological order in which they are
received. If the General Partners reject any subscription prior to the sale of
the Minimum Number of Units, it will cause the Escrow Agent to promptly return
to such subscriber the funds paid by him and deposited with the Escrow Agent
pursuant to such Subscription Documents, without deduction, within ten days
after receipt of the Subscription Documents by the General Partners. If the
General Partners reject any subscription after the sale of the Minimum Number
of Units, they will promptly return to such subscriber the funds paid by him
pursuant to such Subscription Documents, without deduction, within ten days
after receipt of the Subscription Documents by the General Partners.

If the Minimum Number of Units is not sold by the Termination Date, all
monies held in escrow shall be returned in full, without deduction to
subscribers by the Escrow Agent along with any interest earned thereon (subject
to deductions for back-up withholding, if applicable). If at least the Minimum
Number of Units is sold, the funds, with interest, will be paid to the
Partnership for application to Partnership purposes, and those subscribers
whose subscriptions have been accepted as of the date on which such funds are
delivered to the Partnership will be admitted as Limited Partners, on at least
a monthly basis. Subscriptions for Units which are accepted by the General
Partners shall be irrevocable, unless fewer than the Minimum Number of Units is
sold in this Offering.

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DISTRIBUTION REINVESTMENT PLAN SUMMARY

The Partnership has adopted a distribution reinvestment plan (the
"Distribution Reinvestment Plan") which will be available to Limited Partners.
The Distribution Reinvestment Plan is designed to enable Limited Partners to
have their distributions from Cash Flow (the "Distributions") from the
Partnership invested in additional Units should an investor so desire. The
Partnership or an unaffiliated third party will act as agent for those
investors who wish to participate in the Distribution Reinvestment Plan (the
"Participants"). Funds raised through the Distribution Reinvestment Plan will
be used by the Partnership to purchase additional Properties and/or Equipment
or will be added to working capital. The following is a summary of the
principal terms of the Distribution Reinvestment Plan. A copy of the
Distribution Reinvestment Plan is included as part of this Prospectus as
Exhibit D.

During the Offering and after sale of the requisite Minimum Number of
Units, the Partnership, as agent for the Participants in the Distribution
Reinvestment Plan, will use Distributions otherwise payable to Participants to
purchase additional Units for such Participants, if permitted under state
securities laws, through the Participating Dealers registered in the
Participant's state of residence (either being referred to hereunder as the
"Reinvestment Agent").

Distributions shall be invested promptly following the receipt date with
respect thereto, and in no event later than 30 days from the distribution date,
in the Units to the extent that they are available. All such investments of
Distributions in Units will be effected by amendment of the Partnership
Agreement to reflect the issuance of additional Units to Participants.
Distributions, if any, will be timed to coordinate with scheduled amendments to
the Partnership Agreement such that no Distributions are held pending
investment in Units pursuant to the Distribution Reinvestment Plan. Units will
be purchased at the public offering price and commissions equal to 8% of the
Unit purchase price will be paid to the Participating Dealer of record at the
date of distribution. In addition, the General Partners or an Affiliate will
be paid all fees attributable to the sale of Units as set forth in the
Compensation Table. In connection with the receipt of such commissions, the
Participating Dealer assumes the responsibility for blue sky compliance and
performance of due diligence responsibilities and will ascertain whether the
Participants continue to meet the suitability standards of their state of
residence with respect to each investment.

If a Participant's Distribution is not large enough to buy a full Unit,
the Partnership will credit the Participant's account with fractional Units,
computed to five decimal places. As availability of Units will be contingent
upon the number of Units sold pursuant to the Offering, the sale of which
Units, to the extent Subscription Agreements are accepted prior to a
distribution date, shall take priority over the sale of Units pursuant to the
Distribution Reinvestment Plan, there can be no guaranty that sufficient Units
will be available for purchase under the Distribution Reinvestment Plan. Units
will be allocated among Participants on a pro rata basis.

Participants will be charged an Administrative Services charge for
expenses incurred in connection with the Distribution Reinvestment Plan. If,
in their sole discretion, the General Partners determine that additional
service charges are appropriate, the Participants will be notified and provided
an opportunity to modify their participation in the Distribution Reinvestment
Plan.

Units received pursuant to the Distribution Reinvestment Plan will have
the same rights and be treated in the same manner as those issued pursuant to
the Offering. See "Summary of Partnership Agreement."

Following the reinvestment, each Participant will be sent a statement and
accounting showing the Distributions received, the Administrative Services
charge, and the number and price of Units purchased. Taxable Participants may
incur a tax liability for Partnership income allocated to them even though they
have elected not to receive their Distributions in cash but rather to have
their Distributions invested in Units

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pursuant to the Distribution Reinvestment Plan. Tax information for income
earned on Units under the Distribution Reinvestment Plan for the calendar year
will be sent to each Participant by the Partnership.

Investors may become Participants at any time by completing the
appropriate authorization form which will be available from the Partnership.
Participation in the Distribution Reinvestment Plan will start with the next
Distribution payable after receipt by the Partnership of a Participant's
authorization or subscription. Notwithstanding the foregoing, residents of
states which would require the Partnership to register as a broker-dealer, may
not participate in the Distribution Reinvestment Plan. In addition, residents
of California must be able to satisfy the suitability standards imposed by
California at the time of each purchase pursuant to the Distribution
Reinvestment Plan, and satisfaction thereof must be reconfirmed by the
California resident's Participating Dealer. See "Who Should Invest." A
Participant will be able to terminate his participation in the Distribution
Reinvestment Plan at any time without penalty by delivering written notice to
the Partnership. If a Participant terminates his participation, the Partnership
will send him the certificates evidencing the Units in his account. No service
charge will be charged by the Partnership for a termination.

Experience with the operations of this Distribution Reinvestment Plan may
indicate that amendments to the terms of the Distribution Reinvestment Plan are
desirable. Accordingly, the Partnership reserves the right to amend any aspect
of the Distribution Reinvestment Plan effective with respect to any
Distribution paid subsequent to the notice, provided that the notice is sent to
Participants at least 30 days before the record date for a Distribution. The
Partnership also reserves the right to terminate the Distribution Reinvestment
Plan, particularly if the operations of the Distribution Reinvestment Plan
increase the possibility that the Partnership will be considered "publicly
traded" or to assign its obligations under the Distribution Reinvestment Plan
to an unaffiliated entity which will act as independent agent for Participants
for any reason at any time, by sending written notice of such termination or
assignment to all Participants.

The General Partners reserve the right to prohibit Tax-Exempt Investors
from participating in the Plan if such participation would cause the underlying
assets of the Partnership to constitute "plan assets." See "ERISA
Considerations for Qualified Plans." The General Partners may terminate the
participation of any Participant or prohibit a Limited Partner from becoming a
Participant if the Limited Partner ceases to meet a state's suitability
standard for reinvestment or if participation would not be in compliance with
applicable blue sky laws.

For discussion of certain possible tax consequences of reinvestment in the
Distribution Reinvestment Plan, see "Tax Aspects of the Offering."

RIGHT TO TENDER UNITS FOR PURCHASE

Commencing in 1998, but in no event prior to the closing of the Offering,
and subject to certain conditions discussed in the Partnership Agreement, the
Partnership will repurchase a Limited Partner's Unit(s) upon the written
request of the Limited Partner. During 1998 the repurchase price will be equal
to 85% of the tendering Limited Partner's Adjusted Investment and during 1999
the repurchase price will be equal to 90% of the tendering Limited Partner's
Adjusted Investment. Starting in 2000 and in each year thereafter the
repurchase price will be determined by (i) beginning with 100% of the tendering
Limited Partner's Adjusted Investment, subtracting (ii) any Net Sale or
Refinancing Proceeds previously distributed to such Limited Partner not
required to pay the Current Preferred Return to the Investor and further
subtracting (iii) one-half of all prior distributions of Cash Flow to such
Limited Partner. For Units purchased in the secondary market after the closing
of the Offering, Cash Flow per Unit shall be deemed to be equal to the amount
of Cash Flow per Unit that would have been paid to an Investor that purchased
a Unit at the mid-point of the Offering. Limited Partners desiring to have
their Units repurchased will be required to submit to the General Partners
notification on a form supplied by the General Partners of the number of Units
for which they are requesting repurchase. The notification must be postmarked
either after February 1 but before March 1 (the "February Redemption Period")
or after

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August 1 but before September 1 (the "August Redemption Period"; collectively,
the "Redemption Periods") in the year of repurchase. During 1998, no more than
1/2% of the outstanding Units (as of January 1, 1998) will be redeemed during
any Redemption Period, and for years after 1998, no more than 1% of the
outstanding Units (as of January 1 for the relevant year) will be redeemed
during any Redemption Period. Thus, if only the Minimum Number of Units is
issued in the Offering, the maximum number of Units the Partnership will be
required to repurchase in each Redemption Period during 1998 and those years
after 1998 will be 10 and 20, respectively. The maximum number of Units the
Partnership will be required to repurchase in each Redemption Period during
1998 and those years after 1998 will be 150 and 300, respectively, but such
repurchase obligation will only be effective if the Partnership issues the
Maximum Number of Units. In each case, repurchase requests with the earliest
postmarks will be honored first. Units tendered during the February Redemption
Period and August Redemption Period will be repurchased on April 1 and October
1, respectively, of each year, and any Limited Partner who tenders Units that
are not repurchased must retender the Units in succeeding Redemption Periods if
he or she wants the request considered. The Partnership is not obligated to
repurchase any Units(s) if the annualized Cash Flow for the three (3) months
prior to the Redemption Period is less than 10% per annum of the Adjusted
Investment or such repurchases would impair the capital of the Partnership.
Repurchases will be funded out of either (i) Partnership revenues otherwise
distributable to Limited Partners or (ii) Partnership borrowings. No
assurances can be given that such revenues or borrowings will be available or
that the Partnership will be able to repurchase any or all of the Units
tendered. A repurchase will result in less Cash Flow or Net Proceeds of Sale
being distributed to remaining Limited Partners in the year of repurchase, but
will not result in a reduction of taxable income or gains to such Limited
Partners. In addition, a repurchase may result in certain adverse tax
consequences to the tendering Limited Partner. See "Tax Aspects of the
Offering - Sale or Transfer of Partnership Units."

TAX ASPECTS OF THE OFFERING

The following is a summary of the material federal income tax issues
arising from an investment in the Partnership based on the Partnership's
anticipated activities of the Partnership. This summary, to the extent it
pertains to partnerships in general, is also relevant to the tax treatment of
joint venture partnerships through which the Partnership may invest in
particular properties. However, it is not possible to predict the effect of the
provisions discussed in this summary on each Limited Partner's personal tax
liability since the tax implications of an investment in the Partnership will
vary for different Limited Partners. THUS, THE FOLLOWING ANALYSIS IS NOT
INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING AND PROSPECTIVE LIMITED
PARTNERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO
THEIR OWN TAX SITUATION. See "Risk Factors - Tax Consequences."

This summary has been prepared by the General Partners based, in large
part, upon the opinions of counsel to the Partnership, Jaffe, Raitt, Heuer &
Weiss, P.C. See "-Opinion of Counsel" in this Section. The opinions of Jaffe,
Raitt, Heuer & Weiss, P.C., however, are not binding upon the Internal Revenue
Service (the "Service") and no assurance can be given that the Service may not
successfully challenge various tax positions the Partnership will take based on
such opinions. Moreover, this discussion and the opinions of Jaffe, Raitt,
Heuer & Weiss, P.C., are based on the law in effect on the date of this
Prospectus, including the Internal Revenue Code of 1986, as amended to date
(the "Code"), regulations promulgated under the Code (the "Regulations"),
published rulings and administrative determinations of the Service and court
decisions. No assurance can be given that future legislative, administrative or
judicial changes will not significantly modify, or cause to be no longer valid,
the statements or opinions of counsel expressed herein. In addition, the
Service may promulgate Regulations which could alter, perhaps significantly,
the Service's interpretation of portions of the Code which impact on the
Partnership. Any such changes might be applied retroactively with respect to
transactions occurring prior to the effective date of such changes. See
"-Proposed Legislation" in this Section.

There have been several recent changes to the Code, including the Tax
Reform Act of 1986 (the "1986 Act"), the Revenue Act of 1987 (the "1987 Act")
the Technical and Miscellaneous Revenue Act of

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1988 (the "1988 Act"), the Revenue Reconciliation Act of 1989 (the "1989 Act"),
the Revenue Reconciliation Act of 1990 and the Revenue Reconciliation Act of
1993 (the "1993 Act") (the 1993 Act, and together with the 1986 Act, the 1987
Act, the 1988 Act, the 1989 Act and the 1990 Act, the "Acts"). These amendments
to the Code create extensive changes to the tax system, many of which changes
affect an investment in the Partnership. The Acts grant to the Service
significant authority to create interpretive and legislative Regulations on
many of the new provisions, and because the Service has not issued such
Regulations, Jaffe, Raitt, Heuer & Weiss, P.C. is unable to provide certainty
on several issues. The provisions of the Acts are complex and will have a
different effect on each Limited Partner and, therefore, each prospective
Limited Partner should consult with his own tax advisor as to the impact of
such changes on his overall tax situation.

OPINION OF COUNSEL

Jaffe, Raitt, Heuer & Weiss, P.C., having considered the material tax
issues, has issued its opinion, subject to certain assumptions, representations
and undertakings, that the statements in this Prospectus are accurate regarding
the likely favorable outcome on the merits of the tax issues described below.
The Partnership intends to acquire, either in its own name or through joint
venture partnerships, existing, free-standing, income producing retail and
industrial real properties (singly, a "Property" and collectively, the
"Properties") and equipment ("Equipment" - when used in this section of the
Prospectus, the term "properties" shall refer to both Properties and Equipment)
with the capital raised through the Offering. The Partnership intends to
purchase the Properties subject to long-term "triple net" leases using leverage
of up to 50% on an aggregate portfolio basis. It is anticipated that
indebtedness incurred in acquiring Properties will be retired as soon as
sufficient proceeds of the Offering become available.

The material tax issues on which Jaffe, Raitt, Heuer & Weiss, P.C. is able
to render an opinion of counsel as of the date of this Prospectus include:

(i) the status of the Partnership as a partnership for federal income tax
purposes;

(ii) whether the Partnership will be treated as a "publicly traded
partnership";

(iii) whether the Partnership will be considered engaged in a passive
activity or activities with regard to the ownership and leasing operations of
the Properties and Equipment, under the statutory language of Section 469 of
the Code, the legislative history thereof and the temporary Regulations issued
to date, and will, therefore, allocate passive income and loss to the Limited
Partners;

(iv) the economic effect of the allocation of profits and losses under the
Agreement so long as the allocations do not cause or increase deficit balances
in the Limited Partners' Capital Accounts (determined as described in this
Prospectus); the substantiality of such economic effect (page 67); and the
reasonableness of allocations to incoming Limited Partners;

(v) the propriety of the Partnership's intended tax treatment of the fees
it anticipates paying to the General Partners and their Affiliates, although
Jaffe, Raitt, Heuer & Weiss, P.C. is unable to render an opinion as to the
reasonableness of the amounts paid;

(vi) whether based on the anticipated terms of the purchase agreements and
the leases for the Properties, as represented by the General Partners, the
Partnership will be considered the owner of the Properties and Equipment for
federal income tax purposes;

(vii) whether the Partnership's use of the accrual method of accounting
will be respected;

(viii) whether, based on the representations of the General Partners and
those of the Limited Partners contained in their Subscription Agreements, the
Partnership and/or the Limited Partners will be engaged in an activity for
profit; and

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(ix) whether, under current law, substantially more than half of the
material tax benefits, in terms of their financial impact on a typical investor
in the Partnership, more likely than not will be realized if challenged by the
Service.

The opinion further states that the summary of federal income tax
consequences set forth in this Prospectus under the headings "Risk Factors-Tax
Consequences" and "Tax Aspects of the Offering" have been reviewed by counsel
and, that to the extent such summaries involve matters of law, counsel is of
the opinion, unless otherwise noted to the contrary, that such statements of
law are more likely than not correct under the Code, the Regulations and the
existing interpretations thereof.

The opinion of Jaffe, Raitt, Heuer & Weiss, P.C. is based upon the facts
described in this Prospectus and upon the facts as they have been represented
by the General Partners to Jaffe, Raitt, Heuer & Weiss, P.C., or determined by
it as of the date of the opinion. Any alteration of the facts may adversely
affect the opinions rendered therein. Furthermore, the opinion of Jaffe,
Raitt, Heuer & Weiss, P.C. is based upon existing law and applicable current
and proposed Regulations, current published administrative positions of the
Service contained in revenue rulings, revenue procedures and judicial
decisions, which are subject to change either prospectively or retroactively,
and any such changes could cause the opinions to change.

For the reasons described more fully below at the pages noted, Jaffe,
Raitt, Heuer & Weiss, P.C. is of the view that it is not possible, nor will it
become possible prior to the termination of the Offering, for it to reach a
conclusion (either favorable or unfavorable) as to the probable outcome on the
merits of the following federal income tax issues and accordingly, it expresses
no opinion, with respect to: (a) whether the Partnership will be considered a
"dealer" in real estate or equipment at the time of the sale or other
disposition of the Properties or the Equipment, which would cause the entire
gain from such sale or other disposition to be treated as ordinary income and
cause Limited Partners that are tax-exempt entities to recognize unrelated
business taxable income ("UBTI"); (b) whether a Limited Partner will be deemed
to be a "dealer" in limited partnership interests at the time of sale or other
disposition of his Units, which would result in the entire gain from such sale
or other disposition being treated as ordinary income; (c) whether the
Partnership's apportionment of the purchase price and expenses between land and
depreciable improvements for the Properties will be substantiated for cost
recovery purposes; and (d) whether the Properties or Equipment will constitute
"tax-exempt use properties" due to the leasing of space at the Properties to
tax-exempt entities and/or the admission of Limited Partners that are
tax-exempt entities, either of which would cause the Partnership to depreciate
a portion of the Properties or Equipment using the straight-line method of
depreciation.

The Partnership will use the capital raised through this Offering to
acquire Properties and Equipment. Therefore, Jaffe, Raitt, Heuer & Weiss, P.C.
cannot opine at this time on the application of the law to the specific facts
which will exist when the Properties or Equipment are acquired. When the
General Partners enter into agreements to acquire specific Properties or
Equipment or to enter into joint ventures with other parties to acquire
Properties or Equipment, Jaffe, Raitt, Heuer & Weiss, P.C. will, if requested
by the Partnership, make due inquiry of all facts relating to the transaction
which it feels have material tax consequences to the Partnership, including the
terms of the acquisition and the payment of fees to various parties. The
General Partners anticipate that any such opinion delivered to the Partnership
upon entering into joint ventures or the acquisition of specific Properties
and/or Equipment during the Offering period will address the following issues,
if material, and determine whether:

(i) any joint venture partnership through which the Partnership may invest
in a specific Property and/or Equipment should be considered a "partnership"
for federal income tax purposes;

(ii) the basis of each Limited Partners in his Units will be increased by
any financing incurred in the course of entering into a joint venture or a
specific Property and/or Equipment acquisition.

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(iii) each Limited Partner will have sufficient amounts "at-risk",
including qualified non-recourse financing (if any), to deduct (without
considering the other limitations in the Code) losses allocated from the
Properties and/or Equipment in excess of their cash contributions to the
Partnership;

(iv) the Partnership or joint venture will be considered engaged in a
"passive activity" with regard to owning and operating such specific Property
and/or Equipment, so that it will produce passive income or loss;

(v) the Partnership's or the joint venture's intended tax treatment of any
fees which will be paid to the seller or brokers in connection with the
acquisition of a specific Property and/or Equipment is proper;

(vi) the Partnership or joint venture will be considered the owner of the
specific Property and/or Equipment for tax purposes;

(vii) the Partnership's or the joint venture's contemplated method of
depreciation or cost recovery for the specific Property and/or Equipment is
proper;

(viii) the specific Property or Equipment will constitute tax-exempt use
property;

(ix) any loans or other financing provided by the General Partners or any
other lender will constitute debt;

(x) loans incurred by the Partnership or any joint venture to acquire the
specific Property and/or Equipment will be subject to the original issue
discount provisions; and

(xi) the indebtedness incurred in acquiring a specific Property and/or
Equipment will constitute non-recourse indebtedness for purposes of Section
704(b), the application of the "safe harbor" to the allocations attributable to
such indebtedness and the effect of such acquisition and financing on the
Partnership's allocations.

PARTNERSHIP STATUS

Many of the tax benefits from an investment in the Partnership depend on
the Partnership being classified as a partnership for federal income tax
purposes rather than as an association taxable as a corporation. NO TAX RULING
WILL BE SOUGHT FROM THE SERVICE AS TO THE TAX STATUS OF THE PARTNERSHIP AS A
PARTNERSHIP. The General Partners, however, have received the opinion of Jaffe,
Raitt, Heuer & Weiss, P.C. that the Partnership will more likely than not be
considered a partnership for federal income tax purposes, and that the Limited
Partners will be subject to tax as partners pursuant to Subchapter K of the
Code. Unlike a tax ruling, the opinion of counsel represents only such
counsel's best legal judgment and has no binding effect or official status of
any kind. Thus, in the absence of a ruling from the Service, there can be no
assurance that the Service will not attempt to characterize the Partnership as
a corporation for federal income tax purposes. If the Service were to prevail
on this issue, many of the tax benefits expected from an investment in the
Partnership, would not be available, which would substantially reduce the
effective yield from an investment in the Partnership. See "Risk Factors -
Federal Income Tax Risks - Risk of Loss of Partnership Status."

On May 10, 1996, the Service issued proposed regulations to provide a
simple elective approach for classifying business organizations. However, the
rules will not be effective until the regulations are finalized. In addition,
the new rules would not apply to entities classified as a corporation as a
result of Section 7704 of the Code. Accordingly, the new regulatory scheme
when it becomes final is not anticipated to substantially effect the below
discussion of why the Partnership believes that it will more likely than not be
considered a partnership for federal income tax purposes.

The opinion of Jaffe, Raitt, Heuer & Weiss, P.C. assumes compliance from
the date of formation of the Partnership throughout the term of its existence
with the following conditions:

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(i) the Partnership and each Limited Partner therein will have the
objective of carrying on business for profit and dividing the gains therefrom:

(ii) the General Partners have a substantial net worth as described in
"Management" and at all times the General Partners will maintain an aggregate
net worth of at least $250,000;

(iii) the General Partners will have at least a one percent (1%) interest
in each material item of Partnership income, gain, loss, deduction or credit at
all times during the term of Partnership;

(iv) the Partnership's activities will be conducted strictly in accordance
with the terms of the Agreement, the provisions of the Delaware Revised Uniform
Limited Partnership Act and other applicable Delaware law, and that the
Partnership has taken, and will take, all necessary action which may be
required under state or local law to conduct business in Delaware as a limited
partnership, as contemplated by the Agreement; and

(v) no election will be made by the Partnership to be excluded from the
provisions of Subchapter K of the Code.

The opinion of Jaffe, Raitt, Heuer & Weiss, P.C. is based, in part, on
Regulation Section 301.7701-2 which provides that an entity will be treated as
"an association taxable as a corporation" for federal income tax purposes if it
has more corporate characteristics than non-corporate characteristics. The
corporate characteristics which the Regulations indicate are material in
distinguishing between partnerships and corporations are: (a) continuity of
life; (b) liability for debts limited to property owned by the entity (limited
liability); (c) centralization of management; and (d) free transferability of
interests. If an organization possesses more than two of the four corporate
attributes, the organization will be characterized by the Service as a
corporation for federal income tax purposes.

In Larson v. Comm'r, 66 T.C. 159 (1976) and Zuckman v. U.S., 524 F.2d 729
(Ct. Cl. 1975) courts have confirmed that the test in the Regulations is the
proper test for determining whether an entity should be treated as a
partnership for tax purposes. In Announcement 88-118 and Revenue Ruling ("Rev.
Rul.") 88-76, the Service again applied the test in the Regulations to
determine the federal income tax classification of an entity, and stated that
in applying the test in the Regulations, "equal weight must be given to each of
the four corporate characteristics." In addition, the Service announced that
it would not attempt to apply an objective general partner net worth standard
as a substantive rule for all partnerships, or as a requirement for an advance
determination for partnerships that do not have a sole corporate general
partner.

Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that it is more likely
than not that the Partnership will not possess more than two of the four
corporate characteristics enumerated in the Regulations and, therefore, the
Partnership will be taxed as a partnership and not as an association taxable as
a corporation. The Partnership will not possess the corporate characteristics
of continuity of life, limited liability and free transferability of interests,
although it will possess the corporate characteristic of centralized management
and, therefore, the non-corporate characteristics predominate over the
corporate characteristics. If the Service amends the Regulations or if the
Partnership does not act as anticipated, it is possible that the Partnership
might not qualify as a partnership under such amended Regulations.

Under certain circumstances, an entity can obtain from the Service an
advance determination of whether it constitutes a partnership for federal
income tax purposes. In order to obtain such a ruling, an entity must meet all
of the substantive requirements set out in Revenue Procedure ("Rev. Proc.")
89-12, 1989 C.B. 798, which modifies and supersedes several previously issued
revenue procedures. Based upon the representations of the General Partners
regarding the anticipated activities of the Partnership and a review of the
Agreement, the Partnership will not meet all of the requirements of Rev. Proc.
89-12. Therefore, if the Partnership sought an advance ruling as to its
partnership status for tax purposes (which it does not intend to do), it would
not be able to obtain such a ruling. However, failure to qualify for

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a ruling will not necessarily prevent the Partnership from being considered a
partnership for federal income tax purposes, because Rev. Proc. 89-12
explicitly states that the operating rules contained therein "are not intended
to be substantive rules for the determination of partner and partnership status
and are not to be applied upon audit of taxpayer's returns."

In addition to the foregoing, a "publicly traded partnership," as defined
in Section 7704 of the Code is taxed as a corporation, unless 90% or more of
its income constitutes "qualifying income." The Units will not be traded on an
established market, and the General Partners have represented that they will
not facilitate the creation of the equivalent of a secondary market by
providing readily available liquidity opportunities. In addition, in Regulation
Section 1.7704-1(c)(3), the Service set forth "safe harbors" to exempt
partnerships from publicly traded status. Regulation Section 1.7704-1(f) states
that although occasional purchases of interests by a partnership or the general
partner will not constitute public trading, a regular plan of redemption or
repurchase may constitute public trading when holders of interests have readily
available and ongoing opportunities to dispose of their interests. While not
totally clear whether the Repurchase Plan constitutes a "readily available and
ongoing opportunity" to dispose of Units, Counsel is of the opinion that it is
more likely than not that the Repurchase Plan should be so characterized
because of the inordinate length of time between tender and sale, the
establishment of a purchase price at least sixty days after tender, the limited
annual availability to tender Units, the overall 2% limit on repurchases under
the Repurchase Plan and the General Partners' representation that the sum of
all Partnership interests in capital or profits disposed of during any taxable
year will not exceed two percent (2%) of all Partnership interests in capital
or profits. Therefore, as of the date hereof, and based on the aforementioned
representations, as well as the expected terms of the Offering and the
Repurchase Plan, Counsel is of the opinion that it is more likely than not that
the Units will not be publicly traded and that the Partnership will not be
subject to corporate taxation under Section 7704 of the Code because the
Partnership will qualify for one of the safe harbors created in the Regulations
and because the Units will not be publicly traded under the statutory language.
However, later activities by the Partnership or any of the Partners, as well as
future Regulations, could alter this conclusion.

In the event that the Partnership is characterized as publicly traded, an
exception from taxation as a corporation exists for a publicly traded
partnership which meets the "90% of gross income" exception. An entity
qualifies for this exception if 90% or more of its gross income consists of
"qualifying income", which is defined as interest, dividends, real property
rents, gain from the disposition of real property, gain from the disposition of
capital assets or property described in Section 1231(b) of the Code, and income
and gains from certain natural resource activities. Although real property
rents that include a fixed percentage or percentages of receipts or sales
constitute qualifying income, rentals from equipment leasing would not
constitute qualifying income for purposes of this exception. Due to the
inherently factual nature of the ability to qualify for the exception, Jaffe,
Raitt, Heuer & Weiss, P.C. is unable to opine at this time, either favorably or
unfavorably, on whether the Partnership could qualify for this exception.

In the event the Partnership were classified as an association taxable as
a corporation, under the test in the Regulations or the publicly traded
partnership rules, all items of income, gain, loss, deduction and credit of the
Partnership would be included only on its corporate tax returns and would not
be passed through to the Limited Partners. Therefore, losses and deductions
from the Partnership could not be utilized to offset income from other sources
on the Limited Partners' individual tax returns. In addition, the Partnership
would have to pay income tax on its income, thereby reducing the cash available
for distribution to the Limited Partners. Cash distributions to the Limited
Partners would be treated as dividends to the extent of current or accumulated
earnings and profits of the Partnership. The effect of the foregoing would be
to substantially reduce the effective yield on an investment in the
Partnership. Finally, such a change in the status of the Partnership for
federal income tax purposes in the future would be treated by the Service as a
taxable event, in which event the Limited Partners could have tax liability
without receiving a cash distribution from that Partnership to enable them to
pay their increased tax liability.

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The Partnership does not expect to seek a ruling that any of the joint
venture partnerships through which it may hold an interest in Properties or
Equipment will be treated as a partnership for federal income tax purposes. If
the Partnership enters into a joint venture, it expects to receive an opinion
of counsel that under existing federal income tax laws and Regulations such
joint venture will be characterized as a partnership, but such opinion of
counsel is not binding upon the Service. In the event such joint venture were
treated as a corporation for federal income tax purposes, the adverse
consequences described above could occur.

TAXATION OF LIMITED PARTNERS ON PROFITS OR LOSSES OF THE PARTNERSHIP

A partnership is not a taxable entity for federal income tax purposes.
Instead, each partner must report his allocable share (as determined by the
partnership agreement) of the partnership's recognized income, gains, losses,
deductions, credits and items of tax preference, whether such partner receives
any cash distributions during his taxable year. See "Allocations of Profits and
Losses" in this Section. Thus, a partner's tax liability may exceed the cash
distributed to him in a particular year, or he could be allocated losses while
receiving a cash distribution. The characterization of an item of profit or
loss (e.g., as capital gain or ordinary income) is determined at the
partnership level and should be reported by each partner in accordance with
such characterization.

TAXATION OF CASH DISTRIBUTIONS

Cash distributions from a partnership are unrelated to partnership income,
if any, as determined for federal income tax purposes or under generally
accepted accounting principles. Therefore, cash distributions can be made even
if the Partnership suffers a loss. Additionally, there can be no assurance that
Partnership operations will result in cash distributions sufficient to allow
the Limited Partners to pay the income tax resulting from the income they are
allocated.

Cash distributions, either deemed, as described below, or actual, reduce a
partner's tax basis in his interest, and will not result in tax unless the
amount of the distribution exceeds the partner's basis in his interest at the
time of the distribution. Any distributions in excess of a partner's basis will
be taxable to such partner as though it were a gain on the sale or exchange of
his interest in the partnership. In addition, Section 751 of the Code could
cause a partner to recognize gain upon a distribution even if the amount of the
distribution does not exceed the partner's basis in his interests if the
partnership holds substantially appreciated inventory or unrealized
receivables. See "-Sale or Foreclosure of Partnership Properties or Equipment"
and "-Sale or Transfer of Partnership Units" in this Section.

Under Section 752 of the Code, a partner will receive a "deemed" cash
distribution at the time his share of partnership non-recourse liabilities
declines. A deemed cash distribution has the same effect as an actual cash
distribution in that it decreases a partner's basis in his partnership interest
and can trigger gain to the extent that such cash distribution, whether deemed
or actual, exceed the partner's basis in his interest at the time of the
distribution. A deemed cash distribution can result from either: (i) decreases
in a partnership's total non-recourse indebtedness, such as retirement of a
loan, replacing a non-recourse loan with a loan that is "recourse" under the
rules described below; and/or (ii) a decrease in a partner's percentage share
of the non-recourse liabilities pursuant to the rules discussed below. An
increase in a partner's share of a partnership's non-recourse liabilities will
be treated as a deemed cash contribution and will increase a partner's basis in
his interest.

The Partnership intends to acquire Properties and Equipment using leverage
of up to 40% on an aggregate portfolio basis and, with respect to any
individual Property or Equipment, the Partnership will not use leverage greater
than 80% of the cost of acquisition. The General Partners have represented that
they will use their best efforts so that indebtedness incurred by the
Partnership to acquire Properties and/or Equipment, if any, will be
non-recourse so as to be includible in a Limited Partner's basis in his Units.
There can be no assurance, however, that such financing will be available to
the Partnership. If no such

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financing is incurred, the acquisition of Properties or Equipment will have no
effect on a Limited Partner's basis in his Units, but if indebtedness is
incurred and it is non-recourse in nature and held by a non-partner, it will
increase a Limited Partner's basis in his Units when incurred, and decrease his
basis when retired. Although the General Partners do not expect that the
Partnership will allocate losses to the Limited Partners in excess of their
capital contributions or that Cash Flow distributions to a Limited Partner will
exceed profits allocated to the Limited Partner by more than the Limited
Partner's capital contribution (a "Capital Contribution"), in the event that
either of the above occur, the repayment of any Partnership loans could trigger
gain to the Limited Partners.

The taxation of cash distributions is also affected by the "at-risk" rules
in Section 465 of the Code. Under these rules, cash distributions will trigger
the recognition of income if the limited partner had previously claimed losses
and if such distributions exceed the amount a partner has "at-risk" in the
partnership, which is equal to the amount the partner invests in the activity,
increased by all gain previously recognized, and decreased by all losses and
cash distributions. In addition, a limited partner in a partnership owning real
estate is considered "at-risk" to the extent of his allocable share of any
"qualified non-recourse financing" (as defined in Section 465(b)(6)(B) of the
Code). With respect to financing the Properties, the General Partners intend to
obtain indebtedness which is "qualified non-recourse financing" to the extent
that such financing is available, commercially reasonable and economically
beneficial to the Partnership and the Partners. If the Partnership acquires
Properties or Equipment without incurring any indebtedness or uses financing
which is not "qualifying non-recourse financing," such acquisitions will have
no effect on the amount to which the Limited Partners are considered "at-risk."
Any interim financing used to acquire the Properties or Equipment until
additional proceeds of the Offering are received could increase the Limited
Partners' amount "at-risk" until the debt is retired. The retirement of such
interim debt could cause the taxation of cash distributions if the Limited
Partner has an insufficient "at risk" amount.

LIMITATIONS ON DEDUCTIBILITY OF LOSSES

The ability of a partner to deduct his allocable share of the net losses
of a partnership against income from other sources is limited by the partner's
tax basis in his partnership interest, the "at-risk" limitation and the
"passive loss" limitation rule.

Basis Limitation. A partner may deduct his allocable share of partnership
losses only to the extent of his tax basis in his partnership interest at the
end of the year. A partner's initial tax basis for his partnership interest is
the amount of cash and the adjusted basis of property contributed by the
partner. A partner's tax basis is thereafter increased by: (i) the amount of
any additional cash contributions; (ii) his distributable share of partnership
profits; and (iii) the partner's pro rata share of such partnership's
non-recourse liabilities. In addition, under rev. Rul. 77-309, 1977-2 C.B. 216,
a partner's basis will include not only his pro rate share of partnership
non-recourse liabilities, but also non-recourse liabilities of any partnership
in which the partnership is a partner. A partner's basis in his partnership
interest is decreased by the amount of his distributable share of net losses of
the partnership and the amount of any distributions, either deemed or actual,
made to the partner as a result of his ownership of an interest in the
partnership.

The Service has issued final and temporary Regulations which define
whether a partnership liability is non-recourse and, therefore, includible in
the basis of each partner, or recourse, and includible only in the basis of the
partner who bears the risk on such liability. Under the Regulations, a
liability is only considered non-recourse to the extent that no partner or
person "related" to the partner bears the economic risk of loss. All other
liabilities, including a portion of an otherwise non-recourse liability on
which a partner or related party bears a risk of loss, are considered recourse.
Under the Regulations, a partner is considered to bear the economic risk of
loss for a liability to the extent that the partner, or a person related to
such partner, would be ultimately obligated, under all arrangements and
agreements among the partners, to pay a creditor or contribute funds to the
partnership in the event that: (i) all of the partnership's liabilities
were due and payable; (ii) the partnership allocated all gain that resulted
from the disposition; and (iii) there was a "constructive liquidation" of the
partnership so that there were no funds to pay such liabilities. A

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person is considered related to a partner for purposes of these rules if he
were deemed to be related under Sections 267 or 707(b)(1) of the Code if such
sections used an 80% or more test rather than a 50% or more test. If a partner
is entitled to reimbursement for any amounts he pays to creditors or
contributes to the partnership, then such partner is not considered to bear the
economic risk of loss to the extent of his right to reimbursement.

In a departure from the prior Regulations, the Regulations require that
the non-recourse liabilities of a partnership be allocated among the partners,
for inclusion in their bases: (i) first, to reflect the partner's share of any
partnership "minimum gain," (see "-Allocations of Profits and Losses" in this
Section); (ii) second, to reflect the partners' shares of any tax gain that
would be allocated to the partners under Section 704(c) of the Code (which
deals with contribution of appreciated property to the partnership) if the
partnership disposed of all of its property solely in full satisfaction of such
liabilities; and (iii) finally, any excess, in proportion to the partners'
interests in partnership profits, a term which is not defined in the
Regulations. The Regulations state that the partnership agreement may specify
the partners' interest in partnership profit that will be used for allocating
excess non-recourse liabilities, so long as such allocation is reasonably
consistent with allocations (which have substantial economic effect) of some
significant item of partnership income or gain. Under the Agreement, profit
allocations will vary depending upon whether profits are from operations or the
disposition of Properties or Equipment, and the Agreement specifically
indicates that the Partnership will apportion any excess non-recourse
liabilities based on the percentage used to allocate operating profit, although
there can be no assurance that this method will be respected. The General
Partners have represented that they will use their best efforts so that
indebtedness incurred by the Partnership to acquire Properties and/or
Equipment, if any, will be non-recourse so as to be includible in a Limited
Partner's basis in his Units. There can be no assurance, however, that such
financing will be available to the Partnership.

At-Risk Limitation. A limited partner may deduct allocable losses only to
the extent that he is at-risk in a partnership, as determined under Section 465
of the Code. The 1986 Act extended the at-risk rules to real estate activities
and, therefore, the amount of losses an investor in a real estate transaction
can deduct on his individual income tax return is now limited to the amount the
taxpayer has actually placed "at-risk" in that activity and, therefore, could
actually lose in that activity. In Rev. Rul. 77-311, 1977-2 C.B. 216, the
Service indicated that for at-risk purposes the real estate activities of one
partnership are attributed to one of its partners that is also a partnership.

Under Section 465 of the Code, a taxpayer is considered "at-risk" for the
amount of money and the adjusted basis of property he contributes, plus any
amounts borrowed for use in the activity to the extent the taxpayer is liable
for such debt. In addition, the 1986 Act created an exception for entities
engaged in holding real estate which allows an investor to be considered
"at-risk" for his proportionate share of all "qualified non-recourse
financing," as defined in Section 465(b)(6)(B) of the Code. The General
Partners have represented that the Properties will be financed with
indebtedness which qualifies as "qualified non-recourse financing" to the
extent that such financing is available, commercially reasonable and
economically beneficial to the Partnership and the Limited Partners.

Section 465(c)(2)(B) of the Code requires that the Partnership aggregate
its Equipment leasing activities with respect to Equipment placed in service
during the same taxable year. Therefore, the at-risk rules will be applied to
the net taxable income or loss with respect to Equipment which is placed in
service during the same taxable year. This could limit a Limited Partner's
ability to deduct losses with respect to certain items of Equipment even though
he must recognize income with respect to other items of Equipment.

The General Partners do not anticipate the Limited Partners being
allocated losses in excess of their amounts at risk. Counsel, however, is
unable to opine as to what impact, if any, the at-risk rules will have on a
Limited Partner because it can not now be known whether qualified non-recourse
financing will be

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obtained, the amount, if any, of losses which will be allocable to Limited
Partners, and what effect, if any, the timing of placing Equipment into service
will have on allocations to the Limited Partners.

Passive Loss Limitation . Even if a partner has sufficient basis and
amounts at-risk to claim the deductions and losses allocated to him by a
partnership, Section 469 of the Code provides that a taxpayer may only deduct
losses or use credits from a passive activity against income from that or other
passive activities. Losses from a passive activity cannot be used to offset
income from non-passive sources, a category which includes salary or business
income, interest, dividends, capital gains and other forms of "portfolio
income," as defined in Section 469(e) of the Code, or "non-passive" income as
defined in the Regulations. Any passive losses that cannot be used in any year
are carried forward indefinitely to offset passive income in the future,
including, but not limited to, the income resulting from the sale of property
used in the passive activity, or the sale by a taxpayer of his interests in the
passive activity. Upon a complete disposition of an interest in a passive
activity, any suspended loss from the activity, after offsetting the gain
recognized upon the disposition of the entire interest, can be used to offset
income from all sources in an order set out in Section 469 of the Code.

The limitation applies to losses from a "passive activity," which is
defined as any activity which involves a trade or business in which the
taxpayer does not materially participate. For purposes of these new provisions,
the definition of "trade or business" is expanded to include all rental
activities and activities not normally encompassed by such definition. Under
Section 469 of the Code and the proposed and temporary Regulations issued to
date, limited partners are not considered to materially participate in the
activities of a partnership and, therefore, the Limited Partners will not be
considered to materially participate in the activities of the Partnership.

Portfolio and "non-passive" income earned within an activity is stated
and allocated separately from the passive income and maintains its character as
portfolio income, which income cannot be offset by passive losses, including
those produced by the same passive activity. In addition, guaranteed payments
must be treated as portfolio income by recipients. Expenses that are clearly
and directly allocable to portfolio income, even if such income is from a
partnership which is otherwise engaged in a passive activity, produces
portfolio deductions, which are miscellaneous itemized deductions subject to
the 2% floor (see, -"-Deductibility of Fees" in this Section), rather than
reducing passive income. Until the Offering proceeds are fully invested in
Properties and Equipment, the Partnership will produce portfolio income and
passive losses, which cannot offset each other and, therefore, the Partners may
have tax liability even though the overall activities of the Partnership
reflect a loss. In addition, to the extent that any of the leasing activities
of the partnership are treated as sales or financing transactions for tax
purposes, the interest component of such sales or financing would be treated as
portfolio income. See, "-Tax Treatment of the Leases" in this Section.

