JMB INCOME PROPERTIES LTD V, 10-Q, 1996-11-14

JMB INCOME PROPERTIES LTD V
10-Q, 1996-11-14
OPERATORS OF NONRESIDENTIAL BUILDINGS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter ended September 30, 1996 Commission file #0-8716

JMB INCOME PROPERTIES, LTD. - V
(Exact name of registrant as specified in its charter)

Illinois 36-2897158
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

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

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . 3

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 11

PART II OTHER INFORMATION

Item 5. Other Information. . . . . . . . . . . . . . . . . 13

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 14

<TABLE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 1996 AND DECEMBER 31, 1995

(UNAUDITED)

ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 9,758,518 11,134,983
Interest, rents and other receivables . . . . . . . . . . . . . . . . 207,880 283,687
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 104,856 28,421
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 --
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 11,071,254 11,447,091
------------ ------------

Investment properties, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,751,617 2,751,617
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . 31,988,155 29,938,273
------------ ------------
34,739,772 32,689,890
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 18,392,145 17,870,466
------------ ------------
Total investment properties, net of accumulated depreciation. . 16,347,627 14,819,424
------------ ------------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,310 74,671
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 366,568 388,509
------------ ------------
$ 27,820,759 26,729,695
============ ============

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------

Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 20,326,930 20,545,576
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,471,581 1,389,326
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 197,209 201,081
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . 480,933 480,406
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 46,860 30,541
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 22,523,513 22,646,930
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 24,868 23,916
Construction loan payable . . . . . . . . . . . . . . . . . . . . . . . 288,624 --
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 5,548,330 5,880,735
------------ ------------
Commitments and contingencies

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 28,385,335 28,551,581
Venture partner's subordinated equity in venture. . . . . . . . . . . . 11,571,605 10,831,122
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . . 1,413,361 1,397,856
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (3,090,976) (3,090,976)
------------ ------------
(1,676,615) (1,692,120)
------------ ------------
Limited partners (38,505 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . 34,926,505 34,926,505
Cumulative net earnings (loss). . . . . . . . . . . . . . . . . . . 26,777,822 26,276,500
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (72,163,893) (72,163,893)
------------ ------------
(10,459,566) (10,960,888)
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . . . (12,136,181) (12,653,008)
------------ ------------
$ 27,820,759 26,729,695
============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)

<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 2,308,255 2,672,354 7,011,813 7,855,169
Interest income . . . . . . . . . . . . . . . . 131,722 133,355 362,748 370,251
----------- ---------- ----------- ----------
2,439,977 2,805,709 7,374,561 8,225,420
----------- ---------- ----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 592,314 608,465 1,788,350 1,839,720
Depreciation. . . . . . . . . . . . . . . . . . 81,742 225,846 521,679 657,539
Property operating expenses . . . . . . . . . . 1,108,907 1,321,849 3,539,221 3,762,381
Professional services . . . . . . . . . . . . . 17,500 -- 65,934 80,080
Amortization of deferred expenses . . . . . . . 13,120 13,120 39,361 39,361
General and administrative. . . . . . . . . . . 26,401 (698) 83,236 25,397
----------- ---------- ----------- ----------
1,839,984 2,168,582 6,037,781 6,404,478
----------- ---------- ----------- ----------
Operating earnings (loss). . . . . . . . . 599,993 637,127 1,336,780 1,820,942

Venture partner's share of
venture's operations. . . . . . . . . . . . . . (299,780) (319,855) (819,953) (970,653)
----------- ---------- ----------- ----------
Net earnings (loss). . . . . . . . . . . . $ 300,213 317,272 516,827 850,289
=========== ========== =========== ==========
Net earnings (loss) per
limited partnership interest . . . . . . $ 7.56 7.99 13.02 21.42
=========== ========== =========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . . . . . . $ -- -- -- --
=========== ========== =========== ==========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

(UNAUDITED)
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 516,827 850,289
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,679 657,539
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 39,361 39,361
Venture partner's share of venture's operations . . . . . . . . . . . . 819,953 970,653
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 75,807 244,445
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . (76,435) 250
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 21,941 --
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,255 (14,371)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,872) (1,823)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 527 483,137
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 16,319 (21,232)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 952 6,750
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 2,015,314 3,214,998

Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments. . . . . . -- 4,780,996
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (2,049,882) (14,292)
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000,000) --
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (3,049,882) 4,766,704
------------ -----------
Cash flows from financing activities:
Cash proceeds from construction loan. . . . . . . . . . . . . . . . . . . 288,624 --
Bank overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (703,449)
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (551,051) (501,970)
Venture partner's contributions to venture. . . . . . . . . . . . . . . . 621,977 622,696
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (701,447) (701,447)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . (341,897) (1,284,170)
------------ -----------

Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . . . . . . . . . . . (1,376,465) 6,697,532
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . . . . . . . . . . . 11,134,983 3,722,315
------------ -----------

Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,758,518 10,419,847
============ ===========

Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . $ 1,792,463 1,841,543
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . $ -- --
============ ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996 AND 1995

(UNAUDITED)

GENERAL

Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1995 which are
included in the Partnership's 1995 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.

The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.

Statement of Financial Accounting Standards No. 121 was adopted by the
Partnership on January 1, 1996.

TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of September
30, 1996 and for the nine months ended September 30, 1996 and 1995 were as
follows:

Unpaid at
September 30,
1996 1995 1996
-------- ------- -------------
Property management
and leasing fees . . . . . . $196,966 181,288 1,320,070
Insurance commissions . . . . 22,456 22,173 --
Reimbursement (at cost)
for out-of-pocket
expenses . . . . . . . . . . 36,763 52,970 4,415
-------- ------- ---------
$256,185 256,431 1,324,485
======== ======= =========

All amounts deferred or currently payable to the General Partners and
their affiliates do not bear interest. The General Partners and their
affiliates have deferred receipt of property management and leasing fees
pursuant to the venture agreement for the Wachovia Bank Building and
Phillips Building. Prior to 1995, an affiliate of the Corporate General
Partner provided management and leasing services. In December 1994, the
affiliate sold all of its assets and assigned its interest in the
management contracts, including the one for the Wachovia Bank Building and
Phillips Building to an unaffiliated third party. In connection with such
sale, an affiliate of the General Partners guaranteed payment to the
unaffiliated third party the portion of the fees currently deferred due to
the provision in the venture agreement for the Wachovia Bank Building and
Phillips Building. Such amounts are deferred until the sale or disposition
of the property and are subordinated to certain distributions of net sale
and refinancing proceeds. As of September 30, 1996, the General Partners
and their affiliates have deferred receipt of approximately $1,281,000
(approximately $32 per interest) of such fees. This amount is reflected in
accounts payable in the accompanying consolidated financial statements.

BRISTOL MALL

During 1989, the Partnership entered into a lease with the J.C. Penney
Company ("J.C. Penney") for an 86,000 square foot addition at the Bristol
Mall shopping center. For the lease to commence, an addition and
associated mall enhancement program was required to be completed. This led
to protracted negotiations with J.C. Penney and the property's mortgage
lender to determine how these capital costs would be funded. As a result,
in July 1996, the Partnership and J.C. Penney executed an amendment to the
existing lease and the Partnership began construction of the anchor store
and the mall enhancement.

The estimated cost of the construction of the anchor store, as well as
the mall enhancement and certain anticipated tenant improvement costs is
approximately $13,700,000, of which approximately $2,700,000 (including
pre-development costs) has been incurred as of September 30, 1996.