The Service has issued proposed and temporary passive activity
Regulations which define the term "activity," which is important for
determining a taxpayer's level of involvement in a particular activity and
whether the taxpayer has disposed of the activity which would allow the use of
suspended losses from such activity. Despite complex rules which treat each
basic business operation, or "undertaking" as a separate "activity" and then
require the aggregation and/or segregation of various types of activities, the
Regulations allow taxpayers to organize rental real estate operations into one
or more activities in any manner in which taxpayers "find convenient or
advantageous." A rental real estate activity is defined as a rental undertaking
in which at least 85% of the unadjusted basis of the property rented to
customers is real property. Despite this freedom, taxpayers may not fragment or
aggregate the rental real estate operations in a manner that is inconsistent
with the treatment in prior taxable years, or the treatment of such operations
by the pass-through which it is held.

The General Partners will apply the aggregation and fragmentation
rules applicable to rental real estate activities in a manner which is
beneficial to the Partnership as a whole, and the Partners in general, and will
weigh the benefits of fragmenting the operations into separate activities
against the increased

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administrative costs which such treatment would entail. The Partnership will
consider treating each Property as a separate activity so that the sale of any
Property will allow the Partners to utilize any suspended losses related to
such Property that are not otherwise used in offsetting income resulting from
such sale. In addition, the investment of funds not otherwise invested in
Properties will constitute a single separate activity.

The Partnership intends to acquire the Properties and Equipment, and
rent them to unaffiliated third parties, under "triple net" leases in which the
lessees bear substantially all of the costs associated with ownership. Because
Section 469(c)(2) of the Code states that a passive activity includes "any
rental activity," it appears that the Partnership will be engaged in a "passive
activity" as to such rental activities. However, the Service is authorized
under Section 469(1)(3) of the Code to promulgate Regulations which could
require net income from an otherwise passive activity to be treated as
"non-passive." The 1986 Conference Report includes several examples of
instances when the Regulations should apply, including ground rents which
produce income without significant expenses, and related party leases with
respect to property used in a trade or business, and further indicates that the
given examples are not an exclusive list. Although it could be argued that the
Partnership's contemplated activities in leasing the Properties or Equipment
contain attributes which are similar to attributes of the activities contained
in the examples cited above, they clearly do not fall within such examples. In
addition, the proposed and temporary Regulations issued to date under Section
469 of the Code do not mandate, or otherwise indicate, that the Partnership's
anticipated ownership and leasing of the Properties or Equipment should be
recharacterized as a "portfolio" activity or as otherwise producing
"nonpassive" income or loss.

Therefore, based on the language in Section 469 of the Code, the
examples cited in the 1986 Conference Report and the Blue Book, and the
proposed, temporary and final Regulations issued to date, Jaffe, Raitt, Heuer &
Weiss, P.C. is of the opinion that the Partnership's activities in acquiring
the Properties or Equipment and leasing them in the contemplated manner will
more likely than not be characterized as a passive activity producing passive
income or loss for the Limited Partners. However, the Partnership's income from
the investment of Offering proceeds not invested in Properties or Equipment
will be characterized as portfolio income. The Service has indicated that it
will issue additional Regulations on this topic in the near future, and must
finalize the proposed and temporary Regulations issued to date. To the extent
that such Regulations differ from or extend the language and examples in the
Code, the Conference Report and the proposed and temporary Regulations, this
opinion may have to be revised, possibly with an adverse effect on certain
Limited Partners. In particular, the Service has indicated that it will monitor
and possibly prescribe additional Regulations to prevent taxpayer attempts to
structure investments that have economic characteristics similar to portfolio
investments, but which produce passive income. The Service indicated that it
considered recharacterizing income attributable to a preferred or guaranteed
return to investors, but the example in question dealt with a type of preferred
return in which one class of investors received a preferred return even though
it contributed the same amount of capital as the other group of investors, a
type of return which differs from the Cumulative Preferred Return.

Each taxpayer must aggregate income and losses from all passive
activities in which he invests, other than publicly traded partnerships, to
determine whether any particular loss from a passive activity can be deducted
in each taxable year. Passive income from the Partnership will offset passive
losses from other sources, including losses from other partnerships. Any unused
losses from passive activities are carried forward and applied against future
passive activity income, including any income from the termination of the
activity or the taxpayer's disposition of his interest therein. Accordingly,
because the current deductibility of passive losses is determined at the
individual Limited Partner level, Jaffe, Raitt, Heuer & Weiss, P.C. is unable
to render an opinion as to whether the Partnership's losses, if any, will be of
any current tax benefit to any Limited Partner. Each Limited Partner is urged
to consult his individual tax advisor to determine the effect of this provision
on his personal tax situation.

Under Section 469(k) of the Code, the net income of a publicly traded
partnership which is not treated as a corporation because it qualifies for the
90% of gross income exception, is not treated as passive

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income for purposes of applying the passive income and loss rules. This section
requires that the passive income and loss rules be applied separately as to the
tax items of each publicly traded partnership so that the losses of a publicly
traded partnership can only offset future passive income from that particular
partnership, and not from any other publicly traded partnership or other
passive activity. This language, in effect, treats each publicly traded
partnership as its own separate tax category. Therefore, in the unlikely event
that the Partnership is characterized as "publicly traded," the Limited
Partners will not be able to offset their income or losses from the Partnership
against their income or loss from other sources, including from other publicly
traded partnerships.

DEDUCTIBILITY OF FEES

Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that it is more
likely than not that, subject to the limitations discussed below, a deduction
is available under Code Sections 162, 167, 168 or 212 for reasonable amounts
paid or accrued by the Partnership, or any joint venture or partnership of
which the Partnership is a member, as property and partnership management fees,
tax advice fees, investor services fees and, under Code Section 709, for
reasonable amounts paid or incurred by the Partnership for organizational fees
for the taxable years in which the services to which such fees are attributable
are performed, or in the taxable years over which the asset created by such
services is properly amortizable. However, because the issue of reasonableness
is factual, and because the services in question are scheduled to be performed
in the future, Jaffe, Raitt, Heuer & Weiss, P.C. is unable to render an opinion
as to whether these fees will in fact be deductible or, if deductible, will be
deductible in the periods anticipated by the General Partners. There can be no
assurance that the Service will not contend that such amounts are not
deductible in the years paid, but, rather relate to future years, that they
represent costs of acquiring the Properties or Equipment or that they
constitute organizational expenses, syndication expenses or other
non-deductible payments of the Partnership.

To be fully deductible by the Partnership, expenditures, whether made
to affiliated or unaffiliated parties, must be ordinary and necessary business
expenditures which are reasonable in amount. The Service might seek to
challenge the deduction of any fees on the grounds that they exceed the
reasonable value of the services for which they were paid, particularly if paid
to the General Partners or Affiliates, or on other factual grounds. Ordinarily
payments made to a partner for services rendered are governed by the same rules
as payments to unaffiliated parties. Although the amount of some of the fees
payable by the Partnership were not determined by arm's-length negotiations,
the General Partners believe that the amounts of these fees are comparable to
fees that would be charged by third parties for similar services. Jaffe,
Raitt, Heuer & Weiss, P.C., however, is unable to render an opinion as to the
reasonableness of such fees because of the inherently factual nature of this
issue.

In addition, the Service could assert that the payment of fees to the
General Partners constitute a distribution from the Partnership to a Partner.
If the payments are treated as Partnership distributions then such payments
would not be deductible, would not be includible in the bases of the Properties
and/or could result in a reallocation of the Partnership's profits and losses
reflecting such disproportionate distributions, which in either case would
result in an increase in income or a decrease in losses allocable to the
Limited Partners.

Section 709 of the Code provides that a partnership or partner cannot
deduct amounts paid or incurred to organize a partnership or to promote the
sale of (or to sell) an interest in a partnership, but a partnership may elect
to amortize and deduct organizational expenses over a period of not less than
60 months. Syndication expenses incurred to obtain capital contributions to a
partnership are to be treated as capital expenditures, and may not be
amortized. Consequently, the Partnership will not deduct fees and expenses
relating to the syndication of the Partnership and the sale of Units to its
Limited Partners. Such syndication fees and expenses are anticipated to include
the selling commissions amounting to 8% of the dollar amount of Units sold,
payable to Participating Dealers. The Partnership will elect to amortize the
organizational fees and expenses over a period of 60 months. Such
organizational expenses, which consist

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of legal, accounting and miscellaneous expenses, are anticipated to include an
amount of up to 3% of Gross Proceeds. Jaffe, Raitt, Heuer & Weiss, P.C. has
advised the General Partners that the Partnership's intended treatment of the
aforementioned organizational expenses is proper and that any challenges by the
Service will more likely than not be resolved in favor of the Partnership,
although Jaffe, Raitt, Heuer & Weiss, P.C. does not opine as to the
reasonableness of the amount of such fees.

The Partnership may incur fees for tax and financial advice and
services. Such fees are deductible under Section 162 of the Code as ordinary
and necessary business expenses or under Section 212 of the Code as expenses
for the production of income. There can be no assurance that the Service will
not reclassify all or part of these disbursements as organizational expenses,
syndication expenses or other non-deductible expenses.

Under Section 461 of the Code, an accrual basis taxpayer cannot claim
a deduction for an expense until economic performance occurs. A deduction would
not be allowed for a liability to pay for services under a contract until such
services are performed. In addition, Section 267 of the Code provides that an
accrual basis taxpayer may not take a deduction for an expense paid to a
related party (a term which includes partners of a partnership and certain
affiliates of such partners) unless such related party includes such item in
taxable income. Section 404(b) of the Code provides a similar restriction on
the deductibility of payments made to employees and independent contractors,
except that the deduction will be allowed if the payment is delayed no more
than 2-1/2 months into the following year. The General Partners represent that
the Partnership will not take deductions for accrued and unpaid expenses in
years prior to the time the party rendering the services properly includes such
amount in income.

The General Partners have represented to Jaffe, Raitt, Heuer & Weiss,
P.C. that the possible fees: (i) are reasonable in light of the anticipated
services to be rendered and obligations undertaken in exchange for such fees
during the years such fees are accrued by the Partnership; (ii) are ordinary
and necessary business expenses or are expenses incurred for the production of
income; and (iii) do not represent compensation in connection with the
acquisition of the Properties. Based upon the General Partners' representations
as to the reasonableness of asset management fees, Jaffe, Raitt, Heuer & Weiss,
P.C. has advised the General Partners that the asset management fees in amounts
not to exceed those set forth in this Prospectus to be paid to an Affiliate of
the General Partners, will properly be deductible when paid by the Partnership,
and any challenge to such deduction by the Service will more likely than not be
resolved in favor of the Partnership although Jaffe, Raitt, Heuer & Weiss, P.C.
does not opine as to the reasonableness of such fees.

To the extent the Partnership is considered to produce passive income
or passive loss, the Partnership's expenses will be a component of such income
or loss. However, if the Partnership were considered to produce portfolio
income or loss, the expenses would be separately allocated as expenses incurred
for the production of income, which are treated as miscellaneous itemized
deductions. In addition, expenses which are clearly and directly allocable to
portfolio income produced by a partnership, even if the Partnership is
otherwise engaged in a passive activity, can not be taken into consideration in
determining passive income or loss, and instead constitute miscellaneous
itemized deductions. A recent pronouncement from the Service allows a
partnership to apportion its expenses between passive and portfolio based on
any reasonable method, pending issuance of Regulations by the Service. An
individual Limited Partner can only deduct miscellaneous itemized deductions to
the extent that the aggregate amount of such deductions, from all sources
including the Partnership, exceeds 2% of that individual's adjusted gross
income, and, therefore, the full deductibility of any fees characterized as
miscellaneous itemized deductions will depend on the individual tax situation
of each Limited Partner.

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TAX TREATMENT OF THE LEASES

The availability to Limited Partners of their respective shares of
Partnership depreciation deductions with respect to a particular item of
Equipment or Property depends, in part, upon the classification of the lease
(the "Lease") of that Equipment or Property as a lease of property of which the
Partnership is the owner, rather than as a sale, financing or refinancing
arrangement.

Whether the Partnership is the owner of each item of Equipment or
Property and whether each of the Leases is a lease for federal income tax
purposes depends upon complicated questions of fact and law. In Frank Lyon
Company v. U.S., 435 U.S. 561 (1978), the Supreme Court held that a purported
lessor will be treated as the owner of the leased property for income tax
purposes if there is "a genuine multiple-party transaction with economic
substance which is compelled or encouraged by business or regulatory realities
is imbued with tax-independent considerations, and is not shaped solely by
tax-avoidance features that have meaningless labels attached." As long as the
lessor "retains significant and genuine attributes of the traditional lessor
status, the form of the transaction adopted by the parties governs for tax
purposes." Thus, the Court rejected the IRS' attempt to recharacterize the
sale and lease back transaction as a financing arrangement despite rent
payments that were merely sufficient to amortize third party debt, a purchase
option at a price that would be sufficient only to pay off the debt and to
return to the lessor its equity investment plus 6% interest and a renewal
option at an insubstantial rental rate. The Court concluded that where the
lessor has a downside risk of loss and can establish that sufficient upside
potential exists to provide a return of capital and more than an
inconsequential return on its investment, separate and apart from tax
considerations, the transaction will be recognized for tax purposes,
particularly where there are business motivations for structuring the
transaction as a lease, rather than as a financing arrangement or sale.

For example, in Dunlap v. Comm'r, 74 T.C. 1377 (1980), the Tax Court
upheld a taxpayer's characterization of a real estate transaction as a sale and
lease back despite rental payments under a 25-year net lease that approximated
the sum of the purported lessor's principal and interest expenses. The Tax
Court found that the taxpayer's residual interest in the property provided a
sufficient potential for gain. However, in Hilton v. Comm'r, 74 T.C. 305
(1980), the Tax Court recharacterized a sale and lease back as a financing
arrangement and distinguished Lyon based on the following findings: (1) the
rent in Hilton was not sufficient to completely amortize the mortgage
principal; (2) the rent in Hilton was not based on fair market rental value;
(3) in Hilton, no funds were paid by the buyer-lessor to the seller-lessee; (4)
the taxpayer in Hilton could not dispose of its interest in the property at a
profit; and (5) the organizations that owned the property in Hilton were formed
solely for purposes of the transaction and did not have real substance.

In Rice's Toyota World, Inc. v. Comm'r, 81 T.C. 184 (1983), affirmed
on this issue, 752 F.2d 89 (4th Cir. 1985), the Tax Court reaffirmed its
position that the recognition of leveraged leasing transactions for income tax
purposes is predicated on the owner having made an investment that will be
recovered with a profit apart from tax benefits. The Tax Court denied all
deductions, even to the extent of the purported owner's out-of-pocket equity
participation, on the grounds that under the owner's most favorable appraisals
of residual value and at a zero discount rate, the owner would not recover the
original cash equity.

In Estate of Thomas v. Comm'r, 84 T.C. 412 (1985), the Tax Court held
that a partnership which leased computer equipment was the owner of the
equipment for tax purposes, in part because it retained a significant benefit
and burden with respect to the equipment. That is, the partnership had a
reasonable opportunity for a profit because the equipment's residual value was
projected to be substantially in excess of the equity invested in the
equipment. On the other hand, the partnership bore the risk that its equity
investment could be lost. The Tax Court concluded that the partnership was the
owner of the equipment for tax purposes, even though the equipment was subject
to a net lease and the rent payments under the lease were sufficient only to
make payments on the indebtedness incurred to purchase the equipment so that
there would be little cash flow during the term of the lease. The Tax Court
also commented that it is reasonable and normal for investors to take the tax
consequences of a proposed transaction into account if the transaction has
economic substance apart from tax savings.

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In Torres v. Comm'r, 88 T.C. 72 (1987), the Tax Court held that a
partnership which purchased and leased back computer equipment was the owner
for tax purposes since (i) it paid approximately fair market value for the
equipment; (ii) at the time of its purchase, the equipment had an expected
useful life in excess of the lease back term; (iii) the equipment could
reasonably be expected to have a significant residual value at the end of the
lease back term; (iv) the partnership had title to the equipment; (v) the
parties treated the transaction as a sale and lease back of the computer
equipment; (vi) the lessee's option to purchase upon the expiration of the
lease term was for a price equal to the equipment's then fair market value; and
(vii) the partnership had a reasonable possibility of recouping its investment
in the equipment plus a substantial profit solely by looking to the income
potential residual value of the equipment.

In numerous other more recent cases, the Tax Court has relied on Lyon
in upholding the characterization of certain transactions as leases after
focusing on the following factors:

(i) the presence of purchase options and their relationship to the
original cost of the property and the rental payments during the lease period;

(ii) the economic viability of the transaction apart from tax
considerations;

(iii) other business factors influencing the form of the
transaction;

(iv) where the lease is for all or substantially all of the
remaining useful life of the property, the relationship between the costs of
the ownership over the term of the lease and the rental payments; and

(v) the ultimate ownership of the property upon termination of the
lease.

See, e.g., Goldwasser v. Comm'r , 56 T.C.M. 606 (1988); Levy v.
Comm'r, 91 T.C. 838 (1988); Lamb v. Comm'r, 56 T.C.M. 511 (1988); and Young v.
Comm'r, 56 T.C.M. 174 (1988).

Based on the anticipated terms of the Leases related to Property to be
entered into by the Partnership as represented by the General Partners and
discussed in greater detail in "Investment Objectives and Policies - Investment
Standards," Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that it is more
likely than not that the Partnership will be treated as the owner of the
Properties for federal income tax purposes, although no assurance can be
provided until the Properties are acquired. The General Partners intend to
structure the acquisition and leases of Properties to insure that the
Partnership will be treated as the owner of such properties for federal income
tax purposes.

In determining whether the Leases relating to Equipment are true
leases for federal income tax purposes, consideration must be given to the
criteria set forth by the IRS in Rev. Rul. 55-540, 1955-2 C.B. 39, Rev. Proc.
75-21, 1975-1 C.B. 715, Rev. Proc. 75-28. 1975-1 C.B. 752 and Rev. Proc. 76-30,
1976-2 C. .B. 647, for determining whether purported leases will qualify for
federal income tax purposes as leases rather than as sales, financing or
refinancing transactions. For example, under Rev. Proc. 75-21 and Rev. Proc
75-08, the IRS will issue an advance ruling that a lease qualifies as such for
tax purposes only if: (i) the lessor represents and demonstrates that at the
time the lease is entered into, the leased equipment reasonably will, at the
end of the initial term of the lease, have a residual value (ignoring
inflation) of at least 20% of its original cost and a remaining useful life of
the longer of one year or 20% of its originally estimated useful life; (ii) any
option to purchase leased equipment or renew the lease for such equipment will
be at the fair market value of such equipment determined at the time the option
is exercised; (iii) the aggregate rentals to be received over the lease term,
plus the estimated residual value of the leased equipment, will exceed its
purchase price (including acquisition fees and interest indebtedness) plus
operation expenses during the lease term; (iv) aggregate rentals over the lease
term will exceed, by a reasonable amount, aggregate disbursements (i.e., debt
service, if any, and operating expenses) paid in connection with ownership of
the leased equipment; (v) the lessor initially incurs, and maintains over the
lease term, a minimum "at-risk" investment (either equity or recourse
indebtedness) of at least 20% of the

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cost of the equipment; and (vi) the lessee may not lend to the lessor any of
the funds necessary to acquire the property, or guarantee any indebtedness
created in connection with the acquisition of the property by the lessor.
Further, the IRS will not issue an advance ruling that a lease qualifies as
such unless it is established that the leased property is not "limited use
property," i.e., that the use of the property at the end of the lease term by
the lessor or some person other than the lessee or related persons is
commercially feasible.

As presently anticipated, the Leases could not receive a favorable
advance ruling under the above requirements. The advance ruling requirements,
however, are merely guidelines and do not determine, as a matter of substantive
law, whether a particular transaction constitutes a lease of equipment for
federal income tax purposes, and courts have held that transactions not
otherwise satisfying the guidelines were in fact leases for federal income tax
purposes. It is anticipated that, except where the General Partners determine
it is more advantageous that a transaction not qualify as a lease for tax
purposes, substantially all of the Leases will be treated by the Partnership as
leases for tax purposes. However, the Partnership will not request a ruling
from the IRS that the Leases qualify as such for tax purposes, nor is it
expected that the General Partners will in all instances obtain the advice of
tax counsel with respect to the Leases. Moreover, the General Partners may
determine that the Partnership should enter into Leases on such terms that
their tax treatment would be questionable. Counsel has reviewed the standard
form of master equipment lease agreement to be used by the Partnership and
believes, assuming the other relevant economic criteria are satisfied as to a
Lease involving a particular item of Equipment, that the terms of such master
lease agreement form generally would support a determination that a Lease
embodying such form would qualify as a lease for federal income tax purposes so
long as any purchase or renewal options granted pursuant to such Lease are at
fair market value determined at the time of exercise. Whether a Lease is a true
lease will be determined under all of the circumstances, but the possibility of
a challenge by the IRS by reason of such fixed price or rental options is
increased. Should a Lease be recharacterized as a sale, financing or
refinancing transaction for federal income purposes, a portion of the income of
the Partnership under such Lease, equivalent to interest in respect of the
Lease, would be ordinary gain or interest income, without offset for cost
recovery deductions, generally resulting in increased amounts of taxable income
in the initial years of the Lease. Such interest income would be portfolio
income and thus would not be available to offset any passive activity losses of
the Partnership. See "Limitations on Deductibility of Losses-Passive Loss
Limitation" in this Section.

The IRS intensified its efforts to audit so-called "tax shelters,"
including partnerships engaged in equipment leasing activities similar to those
of the Partnership. In its instructions to examiners auditing equipment leasing
transactions, the IRS has placed significant emphasis on determining whether
lease transactions reflect economic reality without regard to anticipated tax
benefits. Examiners are instructed, for example, to determine whether the
present value of the future rent stream, plus the present value of the
anticipated residual value of a piece of equipment, exceeds the present value
of the lessor's investment in the equipment, determined without regard to
anticipated tax benefits (the so-called "present value test"), or whether the
lessor's rate of return on a particular equipment lease, disregarding
anticipated tax benefits, is at least equal to the lessor's alternative
investment rate (the so-called "rate of return test"). The IRS has not taken
the position that the failure to meet either one or both of the foregoing tests
necessarily results in the recharacterization of an equipment lease as a sale,
financing or refinancing transaction (and indeed has issued pronouncements to
the contrary), but has instructed IRS agents to question the proper
characterization of purported equipment lease transactions where the tests are
not met. The General Partners anticipate that all the Equipment Leases will
meet both the "rate of return test" and the "present value test." However,
there can be no assurance that all or any of the Equipment Leases will meet
these tests.

IMPUTED RENTAL INCOME UNDER SECTION 467

The Code requires that rents under a "Section 467 Rental Agreement"
involving total payments in excess of $250,000 be reported for federal income
tax purposes on an accrual basis regardless of the lessee's or lessor's method
of accounting. A Section 467 Rental Agreement includes any rental agreement for
the

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use of tangible property under which there is at least one amount allocable to
the use of property during a calendar year, which amount is to be paid after
the close of the calendar year following the calendar year in which such use
occurs, or there are increases in the amount to be paid as rent under the
agreement. Section 467 of the Code requires that the lessor take into income
during a given year, in addition to any accrued rental payments, imputed
interest on rental amounts not paid by the close of the calendar year following
the calendar year to which the rental relates. In certain deferred rental
payment situations, this could result in more taxable income to the Partnership
and the Limited Partners during the early part of a Lease term.

Section 467 of the Code also provides that, in certain situations,
increasing rental payments will be leveled for federal income tax purposes;
that is, the parties will be required to take into account annually a constant
rental amount and imputed interest on rental amounts from prior years deemed
unpaid. The required rent leveling would apply if (i) a Section 467 Rental
Agreement provides for increasing rents, (ii) the lease is either part of a
sale-leaseback arrangement or for a term in excess of 75% of the statutory
recovery period for the property subject to the lease and (iii) a principal
purpose for the increasing rents is the avoidance of federal income tax. The
IRS has been directed to prescribe Treasury Regulations providing that rents
will not be leveled where the lease is structured in accordance with certain
accepted commercial practices, such as basing rent increases on a consumer
price index, on the lessee's receipts or on payments made to unrelated third
parties. Section 467 of the Code provides that the IRS will promulgate Treasury
Regulations establishing rules for decreasing rentals comparable to those for
increasing rentals. Because the applicability of rent leveling to the Leases
depends on facts not presently known, no opinion of Counsel is available on
this issue. If rent leveling were required with respect to any Leases, it might
result in more taxable income to the Limited Partners during the early part of
each such Lease term.

Even if rent payments under a Section 467 Rental Agreement are not
leveled (because, for example, no tax avoidance purpose is found), a lessor
disposing of property subject to certain types of lease arrangements (including
leasebacks and certain long-term leases) during the lease term may be required
to recognize a portion of the gain on the disposition as ordinary income,
rather than capital gain, to the extent that rental income reported by the
lessor is less than the amount that would have been reported by the lessor if
the rentals had been determined on a constant rental basis. Thus, if the
Partnership disposes of any Equipment during the term of a Lease with respect
to which it has not reported rentals on a constant basis, the Limited Partners
may have to recognize part of the gain on the disposition as ordinary income,
over and above any depreciation recapture income. The General Partners expect
to structure the Leases so as to avoid any adverse tax consequences under the
imputed rent rules except to the extent this treatment is precluded by business
factors.

DEPRECIATION

Current provisions of the Code, together with present interpretations
thereof, will permit the Partnership, as an owner of improved real property and
equipment used in a trade or business, or held for the production of income, to
claim depreciation or cost recovery deductions over time based on the entire
cost of such depreciable property, plus certain capitalized costs related to
the acquisition of the Properties and Equipment, but, in the case of the
Properties, not including the value of the underlying land, even if such
Properties are financed largely with borrowed funds. There can be, however, no
assurance that future legislation or administrative action will not impair the
ability of the Partnership to depreciate its assets in the manner presently
contemplated by the General Partners.

In certain circumstances, the Service can disregard all or a portion
of the debt used to acquire property and thereby reduce the depreciable basis
of the property and hence reduce the depreciation deductions available to the
owners of the property. Courts have decreased the basis of property when the
purchase price for such property substantially exceeded its fair market value,
particularly if the seller was related to the buyer and if the purchase price
is paid primarily with non-recourse indebtedness. See, for example, Estate of
Franklin v. Comm'r, 544 F.2d 1045 (9th Cir. 1976). The Partnership may acquire
the

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Properties and the Equipment with non-recourse indebtedness. The use of
non-recourse indebtedness may provide for an increase in the possibility that
the purchase price of a property exceeds such property's fair market value. The
General Partners, however, have represented that they will use their best
efforts to assure that the cost of any property purchased will not exceed the
valuation of such property.

Under Section 168 of the Code, qualifying property will be depreciated
using a method set forth in that section over a statutorily determined recovery
period. Under the Code, real property placed in service after May 12, 1993,
must generally be depreciated by using the straight-line method over 27 1/2
years for residential real estate or 39 years for nonresidential real estate.
The deductions claimed in the year in which real estate is placed in service
are based on the number of months remaining in such year, although a taxpayer
is allowed only one half of one month's deduction for the month the property is
placed in service.

Tangible personal property placed in service after December 31, 1986,
is placed in a class of either three, five, seven or ten years. In addition to
adding the seven year class of property, the 1986 Act also changed the
depreciation method for personal property from the 150% declining balance
method to the 200% declining balance method for property placed in service
after December 31, 1986. It is expected that the tangible personal property to
be acquired by the Partnership will be classified as either three, five or
seven year property, depending on the nature of the assets and when they are
acquired, and will be depreciated using the statutory percentages which
approximate the 200% declining balance method, with a change to the
straight-line method at the time which maximizes the deduction. It should be
noted that use of the 200% declining balance method will result in a tax
preference item of purposes of the alternative minimum tax. See "-Other
Possible Tax Consequences to Investors-" "Alternative Minimum Tax on
Individuals" and "-Alternative Minimum Tax on Corporations" in this Section.

The recovery allowance with respect to any Equipment acquired by the
Partnership during its initial year of operation will be reduced. In Rev.
Proc. 89-15, 1989-1 C.B. 816, the IRS provided rules for computing the
depreciation allowance when personal property is placed in service in a short
taxable year. In general, Rev. Proc. 89-15 provides that if a partnership
acquires equipment during a taxable year that is shorter than a full twelve
months, the depreciation allowance for the year of acquisition is pro-rated
based on the number of months, or in some instances the number of days, in the
short taxable year. The unrecovered portion of the first year allowance will be
recovered in the next taxable year and a portion of the second taxable year's
recovery allowance will be available in the third year, etc. until the last
portion of the recovery deduction is allowed in the year following the last
year of the recovery period (i.e., the fourth year for 3-year property and the
sixth year for 5-year property).

If, during any taxable year, the aggregate bases of Equipment placed
in service by a Limited Partner, directly and indirectly through the
Partnership, during the last three months of such taxable year exceeds 40% of
the aggregate bases of personal property placed in service during such taxable
year by the Limited Partner, the mid-quarter convention will be applicable to
all personal property placed in service during such taxable year by such
Limited Partner. The mid-quarter convention treats all personal property placed
in service during any quarter of a taxable year (or disposed of during any
quarter of a taxable year) as placed in service (or disposed of) at the
mid-point of such quarter. The effect of the mid-quarter convention may be to
reduce the amount of depreciation allowable as a deduction by a Limited Partner
during such taxable year.

Despite the foregoing, Section 168(g) of the Code may affect the
amount of depreciation deductions the Partnership can claim in any given year.
Section 168(g) of the Code requires the use of the straight-line method over a
40 year life for most real property and 12 years for most personal property, if
such property is "tax-exempt use property." However, in the case of any
tangible personal property which is "tax-exempt use property" subject to a
lease, the recovery period shall in no event be less than 125% of the lease
term.

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In the case of a partnership, property held by the partnership becomes
"tax-exempt use property" if such partnership has both taxable entities and
tax-exempt entities as partners and if any allocations to such tax-exempt
entities are not "qualified allocations." Under Section 168(h)(2), "tax exempt
entities" include not only qualified plans and entities under Section 501 of
the Code, but also foreign persons and entities. These rules also apply in a
tiered partnership situation, and therefore, if a partnership with tax-exempt
partners is a partner in a partnership that owns depreciable property, a
portion of such property will be tax-exempt use property unless the allocations
of both partnerships are qualified allocations.

The Limited Partners are allocated different percentages of income or
loss depending on if the preferred returns have been paid and whether the
income is from operations or the sale of Properties or Equipment. Accordingly,
the Partnership's allocations do not constitute "qualified allocations" and,
therefore, a portion of the Partnership's "tax-exempt use property" equal to
the total of the percentage of allocations to each tax-exempt entity partner (a
term which also includes certain foreign persons) using the highest share such
partners could receive, must be recovered on a straight-line basis over a 40
year period in the case of real property, and must be recovered on a
straight-line basis over 12 years or, if longer, 125% of the lease term, in the
case of equipment. It is unclear the extent to which tax-exempt entities will
acquire Units, and, therefore, Jaffe, Raitt, Heuer & Weiss, P.C. is unable to
determine whether and to what extent this provision will affect the deductions
of the Partnership.

However, in the case of a tax-exempt organization, if its
proportionate share of the Equipment is predominantly used in a trade or
business the income from which is subject to the unrelated business income tax
imposed under Section 511 of the Code, it will not be considered a tax-exempt
entity for purposes of Section 168(h)(6) of the Code and accelerated
depreciation deductions with respect to its proportionate share of such
Equipment will still be available. Thus, because Limited Partners which are
tax-exempt organizations will be required to report their equipment leasing
income from the Partnership as unrelated business taxable income (see "-Impact
on Qualified Tax-Exempt Investors" in this Section), the Limited Partners'
ability to depreciate the Equipment under the 200% declining balance method
over its recovery period should not be adversely affected by such tax-exempt
organizations' investing in the Partnership.

While a foreign person or entity is generally classified as a
"tax-exempt entity" under Section 168(h)(2) of the Code, Section 168(h)(2)(B)
provides that a foreign partner will not be considered a "tax-exempt entity" if
more than 50% of the gross income from its proportionate share of partnership
property is subject to U.S. income tax. As noted below, while the matter is not
totally clear, it is likely that foreign Limited Partners will be deemed to be
engaged in a U.S. trade or business by reason of their investment in the
Partnership. See "-Tax Aspects for Foreign Individuals and Corporations" in
this Section. In addition, while many of the tax treaties to which the U.S. is
a party require that a nonresident alien individual or foreign corporation
maintain a permanent establishment in the U.S. in order to be subject to U.S.
federal income taxation, foreign Limited Partners will be deemed to maintain a
permanent establishment in the U.S. by reason of the Partnership's maintenance
of an office in the U.S. Thus, it is likely that foreign Limited Partners will
be taxable in the U.S. on their distributive shares of net Partnership taxable
income under the normal rates applicable to U.S. taxpayers. However, it is
possible that certain foreign Limited Partners will not be able to satisfy the
50% threshold because of certain exclusions or exemptions which may be
applicable to their proportionate shares of Partnership gross income. Thus, the
possibility exists that certain foreign Limited Partners will be considered
"tax-exempt entities" for purposes of Section 168(h)(6) of the Code and that a
portion of the Property or Equipment will have to be depreciated on a
straight-line basis over a period longer than the otherwise applicable recovery
period. It is not anticipated, however, that the treatment of foreign Limited
Partners as "tax-exempt entities" for purposes of Section 168(h)(6) of the Code
will have a material adverse effect on the tax consequences of an investment in
the Partnership.

In addition, if more than 35% of a piece of real property is leased to
tax-exempt entities and such property is subject to a "disqualified lease," the
real property will be considered tax-exempt use property to the extent such
property is leased to tax-exempt entities. A property is subject to a
disqualified lease if

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leased to a tax-exempt entity and is either: (i) subject to tax-exempt
financing; (ii) subject to a purchase option by the lessee for a fixed price;
(iii) has a lease term in excess of 20 years; or (iv) has been purchased from
the lessee or a party related to the lessee.

Since the Code now prescribes the recovery period which a taxpayer may
elect to use for its depreciable assets, the Service may not, in an audit,
challenge that recovery period, thus eliminating a dispute which frequently
arose between the Service and taxpayers under prior law. There are, however,
some remaining issues relating to the computation of depreciation with respect
to which there may be uncertainty. These include, for example, the allocation
of costs between depreciable and non-depreciable property and real and personal
property, the inclusion of certain capitalized fees in the depreciable basis of
the properties, and the proper time for commencing depreciation, that is, when
the improvements are first placed in service. There can be no assurance that
the positions taken by the Partnership with respect to these matters will be
sustained by the courts if challenged by the Service.

RECAPTURE OF DEPRECIATION

If depreciation previously deducted by a taxpayer is "recaptured," it
is taxed at ordinary income rates. Depreciation recapture is limited to the
amount of gain realized upon the sale or other disposition of the asset. The
1986 Act eliminated the recapture provisions for real property placed in
service after December 31, 1986 and, therefore, there should be no recapture
related to the real property portion of the Properties, although recapture
remains for the personal property components of the Properties and the
Equipment. Under the 1993 Act, for individuals, long-term capital gains income
is subject to a maximum marginal tax rate of 28% while ordinary income is
subject to a maximum marginal tax rate of 39.6%.

METHOD OF ACCOUNTING

In general, a partnership may compute its taxable income in accordance
with the method of accounting used by the partnership in keeping its books and
records, provided that such method of accounting, in the opinion of the
Service, "clearly reflects income." A partnership may adopt any permissible
method of accounting by computing its taxable income in accordance with such
method on its first income tax return.

The General Partners intend to cause the Partnership to maintain its
books and records, and report its income for tax purposes, on the accrual
method of accounting. Generally, under the accrual method of accounting, income
is reported when the taxpayer's right to receive the income becomes
ascertainable regardless of when the cash is received, and deductions are
claimed in the year such expenses become fixed and determinable regardless of
when paid. The determination to elect the accrual method of accounting is based
upon the General Partners' determination that, for federal income tax purposes,
the accrual method of accounting will most clearly reflect the Partnership's
income. In addition, the 1986 Act mandates the use of the accrual method for an
entity such as the Partnership. Jaffe, Raitt, Heuer & Weiss, P.C. is of the
opinion that it is more likely than not that the Partnership's use of the
accrual method of accounting will be respected. For other restrictions on the
application of the accrual method of accounting, see "-Deductibility of Fees"
in this Section.

DEDUCTIBILITY OF INTEREST

Although the Code does not define the term, courts and the Service
have long defined "interest" as amounts which a person has agreed to pay for
the use or forbearance of money. Under the accrual method of accounting which
the Partnership will adopt, interest (and all other expenses) is deductible in
the tax year in which all events occur which establish the fact of the
liability giving rise to deduction and the amount thereof can be determined
with reasonable accuracy.

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The amendments made by the 1986 Act place a stricter limitation on the
deductibility of all interest not incurred in connection with the taxpayer's
trade or business, other than interest on indebtedness secured by the
taxpayer's residences. Interest incurred for personal purposes will be
non-deductible, while interest incurred to purchase or carry property for
investment ("investment interest") will be deductible to the extent of net
investment income. Under the passive loss rules, interest incurred in the
course of a passive activity is not considered investment interest, but instead
constitutes a deduction which decreases the passive income or increases the
passive loss from the activity. However, interest incurred in acquiring an
interest in a passive activity, including interest that a Limited Partner
incurred by borrowing to acquire his Units, will be treated as investment
interest "to the extent attributable to portfolio income," which is a concept
that has not been clearly defined under the Section 469 Regulations, and the
remainder will be treated as part of the passive loss.

Additionally, the Service has issued temporary Regulations which
provide that the character of interest expense deductions depends on the use of
the borrowed funds. Although the proposed Regulations do not deal with interest
tracing of proceeds distributed by pass-through entities, it appears that if a
partnership borrows money or refinances a loan and distributes a portion of the
proceeds to its partners, the classification of the interest on such debt by
the partners will depend on how each partner uses the distributed funds.
Therefore, a partnership has to separately allocate among its partners the
portion of the interest expense on the loan attributable to the distributed
amounts, and the partners will deduct such funds based on how they use the
distributed funds. If a partner invests the distributed funds in another
passive activity, the interest deductions on the entire amount of the loan will
be treated as a component of the partnership's passive income or loss. However,
if the partner invests the distributed funds in a "portfolio" activity (such as
stocks, interest earning accounts, etc.), the interest will constitute
investment interest which can only offset portfolio income, and cannot offset
the partnership's passive income. Finally, if the partner uses the distributed
funds for personal purposes, the interest will be non-deductible subject to the
phase-in rules. If the Partnership in fact makes a distribution covered by
these rules, the General Partners anticipate that a detailed description of the
possible consequences will accompany such distribution.

ALLOCATIONS OF PROFITS OR LOSSES TO INCOMING PARTNERS

Items of income, gain, loss, deduction or credit recognized by a
partnership are allocated to those partners who are partners for tax purposes
under the partnership agreement at the time of recognition. In determining
whether items of income or loss have been recognized prior to a partner's entry
into a partnership, a partnership may either prorate items according to the
portion of the year for which a partner was a partner, or, in effect, separate
the partnership year into two or more segments and allocate income, loss or
special items in each segment among the persons who were partners during that
segment.

The Agreement provides that profits and losses allocated to a Limited
Partner will be apportioned according to the ratio of Units owned by each of
them on a daily basis. The Partnership's allocations of profits and losses
among Limited Partners is intended to comply with Section 706 of the Code as
amended by the Tax Reform Act of 1984 (the "1984 Act"). The method adopted by
the Partnership was adopted for convenience of administration and is not
expected to create any distortion of allocations to any Limited Partners.

The Code does not clearly permit this particular method of allocation.
In an effort to prevent undue complexity, the Conference Committee Report to
the 1984 Act provides that the authorized Regulations will allow partnerships
to use a convention under which partners admitted prior to the sixteenth day of
a month are treat by partners for that entire month and partners admitted on or
after the sixteenth day of the month are treated as partners beginning on the
first day of the following month. However, an exchange on the floor of the
Senate between Senators Armstrong and Dole during debate on the 1984 Act lends
support to the use of a monthly convention which allows partners admitted any
time during the month to be treated as entering as of the first day of that
month. 130 Congressional Record S8418 (daily ed. June 27, 1984).

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Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that there is a
reasonable basis to conclude that the Partnership's method of allocation
complies with the Code and will be respected if challenged by the Service.
However, because of the lack of clear authority on this issue, no assurance can
be given that the Service would not prevail on such a challenge. For example,
in Internal Revenue News Release IR 84-129, December 13, 1984, the Service
stated it would adopt a semi-monthly convention as a permitted method of
allocation of income or loss to incoming partners. Although the adoption of the
semi-monthly convention as a permitted method of allocation to incoming
partners would not prohibit the Partnership's monthly convention, it would
provide support to a Service position holding the monthly allocation method
invalid. If the Partnership's monthly allocation method is held to be invalid,
Limited Partners admitted after the fifteenth day of any month may not be
allocated profit or loss for that month. See "Risk Factors - Federal Income
Tax Risks - Risk of Reallocations of Profits or Losses."

ALLOCATIONS OF PROFITS AND LOSSES

The profits and losses of the Partnership for tax purposes will be
determined as of the end of each fiscal year and will be allocated among the
Limited Partners in accordance with the terms of Section 11 of the Agreement.
Generally, operating profits and losses of the Partnership for tax purposes
will be allocated among the Partners based on the percentage of total
Partnership cash distributions received by the Partners attributable to such
year, although the General Partners will in all events be allocated at least 1%
of each Partnership tax attribute. While it is not anticipated that the
cumulative losses and deductions from Partnership operations that are allocated
to the Limited Partners will exceed the gross proceeds of this Offering, it is
possible that the total amount of such allocations and distributions will
exceed the gross proceeds, thus causing deficit balances in the Limited
Partners' Capital Accounts.

Profits and losses for tax purposes attributable to a sale or
refinancing of any Properties will be allocated pursuant to Paragraph 11.1.2 of
the Agreement, which generally provides for profits to be allocated first to
restore any deficit Capital Accounts balances, allocated in the same ratio as
the deficit in a Partner's Capital Account bears to the aggregate of all such
deficits. Any remaining profits are allocated first, to the Limited Partners
until their Capital Account balances equal the amount of their Adjusted
Investment; second, to the Limited Partners until their aggregate Capital
Account balances equal an amount determined by adding the amount of the
Performance Preferred Return to the amount of the aggregate Original
Contributions and subtracting from such sum the aggregate amounts of all
Distributions to Limited Partners; third, to the General Partners in such
amounts as are necessary to cause the aggregate Capital Account balances of the
General Partners to be in a percentage ratio of 12% of all Partnership Capital
Account balances of all Partners; fourth, to the Limited Partners in such
amounts as are necessary to cause the aggregate Capital Account balances of the
Limited Partners to be in a percentage ratio of 88% of all Partnership Capital
Account balances of all Partners; fifth, to the General Partners in an amount
equal to its contributions of capital to the Partnership; and, thereafter, 88%
to the Limited Partners and 12% to the General Partners.

Losses from the sale, exchange or other disposition of the
Partnership's property are allocable to the Partners to the extent that their
Capital Accounts exceed their Adjusted Investments, next to the Partners to
reduce the balance of their Capital Accounts to zero, and the balance of such
losses 99% to the Limited Partners and 1% to the General Partners.

A partner's distributive share of income, gain, loss, deduction or
credit is generally determined by the provisions of the partnership agreement.
Under Section 704(b)(2) of the Code an allocation of income, gain, loss,
deduction or credit (or item thereof) in the partnership agreement may be
disregarded if the allocation does not have "substantial economic effect." If
the allocation is found to be without "substantial economic effect," a
partner's share of the item will be determined on the basis of his "interest in
the partnership" which is determined by taking into account all the facts and
circumstances relating to the interest, including the partner's obligations
with respect to contributions, his interest in profits, losses and cash flow,
and his rights to distributions of capital on liquidation. The Regulations
under Section 704(b) of

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the Code state that the allocation of partnership profits and losses will be
respected if the allocation has substantial economic effect, or if, taking into
account all facts and circumstances, the allocation is in accordance with the
partner's interest in the partnership.

Allocations of partnership profits and losses generally will have
substantial economic effect only if: (i) the allocation is reflected in the
partners' capital accounts and such capital accounts are maintained in
accordance with Regulation Section 1.704-1(b)(2)(iv); (ii) liquidation proceeds
are, throughout the term of the partnership, to be distributed in accordance
with the partners' capital account balances; and (iii) any partner having a
deficit capital account balance following the distribution of liquidation
proceeds is required to restore the amount of such deficit to the partnership,
which amount will be distributed to partners having positive capital account
balances or paid to creditors. The economic effect of an allocation will be
substantial "if there is a reasonable possibility that the allocation (or
allocations) will substantially affect the dollar amounts to be received by the
partners from the partnership, independent of tax consequences."

Under the Agreement and pursuant to the General Partners'
representation as to maintenance of the Capital Accounts, requirements (i) and
(ii) will be satisfied. Because the Limited Partners have no obligation under
the Agreement to fund deficit Capital Account balances upon liquidation, other
than obligations resulting from the requirement to make initial Capital
Contributions, requirement (iii) will not be satisfied.

The Regulations provide an alternate test for economic effect if
requirement (iii) is not met. Under the alternate test, an allocation will have
economic effect if such allocation does not cause or increase a deficit balance
in such partner's capital account and the partnership agreement contains a
"qualified income offset." For purposes of this alternate test, capital
accounts must be adjusted for, among other items, distributions of cash in
excess of income which "are reasonably expected to occur" in future taxable
years. A partnership agreement contains a "qualified income offset" if it
requires that a partner, who unexpectedly receives a cash distribution in
excess of any offsetting increases in his capital, or an allocation of certain
specifically enumerated deductions which cause a deficit balance in such
partner's capital account, be allocated items of income to eliminate such
deficit balance as quickly as possible.

The Agreement contains a "qualified income offset." There is no fixed
or specifically anticipated schedule of cash distributions to the Limited
Partners from the Partnership, a fact which indicates that there are not cash
distributions which are "reasonably expected to occur." Jaffe, Raitt, Heuer &
Weiss, P.C. is of the opinion that it is more likely than not that allocations
which do not cause or increase deficit balances in the Limited Partners'
Capital Accounts (determined in accordance with the provisions of the alternate
economic effect test discussed above) will have economic effect. Because the
Partnership anticipates acquiring Properties and Equipment and will structure
its operations to minimize deductions, and because any funds not used to
acquire Properties or Equipment will be invested to produce income, the amount
of income or loss that will be realized by the Partnership is unclear, and
therefore, it is unclear whether any Limited Partner's Capital Account balance
will ever be negative. Further, it is possible that once the Capital Account
balances of all Limited Partners become negative, the Regulations will require
the Partnership to allocate all of the Partnership's losses and depreciation
deductions to the General Partners.

In the situation where allocations cause deficit balances in the
partners' capital accounts and, therefore, do not have substantial economic
effect, the Regulations again indicate that such losses and deductions should
be allocated to the partners who bear the risk of loss on such debt. The
Regulations focus on the type of indebtedness incurred by the partnership to
fund the losses or which encumbers its property. Additional rules apply to
allocations attributable to non-recourse debt. Debt is classified as recourse
or non-recourse based upon whether any partner or person related to any partner
bears the ultimate risk of loss with respect to such debt. Therefore, debt will
be classified as non-recourse to the extent that no partner or person related
to a partner bears the ultimate risk of loss on such debt. With regard to
allocations attributable to recourse debt, if requirements (i) and (ii),
described above, are met, the determination of whether the partner allocated
the loss for tax purposes actually bears the economic loss is based on a

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comparison of how the proceeds of partnership liquidation would be distributed
if the partnership's property was sold for its book value (essentially,
adjusted basis) at the end of the year proceeding such allocation and the end
of the year in which such allocation occurs (the "Certain Determinations
Test"). If the allocation of tax loss has actually affected the distribution of
liquidation proceeds, then the allocation is in accordance with such partner's
interest in the partnership. If all Properties and Equipment of the Partnership
were sold for their book values, as required under the Regulations discussed
above, the indebtedness incurred (if any), whether recourse or non-recourse,
should be retired and, therefore, the General Partners should not bear any risk
in excess of that borne by the Limited Partners.

The Regulations provide that allocation of losses or deductions
attributable to non-recourse debt ("non-recourse allocations") do not have
substantial economic effect, since the creditor, and not the partners, bears
the economic burden of such losses. The Regulations also indicate that
indebtedness held by a Partner will be treated as recourse indebtedness. The
Regulations do, however, contain a "safe harbor" under which non-recourse
allocations will be deemed to be made in accordance with the partners'
interests in the partnership. This "safe harbor" is available if: (a) such
allocations are reflected in partners' capital accounts and liquidation
proceeds are distributed in accordance with such capital accounts; (b) the
partnership agreement provides that non-recourse allocations are reasonably
consistent with other allocations, which have substantial economic effect, of
some other significant partnership item attributable to property securing the
non-recourse liability; (c) the partnership agreement contains either: (1)
requirement (iii) of the substantial economic effect test, described above; or
(2) a "minimum gain chargeback;" and (d) all other material allocations are
recognized as being in accordance with a partner's interest in the partnership.

Non-recourse allocations are defined as the next increase in
partnership "minimum gain" for each taxable year. Minimum gain is defined as
the difference between the non-recourse liabilities securing a property and the
adjusted basis of such property. A "minimum gain chargeback" provides that in
any year in which there is a net decrease in minimum gain, partners with
deficit capital accounts will be allocated gross income to restore such deficit
capital accounts. The Regulations also provide that a partner's share of
minimum gain is treated as satisfying requirement (iii) above, to the extent of
such minimum gain. The Regulations also provide that debt held by any partner
or guaranteed by any partner will not be treated as non-recourse and losses and
deductions attributable thereto will also be allocated to such partner.

The Agreement contains a minimum gain chargeback, and so long as the
Limited Partners do not have negative Capital Account balances, the allocations
can have negative Capital Account balances, the allocations can have
substantial economic effect. Accordingly, non-recourse allocations that arise
before the Capital Account balances became negative could meet the "safe
harbor" described above. However, the determination of allocations from any
particular property is based upon the debt structure of such property.
Accordingly, Counsel is unable to determine the extent to which any property
will generate non-recourse allocations or whether there will be sufficient
minimum gain at the time (if ever) the Limited Partners' Capital Accounts
become negative.

The economic effect of an allocation will generally be substantial if
the allocation substantially affects the dollar amounts to be received by the
partners from the partnership. However, an allocation which reduces the total
tax liability of all of the partners but either: (i) does not result in a
substantial difference in the respective capital account balances of each of
the partners at the end of the year ("shifting allocations"); or (ii) will be
largely offset by one or more other allocations within a period of five years
("transitory allocations"), will not have substantial economic effect.
Furthermore, if there is a strong likelihood that the after-tax economic
consequences of no partner will, in present value terms, be substantially
diminished compared to the after-tax consequences had the allocation not been
contained in the partnership agreement, the economic effect of the allocation
will not be substantial.

Once the Limited Partners' Capital Account balances become negative
the allocations will be honored if they are in accordance with the Limited
Partners interests in the Partnership, which is a subjective determination
based on several factors in the Regulations including: (i) relative
contributions to

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the Partnership; (ii) interests in economic profits and losses; (iii) interests
in cash flow and other non-liquidating distributions; and (iv) rights to
liquidating distributions. The allocations of profit and loss from operations
are in the same ratio as distributions of Cash Flow. In addition, the
percentages for allocating profits and distributing cash from sales or
refinancings are approximately the same. Finally, because all allocations
increase or decrease the Partners' Capital Account balances, they affect the
cash distributions ultimately received by the Partners. Based on the foregoing,
Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion that it is more likely than
not that substantially all of the allocations which cause negative Capital
Account balances will be considered in accordance with the Limited Partners'
interests in the Partnership, except if the Partnership incurs "recourse" debt
or other debt for which not all Partners bear the risk of loss. Many factors
will determine whether the Limited Partners Capital Accounts will become
negative, including: (i) the amount of capital contributed by the Limited
Partners; (ii) the taxable income or loss produced by the Properties or
Equipment; (iii) the amount of depreciation related to the Properties or
Equipment; and (iv) the cash distributed to the Limited Partners. Many of these
factors are based on facts not ascertainable as of the date of the Prospectus
and, therefore, it is unclear when, if ever, the Limited Partners will have
negative Capital Account balances.

In conclusion, Jaffe, Raitt, Heuer & Weiss, P.C. is of the opinion
that based upon, and subject to, the assumptions set forth above that it is
more likely than not:

(i) that the allocations of profit and loss which do not cause deficit
balances in the Limited Partners' Capital Accounts (determined in accordance
with the requirements of the Regulations) have economic effect and that such
economic effect will be substantial; and

(ii) substantially all of the other allocations of profit and loss
attributable to Properties or Equipment will be considered in accordance with
the Partners' interests in the Partnership and, therefore, will be given effect
for federal income tax purposes.

The Regulations will require future interpretation and clarification
through rulings or judicial decisions and there is no assurance that the
Regulations will not be interpreted by the Service in a manner adverse to the
Limited Partners. The General Partners may, under certain circumstances, amend
the Agreement: (i) to cause the allocations of Partnership profits and losses
contained in the Agreement to have substantial economic effect in accordance
with future interpretations of the Regulations under Section 704 of the Code or
any other statutory provision or regulation relating to such allocations; or
(ii) to cause the provisions of the Agreement to comply with any applicable
federal legislation enacted or regulations issued after the date of the
Agreement. If the allocations of profits and losses are modified due to future
interpretations or based on subsequent events (such as incurring indebtedness),
such modified allocations could have an impact on the amount of income and
deductions allocated, and ultimately the cash distributed, to the Limited
Partners.

Finally, in the event that any creditor of the Partnership is entitled
to a percentage of the profits of the Partnership of a particular property or
the net sales proceeds from a property, such creditor may be recharacterized as
an equity participant in the Partnership. If this occurs, the Partnership's
allocation of profits and losses could be adversely affected, because the
"creditor", as a holder of an interest in the Partnership, would be allocated
profits and losses which would otherwise be allocated to the Limited Partners.

POTENTIAL APPLICATION OF SECTION 183 OF THE CODE

Under Section 183 of the Code, deductions that a taxpayer derives from
"activities not engaged in for profit" are allowed only to the extent of the
gross income derived by the taxpayer from the activity, less amounts that are
deductible irrespective of a profit motive. Whether a profit motive exists is a
question of fact that depends on the actual intent of the Limited Partner as
evidenced by the presence of objective facts. No investor should become a
Limited Partner unless his objective is to secure an economic profit,

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determined without regard to any tax benefits that may be received. In
addition, deductions can be denied if the Partnership is not engaged in an
activity for profit. The Code contains an objective test of profit motive which
the partnership should meet, based on its anticipated activities. Based upon
the profit motive of the Partnership and the Limited Partners, as represented
to counsel by the General Partners, Jaffe, Raitt, Heuer & Weiss, P.C. is of the
opinion that any such application of Section 183 by the Service to the
Partnership is more likely than not to be resolved in favor of the Partnership.

REFINANCING OF PARTNERSHIP PROPERTY

No gain or loss is recognized by a partnership upon the refinancing of
a non-recourse loan, so long as the new loan is non-recourse and equals or
exceeds the unpaid balance of the hold loan. In addition, no gain or loss will
be recognized if a partnership encumbers a property with a loan at a time
following its acquisition. Any financing or refinancing proceeds distributed to
the Limited Partners which occurs because a new non-recourse loan is obtained
which equals or exceeds the unpaid balance of the old loan will not constitute
taxable income to the Limited Partners receiving the distributions if at the
time of distribution the distributee's tax basis in his Units equals or exceeds
the amount distributed. The deductibility of the interest on the loan and the
funds which were distributed to the Limited Partners, will depend on how the
Limited Partners use the funds. See "Deductibility of Interest" in this
Section. To the extent the amount of any new non-recourse loan is less than the
amount of the existing non-recourse loan, or is refinanced with a mortgage that
is recourse to the Partnership or any Limited Partner, the Limited Partners
will be treated as having received a deemed cash distribution from the
Partnership, possibly causing the Limited Partners to recognize gain even
though they would receive no cash. See "- Taxation of Cash Distributions" in
this Section.

SALE OR FORECLOSURE OF PARTNERSHIP PROPERTIES OR EQUIPMENT

Under Section 1001 of the Code, gain for federal income tax purposes
is equal to the difference between the amount "realized" by a taxpayer on the
sale or exchange, and the taxpayer's basis in the property sold. In addition,
the amount realized by a taxpayer includes the principal amount of any debt for
which the taxpayer is relieved by the sale or to which the property was
subject. Therefore, the gain realized by the Partnership upon the sale or
exchange of a Property or Equipment, which includes a foreclosure of any
mortgage or lien on such Property or Equipment, will be measured by the
difference between: (i) the proceeds, if any, realized upon the sale, plus the
principal amount of, and any accrued interest on, any continuing mortgages and
other indebtedness of the Partnership, or to which the Property or Equipment
thereof is subject; and (ii) the Partnership's adjusted basis in such Property
or Equipment at the time of the sale or exchange.

It is anticipated that the Properties or Equipment will constitute
"Section 1231 assets" (i.e., property used in a trade or business and held for
the holding period applicable to long-term capital gain), unless it is
determined that the Partnership is a "dealer" in real estate for federal income
tax purposes. A Limited Partner's proportionate share of gains or losses from
the sale of such assets will be combined with any other Section 1231 gains or
losses incurred by that Limited Partner in that year. Section 1231 gains are
treated as ordinary income to the extent of Section 1231 losses recognized by a
Limited Partner during the previous five year period, to the extent such
Section 1231 losses have not already been "recaptured" by such Limited Partner.
If Section 1231 gains exceed Section 1231 losses, such gains and losses are
treated as net long-term capital gains. If Section 1231 losses exceed Section
1231 gains, such losses are treated as ordinary losses.

In the event that Property or Equipment is deemed to be held for sale
to customers in the ordinary course of the Partnership's trade or business
("dealer property"), the gain or loss on the sale or other disposition of such
Property or Equipment will be taxed as ordinary income or loss, rather than
capital gain. Also, if a Limited Partner were a "dealer" in real estate or
equipment, his share of any gain or loss could be treated as ordinary income or
loss, even if the Partnership were not deemed to be a "dealer." The
Partnership intends to hold the Properties and Equipment for the production of
rental income and has not been organized to operate as a "dealer" in real
property or equipment, nor does it presently intend to hold

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property for sale to customers in the ordinary course of its trade or business.
If the Partnership conducts its operations as it presently contemplates, the
General Partners believe the Properties and Equipment should not be classified
as "dealer properties" and the Partnership should not be classified as a
"dealer" in real estate or equipment at the time it sells the Properties or
Equipment. However, because the determination of "dealer" status is based upon
the facts existing at the time of the sale of a property. Jaffe, Raitt, Heuer &
Weiss, P.C. is unable to render an opinion (either favorable or unfavorable) as
to the probable outcome of this issue.

Under the Code, capital gains income is subject to a maximum marginal
tax rate of 28% while ordinary income is subject to a maximum marginal tax rate
of 39.6%. However, the mechanisms of computing net capital losses remain. In
addition, income realized by Limited Partners that are tax-exempt entities from
the sale of "dealer" property will be taxed as UBTI.

In general, involuntary transfers of the Partnership's property (such
as a mortgage foreclosure) would have the same effect as a sale. If there is a
foreclosure or other involuntary disposition, the Partnership will recognize
taxable gain to the extent that its adjusted basis for the property is less
than the amount of the mortgage discharged by the foreclosure or other
involuntary disposition, the partnership will recognize taxable gain to the
extent that its adjusted basis for the property is less than the amount of the
mortgage discharged by the foreclosure or other involuntary disposition, and
the Partners would recognize taxable income without receiving cash with which
to pay the tax. Because any foreclosure is likely to produce substantial
taxable gain, such an event may have serious adverse tax consequences for an
Unit Holder. Under certain other circumstances, the net cash proceeds
distributed from the sale or other disposition of Property or Equipment may not
be sufficient to pay the tax liabilities of a Limited Partner resulting from
such event. Such circumstances might include: (i) the sale of property from
which a Limited Partner's share of cash proceeds is significantly less than his
share of gain from federal income tax purposes, which could occur if the
Property or Equipment is sold subject to non-recourse debt and if the basis of
the Property or Equipment is low; and (ii) the sale of property at a time when
all or part of the net proceeds therefrom may have to be utilized by the
Partnership to meet other obligations.

If the taxpayer sells property which is not "dealer property", and
receives cash and indebtedness from the buyer, the gain from such sale will
qualify for the installment method, which allows the seller to recognize the
gain from the sale as the cash related to the indebtedness is received. Despite
this general rule, following the 1987 Act, a seller who utilizes the
installment method is required to pay interest to the Service with respect to a
deferred tax attributable to such installment obligations if the aggregate face
amount of all such installment obligations held by the taxpayer exceeds
$5,000,000. Although these new rules do not deal with the question of
pass-through entities, such as the Partnership, the 1987 Conference Report
indicates that Regulations will treat the installment obligations of a
partnership as though they were held directly by the partners "in proportion to
each partner's share in the partnership." Therefore, if the Partnership sells
Property or Equipment using the installment method, it appears that each
Partner will aggregate his proportionate share of the Partnership's installment
obligations along with such Partner's installment obligations from other
sources to determine if he exceeds the $5,000,000 limit. In addition, if the
Partnership pledges the installment obligation as security for other
indebtedness, the net proceeds of the loan are treated as a payment on the
pledged installment obligation and, therefore, gain would be recognized under
the installment method.

SALE OR TRANSFER OF PARTNERSHIP UNITS

Gain recognized by a Limited Partner, who is not a "dealer' in
securities or partnership interests, on the sale of a Unit which has been held
for more than the applicable holding period will generally be treated as
long-term capital gain. Under the Code, capital gains income is subject to a
maximum marginal tax rate of 28% while ordinary income is subject to a maximum
marginal tax rate of 39.6%. (See "-Other Possible Tax Consequences to
Investors--Capital Gain and Loss Provisions" in this Section). In computing
such gain, the selling Limited Partner's allocable share of existing
non-recourse indebtedness is included for

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the purposes of determining both the selling Limited Partner's tax basis in his
Units (as adjusted for income, loss and cash distributions) and the amount of
proceeds realized upon such a sale or transfer. That portion of the selling
Limited Partner's amount realized which is allocable to "substantially
appreciated inventory items" and "unrealized receivables," as defined in
Section 751 of the Code ("Section 751 Property"), will be treated as ordinary
income regardless of whether such sale or exchange produced a profit or loss
and, therefore, income could be recognized even if there was a loss upon the
sale. "Unrealized receivables" includes potential depreciation recapture. Due
to potential depreciation recapture relating to Equipment, a significant amount
realized on the disposition of Units could be ordinary income. If the amount
allocable to unrealized receivables were to exceed the total gain realized or
if such Limited Partner were to incur a loss on the sale, he would nonetheless
be required to recognize ordinary income equal to such allocable amount, with
an offsetting capital loss. Additionally, the transferor of a Unit must provide
the Partnership with notice of such transfer or be subject to various
penalties.

In addition, final Regulations require a partnership to prepare an
information from any time there is a sale or exchange of any interest in a
partnership which has Code Section 751 property. Section 6050K of the Code
requires the transferor Limited Partner to notify the Partnership of the
transfer, and the Partnership is then required to furnish a notice to each
transferor and transferee. The information return (Form 8308) will be attached
to the Partnership's informational tax return each year.

NO SECTION 754 ELECTION

If a partnership files an election under Section 754 of the Code (a
"Section 754 Election") and a partner transfers his interest, the basis of the
partnership's property, with respect to the transferee partner only, is either
increased or decreased by the difference between the purchase price for his
partnership interest and his proportionate share of the partnership's adjusted
basis for all partnership property. Any increase or decrease resulting from
such adjustment is allocated among the partnership's assets in accordance with
rules established under Section 755 of the Code, which results in an increase
or decrease in depreciation deductions with respect to the transferee partner.
After such adjustment has been made, the transferee partner's share of the
adjusted basis of the partnership's property is equal to the adjusted basis of
his partnership interest.

The Partnership does not presently intend to file a Section 754
Election to adjust the bases of Partnership property following the transfer of
a Unit because of the cost and tax accounting complexities such an election
could entail. In the absence of a Section 754 Election, a transferee Limited
Partner will be subject to tax upon a portion of the proceeds which, as to such
taxpayer, constitutes a return of his purchase price for his Unit. This will
occur because, in the absence of a Section 754 Election, the Partnership's tax
basis in the Properties and Equipment will not be changed following the
transfer of the Unit to take into account any changes in the fair market value
of the Properties and Equipment, and the amount of gain recognized by the
Partnership and allocated to the Partners, including the transferee of the
Unit, will be based on this unchanged basis figure. However, the transferee of
the Unit will be able to take this difference into account through either less
income or a greater loss upon the liquidation of the Partnership.

DISSOLUTION OF PARTNERSHIP

In the event of a dissolution of the Partnership prior to the
expiration of its term, the Partnership might be required to liquidate all of
its Properties during a limited period of time. This might cause the
Partnership to sustain substantial economic losses in terms of the original
cost of the Properties or Equipment. Nevertheless, the Partnership wold be
required to recognize taxable income on such sales to the extent the selling
price exceeds the Partnership's adjusted tax basis in the Properties or
Equipment. See "-Sale or Foreclosure of partnership Properties or Equipment" in
this Section.

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Under Section 708(b) of the Code, if at any time no part of the
business of the Partnership continues to be carried on by any of the Partners,
or if within a 12-month period there is a sale or exchange of 50% or more of
the total interests in Partnership capital and profit, a termination of the
Partnership occurs and the taxable year of the Partnership would close. Upon
such a termination, the Properties or Equipment acquired by the Partnership
would be treated as distributed to the Partners, resulting in gain or loss to
the Partners without necessarily receiving a cash distribution. Following the
deemed distribution, contribution of the same Properties and Equipment in the
form of undivided interest, would be deemed to be made to a new partnership or
to an association taxable as a corporation. The Properties and Equipment owned
by the Partnership might have a different basis in the hands of the new
partnership.

OTHER POSSIBLE TAX CONSEQUENCES TO INVESTORS

The following is a summary of certain provisions of the Code which,
while they are generally not peculiar to the Partnership, may affect an
investor depending on his individual circumstances, such as, for example, his
tax bracket, the amount of his capital gains or losses and the character and
type of his other investments.

Miscellaneous Deductions. Section 67 of the Code imposes a limitation
on the allowance of miscellaneous itemized deductions. Miscellaneous itemized
deductions of noncorporate taxpayers now are allowable only to the extent they
exceed a "floor" of two percent of a taxpayer's adjusted gross income. The
applicable Treasury Regulations also prevent taxpayers from indirectly
deducting, through a pass-through entity such as a partnership, expenses which
would not be deductible by reason of the two percent floor if paid or incurred
directly by such taxpayers. Among the deductions subject to the two percent
floor are those for expenditures related to investment income or property,
which are deductible under Section 212 of the Code. It is possible that the IRS
could take the position that some or all of the deductions claimed by the
Partnership for expenses incurred in connection with its activities should be
treated as deductions which are subject to the two percent limitation.

Capital Gain and Loss Provisions . Under the Code, net capital gain
(long-term capital gain less short-term capital loss) of individuals is subject
to a maximum marginal tax rate of 28% while ordinary income is subject to a
maximum marginal tax rate of 39.6%. In addition, the amount of ordinary income
against which net capital losses may be deducted by an individual is limited in
each year to the lesser of taxable income or $3,000. A corporation is taxed on
net capital gain at the regular tax rates applicable to corporations.

Alternative Minimum Tax On Individuals . A non-corporate taxpayer will
be liable for the alternative minimum tax for any year in which such
tax exceeds the taxpayer's regular tax. The base of the alternative minimum tax
(alternative minimum taxable income) is taxable income as specifically computed
in this provision plus specified preferences. In addition, in determining the
deductions allowable in computing alternative minimum taxable income, interest
paid or incurred is deductible, but only to the extent of a Limited Partner's
"qualified net investment income" which is generally investment income less
investment expense. Interest paid or incurred to purchase or carry a limited
partnership interest is not allowable in computing adjusted gross income for
purposes of the expanded alternative minimum tax unless such interest meets the
above qualifications. Additionally, the passive loss rules of the regular tax
apply to the alternative minimum tax, thereby imposing the same limitations and
allowances. For personal property placed in service after 1986, depreciation
which is otherwise computed for regular tax purposes using the 200% declining
balance method must be computed on the basis of the 150% declining balance
method for AMT purposes. In addition, in computing alternative minimum taxable
income, real property must be depreciated over a 40 year useful life.

The alternative minimum tax rate is 26% on alternative minimum taxable
income (above the exemption amount) of up to $175,000 and on the excess of such
amount the exemption amount is: (i) $40,000 in the case of a joint return;
(ii) $20,000 in the case of an individual who is not married; and (iii)

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$20,000 in the case of a married individual who files a separate return or an
estate or trust, which exemptions are reduced by 25 cents for each dollar of
alternative minimum taxable income in excess of $150,000 for married taxpayers
filing jointly, $112,500 for single taxpayers and $75,000 for married taxpayers
filing separately. A taxpayer will pay the higher of his regular tax or the
alternative minimum tax. The impact, if any, of Partnership tax preference
items allocated to each Limited Partner will depend on the particular Limited
Partner's overall tax situation. THE EXTENT, IF ANY, TO WHICH A CORPORATE OR
NON-CORPORATE PARTNER COULD BE SUBJECT TO THE ALTERNATIVE MINIMUM TAX WILL
DEPEND UPON HIS PERSONAL TAX SITUATION. EACH INVESTOR IS THEREFORE URGED TO
CONSULT HIS PERSONAL TAX ADVISOR WITH RESPECT TO THE POSSIBLE EFFECT OF SUCH
TAX ON HIM.

Alternative Minimum Tax on Corporations. An alternative minimum tax is
imposed on corporations (other than Subchapter S corporations) annually at the
current rate of 20% of the amount by which the corporation's alternative
minimum taxable income exceeds $40,000, phased out for alternative minimum
taxable income in excess of $150,000. In computing alternative minimum taxable
income, only 40-year straight-line depreciation on real property can be used,
but this will not cause an alteration because the Partnership anticipates
electing such 40-year method. Additional preference items include 75% of the
difference between "adjusted current earnings" and alternative minimum taxable
income for years beginning after 1989.

PARTNERSHIP TAX RETURNS AND TAX INFORMATION

The tax return filed by the Partnership may be audited by the Service.
Adjustments (if any) resulting from such an audit could result in an audit of
the Limited Partners' own returns. Any such audit of the Limited Partners' tax
returns could result in adjustments to both Partnership and non-Partnership
items of income, gain, loss, deduction or credit. See "Risk Factors - Federal
Income Tax Risks - Audit Risks."

The Code generally provides that partnership income, gain, loss,
deductions and credits reported by partners can be adjusted only through a
unified partnership proceeding, rather than through separate proceedings with
each partner. Section 6223 provides for certain notice requirements of the
unified administrative proceeding and the right of certain partners to
participate in the proceeding including any settlement resulting therefrom. An
exception to the notice requirement exists for any partner with less than a 1%
profit interest in a partnership having more than 100 partners. However, a
group of partners who together have a 5% profit interest may designate a member
of the group to receive notice from the Service on behalf of the group.
Otherwise, the less than 1% partners will receive notice through a designated
"tax matters partner" determined by the General Partners. The Managing General
Partner will be designated as the tax matters partner. The tax matters partner
may enter into settlement agreements that may be binding on non-notice Limited
Partners. The tax matters partner also has the authority to extend the statute
of limitations for assessment as to all Limited Partners (even if their profits
interest is 1% or greater) and to determine the judicial forum where the
Service's proposed adjustment will be litigated. If the Tax Court is not
chosen, the Service can assess a proposed deficiency immediately against all
Limited Partners. Failure of the tax matters partner to keep each Limited
Partners informed of the administrative and judicial proceeding does not affect
the applicability or adjustment to the non-notified Limited Partners. The new
law also provides for consolidated judicial proceedings.

Limited Partners will be charged interest and may be required to pay
penalties with respect to any deficiencies assessed by the Service. Section
6621 of the Code provides that the interest rate on underpayments of federal
income tax will be determined quarterly, and is compounded daily. The rate for
the period from July 1, 1996 to September 30, 1996 is 9% per annum.

Under the 1989 Act, several penalty provisions were consolidated into
one accuracy-related penalty. This new penalty is equal to 20% of any
underpayment of tax resulting from negligence of disregard of the rules and
Regulations, substantial underpayments of tax, substantial valuation
overstatements, substantial

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overstatement of pension liabilities, and substantial estate or gift tax
valuation understatements. An underpayment is defined as the amount by which
any tax exceeds the excess of the sum of tax shown on the tax return plus any
tax assessed or collected without assessment over any amount credited, refunded
or repaid a taxpayer on the ground that the tax imposed was less than the
excess described above.

The 20% penalty applies to any substantial understatement of income
tax. Generally, a substantial understatement is defined as an understatement in
tax exceeding the greater of 10% of the tax required to be shown on the return
or $5,000. The penalty generally does not apply where the taxpayer's position
is supported by a reasonable basis for taking such position as to any item, the
relevant facts of which are adequately disclosed in the return. In the case of
"tax shelters," however, mere disclosure of the relevant facts of an item on
the return will not abate the penalty. Furthermore, the "substantial authority"
exception will not apply to "tax shelters" unless the taxpayer also reasonably
believed that the tax treatment of such item was more likely than not the
proper treatment. For purposes of these exceptions, a "tax shelter" includes a
partnership if the principal purpose of such partnership is the avoidance or
evasion of federal income tax. The 1989 Act expanded the list of authorities
upon which taxpayers may rely as "substantial authority" and requires the
Service to develop a list of popular positions for which it believes there is
not "substantial authority."

The Partnership will provide tax information to the Limited Partners
within 75 days following the close of each fiscal year.

REGISTRATION WITH THE SERVICE

Entities classified as "tax shelters" must register with the Service
and provide each investor with a tax shelter registration number, which will be
issued by the Service. Under Section 6111 of the Code and temporary Regulations
issued thereunder, an entity must register if the ratio of deductions generated
by the entity (computed without regard to income earned by the entity) and 350%
of the credits available to the entity, to the investment in the entity by the
investor equals or exceeds 2:1. A general partner is considered an investor if
its allocable share of profits and losses exceeds 2% of the Partnership's
profits and losses. However, entities in which all projections and
representations indicate that gross income will exceed gross deductions during
each of the first five years of the investment are considered projected income
investments and are exempted from the registration requirements.

The General Partners do not intend to register the Partnership with
the Service under Section 6111 of the Code because the General Partners believe
that the gross income of the Partnership is anticipated to equal or exceed its
gross deductions at the end of each of the Partnership's first five tax years.
In addition, it is possible that the tax shelter ratio of the Partnership will
not exceed 2:1 during any of the first five tax years. Any penalties that might
stem from this failure to register would be imposed on the General Partners as
the organizers of the investment and, therefore, would not have any direct
adverse impact on the Limited Partners or their investment in the Partnership.
However, listing the Partnership's activities on an individual Limited
Partner's tax return without a registration number could increase the
possibility of scrutiny of such return by the Service.

TAX ASPECTS FOR FOREIGN INDIVIDUALS AND CORPORATIONS

The Partnership's anticipated activities will cause it to be treated
as being engaged in a United States trade or business and foreign persons
(i.e., nonresident aliens, foreign corporations, foreign Partnerships and other
foreign investors) who become Limited Partners will, therefore, also be
considered to be engaged in a trade or business within the United States and
such activities will probably be deemed to be conducted through a permanent
establishment. In such case, the foreign person will be taxable on this
allocable share of the Partnership's income under the normal rules applicable
to United States taxpayers and will be subject to all the federal and state
income tax return filing requirements.

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In addition to the requirement that foreign persons pay tax on their
United States source income, foreign persons who hold Units will be subject to
withholding rules which will require the Partnership to withhold with respect
to distributions of cash and allocations of income to them. Under the rules
created in the Foreign Investment and Real Property Tax Act ("FIRPTA"), as
modified by the 1986 Act, the Partnership is required to withhold a portion of
the proceeds from the sale of any United States Real Property Interests
("USRPIs"). In addition, under Section 1446 of the Code, the Partnership is
required to withhold based on the income of the Partnership which is considered
to be effectively connected with a U.S. trade or business. Under Section 897 of
the Code, as enacted in FIRPTA, gain from the sale of USRPIs will be treated as
effectively connected with a U.S. trade or business.

In order to clarify the withholding requirements for partnerships
holding USRPIs, the Service issued Rev. Proc. 89-31,1989-1 C.B. 895 and Rev.
Proc. 92-66, 1992-2 C.B. 428, which requires a domestic partnership to withhold
an "applicable percentage" of all effectively connected taxable income
allocable to its foreign partners, expressly including any partnership income
treated as "effectively connected" pursuant to Section 897 of the Code. For
this purpose, "applicable percentage" means the highest rate of tax imposed
under the Code. In addition, Rev. Proc. 89-31 expressly states that if a
domestic partnership complies with the requirements under Rev. Proc. 89-31, it
will be deemed to have satisfied the FIRPTA withholding requirements. Rev.
Proc. 89-31 further indicates that a partnership should take into account all
treaty provisions and reciprocal agreements in determining the amount of a
partnership's effectively connected taxable income allocable to its foreign
partners. Finally, in the unlikely event that the Units were to be listed on an
exchange or become regularly traded on an established securities market, Rev.
Proc. 89-31 requires that the Partnership withhold similarly from foreign
Limited Partners distributions, unless the Partnership expressly elected to
instead be subject to a similar withholding requirement based on income.

The Partnership's withholding obligation extends to all persons who
are not able to provide the Partnership with a certification of non-foreign
status, which certification must be renewed every three years. In addition,
each Limited Partner has an obligation to notify the Partnership if it becomes
a foreign person.

Regulation Section 1.1445-8 provides that a person that : (1) is a
nominee; (2) receives a distribution attributable to a disposition of USRPIs by
a publicly traded limited partnership; (3) receives a distribution for payment
to any foreign person or on the account of any foreign person; and (4) receives
notice, as described below, shall be required to withhold in accordance with
the general rules of Section 1445(e)(1) of the Code. Such nominee becomes a
withholding agent. In order to require the nominee to become the withholding
agent, rather than the Partnership, the Partnership must satisfy certain notice
requirements. The notice requirement is satisfied by giving notice of a
distribution that is attributable to a disposition of a USRPI in accordance
with Sections 10(b)-17(b)(1) or (3) of the Securities Exchange Act of 1934. The
Partnership intends to provide such notice upon all distributions attributable
to USRPIs for all Units held by nominees on behalf of foreign persons. Rev.
Proc. 89-31 applies these same nominee rules to partnerships whose interests
are regularly traded on an established exchanged. In such situation, the
Partnership will not withhold from the distribution as it will become the
obligation of the nominee to so withhold. The Agreement provides that any tax
required to be withheld with respect to a Limited Partner will be charged to
that Partner's capital account as if such tax had been distributed to such
Partner. The General Partners will have the right: (i) to make a loan to such
Limited Partner, at a rate of interest subject to the limitations of the
Agreement, in an amount equal to the tax required to be withheld to the extent
that cash is needed to make such withholding payment attributable to that
Limited Partner; and (ii) retain appropriate portions of the Limited Partner's
distribution until any withholding obligations relating to that Limited Partner
are satisfied.

IMPACT ON QUALIFIED TAX-EXEMPT INVESTORS

Under Section 501, qualified pension, profit-sharing and stock bonus
plans, Keogh Plans and Individual Retirement Accounts (collectively "Qualified
Plans") are generally exempt from federal income tax on the income they earn.
The discussion contained in this section of the Prospectus applies in the same

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fashion to other entities which are exempt from federal income tax under
Sections 401 or 501 of the Code as if they were Qualified Plans. Any income
earned by a Qualified Plan which is not substantially related to the exercise
or performance of the Qualified Plan's particular tax-exempt purpose is treated
as unrelated business taxable income ("UBTI"). However, certain earnings from
"investment-type" sources, such as dividends, interest, royalties, sales of
non-inventory property and certain forms of rent are specifically exempted from
taxation as UBTI, even if earned outside of the Qualified Plan's tax-exempt
function. The gross amount of UBTI incurred by a Qualified Plan is offset by
the deductions that are directly connected to the activity producing the UBTI,
and each Qualified Plan is entitled to an annual $1,000 deduction.

The tax consequences of the income of the Partnership will be
determined as though the income was earned directly by the Partners, including
any Qualified Plan that becomes a Limited Partner. Therefore, if the
Partnership is considered a "dealer" in real property or equipment, the gain
from the Partnership's investment in Properties or Equipment which is allocated
to the Qualified Plan will be UBTI. In addition, if the Partnership invests in
and owns "debt-financed property" a portion of a Qualified Plan's distributive
share of the Partnership's taxable income (including capital gain) that is
attributable to any such debt-financed Property, will also generate UBTI. For
purposes of computing the portion of income treated as UBTI or the amount of
gain or loss to be taken into account on a sale or other disposition of
debt-financed property, the taxpayer applies a ratio of (A) the "average
acquisition indebtedness" related to such property, to (B) the average amount
of the adjusted basis of such property. The term "average acquisition
indebtedness" means, in the case of a sale or disposition, the highest amount
of the acquisition indebtedness with respect to such property during the
12-month period ending with the date of the sale or other disposition, and in
all other cases, such term means the average monthly level of debt during that
taxable year.

Notwithstanding the tax-exempt status of the Qualified Plan, any UBTI
recognized by a Qualified Plan is subject to federal income tax at the tax
rates imposed on corporations or trusts, depending on the character of the
particular tax-exempt entity. In addition to the tax on UBTI, the Qualified
Plan will also be subject to the alternative minimum tax and recapture of
depreciation provisions. Any UBTI income resulting from the sale of
debt-financed property will be treated as capital gain to the extent that it
would be treated as such by an organization not exempt from taxation. If a
tax-exempt entity realized net UBTI losses for a year, such losses may be
carried forward against UBTI produced in later years from the activities or
assets producing the loss. Even if a portion of the income of a tax-exempt
entity is UBTI, income from other investments that is not UBTI will continue to
be exempt from federal income tax. Thus, the realization of any UBTI from the
Partnership generally would not affect the exempt status of the entity. For
certain types of tax-exempt entities, however, the receipt of any UBTI may have
very adverse consequences. For example, if a charitable remainder annuity trust
or a charitable remainder unitrust (as defined in Section 664 of the Code)
receives any UBTI during the year, all of its income from all sources in that
year will be taxable. In addition to being subject to possible federal income
taxation, any UBTI may be subject to state and local income taxation, which may
differ from federal income taxation in method of computation and amount.

The Partnership anticipates that the majority of its income will be
interest, rents from real property and equipment leasing, and gains from the
sales of such real property and equipment. The rental income from equipment
leasing will constitute UBTI. The gain or loss from the sale of the Equipment
will qualify for an exception from UBTI treatment, except to the extent that
the Partnership incurs indebtedness to acquire or improve the Equipment or such
sale is deemed to be made in the ordinary course of the Partnership trade or
business and such Equipment is deemed to be held primarily for sale. In
addition, any interest income the Partnership recognizes will qualify for an
exemption from UBTI treatment. With regard to leasing the Properties, the
Partnership intends to receive not only base rents, but also additional rents
from the lessees of the Properties based on the percentage of the lessee's
gross sales. Under Section 512(b)(3)(B)(ii) of the Code such percentage rents
should be excluded from treatment as UBTI. Regulation Section
1.512(b)-1(c)(2)(ii)(b) states that the rental of personal property will be
considered incidental to the rental of the real property associated therewith,
and hence exempt from UBTI treatment, if the portion of

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the rental payment attributable to the personal property constitutes 10% or
less of the total rental payments on such property for the year. The General
Partners expect that the amount attributable to any personal property rented
with the Properties will constitute 10% or less of the rental payments received
on each Property. Qualified Plans will recognize UBTI from leasing of the
Properties or upon the sales thereof to the extent that the Partnership incurs
indebtedness to acquire or improve the Properties, or incurs indebtedness that
would not have been incurred "but for" the acquisition or improvement of the
Properties, (possibly including debt which might be incurred in the future),
and such indebtedness is not retired before a tax year in which the
debt-financed property produces taxable income or more than 12 months before
the debt-financed property is sold.

In conclusion, based on the General Partners' representations as to
the anticipated activities of the Partnership, all rental income derived from
equipment leasing will constitute UBTI. Although the income generated by the
Properties, including gain on the eventual sale of the Properties, should not
constitute UBTI unless and to the extent that such Properties constitute
debt-financed property. However, if the Partnership incurs indebtedness to
improve the Properties, or incurs indebtedness secured by the Properties at the
time of acquisition or shortly thereafter, it is likely that such indebtedness
would be characterized as acquisition indebtedness which would produce UBTI if
it is on the Property during a tax year in which income is recognized, or
during the 12-month period prior to sale.

PROPOSED LEGISLATION

In recent years, members of Congress, governmental agencies and the
executive branch of the federal government have proposed a number of changes in
the federal income tax laws. Such proposals have varied widely in their scope
and in their likely effect on taxpayers investing in real property and leasing
activities. Some of these proposals would, if adopted, have the overall effect
of reducing the tax benefits presently associated with investments like the
Units. Several proposals have been made recently which would alter, in some
cases radically, the treatment of tax-exempt entities and which could
potentially lead to substantial changes in the taxation of those Limited
Partners that are tax-exempt entities.