The Partnership expects to utilize a construction loan provided by J.
C. Penney for certain construction costs up to $5,165,200, of which
approximately $288,000 has been funded at September 30, 1996. The
remaining costs to be funded by the Partnership of approximately $6,200,000
is expected to be funded from available cash.

The construction loan bears an interest rate of 10% per annum and
interest accrues on the funds from the date of the advance. The
Partnership is not required to make any payments on the loan until the
first month after the opening date of the new anchor store (currently
expected to be in August 1997). Upon opening of the new anchor store, the
Partnership will be required to make monthly interest only payments for
five years on the total amount advanced under the loan plus any accrued,
but unpaid interest from the construction period. Thereafter, for the
remaining 5-year term of the loan, the Partnership will be required to make
payments of both principal and interest based on a ten-year amortization
schedule with the balance of unpaid principal due upon maturity. All
rental amounts due from the tenant to the Partnership under the terms of
the lease amendment will be applied to offset these debt service payments.
Additionally, in September 1996, the Partnership escrowed $1,000,000 as
required by the loan. The Partnership may begin to withdraw funds from the
escrow account when construction of the anchor store is 50% complete, and
all remaining escrowed funds are expected to be withdrawn before completion
of construction.

Due to the above, the Partnership is no longer actively marketing the
property for sale.

WACHOVIA BANK BUILDING AND PHILLIPS BUILDING

The Partnership is currently marketing the remaining space
(approximately 30% of the buildings vacated by Wachovia Bank at the
expiration of their lease in December 1995) to prospective replacement
tenants but has not been successful in its efforts due to the lack of large
space users in this market. Re-leasing the remaining space in the building
or any additional extensions of the Wachovia Bank lease would likely
require major renovation to the building as well as significant tenant
improvements which, in turn, would be contingent upon the Partnership
obtaining financing for these tenant replacement costs. Unless replacement
tenants are secured on acceptable terms for the remaining space, it is
unlikely that the Partnership will commit any additional funds to the
property. This may result in the Partnership no longer having an ownership
interest in the two office buildings. This action would result in a gain
for financial reporting and Federal income tax purposes with no
corresponding distributable proceeds. Additionally, the Partnership could
be required to remit to the local tax authorities withholding for taxes due
as a result of this action. This withholding amount is currently estimated
to be approximately $500,000.

The mortgage loan secured by the property matured in October, 1996.
The Partnership is currently negotiating with the Lender for a possible
extension of the mortgage loan. However, there can be no assurance that
any extension will be obtained.

The Partnership's venture partner had agreed to contribute
$10,700,000, before applicable interest, to the venture pursuant to a
payment schedule by August 1, 1996. The venture partner is currently
approximately $7,600,000 in arrears for these contributions as of the date
of this report. In the fourth quarter of 1996, the Partnership notified
the venture partner of its default effective August 1996. The Partnership
is currently considering its options concerning such unpaid amounts, but no
progress is expected with discussions with the venture partner until the
negotiations between the Partnership and the Lender regarding the extension
and the modification of the mortgage loan are completed.

The property has been classified held for sale or disposition as of
July 1, 1996, and therefore, has not been subject to continued
depreciation. The accompanying consolidated financial statements include
$4,918,393 and $5,889,772 of revenues and $2,575,671 and $3,116,479 of
operating expenses for the nine months ended September 30, 1996 and 1995,
respectively. The property had a net carrying value of $7,235,130 at
September 30, 1996 and $7,263,927 at December 31, 1995.

The accompanying consolidated financial statements include
approximately $6,400,000 of undistributed operating cash flow related to
Wachovia Building Associates. Such funds are distributable to the
Partnership and the unaffiliated joint venture in the amounts of
approximately $3,700,000 and $2,700,000, respectively.

ADJUSTMENTS

In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1996 and for the three and nine months ended September 30, 1996 and 1995.

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investments.

During the second quarter some of the Limited Partners in the
Partnership received from an unaffiliated third party an unsolicited tender
offer to purchase up to 1,425 Interests in the Partnership between $100 and
$120 per Interest. Also, the Partnership was made aware of an additional
solicitation from another unaffiliated third party for the purchase of a
limited number of Interests in the Partnership at $115 per Interest. The
Partnership recommended against acceptance of these offers on the basis
that, among other things, the offer prices were inadequate. Such offers
expired with approximately 603 and 240 Interests being purchased by such
unaffiliated third parties, respectively, pursuant to such offers. In
addition, the Partnership has, from time to time, received inquires from
other third parties that may consider making offers for Interests,
including requests for the list of Limited Partners in the Partnership.
These inquiries are generally preliminary in nature. There is no assurance
that any other third party will commence an offer for Interests, the terms
of any such offer or whether any such offer, if made, will be consummated,
amended or withdrawn. The board of directors of JMB Realty Corporation
("JMB") the managing general partner of the Partnership, has established a
special committee (the "Special Committee") consisting of certain directors
of JMB to deal with all matters relating to tender offers for Interests in
the Partnership, including any and all responses to such tender offers.
The Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and has retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests.

The General Partners and their affiliates have deferred payment of
certain fees of approximately $1,281,000 (approximately $32 per interest)
as of September 30, 1996 pursuant to the venture agreement for the Wachovia
Bank Building and Phillips Building.

The General Partners of the Partnership expect to be able to conduct
an orderly liquidation of its remaining investment portfolio as quickly as
practicable. Therefore, the affairs of the Partnership are expected to be
wound up no later than December 31, 1999 (sooner, if the properties are
sold or disposed of in the near term), barring unforeseen economic
developments. The Partnership's only remaining real estate assets are its
joint venture interest in the Wachovia Bank and Phillips Buildings, and its
interest in Bristol Mall. The Partnership does not expect to realize any
proceeds from the disposition of the Wachovia Bank and Phillips Buildings.
However, the Partnership does expect to realize net proceeds from the sale
of Bristol Mall.

RESULTS OF OPERATIONS

The increase in prepaid expenses at September 30, 1996 as compared to
December 31, 1995 is primarily due to the timing of payments for interest
at the Bristol Mall and the Wachovia Bank Building.

The increase in escrow deposits, buildings and improvements,
construction loan payable and the corresponding decrease in cash and cash
equivalents at September 30, 1996 as compared to December 31, 1995 is
primarily due to the commencement of the addition and related mall
enhancement at the Bristol Mall in July 1996.

The decrease in rental income and venture partner's share of venture's
operations for the three and nine months ended September 30, 1996 as
compared to the same periods in 1995 is primarily due to the decrease in
occupancy at the Wachovia Bank Building and Phillips Building due to the
Wachovia Bank vacating approximately 40% of the buildings upon expiration
of their lease in December 1995.

The decrease in depreciation for the three and nine months ended
September 30, 1996 as compared to the same period in 1995 is primarily due
to the classification of the Wachovia Bank Building as assets held for sale
or disposition at July 1, 1996, and therefore not subject to continued
depreciation.

The decrease in property operating expenses for the three and nine
months ended September 30, 1996 as compared to the same periods in 1995 is
primarily the result of a decrease in utility and janitorial costs due to
the decrease in occupancy at the Wachovia Bank Building.

The increase in general and administrative expenses for the three and
nine months ended September 30, 1996 as compared to the same periods in
1995 is primarily due to the timing of the recognition of costs for certain
outsourcing services.

<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION

OCCUPANCY

The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties:
<CAPTION>
1995 1996
-------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Wachovia Bank Building and
Phillips Building
Winston-Salem,
North Carolina. . . . . . . 100% 100% 100% 100% 60% 69% 65%

2. Bristol Mall
Bristol, Virginia. . . . . . 82% 83% 82% 83% 81% 81% 81%

</TABLE>

PART IV

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3-A.* The Prospectus of the Partnership dated August 15,
1977, as supplemented September 20, 1977, filed with the Commission
pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by
reference.

3-B.* Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which is incorporated herein by
reference and which agreement is hereby incorporated herein by reference.

4-A. Documents relating to the refinancing of the mortgage
loan, dated October 17, 1986, secured by the Wachovia Bank Building and
Phillips Building office buildings in Winston-Salem, North Carolina are
hereby incorporated by reference to the Partnership's report for December
31, 1992 on Form 10-K (File No. 0-8716) dated March 19, 1993.

4-B. Documents relating to the mortgage loan secured by the
Bristol Mall shopping center in Bristol, Virginia are hereby incorporated
by reference to the Partnership's report on Form 8-K (File No. 0-8716)
dated October 17, 1977.

4-C. Documents relating to the construction loan, dated
July 25, 1996 secured by the Bristol Mall shopping center in Bristol,
Virginia are filed herewith.

10-A. Acquisition documents relating to the purchase by the
Partnership of an interest in the Wachovia Bank Building and Phillips
Building in Winston Salem, North Carolina are hereby incorporated by
reference to the Partnership's Registration Statement on Form S-11 (File
No. 2-58026) dated September 20, 1977.

10-B. Acquisition documents relating to the purchase by the
Partnership of the Bristol Mall shopping center in Bristol, Virginia are
hereby incorporated by reference to the Partnership's report on Form 8-K
(File No. 0-8716) dated October 17, 1977.

27. Financial Data Schedule

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

* Previously filed as Exhibits 3-A and 3-B, respectively, to the
Partnership's Report for December 31, 1992 on Form 10-K of the
Securities Exchange Act of 1934 (File No. 0-8716) filed on March 19, 1993
and hereby incorporated herein by reference.

(b) No Reports on Form 8-K have been filed during the last quarter
of the period covered by this report.

SIGNATURES

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

JMB INCOME PROPERTIES, LTD. - V

BY: JMB Realty Corporation
(Managing General Partner)

By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 8, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.

GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 8, 1996

EXHIBIT 4-C

Construction Loan Agreement

between

BRISTOL MALL ASSOCIATES
(Borrower)

and

J. C. PENNEY COMPANY, INC.
(Lender)

TABLE OF CONTENTS

SECTION PAGE

1. The Loan . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Disbursement . . . . . . . . . . . . . . . . . . . . . . . 8

3. Covenants of the Borrower. . . . . . . . . . . . . . . . . 14

4. Representations and Warranties . . . . . . . . . . . . . . 18

5. Covenants of Borrower. . . . . . . . . . . . . . . . . . . 22

6. Environmental Matters. . . . . . . . . . . . . . . . . . . 28

7. Default and Remedies . . . . . . . . . . . . . . . . . . . 31

8. Miscellaneous Provisions . . . . . . . . . . . . . . . . . 37

9. Effect of Bankruptcy or Insolvency Proceeding on the Loan and
the Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

LIST OF EXHIBITS:

Exhibit A: Legal Description of the Property
Exhibit B: Promissory Note
Exhibit C: Deed of Trust
Exhibit D: Assignment of Leases
Exhibit E: Intentionally Omitted
Exhibit F: Assignment of Construction Documents
Exhibit G: Surveyor's Certification
Exhibit H: Certificate of Partial Satisfaction
Exhibit I: Intentionally Omitted
Exhibit J: List of Plans and Specifications
Exhibit K: Borrower's Affidavit
Exhibit L: Budget
Exhibit M: Lien Waiver
Exhibit N: Certificate of Borrower
Exhibit O: Architect's Certificate
Exhibit P: Intentionally Omitted
Exhibit Q: Draw Request
Exhibit R: List of Litigation Matters
Exhibit S: General Contractor's Acknowledgement of Assignment
Exhibit T: Architect's Acknowledgement of Assignment

CONSTRUCTION LOAN AGREEMENT

THIS CONSTRUCTION LOAN AGREEMENT ("AGREEMENT") is made and
entered into as of July 25, 1996, between BRISTOL MALL ASSOCIATES, an
Illinois general partnership (the "BORROWER"), and J.C. PENNEY COMPANY,
INC., a Delaware corporation (the "LENDER").

FACTUAL BACKGROUND

A. Borrower and Lender have entered into that certain Lease
dated as of November 29, 1989, a Memorandum of which was recorded in the
Clerk's Office of the Circuit Court of the City of Bristol, Commonwealth
of Virginia, in Book 279, Page 607, as amended by that certain First
Amendment of Lease dated as of the date hereof, by and between Borrower
and Lender (such lease as so amended is herein referred to as the
"LEASE").

B. Pursuant to the Lease, Borrower is to construct a J.C.
Penney store including, but not limited to, the shell and core thereof and
all building, mechanical, electrical and other operating systems (herein
referred to as the "IMPROVEMENTS") as described and identified in the
Lease and in the "Plans and Specifications" (as such term is hereinafter
defined) on real property (the "LAND") owned by Borrower and leased to
Lender pursuant to the Lease and located in the City of Bristol,
Commonwealth of Virginia, as described in EXHIBIT A (collectively, the
"PROJECT"). Lender has agreed to make a construction loan to Borrower for
certain hard costs in excess of $1,000,000 for preparing the site and
constructing the Improvements, which construction loan shall not exceed
the maximum principal amount of Five Million One Hundred Sixty-Five
Thousand Two Hundred Dollars ($5,165,200.00) (the "MAXIMUM LOAN Amount"),
subject to adjustment as provided herein (the "LOAN"), which Loan shall be
subject to and in accordance with the terms and provisions hereof.

C. The Improvements are described in those certain final
working drawings and specification described in EXHIBIT J attached hereto
(the "PLANS AND SPECIFICATIONS") agreed to by Borrower and Lender pursuant
to the Lease.

D. Borrower is executing a promissory note in the form
attached hereto as EXHIBIT B, which provides for interest to accrue at the
rate of ten percent (10%) per annum (the "NOTE") payable to Lender
evidencing the Loan. The Note is to be secured by a first lien Credit
Line Deed of Trust and Security Agreement in the form attached hereto as
EXHIBIT C ("DEED OF TRUST") covering the Land and Improvements, UCC-1
Financing Statements in the form prescribed by the Commonwealth of
Virginia, an absolute Assignment of Rents and Leases in the form attached
hereto as EXHIBIT D (the "ASSIGNMENT OF LEASES"), an Assignment of
Construction Contracts and Warranties covering all contracts for the
designing, planning and construction of the Improvements, including all
agreements with architects and all construction warranties assigned to
Borrower, in the form attached hereto as EXHIBIT F (the "ASSIGNMENT OF
CONSTRUCTION Documents"), and such other documents as Lender reasonably
deems necessary. In this Agreement, the term "PROPERTY" refers to all or
any part of the real and personal property described in the Deed of Trust,
including any direct or indirect interest in all or any part of it, as the
context may require.

E. Concurrently herewith, Borrower and Lender are entering
into that certain Easement and Operating Agreement (the "EASEMENT AND
OPERATING AGREEMENT"), which Easement and Operating Agreement relates to
the Land and Improvements and the shopping center of which the Land and
Improvements are a part.

F. This Agreement, the Note, the Deed of Trust, the UCC-1
Financing Statement, the Assignment of Leases, and the Assignment of
Construction Documents, together with all of their exhibits, and all other
documents which are executed by Borrower and otherwise evidence or secure
the Loan, as the same may hereafter be amended, modified or renewed,
collectively constitute the "LOAN DOCUMENTS."