It is not possible to predict if any proposals will be enacted into
law or the effect on each investor. In addition, the Service regularly issues
Regulations and pronouncements which could affect an investment in the
Partnership. Each investor is urged to consult with his own tax advisor as to
the possible effect of tax reform proposals upon his particular tax situation.

STATE AND LOCAL TAXES

In addition to the federal income tax aspects described above,
prospective Limited Partners should consider potential state tax consequences
of an investment in the Partnership. Each Limited Partner is advised to consult
his own tax advisor to determine if the state in which he is a resident imposes
a tax upon his share of the income or loss of the Partnership. In addition, a
Limited Partner may be required to file an income tax or other return in those
states where the Partnership acquires real property. A Limited Partner may be
taxable on income derived from sources within a particular state (including
capital gains on the sale of properties) regardless of whether the Partnership
sustains losses from properties located outside that particular state and
regardless of the amount of such losses, even though such losses equal or
exceed the income derived from sources within that particular state or the
total operations of the Partnership result in a net loss. Although most states
do not impose a tax on tax-exempt entities, Limited Partners that are
tax-exempt entities are urged to consult their advisors on this question.

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The Partnership will advise each Limited Partner of his share of
income or loss to be reported to each of the states where the Partnership owns
property. Personal exemptions, computed in various ways, are allowed by the
various states and may reduce the amount of tax owed to a particular state. The
Partnership may be required to withhold state taxes from distributions to the
Limited Partners in some instances. At the present time, certain states have
not adopted the favorable federal installment sale or accelerated depreciation
rules. Thus, it is possible that investors in some states will be unable to
defer part of the gain upon an installment sale of Partnership property or take
advantage of the higher deductions available under ACRS on their state income
tax returns. In such cases, future gains and net income for state tax purposes
will be correspondingly less than for federal tax purposes.

To the extent that a non-resident Limited Partner pays tax to a state
by virtue of Partnership operations within that state, he may be entitled to a
deduction or credit against tax owed to his state of residence with respect to
the same income, and should consult his tax advisor in this regard. In
addition, payment of state taxes constitutes a deduction for federal income tax
purposes, if the taxpayer itemizes deductions.

THE FOREGOING ANALYSIS IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING. IT IS NOT POSSIBLE TO PREDICT THE EFFECT OF THE TAX LAWS ON
INDIVIDUAL INVESTORS IN THE PARTNERSHIP. ACCORDINGLY, EACH POTENTIAL LIMITED
PARTNER IS URGED TO SEEK THE ADVICE OF HIS TAX ADVISORS WITH RESPECT TO THIS
INVESTMENT IN THE PARTNERSHIP, WITH SPECIFIC REFERENCE TO HIS OWN TAX SITUATION
AND POTENTIAL CHANGES IN THE APPLICABLE LAWS.

ERISA CONSIDERATIONS FOR QUALIFIED PLANS

In considering whether to invest a portion of the assets of a
Qualified Plan in the Partnership, fiduciaries should consider, in addition to
other things: (i) whether investing in the Partnership is in accordance with
the documents and instruments governing such Qualified Plan; (ii) whether the
investment satisfies the diversification requirements of Section 404(a)(1)(C)
of ERISA, if applicable; (iii) whether the investment will result in unrelated
business taxable income to the Qualified Plan (iv) whether the investment
provides sufficient liquidity; (v) the need for periodic valuation of the
assets of the Qualified Plan; and (vi) whether the investment is prudent. The
General Partners have not, and will not, evaluate whether an investment in the
Partnership is suitable for any particular plan or investor, but, subject to
the disclosure included therein, will accept such entities as Limited Partners
if they meet the suitability standards.

ERISA and the Code prohibit parties in interest (including
fiduciaries) of the Qualified Plan from engaging in various acts of
self-dealing. To prevent a possible violation of these self-dealing rules, the
General Partners and their Affiliates may not permit the purchase of Units with
assets of any Qualified Plan (including a Keogh Plan or IRA) if they: (i) have
investment discretion with respect to the assets of the Qualified Plan; or (ii)
regularly give individualized investment advice which serves as the primary
basis for the investment decisions made with respect to such assets.

PLAN ASSETS -- EXEMPTION UNDER THE DOL REGULATIONS

On November 13, 1986, the Department of Labor ("DOL") issued
Regulations (the "DOL Regulations") which discuss when the assets of a
partnership or other entity are considered to be assets of the Qualified Plans
that invest therein ("Plan Assets") and also contain a number of exemptions
from Plan Asset status. The Partnership intends to rely on at least one of
these exemptions. See "Risk Factors - Investment Risks - Investments by
Qualified Pension and Profit-Sharing Trusts."

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PUBLICLY OFFERED SECURITY EXEMPTION

One exemption, which is available for entities such as the
Partnership, is the "publicly offered security" exemption. An entity will
qualify for this exemption if the security is: (i) part of a class of
securities which are registered under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or sold as part of an offering pursuant to an
effective registration statement under the Securities Act of 1933 so long as
the securities are subsequently registered under the 1934 Act within the
designated time frame; (ii) widely held; and (iii) freely transferable. Under
the DOL Regulations, a class of securities will be considered widely held if it
is owned by 100 or more investors who are independent of the issuer and of each
other.

Although the determination of whether a class of securities is
considered freely transferable is based on all the facts and circumstances of
the situation, the DOL Regulations indicate that if the minimum investment is
$10,000 or less, the existence of certain restrictions (similar to those
contained in Section 12 of the Agreement) should not prevent a security from
being considered freely transferable. The DOL Regulations state that a
restriction or prohibition on transfers or assignments that would result in a
termination or reclassification of an entity for tax purposes will not, alone
or in combination with the other enumerated restrictions, ordinarily prevent a
security from being considered freely transferable. In Opinion 89-14A (August
2, 1989), the DOL held that transfer restrictions designed to avoid a
partnership's being classified as "publicly traded" under Code Section 7704,
including restrictions designed to ensure compliance with the safe harbors in
IRS Notice 88-75, are the type of restrictions which will not prevent
securities from being considered freely transferable. Therefore, the fact that
the General Partners have indicated that they will attempt to prevent a market
from developing so that the Partnership will not be considered "publicly
traded" will not alone prevent the Units from being considered freely
transferable. The explanation accompanying the DOL Regulations states that if
the minimum investment is $10,000 or less, the securities are "likely to be
widely distributed," and, therefore, are presumed to be freely transferable.
The General Partners have represented that it is likely that there will be 100
or more independent investors and that they will use their best efforts to
ensure that there will be the requisite number of independent investors. Based
on these representations and the other facts surrounding the Offering, and
assuming that the Partnership will register under the Securities Exchange Act
of 1934, as amended, within 120 days of the end of its fiscal year, Jaffe,
Raitt, Heuer & Weiss, P.C. is of the opinion that the Partnership will more
likely than not meet the publicly offered security exemption.

OTHER PROTECTIVE MEASURES AVAILABLE TO THE GENERAL PARTNERS.

There can be no assurance that the Partnership will qualify for
exemption from Plan Asset status under the DOL Regulations. However, the
General Partners will use their best efforts to qualify for an exemption under
the DOL Regulations. In order to help ensure that the Partnership will not be
deemed to hold Plan Assets or otherwise be engaged in prohibited transactions,
and if an exemption for such transactions could not be obtained from the DOL,
the General Partners have the right (upon notice to all investors but without
the consent of any investor): (a) to restructure the Partnership's activities
to the extent necessary to comply with any exemption in DOL Regulations,
including limiting the number of Units which Qualified Plans or other benefit
plan investors could hold, discontinuing sales to such investors after a given
date; (b) to terminate the offering or to compel a dissolution and termination
of the Partnership; and/or (c) to alter the activities of the Partnership in
order to qualify for a prohibited transaction exemption from the DOL.

PLAN ASSET CONSEQUENCES

If the Partnership were to be deemed to hold Plan Assets, additional
issues relating to the Plan Assets and "prohibited transaction" concepts of
ERISA and the Code arise by virtue of the General Partners' ownership of an
interest in the Partnership and the possible relationship between the General
Partners and any Qualified Plan which may purchase Units. Section 406 of ERISA
and Section 4975(c) of the Code

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prohibit Qualified Plans from engaging in certain transactions with specified
parties involving plan assets. One of the transactions prohibited is the
furnishing of services between a plan and a "party in interest" or a
"disqualified person." Included in the definition of party in interest under
Section 3(14) of ERISA and the definition of disqualified person in Section
4975(e) of the Code are fiduciaries and "persons providing services to the
plan." Thus, transactions between the Partnership and a party in interest or
disqualified person of an invested Qualified Plan could be a prohibited
transaction if the Partnership were deemed to hold Plan Assets.

In addition, in the event that the Partnership were deemed to hold
plan assets, and if the General Partners or certain entities and individuals
related to the General Partners had previously provided services to an
investing Qualified Plan, then the General Partners could be characterized as a
"party in interest" under ERISA and a "disqualified person" under the Code with
respect to such Qualified Plan. If such relationships exists, various
transactions between the General Partners or their Affiliates and the
Partnership could constitute prohibited transactions. In addition, it could be
argued that, because the General Partners share in Partnership distributions
and tax allocations in a manner disproportionate to their capital contributions
to the Partnership, the General Partners are being compensated directly out of
plan assets rather than Partnership assets in exchange for the provision of
services. If this were the case, absent a specific exemption applicable to the
transaction, a prohibited transaction could be determined to have occurred
between the Qualified Plan and the General Partners. Finally, because the
General Partners receive fees from the Partnership directly and not as
compensation from the Qualified Plans, it could be argued that if the
Partnership were deemed to hold plan assets, a prohibited transaction would
occur.

If the Partnership's assets were Plan Assets and if it were determined
by the DOL that the acquisition of a Unit by a Qualified Plan or the operation
of the Partnership by the General Partners constitute a prohibited transaction,
then the General Partners and/or any party in interest that has engaged in any
such prohibited transaction would be required to: (i) restore to the Qualified
Plan for any profit it realized on the transaction; and (ii) indemnify the
Qualified Plan for any losses suffered by the Qualified Plan as a result of
such investment. In addition, each party in interest involved may be liable to
pay an excise tax equal to 5% of the "amount involved" in the transaction for
each year during which the transaction remains uncorrected, and be required to
eliminate the prohibited transaction by reversing the transaction. Moreover, if
the fiduciary or party in interest is ordered to correct the transaction by
either the Service or the DOL and such transaction is not corrected within a
90-day period, the party in interest involved could also be liable for an
additional excise tax in an amount equal to 100% of the amount involved, for
each taxable year commencing with the year in which the 90 period expires and
ending with the year in which the prohibited transaction is corrected. Plan
fiduciaries who make the decision to invest in Units could, under certain
circumstances, be liable as co-fiduciaries for actions taken by the
Partnership, its General Partners or any fiduciary.

With respect to investing IRA's, the tax-exempt status of the account
could be lost if the investment constituted a prohibited transaction under
Section 408(e)(2) of the Code by reason of the Partnership engaging in a
prohibited transaction with the individual who established the IRA or his
beneficiary. If the IRA were to lose its tax-exempt status, the other
above-described penalties for prohibited transactions would not apply.

VALUATION REPORTS TO QUALIFIED PLANS

Commencing with the year ended December 31, 1997, the Partnership will
provide Qualified Plans with an annual valuation of Units within 120 days after
the end of each fiscal year of the Partnership which is intended to satisfy the
requirements of ERISA. However, during the first three years of Partnership
operations, the Units are expected to be valued at their initial offering
price. Such valuations will be made by the General Partners or their designees.

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ALL FIDUCIARIES ARE ENCOURAGED TO CONSULT THEIR TAX AND LEGAL ADVISORS
FOR THE QUALIFIED PLANS THEY REPRESENT TO ASSURE THAT AN INVESTMENT IN THE
PARTNERSHIP IS APPROPRIATE.

SUMMARY OF PARTNERSHIP AGREEMENT

The rights and obligations of the Partnership's Partners will be
governed by the Partnership Agreement which is set out in its entirety at the
end of this Prospectus as Exhibit A. Prospective investors should study the
Partnership Agreement carefully before subscribing for Units. The following and
other statements in this Prospectus concerning the Partnership Agreement and
related matters merely outline material provisions of, and do not purport to be
complete or in any way modify or amend, the Partnership Agreement.

THE RESPONSIBILITIES OF THE GENERAL PARTNERS

Subject to certain express restrictions set forth in the Partnership
Agreement, the Managing General Partner has the exclusive management and
control of all aspects of the business of the Partnership and, except for
certain limited voting rights and other powers contained in the Partnership
Agreement, the Limited Partners shall not have any authority to transact
business for, or participate in the management activities and decisions of, the
Partnership.

In addition, the Managing General Partner has been designated the "Tax
Matters Partner" under Paragraph 14.7 of the Partnership Agreement to manage
administrative tax proceedings conducted at the Partnership level by the
Service with respect to Partnership matters. Any Partner has the right to
participate in such administrative proceedings relating to the determination of
Partnership items at the Partnership level. Expenses of such administrative
proceedings undertaken by the Tax Matters Partner will be paid for out of
Partnership assets. Each Limited Partner who elects to participate in such
proceedings will be responsible for any expenses incurred by such Limited
Partner in connection with such participation. Further, the cost of any
adjustments to a Limited Partner and the cost of any resulting audits or
adjustments of a Limited Partner's tax return will be born solely by the
affected Limited Partner. See "Conflicts of Interest-Tax Matters Partner."

LIABILITY OF LIMITED PARTNERS-NONASSESSABILITY OF UNITS

A Limited Partner's capital is subject to the risks of the
Partnership's business. No Limited Partner is permitted to take any part in the
control of the business as a Limited Partner and no Limited Partner may be
assessed to provide additional capital at any time. Under the Delaware Act, a
Limited Partner, as such, will not be liable for obligations of the Partnership
in excess of his contribution to the capital of the Partnership and his share
of the undistributed profits and assets of the Partnership (and for the return
of distributions made to him in violation of the Delaware Act as discussed
below) unless he is also a General Partner or, in addition to the exercise of
his rights and powers as a Limited Partner, he takes part in the control of the
business of the Partnership. However, since the limited partnership statutes of
certain states in which the Partnership may do business do not expressly grant
or deny certain voting rights and other powers which may be exercised by
Limited Partners, it may be argued that, under the laws of such states, the
existence of such rights and powers under the Partnership Agreement with
respect to the operation of the Partnership's business may cause Limited
Partners in such states to be deemed to have taken part in the control of the
Partnership business.

The acceptance of the foregoing argument by a court would subject all
or some of the Limited Partners to general liability and could make them liable
with the General Partners for any civil judgement which could not be satisfied
by the Partnership's assets.

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Furthermore, subject to the obligation of a Limited Partner to repay
to the Partnership distributions made to him in violation of the Delaware Act,
as discussed below, at such time a person (who is not also a General Partner
and does not take part in the control of the business of the Partnership) is
admitted or substituted as a Limited Partner, such person should not be legally
obligated for the liabilities of the Partnership in an amount in excess of his
contribution to the capital of the Partnership (or in the case of a substituted
Limited Partner, such contribution of his predecessor-in-interest) and his
share of the undistributed profits and assets of the Partnership. The Delaware
Act provides that the Partnership shall not make any distribution to any
Limited Partner to the extent that, at the time of the distribution and after
giving effect to the distribution, all liabilities of the Partnership, other
than liabilities to the General Partners and the Limited Partners on account of
their Partnership interests and liabilities for which the recourse of creditors
is limited to specified assets of the Partnership, exceed the fair value of the
Partnership's assets, except that the fair value of assets that are subject to
a liability for which the recourse of creditors is limited shall be included in
the assets of the Partnership only to the extent that the fair value of those
assets exceeds that liability. A Limited Partner who receives a distribution in
violation of the Delaware Act prohibition and who knows at the time of the
distribution that the distribution violates this prohibition, will be liable to
the Partnership for the amount of the distribution. A Limited Partner who
receives a distribution in violation of the Delaware Act prohibition and who
does not know at the time of the distribution that the distribution violates
this prohibition shall not be liable to the Partnership for the amount of the
distribution. Unless otherwise agreed, a Limited Partner who receives a
distribution from the Partnership has no liability under the Delaware Act for
the amount of the distribution after the expiration of three years from the
date of the distribution.

The Partnership Agreement precludes the Limited Partners from making
any claims against the General Partners, or any of their agents or employees,
for any act done on behalf of the Partnership, unless any such act is the
result of negligence, misconduct or breach of any fiduciary duty imposed upon
the General Partners by law, or under certain circumstances, involves
securities law violations.

TERMS AND DISSOLUTION

The Partnership will continue for a maximum period ending December 31,
2026, but may be dissolved at an earlier date if certain contingencies occur.
Limited Partners may not withdraw from the Partnership prior to dissolution,
but may assign their Units to others. The contingencies whereby the Partnership
may be dissolved are as follows:

(a) withdrawal, removal, adjudication of bankruptcy, insolvency,
dissolution or other cessation to exist as a legal entity of the last remaining
General Partner, unless within 90 days of the date of such event and effective
as of the date of such event, the Limited Partners by unanimous vote, elect a
successor General Partner and elect to continue the business of the
Partnership;

(b) a Majority Vote (which may, but need not be, solicited by the
General Partners) in favor of dissolution and termination of the Partnership;
or

(c) the sale or other disposition of all Assets held by the
Partnership and the receipt of final payment with respect to all investments.

If the Partnership has not been liquidated within ten years of the
date the Partnership last purchased a Property or an Equipment package, the
General Partners are required to call for a vote of the Limited Partners as to
whether they wish to liquidate the Partnership. Upon dissolution of the
Partnership, the Managing General Partner must take a full account of the
Partnership's assets and liabilities, and shall promptly liquidate any
remaining Partnership assets and the proceeds of liquidation will first be
applied to the payment of obligations of the Partnership to creditors,
including Partners who are creditors, to the extent permitted by law, but
excluding secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Partnership assets; and second, to the
Partners pursuant to the provisions

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of Paragraph 18.2.2 of the Partnership Agreement, after allowance for the
expenses of liquidation and the setting up of any reserves for contingencies
which the Managing General Partner considers necessary. Any remaining proceeds
will then be distributed to the Partners in the same manner as Net Sale or
Refinancing Proceeds.

RESTRICTIONS ON TRANSFER OF UNITS

There is no established market for the Units, and because there are
expected to be only a limited number of investors and significant restrictions
on the transferability of Units, it is not likely that a public market in the
Units will develop. Sales, exchanges, assignments, transfers and other
dispositions of Units are subject to the following restrictions: (1) any sale,
assignment, transfer, exchange or other disposition must be in compliance with
and supported by an opinion of counsel acceptable to the Managing General
Partner (if the Managing General Partner in its sole discretion deems it
advisable to require such opinion) that it is in compliance with the rules of
any other applicable governmental authority including suitability provisions
and exemption from the registration requirements of the applicable securities
laws; (2) no such Units may be sold, assigned or exchanged if such Units, when
added to the total of all Units sold or exchanged within the period of twelve
(12) consecutive months prior to the proposed date of sale or exchange, would,
in the opinion of counsel to the Partnership, result in the termination of the
Partnership under Internal Revenue Code Section 708 unless the Partnership and
the transferring holder shall have received a ruling by the Service that the
proposed sale or exchange will not cause such termination; and (3) no
assignment of Units by a Limited Partner may be made unless the Managing
General Partner determines, in its sole discretion, that the Partnership would
be able to satisfy either the 5% or 2% "safe harbors" contained in Advance
Notice 88-75 or in corresponding regulations, or the Partnership has received
an opinion of counsel satisfactory to the Managing General Partner or a
favorable ruling from the IRS that such transfer would not result in the
Partnership being classified as a "publicly-traded partnership" for federal
income tax purposes.

Pursuant to the Partnership Agreement, the Limited Partners agree to
provide all information with respect to proposed assignments which the Managing
General Partner deems necessary in order to determine whether the assignment
occurred on a secondary market or the substantial equivalent thereof. As a
result of these provisions, Limited Partners who purport to sell, transfer,
assign, or otherwise dispose of their Units except as set forth herein, may
continue to receive all cash distributions, and may be allocated all Net Income
and Net Loss, of the Partnership, notwithstanding any such action. Conversely,
persons who purport to acquire Units from original Limited Partners within such
period may not receive any such distributions or allocations.

Limited Partners generally will not be permitted to transfer less than
10 Units, unless such transfer constitutes a transfer of all Units held by a
transferor. Additional restrictions on transfers of Units are imposed under the
securities laws of some states, including a limitation to transferees who meet
certain investment suitability standards similar to those described under "Who
Should Invest." As referenced above, the Partnership will require that such
standards are met before agreeing to any transfers of Units.

VOTING RIGHTS OF LIMITED PARTNERS

Limited Partners have no right to participate in the management or
control of the Partnership's business. However, Limited Partners have been
granted certain voting rights which are set forth in Paragraph 15.1 of the
Partnership Agreement. The Limited Partners have the right by Majority Vote to:

(a) remove a General Partner;

(b) elect a new General Partner;

(d) amend the Partnership Agreement, provided such amendment is
not for any of the purposes set forth in Paragraph 14.2.15 of the Partnership
Agreement; and

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(e) approve or disapprove the sale of all or Substantially All of
the Assets of the Partnership in a single sale or in multiple sales in the same
12-month period, except in connection with the liquidation and winding up of
the business of the Partnership upon its termination and dissolution or in the
ordinary course of business.

The General Partners must obtain the approval of the Limited Partners (by
Majority Vote) prior to:

(a) effecting a change in the Partnership's investment objectives;

(b) assigning a General Partner's interest in the Partnership,
except as otherwise provided in Paragraph 16.5 of the Partnership Agreement;

(d) selling all or Substantially All of the Assets of the
Partnership in a single sale or in multiple sales in the same 12-month period,
except in connection with the liquidation and winding up of the business of the
Partnership upon its termination and dissolution or in the ordinary course of
business.

Paragraph 14.4.25 of the Partnership Agreement requires that Limited
Partners owning at least two-thirds of the Units then outstanding approve any
transaction or series of transactions that the Partnership enters into that
directly or indirectly, through acquisition or otherwise involves the
combination, merger, conversion or reorganization of the Partnership or the
Partnership with other entities ("Roll-Up Transaction"). Further, Paragraph
14.4.25 of the Partnership Agreement cannot be changed or eliminated without
the consent of the Limited Partners owning at least two-thirds of the Units
then outstanding. Paragraph 14.4.25 of the Partnership Agreement is intended to
provide the Limited Partners with increased control over the occurrence of this
type of transaction.

The Partnership Agreement also sets forth certain restrictions in
regard to a Roll-Up Transaction. Initially, the Partnership Agreement requires
that an appraisal of all Partnership assets shall be obtained from a competent
independent expert in connection with a proposed Roll-Up Transaction. In
addition, the Partnership Agreement provides Limited Partners who vote "no" in
connection with a proposed Roll-Up Transaction the choice of: (i) accepting
the securities of the roll-up entity offered in the proposed Roll-Up
Transaction; or (ii) one of the following: (A) remaining as Limited Partners
in the Partnership and preserving their interests therein on the same terms and
conditions as existed previously; or (B) receiving cash in an amount equal to
the Limited Partners' pro rata share of the appraised value of the net assets
of the Partnership. The Partnership Agreement also restricts the ability of the
Partnership to engage in a Roll-Up Transaction which would adversely affect the
democracy or voting rights of the Limited Partners or would materially impede
or frustrate the accumulation of the shares by any purchaser of the securities
of a roll-up entity. The Partnership Agreement also restricts the ability of
the Partnership to participate in a proposed Roll-Up Transaction in which the
Limited Partners' rights of access to records would be less than currently
provided under the Partnership Agreement, or which would require the
Partnership to bear the costs of a proposed Roll-Up Transaction which is not
approved by the Limited Partners.

Paragraph 15.1.4 of the Partnership Agreement provides that with
respect to any Units owned by the General Partners or their Affiliates, the
General Partners or their Affiliates may not vote or consent on matters
submitted to the Limited Partners regarding the removal of a General Partner or
regarding any transaction between the Partnership and the General Partners or
their Affiliates. In determining the existence of the requisite percentage and
interest of Units necessary to approve a matter on which the General Partners
or their Affiliates may not vote or consent any Units owned by the General
Partners or their Affiliates shall not be included.

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MEETINGS

The Managing General Partner may at any time call a meeting of Limited
Partners or call for a vote, without a meeting of the Limited Partners, on
matters on which they are entitled to vote, and shall be required to call for
such meeting or vote following receipt of a written request therefor of holders
of 10% or more of the outstanding Units.

INDEMNIFICATION OF THE GENERAL PARTNERS BY THE PARTNERSHIP

The Partnership Agreement provides that the General Partners shall
have no liability to the Partnership or to any Partner for any loss suffered by
the Partnership which arises out of any action or inaction of the General
Partners or Affiliates of the General Partners if the General Partners or their
Affiliates, in good faith determined that such course of conduct was in the
best interests of the Partnership and such course of conduct did not constitute
negligence or misconduct by the General Partners or their Affiliates. The
General Partners shall be indemnified by the Partnership against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by them in connection with the Partnership, provided that the same
were not the result of negligence or misconduct on the part of the General
Partners, and the General Partners determined, in good faith, that such course
of conduct was in the best interests of the Partnership and did not constitute
negligence or misconduct by the General Partners. Any such indemnification is
recoverable only from the assets of the Partnership and not from the Limited
Partners.

Notwithstanding the above, the General Partners and any person acting
as a broker-dealer shall not be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of federal or state
securities laws unless: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee; or (ii) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the particular
indemnitee; or (iii) a court of competent jurisdiction approves a settlement of
claim against a particular indemnitee and such indemnification is approved by
the court. Further, in any claim for indemnification for federal or state
securities law violations, the party seeking indemnification shall, prior to
requesting indemnification, place before the court the position of the
Securities and Exchange Commission and the positions of certain states,
including California, with respect to the issue of indemnification for
securities law violations.

The Partnership shall not incur the cost of that portion of any
insurance, other than public liability insurance, which insures any party
against any liability the indemnification of which is prohibited by the terms
of the Partnership Agreement.

REPORTS TO LIMITED PARTNERS

The General Partners will keep, or cause to be kept, full and true
books of account on an accrual basis of accounting, in accordance with
generally accepted accounting principles ("GAAP"). All of such books of
account, together with a copy of the Certificate of Limited Partnership and any
amendments thereto, will at all times be maintained at the principal office of
the Partnership, and will be open to inspection, examination and duplication at
reasonable times by the Limited Partners or their agents. Limited Partners may
receive, upon request, a list of the names and addresses of all of the Limited
Partners from the Partnership by mail. See Paragraph 13.1 of the Partnership
Agreement.

The General Partners will submit to each Limited Partner audited
annual reports of the Partnership within 120 days following the close of each
fiscal year. These annual reports will contain the following: (1) audited
financial statements; and (2) an audited report setting forth Distributions per
Unit during such year, which report shall separately identify Distributions
from: (i) Cash Flow during the period; (ii) Cash Flow during a prior period
which had been held as reserves; (iii) annual net rental revenues on a per
Property basis; (iv) Net Sale or Refinancing Proceeds; and (v) reserves, if
any, established from Gross

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Proceeds. The annual report will also contain a statement of compensation and
fees paid by the Partnership to the General Partners and their Affiliates
including an itemized presentation of expense reimbursements to the General
Partners and their Affiliates or any other transactions between the Partnership
and the General Partners or their Affiliates, which information shall be
verified by the independent public accountants retained by the Partnership. The
method of verification shall at a minimum provide: (i) a review of the time
records of individual employees, the costs of whose services are reimbursed;
and (ii) a review of the specific nature of the work performed by each such
employee. The additional costs of such verification will be itemized by such
accountants and may be reimbursed to the General Partners and their Affiliates
by the Partnership to the extent that such reimbursement, when added to the
cost for administrative services rendered, does not exceed the competitive rate
for such services.

In addition, each Limited Partner will receive a quarterly financial
highlight report of the Partnership's performance. Upon request, unaudited
quarterly reports containing information required by Form 10-Q will be mailed
to a Limited Partner not later than 60 days after the close of each of the
first three fiscal quarters of each fiscal year.

Within 60 days following the close of any calendar quarter during the
Offering in which the Partnership has acquired a Property, a report will be
submitted to each Limited Partner containing: (1) the location and a
description of the general character of the Property acquired during the
quarter; (2) the present or proposed use of such Property and its suitability
and adequacy for such use; (3) the terms of any material lease affecting the
Property; (4) the proposed method of financing, if any, including estimated
down payment, leverage ratio, prepaid interest, balloon payment(s), prepayment
penalties, "due-on-sale" or encumbrance clauses and possible adverse effects
thereof and similar details of the proposed financing plan; and (5) a statement
that title insurance has been or will be obtained on the Property acquired,
unless the seller has agreed to provide indemnification to the Partnership
substantially equivalent to that which would be available under a title policy
and the seller has represented to the General Partners that it has a rating by
Moody's of AA or better or by Standard and Poor's of AA or better. In addition,
during the Offering, the Prospectus will be supplemented, at such time as the
General Partners believe a reasonable probability exists that a property will
be acquired involving the use of 10% or more, on a cumulative basis, of the Net
Proceeds of this Offering.

After the last acquisition, the General Partners shall, upon request,
send to the Commissioner of Corporations of the State of California a schedule,
verified under the penalty of perjury, reflecting: (i) each acquisition made;
(ii) the purchase price paid; (iii) the aggregate of all Acquisition Fees paid
on each transaction; and (iv) a computation showing compliance with the
Partnership Agreement. The Partnership shall, upon request, submit to the
Commissioner of Corporations of the State of California or to any of the
various state securities administrators any report or statement required to be
distributed to Limited Partners pursuant to the Partnership Agreement or any
applicable law or regulation.

The Partnership's United States Partnership Income Tax Informational
Return (and any applicable state income tax information returns) will be
prepared by the accountants regularly retained by the Partnership, and
appropriate tax information will be submitted to the Limited Partners within 75
days following the end of each fiscal year of the Partnership. A reconciliation
between GAAP and income tax information will not be provided to the Limited
Partners, however, such reconciliation will be available in the office of the
Partnership for inspection and review by any interested Limited Partner.

SALES LITERATURE

In addition to and apart from this Prospectus, the Partnership will
use certain supplemental sales material in connection with the offering of the
Units. This material, prepared by the General Partners, includes a brochure
describing the General Partners and their Affiliates, the objectives of the
Partnership, and pictures and summary descriptions of properties similar to
those to be acquired by the Partnership. The

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brochure will be accompanied or preceded by this Prospectus. Business reply
cards, introductory letters and seminar invitation forms may be sent to
Participating Dealers for their internal use. The Partnership may also respond
to specific questions from Participating Dealers and prospective investors. No
person has been authorized to prepare for, or furnish to, a prospective
investor any sales literature other than: (i) that described herein or in a
supplement hereto; and (ii) newspaper advertisements or solicitations of
interest limited to identifying the Offering and the location of sources of
further information.

Use of any sales materials is conditioned upon the filing with and, if
required, clearance by appropriate regulatory agencies. Such clearance (if
provided), however, does not indicate that the regulatory agency allowing the
use of the materials has passed on the merits of the Offering or the adequacy
or accuracy of the materials.

This Offering is made only by means of this Prospectus. Except as
described herein, the Partnership has not authorized the use of supplemental
literature or sales material in connection with this Offering. Although it is
believed that the information contained in such literature does not conflict
with any of the information set forth in this Prospectus, such material does
not purport to be complete, and should not be considered as a part of this
Prospectus, or as incorporated in this Prospectus by reference, or as forming
the basis of the Offering described herein.

LEGAL MATTERS

Legal matters in connection with the Units offered hereby, the
formation of the Partnership and its status as a limited partnership for
federal income purposes have been passed upon, by Jaffe, Raitt, Heuer & Weiss,
P.C., One Woodward Avenue, Suite 2400, Detroit, Michigan 48226, counsel to the
Partnership. Additionally, the statements under the caption "Tax Aspects of the
Offering" and elsewhere as they relate to federal income tax matters and the
statements under the caption "ERISA Considerations for Qualified Plans" have
been reviewed by Jaffe, Raitt, Heuer & Weiss, P.C. Jaffe, Raitt, Heuer &
Weiss, P.C. does not purport to represent Limited Partners or potential
investors, who should consult their own counsel. See "Conflicts of
Interest-Legal Counsel for the Partnership and the General Partners in the Same
Law Firm."

EXPERTS

Balance sheets of the Partnership and of the Managing General Partner,
each as of July 30, 1996, included in this Prospectus, have been included in
reliance on the reports of Coopers & Lybrand, L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION

As of the date of this Prospectus, the Partnership has not yet had any
operations. The Partnership intends to utilize the proceeds of this Offering as
set forth under "Estimated Use of Proceeds" to acquire existing,
income-producing commercial properties and equipment which will be leased on a
"triple-net" basis primarily to operators of national chain and nationally
franchised fast-food, family style and dinner house restaurants as well as
other franchised service-type businesses. The Partnership also intends to
acquire Properties that will be leased on a "double net" basis (the Partnership
being responsible for the maintenance of the roof and/or exterior walls for
such Properties) to various Retail Concerns that are operating at least ten
other store locations. The Property leases are expected to provide for a base
minimum annual rent, with provisions for fixed increases on specific dates or
indexation of rent to indices such as the Consumer Price Index and/or
percentage rents. Equipment will be leased only pursuant to Full Payout

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Leases. The Partnership may incur secured indebtedness in connection with the
acquisition of its Properties and/or Equipment.

LIQUIDITY

Once substantially all of the Partnership's funds have been applied as
intended, the Partnership expects to require limited amounts of liquid assets
since the form of lease which it intends to use for its Properties and
Equipment will require lessees to pay all taxes and assessments, most repairs
and insurance premiums. Moreover, the lessees will be required, in most
instances, to maintain, for the joint benefit of the Partnership and lessee,
casualty insurance. The General Partners expect that the cash flow to be
generated by the Partnership's Properties and Equipment will be adequate to pay
operating expenses and provide distributions to Limited Partners.

Net Offering Proceeds, together with leverage of up to 35% of the sum
of Gross Proceeds and the aggregate amount of Partnership indebtedness secured
by Partnership Assets (approximately 40% of the aggregate purchase prices of
Partnership Assets) when incurred, will provide funds to enable the Partnership
to purchase Properties and Equipment. See "Investment Objectives and Policies."

RESULTS OF OPERATIONS

The General Partners are not aware of any known trends or
uncertainties, other than national or regional economic conditions, which
reasonably may be expected to have a material impact, favorable or unfavorable,
on revenues or income from the acquisition and operation of Properties and/or
Equipment other than those referred to herein.

CAPITAL RESOURCES

As of the date of this Prospectus, the Partnership has not yet
acquired any Properties or Equipment. The number of Properties and/or the
amount of Equipment to be acquired will depend upon the number of Units sold in
the Offering. The General Partners are not aware of any material trends,
favorable or unfavorable, in either capital resources or the outlook for
long-term cash generation, nor do they expect any material changes in the
availability and relative cost of such capital resources, other than as
referred to herein.

ADDITIONAL INFORMATION

This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto with respect to the offer
and sale of Units which the Partnership has filed with the Securities and
Exchange Commission (the "Commission"), and which may be inspected and copied
at the Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission at 500 West Madison Street,
Fourteenth Floor, Chicago, Illinois 60661 and 26 Federal Plaza, Room 1102, New
York, New York 10278. This material, as well as copies of all other documents
filed with the Commission, may be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549 upon payment of the fee prescribed by
the Commission. The Commission maintains a Web site that contains reports,
proxy information and statements, and other information regarding registrants
that file electronically with the Commission. The Web site address is
http://www.sec.gov. The Partnership files electronically.

DEFINITIONS

"Act" shall mean the Securities Act of 1933, as amended.

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"Adjusted Investment" shall mean the amount of cash contributed by the
Limited Partners to the Partnership reduced by certain prior cash distributions
upon the sale or refinancing of an Asset.

"Administrative Services" shall mean services such as typing, record
keeping, preparation and dissemination of Partnership reports, preparation and
maintenance of records regarding Limited Partners, preparation and
dissemination of responses to investor inquiries and other communications with
investors and any other record keeping required for Partnership purposes.

"Acquisition Fees" shall mean all fees and commissions paid or payable
to any person by any person (whether designated as real estate commissions,
finder's fees or similar fees) in connection with the Partnership's acquisition
of Properties and Equipment.

"Acquisition Expenses" shall mean surveys, appraisals, title and
escrow fees, legal and accounting fees and expenses, computer use related
expenses, environmental and asbestos audits and travel and communication
expenses incurred in the selection and acquisition of Properties and Equipment.

"Affiliate" shall mean: (i) any Person directly or indirectly
controlling, controlled by or under common control with another Person; (ii)
any Person owning or controlling 10% or more of the outstanding voting
securities of such other Person; (iii) any officer, director, trustee, or
partner of such Person; and (iv) if such other Person is an officer, director
or partner, any company for which such Person acts in any such capacity.
Notwithstanding the foregoing, the term Affiliate shall not apply to any Person
who shall serve solely as an independent director, trustee or partner of the
General Partners or of an Affiliate of the General Partners nor shall a partner
in a partnership or joint venture with (a) the Partnership or (b) an Affiliate
of the General Partners, be deemed an Affiliate of the General Partners solely
by virtue of such relationship.

"Assets" shall mean the Equipment and the Properties.

"Assignment Agreement" shall mean that certain agreement between
Patrick L. Beach and the other partners of City Centre.

"August Redemption Period" shall mean the period of time from March 1
but before April 1.

"Capital Contribution" shall mean the Original Contribution.

"Cash Flow" shall mean, with respect to any period, all cash receipts
derived from payments of all forms of income on Assets held by the Partnership
including all rents from and other revenues paid in connection with Partnership
Assets (as distinguished from Original Contributions and exclusive of any Net
Sale or Refinancing Proceeds), without deduction for depreciation, plus
amounts, if any, from reserves attributable to such cash receipts with respect
to any prior period, if no longer deemed necessary for Partnership operations,
less cash receipts used to pay operating expenses and to repurchase any Units
or set aside from such cash receipts by the Managing General Partner for
working capital reserves.

"Captec" shall mean Captec Financial Group, Inc., the parent of the
Managing General Partner, Captec Franchise Capital Corporation IV.

"Captec II" shall mean Captec Franchise Capital Corporation II.

"Captec III" shall mean Captec Franchise Capital Corporation III.

"Captec L.P. II" shall mean Captec Franchise Capital Partners L.P. II.

"Captec L.P. III" shall mean Captec Franchise Capital Partners L.P.
III.

95
<PAGE> 127

"City Centre" shall mean City Partners Limited Partnership.

"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.

"Commission" shall mean the Securities and Exchange Commission.

"Corporation" shall mean Captec Franchise Capital Corporation IV.

"Current Preferred Return" shall mean a cumulative, noncompounded
return equal to ten percent (10%) per annum on a Limited Partner's Adjusted
Investment, calculated to commence on the first day of the month following the
month in which the Limited Partner is admitted to the Partnership as a Limited
Partner.

"Dealer Property" shall mean property or equipment held for sale to
customers in the ordinary course of the Partnership's trade or business.

"Debt Fee" shall mean 0.067% for each 1% of indebtedness (calculated
as the aggregate amount of Partnership indebtedness secured by Partnership
Assets as a percentage of the aggregate purchase prices of such Assets)
incurred in acquiring Properties and/or Equipment.

"Distributions" shall mean distributions to Limited Partners from the
Partnership.

"DOL" shall mean the United States Department of Labor.

"DOL Regulations" shall mean the Department of Labor Regulations.

"Double Net Lease" shall mean a lease in which the tenant is required
to pay all taxes, assessments, utilities, insurance, maintenance and repair
costs, other than the maintenance and repair of the exterior walls and roof,
associated with the Property that is the subject of such lease.

"Equipment" shall mean the equipment packages acquired by the
Partnership.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

"Escrow Agent" shall mean Michigan National Bank.

"Extended Termination Date" shall mean 2 years after the effective
date of this Prospectus.

"February Redemption Period" shall mean the period of time from
February 1 but before March 1.

"FIRPTA" shall mean the Foreign Investment and Real Property Tax Act.

"Front-End Fees" shall mean fees and expenses paid by any party for
any services rendered in connection with and during the Partnership's
organizational or acquisition phase including Organizational and Offering
Expenses, Acquisition Fees, Acquisition Expenses and any other similar fees.

"Full Payout Lease" shall mean a lease providing that the present
value of the rental payments during the term of the lease is at least
sufficient to permit the Partnership to recover the purchase price of the
Equipment that is the subject of such lease.

"GAAP" shall mean generally accepted accounting principles.

96
<PAGE> 128

"General Partners" shall mean Captec Franchise Capital Corporation IV,
a Michigan corporation, and Patrick L. Beach, or any other person, corporation
or other entity which succeeds either of them in such capacity, as well as any
additional general partners.

"Gross Proceeds" shall mean the aggregate purchase price of all Units
sold for the account of the Partnership through the Offering, without deduction
for Selling Commissions, the Non-Accountable Expense Allowance, Other
Organization and Offering Expenses, and Acquisition Fees and Expenses. For
purposes of computing Gross Proceeds, the purchase price of any Unit for which
reduced Selling Commissions are paid to a Participating Dealer (where net
proceeds to the Partnership are not reduced) shall be deemed to be $1,000.00.

"Investor" shall mean any person or entity admitted to the Partnership
as a limited partner, including any person or entity admitted to the
Partnership as a substituted limited partner in accordance with the Partnership
Agreement.

"Investment in Assets" shall mean the amount of Gross Proceeds used to
invest in Property and/or Equipment, including working capital reserves
allocable thereto and other cash payments, but excluding Front-End Fees.

"IRA" shall mean Individual Retirement Account.

"IRS" shall mean the Internal Revenue Service.

"Lease" shall mean a lease for Equipment or Property entered into by
the Partnership as lessor.

"Limited Partner" shall mean any person or entity admitted to the
Partnership as a limited partner, including any person or entity admitted to
the Partnership as a substituted limited partner in accordance with the
Partnership Agreement.

"Managing General Partner" shall mean Captec Franchise Capital
Corporation IV, a Michigan corporation.

"Maximum Number of Units" shall mean 30,000 Units.

"Minimum Number of Units" shall mean 2,000 Units.

"NASD" shall mean National Association of Security Dealers.

"Net Offering Proceeds" shall mean Gross Proceeds less Selling
Commissions, the Non-Accountable Expense Allowance, Other Organization and
Offering Expenses, and Acquisition Fees and Expenses.

"Net Sale or Refinancing Proceeds" shall mean receipts from
dispositions or refinancing of Partnership Properties or Equipment plus
amounts, if any, from reserves attributable to prior dispositions if no longer
deemed necessary for Partnership operations, less (i) the amount paid or to be
paid in connection with or as an expense of such disposition or refinancing;
(ii) the amount necessary for the payment of all debts and obligations of the
Partnership including, but not limited to, fees to the Managing General Partner
or its Affiliates and amounts, if any, required to be paid to, arising from or
otherwise related to the particular disposition or refinancing; and (iii) any
amount set aside by the Managing General Partner for working capital reserves
from such receipts.