Therefore, in consideration of the Loan being made by Lender to
Borrower, the construction to be completed by Borrower on the Land, and
other good and valuable consideration, the amount and sufficiency of which
is hereby agreed to, Lender and Borrower agree as follows:

AGREEMENT

THE LOAN.

A. AMOUNT OF THE LOAN. Lender hereby agrees to loan to
Borrower from time to time during the construction of the Improvements
sums required to reimburse Borrower for certain portions of Borrower's
Costs (as hereinafter defined), as more fully set forth in Section 1.3;
provided, however, that such sums to be loaned to Borrower hereunder,
including accrued interest thereon, shall not exceed the Maximum Loan
Amount. Such sums shall be evidenced by the Note. Borrower's liability
for repayment of the interest on account of the Loan shall be limited to
and calculated with respect to the Loan proceeds actually disbursed to
Borrower pursuant to the terms of this Agreement and the Note, and only
from the date or dates of such disbursements.

B. DEFINITION OF BORROWER'S COSTS. For purposes hereof,
the term "BORROWER'S COSTS" shall mean the direct hard costs set forth in
the budget approved by Borrower and Lender and attached hereto as EXHIBIT
L (which budget may set forth an aggregate amount in excess of the Maximum
Loan Amount) as the same may be modified from time to time by written
agreement by Borrower and Lender (the "BUDGET") which are actually
incurred by Borrower to prepare the site and construct the Improvements,
which shall include only the following:

(a) fees for the contractors under the Construction
Contract and fees for any other contractors under separate contracts
approved in writing by Lender;

(b) costs to prepare the site for construction in
accordance with the Plans and Specifications, including but not limited to
utility relocations;

(d) costs of materials for the Improvements, at
Borrower's cost without markup; and

(e) costs for bonds, permits and certificates.

The term "Borrower's Costs" shall not include any of the following:

(a) fees for architects, engineers, attorneys or
consultants;

(b) development fees;

(d) operating deficits;

(e) interest, interest reserves, mortgage payments, or
other financing obligations;

(f) marketing costs;

(g) commissions or concession costs;

(h) taxes and insurance premiums;

(i) recordation, financing or appraisal costs; or

(j) costs incurred to develop and review the Plans and
Specifications.

C. CALCULATION OF LOAN AMOUNT AND ORDER OF DISBURSEMENTS.
The Loan shall be calculated and disbursed as follows:

(a) The first One Million Dollars ($1,000,000.00) of
Borrower's Costs ("BORROWER'S INITIAL COSTS") shall be paid by Borrower
and shall not be included in the Loan; provided, however, that Borrower
shall provide to Lender promptly after Lender's request from time to time
draw requests relating to Borrower's Initial Costs;

(b) The next Four Million Six Hundred Sixty-Five
Thousand Two Hundred Dollars ($4,665,200.00) of Borrower's Costs shall be
included in the Loan;

(c) The next Two Hundred Sixty-Seven Thousand Four
Hundred Dollars ($267,400.00) of Borrower's Costs shall be paid by
Borrower and shall not be included in the Loan;

(d) The next Two Hundred Sixty-Seven Thousand Four
Hundred Dollars ($267,400.00) of Borrower's Costs ("LENDER'S
CONTRIBUTION") shall be paid by Lender and shall not be included in the
Loan; provided, however, that Lender's Contribution shall not include any
costs related to unforeseen site conditions as defined in (e) below, which
costs shall be borne by Borrower; provided further, however, that
notwithstanding the items for which Lender's Contribution is disbursed to
Borrower pursuant to the following sentence, for tax purposes Lender may
in its discretion allocate Lender's Contribution among items 9, 43, 54,
56-58, 62, 73, 97-100 and 102 of EXHIBIT L attached hereto. Lender's
Contribution shall be disbursed to Borrower by Lender pursuant to Draw
Requests (as hereinafter defined) and otherwise in accordance with the
terms and conditions set forth in this Agreement relating to disbursements
of the Loan; provided, however, that Borrower shall have no obligation to
reimburse Lender with respect to Lender's Contribution or any interest
thereon, and provided further that if Lender fails to disburse any portion
of Lender's Contribution as and when required under this Agreement for
reasons solely within Lender's control, such failure shall be deemed a
default by the tenant under the Lease following notice from Borrower
pursuant to the terms of the Lease, and Borrower shall have, in addition
to and not in lieu of its rights and remedies hereunder and at law and in
equity, the rights and remedies of the landlord under the Lease in the
event
of a default thereunder. Lender's Contribution shall be in addition to,
and not in lieu of, the payment obligations of the tenant under the Lease
in the event the tenant under the Lease changes plans or specifications,
as set forth in Paragraph B.V of the article of the Lease captioned
"IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD". Lender, not Borrower, shall
be entitled to all depreciation for the items paid for by Lender's
Contribution;

(e) The next Five Hundred Thousand Dollars ($500,000.00)
of Borrower's Costs shall be included in the Loan to the extent such costs
relate to unforeseen site conditions, including but not limited to soil
problems, environmental problems and problems attributable to the
attachment of the Improvements to the existing mall building adjacent
thereto or the structural condition of such mall building; and

(f) Any amounts above the sum of the amounts set forth
in paragraphs (a) through (e) above shall be paid by Borrower and shall
not be included in the Loan.

D. EVIDENCE OF LOAN.Borrower shall execute and deliver to
Lender or cause to be executed and delivered to Lender all of the Loan
Documents as a precondition to making the Loan. Borrower shall also
execute any and all additional documents which Lender reasonably deems
necessary to secure the Loan. Additionally, as a condition to Lender's
obligation to close the Loan, Borrower shall have, on or before September
30, 1996, delivered to Lender the following documents (the "CLOSING
DOCUMENTS"), all of which shall be in form and substance reasonably
acceptable to Lender; provided, however, that such reasonability standard
shall not be construed so as to modify a requirement expressly provided
for in this Section 1.4:

(a) an opinion of Borrower's counsel in a form
reasonably acceptable to Lender, evidencing that (i) Borrower is duly
formed and validly existing under the laws of the State of Illinois, and
that Borrower is authorized to do business in the Commonwealth of
Virginia; (ii) notwithstanding the terms of Section 11.2 of Borrower's
partnership agreement, Borrower possesses full power and partnership
authority to own the Property, to construct the Improvements and to
perform Borrower's obligations under the Loan Documents; (iii) the Loan
Documents are duly authorized, executed and delivered and are binding upon
and enforceable against Borrower in accordance with their terms; (iv) the
Loan is not usurious; (v) to the actual knowledge of such counsel (based
only upon a certificate of an officer of JMB Realty Corporation or another
authorized representative of Borrower), except as set forth on EXHIBIT R,
attached hereto, there are no actions pending or threatened against or
affecting Borrower or the Property; (vi) to the actual knowledge of such
counsel (based only upon a certificate of an officer of JMB Realty
Corporation or another authorized representative of Borrower), Borrower is
not in default with respect to any order, writ, injunction, decree or
demand of any court or governmental entity; (vii) to the actual knowledge
of such counsel (based only upon a certificate of an officer of JMB Realty
Corporation or another authorized representative of Borrower), the
consummation of the transactions contemplated hereby and the performance
of the terms and provisions of the Loan Documents will not violate or
contravene any provision of Borrower's partnership agreement (or other
instrument creating Borrower or other instrument to which Borrower is a
party which limits Borrower's authority to act), or the respective
partnership agreements of General Partner and Bristol Partners, a general
partner of Borrower, and, to the actual knowledge of such counsel (based
only upon a certificate of an officer of JMB Realty Corporation or another
authorized representative of Borrower, which certificate specifically
excludes any Borrower representation, warranty, confirmation and agreement
with respect to that certain Deed of Trust dated as of September 27, 1973
to The Northwestern Mutual Life Insurance Company [the "NWM DEED OF
TRUST"]), will not result in the breach of, or constitute a default under,
any mortgage, deed of trust, lease, bank loan or credit agreement or other
instrument to which Borrower is a party or by which Borrower is bound or
affected (provided, however, that such opinion of Borrower's counsel shall
opine that, based upon such counsel's actual review of the NWM Deed of
Trust and not upon Borrower's certificate, upon the filing for record in
Clerk's Office, Circuit Court, Washington County, Virginia, and in Clerk's
Office, Circuit Court, City of Bristol, Virginia, of the Certificate of
Partial Satisfaction releasing the Property from the lien of the NWM Deed
of Trust, (y) Borrower's execution and delivery of the Loan Documents and
the Easement and Operating Agreement and (z) Borrower's performance of the
terms and provisions of the Loan Documents and the Easement and Operating
Agreement required to be performed by Borrower will not result in a breach
of, or constitute a default under, the NWM Deed of Trust); (viii) the
Easement and Operating Agreement is duly authorized, executed and
delivered; and (ix) such other matters as Lender may reasonably request;

(b) Intentionally omitted;

(d) a resolution from JMB Realty Corporation on behalf
of each of JMB Income Properties, Ltd.-V and Bristol Mall Partners
authorizing Borrower to obtain the Loan and enter into all of the Loan
Documents and perform the obligations thereunder;

(e) Borrower's unaudited financial statements, and
audited financial statements of JMB Income Properties, LTD.-V ("GENERAL
PARTNER") for the prior two (2) fiscal years;

(f) a recent Phase I environmental report on the
Property, copies of all other such reports done on the Property, and such
other environmental studies and reports as Lender deems necessary;

(g) four (4) copies of a recent survey of the Property
certified to Lender, containing the surveyor's certification attached
hereto as EXHIBIT G;

(h) an ALTA mortgagee's construction loan title binder
reasonably acceptable to Lender, containing such endorsements as are
requested by Lender (the "TITLE POLICY");

(i) certificates of insurance required pursuant to the
article of the Lease captioned "INSURANCE" naming Lender as an additional
insured, which certificates shall state that the insurer will send Lender
at least thirty (30) days prior written notice of any expiration or
cancellation of such insurance or any decrease in coverage below the
amounts required hereunder or the elimination of Lender as an additional
insured;

(j) a Certificate of Partial Satisfaction executed and
acknowledged by The Northwestern Mutual Life Insurance Company in the form
attached hereto as EXHIBIT H;

(l) Intentionally omitted;

(m) an Easement and Operating Agreement executed and
acknowledged by Lender and Borrower in a mutually satisfactory form
setting forth certain easements, restrictions, covenants and conditions
affecting the Property and the Entire Premises, as that term is defined in
the Lease, together with a subordination thereto executed and acknowledged
by Northwestern Mutual Life Insurance Company;

(n) an Affidavit of Borrower in the form attached hereto
as EXHIBIT K;

(o) a letter from the licensed architect retained by
Borrower and approved by Lender to work on the Project ("BORROWER'S
ARCHITECT") stating that Borrower's Architect has reviewed and approved
the Plans and Specifications and that Borrower's Architect is satisfied
that the Improvements can be constructed within the scope of the cost
breakdown set forth in the Budget;

(p) a fully-executed copy of the Construction Contract
(as hereinafter defined);

(q) a First Amendment of Lease Agreement and a
Memorandum of First Amendment of Lease executed and, as to the Memorandum,
acknowledged by Borrower and Lender in a mutually satisfactory form; and

(r) a list of all contractors and major subcontractors
and materialmen involved in the construction of the Project; it being
agreed that Lender has, as of the date hereof, approved Borrower's general
contractor, The Winter Construction Company ("GENERAL CONTRACTOR") (and
has agreed that General Contractor need not be bonded) and has approved a
list of major subcontractors and materialmen known as of the date hereof,
and that Borrower will submit to Lender for its approval from time to time
any changes to such list.

DISBURSEMENT.

E. CONDITIONS TO DISBURSEMENT. Before Lender becomes
obligated to make any disbursement under this Agreement all conditions to
the disbursement set forth in this Section 2.1 must be satisfied in a
manner acceptable to Lender in the exercise of its reasonable judgment.

1. FIRST DISBURSEMENT. Lender is not required to
advance any funds under the Loan until all conditions to such advance are
satisfied in a manner reasonably acceptable to Lender. If each of such
conditions is not satisfied by September 30, 1996, Lender shall have no
obligation to fund any portion of the Loan. Those conditions are the
following:

a. Lender receives all of the Loan Documents duly
executed by Borrower and all third parties thereto, and acknowledged when
required.

b. Lender receives all of the Closing Documents.

c. Lender must receive a "Draw Request" (as
defined herein)for all funds requested at such time.

d. The Deed of Trust must be duly recorded and in
a first-priority lien position, and the Easement and Operating Agreement
must be duly recorded and superior to both the Deed of Trust and the liens
and other security interests of Northwestern Mutual Life Insurance Company
("Mortgagee").

e. Lender's security interest in all personal
property and fixtures covered by the Deed of Trust must be duly perfected
and in a first-priority lien position.

f. The preconstruction requirements that are
contained in Paragraphs B.II and B.III of the article of the Lease
captioned "IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD" shall have been
satisfied by Borrower to Lender's reasonable satisfaction and certified by
Borrower's Architect as being substantially completed in accordance with
the Plans and Specifications.

g. If any funds are being requested, Borrower has
provided to Lender receipted invoices and other materials reasonably
satisfactory to Lender (including lien waivers) evidencing that Borrower
has paid at least Borrower's Initial Costs in preparing the Land and
constructing the Improvements.

h. The general construction contract (the
"CONSTRUCTION CONTRACT") has been submitted to and approved by Lender in
writing in connection with the construction of the Improvements. The
Construction Contract shall be a lump sum contract.

i. No default (taking into account applicable
notice and cure periods) under any Loan Document, the Lease or any other
lease for space in the Shopping Center (as that term is defined in the
Lease) between Borrower and the tenants listed in the article of the Lease
captioned "OTHER TENANCIES" (collectively, the "OTHER LEASES") shall have
occurred or be continuing ( but this shall apply to the Other Leases only
if the representations and warranties contained in the article of the
Lease captioned "OTHER TENANCIES" shall be rendered inaccurate thereby),
and Borrower has provided to Lender a Certificate of Borrower in the form
attached hereto as EXHIBIT N.

(10) Lender receives letters from all utility
companies or municipalities involved (or other satisfactory evidence)
indicating that such sources are prepared to furnish the Property with
water, electricity and gas in quantities adequate for its needs; that
telephone service will be provided; and that the Property will be served
by sanitary and storm sewers of sufficient capacity to dispose of the
surface water and sanitary sewer affluent within its boundaries.

(11) Lender receives copies of all building permits
issued with respect to the Project.

(12) A subdivision plat (the "SUBDIVISION")
acceptable to Lender, Borrower and all appropriate governmental
authorities separating the Land from the balance of the Entire Premises
has been filed of record in the appropriate records of Bristol, Virginia.