"Non-Accountable Expense Allowance" shall mean 2% of the Gross
Proceeds to cover non-accountable expenses related to the offering.

97
<PAGE> 129

"Offering" shall mean the offering of up to 30,000 Units in Captec
Franchise Capital Partners L.P. IV.

"Original Contributions" shall mean the Limited Partners' original
capital contributions to the Partnership.

"Organization and Offering Expenses" shall mean all expenditures
classified as syndication expenses pursuant to Code Section 709 and Treasury
Regulation Section 1.709-2(b), including, but not limited to, all those
expenses incurred in connection with the formation, qualification and
registration of the Partnership and in marketing, distributing and processing
Units, including any selling commissions and discounts under applicable federal
and state law, and any other expenses actually incurred and directly related to
the offering and sale of Units, including such expenses as: (a) fees and
expenses paid to attorneys in connection with the offering, (b) securities
jurisdictional fees, filing fees and taxes, (c) the costs of qualifying,
printing, amending, supplementing, mailing and distributing the Partnership's
Prospectus including telephone and telegraphic costs, (d) the costs of
qualifying, printing, amending, supplementing, mailing and distributing sales
materials used in connection with the issuance of Units, including telephone
and telegraphic costs, (e) remuneration of officers and employees of the
General Partners and its Affiliates and the Partnership while directly engaged
in marketing, distributing, processing and establishing records of Units and
establishing records and paying selling commissions, (f) accounting and legal
fees and expenses incurred in connection therewith by the General Partners or
its Affiliates, (g) reimbursements for accountable bona fide costs of due
diligence incurred by Participating Dealers and their registered
representatives, (h) escrow fees and expenses in connection with the Offering,
and (i) the Non-Accountable Expense Allowance.

"Participants" shall mean participants in the Distribution
Reinvestment Plan.

"Participating Dealers" shall mean selected broker-dealers who are
members of the NASD.

"Partnership" shall mean Captec Franchise Capital Partners L.P. IV.

"Partnership Agreement" shall mean the limited partnership agreement
of Captec Franchise Capital Partners L.P. IV, as it may be amended.

"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.

"Plan Assets" shall mean the assets of a Qualified Plan.

"Performance Preferred Return" shall mean a cumulative, noncompounded
return equal to ten and one-half percent (10.5%) per annum on a Limited
Partner's Adjusted Investment, calculated to commence on the first day of the
month following the month in which the Limited Partner is admitted to the
Partnership as a Limited Partner.

"Property" or the "Properties" shall mean (i) the real property or
properties, including the building or buildings located thereon, (ii) the real
properties only, or (iii) the buildings only, which are acquired by the
Partnership, either directly or through partnership or other joint venture
arrangements. For purposes of this definition, the term real property includes
the Partnership's interest as lessee under a ground lease.

"Purchase Price" shall mean (i) the invoice price or contract price at
which the Partnership acquired Property and/or Equipment from the manufacturer
or a third party seller, or an amount no greater than the invoice price or
contract price, at which an Affiliate of the Partnership, acquired Property
and/or Equipment. The Purchase Price of Equipment and/or Property shall include
Acquisition Fees (except for purpose of the calculation of such Fees) and all
debt secured by liens and security interests on the Property and/or Equipment,
but shall exclude points and prepaid interest.

98
<PAGE> 130

"Qualified Plans" shall mean pension, profit-sharing and stock bonus
plans, Keogh Plans, and Individual Retirement Accounts that qualify under
Section 501 of the Code.

"Redemption Periods" shall mean both February and March redemption
periods.

"Regulations" shall mean regulations promulgated under the Internal
Revenue Code of 1986 as amended.

"Reinvestment Agent" shall mean Participating Dealers registered in
the Participant's state of residency.

"Retail Concerns" shall mean prominent national and regional retail
concerns.

"Rev. Proc." shall mean a Revenue Procedure issued by the Service.

"Section 467 Rental Agreement" shall mean a rental agreement for the
use of tangible property under which there is at least one amount allocable to
the use of property during a calendar year, which amount is to be paid after
the close of the calendar year following the calendar year in which such use
occurs, or there are increases in the amount to be paid as rent under the
agreement.

"Section 751 Property" shall mean substantially appreciated inventory
items and unrealized receivables as defined in Section 751 of the Code.

"Section 754 election" shall mean a partnership election under Section
754 of the Code.

"Selling Commissions" shall mean any and all commissions payable to
underwriters, managing dealers, or other broker-dealers in connection with the
sale of Units as described in the Prospectus.

"Service" shall mean the Internal Revenue Service.

"Subscription Agreement" shall mean the subscription agreement for
Captec Franchise Capital Partners L.P. IV.

"Subscription Documents" shall mean the Subscription Agreement and
other related subscription documents.

"Tax Exempt Investors" means those Investors that are described in
section 168(h)(2) of the Code.

"Tax Treaties" shall mean income tax treaties between the United
States to foreign jurisdictions.

"Termination Date" shall mean the date one (1) year after the date of
this Prospectus.

"Triple Net Lease" shall mean a lease in which the tenant is required
to pay all taxes, assessments, utilities, insurance, maintenance, and repair
costs associated with the Property that is the subject of such lease.

"UBTI" shall mean unrelated business taxable income.

"Unit" shall mean the limited partnership interest of a Limited
Partner that represents a capital contribution of $1,000.00.

"USRPIs" shall mean United States real property interests.

99
<PAGE> 131

"1986 Act" shall mean the Tax Reform Act of 1986.

"1987 Act" shall mean the Revenue Act of 1987.

"1988 Act" shall mean the Technical and Miscellaneous Revenue Act of
1988.

"1989 Act" shall mean the Revenue Reconciliation Act of 1989.

"1993 Act" shall mean the Revenue Reconciliation Act of 1993.

"1984 Act" shall mean the Tax Reform Act of 1984.

"1934 Act" shall mean Securities and Exchange Act of 1934.

100
<PAGE> 132

INDEX TO FINANCIAL STATEMENTS

Page(s)
------
Captec Franchise Capital Partners L.P. IV

Report of Independent Accountants F-2

Financial Statement:

Balance Sheet F-3

Notes to Balance Sheet F-4 through F-5

Captec Franchise Capital Corporation IV

Report of Independent Accountants F-7

Financial Statement:

Balance Sheet F-8

Notes to Balance Sheet F-9

F-i
<PAGE> 133

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

REPORT ON AUDIT OF BALANCE SHEET

AS OF JULY 30, 1996

F-1

<PAGE> 134

Report of Independent Accountants

To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:

We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of July 30, 1996. This financial statement is the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Captec Franchise Capital
Partners L.P. IV as of July 30, 1996, in conformity with generally accepted
accounting principles.

/s/ COOPERS & LYBRAND L.L.P.

Detroit, Michigan
July 31, 1996

F-2

<PAGE> 135
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
July 30, 1996

ASSETS

<TABLE>
<S> <C>
Cash $300
----

Total assets $300
====

LIABILITIES & PARTNERS' CAPITAL

Total liabilities -

Partners' Capital:
Limited partners' capital accounts $100
General partners' capital account 200
----

Total partners' capital 300
----

Total liabilities & partners' capital $300
====

</TABLE>

The accompanying notes are an integral part of the balance sheet.

F-3
<PAGE> 136

Captec Franchise Capital Partners L.P. IV
Notes to Balance Sheet

1. THE PARTNERSHIP:

Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was organized on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a "triple net" or "double net" basis, primarily to operators of
national and regional franchised businesses, principally restaurants, as
well as national and regional retail chains. The Partnership has not
commenced operations.

The General Partners of the Partnership are Captec Franchise Capital
Corporation IV (the "Corporation"), a wholly owned subsidiary of Captec
Financial Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
hereinafter collectively referred to as the Sponsors. Patrick L. Beach
is also the Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation and Captec. The General Partners
have each contributed $100 in cash to the Partnership as a capital
contribution.

The initial Limited Partner of the Partnership is Patrick L. Beach. Mr.
Beach has contributed $100 to the capital of the Partnership and has
received 0.1 Unit. Upon admission to the Partnership of any other
Limited Partner, the initial Limited Partner may withdraw from the
Partnership, in which case his 0.1 Unit shall be redeemed for $100.

2. ORGANIZATION AND OFFERING EXPENSES:

Organization and offering expenses, excluding selling commissions, will
be paid initially by the Sponsors and/or their affiliates and reimbursed
by the Partnership in an amount equal to up to three percent (3%) of the
gross proceeds of the offering (less any amounts paid directly by the
Partnership). The Sponsors are liable for all expenses of the offering
and for the general obligations of the Partnership if no Units are sold
(i.e., if subscriptions are not received for the minimum number of
Units). In addition, the Sponsors and/or their affiliates will be paid a
non-accountable expense allowance by the Partnership in an amount equal
to two percent (2%) of the gross proceeds of the offering.

The Sponsors have also guaranteed payment of organization and offering
expenses which exceed 13% of the gross proceeds of the offering.

F-4

<PAGE> 137

Captec Franchise Capital Partners L.P. IV
Notes to Balance Sheet

3. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:

The Partnership was organized in July 1996, but has not commenced
operations. As no revenues or expenses have been incurred, no Statement
of Operations, Statement of Partners' Capital or Statement of Cash Flows
are included for the Partnership.

F-5
<PAGE> 138

CAPTEC FRANCHISE CAPITAL CORPORATION IV

REPORT ON AUDIT OF BALANCE SHEET

AS OF JULY 30, 1996

F-6
<PAGE> 139

Report of Independent Accountants

To the Board of Directors of
Captec Franchise Capital Corporation IV:

We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of July 30, 1996. This financial statement is the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Captec Franchise Capital
Corporation IV as of July 30, 1996, in conformity with generally accepted
accounting principles.

/s/ COOPERS & LYBRAND L.L.P.

Detroit, Michigan
July 31, 1996

F-7

<PAGE> 140
CAPTEC FRANCHISE CAPITAL CORPORATION IV
BALANCE SHEET
July 30, 1996

ASSETS

<TABLE>
<S> <C>
Cash $ 900

Investment in partnership 100
------
Total assets $1,000
======

LIABILITIES & STOCKHOLDERS' EQUITY

Total liabilities 0

Stockholders' equity:
Common stock, no par value; 60,000 shares authorized;
1,000 shares issued and outstanding $1,000
------

Total stockholders' equity 1,000
------

Total liabilities & stockholders' equity $1,000
======

</TABLE>

The accompanying notes are an integral part of the balance sheet.

F-8
<PAGE> 141

Captec Franchise Capital Corporation IV
Notes to Balance Sheet

1. ORGANIZATION:

Captec Franchise Capital Corporation IV (the "Corporation") is a Michigan
corporation organized on July 22, 1996. The Corporation was formed for
the purpose of serving as the managing general partner of Captec
Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership.

The Corporation is a wholly owned subsidiary of Captec Financial Group,
Inc. ("Captec"). Captec has paid $1,000 in cash to the Corporation for
the purchase of 1,000 shares of common stock of the Corporation. As a
general partner of the Partnership, the Corporation has contributed $100
to the capital of the Partnership. Patrick L. Beach is also a general
partner of the Partnership and is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec.
Each general partner has a 0.5 percent share in the Partnership's net
income or loss.

Affiliates of the Corporation are expected to provide various services to
the Partnership and will be paid certain fees for such services as
specified in the Partnership Agreement.

2. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:

The Corporation was organized in July 1996, but has not commenced
operations. As no revenues or expenses have been incurred, no Statement
of Operations, Statement of Stockholders' Equity or Statement of Cash
Flows are included for the Corporation.

F-9
<PAGE> 142
EXHIBIT A

PRIOR PERFORMANCE TABLES

The information in this Exhibit A contains certain relevant summary
information concerning prior partnerships sponsored by the General Partners and
their Affiliates which have investment objectives similar to the Partnerships
(the "Prior Partnerships").

Upon request to the General Partners, the General Partners will provide,
without charge, a copy of the most recent Annual Report on Form 10-K filed with
the Securities and Exchange Commission for Captec Franchise Capital Partners
L.P. II and Captec Franchise Capital Partners L.P. III, as well as a copy, for
a reasonable fee, of the exhibits filed with such reports.

The investment objectives of the Prior Partnerships, which are substantially
the same as those of the Partnership, generally include preservation and
protection of capital, the generation of increased income and protection
against inflation, capital appreciation, and deferral of taxation of a portion
of cash distributions.

INVESTORS SHOULD NOT CONSTRUE INCLUSION OF THE FOLLOWING TABLES AS IMPLYING
THAT THE PARTNERSHIP WILL HAVE RESULTS COMPARABLE TO THOSE REFLECTED IN SUCH
TABLES. DISTRIBUTABLE CASH FLOW, FEDERAL INCOME TAX DEDUCTIONS, OR OTHER
FACTORS COULD BE SUBSTANTIALLY DIFFERENT. INVESTORS SHOULD NOTE THAT, BY
ACQUIRING UNITS IN THE PARTNERSHIP, THEY WILL NOT BE ACQUIRING ANY INTEREST IN
ANY PRIOR PARTNERSHIPS.

DESCRIPTION OF TABLES

The following Tables are included herein:

Table I - Prior Performance Experience in Raising and Investing Funds

Table II - Prior Performance Compensation to Sponsor

Table III - Prior Performance Operating Results of Prior Programs

Unless otherwise indicated in the Tables, all information contained in the
Tables is as of June 30, 1996. The following is a brief description of the
Tables:

Table I - Experience in Raising and Investing Funds

Table I presents information on a percentage basis showing the experience of
the General Partners and their Affiliates in raising and investing funds for
the Prior Partnerships, the offerings of which closed between May 6, 1994 and
August 12, 1996.

The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise
funds for investment.

Table II - Compensation to Sponsor

Table II provides information, on a total dollar basis, regarding amounts and
types of compensation paid to the general partners of the Prior Partnerships.
<PAGE> 143

The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to the General Partners and their
Affiliates in connection with the Prior Partnerships, the offerings of which
closed between May 6, 1994 and August 12, 1996. The Table also shows the
amounts paid to the General Partners and their Affiliates from cash generated
from operations and from cash generated from sales or refinancing by each of
the Prior Partnerships on a cumulative basis commencing with inception and
ending June 30, 1996.

Table III - Operating Results of Prior Programs

Table III presents a summary of operating results for the period from
inception through June 30, 1996, of the Prior Partnerships, the offerings of
which closed between May 6, 1994 and August 12, 1996.

The Table includes a summary of income or loss of the Prior Partnerships
presented on the basis of generally accepted accounting principles. The Table
also shows cash generated from operations, which represents the cash generated
from operations of the properties of the Prior Partnerships, as distinguished
form cash generated from other sources (special items). The section of the
Table entitled "Special items" provides information relating to cash generated
from or used by items which are not directly related to the operations of the
properties of the Prior Partnerships, but rather are related to items of a
partnership nature. These items include proceeds from capital contributions of
limited partners, proceeds of mortgage loans, and disbursements made from these
sources of funds, such as acquisition of the properties and other costs which
are related more to the formation of the partnership than to the actual
operations of the properties.

The Table also presents information pertaining to investment income, returns
of capital, cash distributions from operations, sales and refinancing proceeds
expressed in total dollar amounts as well as distributions and tax results on a
per $1,000 investment basis.

<PAGE> 144

TABLE I

PRIOR PERFORMANCE EXPERIENCE IN RAISING AND INVESTING FUNDS

CAPTEC FRANCHISE CAPTEC FRANCHISE
CAPITAL PARTNERS CAPITAL PARTNERS
L.P. II(a) L.P. III(b)
---------------- ----------------
<S> <C> <C>
Dollar amount offered $7,500,000 $20,000,000

Dollar amount raised (100%) $1,940,500 $20,000,000

Less offering expenses:

Selling Commissions 8.0% 8.0%

Organizational expenses 3.0% 3.0%

Other (non-accountable allowance) 2.0% 2.0%

Reserves 0.0% 0.0%

Percent Available for Investment 87.0% 87.0%

Acquisition Costs:

Cash down payment 123.6% 81.7%

Acquisition fees 6.2% 3.2%

Acquisition expenses 0.0% 0.0%

Total acquisition costs 129.8% 84.9%

Percentage leverage 33.0% 0.0%

Date offering began May 7, 1992 August 12, 1994

Length of offering (months) 24 24

Months to invest 90% of amount available
for investment 4 (b)

</TABLE>
- ----------------------------

(a) Captec Franchise Capital Partners L.P.II ("Captec L.P. II") and Captec
Franchise Capital Partners L.P. III ("Captec L.P. III") are each
public programs with investment objectives similar to those of the
Partnership.

(b) Information in the table is presented as of September 30, 1996.
Captec L.P. III closed its offering on August 12, 1996 having raised
$20,000,000 from 1,391 investors. As of September 30, 1996, Captec
L.P. III had purchased the land and building of eleven properties for
a purchase price of $13,625,918 and ten equipment packages for
$3,359,131.

A-1

<PAGE> 145

TABLE II

PRIOR PERFORMANCE COMPENSATION TO SPONSOR

<TABLE>
<CAPTION>
CAPTEC FRANCHISE
CAPITAL PARTNERS L.P. II(a)
------------------------

<S> <C> <C> <C>
Date offering commenced May 7, 1992

Dollar amount raised $1,940,500

Amount paid to sponsor from proceeds of offering:

Offering expenses $252,265

Acquisition fees

- real estate commissions 0

- advisory fees 0

- other $119,953

Other

Dollar amount of cash generated from operations 1994 1995 1996(b)
before deducting payments to sponsor
$179,410 $256,554 $181,711

Amount paid to sponsor from operations:

Property management fees 0 0 0

Partnership management fees 0 0 0

Reimbursements 0 0 0

Leasing commissions 0 0 0

Other 0 0 0

Dollar amount of property sales and refinancing
before deducting payments to sponsor:

Cash 0 0 7,400

Notes 0 0 0

Amount paid to sponsor from property sales and
financing

Real estate commissions 0 0 0

</TABLE>
- ----------------------------

(a) Captec Franchise Capital Partners L.P. II is a public program with
investment objectives similar to those of the Partnership.

(b) Information is presented as of September 30, 1996.

A-2

<PAGE> 146
TABLE II

PRIOR PERFORMANCE COMPENSATION TO SPONSOR

<TABLE>
<CAPTION>
CAPTEC FRANCHISE
CAPITAL PARTNERS
L.P. III(a)
-------------------
<S> <C> <C>
Date offering commenced August 12, 1994

Dollar amount raised $20,000,000
Amount paid to sponsor from proceeds of offering:

Offering Expenses $2,588,775(b)
Acquisition fees

- real estate commissions 0

- advisory fees 0
- other $653,176(b)

Other 0

1995 1996(b)
---- ----

Dollar amount of cash generated from operations $346,827 $936,534
before deducting payments to sponsor

Amount paid to sponsor from operations:

Property management fees 0 0

Partnership management fees 0 0

Reimbursements 0 0

Leasing commissions 0 0

Other 0 0
Dollar amount of property sales and refinancing
before deducting payments to sponsor:

Cash 0 0

Notes 0 0

Amount paid to sponsor from property sales and 0 0
refinancing

Real estate commissions 0 0
</TABLE>
- ----------------------------

(a) Captec Franchise Capital Partners L.P. III is a public program with
investment objectives similar to those of the Partnership.

(b) Information is presented as of September 30, 1996.

A-3
<PAGE> 147

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC II

<TABLE>
<CAPTION>
1994 1995 1996(b)
------------ ------------- ------------
<S> <C> <C> <C>
Gross revenues $169,837 $ 349,675 $ 254,595
Profit on sale of properties 0 0 3,652
Interest income 30,325 0 0
Less: Operating expenses (6,443) (9,568) (12,980)
Interest expense (14,309) (83,553) (59,904)
Depreciation (15,377) (28,462) (21,355)
------------ --------- ---------

Net income - GAAP basis $ 164,033 $ 228,092 $ 164,008
============ ========= =========

Taxable Income
- from operations $ 126,606 $ 111,079 N/A(c)
============ ========= =========

- from gain on sale $0 $0 $0
== == ==

Cash generated from operations $ 179,410 $ 256,554 $ 181,711
Cash generated from sales 0 0 7,400
Cash generated from refinancing 0 0 0
------------ --------- ---------

Cash generated from operations, sales and
refinancing 179,410 256,554 189,111
Less cash distributions to investors: (a)
- from operating cash flow (136,988) (177,618) (102,645)
- from sales and refinancing 0 0 (7,400)
- from other: reduction of net investment in
financing leases (6,957) (69,282) (122,455)
------------ --------- ---------

Cash generated (deficiency) after cash distributions 35,465 9,654 (43,389)
Special items (not including sales and refinancing):
- Partners' capital contributions, net of
offering costs 1,688,135 0 0
- Proceeds from borrowings 831,000 0 0
- Purchase of real estate for operating leases (2,271,562) 326,760 0
- Purchase of equipment for financing leases (149,139) (425,284) 0
- Reduction of net investment in financing leases 6,957 69,282 122,455
- Principal payments of debt obligations (6,133) (39,099) (32,085)
- Increase in other assets (69,886) (7,837) (78,003)
- Increase (decrease) in other liabilities 22,187 36,753 (33,045)
------------ --------- ---------

Cash generated (deficiency) after cash distributions
and special items $ 87,024 ($ 29,771) ($ 64,067)
============ ========= =========
</TABLE>

A-4

<PAGE> 148
TABLE III (CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC II

<TABLE>
<CAPTION>
1994 1995 1996(b)
------------ ------------- ------

<S> <C> <C> <C>
Tax and Distribution Data per $1,000 Invested:

Federal Income Tax Results:
Ordinary income (loss)
- from operations $67 $57 N/A(c)
- from recapture 0 0 0
Capital gain (loss) 0 0 0

Cash Distributions to Investors: (a)
Source (on a GAAP basis):
- Investment income $77 $127 $85
- Return of capital 0 0 35

Source (on a cash basis):
- Sales 0 0 4
- Refinancing 0 0 0
- Operations $73 $91 53
- Other: reduction of net investment in
financing leases 4 36 63

Amount (in percentage terms) remaining
invested in program properties at the end
of the last year reported in the Table 100% 100% 98%

</TABLE>

A-5

<PAGE> 149
TABLE III (CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC L.P. III

<TABLE>
<CAPTION>
1995 1996(b)
------------- ------

<S> <C> <C>
Gross revenues $ 359,018 $ 865,796
Profit on sale of properties 0 0
Interest income 10,928 114,406
Less: Operating expenses (23,119) (43,668)
Interest expense 0 0
Depreciation (33,978) (65,441)
---------- -----------

Net income - GAAP basis $ 312,849 $ 871,093
========== ==========

Taxable Income
- from operations $ 63,498 N/A(c)
========== ==========

- from gain on sale $0 $0
== ==

Cash generated from operations $ 346,827 $ 936,534
Cash generated from sales 0 0
Cash generated from refinancing 0 0
---------- -----------
Cash generated from operations, sales and refinancing 346,827 936,534
Less cash distributions to investors: (a)
- from operating cash flow (289,426) (878,364)
- from sales and refinancing 0 0
- from other: reduction of net investment in financing leases (121,674) (229,625)
---------- -----------

Cash generated (deficiency) after cash distributions (64,273) (171,455)
Special items (not including sales and refinancing):
- Partners' capital contributions, net of offering costs 6,437,467 10,957,716
- Purchase of real estate for operating leases (3,403,260) (10,222,658)
- Purchase of equipment for financing leases (2,001,275) (1,357,856)
- Reduction of net investment in financing leases 121,674 229,625
- Increase in other assets (53,560) (128,012)
- Increase in other liabilities 55,034 414,066
---------- -----------

Cash generated (deficiency) after cash distributions and special items $1,091,807 $ (278,574)
========== ==========
</TABLE>

A-6

<PAGE> 150
TABLE III (CONTINUED)

OPERATING RESULTS OF PRIOR PROGRAMS
CAPTEC L.P. III

<TABLE>
<CAPTION>
1995 1996(b)
------------- ---------

<S> <C> <C>
Tax and Distribution Data per $1,000 Invested:

Federal Income Tax Results:
Ordinary income (loss)
- from operations $16 N/A(c)
- from recapture 0 0
Capital gain (loss) 0 0

Cash Distributions to Investors: (a)
Source (on a GAAP basis):
- Investment income $81 $62
- Return of capital 26 17

Source (on a cash basis)
- Sales 0 0
- Refinancing 0 0
- Operations $75 $63
- Other: reduction of net investment in financing leases 32 16

Amount (in percentage terms) remaining
invested in program properties at the end
of the last year reported in the Table 100% 100%
</TABLE>

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

(a) Cash distributions are paid quarterly, 15 days after the end of the
quarter. Distributions indicated above correspond to the reporting period,
but the last of the quarterly distributions included in the total were
actually paid in the following period.

(b) Results for the nine month period ended September 30, 1996.

A-7

<PAGE> 151

EXHIBIT B

AGREEMENT OF LIMITED PARTNERSHIP
<PAGE> 152

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
<PAGE> 153
EXHIBIT B

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

INDEX

<TABLE>
<CAPTION>
Page
<S> <C>
1. NAME AND PLACE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . B-1

2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

3. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9

4. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10

5. GENERAL PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10

6. LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10

7. PARTNERSHIP CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . B-11

8. LIABILITY OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . B-12

9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES . . . . . . . B-12

10. PARTNERSHIP EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . B-15

11. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS . . . . . . . . . . . . B-17

12. TRANSFERABILITY OF UNITS . . . . . . . . . . . . . . . . . . . . . . . B-23

13. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS . . . . . . . . . . . . . . . . B-26

14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND
DUTIES OF THE MANAGING GENERAL PARTNER . . . . . . . . . . . . . . . . . B-29

15. RIGHTS AND POWERS OF THE LIMITED PARTNERS . . . . . . . . . . . . . . . B-42

16. REMOVAL, BANKRUPTCY OR DISSOLUTION OF A
GENERAL PARTNER AND TRANSFER OF A
GENERAL PARTNER'S INTEREST . . . . . . . . . . . . . . . . . . . . . . . B-44

17. CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-46

18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP . . . . . . . . . . . . . B-46

19. SPECIAL POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . B-47

20. LIABILITY AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . B-49

21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-50

</TABLE>
<PAGE> 154

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

AMENDED AND RESTATED AGREEMENT of LIMITED PARTNERSHIP ("Partnership
Agreement") entered into as of the 31st day of October, 1996, by and among
Captec Franchise Capital Corporation IV, a Michigan corporation (the "Managing
General Partner") and Patrick L. Beach (the "Individual General Partner"), as
General Partners and Patrick L. Beach as the Initial Limited Partner (the
"Initial Limited Partner"), with offices at 24 Frank Lloyd Wright Drive, P.O.
Box 544, Ann Arbor, Michigan 48106-0544, and Patrick L. Beach, as the Initial
Limited Partner, with offices at 24 Frank Lloyd Wright Drive, P.O. Box 544, Ann
Arbor, Michigan 48106-0544.

WHEREAS, Captec Franchise Capital Partners L.P. IV is a limited partnership
presently existing under Delaware law and governed by a Partnership Agreement
dated as of July 30, 1996 (the "Former Partnership Agreement")." The Managing
General Partner, the Individual General Partner and the Initial Limited Partners
wish to amend and restate the Former Partnership Agreement as set forth below;

NOW, THEREFORE, in consideration of mutual promises made herein, the
parties hereto hereby agree as follows:

1. NAME AND PLACE OF BUSINESS

The name of the limited partnership to be governed hereby is Captec
Franchise Capital Partners L.P. IV (the "Partnership"). Its registered office in
Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The Partnership's registered agent at that address is The
Corporation Trust Company. The Managing General Partner shall have full power
and authority to change the Partnership's registered office or registered agent.
The Partnership's principal place of business is 24 Frank Lloyd Wright Drive,
P.O. Box 544, Ann Arbor, Michigan 48106-0544, or such other place as the
Managing General Partner may hereafter determine. The General Partners shall
from time to time execute or cause to be executed the Certificate and all such
certificates (including limited partnership and fictitious name certificates) or
other documents or cause to be done all such filing, recording, publishing or
other acts as may be necessary or appropriate to comply with the requirements
for the formation and the operation of a limited partnership under the laws of
the State of Delaware and for the purpose of establishing and protecting the
limited liability of the Limited Partners, under the laws of any other
jurisdiction in which the Partnership may conduct business.

2. DEFINITIONS

The following terms used in this Partnership Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:

"Acquisition Expenses" shall mean expenses, including but not limited to
credit reports, escrow fees, appraisal reports, attorneys' fees and title
insurance, accountants' fees and miscellaneous expenses, and travel and
communication expenses related to selection and acquisition of investments,
whether or not acquired.
<PAGE> 155

"Acquisition Fees" shall mean the total of all fees and commissions paid by
any Person to any Person, including the General Partners and their Affiliates in
connection with the selection, evaluation, acquisition, construction, and/or
development of, Property or Equipment by the Partnership, whether or not
acquired, including but not limited to, real estate commissions, selection fees,
finder's fees, Development Fees, nonrecurring management fees, consulting fees,
payments for covenants not to compete, guarantee fees, financing fees or other
similar fees or commissions, however designated and however treated for tax or
accounting purposes, or any fees of a similar nature, however designated. As
used herein, "Development Fee" shall mean a fee for packaging of a Partnership's
property, including negotiating and approving plans, and undertaking to assist
in obtaining zoning and necessary variances and necessary financing for the
specific property, either initially or at a later date.

"Act" shall mean the Securities Act of 1933, as amended.

"Additional Closing Date" shall mean each date between the Initial Closing
Date and the Final Closing Date on which a closing for Units sold pursuant to
the Prospectus occurs.

"Adjusted Investment" shall mean the Original Contributions attributable to
a Unit, reduced by the total amount of Net Sale or Refinancing Proceeds
distributed.

"Adjusted Net Asset Value" shall mean the book value of all Assets minus
all liabilities of the Partnership.

"Affiliate" of a Person shall mean: (i) any Person directly or indirectly
controlling, controlled by or under common control with another Person; (ii) any
Person owning or controlling 10% or more of the outstanding voting securities of
such other Person; (iii) any officer, director, trustee, or partner of such
Person; and (iv) if such other Person is an officer, director or partner, any
company for which such Person acts in any such capacity. Notwithstanding the
foregoing, the term Affiliate shall not apply to any Person who shall serve
solely as an independent director, trustee or partner of the General Partners or
of an Affiliate of the General Partners nor shall a partner in a partnership or
joint venture with (a) the Partnership or (b) an Affiliate of the General
Partners, be deemed an Affiliate of the General Partners solely by virtue of
such relationship.

"Appraised Value" shall mean the value of any real property according to an
appraisal made by an independent qualified appraiser who is a member in good
standing of the American Institute of Real Estate Appraisers (an MAI appraiser).

"Assets" means collectively all Partnership Properties and Equipment.

"Capital Account" shall mean, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:

(i) to each Partner's Capital Account there shall be credited such
Partner's Original Contribution, such Partner's distributive share of
Income, and any items in the

B-2
<PAGE> 156

nature of income or gain that are specifically allocated to such Partner,
and the amount of any Partnership liabilities that are assumed by such
Partner or that are secured by any Partnership property distributed to such
Partner.

(ii) to each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership property
distributed to such Partner pursuant to any provision of this Partnership
Agreement, such Partner's distributive share of losses, and any items in
the nature of expenses or losses that are specifically allocated to such
Partner, and the amount of any liabilities of such Partner that are assumed
by the Partnership or that are secured by any property contributed by such
Partner to the Partnership.

In the event any interest in the Partnership is transferred in accordance
with the terms of this Partnership Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent it relates to the
transferred interest. In the event the Gross Asset Values of Partnership assets
are adjusted pursuant hereto, the Capital Accounts of all Partners shall be
adjusted simultaneously to reflect the aggregate net adjustment.

The foregoing provisions and the other provisions of this Partnership
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the Managing
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto, are computed in order to
comply with such Regulations, the Managing General Partner may make such
modification. The Managing General Partner shall adjust the amounts debited or
credited to Capital Accounts with respect to (a) any property contributed to the
Partnership or distributed to the Partners; and (b) any liabilities that are
secured by such contributed or distributed property or are assumed by the
Partnership or the Partners in the event the Managing General Partner shall
determine such adjustments are necessary or appropriate pursuant to Treasury
Regulation Section 1.704-1(b) (2) (iv). The Managing General Partner also shall
make any appropriate modifications in the event unanticipated events might
otherwise cause this Partnership Agreement not to comply with Treasury
Regulations Section 1.704-1(b).

"Capital Contribution" shall mean the Original Contribution.

"Cash Flow" means, with respect to any period, all cash receipts derived
from payments of all forms of income on Assets held by the Partnership including
all rents from and other revenues paid in connection with Partnership Assets (as
distinguished from Original Contributions and exclusive of any Net Sale or
Refinancing Proceeds), without deduction for depreciation, plus amounts, if any,
from reserves attributable to such cash receipts with respect to any prior
period, if no longer deemed necessary for Partnership operations, less cash
receipts used to pay operating expenses and to repurchase any Units or set aside
from such cash receipts by the Managing General Partner for working capital
reserves.

B-3
<PAGE> 157

"Certificate" shall mean the Certificate of Limited Partnership of Captec
Franchise Capital Partners L.P. IV as filed with the Secretary of State of the
State of Delaware, and all amendments thereto.

"Closing Date" shall mean each date designated by the General Partners on
which subscribers for Units are admitted as Limited Partners as a result of
purchases occurring during the offering period.

"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.

"Current Preferred Return" shall mean a cumulative, noncompounded return
equal to ten percent (10%) per annum on a Limited Partner's Adjusted Investment,
calculated to commence on the first day of the month following the month in
which the Limited Partner is admitted to the Partnership as a Limited Partner.

"Delaware Act" shall mean the Delaware Revised Uniform Limited Partnership
Act as in effect and as it may be amended.

"Depreciation" shall mean, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis.

"Disposition" shall mean any Partnership transaction with respect to
Property or Equipment not in the ordinary course of its business including,
without limitation, sales, exchanges, or other dispositions of Property or
Equipment held by the Partnership, and recoveries of damage awards and insurance
proceeds with respect to Property or Equipment.

"Distributions" shall mean any cash or other property distributed to the
Limited Partners and the General Partners arising from their interests in the
Partnership, but shall not include any payments to the Managing General Partner
under the provisions of Sections 9 or 10.

"Equipment" shall mean any equipment acquired for lease by the Partnership,
whether directly or indirectly through a nominee, agent, partnership, trust,
joint venture or otherwise, but does not include leases.

"Final Closing Date" shall mean the date on which the last closing for
Units sold pursuant to the Prospectus occurs.

"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered in connection with and during the Partnership's organizational
or acquisition phase

B-4
<PAGE> 158

including Organizational and Offering Expenses, Acquisition Fees, Acquisition
Expenses and any other similar fees.

"Full Payout Lease" shall mean a lease under which the present value of
non-cancelable rental payments payable during the initial term of the lease is
at least sufficient to permit a lessor to recover the purchase price of
equipment.

"General Partners" shall mean Captec Franchise Capital Corporation IV and
Patrick L. Beach in their respective capacities as general partners of the
Partnership, or any other Person, corporation or other entity which succeeds
either of them in such capacity, as well as any additional general partners.

"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and the
Partnership;

(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing General Partner, as of the following times:
(a) the acquisition of an additional interest in the Partnership by
any new or existing Partner in exchange for more than the Original
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimus amount of Partnership property other than
money, unless all Partners receive simultaneous distributions of
undivided interests in the distributed property in proportion to their
interests in the Partnership; and (c) the termination of the
Partnership for federal income tax purposes pursuant to Code Section
708(b) (1) (B); and

(iii) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraph (i) or subparagraph (ii) hereof,
such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for
purposes of computing taxable income and loss.

"Gross Proceeds" shall mean the total proceeds from the sale of Units
before deductions for Front-End Fees.

"Individual General Partner" shall mean Patrick L. Beach in his capacity as
the individual general partner of the Partnership.

"Initial Closing Date" shall mean the date on which the first closing for
Units sold pursuant to the Prospectus occurs.

B-5
<PAGE> 159

"Initial Limited Partner" shall mean Patrick L. Beach in his capacity
as the initial limited partner.

"Limited Partners" shall mean the Initial Limited Partner and any
other Persons who are admitted to the Partnership as additional or
substituted Limited Partners. Reference to a "Limited Partner" shall refer
to any one of them.

"Limited Partnership Interests" shall mean the ownership interest of a
Partner in the Partnership from time to time, including the right of such
Partner to any and all benefits to which such Partner may be entitled as
provided in this Partnership Agreement and in the Delaware Act, together with
the obligations of such Partner to comply with all the terms and provisions of
this Partnership Agreement and of the Delaware Act.

"Majority Vote" shall mean the affirmative vote of the holders of more than
50% of the outstanding Units.

"Managing General Partner" shall mean Captec Franchise Capital Corporation
IV, or its successors and assigns in its or their capacity as the managing
general partner of the Partnership.

"Minimum Number of Units" shall mean 2,000 Units.

"Net Income or Loss From Annual Operations" shall mean the income or loss
for the Partnership's calendar year computed under the accrual method of
accounting for purposes of the federal income tax (excluding any income or loss
attributable to a Disposition or involuntary conversion of any of the
Partnership Property).

"Net Income or Loss From Other Than Annual Operations" shall mean the
income or loss for the Partnership's calendar year computed under the accrual
method of accounting for purposes of the federal income tax arising from (i) a
Disposition or (ii) any other transaction not included in the determination of
Net Income or Loss From Annual Operations.

"Net Offering Proceeds" shall mean the total Gross Proceeds less
Organizational and Offering Expenses.

"Net Sale or Refinancing Proceeds" shall mean receipts from Dispositions or
refinancing of Partnership Properties or Equipment plus amounts, if any, from
reserves attributable to prior Dispositions if no longer deemed necessary for
Partnership operations, less the following:

(i) the amount paid or to be paid in connection with or as an
expense of such Disposition or refinancing;

B-6
<PAGE> 160

(ii) the amount necessary for the payment of all debts and
obligations of the Partnership including, but not limited to, fees to the
Managing General Partner or its Affiliates and amounts, if any, required to
be paid to, arising from or otherwise related to the particular Disposition
or refinancing; and

(iii) any amount set aside by the Managing General Partner for working
capital reserves from such receipts.

"Offering" shall mean the offering of Units pursuant to the Prospectus.

"Organizational and Offering Expenses" shall mean all expenditures
classified as syndication expenses pursuant to Code Section 709 and Treasury
Regulation Section 1.709-2(b), including, but not limited to, all those expenses
incurred in connection with the formation, qualification and registration of the
Partnership and in marketing, distributing and processing Units, including any
selling commissions and discounts under applicable federal and state law, and
any other expenses actually incurred and directly related to the offering and
sale of Units, including such expenses as: (a) fees and expenses paid to
attorneys in connection with the offering, (b) securities jurisdictional fees,
filing fees and taxes, (c) the costs of qualifying, printing, amending,
supplementing, mailing and distributing the Partnership's Prospectus including
telephone and telegraphic costs, (d) the costs of qualifying, printing,
amending, supplementing, mailing and distributing sales materials used in
connection with the issuance of Units, including telephone and telegraphic
costs, (e) remuneration of officers and employees of the General Partners and
its Affiliates and the Partnership while directly engaged in marketing,
distributing, processing and establishing records of Units and establishing
records and paying selling commissions, (f) accounting and legal fees and
expenses incurred in connection therewith by the General Partners or its
Affiliates, (g) reimbursements for accountable bona fide costs of due diligence
incurred by Participating Dealers and their registered representatives, (h)
escrow fees and expenses in connection with the Offering, and (i) the 2% non-
accountable expense allowance payable to the General Partners pursuant to
Section 9.1 hereof.

"Original Contribution" shall mean the amount of $1,000 for each Unit,
which amount shall be attributed to such Unit in the hands of subsequent holders
thereof, less the return of any amount of uninvested funds returned pursuant to
Paragraph 11.10 hereof.

"Participating Dealers" shall mean those broker-dealers who as members of
the National Association of Securities Dealers, Inc. who are participating in
the public offering of the Units.

"Partners" shall mean collectively the General Partners and the Limited
Partners, and reference to a "Partner" shall be to any one of the Partners.

"Partnership" shall mean the limited partnership created under this
Partnership Agreement and any successor thereto.

"Partnership Agreement" shall mean this agreement of limited Partnership,
as amended and restated, and all amendments thereto.

B-7
<PAGE> 161

"Partnership List" shall mean an alphabetical list of the names, addresses
and business telephone numbers of the Limited Partners along with the number of
units held by each.

"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.

"Property" or "Properties" shall mean the real estate, together with the
buildings improvements, fixtures and Personal property associated therewith (but
excluding Equipment), acquired or to be acquired, by the Partnership.

"Prospectus" shall mean the prospectus contained in the registration
statement filed with the Securities and Exchange Commission for the registration
of the Units under the Securities Act of 1933, as amended, in the final form in
which said prospectus is filed with said Commission and as thereafter
supplemented.

"Purchase Prices" shall mean (i) the invoice price or contract price at
which the Partnership acquired Property and/or Equipment from the manufacturer
or a third party seller, or an amount no greater than the invoice price or
contract price, at which an Affiliate of the Partnership, acquired Property
and/or Equipment. The Purchase Price of Equipment and/or Property shall include
Acquisition Fees (except for purpose of the calculation of such Fees) and all
debt secured by liens and security interests on the Property and/or Equipment,
but shall exclude points and prepaid interest.

"Roll-Up Entity" shall mean a partnership, real estate investment trust,
corporation, trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up Transaction.

"Roll-Up Transaction" shall mean any transaction or series of transactions
that directly or indirectly, through acquisition or otherwise, involve the
combination, merger or conversion of the Partnership.

"Qualified Plans" shall mean qualified pension, profit sharing and other
employee retirement benefit plans (including Keogh [H.R. 10] plans) and trusts,
bank commingled trust funds for such plans and individual retirement accounts.

"Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or who will manage or participate
in the management of the Partnership and any Affiliate of such Person, but does
not include (i) any Person that is not an Affiliate whose only relationship with
the Partnership or the General Partners is that of an asset manager whose only
compensation from the Partnership is as such, and (ii) wholly-independent

B-8
<PAGE> 162

third parties such as attorneys, accountants and underwriters whose only
compensation from the Partnership is for professional services rendered in
connection with the offering of Units or the operations of the Partnership. A
Person may also be a Sponsor of the Partnership by: (i) taking the initiative,
directly or indirectly, and founding or organizing the business or enterprise of
the Partnership, either alone or in conjunction with one or more other Persons;
(ii) receiving a material participation in the Partnership in connection with
the founding or organizing of the business of the Partnership, in consideration
of services or property, or both the services and property; (iii) having a
substantial number of relationships and contacts with the Partnership; (iv)
possessing significant rights to control Partnership property; (v) receiving
fees for providing services to the Partnership which are paid on a basis that is
not customary in the industry; and (vi) providing goods or services to the
Partnership on a basis which was not negotiated at arms-length with the
Partnership.