(13) Lender receives evidence satisfactory to Lender
(which evidence may include an opinion letter from Borrower's local
counsel handling the subdivision matters) that after the filing of the
Subdivision (and any variance or other governmental approval obtained in
connection therewith) and construction of the Improvements relating to
parking and access, the applicable governmental parking and access
requirements for the Property will be satisfied (by means of the Easement
and Operating Agreement or otherwise).

(14) Lender receives an acknowledgement from each
of General Contractor and Borrower's Architect, substantially in the form
attached hereto as EXHIBIT S and EXHIBIT T, respectively, acknowledging
Borrower's assignment to Lender, pursuant to the provisions of the
Assignment of Construction Documents, of all of Borrower's rights under
each such entity's respective contract with Borrower in connection with
Borrower's construction of the Improvements.

(15) Lender receives an update of title to the
Property acceptable to Lender to be followed by a down date endorsement to
the Title Policy evidencing the total amount of the Loan proceeds
disbursed to date.

2. SUBSEQUENT DISBURSEMENTS. After the Loan has
closed, Lender shall make disbursements of Loan proceeds to Borrower
within thirty (30) days of receipt of a Draw Request (and all supporting
information) in such amounts as specified therein provided that the
following conditions have been satisfied:

a. The Property then subject to the Deed of Trust
has not been materially damaged unless repaired or unless Borrower has
deposited with Lender sufficient funds (from insurance or otherwise) to
repair such damage and neither Borrower nor Lender has exercised any right
to terminate the Lease in connection with a casualty pursuant to the terms
thereof; and

b. No portion of the Property then subject to the
Deed of Trust is affected or threatened by eminent domain or condemnation
proceedings and neither Borrower nor Lender has exercised any right to
terminate the Lease in connection with a condemnation proceeding pursuant
to the terms thereof; and

c. Lender shall have received affidavits or lien
waivers from General Contractor and the subcontractors in the form
attached hereto as EXHIBIT M or such other form as may be approved by
Lender as to the amounts requested under the Draw Request (or,
alternatively, as to amounts requested under the immediately preceding
Draw Request); and

d. Borrower has provided Lender with evidence
reasonably satisfactory to Lender that upon payment of the Draw Request,
Borrower will have enough funds in the Budget to complete the remaining
Improvements (excluding the portions of the remaining Improvements
relating to soft costs and other line items not included in the Budget),
or if the budgeted funds are not adequate, Lender shall have approved a
modification of the Budget to eliminate such inadequacy, which approval
shall not be unreasonably withheld (but this shall not be construed to
require Lender to approve items not included in Borrower's Costs or to
increase the Maximum Loan Amount); and

e. Borrower has delivered to Lender an update of
title acceptable to Lender followed by a down date endorsement to the
Title Policy evidencing the total amount of the Loan proceeds disbursed to
date; and

f. Borrower has delivered to Lender a Certificate
of Borrower in the form attached hereto as EXHIBIT N stating that there is
no default (taking into account applicable notice and cure periods) under
any of the Loan Documents or the Lease or any of the Other Leases (but
this shall apply to the Other Leases only if the representations and
warranties contained in the article of the Lease captioned "OTHER
TENANCIES" shall be rendered inaccurate thereby), neither the Lease nor
any of the Other Leases (but this shall apply to the Other Leases only if
the representations and warranties contained in the article of the Lease
captioned "OTHER TENANCIES" shall be rendered inaccurate thereby) have
been modified or terminated and Borrower has not received or sent notice
of an intent to terminate the Lease or any of the Other Leases, and that
all the covenants, representations and warranties made by Borrower to
Lender under Sections 4, 5 and 6 hereof are true and correct and have been
complied with; and

g. Lender shall have received evidence that the
amount(s) requested in the Draw Request is in accordance with the Budget
(or is otherwise appropriate for disbursement pursuant to Section 1.3(e)
hereof); and

h. Lender shall have received a certificate from
Borrower's Architect in the form attached hereto as EXHIBIT O stating that
the work for which payment is sought has been substantially completed and
is in compliance with the Plans and Specifications.

3. FINAL DISBURSEMENT. The final disbursement of
proceeds under the Loan and all sums retained pursuant to Section 2.2
hereof shall not become due until Borrower submits to Lender the following
items:

a. a certificate signed by Borrower's Architect
for the Project in the form set forth in EXHIBIT O (except that such
certificate will state that the Project is completed in accordance with
the Plans and Specifications and that final payment is due);

b. an affidavit from General Contractor together
with receipts and such releases and waivers of lien as Lender may require,
evidencing the fact that all contractors, subcontractors and other parties
supplying labor or materials for the Project have been paid in full, and
that all other indebtedness connected with the construction of the Project
by General Contractor for which Borrower might be responsible, or for
which the Project might in any way be subject to a lien, has been paid or
otherwise satisfied;

c. evidence that all sureties (if any) on the
Property have consented to final payment;

d. a certificate of occupancy for the Property
(unless the failure to issue a certificate of occupancy is attributable to
work required to be performed by the tenant under the Lease);

e. all original warranties for the work performed
and materials used to construct the Property; and

f. evidence that the statutory period for
mechanics' and materialmen's liens to attach has expired or evidence from
the title company that issued the Title Policy will insure against future
mechanics' and materialmen's liens resulting from the construction of the
Project.

F. DRAW REQUESTS. Before Lender becomes obligated to make
any disbursement, it must receive a written request signed by Borrower
using the form attached hereto as EXHIBIT Q ("DRAW REQUEST"), which Draw
Request shall be sent to Lender at the address set forth in Section 8.3
hereof, accompanied by such documentation and information set forth in
Sections 2.1(a) and (b) above, and Section 2.1(c) in the case of the final
disbursement, or as otherwise requested by Lender. All such documentation
and information must be acceptable in form and substance to Lender in the
exercise of its reasonable judgment. In the event the Draw Request is so
approved, Lender shall disburse directly to Borrower (or directly to
General Contractor if Borrower so requests) such Loan funds equal to (a)
the sum due pursuant to the Draw Request, to the extent that such sum is
in the Budget (or a modification thereof which is approved in writing by
Lender, in accordance with the reasonability standard set forth above),
less (b) ten percent (10%) thereof to be retained by Lender until final
payment shall be due and owing, provided, however, that subsequent to
completion of fifty percent (50%) of the value of the Improvements, if in
Lender's and Borrower's judgement, the Improvements are satisfactorily
progressing and such progress continues, the future retainage shall be
reduced to five percent (5%); provided, however that if at any time
thereafter, in Lender's reasonable judgment, the Improvements are no
longer satisfactorily progressing, the retainage will, from and after the
next disbursement after notice thereof from Lender setting forth the
reasons for its determination, unless satisfactory progress is
subsequently restored, be ten percent (10%); provided, however, that if a
Draw Request shall have been submitted prior to Borrower's receipt of such
notice, then the increase in retainage will be postponed until the
following disbursement. Notwithstanding the foregoing, if such
disbursement would cause the total amount disbursed under the Loan,
including accrued interest thereon, to exceed the Maximum Loan Amount,
Lender shall only disburse such amount that, when added to the total
amount of the Loan previously disbursed and all interest accrued but
unpaid, will increase the Loan balance to equal the Maximum Loan Amount.
Despite any other provisions of this or any other Loan Documents, Borrower
may submit Draw Requests to Lender no more frequently than once each
month, unless Lender has given its prior written consent in each instance.

G. NO WAIVER OF CONDITIONS. Any waiver by Lender of a
condition of disbursement must be expressly made by Lender in writing.
Any such waiver shall not constitute a waiver with respect to (a) any
other condition of that disbursement or (b) any condition with respect to
any subsequent Draw Request. If Lender makes a disbursement before
fulfillment of one or more required conditions, such disbursement shall
not be a waiver of such disbursement conditions, and Lender reserves the
right to require their fulfillment before making any subsequent
disbursements. If all disbursement conditions are not satisfied, Lender,
without waiving any rights or conditions as to any other or further
disbursements, may, in its sole and absolute discretion, disburse
selectively as to certain items or categories of costs and not others.

H. MAXIMUM LOAN AMOUNT. The Lender shall have no obligation
to advance to Borrower pursuant to the Loan any sum in excess of the
"MAXIMUM LOAN AMOUNT".

I. COVENANTS OF THE BORROWER. Borrower promises to keep and
perform each of the covenants set forth below.

A. COMMENCEMENT AND COMPLETION OF CONSTRUCTION. Borrower
shall commence on-site physical construction of the Improvements within or
by the date for the commencement of construction as established pursuant
to Paragraph B.VIII (p.13) of the article of the Lease captioned
"IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD" and shall diligently continue
construction to completion, all in accordance with the schedule
("COMPLETION SCHEDULE") set forth in such Paragraph B.VIII. Borrower will
cause to be prepared and sent to Lender, within sixty (60) days after
completion of all construction, "as built" plans with respect to such
construction and an "as built" survey showing the Land and all
Improvements thereon and otherwise complying with the provisions of
Section 1.4(g) hereof.

B. REQUIREMENTS. Borrower shall construct the Improvements
in accordance with Paragraphs B.II and B.III (pp. 11-12) of the article of
the Lease captioned "IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD".

C. CHANGES.

(a) Borrower may make any reasonable changes necessary to
the Plans and Specifications that are not material in nature and do not
conflict with "Tenant's Preliminary Plans and Specifications" (as defined
in the Lease) to the extent such changes are allowed under the Lease and,
provided that Borrower first obtains the prior written approval of such
changes from the tenant under the Lease (to the extent required by the
Lease).

D. PURCHASE OF MATERIALS; CONDITIONAL SALES CONTRACTS; STORED
MATERIALS.

1. Borrower shall not purchase or contract for any
materials, equipment, furnishings, fixtures or articles of personal
property to be placed or installed on the Land or in any Improvements
under any security agreement or other agreement where the seller reserves
or purports to reserve title or the right of removal or repossession, or
the right to consider them personal property after their incorporation in
the work of construction, unless Lender in each instance has authorized
Borrower to do so in writing.

2. Lender shall also make disbursements to Borrower in
accordance with the Budget for materials stored on the Land or off-site
("STORED MATERIALS"); provided that Borrower shall first supply to Lender
evidence reasonably satisfactory to Lender: (i) that no Event of Default
exists under any Loan Document and that Borrower has met all conditions
for disbursement set forth in Paragraph 2.1 hereof; (ii) that the
aggregate value of materials stored at the Property does not exceed
$250,000.00; (iii) including bills of sale or other such documents
reasonably satisfactory to Lender to establish Borrower's title to such
Stored Materials or from the seller or fabricator of the Stored Materials
that, upon payment, ownership thereof will vest in Borrower free of any
liens or claims of third-parties; and (iv) (A) that the Stored Materials
have been delivered to the Land and are satisfactorily stored on the
Property to protect against theft, damage, vandalism,and the elements, or
(B) if the Stored Materials are not stored on the Property, that the
Stored Materials are stored in a bonded warehouse or storage yard approved
in writing by Lender, and that the warehouse or yard has been notified in
writing that Lender has a security interest in the subject Stored
Materials, and that there is insurance covering the Stored Materials
against fire and the perils commonly covered under the extended coverage
and vandalism and malicious mischief endorsements to the extent of 100% of
the insurable value thereof protecting Borrower's and Lender's interests
therein. No payments shall be made by Lender to Borrower for Stored
Materials which are not yet delivered to the Land or a storage facility
approved in writing by Lender.

E. SITE VISITS; RIGHT TO STOP WORK.

1. Without limitation on Lender's rights pursuant to
the Lease, Lender and its agents and representatives shall have the right
at any time to enter and visit the Property for the purposes of observing
the work of construction and examining all materials, plans,
specifications, working drawings and other matters relating to the
construction. In each instance, Lender shall give Borrower notice before
entering the Property. Lender shall make reasonable efforts to avoid
materially interfering with Borrower's use of the Property when exercising
any of the rights granted in this Section 3.5.

2. If at any time Lender shall reasonably determine
that the construction of the Improvements is not satisfactory or that the
construction should be discontinued for any reason, either temporarily or
permanently, or if Lender shall determine that the construction of the
Improvements is not in accordance with the Plans and Specifications,
Lender may demand that the construction work stop until such time as the
problems perceived by Lender are resolved to its satisfaction. Upon
receipt of such demand by Lender, Borrower shall immediately cause all
construction work to stop and to remain stopped until Lender orders
commencement. Borrower shall cooperate with Lender to remedy any problems
giving rise to the stoppage of construction.

F. PAYMENT OF EXPENSES. Borrower shall pay for (a) all
expense related to the recording of any instrument or document associated
with the Loan, including documentary recording taxes and fees related to
the Loan or the Loan documents; (b) Borrower's legal fees and expenses and
the cost of all opinions, certificates, instruments, documents and papers
required to be delivered, or caused to be delivered, by Borrower
hereunder, including the Title Policy, and all endorsements and
certificates thereto, and, without limitation, the cost of all
performances by Borrower of its obligations hereunder; (c) reasonable
legal fees and expenses paid by Lender to outside counsel and Lender's
other reasonable out-of-pocket costs and expenses incurred in connection
with the making of the Loan.

G. NOTICES. Borrower shall promptly notify Lender in writing
of:

1. any pending or threatened litigation of which
Borrower has knowledge affecting Borrower, or the Property, where the
amount claimed is Fifty Thousand Dollars ($50,000) or more;

2. any communication, notice or knowledge obtained by
Borrower, whether or not in writing, that Borrower may receive from any
governmental, judicial or legal authority, giving notice of any claim or
assertion that the Land or the Improvements fail in any respect to comply
with any applicable governmental law, regulation, ordinance or guidance;

3. any material adverse change in the physical
condition of the Property (including any damage suffered as a result of
earthquakes or floods) of which Borrower has knowledge;

4. any default (after applicable notice and cure
periods) under the Construction Contract;

5. any actual or proposed or threatened condemnation or
taking for public or private use which affects all or any part of the
Property or any interest in it of which Borrower has knowledge;

6. any modification, amendment or termination of any
Other Lease (but this shall apply only if the representations and
warranties contained in the article of the Lease captioned "OTHER
TENANCIES" shall be rendered inaccurate thereby) without the prior written
consent of Lender or any default or notice of termination under any of the
Other Leases (but this shall apply only if the representations and
warranties contained in the article of the Lease captioned "OTHER
TENANCIES" shall be rendered inaccurate thereby);

7. any enforcement, cleanup, removal, remedial or other
governmental or regulatory actions threatened, instituted or completed
against or with respect to the Property pursuant to any applicable
Environmental Laws (as hereinafter defined) of which Borrower has
knowledge, and any claims threatened or made by any non-governmental party
against or with respect to the Property relating to damage, contribution,
cost recovery, compensation, loss or injury resulting from any Hazardous
Materials (as hereinafter defined) of which Borrower has knowledge
("ENVIRONMENTAL CLAIMS");

8. any filing of or any notice of an intent to file a
lien of any type, including a mechanic's lien or materialman's lien,
against the Property of which Borrower has knowledge;

9. the occurrence of any material labor controversy not
previously disclosed to Lender which is pending or threatened against
Borrower or any construction contractor involved in the construction of
the Improvements, or the occurrence of any material development in any
such labor controversy previously disclosed to Lender, in each case to the
extent Borrower has knowledge; or

10. any notice received by Borrower with respect to the
cancellation, material adverse alteration or non-renewal of any insurance
coverage required to be maintained with respect to the Project.