"Substantially All of the Assets" shall mean, unless the context otherwise
dictates, assets representing 66-2/3% or more of the net book value of all of
the Partnership's Assets as of the end of the most recently completed fiscal
quarter.

"Tax-Exempt Entities" shall mean Qualified Plans and other entities exempt
from federal income taxation, such as endowment funds and foundations and
charitable, religious, scientific or educational organizations.

"Termination Date" shall mean one year after the effective date of the
Partnership's Prospectus.

"Unit" shall mean the ownership interest of the Limited Partners in the
Partnership.

3. PURPOSE

The principal purpose of the Partnership is to acquire, hold, lease,
mortgage, operate, sell or otherwise dispose of (i) Properties and Equipment
which will be leased on a "triple net" basis primarily to operators of national
chain and nationally franchised fast-food, family style and dinner house
restaurants as well as other franchised or chain businesses, and (ii) Properties
which will be leased on a "double net" (with the Partnership being responsible
for maintenance of the roof, exterior walls and/or parking lot) or "triple net"
basis to prominent franchised or chain national retail concerns which are
operating at least ten other store locations; and to take any and all actions
and to engage in any other business in which a limited partnership may lawfully
engage under the laws of the state which, in the opinion of the Managing General
Partner, are incidental to the foregoing or are necessary or appropriate to the
accomplishment of the purposes of the partnership. The principal investment
objectives of the Partnership will be: (i) preservation and protection of
capital; (ii) distribution of cash flow generated by the Partnership's leases;
(iii) capital appreciation of Partnership Properties; (iv) generation of
increased income and protection against inflation through required escalations
of base rents or participation in gross revenues of lessees of Partnership
Properties; and (v) deferral of taxation of Partnership cash distributions for
Limited Partners. The Partnership's overall objectives will

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be to maximize long term returns with its Properties and to enhance short term
returns with its Equipment.

4. TERM

The Partnership was formed as of the day of filing of the Certificate of
the Partnership with the Delaware Secretary of State and shall continue until
the 31st day of December 2026, unless previously terminated in accordance with
the provisions of this Partnership Agreement.

5. GENERAL PARTNERS

5.1 Capital Contributions. Captec Franchise Capital Corporation IV, and
Patrick L. Beach in their capacities as General Partners, have each contributed
$100 in cash to the Partnership. At all times during the existence of the
Partnership, the General Partners shall have a present and continuing interest
in Net Income or Loss From Other Than Annual Operations and Distributions
according to the provisions of Section 11.

5.2 Capital Accounts. The Partnership shall establish for each General
Partner a Capital Account (to be maintained in accordance with appropriate
provisions of federal income tax law, including Treasury Regulation Section
1.704-1(b)). In the event any interest in the Partnership is transferred in
accordance with the terms of this Partnership Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest. In the event the Gross Asset Values of Partnership assets
are adjusted for purposes of computing income or loss, the Capital Accounts of
all General Partners shall be adjusted simultaneously to reflect the aggregate
net adjustment as if the Partnership recognized gain or loss equal to the amount
of such aggregate net adjustment. Loans by any General Partner to the
Partnership shall not be considered contributions to the capital of the
Partnership.

5.3 Reserves. Since most of the Partnership's leases will be on a "triple
net" basis, it is not anticipated that a permanent reserve for maintenance and
repairs will be established. However, to the extent the Partnership has
insufficient funds for such purposes, the General Partners will advance to the
Partnership an aggregate amount of up to 1% of the Gross Proceeds for
maintenance and repairs.

6. LIMITED PARTNERS

6.1 Initial Limited Partner. The Initial Limited Partner has contributed
the sum of $100 to the capital of the Partnership and has received 1/10 Unit.
The 1/10 Unit of the Initial Limited Partner shall be redeemed immediately
following the admission to the Partnership of any other Limited Partner in
return for the sum of $100, whereupon the Initial Limited Partner shall withdraw
as a Limited Partner.

6.2 Capital Accounts. The Partnership shall establish for each Limited
Partner a Capital Account (to be maintained in accordance with appropriate
provisions of federal income tax law, including Treasury Regulation Section
1.704-1(b)). In the event any interest in the

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Partnership is transferred in accordance with the terms of this Partnership
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred interest. In the event the Gross
Asset Values of Partnership assets are adjusted for purposes of computing income
or loss, the Capital Accounts of all Limited Partners shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the Partnership
recognized gain or loss equal to the amount of such aggregate net adjustment.
Loans by any Limited Partner to the Partnership shall not be considered
contributions to the capital of the Partnership.

6.3 Authorization of Sale of Units. The Partnership is authorized to
issue not more than 30,000 Units (including the 1/10 Unit held by the Initial
Limited Partner, which 1/10 Unit shall be available for sale upon withdrawal of
said Initial Limited Partner). The Persons purchasing such Units shall
contribute the purchase price to the capital of the Partnership. The General
Partners, their Affiliates and Participating Dealers may purchase up to ten per
cent (10%) of the authorized Units net of any selling commissions but otherwise
on the same terms as other purchasers.

6.4 Escrow of Original Contributions and Commencement of Partnership
Operations. All Original Contributions shall be received by the Partnership in
trust, and shall be deposited in an escrow account in any financial institution
designated by the Managing General Partner as escrow agent for the Original
Contributions. If the Minimum Number of Units is not sold on or before one year
after the effective date of the Partnership's Prospectus (the "Termination
Date"), all monies held in escrow shall be returned to subscribers with any
interest earned thereon (subject to deductions for back-up withholding, if
applicable). If the Minimum Number of Units is sold by the Termination Date,
all monies held in escrow together with any interest earned thereon will be
distributed promptly by the escrow agent to the Partnership on the Initial
Closing Date, and all selling commissions then due and payable shall be paid to
the participating broker-dealers by the Partnership, as agent for the purchasers
of Units, and the Managing General Partner may, in its sole discretion continue
the offering for a period to end not later than (i) the sale of all Units
offered by the Prospectus or (ii) two years after the effective date of the
Prospectus. After the Initial Closing Date, investors shall be admitted as
Limited Partners on at least a monthly basis. Subscriptions shall be accepted or
rejected by the General Partners within thirty (30) days of their receipt; if
rejected, all funds shall be returned to the investor within ten (10) business
days after rejection. Investors whose subscriptions are accepted by the General
Partners shall be admitted to the Partnership at the time their names are shown
on the books and records of the Partnership as Limited Partners.

6.5 No Assessments or Additional Contributions. The Units are
non-assessable and no Limited Partner shall be required to make additional
contributions to the capital of the Partnership.

7. PARTNERSHIP CAPITAL

7.1 Withdrawal of Capital. No Partner shall have the right to withdraw, or
receive any return of, his Capital Contribution, except as specifically provided
herein. Except as provided in

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Paragraph 6.1, no Limited Partner shall have priority over any other Limited
Partner, as to the return of his Capital Contribution or as to profits, losses
or distributions.

7.2 Return of Capital. Under circumstances requiring a return of any
Capital Contribution, no Partner shall have the right to receive property other
than cash.

8. LIABILITY OF LIMITED PARTNERS

8.1 No Personal Liability. Limited Partners shall not be bound by, or be
personally liable for, the expenses, liabilities or obligations of the
Partnership, and no Limited Partner shall be required to lend funds to the
Partnership or to make any further Capital Contribution to the Partnership.

8.2 Obligation to Refund Prior Distributions. If the Partnership does not
have sufficient assets to discharge its liabilities, and under the Delaware Act,
Limited Partners are liable to the Partnership for previous Distributions as
determined by court of competent jurisdiction, then notwithstanding the
provisions of this Partnership Agreement, such Limited Partner shall be required
to repay all or any part of such Distributions, such obligation shall be the
obligation of such Limited Partner and not the obligation of the General
Partners.

9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES

The General Partners and their Affiliates will receive compensation from
the Partnership only as specified by Sections 9, 10, 11, and Paragraphs 14.2.7
and 14.2.8 hereof. Front-End Fees shall be reduced to the extent necessary to
comply with Paragraph 14.6 hereof.

9.1 Securities Commissions. Participating Dealers, including Affiliates of
the General Partners will receive selling commissions in an amount equal to 8.0%
of the Gross Proceeds attributable to all Units placed by them directly, subject
to volume discounts. An additional amount not exceeding 0.5% of such Gross
Proceeds may be paid to prospective Participating Dealers by the General
Partners from amounts received by them for Organizational and Offering Expenses
for accountable expenses incurred in connection with due diligence activities of
such prospective Participating Dealers and their registered representatives.

9.2 Non-Accountable Expense Allowance. The General Partners and/or their
Affiliates shall receive a non-accountable expense allowance from the
Partnership (the "Non-Accountable Expense Allowance"), aggregating 2.0% of Gross
Proceeds.

9.3 Organizational and Offering Expenses. The Managing General Partner or
an Affiliate shall be reimbursed for all Organizational and Offering Expenses up
to a maximum amount equal to 3.0% of Gross Proceeds, (less amounts paid directly
by the Partnership), excluding selling commissions and the Non-Accountable
Expense Allowance referenced in Paragraph 9.2 hereof, but including amounts paid
to participating dealers as accountable bona fide due diligence expenses in an
amount not exceeding 0.5% of Gross Proceeds.

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9.4 Acquisition Fees and Expenses. The General Partners or an Affiliate
shall receive Acquisition Fees equal to the lesser of (1) 4.0% of Gross Proceeds
plus an additional .0677% ("Debt Fee") for each 1% of indebtedness (calculated
as the aggregate amount of Partnership indebtedness secured by Partnership
Assets as a percentage of the aggregate Purchase Prices of such Assets) incurred
in acquiring Properties and/or Equipment, but in no event shall Acquisition Fees
exceed 5.0% of the aggregate Purchase Prices of Properties and/or Equipment; or
(2) compensation customarily charged in arm's-length transactions by others
rendering similar services as an on-going activity in the same geographic
location for property or equipment comparable to the Property or Equipment to be
purchased by the Partnership. Although the Debt Fee is included within the
definition of Acquisition Fees in calculating the 5.0% limitation, the Debt Fee
will be paid out of the proceeds of indebtedness rather than from Gross
Proceeds. The General Partners or an Affiliate shall pay all Acquisition
Expenses from amounts received as Acquisition Fees.

9.5 Asset Management Fees. The Managing General Partner or an Affiliate
shall receive an asset management fee equal to the lesser of competitive fees
for similar services in the same geographic location or 1.0% of gross rental
revenues from Partnership Properties and Equipment. Such asset management fee
shall be payable on a monthly or quarterly basis as determined by the Managing
General Partner, provided however, that such fees will accrue and be
subordinated to receipt by the Limited Partners of their Current Preferred
Return. Notwithstanding the foregoing, in the event of a default under a lease
which requires the Partnership to assume operations of a Property and/or
Equipment, such operations may be managed by an Affiliate of the General
Partners who will be responsible for providing leasing services for such
Property or Equipment. In such event, the Affiliate will be entitled to an
unsubordinated management fee equal to 3% of gross revenues generated by the
Property and/or Equipment plus reimbursement for on-site expenses.

9.6 Equipment Liquidation Fees. The Partnership may pay an Affiliate of
the General Partner a liquidation fee for the resale of Equipment in an amount
equal to the lesser of (i) 3.0% of the Purchase Price of the Equipment or
(ii) Fees customarily charged for similar services in the locale of the
Equipment being sold.

9.7 Real Estate Liquidation Fees. The Partnership may pay an Affiliate of
the General Partners a liquidation fee for the resale of real estate in an
amount equal to the lesser of (a) fifty percent (50%) of the real estate
commission customarily charged for similar services in the locale of the
Property being sold or (b) three percent (3%) of the Purchase Price of a
Property. Such fees shall accrue and be subordinated to receipt by the Limited
Partners of aggregate Distributions equal to a 10% per annum cumulative,
non-compounded return on their Adjusted Investment plus aggregate distributions
of Net Sale or Refinancing Proceeds equal to 100% of their Original
Contributions. Notwithstanding anything to the contrary herein, neither the
General Partners nor any of their Affiliates shall have an exclusive listing in
connection with the sale of a Property by the Partnership. The total
compensation paid by the Partnership to all persons and entities as real estate
liquidations fees or commissions in connection with any sale of Partnership
Properties shall not exceed the lesser of (i) six percent (6%) or (ii) that
commission or fee paid for the purchase or sale of property which is reasonable,
customary and competitive in light of the size, type and location of the
Property. In no event

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shall the Partnership pay, directly or indirectly, a commission or fee to the
General Partners or their Affiliates in connection with the reinvestment or
distribution of Net Sale or Refinancing Proceeds other than as described in
this Section 9.

9.8 Payment of Fees. Should a General Partner be removed from the
Partnership, any portion of any of the foregoing fees or any other fee or
reimbursement payable under this Partnership Agreement which is then due but not
yet paid, shall be paid by the Partnership to the General Partner or their
Affiliates, as the case may be, in cash within thirty (30) days of the date of
removal as stated in the written notice of removal, unless such amount is
included in the purchase price of the General Partners' interest in the
Partnership as determined under Paragraph 16.3 hereof.

9.9 Other Goods and Services. In extraordinary circumstances, the General
Partners and their Affiliates may provide other goods and services to the
Partnership if all of the following criteria are met: (i) the goods or services
must be necessary to the prudent operation of the Partnership; (ii) the
compensation, price or fee must be equal to the lesser of 90% of the
compensation, price or fee the Partnership would be required to pay to
unaffiliated parties who are rendering comparable services or selling or leasing
comparable goods on competitive terms in the same geographic location, or 90% of
the compensation, price or fee charged by the General Partners or their
Affiliates for rendering comparable services or selling or leasing comparable
goods on competitive terms; or (iii) if at least 95% of gross revenues
attributable to the business of rendering such services or selling or leasing
such goods are derived from Persons other than Affiliates, the compensation,
price or fee charged by an unaffiliated Person who is rendering comparable
services or selling or leasing comparable goods on competitive terms in the same
geographic location; (iv) the goods and services must be provided pursuant to a
written contract which may be modified in any material respect only by the vote
of a majority in interest of the Limited Partners and shall be terminable
without penalty on 60 days notice; and (v) the General Partners must receive at
least 33% of gross revenues for such goods and services from Persons other than
Affiliates. In addition, any such payment shall be subject to the further
limitation described in Paragraph 10.2 below. Extraordinary circumstances shall
be presumed only when in the good faith belief of the General Partners there is
an emergency situation requiring immediate action by the General Partners or
their Affiliates and the goods or services are not immediately available from
unaffiliated parties. Services which may be performed in such extraordinary
circumstances include emergency maintenance of Partnership assets, janitorial
and other related services due to strikes or lock- outs, emergency tenant
evictions and repair services which require immediate action.

The Partnership or an Affiliate may provide insurance brokerage services in
connection with obtaining insurance on the Property so long as the cost of
providing such service, including the cost of the insurance, is no greater than
the lowest quote obtained from two unaffiliated insurance agencies and the
coverage and terms are likewise comparable. In no event may such services be
provided by the Partnership or an Affiliate unless they are independently
engaged in the business of providing such services to other than Affiliates and
at least 75% of their insurance brokerage service gross revenue is derived from
other than Affiliates.

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The General Partners will not provide construction services to the
Partnership. The Partnership will obtain either a payment and performance bond
or a guaranty of performance for any Property which has not been constructed at
the time the Partnership acquires a particular Property.

9.10 Reimbursements. The General Partners shall also receive reimbursement
for (i) the actual cost to the General Partners or their Affiliates of goods and
materials used for and by the Partnership if obtained from unaffiliated parties;
and (ii) administrative services (as hereinafter defined) necessary for the
prudent operation of the Partnership. The amounts charged to the Partnership
for services performed pursuant to clause (ii) above shall not exceed the lesser
of: (l) the actual cost of such services; or (2) 90% of the amount which the
Partnership would be required to pay to unaffiliated parties for comparable
services. The Partnership's annual report to the Limited Partners shall include
an itemized breakdown of the services performed and the amount reimbursed to the
General Partners or their Affiliates pursuant to clause (ii) above, which
information shall be verified by the independent public accountants retained by
the Partnership. "Administrative services" for purposes of this Paragraph 9.10
include only services such as typing, record keeping, preparation and
dissemination of Partnership reports, preparation and maintenance of records
regarding Limited Partners, preparation and dissemination of responses to
investor inquiries and other communications with investors and any other record
keeping required for Partnership purposes. Notwithstanding the foregoing, the
General Partners and their Affiliates also may be reimbursed for actual expenses
incurred when extraordinary on site action is required.

9.11 Limitation on Claims for Fees. In no event shall the General Partners
be entitled to collect any fees or reimbursement amounts not requested within
one year of the date they were earned.

9.12 Guarantee of General Partners. The General Partners guarantee payment
of Organization and Offering Expenses (including selling commissions and the
Non-Accountable Expense Allowance) which exceed 13% of Gross Proceeds. Payment
of expenses pursuant to this guarantee will be without recourse to, or
reimbursement by, the Partnership.

10. PARTNERSHIP EXPENSES

10.1 Partnership Obligations. Except as otherwise contemplated by Section
9 hereof, the Partnership shall pay all expenses of the Partnership (which
expenses may be billed directly to the Partnership) which may include, but are
not limited to:

10.1.1 all costs of personnel employed by the Partnership;

10.1.2 all costs of borrowed money, taxes and assessment on
Partnership assets and other taxes applicable to the Partnership;

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10.1.3 except as otherwise provided in Paragraph 15.2.4, fees and
expenses of professionals retained by the Partnership in connection
with any of the foregoing, including without limitation, attorneys,
accountants, consultants and appraisers;

10.1.4 printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and
recording of documents evidencing ownership of an interest in the
Partnership or in connection with the business of the Partnership;

10.1.5 fees and expenses paid to independent contractors,
appraisers, mortgage bankers, brokers and servicers, leasing agents,
consultants, on-site managers, real estate brokers, insurance brokers,
consultants and other agents;

10.1.6 expenses in connection with the acquisition, disposition,
alteration, repair, remodeling, refurbishment, leasing, initial
financing, refinancing and operation of Partnership Properties
(including the costs and expenses of insurance premiums, real estate
brokerage and leasing commissions and of maintenance of such Property
as and if necessary); provided, however, that nothing contained herein
shall be construed to permit payment of construction or Development
Fees to the General Partners or their Affiliates;

10.1.7 the cost of insurance as required in connection with the
business of the Partnership; provided, however, that nothing contained
herein shall be construed to permit payment of insurance costs of
Affiliates or employees of the General Partners;

10.1.8 expenses of organizing, revising, amending, converting,
modifying or terminating the Partnership;

10.1.9 the cost of preparation and dissemination of the
informational material and documentation relating to Partnership
operations;

10.1.10 the cost incurred in connection with any litigation in which
the Partnership is involved, as well as in the examination,
investigation or other proceedings conducted by any regulatory agency
of the Partnership, including legal and accounting fees incurred in
connection therewith;

10.1.11 the cost of any computer equipment or services used for or by
the Partnership; and

10.1.12 the cost of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of
the Partnership.

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10.2 Notwithstanding anything herein and except as contemplated by
Paragraph 9.3 hereof, to the contrary, neither the General Partners nor their
Affiliates shall be entitled to reimbursement for:

10.2.1 rent or depreciation, utilities, capital equipment, other
administrative items;

10.2.2 services for which the General Partners or their Affiliates
are entitled to be compensated by way of a separate fee; and

10.2.3 salaries, fringe benefits, travel expenses, and other
administrative items incurred or allocated to any controlling Persons
of the General Partners or their Affiliates. Controlling Persons, for
purposes of this Paragraph 10.3 includes but is not limited to any
Person, whatever his title, who performs functions for a General
Partner similar to those of:

(a) Chairman or member of the Board of Directors;

(b) President;

(d) Those Persons holding 5% or more of the stock of the
Managing General Partner; or

(e) A Person having the power to direct or cause the
direction of the Managing General Partner, whether
through the ownership of voting securities, by contract,
or otherwise.

11. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS

11.1 Allocation of Income and Loss. The income and loss of the
Partnership for purposes of the federal income tax shall be allocated among the
Partners in accordance with this Paragraph 11.1. For purposes of this Section
11, Limited Partners shall mean and include all Limited Partners, other than the
Initial Limited Partner.

11.1.1 Net Income or Loss From Annual Operations. Net Income or Loss
From Annual Operations shall be allocated 99% to the Limited Partners
and 1% to the General Partners.

11.1.2 Net Income From Other Than Annual Operations. Net Income From
Other Than Annual Operations shall be allocated to the Capital
Accounts of the Partners prior to the distribution of Net Sale or
Refinancing Proceeds and cash from reserves deemed no longer necessary
for Partnership operations as follows:

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(a) First, Net Income in an amount equal to the aggregate
deficit in the Partners' Capital Accounts, if any, shall be
allocated to each Partner in the same ratio as the deficit in
such Partner's Capital Account bears to the aggregate of all such
Partners' deficit Capital Accounts;

(b) Second, to and among the Limited Partners until each
Limited Partner's Capital Account balance equals the sum of his
Performance Preferred Return and his Original Contribution less
the aggregate amount of Distributions to each Limited Partner;

(c) Third, to the General Partners in such amounts as are
necessary to cause the aggregate Capital Account balances of the
General Partners to be in a percentage ratio of 10% of all
Partnership Capital Account balances of all Partners;

(d) Fourth, to the Limited Partners in such amounts as are
necessary to cause the aggregate Capital Account balances of the
Limited Partners to be in a percentage ratio of 90% of all
Partnership Capital Account balances of all Partners;

(e) Fifth, to the General Partners in an amount equal to
their contributions of capital to the Partnership;

(f) Thereafter, the balance of the Net Income, if any, shall
be allocated 90% to the Limited Partners and 10% to the General
Partners.

11.1.3 Net Loss From Other Than Annual Operations. Net Loss From
Other Than Annual Operations shall be allocated to the Capital
Accounts of the Partners prior to the distribution of Net Sale or
Refinancing Proceeds and cash from reserves deemed no longer necessary
for Partnership operations, as follows:

(a) First, to the Partners having positive Capital Accounts
in proportion to and to the extent of their positive Capital
Account balances, until all positive Capital Account balances
shall be reduced to zero;

(b) Second, the balance of such losses shall be allocated to
those Partners bearing the ultimate risk of law related to such
losses in accordance with Treasury Regulations promulgated
pursuant to Code Section 704.

11.1.4 Unexpected Allocations. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) (4),
1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6), which causes or
increases a deficit balance in such Partner's Capital Account shall

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be specially allocated items of income and gain in an amount and
manner sufficient to eliminate such deficit balance as quickly as
possible.

11.1.5 Minimum Gain. Notwithstanding the foregoing, if there is a
net decrease in the Partnership's "minimum gain" (as defined in
Section 1.704-2(d)(1) of the Regulations) during a Partnership
taxable year, all Partners with deficit Capital Account balances
shall be allocated, before any other allocation is made under Code
Section 704(b), items of income and gain for such years (and, if
necessary, subsequent years) in the amount and in the proportions
needed to eliminate such deficits as quickly as possible. Such
allocation shall be interpreted in a manner to conform with Section
1.704-2(f) of the Regulations.

11.2 Apportionment of Income and Loss. That portion of Net Income and
Loss From Annual Operations allocated to the Limited Partners shall be
apportioned among those Persons owning Units at any time during each calendar
month in proportion to allocation factors calculated by multiplying their
respective Units by the number of days in such calendar month that they were the
owners of record of such Units. To the extent that any discrepancies in Capital
Accounts (as determined on a per Unit basis) arise among the Limited Partners
during the offering period, then, in the sole discretion of the Managing General
Partner, allocations of Net Income and Loss From Annual Operations and/or
Distributions shall first be made at the close of the offering period or as soon
as possible thereafter so as to equalize the Capital Accounts of each Limited
Partner on a per Unit basis, with any excess allocated in the manner described
herein.

11.3 Compliance With Allocation Laws. It is the intent of the Partners
that each Partner's distributive share of income, gain, loss, deduction, or
credit (or item thereof) shall be determined and allocated in accordance with
this Section 11 to the fullest extent permitted by Section 704(b) of the Code.
In order to preserve and protect the determinations and allocations provided for
in this Section 11, the Managing General Partner is authorized and directed to
allocate income, gain, loss, deduction, or credit (or any item thereof) arising
in any year differently than otherwise provided for in this Section 11 to the
extent that allocating income, gain, loss, deduction, or credit (or any item
thereof) in the manner provided for in this Section 11 would cause the
determinations and allocations of each Partner's distributive share of such
items not to be permitted by Section 704(b) of the Code and Treasury Regulations
promulgated thereunder. Any allocation made pursuant to this Paragraph 11.3
shall be deemed to be a complete substitute for any allocation otherwise
provided for in this Section 11 and no amendment of this Partnership Agreement
or approval of any Partner shall be required.

In making any allocation (the "New Allocation") under this Paragraph 11.3,
the Managing General Partner is authorized to act only after having been advised
by counsel to the Partnership that, under Section 704(b) of the Code and the
Treasury Regulations thereunder (i) the New Allocation is necessary, and (ii)
the New Allocation is the minimum modification of the allocations otherwise
provided for in this Section 11 necessary in order to assure that, either in

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the then current year or in any preceding year, each Partner's distributive
share of income, gain, loss, deduction, or credit (or any item thereof) is
determined and allocated in accordance with this Section 11 to the fullest
extent permitted by Section 704(b) of the Code and the Treasury Regulations
thereunder.

If the Managing General Partner is required by this Paragraph 11.3 to make
any New Allocation in a manner less favorable to the Limited Partners than is
otherwise provided for in Section 11, then the Managing General Partner is
authorized and directed, insofar as he is permitted to do so by Code Section
704(b), to allocate income, gain, loss, deduction or credit (or any item
thereof) arising in later years in such manner so as to bring the proportion of
income, gain, loss, deduction, or credit (or any item thereof) allocated to the
Limited Partners as nearly as possible to the proportion otherwise contemplated
by this Section 11.

11.4 Tax Allocation: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Grass Asset
Value.

In the event the Gross Asset Value of any Partnership property is adjusted,
subsequent allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury Regulations thereunder.

In the event of a combined taxable disposition of property pursuant to
which gain is to be allocated under this Paragraph 11.4 and other property the
gain from which is not allocated under this Paragraph 11.4, the gain to be
allocated under this Paragraph 11.4 in any calendar year shall bear the same
relationship to the total gain to be recognized in such year as the total gain
to be allocated under this Paragraph 11.4 from the disposition of the properties
bears to the total gain to be allocated from the disposition of the properties.

Any elections or other decisions relating to such allocations shall be made
by the Managing General Partner in any manner that reasonably reflects the
purpose and intention of this Partnership Agreement. Allocations pursuant to
this Paragraph 11.4 are solely for purposes of federal, state and local taxes
and shall not affect, or in any way be taken into account in computing, any
Partner's capital account or share of Income, Losses, other items or
distributions pursuant to any provision of this Partnership Agreement.

11.5 Distributions of Cash Flow. Distributions of Cash Flow shall be
made to the Partners in the following order of priority and in the following
amounts:

(i) First, to the Limited Partners in an amount up to the amount
necessary so as to cause the aggregate amount of distributions to

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the Limited Partners pursuant to this Section 11.5 to be equal to
their Current Preferred Return as of the last day of the preceding
month;

(ii) Second, to the General Partners in an amount up to that amount
necessary so as to cause the aggregate amount of distributions to
the General Partners pursuant to this Section 11.5 to be equal to
1% of the aggregate amount of distributions to all of the Partners
pursuant to this Section 11.5; and

(iii) Third, 99% to the Limited Partners and 1% to the General Partners

Such distributions of Cash Flow shall be apportioned quarterly among the
Limited Partners of record as of a record date declared within thirty (30) days
after the end of each quarter and shall be paid no less frequently than
quarterly. Limited Partners owning at least ten (10) Units may elect to
receive their quarterly distributions on a monthly basis, in which event their
quarterly distributions shall be paid in three (3) consecutive equal monthly
installments commencing on the quarterly distribution date. Such installment
shall be paid to Limited Partners of record as of the record date for quarterly
distributions. Cash Flow shall not be reinvested in Properties or Equipment.

11.6 Net Sale or Refinancing Proceeds and Reserves. Distributions of Net
Sale or Refinancing Proceeds shall be apportioned among the Limited Partners in
the same manner as Cash Flow and made to the Partners in the following order of
priority:

(i) First, to the Limited Partners in an amount up to the amount
necessary so as to cause the aggregate amount of distributions to
the Limited Partners pursuant to this Section 11.6 and Section 11.5
to be equal to the sum of (A) their Performance Preferred Return as
of the last day of the preceding month, and (B) their Original
Contributions;

(ii) Second, to the General Partners in an amount up to that amount
necessary so as to cause the aggregate amount of distributions to
the General Partners pursuant to this Section 11.6(ii) to be equal
to 10% of the aggregate amount of distributions to all of the
Partners pursuant to this Section 11.6; and

(iv) Third, 90% to the Limited Partners and 10% to the General Partners.

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11.7 Liquidating Distributions. Unless otherwise required by the
Delaware Act, the net cash proceeds of a sale, exchange or other disposition of
all or Substantially All of the Assets of the Partnership constituting a
dissolution of the Partnership shall be distributed in accordance with the
Partners Capital Account balances. Notwithstanding anything herein to the
contrary, the Partnership shall not distribute assets in kind.

11.8 General Partners' Interest. In no event will the General Partners
be allocated less than 1% of Net Income or Loss From Annual Operations for tax
purposes. To the extent that the Partnership shall be entitled to any deduction
for federal income tax purposes as a result of any interest in Net Income, Net
Loss and Distributions granted to the General Partners, such deduction shall be
allocated for federal income tax purposes to the General Partners. As among the
General Partners, the allocations of profit and loss and Distributions of Cash
Flow and Net Sale or Refinancing Proceeds, shall be divided as they may mutually
agree from time to time, without the need for consent of the Limited Partners.

11.9 Consent to Allocation Method. The methods hereinabove set forth by
which Distributions and allocations of Net Income and Loss From Annual
Operations and Net Income and Loss From Other Than Annual Operations are made
and apportioned are hereby expressly consented to by each investor as an express
condition to becoming a Partner.

11.10 Unutilized Net Proceeds. In the event that any portion of the Net
Proceeds is not invested or committed for investment within the later of
twenty-four (24) months from the date of the Prospectus or twelve (12) months
after the offering has terminated (except for any amounts set aside for
operating expenses or reserves), such portion of the Net Proceeds shall be
distributed to the investors who purchased Units as a return of capital without
reduction for Front-End Fees which would have been payable to the General
Partners or their Affiliates if such funds had been committed to investment. For
purposes of this Paragraph 11.10, funds shall be deemed to have been committed
to investment and will not be returned to the extent written agreements in
principle or letters of understanding were at any time executed, regardless of
whether any such investment may or may not be consummated, and to the extent any
funds have been reserved to make contingent payments in connection with any
Asset regardless of whether any such payments may or may not be made.

11.11 Escheat of Distributions. If, upon the termination and dissolution
of the Partnership, there remains outstanding on the books of the Partnership a
material amount of Distribution checks which have not been negotiated for
payment by Limited Partners, the Managing General Partner may, if deemed to be
in the best interests of the Partnership, cause such amounts to be redistributed
pro rata to Limited Partners of record on such final distribution date who have
previously cashed all of their Distribution checks; provided, however, that the
Partnership shall not be liable for any subsequent claims for payment of such
redistributed Distributions. The Managing General Partner is not required to
make such a redistribution, in which case such amounts will eventually escheat
to the state or as otherwise required in

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accordance with appropriate statutory authority. Notwithstanding the
foregoing, unclaimed funds of Persons who, for purposes of the Partnership's
records are Ohio residents, shall be distributed in accordance with the Ohio
unclaimed funds statute in effect as of the date on which the Partnership shall
have unclaimed funds.

11.12 Section 709 Expenses. Syndication and other nondeductible and
non-amortizable expenses, as defined in Code Section 709, shall be allocated to,
and under the capital account maintenance rules reduce, the Capital Accounts of
the Partners actually incurring such expense.

11.13 Withholding Taxes. In the event that the Partnership is required
to pay any withholding tax or other liability or obligation to any state,
federal or foreign taxing authority that arises because of any act or status of
any Limited Partner, including (but not limited to) the status of a Limited
Partner (or the Person owning such Unit), as a foreign Person under the Code,
and such tax or liability attributable to any year is in excess of the
distributions attributable to such Limited Partner for such year, the
Partnership shall pay such funds on behalf of such Limited Partner, and such
payment shall constitute a loan to such Limited Partner bearing interest at the
First Chicago NBD Bank prime rate and payable in full from the next distribution
of Net Sale or Refinancing Proceeds. Each Partner hereby grants the Partnership
a security interest in all Net Sale or Refinancing Proceeds distributable to
such Limited Partner or with respect to such Units in the amount of the loan
discussed in this Paragraph 11.13 and the Partnership shall have a right of
set-off against any such distributions of Net Sale or Refinancing Proceeds. Any
tax required to be withheld with respect to a Limited Partner will be charged to
that Limited Partner's Capital Account as if such tax had been distributed to
such Partner.

11.14 Distribution Reinvestment Plan. The Partnership has adopted a
Distribution Reinvestment Plan pursuant to which Limited Partners may elect to
have their distributions of Cash Flow, together with distributions from
Affiliates of the General Partner and other sources, applied to the purchase of
Units after sale of the Minimum Number of Units and prior to termination of the
offering of Units. The Distribution Reinvestment Plan is set forth in Exhibit 2
attached hereto.

12. TRANSFERABILITY OF UNITS

12.1 Restrictions on Transfers of Units by Limited Partners. A Limited
Partner may assign his Units only by a duly executed, written instrument of
assignment, the terms of which are not in contravention of any of the provisions
of this Partnership Agreement. The Partnership need not recognize for any
purpose any assignment of the Units of a Limited Partner unless there shall have
been filed with the Partnership and recorded on the Partnership's books a duly
executed and acknowledged counterpart of such written instrument of assignment,
and such instrument evidences the written acceptance by the assignee of all of
the terms and provisions of this Partnership Agreement, represents that such
assignment was made in accordance with all

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applicable laws and regulations and in all other respects is satisfactory in
form and substance to the Managing General Partner. Notwithstanding the
foregoing, no Limited Partner may sell, assign, transfer or exchange any Units:

12.1.1 if in the opinion of counsel for the Partnership such sale,
assignment, transfer or exchange may result, when considered with all
other sales, assignments, transfers and exchanges of Units in the
Partnership within the previous twelve (12) months, in the Partnership
being considered to have been terminated within the meaning of Code
Section 708 unless the Partnership and the transferring holder shall
have received a ruling by the Service that the proposed sale or
exchange will not cause such termination;

12.1.2 if counsel for the Partnership shall be of the opinion that
such sale, assignment, transfer or exchange might cause a violation of
applicable federal and state securities laws. In connection
therewith, Limited Partners may be required to furnish an opinion of
counsel satisfactory to counsel to the Partnership that such sale,
assignment, transfer or exchange complies with applicable federal and
state securities laws;

12.1.3 if the transferor or the transferee would hold Units
representing an Original Contribution of less than $5,000 unless 100%
of the transferor's Units are being transferred to such transferee,
except for transfers by gift or inheritance, intra- family transfers,
transfers resulting from family dissolutions and transfers to
Affiliates; or

12.1.4 if the Managing General Partner determines in its sole
discretion that such assignment would prevent the Partnership from
being able to satisfy either the 2% or 5% "safe harbors" contained in
Service Advance Notice 88-75 or in corresponding regulations or the
Partnership has received an opinion of counsel or a favorable service
ruling that such transfer would not result in the Partnership being
classified as a "publicly-traded partnership" for federal income tax
purposes.

Any attempted sale, assignment, transfer or exchange in contravention of
the provisions of this Paragraph shall, in the sole discretion of the Managing
General Partner, be voided and deemed ineffectual and shall not bind or be
recognized by the Partnership.

12.2 Special Exercise of the Rights of a Limited Partner. If a Limited
Partner dies, his executor, administrator or trustee, or, if he is adjudicated
incompetent, his committee, guardian or conservator, or if he becomes bankrupt,
the trustee or receiver of his estate, shall have all the rights of a Limited
Partner for the purpose of settling or managing his estate and such power as the
decedent or incompetent possessed to assign all or any part of his Units and to
join with the assignee thereof in satisfying conditions precedent to such
assignee becoming a substituted Limited Partner. The death, dissolution,
adjudication of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.

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12.3 Substituted Limited Partner. No Person shall have the right to
become a substituted Limited Partner in place of his assignor unless all of the
conditions set forth in Paragraph 12.1 are satisfied and:

12.3.1 the Limited Partner and his assignee shall execute and
acknowledge such other instruments as the Managing General Partner
may deem necessary or desirable to effect such substitution,
including (a) the written acceptance and adoption by the assignee
of the provisions of this Partnership Agreement, as the same may be
amended and his execution, acknowledgment; (b) delivery to the
Managing General Partner of a special power of attorney, the form
and content of which are described herein; and (c) a statement that
the assignee is acquiring the Units for investment purposes only
and not with an intent of further distribution of the Units.

12.3.2 a transfer fee of $100 (which may be increased in the
discretion of the Managing General Partner) shall have been paid to
the Partnership to cover all reasonable expenses connected with
such substitution.

12.4 Consent. By executing or adopting this Partnership Agreement, each
Limited Partner hereby consents to the admission of substituted Limited Partners
by the Managing General Partner, in accordance with the foregoing.

12.5 Effective Date; Records. No attempted transfer of Units or
substitution shall be effective, and the Partnership and the Managing General
Partner shall be entitled to treat the assignor of such Units as the absolute
owner thereof in all respects, and shall incur no liability for allocations of
Net Income, Net Loss or Distributions or transmittal of reports and notices
required to be given to Limited Partners hereunder which are made in good faith
to such assignor, until the "effective date", which shall be the first day of
the calendar month following completion (no later than five (5) days prior to
the beginning of such month) of the requirements set forth in Paragraphs 12.1
and 12.3 above. The Managing General Partner shall cause the records of the
Partnership and this Partnership Agreement to be amended to reflect the
admission and/or substitution of substituted Limited Partners as of the first
day of any month following the satisfaction of the conditions set forth in
Paragraph 12.3.

12.6 Right to Tender Units for Purchase. Commencing in 1998 or the
closing of the offering of Units for sale, whichever occurs later, the
Partnership shall repurchase any part or all of a Limited Partner's Units at his
written request, upon the following terms and subject to the following
restrictions:

12.6.1 The repurchase price shall be an amount equal to (i) 85%
of the tendering Limited Partner's Adjusted Investment, if the
repurchase occurs in 1998, (ii) 90% of the tendering Limited
Partner's Adjusted Investment, if the repurchase occurs in 1999, or
(iii) 100% of the tendering Limited Partner's Adjusted Investment
less (A) any Net Sale or Refinancing Proceeds previously
distributed in respect of such Units and not

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applied to a reduction of Adjusted Investment and (B) one-half of all
prior distributions of Net Cash Flow in respect of such Units, if the
repurchase occurs in 2000 or thereafter; distributions of Net Cash
Flow in respect of Units purchased in the secondary market after the
closing of the Offering shall be calculated as if such Units had been
issued at the mid-point of the offering of Units;

12.6.2 Limited Partners desiring to have their Units repurchased
must submit to the General Partners notification of the number of
Units for which they are requesting repurchase, on a form supplied by
the General Partners; the notification must be postmarked either after
February 1 but before March 1 (the "February Redemption Period") or
after August 1 but before September 1 (the "August Redemption Period";
collectively, the "Redemption Periods") in the year of repurchase;

12.6.3 During 1998, no more than 1/2% of the outstanding Units (as
of January 1, 1998) will be redeemed during either Redemption Period,
and thereafter no more than 1% of the outstanding Units (as of January
1 for the relevant year) will be redeemed during any Redemption
Period;

12.6.4 Repurchase requests with the earliest postmarks will be
honored first; Units tendered during the February Redemption Period
and August Redemption Period will be repurchased on the April 1 and
October 1, respectively, thereafter; any such Units tendered during a
Redemption Period which are not repurchased will not be eligible for
repurchase following a subsequent Redemption Period unless re-tendered
in such Redemption Period;

12.6.5 The Partnership shall not be obligated to repurchase any
Units if the Partnership's annualized Net Cash Flow for the three (3)
months prior to the Redemption Period, calculated on an annualized
basis, is less than 10% of the Adjusted Investment at the beginning of
such period;

12.6.6 The Partnership shall not be obligated to repurchase any
Units unless the Managing General Partner determines in his sole
discretion that funds are available for that purpose from Partnership
revenues otherwise distributable to Limited Partners or Partnership
borrowings and that such repurchase will not impair the capital or the
operations of the Partnership.

13. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS

13.1 Location of Records; Copies. The Partnership's books and records,
the Partnership Agreement and any amendments thereto and any separate
certificate of limited partnership and any amendments thereto shall be
maintained at the principal office of the Partnership or such other place as the
Managing General Partner may determine and shall be open to inspection and
examination of Limited Partners or their duly authorized representatives at all
reasonable times.

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The Limited Partners shall receive copies of this Partnership Agreement and any
amendments hereto and the certificate of limited partnership and any amendments
thereto, upon a request in writing to the Managing General Partner and payment
of any necessary duplication fees.

An alphabetical list of the names, addresses, and business telephone
numbers of the Limited Partners along with the number of Units held by each of
them (the "Partnership List") shall be maintained as part of the books and
records of the Partnership and shall be available for inspection by any Limited
Partner or its designated agent at the principal office of the Partnership upon
the request of the Limited Partner. The Partnership List shall be updated at
least quarterly to reflect changes in the information contained therein. A copy
of the Partnership List shall be mailed to any Limited Partner requesting the
Partnership List within ten days after receipt of the request. The copy of the
Partnership List shall be printed in alphabetical order, on white paper, and in
a readily readable type size (in no event smaller than ten-point type). A
reasonable charge for copy work may be charged by the Partnership. The purposes
for which a Limited Partner may request a copy of the Partnership List include,
without limitation, matters relating to the Limited Partner's voting rights
under the Partnership Agreement, and the exercise of the Limited Partner's
rights under federal proxy laws. If the General Partners, or an Affiliate
having charge of the Partnership List, neglect or refuse to exhibit, produce or
mail a copy of the Partnership List as requested, the General Partners or the
Affiliate shall be liable to any Limited Partner requesting the list for the
costs, including attorneys' fees,' incurred by that Limited Partner for
compelling the production of the Partnership List, and for actual damages
suffered by any Limited Partner by reason of such refusal or neglect. It shall
be a defense that the actual purpose and reason for the request for inspection
or for a copy of the Partnership List is to secure such list of Limited Partners
or other information for the purpose of selling such list or copies thereof, or
of using the same for a commercial purpose other than in the interest of the
applicant as a Limited Partner relative to the affairs of the Partnership. The
Managing General Partner may require that the Limited Partner requesting the
Partnership List to represent that the Partnership List is not requested for a
commercial purpose unrelated to the Limited Partner's interest in the
Partnership. The remedies provided hereunder to Limited Partners requesting
copies of the Partnership List are in addition to and shall not in any way
limit, other remedies available to Limited Partners under federal laws or the
laws of any state. The Partnership shall maintain a record of the information
obtained to indicate that a Limited Partner meets the suitability standards
employed in connection with the offer and sale of Units and a representation
that the purchaser is purchasing for his own account, or, in lieu of such
representation, information indicating that the party for whose account the
purchase is made meets such suitability standards.

13.2 Reports on Acquisitions. Within sixty (60) days after the end of
each quarter and until Net Offering Proceeds shall be fully invested, the
Managing General Partner shall cause to be prepared and distributed to each
Person who was a Limited Partner at any time during the quarter then ended, a
special report containing: (1) the location and a description of the general
character of the Property acquired during the quarter; (2) the present or
proposed use of such Property and its suitability and adequacy for such use; (3)
the terms of any material lease affecting the Property; (4) the proposed method
of financing, if any, including estimated down

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payment, leverage ratio, prepaid interest, balloon payment(s), prepayment
penalties, "due-on-sale" or encumbrance clauses and possible adverse effects
thereof and similar details of the proposed financing plan; and (5) a statement
that title insurance has been or will be obtained on the Property acquired,
unless the seller has agreed to provide indemnification to the Partnership
substantially equivalent to that which would be available under a title policy
and the seller has represented to the General Partners that it has a rating by
Moody's of AA or better or by Standard and Poor's of AA or better.

13.3 Tax Information. Within seventy-five (75) days after the end of
each fiscal year, the Managing General Partner shall send to each Person who was
a Limited Partner on the first day of any month during the year then ended, such
tax information as shall be necessary for the preparation by such Person of his
federal income tax return. A reconciliation between generally accepted
accounting principles and income tax information will not be provided to the
Limited Partners, however, such reconciliation will be available in the office
of the Partnership for inspection and review by any interested Limited Partner.

13.4 Annual Reports. Within one hundred twenty (120) days after the end
of each fiscal year, the Managing General Partner shall send to each Person who
was a Limited Partner on the last day of the year then ended: (i) audited
financial statements of the Partnership, and (ii) an audited report showing
Distributions per Unit during such year, which report shall separately identify
Distributions from: (a) Cash Flow generated during the year; (b) Cash Flow
generated during prior periods which had been held as reserves; (c) cash from
initial working capital reserves; (d) annual net rental revenues on a per
Property basis; and (e) Net Sale or Refinancing Proceeds. The annual report
shall also include a break-down of the costs reimbursed to the General Partners,
which report shall have been verified by the Partnership's accountants to ensure
that the allocation of costs to the Partnership is appropriate, which
verification shall at a minimum provide for (i) a review of the time records of
individual employees, the cost of whose services were reimbursed; and (ii) a
review of the specific nature of the work performed by each such employee. The
annual report shall also include, at Partnership expense, commencing with the
Partnership's first fiscal year of operations or portion thereof, a statement of
compensation and fees paid by the Partnership to the General Partners and their
Affiliates, including an itemized presentation of expense reimbursements to the
General Partners and their Affiliates or any other transactions between the
Partnership and the General Partners or their Affiliates, which information
shall be verified by the independent public accountants retained by the
Partnership. The method of verification shall at a minimum provide: (i) a
review of the time records of individual employees the costs of whose services
are reimbursed; and (ii) a review of the specific nature of the work performed
by each such employee during such year.

13.5 Quarterly Reports. The Managing General Partner shall prepare, at
Partnership expense, commencing with the first fiscal quarter after the Initial
Closing Date, a quarterly financial highlight report of the Partnership's
performance that shall be distributed to each Limited Partner within sixty (60)
days after the close of the quarterly period

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covered by such report. Upon request, unaudited quarterly reports containing
information required by Form 10-Q will be mailed to a Limited Partner not later
than 60 days after the close of each of the first three fiscal quarters of each
fiscal year.

13.6 Valuation Reports. Commencing with the year ended December 31,
1997, the Partnership shall provide Qualified Plans with an annual valuation of
Units within 120 days after the end of each fiscal year of the Partnership which
is intended to satisfy the requirements of ERISA. Such reports will be based
upon the Managing General Partner's estimate of the amount which would be
received if the Partnership's Properties and Equipment were sold as of the close
of the Partnership's fiscal year and if such proceeds (without reduction for
selling expenses), together with other Partnership funds, were distributed in
liquidation of the Partnership. Absent significant increases or decreases in
the value of assets, the net asset value of each Unit will be reported at cost
and deemed to be $1,000 for the first three annual statements of value following
termination of the Offering; thereafter, the value of the Units will be based on
an annual valuation, subject to quarterly adjustment in the General Partners'
discretion.

14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE MANAGING
GENERAL PARTNER

14.1 Services of Managing General Partner. The Managing General Partner
shall only be responsible for the following services to the Partnership:

14.1.1 supervising the organization of the Partnership and the
offering and sale of Units;

14.1.2 arranging for (a) the identification of suitable investments
for the Partnership; (b) a review of the significant factors in
deciding whether or not to make a particular investment; and (c) the
making of a final investment decision;

14.1.3 supervising Partnership management, which includes: (a)
establishing policies for the operation of the Partnership; (b)
causing the Partnership's agents or employees to arrange for the
provision of services necessary to the operation of the Partnership
(including any necessary property management, accounting and legal
services and services relating to distributions by the Partnership);
(c) when necessary or appropriate, approving actions to be taken by
the Partnership; (d) providing advice, consultation, analysis and
supervision with respect to the functions of the Partnership in making
or acquiring investments (including compliance with federal, state and
local regulatory requirements and procedures); (e) executing documents
on behalf of the Partnership and (f) making all decisions as to
accounting matters; and

14.1.4 approving the terms of Dispositions, including establishing
the terms of, and arranging for, any such transactions.

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14.2 Powers of Managing General Partner. The conduct of the
Partnership's business shall be controlled solely by the Managing General
Partner in accordance with this Partnership Agreement. The Managing General
Partner shall have the fiduciary responsibility for the safekeeping and use of
all funds and assets of the Partnership, whether or not in the Managing General
Partner's possession or control. The Managing General Partner shall have all
authority, rights and powers conferred by law and those required or appropriate
to the management of the Partnership's business which, by way of illustration
but not by way of limitation, shall, subject only to the provisions of Paragraph
14.4 following, include the right, authority and power:

14.2.1 to offer and sell Units to the public directly or through
any Affiliate of the Managing General Partner or any other
broker-dealer who is a member of the National Association of
Securities Dealers, Inc. and is authorized to sell Units and to employ
personnel, agents and dealers for such purpose;

14.2.2 to invest Net Offering Proceeds temporarily prior to
investment in Assets in short-term, highly liquid investments
determined by the Managing General Partner, in its sole discretion, to
have appropriate safety of principal;

14.2.3 to make or purchase Assets or interests therein in its own
name or in the name of a nominee, a trust or otherwise and temporarily
hold title thereto for the purpose of facilitating such origination or
acquisition or for any other purpose related to the business of the
Partnership; provided that in the event of the acquisition of such
Assets by the Partnership from the Managing General Partner or its
Affiliates, (i) the purchase price paid by the Partnership may not
exceed the cost of the Assets to the Affiliated seller thereof plus
all closing costs and Acquisition Fees paid by the Partnership and
(ii) no compensation or other benefit may accrue to the Managing
General Partner or its Affiliates except as otherwise permitted herein
and except that they may be reimbursed for the cost of carrying the
investment; accordingly, all income generated and expenses associated
with Assets so acquired shall be treated as belonging to the
Partnership; in no event shall the Partnership purchase Assets from
the Managing General Partner or its Affiliates if the Managing General
Partner or its Affiliates have held the Assets for a period in excess
of twelve (12) months prior to commencement of the Partnership's
offering; furthermore, the General Partners or their Affiliates may
not sell Assets to the Partnership pursuant to this subparagraph if
the cost of the Assets exceeds the funds reasonably anticipated to be
available to the Partnership to purchase the Assets. Notwithstanding
the foregoing, no assets or interests therein may be purchased from
affiliated Programs. As used herein, "Program" shall be defined as: a
limited or general partnership, joint venture, unincorporated
association or similar organization other than a corporation formed
and operated for the primary purpose of investment in and the
operation of or gain from a interest in real property including such
entities formed to make or invest in mortgage loans.

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14.2.4 to originate, acquire, hold, lease, exchange, foreclose on,
sell, dispose of and otherwise deal with all or any part of
Partnership Assets (including the grant of easements or servitudes
thereon) in such amounts and upon such terms, including by private
contract or at public sale, as the Managing General Partner deems in
its sole discretion to be in the best interests of the Partnership;

14.2.5 on behalf of the Partnership, to employ Persons in the
operation and management of the business of the Partnership including,
but not limited to, agents, employees, managers, accountants,
attorneys, consultants and others, on such terms and for such
compensation as the Managing General Partner shall determine, subject,
however, to the limitations with respect thereto as set forth in
Section 9, and provided that agreements with the Managing General
Partner or its Affiliates for the services set forth in Section 9
shall contain the terms and limitations as to fees and expenses as set
forth in Section 9 and provided further that any of such agreements
shall be terminated immediately upon dissolution of the Partnership
under Paragraph 18.1;

14.2.6 to open accounts and deposit and maintain funds in the name
of the Partnership in banks or savings and loan associations;

14.2.7 to allow the Partnership to borrow money from the General
Partners or their Affiliates on a short-term basis, at any time and
from time to time and in connection therewith to pay interest and
other financing charges or fees which shall not exceed the interest
and other financing charges or fees which would be charged by
unrelated lending institutions on comparable loans for the same
purpose. Except as permitted by this Paragraph 14.2.8, the General
Partners and their Affiliates shall be prohibited from providing
financing to the Partnership. Furthermore, on loans made available by
a General Partner or its Affiliates, the General Partner and its
Affiliates shall not receive interest or similar charges or fees in
excess of those charged by unrelated lending institutions on
comparable loans for the same purpose in the locality. There shall be
no prepayment penalty on any loan by the General Partners to the
Partnership. Nothing herein shall be construed as prohibiting a bona
fide prepayment provision in the financing agreement. An
"all-inclusive" or "wraparound" note and deed of trust (the
"all-inclusive note" herein) may be used to finance the purchase of
property by the Partnership from the General Partners or their
Affiliates only if the following conditions are complied with: (i) the
General Partners or their Affiliates under the all- inclusive note
shall not receive interest on the amount of the underlying encumbrance
included in the all inclusive note in excess of that payable to the
lender on that underlying encumbrance; (ii) the Partnership shall
receive credit on its obligation under the all-inclusive note for
payments made directly on the underlying encumbrance; and (iii) a
paying agent, ordinarily a bank, escrow company or savings and loan
association, shall collect payments (other than any initial payment of
prepaid interest or loan points not to be applied to the underlying
encumbrance) on the all-inclusive note and make disbursement

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therefrom to the holder of the underlying encumbrance prior to making
any disbursement to the holder of the all-inclusive note, subject to
the requirements of subparagraph (i) above, or, in the alternative,
all payments on the all-inclusive and underlying note shall be made
directly by the Partnership. In no event, however, shall the General
Partners or any of their Affiliates provide permanent financing to the
Partnership for any of the Partnership's Properties. Additionally, to
the extent that the Partnership has insufficient funds to fund working
capital reserves, the General Partners shall advance to the
Partnership an aggregate amount of up to 1% of the offering proceeds
for this purpose, with interest and other financing charges or fees to
be paid consistently with the foregoing;

14.2.8 to prepare or cause to be prepared reports, statements and
other relevant information for distribution to the Limited Partners,
including annual and quarterly reports. The Partnership shall, upon
request, provide to the state securities administrator any report or
statement required to be distributed to the Limited Partners;

14.2.9 to require in all Partnership obligations that the General
Partners shall not have any personal liability thereon and that the
Person or entity contracting with the Partnership is to look solely to
the Partnership and its assets for satisfaction, and in the event that
any such obligations have personal liability, the General Partners may
require their satisfaction prior to contracts without such personal
liability; provided, however, that the inclusion of the aforesaid
provisions shall not materially affect the cost of the service or
material being supplied and all Partnership obligations are satisfied
in accordance with prudent business practices as to time and manner of
payment;

14.2.10 to cause the Partnership to make or revoke any of the
elections permitted by the Code;

14.2.11 to select as its accounting year a calendar year or such
fiscal year as approved by the Internal Revenue Service;

14.2.12 to determine the appropriate accounting method or methods
to be used by the Partnership in maintaining its books and records;

14.2.13 to assure any Person dealing with the Partnership or the
General Partners that he may rely upon a certificate signed by the
Managing General Partner as authority with respect to: (a) the
identity of the General Partners or any Limited Partners; (b) the
existence or nonexistence of any fact or facts which constitute a
condition precedent to acts by the General Partners or in any other
manner germane to the affairs of the Partnership; (c) the Persons who
are authorized to execute and deliver any instrument or document of
the Partnership; or (d) any act or failure to act by the Partnership
or as to any other matter whatsoever involving the Partnership or any
Partner;

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14.2.14 (a) to take such steps as the Managing General Partner
determines are advisable or necessary in order to preserve the tax
status of the Partnership as a pass-through entity for federal income
tax purposes including, without limitation, imposing additional
restrictions on transfers of Units (provided such restrictions on
transfers do not cause the Partnership's assets to be deemed to be
"plan assets" with respect to investors which are Qualified Plans) or
(b) to compel a dissolution and termination of the Partnership or
restructuring of the Partnership's activities to the extent necessary
(i) to comply with any exemption in final plan asset regulations
adopted by the Department of Labor, including, but not limited to,
establishing a fixed percentage of Units permitted to be held by
Qualified Plans or other tax-exempt investors or discontinuing sales
to such entities after a given date, in the event that either (A) the
assets of the Partnership constitute "plan assets" for purposes of
ERISA or (B) the transactions contemplated hereunder constitute
prohibited transactions under ERISA or the Code and an exemption for
such transactions is not obtainable from the Department of Labor or
(ii) to obtain a prohibited transaction exemption from the Department
of Labor.

14.2.15 in addition to any amendments otherwise authorized herein,
to amend this Partnership Agreement from time to time without the
approval of the Limited Partners,

(a) to add to the representations, duties or obligations of the
Managing General Partner or its Affiliates or surrender any right
or power granted to the Managing General Partner or its
Affiliates herein, for the benefit of the Limited Partners;

(b) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with law or with any
other provision herein, or to add any other provisions with
respect to matters or questions arising under this Partnership
Agreement which will not be inconsistent with law or with the
provisions of this Partnership Agreement;

(c) to delete or add any provision of this Partnership
Agreement required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state securities
commissioner or similar such official, which addition or deletion
is deemed by such commission or official to be for the benefit or
protection of the Limited Partners;

(d) to change the name of the Partnership to any lawful name
which it may select;

(e) to reflect the addition or substitution of Limited Partners
or the reduction of capital accounts upon the return of capital
to Partners or to

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reflect the admission of additional General Partners (who may be
admitted without the consent of the Limited Partners);

(f) to amend the provisions of Section 11 of this Partnership
Agreement or any other provisions of this Partnership Agreement
if, in the opinion of counsel to the Partnership and the General
Partners, such modification is necessary to (i) cause the
allocations and Distributions contained in Section 11 to have
substantial economic effect in accordance with the most recently
proposed or final regulations relating to Section 704 of the Code
or any other statutory provision or regulation relating to such
allocations or (ii) cause the periodic allocations to be
respected, such as on a monthly basis, under Section 706 of the
Code or any other statute or provision or regulation relating to
such periodic allocations or (iii) cause the provisions of this
Partnership Agreement to comply with any applicable federal
legislation enacted after the date of this Partnership Agreement;
provided, however, no such amendment shall be effected unless, in
the opinion of counsel, such amendment does not adversely affect
the rights or interests of any of the Limited Partners;

(g) to make any amendments that the Managing General Partner
reasonably believes are appropriate to lessen the possibility
that Units would be "plan assets," as that term is used in ERISA,
and to maintain the status of the Partnership as a pass-through
entity for federal income tax purposes;

(h) to alter the division of profit and loss allocations among
the General Partners and of Distribution rights among the General
Partners in accordance with Paragraph 11.5 hereof; and

(i) to substitute any entity for the Individual General
Partner, provided such substituted General Partner either (a) in
the opinion of counsel to the Partnership, complies with
Paragraph 14.9 hereof, or (b) has a liquid net worth of at least
10% of the Adjusted Investments, as of the date of such
substitution or the general partner(s) of such substituted
General Partner (if a partnership) or the substituted General
Partner (if an individual), shall have a net worth, independent
of any investment in the Partnership of at least 10% of the
Adjusted Investments as of the date of such substitution.

14.2.16 to borrow money from banks and other financial institutions
and for sums so borrowed issue a promissory note (or any other
evidence of indebtedness) as a General Partner of this Partnership,
and secure repayment thereof by pledging, mortgaging or granting a
security interest in all or any part of the Partnership assets. No
such Person loaning money to the Partnership shall be bound to verify
the validity, expediency or propriety of such borrowing.

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14.2.17 to execute, acknowledge and deliver any and all instruments
to effectuate all of the foregoing, and to take all such action in
connection therewith as the Managing General Partner shall deem
necessary or appropriate.

14.3 General Rights and Powers. The General Partners shall, except as
otherwise provided in this Partnership Agreement, have all the rights and powers
and shall be subject to all the restrictions and liabilities of a partner in a
partnership without limited partners.

14.4 Limitations. Neither the General Partners nor any of their
Affiliates shall have the authority to:

14.4.1 cause the Partnership to enter into contracts with the
General Partners or their Affiliates which would bind the Partnership
after the removal, adjudication of bankruptcy or insolvency of the
last remaining General Partner or continue the business with
Partnership assets after the occurrence of such event;

14.4.2 alter the primary purpose of the Partnership as set forth
in Section 3;

14.4.3 cause the Partnership to invest in any Assets through
cotenancy arrangements, joint ventures or general partnerships with a
publicly registered Affiliate unless: (a) the affiliated program has
investment objectives and policies substantially identical to those of
the Partnership; (b) no duplicate management fees are paid; (c) the
compensation paid to the Sponsor by the Partnership and the Affiliate
is substantially identical with regard to each program; (d) the
Affiliated program makes its investments on substantially the same
terms and conditions as the Partnership, although the amounts invested
do not have to be comparable; and (e) the Partnership has a right of
first refusal to purchase the investment if the other program wishes
to sell the investment;

14.4.4 cause the Partnership to invest in any Assets through
co-tenancy arrangements, joint ventures or general partnerships with
Affiliates other than publicly registered Affiliates unless: (a) the
investment is necessary to relieve the General Partners from any
commitment to purchase a property entered into in compliance with
Section 14.2.3 prior to the closing of the Offering (b) the affiliated
program has investment objectives and policies substantially identical
to those of the Partnership; (c) no duplicate management fees are
paid; (d) the compensation paid to the Sponsor by the Partnership and
the Affiliate is substantially identical with regard to each program;
(e) the Affiliated program makes its investments on substantially the
same terms and conditions as the Partnership, although the amounts
invested do not have to be comparable; and (f) the Partnership has a
right of first refusal to purchase the investment if the other program
wishes to sell the investment.

14.4.5 cause the Partnership to invest in any Asset with
unaffiliated parties through co-tenancy arrangements, joint ventures
or general partnerships except on

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substantially the same terms and conditions (although not necessarily
the same percentage interest) as such unaffiliated parties; provided,
however, that no such investment shall be entered into by the
Partnership (i) if it involves the payment of duplicative property
management or other fees which would have the effect of circumventing
any of the restrictions on and prohibited transactions involving
conflicts of interest contained in this Partnership Agreement, and
(ii) unless the Partnership acquires a controlling interest in such
joint venture or partnership. For purposes of the above, "controlling
interest" means an equity interest possessing the power to direct or
cause the direction of the management and policies of the partnership
or joint venture, including the authority to: (a) review all contracts
entered into by the partnership or joint venture that will have a
material effect on its business or assets, (b) cause a sale or
refinancing of the property or its interest therein subject in certain
cases where required by the partnership or joint venture agreement, to
limits as to time, minimum amounts and/or a right of refusal by the
joint venture partner or consent of the joint venture partner; (c)
approve budgets and major capital expenditures, subject to a stated
minimum amount; (d) veto any sale or refinancing of the property, or
alternatively, to receive a specified preference on sale or
refinancing proceeds; and (e) exercise a right of first refusal on any
desired sale or refinancing by the joint venture partner of its
interest in the assets except for the transfer to an Affiliate of the
joint venture partner.

14.4.6 cause the Partnership to exchange Units for Partnership
Property;

14.4.7 cause the Partnership to invest in limited partnerships,
unless such investment is as a general partner and is substantially
identical to a direct purchase of the underlying property (i.e., where
the investment includes the purchase of substantially all of the
interests of such partnership) or the investment is in a joint
venture. In both cases such investment must (i) be on terms which
entail the acquisition of a "controlling interest" as defined
elsewhere herein; (ii) prohibit the payment of duplicative fees and
otherwise limit compensation to that permitted by Section 9 hereof;
and (iii) otherwise comply with the limitations on dealings with
Affiliated parties as set forth in this Partnership Agreement;

14.4.8 invest in junior trust deeds or similar obligations, except
that junior trust deeds or similar obligations may be taken back from
purchasers of Properties and/or Equipment in connection with the sale
thereof by the Partnership;

14.4.9 take any action with regard to any property owned through
another entity or partnership which they would not have been empowered
to take had the Partnership owned the property directly;

14.4.10 do any act in contravention of this Partnership Agreement
or which would, in the opinion of the Managing General Partner, make
it impossible to carry on the ordinary business of the Partnership;

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14.4.11 perform any act (other than an act required by this
Partnership Agreement or any act taken in good faith reliance upon
counsel's opinion) which would, at the time such act occurred, subject
any Limited Partner to liability as a general partner in any
jurisdiction;

14.4.12 employ, or permit the employment of, the funds or assets of
the Partnership in any manner except for the exclusive benefit of the
Partnership;

14.4.13 commingle Partnership funds with those of any other Person
or entity;

14.4.14 operate the Partnership in such a manner as to have the
Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940;

14.4.15 except as specifically provided for in Section 14.2.2 or
another provision of this Partnership Agreement, cause the Partnership
to invest in or underwrite the securities of other issuers for any
purposes;

14.4.16 cause the Partnership to invest in real estate contracts of
sale unless such contracts of sale are in recordable form and are
appropriately recorded in the chain of title;

14.4.17 cause the Partnership to invest in Property unless it first
obtains an owner's title insurance policy or commitment as to the
condition of title or its equivalent and an appraisal prepared by an
independent MAI appraiser (the Partnership shall retain the appraisal
for at least five (5) years and such appraisal shall be available for
inspection and duplication (at the Limited Partner's expense) by the
Limited Partners);

14.4.18 cause the Partnership to invest in unimproved real property
(except that such prohibition will not apply to an interest in
unimproved, non-income-producing real estate acquired as part of an
investment so long as such unimproved real property constitutes less
than 10% of Gross Proceeds);

14.4.19 give an exclusive right to sell or exclusive employment to
sell any property for the Partnership to a General Partner or any
Affiliate;

14.4.20 permit receipt by a General Partner or any Affiliate of any
rebates or "give-ups" or permit a General Partner or any Affiliate to
participate in any reciprocal business arrangements which would have
the effect of circumventing any of the provisions of this Partnership
Agreement;

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<PAGE> 191

14.4.21 make loans to a General Partner or any Affiliate or other
Person;

14.4.22 directly or indirectly pay or award any finder's fee,
commission, or other compensation to any Person engaged by a potential
investor for investment advice as an inducement to such advisor to
advise the purchase of Units; provided, however, that this provision
shall not prohibit payment by the Partnership of normal sales
commissions to registered broker-dealers or other properly licensed
Persons (including an Affiliate of a General Partner) in connection
with the offering and sale of Units;

14.4.23 purchase or lease property from or sell or lease property
to the General Partners or any of their Affiliates except as
contemplated by Paragraphs 14.2.3, 14.4.3, and 14.4.4 hereof;

14.4.24 permit the Limited Partners to contract away the fiduciary
duty owed to the Limited Partners under common law; or

14.4.25 following the termination of the Offering, allow the total
amount of secured indebtedness with respect to a particular Property
or Equipment package to exceed 80% of the Purchase Price thereof; in
no event will such indebtedness exceed an amount equal to 35% of the
sum of Gross Proceeds plus the aggregate amount of Partnership
indebtedness secured by Partnership Assets (approximately 40% of the
aggregate Purchase Price of Assets) on a portfolio basis when
incurred;

14.4.26 enter into any "Roll-Up Transaction" without the consent of
Limited Partners owning at least two-thirds of the Units then
outstanding as used herein, "Roll-Up Transaction" shall mean any
transaction or series of transactions that directly or indirectly,
through acquisition or otherwise, involve the combination, merger, or
conversion of the Partnership; this paragraph 14.4.25 cannot be
amended or deleted from the Partnership Agreement without the consent
of the Limited Partners owning at least two-thirds of the Units then
outstanding;

(a) in connection with a proposed Roll-Up Transaction, an
appraisal of all Partnership assets shall be obtained from a
competent "independent expert"; "independent expert", as used
herein, shall mean a Person with no material current or prior
business or personal relationship with the Sponsor or its
Affiliates who is engaged to a substantial extent in the business
of rendering opinions regarding the value of assets of the type
held by the Partnership, and who is qualified to perform such
work; if the appraisal will be included in a prospectus used to
offer the securities of a "Roll-Up Entity," the appraisal shall
be filed with the Securities and Exchange Commission, and with
such states as may require, an exhibit to the registration
statement of the "Roll-Up Entity"; a "Roll-Up Entity"

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shall mean a partnership, real estate investment trust,
corporation, trust or other entity that would be created or would
survive after the successful completion of a proposed Roll-Up
Transaction; the Partnership's assets shall be appraised on a
consistent basis; the appraisal shall be based on a evaluation of
all relevant information, and shall indicate the value of the
Partnership's assets as of the date immediately prior to the
announcement of the proposed Roll-Up Transaction; the appraisal
shall assume an orderly liquidation of the Partnership's assets
over a 12 month period; the terms of the engagement of the
independent expert shall clearly state that the engagement is for
the benefit of the Partnership and its Limited Partners; a
summary of the appraisal, indicating all material assumptions
underlying the appraisal, shall be included in a report to the
Limited Partners in connection with a proposed Roll-Up
Transaction; accordingly, if such appraisal is included in the
Partnership's prospectus, the Partnership shall be subject to
liability for violation of Section 11 of the Securities Act of
1933, as amended and comparable provisions under state laws for
any material misrepresentations or material omissions in the
appraisal;

(b) in connection with a proposed Roll-Up Transaction, the
Person sponsoring the Roll-Up Transaction shall offer to the
Limited Partners who vote "no" on the proposal the choice of: (i)
accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up Transaction; or (ii) one of the following: (A)
remaining as Limited Partners in the Partnership and preserving
their interest therein on the same terms and conditions as
existed previously; or (B) receiving cash in an amount equal to
the Limited Partner's pro-rata share of the appraised value of
the net assets of the Partnership;

(c) the Partnership shall not participate in any proposed
Roll-Up Transaction which would result in Limited Partners having
democracy rights in the Roll-Up Entity which are less than those
provided for under paragraph 15.1; if the Roll-Up Entity is a
corporation, the voting rights of the Limited Partners shall
correspond to the voting rights provided for in paragraph 15.1 to
the greatest extent possible;

(d) the Partnership shall not participate in any proposed
Roll-Up Transaction which includes provisions that would operate
to materially impede or frustrate the accumulation of shares by
any purchaser of the securities of the Roll-Up Entity (except to
the minimum extent necessary to preserve the tax status of the
Roll-Up Entity); the Partnership shall not participate in any
proposed Roll-Up Transaction which would limit the ability of a
Limited Partner to exercise the voting rights of its securities
of the Roll-Up Entity on the basis of the number of Units held by
that Limited Partner;

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(e) the Partnership shall not participate in any proposed
Roll-Up Transaction in which the Limited Partner's rights of
access to the records of the Roll-Up Entity would be less than
those provided for under paragraph 13.1;

(f) the Partnership shall not participate in any proposed
Roll-Up Transaction in which any of the cost of the Roll-Up
Transaction would be borne by the Partnership if the Roll-Up
Transaction is not approved by the Limited Partners;

14.4.27 issue Units in exchange for Property or Equipment or in
ways other than pursuant to the terms set forth in the Prospectus;

14.4.28 issue securities senior to the Units except notes to banks
and other financial institutions;

14.4.29 invest in real estate mortgages except in connection with
the disposition of one or more of the Properties;

14.4.30 engage in the purchase and sale (or turnover) of
investments other than as set forth in the Prospectus;

14.4.31 repurchase the Units, except as provided in Paragraph 12.6;

14.4.32 cause the Partnership to invest less than 83% of the
Original Contributions in Assets;

14.4.33 cause the Partnership to reinvest Net Sale or Refinancing
Proceeds received more than four years after the date on which the
Partnership terminates the Offering;

14.4.34 permit the aggregate amount of selling commissions,
Non-Accountable Expense Allowance used for underwriting compensation,
and funds paid as underwriting compensation to the Participating
Dealers from any other source with respect to the sale of Units to be
greater than 10% of the Original Contributions; or

14.4.35 permit the aggregate amount of reimbursement for due
diligence expenses paid to the Participating Dealers from the
Partnership or any Affiliate of the Partnership or the General
Partners to be greater than 0.5% of the Original Contributions.

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14.5 No Personal Liability. The General Partners shall have no personal
liability for the repayment of the Original Contributions of any Limited Partner
or to repay the Partnership any portion or all of any negative balance in its
capital account, except as otherwise provided in Section 20.

14.6 Accounting Matters. The Managing General Partner shall make all
decisions as to accounting matters in connection with the accounting methods
adopted by the Partnership in accordance with generally accepted accounting
principles and procedures applied on a consistent basis and shall make all
decisions with respect to tax accounting matters in accordance with tax
accounting principles. The Managing General Partner may rely on the
Partnership's independent certified public accountants to determine whether such
decisions are in accordance with generally accepted accounting principles.

14.7 Tax Matters Partner. The Managing General Partner is hereby
designated as the "Tax Matters Partner" in accordance with Section 6231(a) (7)
of the Code and, in connection therewith and in addition to all other powers
given thereunder, shall have all other powers needed to fully perform hereunder
including, without limitation, the power to retain all attorneys and accountants
of its choice and the right to settle any audits without the consent of the
Limited Partners. The designation made in this Paragraph 14.7 is hereby
expressly consented to by each Partner as an express condition to becoming a
Partner.

14.8 Funds and Assets. The Managing General Partner shall have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Partnership, whether or not in its immediate possession or control, and
shall not employ, or permit another to employ, such funds or assets in any
manner except for the exclusive benefit of the Partnership.

14.9 Net Worth of Individual General Partner. The Individual General
Partner and any successor Individual General Partner shall use his best efforts
to meet the requirements, necessary to assure that the Partnership will be
classified as a partnership for federal income tax purposes, of the Code, as
interpreted from time to time by the Internal Revenue Service, or any successor
thereto, any other agency of the federal government or courts of law.

14.10 Preservation of Tax Status. The Managing General Partner shall use
its best efforts to take such actions as are necessary to preserve the
Partnership's status as a partnership or other pass-through entity for tax
purposes in light of any amendments to the Code or administrative or judicial
interpretations thereof.

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15. RIGHTS AND POWERS OF THE LIMITED PARTNERS

15.1 Voting Rights.

15.1.1 The Limited Partners by Majority Vote may, without
the concurrence of the General Partners, vote to:

(a) remove a General Partner in accordance with
Section 16 (provided that the General Partners,
insofar as they may act as Limited Partners due to
the ownership of Units of the Partnership, will
abstain from voting Units held by them with regard
to removal of a General Partner);

(b) elect a new General Partner;

(d) amend the Partnership Agreement, provided
such amendment is not for any of the purposes set
forth in Paragraph 14.2.15 of the Partnership
Agreement; and

(e) approve or disapprove the sale of all or
Substantially All of the Assets of the Partnership
in a single sale, or in multiple sales in the same
twelve-month period, except in the liquidation and
winding-up of the business of the Partnership upon
its termination and dissolution or in the ordinary
course of business.

15.1.2 The General Partners must obtain the approval of
the Limited Partners by Majority Vote prior to:

(a) effecting a material change in the
Partnership's investment objectives;

(b) assigning a General Partner's interest in the
Partnership, except as otherwise provided in
Paragraph 16.5 of this Agreement;

(d) selling all or Substantially All of the
Assets of the Partnership in a single sale, or in
multiple sales in the same twelve-month period,
except in the liquidation and winding-up of the
business of the Partnership upon its termination
and dissolution or in the ordinary course of
business.

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15.1.3 In determining the existence of the requisite
percentage in interest of Units necessary to approve the
matters set forth in Sections 15.1.1 and 15.1.2, Units owned
by the General Partners or their Affiliates shall not be
included.

15.1.4 A Limited Partner shall be entitled to cast one vote
for each Unit which he owns, as at a meeting, in person, by
written proxy or by a signed writing directing the manner in
which he desires that his votes be cast, which writing must be
received by the Managing General Partner prior to such meeting,
or (b) without a meeting, by a signed writing directing the
manner in which he desires that his votes be cast, which
writing must be received by the Managing General Partner prior
to the date upon which the votes of Limited Partners are to be
counted. Units owned by the General Partners and their
Affiliates may not be voted by, nor may the General Partners
and their Affiliates consent with respect to such Units, on
matters submitted to the Limited Partners regarding the removal
of a General Partner or regarding any transaction between the
Partnership and the General Partners and their Affiliates. In
determining the existence of the requisite percentage and
interest of Units necessary to approve a matter on which the
General Partners and their Affiliates may not vote or consent,
any Units owned by the General Partners and their Affiliates
shall not be included.

15.2 Meetings. Meetings of the Limited Partners for any purpose
may be called by the Managing General Partner at any time and shall be called
by the Managing General Partner within ten (10) days after receipt of a written
request for such a meeting signed by ten percent (10%) or more in interest of
the Limited Partners as of the date of receipt of such written request. Any
such request shall state the purpose of the proposed meeting and the matters
proposed to be acted upon thereat. Meetings shall be held at the principal
office of the Partnership or at such other place as may be designated by the
Managing General Partner so long as such meeting is held at a time and place
convenient to Limited Partners.

15.3 Consent Without a Meeting. The Managing General Partner may
and, upon receipt of a request in writing signed by ten percent (10%) or more
in interest of the Limited Partners, the Managing General Partner shall, submit
any matter upon which the Limited Partners are entitled to act, to the Limited
Partners for a vote by written consent without a meeting. For purposes of
obtaining a written vote under this Partnership Agreement, the Managing General
Partner may require a written response within a specified time, but not less
than fifteen (15) days and no more than sixty (60) days from receipt of said
request, and, provided such notice was sent by U.S. mail, return receipt
requested and the Limited Partner's receipt of such notice was confirmed, the
failure of a Limited Partner to file such a written response within such time
shall constitute a vote which is consistent with the Managing General Partner's
recommendation with respect to such proposal so long as a quorum is otherwise
obtainable.

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15.4 Notice of Meeting. Notification of any meeting to be held
pursuant to Paragraph 15.2 shall be given within ten (10) days after receipt of
a request in writing signed by ten percent (10%) or more in interest of the
Limited Partners by the Managing General Partner, to each Limited Partner at
its record address, or at such other address which he may have furnished in
writing to the Managing General Partner. Such notification (which shall be in
person or by certified mail) shall state the place, date and hour of the
meeting (which shall be held not less than fifteen (15) nor more than sixty
(60) days after receipt of written request), and shall indicate that the
notification is being issued at or by the direction of the Partner or Partners
calling the meeting. The notification shall state the purpose or purposes of
the meeting. For the purpose of determining the Limited Partners entitled to
vote at any meeting of the Limited Partners, or any adjournment thereof, or to
vote by written consent without a meeting, the Managing General Partner or the
Limited Partners requesting such meeting or vote may fix, in advance, a date as
the record date for any such determination of Limited Partners. Such date
shall not be more than sixty (60) days nor less than ten (10) days before any
such meeting or submission of a matter to the Limited Partners for a vote by
written consent. If a meeting is adjourned to another time or place, and if an
announcement of the adjournment of time or place is made at the meeting, it
shall not be necessary to give notification of the adjourned meeting. The
presence in person or by proxy of a majority in interest of the Limited
Partners shall constitute a quorum at meetings of the Limited Partners;
provided, however, that if there be no such quorum, holders of a majority in
interest of the Units so present or so represented may adjourn the meeting from
time to time without further notification, until a quorum shall have been
obtained. No notification of the time, place or purpose of any meeting of
Limited Partners need be given to any Limited Partner who attends in person or
is represented by proxy, except for a Limited Partner attending a meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, or to any Limited Partner entitled to such notification
who, in writing, executed and filed with the records of the meeting, either
before or after the time thereof, waives such notification.

15.5 Proxies. The laws of the State of Delaware pertaining to the
validity and use of corporate proxies shall govern the validity and use of
proxies given by Limited Partners.

15.6 Conduct of Meeting. At each meeting of Limited Partners, the
Managing General Partner shall appoint such officers and adopt such rules for
the conduct of such meeting as the Managing General Partner shall deem
appropriate.

15.7 Limitations. No Limited Partner shall have the right or power
to: (i) bring an action for partition against the Partnership or (ii) cause the
termination and dissolution of the Partnership by court decree or otherwise,
except as set forth in this Partnership Agreement or as provided by law. Other
than upon the termination and dissolution of the Partnership as provided by
this Partnership Agreement, there has been no time agreed upon when the
contribution of each Limited Partner may be returned.

16. REMOVAL, BANKRUPTCY OR DISSOLUTION OF A GENERAL PARTNER AND TRANSFER
OF A GENERAL PARTNER'S INTEREST

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16.1 Removal. The General Partners may be removed from the
Partnership upon a Majority Vote. Written notice of the removal of the General
Partners shall be served either by certified or by registered mail, return
receipt requested, or by personal service. Such notice shall set forth the date
upon which the removal is to become effective.

16.2 Sale of Interest. Upon the removal, adjudication of
bankruptcy, dissolution or other cessation to exist of either of the General
Partners ("Terminated Partner"), the interest of such Terminated Partner in the
Net Income, Net Loss and Distributions of the Partnership may be purchased by a
successor General Partner (elected by Majority Vote of the Limited Partners)
for a purchase price determined according to the provisions of Paragraph 16.3.
Effective as of the removal, withdrawal, dissolution or other departure of the
Managing General Partner from the Partnership, should the Individual General
Partner remain as a General Partner of the Partnership, the Individual General
Partner shall assume all rights, obligations and responsibilities of the
Managing General Partner.

16.3 Purchase Price. If a successor General Partner is elected as
provided in Section 16.2, the Partnership shall acquire the interest of the
Terminated Partner for a purchase price equal to the fair market value of the
Terminated Partner's interest in the Partnership, determined by agreement
between the Terminated Partner and the Partnership or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association in Detroit, Michigan. The cost of any such required
arbitration shall be borne equally by the Terminated General Partner and the
Partnership. For this purpose, the fair market value of the interest of the
Terminated Partner shall be deemed to be the amount the Terminated Partner
would receive upon dissolution and termination of the Partnership under
Paragraph 18.2.1 assuming such dissolution or termination occurred on the date
of the dissolving event and assuming the assets of the Partnership were sold
for their then fair market value without compulsion of the Partnership to sell
such assets. Payment shall be made by a promissory note at the announced prime
rate of interest of the bank at which the majority of the Partnership's cash is
on deposit as of the date of determination of the fair market value of the
Terminated Partner's interest in the Partnership. Such promissory note shall
be for a term of five (5) years, or such other period as may be agreed upon
between the Terminated Partner and the Partnership and shall be a full recourse
obligation of the Partnership. The principal amount of said promissory note
together with accrued interest shall be payable in equal fully amortizing
installments until such time as the principal amount together with accrued
interest is paid in full.

16.4 No Voluntary Dissolution or Withdrawal. Until the dissolution
of the Partnership, the General Partners shall not take any voluntary steps to
dissolve themselves or to voluntarily withdraw from the Partnership. Nothing
in this Partnership Agreement shall be deemed to limit the ability of a General
Partner to transfer, pledge or hypothecate its interest in the Partnership to
third parties and no such action shall constitute a withdrawal from the
Partnership.

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16.5 No Limitation on Merger or Reorganization. Nothing in this
Partnership Agreement shall be deemed to prevent the merger or reorganization
of the Managing General Partner into or with any other corporation, partnership
or other entity, or the transfer of all the capital stock or partnership
interests of the Managing General Partner and the assumption of the rights and
duties of the Managing General Partner by, in the case of a merger,
reorganization or consolidation, the surviving corporation or partnership or by
operation of law.

17. CERTAIN TRANSACTIONS

The General Partners, any Limited Partner, any Affiliates, any
shareholder, officer, director, partner or employee thereof, or any Person
owning a legal or beneficial interest therein, may engage in or possess an
interest in any other business or venture of every nature and description,
independently or with others including, but not limited to, the ownership,
financing, leasing, operation, management, brokerage and development of real
property. Except as set forth in the Prospectus, neither the General Partners
nor any Affiliate of the General Partners shall be obligated to present any
particular investment opportunity to the Partnership, even if such opportunity
is of a character which, if presented to the Partnership, could be taken by the
Partnership and each of them shall have the right to make for its own account
(individually or as trustee) or to recommend to others any such particular
investment opportunity. The General Partners shall not be required to devote
all of their time or business efforts to the affairs of the Partnership, but
shall devote so much of such time and attention to the Partnership as is
reasonably necessary and advisable to manage the affairs of the Partnership to
the best advantage of the Partnership.

18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP

18.1 Terminating Events. The Partnership shall be terminated and
dissolved upon the earliest to occur of the following:

18.1.1 the withdrawal, removal, adjudication of
bankruptcy, insolvency, dissolution or other cessation of
existence as a legal entity (collectively, the "Withdrawal")
of the last remaining General Partner unless, within ninety
(90) days of the date of such event, the Limited Partners by a
majority vote (unless a unanimous vote is required under the
Delaware Act) elect to continue the business of the
Partnership and elect a successor General Partner as of the
date of the Withdrawal;

18.1.2 a Majority Vote (which may, but need not be
solicited by the General Partner) in favor of dissolution and
termination of the Partnership;

18.1.3 the expiration of the term of the Partnership; or

18.1.4 the disposition of all assets held by the
Partnership receipt of final payment with respect to all
investments.

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Further, if the Partnership has not been liquidated within ten (10)
years of the date the Partnership last purchased a Property or an Equipment
package, the General Partners are required to call for a vote of the Limited
Partners as to whether they wish to liquidate the Partnership.

18.2 Liquidation and Distribution of Assets. Upon a dissolution
and termination of the Partnership for any reason, the Managing General Partner
shall take full account of the Partnership's assets and liabilities, shall
liquidate the assets as promptly as is consistent with obtaining the fair value
thereof, and shall apply and distribute the proceeds therefrom in the following
order:

18.2.1 first, to the payment of creditors of the
Partnership but excluding secured creditors whose obligations
will be assumed or otherwise transferred on the liquidation of
Partnership assets; and

18.2.2 second, after allowance for the expenses of
liquidation and the setting up of any reserves for
contingencies which the Managing General Partner considers
necessary, to the Partners in proportion to and to the extent
of the positive balances in their Capital Accounts, after Net
Income arising from a Disposition and Net Loss has been
allocated in accordance with Paragraph 11.1 hereof.

18.2.3 notwithstanding anything to the contrary, the
Managing General Partner has the right to defer liquidation
if, in the opinion of the Managing General Partner, the sale
of Partnership assets in liquidation would result in a
material underrealization on the Partnership's assets.

18.2.4 notwithstanding anything herein to the contrary,
the Partnership shall not make any distributions in kind.

18.3 Additional Terminating Event. In addition to the events
described in Paragraph 18.1, the Managing General Partner may also compel a
termination and dissolution of the Partnership, upon notice to all Limited
Partners but without the consent of any Limited Partner, if, in the opinion of
counsel to the Partnership, either (i) the Partnership's assets constitute
"plan assets," as such term is defined for purposes of ERISA, or (ii) any of
the transactions contemplated hereunder constitute "prohibited transactions"
under ERISA and no exemption for such transactions is obtainable from the
United States Department of Labor.

19. SPECIAL POWER OF ATTORNEY

19.1 By completing and signing the Partnership's Subscription
Documents or any transfer form, each Limited Partner grants to the General
Partners and to each officer of the Managing General Partner and their
designees and each of them a power of attorney irrevocably making, constituting
and appointing each of them with full power of substitution and resubstitution,
as its or their attorney-in-fact with full power and authority to act in its or
their name on its or their behalf to execute complete and/or correct in a
manner consistent with the

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Prospectus and the Partnership Agreement and to execute, acknowledge, swear to
and file the following documents, subject to all of the provisions of the
Partnership Agreement:

19.1.1 the Partnership Agreement, the Certificate, and any
separate certificates of limited partnership to be filed in
the appropriate public offices in the State of Delaware (and
any other state for which the General Partners shall deem it
advisable to file, upon advice of counsel) and in such form as
shall be necessary under the laws of such state to give effect
to the provisions of the Partnership Agreement and to preserve
the character of the Partnership as a limited partnership, and
any amended Certificate, including any amendment to the
Certificate or to the Partnership Agreement to reflect the
admission of additional General or Limited Partners in
accordance with the terms of the Partnership Agreement or the
substitution of a Limited Partner or General Partner in
accordance with the provisions of the Partnership Agreement;

19.1.2 any other instrument or document which the General
Partners deem to be in the best interests of the Partnership
to file and which is not inconsistent with this Partnership
Agreement;

19.1.3 any document which may be required in connection
with borrowings by the Partnership, including, without
limitation, documents required by any financial institution;

19.1.4 any documents which may be required in connection
with any filings with state securities commissions or other
state authorities;

19.1.5 any document necessary or appropriate in order to
qualify the Partnership to transact business in any state, or
to reconstitute the Partnership as provided in Paragraph
21.10.

19.1.6 any amendment to this Partnership Agreement which
in the opinion of the General Partners does not adversely
impact the interests of the Limited Partners, or is necessary
to clarify any ambiguities, misstatements or omissions from
this Partnership Agreement;

19.1.7 any instruments or other documents necessary to
effect any of the amendments to this Partnership Agreement in
accordance with Paragraph 14.2.15 hereof.

19.2 The power of attorney granted by each Limited Partner:

19.2.1 is a special power of attorney coupled with an
interest which is irrevocable and shall survive and not be
affected by the death, incompetency, disability or incapacity
of the granting Limited Partner;

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19.2.2 may be exercised by the attorney-in-fact appointed
as set forth in Paragraph 19.1 hereof either by signing
separately as attorney-in-fact for the Limited Partners or,
after listing all of the Limited Partners executing any
instrument, by a single signature of such attorney-in-fact for
all of them; and

19.2.3 shall survive the delivery of an assignment by a
Limited Partner of the whole or any portion of his Units
except that, where the assignee thereof has been approved by
the Managing General Partner for admission to the Partnership
as a substituted Limited Partner, this power of attorney given
by the assignor shall survive the delivery of such assignment
for the sole purpose of enabling the General Partners and each
officer of the Managing General Partner and their designees
and each of them to execute, acknowledge, swear to and file
any instrument or document necessary to effect such
substitution.

19.3 Each Limited Partner is fully aware that he and each other
Limited Partner have executed this power of attorney, and that each Limited
Partner will rely on the effectiveness of such powers with a view to the
orderly administration of the Partnership's affairs.

20. LIABILITY AND INDEMNIFICATION

20.1 The General Partners and their Affiliates shall have no
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of a General Partner or
the Affiliate of a General Partner if the General Partners or the Affiliates,
in good faith, determined that such course of conduct was in the best interests
of the Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner or the Affiliate. The General Partners shall
not be liable because of any taxing authorities disallow or adjust any income,
nor shall the General Partners be liable for actions taken or not taken in
accordance with the provisions of this Partnership Agreement, provided that the
same were not the result of negligence, breach of contract or misconduct.
Furthermore, the General Partners shall not have any liability for the
repayment of Capital Contributions of the Limited Partners except as provided
in this Partnership Agreement, nor shall the General Partners be obligated,
except as required by law, to make additional Capital Contributions or advances
to the Partnership. The General Partners and their Affiliates shall be
indemnified by the Partnership against any losses, judgments, liabilities,
expenses and amounts paid in settlement of any claims sustained by them while
acting on behalf of or performing services for the Partnership, provided that
the same were not the result of negligence or misconduct on the part of the
General Partners or their Affiliates, provided however, that such
indemnification shall be recoverable only out of the assets of the Partnership
and not from the Limited Partners, provided further, that the General Partners
or their Affiliates, in good faith, determine that their course of conduct was
in the best interest of the Partnership.

20.1.1 Notwithstanding the above, the General Partners and
their Affiliates and any Person acting as a broker-dealer
shall not be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of
federal or state securities laws unless (i) there has been a
successful adjudication on the merits of each count involving
alleged securities law violations as to the particular

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indemnitee, or (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee or (iii) a court of competent
jurisdiction approves a settlement of the claims against a
particular indemnitee and finds that indemnification of the
settlement and related costs should be made.

20.1.2 In any claim for indemnification for federal or
state securities law violations, the party seeking
indemnification shall place before the court the position of
the Securities and Exchange Commission and the positions of
certain state securities divisions, including California,
Oklahoma and Tennessee, and in such other states in which the
claimants allege Units were offered or sold, with respect to
the issue of indemnification for securities law violations.

20.1.3 The Partnership shall not pay for any insurance
covering liability of the General Partners and their Affiliates
for actions or omissions for which indemnification is not
permitted hereunder; provided, however, that nothing contained
herein shall preclude the Partnership from purchasing and
paying for such types of insurance, including extended coverage
liability and casualty and workers compensation, as would be
customary for any Person owning comparable assets and engaged
in a similar business from naming the General Partners and
their Affiliates as additional insured parties thereunder,
provided that such addition does not add to the premiums
payable by the Partnership.

20.1.4 The provision of advances from Partnership funds to
the General Partners or their Affiliates for legal expenses
and other costs incurred as a result of any legal action
initiated against a General Partner by a Limited Partner of
the Partnership is prohibited.

20.1.5 The provision of advances from Partnership funds to
the General Partners or their Affiliates for legal expenses
and other costs incurred as a result of a legal action is
permissible if the following three conditions are satisfied:
(1) the legal action relates to acts or omissions with respect
to the performance of duties or services by General Partners
or their Affiliates on behalf of the Partnership; (2) the
legal action is initiated by a third party who is not a
Limited Partner of the Partnership; and (3) the General
Partners or their Affiliates undertake to repay the advanced
funds to the Partnership in cases in which they would not be
entitled to indemnification under Paragraph 20.1 hereof.

21. MISCELLANEOUS

21.1 Counterparts. This Partnership Agreement may be executed in
several counterparts and as so executed shall constitute one Partnership
Agreement, binding on all of the parties hereto, notwithstanding that all of
the parties are not signatories to the original or the same counterpart.

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21.2 Binding Provisions. The terms and provisions of this
Partnership Agreement shall be binding upon and shall inure to the benefit of
the successors and assigns of the respective Partners.

21.3 Severability. In the event any phrase, sentence or paragraph
of this Partnership Agreement is declared by a court of competent jurisdiction
to be void, such phrase, sentence or paragraph shall be deemed severed from the
remainder of the Partnership Agreement and the balance of the Partnership
Agreement shall remain in effect.

21.4 Notice. All notices under this Partnership Agreement shall be
in writing and shall be given to the party entitled thereto by personal service
or by mail, posted to the address maintained by the Partnership for such Person
or at such other address as he may specify in writing.

21.5 Headings. Titles or captions contained in this Partnership
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Partnership Agreement nor the intent of any provision hereof.

21.6 Meanings. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa; and the word "Person"
shall include a corporation, partnership, firm or other form of association.

21.7 List of Partners. The names, addresses and Original
Contributions of the Partners shall be set forth on Exhibit 1 attached hereto,
which exhibit shall be updated by the Managing General Partner as Partners are
admitted to or withdraw from the Partnership, by amendments to this Agreement.
A current copy of Exhibit 1 shall be maintained at the principal place of
business of the Partnership.

21.8 Governing Law. Notwithstanding the place where this
Partnership Agreement may be executed by any of the parties hereto, the parties
expressly agree that all the terms and provisions hereof shall be construed
under the laws of the State of Delaware and that the Delaware Act, as amended,
shall govern the partnership aspects of this Partnership Agreement.

21.9 Other Jurisdictions. In the event the business of the
Partnership is carried on or conducted in states in addition to the State of
Delaware, then the parties agree that this Partnership shall exist under the
laws of each state in which business is actually conducted by the Partnership,
and they severally agree to execute such other and further documents as may be
required or requested in order that the Managing General Partner legally may
qualify this Partnership in such states. The power of attorney granted to the
Managing General Partner in Section 20 shall constitute the authority of the
Managing General Partner to perform the ministerial duty of qualifying this
Partnership under the laws of any state in which it is necessary to file
documents or instruments of qualification. A Partnership office or principal
place of

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business in any state, including the State of Michigan, may be designated from
time to time by the Managing General Partner.

21.10 Power to Reconstitute. In the event that the State of
Delaware amends its Revised Uniform Limited Partnership Act in any manner which
precludes the Partnership, at any time, from obtaining an opinion of tax
counsel to the effect that the Partnership will be treated as a pass-through
entity for federal income tax purposes and not as an association taxable as a
corporation, then the Managing General Partner may, in its sole discretion,
reconstitute the Partnership under the laws of another state.

IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement of Limited Partnership as of the date first above written.

GENERAL PARTNERS:

CAPTEC FRANCHISE CAPITAL CORPORATION IV

By: ______________________________
Patrick L. Beach
President and
Chief Executive Officer

______________________________
Patrick L. Beach

INITIAL LIMITED PARTNER:

By: _____________________________
Patrick L. Beach

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EXHIBIT 1

NAMES, ADDRESSES AND ORIGINAL INVESTMENTS OF THE PARTNERS

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EXHIBIT 2

DISTRIBUTION REINVESTMENT PLAN

Capitalized terms contained herein shall have the same meanings set
forth in the Agreement unless otherwise defined or the context otherwise
indicates.

1. As agent for the participants in the Distribution Reinvestment
Plan (the "Participants"), the Partnership or an unaffiliated third party will
apply all distributions of Cash Flow during the offering period paid with
respect to Units (the "Distributions"), including distributions paid with
respect to any full or fractional Units acquired under the Distribution
Reinvestment Plan, to the purchase of Units for said Participants directly, if
permitted under state securities laws and, if not, through participating
dealers registered in the Participant's state of residence (either being
referred to herein as the "Reinvestment Agent") as hereunder described.

A participating dealer, or in the event there is no
participating dealer, the Partnership, assumes the responsibility for Blue Sky
compliance and performance of due diligence responsibilities and will ascertain
whether the Participants continue to meet the suitability standards of their
state of residence with respect to each reinvestment. Additionally, the
Participating Dealers involved in the Distribution Reinvestment Plan must
obtain in writing an agreement from the client by which the client agrees to
the payment of compensation to the Participating Dealer in connection with said
client's reinvestment.

Units will be purchased at the public offering price and
commissions equal to 8% of the Unit purchase price will be paid to the
Participating Dealer who originated the Participant's investment in the
Partnership. In addition, the General Partners or an Affiliate will be paid the
Non-Accountable Expense Allowance. In connection with the receipt of such
commissions, Participating Dealers will be required, at least annually, to
review the performance of the Partnership, the General Partners and their
affiliates to determine whether continued participation in the Plan is
consistent with their clients' investment intent and to affirmatively determine
whether continued participation is suitable for their clients.

Subsequent to the sale of the Minimum Number of Units and
prior to the Termination Date, Distributions paid by the Partnership will be
reinvested in Units for the Participants promptly following the payment date
with respect thereto and in no event later than 60 days from such receipt to
the extent such Distributions are available or distributed to the Limited
Partners at the public offering price to the extent Units are available. All
such investments of Distributions in Units will be effected by amendment of the
Partnership Agreement to reflect the issuance of additional Units to
Participants. Distributions, if any, will be timed to coordinate with scheduled
amendments of the Partnership Agreement such that no Distributions are held
pending investment in Units pursuant to the Distribution Reinvestment Plan. If
a Participant's Distribution is not large enough to buy a full Unit, he will be
issued a fractional Unit, computed to five decimal places. Participants will
not be permitted to contribute amounts in excess of their Distributions to
purchase Units under the Distribution Reinvestment

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Plan. If sufficient Units for all Participants are not available, the
Partnership will allocate available Units (or fractional Units) to Participants'
accounts on a pro rata basis.

2. Limited Partners may become Participants in the Distribution
Reinvestment Plan at any time by completing the appropriate authorization form
available from the Partnership. Participation in the Distribution Reinvestment
Plan will start with the next Distribution payable after receipt of a
Participant's authorization, provided it is received before the record date for
that Distribution.

4. The Partnership will distribute to Participants proxy
solicitation materials, if any, which relate to Units held in the Distribution
Reinvestment Plan and the voting procedures will comply with the Partnership
Agreement.

5. The Partnership will mail to each Participant a statement and
accounting showing the Distributions received, the number of Units purchased,
as soon as practicable after all Distributions paid on any payment date with
respect thereto have been invested. Tax information for income earned on Units
and the investment of funds under the Distribution Reinvestment Plan for the
calendar year will be sent to each Participant by the Partnership.

6. No Participant shall have any right to draw checks or drafts
against his account or to give instructions to the Partnership except as
expressly provided herein.

7. Participants will be charged for ministerial services incurred
in connection with the administration of the Distribution Reinvestment Plan.

8. Taxable Participants may incur a tax liability for Partnership
income allocated to them even though they have elected not to receive their
Distributions in cash but rather to have their Distributions held in their
account under the Distribution Reinvestment Plan.

9. A Participant may terminate an account at any time, without
charge, by written notice to the Partnership at 24 Frank Lloyd Wright Drive,
P.O. Box 544, Ann Arbor, Michigan 48106-0544, or such other address as may be
specified by the Partnership. To be effective for any Distribution, such notice
must be received at least 10 days before the record date for such payment. The
Partnership may terminate a Participant's individual participation in the
Distribution Reinvestment Plan or the Distribution Reinvestment Plan itself at
any time by written notice mailed to a Participant, or to all Participants, as
the case may be, at the address or addresses shown on their account. Upon
termination of the Distribution Reinvestment Plan, or upon termination of an
individual Participant's involvement in the Distribution Reinvestment Plan, the
Partnership will send to each Participant certificates evidencing the Units in
such Participant's account.

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If a Participant disposes of all Units registered on the books
of the Partnership in his name, the Partnership will, by written notice mailed
to the Participant, determine from the Participant the disposition to be made
of the Units in the Participant's account with the Partnership. If the
Partnership does not receive instructions from the Participant within 60 days
of such notice, it may, in its discretion, terminate the Participant's further
participation in the Distribution Reinvestment Plan or continue to reinvest the
Distributions paid in respect of the Units in the account until otherwise
notified in writing.

10. The Partnership shall not be liable for any act done in good
faith, or for any good faith omission to act, including, without limitation,
any claims of liability: (a) arising out of failure to terminate a
Participant's account upon such Participant's death prior to receipt of notice
in writing of such death and (b) with respect to the time and the prices at
which Units are purchased or sold for a Participant's account.

11. Each Participant agrees to notify the Partnership promptly in
writing of any change of address. Notices to the Participant may be given by
letter addressed to the Participant at his last address of record with the
Partnership.

12. These terms and conditions of the Distribution Reinvestment
Plan may be amended or supplemented by the General Partners in their sole
discretion at any time by mailing an appropriate notice at least 30 days prior
to the effective date thereof to each Participant at his last address of
record. Such amendment or supplement shall be deemed conclusively accepted by
each Participant except those Participants from whom the Partnership receives
written notice of termination prior to the effective date thereof.

13. This Distribution Reinvestment Plan and a Participant's
election to participate in the Distribution Reinvestment Plan shall be governed
by the laws of the State of Delaware. The Partnership may terminate the
Distribution Reinvestment Plan by giving 10 days prior written notice to each
Participant at his last address of record. Notwithstanding the foregoing, the
Distribution Reinvestment Plan will terminate concurrently with the Offering.

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SUBSCRIPTION INSTRUCTIONS
<PAGE> 211
SUBSCRIPTION INSTRUCTIONS

Please follow these instructions carefully. Failure to do so may result in
the rejection of your subscription.

1. Complete the Subscription Agreement marked "Signature Page." All
information requested must be included on the Signature Page. If the Units are
to be held in joint ownership both purchasers must complete the information
required in Items 3 and 4. If interests are being acquired by a partnership,
trust, corporation or other entity, special instructions should be obtained from
the Partnership.

2. Taxpayer Identification Number Certification. In October 1983,
the Internal Revenue Service ("IRS") enacted specific legislation affecting all
accounts which paid reportable escrow or dividend interest and certain other
payments after January 1, 1984. The Partnership, as payor, must generally
withhold 20% of your taxable interest or dividends if you, as payee: (1) fail to
furnish the Partnership with your certified, correct Taxpayer Identification
Number ("TIN"); and (2) fail to certify that you are not subject to backup
withholding under Section 3406(a)(1)(C) of the Code. Under Section 3406(a)(1)(C)
of the Code, the IRS will notify a payee that he or she is subject to backup
withholding because he or she has underreported interest or dividends or was
required to, but failed to, file a return which would have included a reportable
interest or dividend payment. For most individual taxpayers, the TIN is the
social security number.

Effect of Backup Withholding. Subscribers should note that while backup
withholding may be imposed on payments of escrow interest on subscription funds,
under current legislation, backup withholding is generally inapplicable to
partnership distributions. There is no assurance that this will not change in
the future. To prevent backup withholding of your taxable interest or
distributions, the certified, correct TIN of the record owner of the account
must appear in Item 3 on the front of the Signature Page. If more than one name
is on the account (e.g., Joint Tenants), the TIN should be that of the first
name listed in the Signature Page. The person whose TIN is listed must SIGN and
DATE the certification as true, correct and complete under the penalty of
perjury.

Payees Subject to Backup Withholding: If you have been notified by the IRS
that you are subject to backup withholding under Section 3406(a)(1)(C) of the
Code, you should strike out the language under #(3) of the certification and
still sign to certify under penalty of perjury that this is your true, correct
and complete TIN. While a subscriber will still be subject to backup
withholding, completion of the certification in the foregoing manner eliminates
the risk that penalties may be imposed by the IRS on the subscriber for failing
to make such certification. Refer to the back of the IRS Form W-9 or consult
your local office of the IRS for a complete listing of such penalties.

Information concerning payees exempt from backup withholding can be found
on the IRS Form W-9 or can be obtained from the IRS. The major payee exceptions
from backup withholding, but not from taxpayer identification requirements, are:
(1) corporations; (2) financial institutions; (3) organizations exempt from tax
under Section 501(a) or IRAs; (4) real estate investment trusts; and (5)
registered dealers in securities or commodities registered in the United States
or in a possession of the United States. If your account is exempt, insert your
TIN, write "EXEMPT" under it and still sign the certification as indicated
above. Failure to sign the certification will result in imposition of backup
withholding.

IF THE SUBSCRIBER DOES NOT HAVE A TAXPAYER IDENTIFICATION NUMBER, he should
obtain Form SS-5 for a Social Security Number, or Form SS-4 for an Employer ID
Number from his local office of the Social Security Administration or the IRS.
IF THE SUBSCRIBER HAS APPLIED FOR A TAXPAYER IDENTIFICATION NUMBER and has not
yet received it, he should write "APPLIED FOR" in the certification section and
SIGN THE FORM (after first striking out the language under #(1) of the
certification) certifying under penalty of perjury that he is not subject to
backup withholding under section 3406(a)(1)(C). The subscriber should also
understand that if he does not provide a TIN to the payor

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within 60 days, the payor is required to withhold 20% of all reportable
payments thereafter until a certified TIN is provided. Upon the processing of
his order, the subscriber will be sent another form with which to certify that
he has mailed or delivered an application to receive a TIN to the appropriate
IRS or Social Security Administration Office or that he intends to mail or
deliver one in the near future.

3. Fill in the information required in each of the Items 1-9:

Item 1: Enter date of execution, number of Units being purchased,
and the dollar amount of investment.

Item 2: Check type of ownership.

Item 3: Enter the name, Tax Identification or Social Security
Number of the Registered Owner and sign where indicated.

Item 4: Enter the residential address of the Registered Owner.

Item 5: Enter the custodian or trust company address, if
applicable.

Item 6: Enter the mailing address for checks if different from
that listed in Item 4 or 5, as applicable.

Item 7: Investor must initial the two spaces indicating they have
received a prospectus and that they meet suitability
requirements.

Item 8: Check this box if you wish to have monthly distributions.

Item 9: Check this box if you wish to participate in the
Distribution Reinvestment Program.

4. The Signature Page of the Subscription Agreement, together with
a check or money order for the full purchase price of the Units
subscribed for payable to "Michigan National Bank, Escrow Agent for Captec
Franchise Capital Partners L.P. IV", should be delivered or mailed to your
broker-dealer.

IMPORTANT! A minimum investment of $2,000 (two Units) is required for all
investors. The minimum subscription for Iowa IRAs and Minnesota and South
Carolina investors is two and one-half Units ($2,500). Tax Exempt Investors who
are residents of Minnesota may have minimum subscriptions of two Units ($2,000).
Residents of Nebraska must have minimum subscriptions of five Units ($5,000).
The minimum subscription for Tax Exempt Investors who are residents of Nebraska
is two Units ($2,000). Units may be purchased only by persons meeting the
standards set forth under "Who Should Invest" in the Prospectus.

I-2
<PAGE> 213

EXHIBIT C

SUBSCRIPTION AGREEMENT

<PAGE> 214
CAPTEC FRANCHISE CAPITAL PARTNERS, L.P. IV
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY

1. Subscription. The undersigned hereby agrees to purchase that number of Units
indicated upon the signature page of this Subscription Agreement and Power of
Attorney (the "Subscription Agreement") in a limited partnership known as
Captec Franchise Capital Partners L.P. IV (the "Partnership") and to pay the
amount therefore in cash or check payable to "Michigan National Bank, Escrow
Agent for Captec Franchise L.P. IV". This Subscription Agreement and the
accompanying payment are to be delivered to the dealer whose name appears on
the signature page of the Subscription Agreement for deposit in trust to a
segregated account for the benefit of the Partnership and the subscriber. The
Units subscribed for herein shall not be deemed issued to the undersigned nor
shall the undersigned own any Units subscribed for herein or be deemed to be a
Limited Partner until: (i) the undersigned has personally executed (or in the
case of fiduciary accounts, the person authorized to sign on such investors
behalf) this Subscription Agreement and initialed EACH of the representations;
(ii) the undersigned has fully paid the capital contribution required for the
Units for which the investor has subscribed; (iii) the General Partners have
accepted the investor's subscription; and (iv) the General Partners have
accepted subscriptions for the Minimum Number of Units as set forth in the
Prospectus of the Partnership, dated December 23, 1996 (the "Prospectus"). If
the undersigned has not paid for the Units for which they have subscribed, the
General Partners, at their option, may forthwith terminate this subscription
and this Subscription Agreement. In the event the offering is terminated in
accordance with the provisions described in the Prospectus, the Escrow Agent
will cause the subscription amount to be returned to the undersigned, in full,
with interest, less escrow expenses, and the undersigned shall have no further
interest in the Partnership.

2. Adoption of Limited Partnership Agreement. The undersigned hereby intends
that his signature hereon shall constitute a subscription for the number of
Units specified on the signature page of this Subscription Agreement, as well
as a specific acceptance and adoption of each and every provision of the
document designated as the Agreement of Limited Partnership of Captec Franchise
Capital Partners L.P. IV, a form of which is attached to the Prospectus and is
incorporated and made a part hereof by this reference (the "Partnership
Agreement'), and hereby agrees to be bound and governed by the provisions of
said Partnership Agreement..

3. Limitation of Assignment. The undersigned acknowledges that the Units may be
assigned only as provided in the Partnership Agreement and that the issuance of
any certificate representing the Units will be subject to the following legend
condition imposed by the rules of the Commissioner of Corporations of the State
of California.

IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

The undersigned further specifically acknowledges the restrictions on resale,
transfer or assignment of the Units set forth in the Prospectus under "Risk
Factors-Lack of Liquidity-Limited Transferability" and "Summary of Partnership
Agreement-Restrictions on Transfer of Units" therein. The undersigned
specifically acknowledges the Units are being acquired for the investor's own
account and for the purpose of earning an economic profit thereon, without
regard to any federal income tax benefits resulting from ownership of the
Units.

If executing this Subscription Agreement in a representative or fiduciary
capacity, the undersigned acknowledges individually that they have full power
and authority to execute and deliver this Subscription Agreement on behalf of
the subscribing individual, ward, partnership, trust, estate, corporation or
other entity for whom they are executing this Subscription Agreement, and that
such individual, ward, partnership, trust, estate, corporation or other entity
had full right and power to execute, deliver and perform pursuant to this
Subscription Agreement and become a Limited Partner in the Partnership.

4. Special Power of Attorney. The undersigned hereby irrevocably makes,
constitutes and appoints the General Partners and any person designated by
either of them, as their true and lawful attorney with full

power of substitution, for them and in their name, place and stead for their
use and benefit to make, execute acknowledge, file and record:

(a) A Certificate of Limited Partnership under the laws of the State of
Delaware, the Partnership Agreement, a Certificate of Cancellation of the
Partnership and any and all amendments and restatements thereof;
(b) Any certificate or other instrument which may be required to be filed by
the Partnership under the laws of the State of Delaware (or any other
jurisdiction in which the General Partners shall deem it advisable to file,
upon advice of counsel or otherwise);
(c) All instruments relating to the admission, withdrawal or substitution of
any partner;
(d) Any and all such other instruments as may be deemed necessary or
desirable by the General Partners to carry out fully the provisions of the
Partnership Agreement in accordance with its terms;
(e) Any and all amendments or modifications of the instruments described in
paragraph a, b or c above; and
(f) Any revision or structural changes necessary to comply with the
Regulations promulgated by the Department of Labor regarding plan asset
characterizations.

The foregoing grant of authority:

(i) is a special power of attorney coupled with an interest, is irrevocable
and shall survive and not be affected by the death, liability, incapacity,
dissolution, bankruptcy or termination of the undersigned, and is limited to
those matters herein set forth;

(ii) shall survive the delivery of an assignment by a Limited Partner of
all or any portion of their Units, except that where the assignee thereof has
been approved by the Managing General Partner for admission to the Partnership
as a substituted Limited Partner, the power of attorney of the assignor Limited
Partner shall survive the delivery of such assignment for the sole purpose of
enabling any of such attorneys to execute, acknowledge, file and record any and
all instruments necessary to effect such substitution; and

(iii) may be exercised by any of such attorneys for each Limited Partner by
a facsimile signature or by listing all of the Limited Partners executing any
instrument with a single signature of any of such attorneys acting as
attorney-in-fact for all of them.

5. Additional Suitability Requirements. Residents of Iowa, Minnesota and
Missouri must personally sign the Subscription agreement. In addition to
the suitability standards established by the Partnership, residents of
Pennsylvania, Missouri, and Ohio must also meet the suitablity requirements
established by their respective states as described in the Prospectus
section titled "Who Should Invest".

<PAGE> 215
CAPTEC FRANCHISE CAPITAL PARTNERS, L.P. IV

SIGNATURE PAGE
<TABLE>
<CAPTION>
MAKE CHECKS PAYABLE TO: MICHIGAN NATIONAL BANK, ESCROW AGENT FOR CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

IN WITNESS WHEREOF, I have executed this subscription on this______________________day of ____________________, 19_______.

Number of Units_____________________Amount of Investment ($1,000 x Number of Units) $_____________________________________
<S> <C> <C> <C> <C>
___IRA ___Individual ___Corporation ___Trust
___Joint Tenants ___Community Property ___Pension/Profit Sharing Plan ___KEOGH
___Partnership ___Tenants in Common ___Uniform Gift to Minors Act ___Other (Specify)

Under the penalties of perjury, I certify that the number provided
[ ] herein is my true, correct and complete Tax Identification Number.
Please check if you are subject to a 20% backup withholding under the
provisions of Sections 3406(a)(1)(C) of the Internal Revenue
Code. ANY CHANGES MADE TO THIS SIGNATURE PAGE MUST BE INITIALED BY
THE INVESTOR.

______________________________________________ _______________________________________________
Print Name of Custodian or Trustee Tax Identification Number

______________________________________________ _______________________________________________
Print Name(s) of Registered Owner Social Security Number

X_____________________________________________ X______________________________________________
Investor's Signature or Authorized Signature Investor's Signature or Authorized Signature
(Custodian or Trustee)* (Custodian or Trustee)*

*Residents of Iowa, Minnesota and Missouri must personally sign this
Subscription Agreement.

INVESTOR(S) LEGAL Street Address: Day Telephone:
RESIDENCE

City: State: Zip Code:

CUSTODIAN OR TRUST Street Address: Day Telephone:
COMPANY ADDRESS

City: State: Zip Code:

MAILING ADDRESS Company or Bank Name: Account Number:
FOR CHECKS
(if different from above) Street Address:

City: State: Zip Code:

WARRANTIES AND REPRESENTATIONS. The investor hereby warrants and represents the
following by INITIALING EACH STATEMENT:

________ The investor acknowledges receipt of the Partnership's
Prospectus
(initial)

_________ The investor has a net worth (excluding home, home furnishings
and automobiles) of at least $150,000; or the investor has a
net worth (excluding home, home
(initial) furnishings and automobiles) of at least $45,000 and, (without
regard to the investment herein) the investor has an annual
income of at least $45,000; or the investor is purchasing in a
fiduciary capacity for a person that meets such conditions.

_________ (PENNSYLVANIA, MISSOURI, AND OHIO RESIDENTS ONLY) The
investor acknowledges that he/she meets the suitability
requirements for the state in which the
(initial) investor is a resident as described in the Prospectus section
titled "Who Should Invest".

/ / Please check here if you would like your cash flow
distributions from the Partnership or other sources reinvested
during the Offering pursuant to the Distribution Reinvestment
Plan.

/ / Please check here if you have acquired ten (10) or more Units
and wish to receive monthly distributions. By making this
election, you will receive three equal monthly distributions
beginning with the payment date rather than receiving the full
distribution on the payment date.

</TABLE>

<PAGE> 216
TO BE COMPLETED BY BROKER/DEALER

The registered representative hereby undertakes by his signature that he has
made a determination in compliance with the provisions of Appendix F to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
that the offering of Units in the Partnership is suitable for the investor and
that he has disclosed to such investor the lack of liquidity and marketability
of the Units as stated in the "Who Should Invest" section of the Prospectus

Registered Representative_________________________________________________

Brokerage Firm Name_______________________________________________________

Address___________________________________________________________________

City___________________________________________State _______

Zip_______________

Business Phone____________________________________________________________

X_________________________________________________________________________

Signature of Registered Representative

MAIL COPY OF SIGNATURE PAGE WITH CHECK PAYABLE TO: MICHIGAN NATIONAL BANK,
ESCROW AGENT FOR CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV, 4755 WASHTENAW
AVENUE, ANN ARBOR, MICHIGAN 48108.

MAIL THIS ORIGINAL FORM and all other documents to Captec Franchise Capital
Partners L.P. IV, 24 Frank Lloyd Wright Drive, P.O. Box 544, Ann Arbor,
Michigan 48106-0544.

DEPOSIT DATE _____/_____/_____
<PAGE> 217

EXHIBIT D

DISTRIBUTION REINVESTMENT PLAN
<PAGE> 218
DISTRIBUTION REINVESTMENT PLAN

Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership") governed under the Amended and Restated Limited
Partnership Agreement dated as of October 31, 1996, (the "Agreement"), by
and among Captec Franchise Capital Corporation IV and Patrick L. Beach (the
"General Partners"), and Patrick L. Beach, the Initial Limited Partner, has
adopted a Distribution Reinvestment Plan (the "Distribution Reinvestment
Plan"), the terms and conditions of which are set forth below. Capitalized
terms contained herein shall have the same meanings set forth in the Agreement
unless otherwise defined or the context otherwise indicates.

3. The Partnership shall have no responsibility or liability as
to the value of the Partnership's Units or may change the value of the Units
acquired for a Participant's account or as to the rate of return or value of
the interest-bearing accounts or securities in which a Participant's
Distributions may be invested.
<PAGE> 219
4. The Partnership will distribute to Participants proxy
solicitation materials, if any, which relate to Units held in the Distribution
Reinvestment Plan and the voting procedures will comply with the Partnership
Agreement.

6. No Participant shall have any right to draw checks or drafts
against his account or to give instructions to the Partnership except as
expressly provided herein.

7. Participants will be charged for ministerial services incurred
in connection with the administration of the Distribution Reinvestment Plan.

If a Participant disposes of all Units registered on the books of
the Partnership in his name, the Partnership will, by written notice mailed to
the Participant, determine from the Participant the disposition to be made of
the Units in the Participant's account with the Partnership. If the Partnership
does not receive instructions from the Participant within 60 days of such
notice, it may, in its discretion, terminate the Participant's further
participation in the Distribution Reinvestment Plan or continue to reinvest the
Distributions paid in respect of the Units in the account until otherwise
notified in writing.

<PAGE> 220

his last address of record. Notwithstanding the foregoing, the
Distribution Reinvestment Plan will terminate concurrently with the Offering.
<PAGE> 221

CAPTEC

FINANCIAL GROUP, INC.

TELEPHONE (313) 994-5505
TELECOPIER (313) 994-1376
<PAGE> 222

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) payable in
connection with the issuance and distribution of Units assuming 30,000 Units
are sold.

<TABLE>
<S> <C>
Securities and Exchange Commission, registration fee $10,345
NASD filing fee..................................... 3,500
Printing and Mailing................................ 50,000
Accountants (fees and expenses)..................... 6,155
Blue Sky fees and expenses (including legal fees)... 60,000
Legal fees and expenses............................. 65,000
Sales Activities and Seminars....................... 805,000
Due Diligence....................................... 500,000
----------
Total............................................... $1,500,000
==========
</TABLE>

ITEM 32. RECENT SALE OF UNREGISTERED SECURITIES.

The Partnership has sold .1 Units for $100 to Patrick L. Beach in order
that Mr. Beach may become the initial Limited Partner and permit the filing of
a Certificate of Limited Partnership. This sale was made pursuant to the
exemption contained in Section 4(2) of the Securities Act of 1933, as amended
(the "Act"), as a transaction not involving any public offering.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under the Partnership Agreement, neither the General Partners nor any
affiliate of the General Partners will be liable, responsible, accountable in
damages or otherwise to the Partnership or to any Limited Partners for any
action taken or failure to act on behalf of the Partnership within the
authority granted to them by the Partnership Agreement provided that the
General Partners or such Person believed in good faith that the course of
conduct which caused the loss or liability was in the best interest of the
Partnership and such liability or loss was not the result of negligence or
misconduct by such Person. The Partnership will indemnify the General Partners
and their Affiliates against any losses, judgments, liabilities, expenses and
amounts paid in settlement of any claims sustained by them on behalf of the
Partnership within the scope of the authority conferred on them by the
Partnership Agreement or by law or in furtherance of the Partnership's
interests, provided that the same were not the result of negligence or
misconduct on the part of the General Partners or their Affiliates and the
General Partners have determined in good faith that the conduct was in the best
interest of the Partnership.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

(b) Financial Statement Schedule

Report of Independent Accountants

Schedule XI -- Real Estate and Accumulated Depreciation

II-1

<PAGE> 223

ITEM 36.UNDERTAKINGS.

The Registrant hereby undertakes as follows:

(a) to file a sticker supplement pursuant to Rule 424(c) under the Act
during the distribution period describing each property not identified in the
Prospectus at such time as there arises a reasonable probability that such
property will be acquired and to consolidate all such stickers into a
post-effective amendment filed at least once every three months, with the
information contained in such amendment provided simultaneously to the existing
Limited Partners. Each sticker supplement will disclose all compensation and
fees received by the General Partners or their affiliates in connection with
any such acquisition. Audited financial statements meeting the requirements of
Rule 3-14 of Regulation S-X for properties acquired during the distribution
period will only be filed with the post-effective amendment;

(b) to submit all sales literature to the staff of the Commission as
supplemental literature prior to its use;

(c) (i) to file any prospectuses required by Section 10(a)(3) as
post-effective amendments to the Registration Statement; (ii) that for the
purpose of determining any liability under the Act each such post-effective
amendment may be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time may
be deemed to be the initial bona fide offering thereof; (iii) that all
post-effective amendments will comply with the applicable forms, rules and
regulations of the Commission in effect at the time such post-effective
amendments are filed; and (iv) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain at
the termination of the offering;

(d) to file, after the end of the distribution period, a current report on
Form 8-K containing the financial statements and any additional information
required by Rule 3-14 of Regulation S-K, to reflect each commitment (i.e., the
signing of a binding purchase agreement) made after the end of the distribution
period involving the use of 10% or more (on a cumulative basis) of the net
proceeds of the offering and to provide the information contained in such
report to the Limited Partners at least once each quarter after the
distribution period of the offering has expired;

(e) to provide to the Limited Partners the financial statements required
by Form 10-K for the first full fiscal year of operations of the Partnership;

(f) to send to each Limited Partner at least on an annual basis a detailed
statement of any transactions with the General Partners or their Affiliates,
and of fees, commissions, compensation and other benefits paid or accrued to
the General Partners or their Affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed;

(g) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20%

II-2

<PAGE> 224

change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table set forth in this
registration statement; and

(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;

(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the Securities offered herein, and
the offering of such Securities at that time shall be deemed to be the initial
bona fide offering thereof;

(i) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering;

(j) That, for the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed a part of
this Registration Statement as of the time it was declared effective; and

(k) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering.

(l) insofar as indemnification for liabilities arising under the Act may
be permitted to the General Partners and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a General Partner or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such General Partners and the controlling persons in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-3

<PAGE> 225

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements of filing on Form S-11 and authorized this
Post-Effective Amendment No. 3 to Registration Statement to be signed on its
behalf by the undersigned, in the City of Ann Arbor, State of Michigan, on
October 17, 1997.

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

By: Captec Franchise Capital Corporation IV,
General Partner

By: /s/ Patrick L. Beach
-------------------------------------
Patrick L. Beach
Chairman of the Board, President and
Chief Executive Officer

By: /s/ Patrick L. Beach
-------------------------------------
Patrick L. Beach, General Partner

In accordance with the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 3 to Registration Statement was
signed by the following persons in the capacities and on the dates indicated:

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

By: Captec Franchise Capital Corporation IV, General Partner

/s/ Patrick L. Beach Chairman of the October 17, 1997
- -------------------- Board, President
Patrick L. Beach and Chief Executive
Officer

/s/ W. Ross Martin Director, Senior October 17, 1997
- -------------------- Vice President,
W. Ross Martin Treasurer,
Secretary, and
Chief Financial
Officer (principal
financial officer
and principal
accounting officer)

II-4

<PAGE> 226

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1.1* Proposed Form of Participating Dealer Agreement

1.2* Proposed Form of Amended and Restated
Participating Dealer Agreement

1.3* Dealer-Manager Agreement

3.1* Agreement of Limited Partnership of the
Partnership (included in prospectus)

3.2* Articles of Incorporation of Captec Franchise
Capital Corporation IV (the General Partner)

3.3* Bylaws of Captec Franchise Capital Corporation IV

3.4* Certificate of Limited Partnership

3.5* Certificate of Limited Partnership Interest

3.6* First Amendment to Agreement of Limited
Partnership of the Partnership

5.1* Opinion letter of Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, regarding the validity
of the securities being registered

8.1* Opinion Letter of Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, regarding tax matters

10.1* Proposed Form of Escrow Agreement

23.1* Consent of Jaffe, Raitt, Heuer & Weiss, P.C.
(included in Exhibits 5.1 and 8.1)

23.2** Consent of Coopers & Lybrand, L.L.P.

24.1* Power of Attorney (included on signature page)

99.1* Table VI Acquisitions of Properties by Programs
</TABLE>

*Previously filed.

**Filed herewith.

<PAGE> 1
[COOPERS & LYBRAND LETTERHEAD]

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this post effective amendment to the
Registration Statement on Form S-11 of our reports dated March 14, 1997 on our
audits of the financial statements of Captec Franchise Capital Partners L.P. IV
and Captec Franchise Capital Corporation IV. We also consent to the reference
to our firm under the caption "Experts".

Coppers & Lybrand L.L.P.

Detroit, Michigan
October 17, 1997