H. SUBDIVISION. Borrower shall, at its sole cost and
expense, diligently attempt to cause the Subdivision to be accomplished on
or before September 30, 1996. Notwithstanding Borrower's diligent
attempts to cause the Subdivision to be accomplished by such date, if
Borrower fails to cause the Subdivision to be accomplished on or before
such date, then Lender shall have no obligation to fund any portion of the
Loan.

II. REPRESENTATIONS AND WARRANTIES. Borrower promises that each
representation and warranty set forth below is true, accurate and correct
as of the date of this Agreement, and each such representation and
warranty shall survive the execution and delivery of this Agreement and
all other Loan Documents.

A. EXISTENCE AND CAPACITY. Borrower is a general partnership
formed under the Illinois Uniform Partnership Law, and is duly organized
and validly existing under the laws of the State of Illinois. A true and
complete copy of the partnership agreement of Borrower has been delivered
to Lender. Borrower is authorized to do business in the Commonwealth of
Virginia. Borrower has the partnership power and partnership authority to
own the Land and the Project, to construct the Improvements, and to enter
into and perform its obligations under this Agreement and each other Loan
Document executed by Borrower. The only partners in Borrower are JMB
Income Properties, Ltd.-V and Bristol Partners. No action has been taken
to dissolve or terminate Borrower. JMB Income Properties, Ltd.-V and
Bristol Partners are each formed under the laws of Illinois, are each a
duly organized and validly existing limited partnership and general
partnership, respectively, under the laws of Illinois, and are each
authorized to do business in the Commonwealth of Virginia; and JMB Income
Properties, Ltd.-V is in good standing under the laws of Illinois and
Virginia, and to the extent that Borrower and/or Bristol Partners is
required to become authorized to do business, to be in good standing (if
applicable) or to otherwise comply with filing requirements in Illinois
and/or Virginia, each is in compliance with such requirement.

B. AUTHORIZATION AND NON-CONTRAVENTION. The execution and
delivery of the Loan Documents by Borrower, and the performance and
observance of the provisions thereof, have been duly authorized by all
necessary actions of the partners in Borrower and their respective
partners, all in accordance with their respective organizational
documents. Notwithstanding any provision to the contrary contained in
Borrower's partnership agreement, by virtue of the consent of each general
partner of Borrower to the transactions contemplated by this Agreement and
the other Loan Documents, Borrower's execution, delivery and performance
of this Agreement and the other Loan Documents to which Borrower is a
party shall not result in a breach of or a default under Borrower's
partnership agreement. Borrower's execution, delivery and performance of
this Agreement and the other Loan Documents to which Borrower is a party
shall not result in a breach of or a default under any agreement to which
Borrower is a party or by which Borrower or any of its assets may be bound
or affected.

C. FINANCIAL INFORMATION. All financial statements
regarding Borrower and General Partner delivered by Borrower to Lender
pursuant to this Agreement are true and correct in all material respects
as of the respective dates thereof, and, unless otherwise set forth
therein or in any accountant's certification annexed thereto, all annual
financial statements (whether audited or unaudited) have been prepared in
accordance with generally accepted accounting principles ("GAAP") and
fairly present Borrower's and General Partner's financial condition as of
the respective dates thereof, and no changes have occurred in Borrower's
or General Partner's financial condition reflected therein since the
respective dates thereof which would materially adversely affect the
ability of Borrower to make any payment or perform any other material
obligation required under this Agreement or any other Loan Document.

D. NO OTHER DEFAULTS. Except as otherwise previously or
concurrently disclosed to Lender in writing and approved by Lender in
writing, Borrower is not in default under the terms of any other
indebtedness or obligation of Borrower, nor in default with respect to any
order, writ, injunction, judgment, decree or demand of any court or
tribunal or any governmental authority, if any such default would have a
material adverse impact on Borrower's ability to comply with its
obligations under the Loan Documents.

E. LITIGATION. Except as otherwise previously or
concurrently disclosed to Lender in writing and approved by Lender in
writing, there are no actions, suits or proceedings pending or threatened
against or affecting Borrower before any court of law or equity or any
administrative board or before or by any governmental authority which
would have a material adverse impact on Borrower's ability to comply with
its obligations under the Loan Documents.

F. PERMITS AND APPROVALS. All zoning, platting (subject to
the filing of the Subdivision), site planning, developmental and other
similar governmental requirements which are conditions precedent to the
commencement of construction of the Improvements or to the recording of
the Deed of Trust and the creation of a valid first lien have been duly
complied with. Borrower has duly obtained or caused to be obtained all
currently required permits, licenses, approvals and consents from, and
made or caused to be made all filings with, any governmental authority
(and the same have not lapsed nor been rescinded or revoked) which are
necessary in connection with the construction of the Improvements, the
execution and delivery of any Loan Document, the performance of Borrower's
obligations to Lender hereunder, or the enforcement of any Loan Document.

A true and correct copy of all such existing permits, licenses, approvals,
consents and filings (including any changes or supplements thereto) have
been or, with respect to the Subdivision, will be delivered to Lender.

G. TAXES. To the extent required by applicable law, Borrower
has filed all necessary tax returns and reports and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or
charges that are being contested in good faith by appropriate proceedings
and for which adequate reserves have been set aside on its books in
accordance with GAAP.

H. GENERAL CONTRACT. Borrower has delivered to Lender a true
and correct copy of the Construction Contract (including all change orders
thereto), which cover(s) all labor, materials and equipment required by
the Plans and Specifications as necessary to complete the Project. Except
as otherwise previously or concurrently disclosed to Lender in writing,
Borrower has received from General Contractor no notice of default or
notice of intention to suspend work under the Construction Contract.

I. CONSTRUCTION. All construction work performed on the
Improvements will be performed in accordance with the Plans and
Specifications and all applicable governmental requirements; to Borrower's
knowledge, when the Improvements are completed in accordance with the
Plans and Specifications, the Improvements will not encroach upon any
building line or setback line nor violate any recorded or visible easement
which exists with respect to the Land, except to the extent that such
encroachment or violation has been approved by the applicable governmental
authorities.

J. LABOR CONTROVERSIES. Except as otherwise previously or
concurrently disclosed to Lender in writing, to Borrower's knowledge there
are no labor controversies pending or threatened against Borrower or any
construction contractor involved in the construction of the Improvements.

K. VIOLATIONS. Except as previously or concurrently
disclosed to Lender in writing, Borrower has no knowledge of and has
received no notices of any material violations of any federal law or
municipal ordinance or order or requirement of the Commonwealth of
Virginia or any municipal department or other governmental authority
having jurisdiction affecting the Property, which violations in any way
relate to or affect the Property.

L. COMPLIANCE WITH RESTRICTIONS. Except as previously or
concurrently disclosed to Lender in writing, to Borrower's knowledge the
use of the Property contemplated by Borrower complies and will comply with
all applicable restrictive covenants, zoning and subdivision ordinances
and building codes, all other applicable laws, rules and regulations, and
all standards and regulations of appropriate supervising boards of fire
underwriters and similar agencies.

M. UTILITIES. All utility and municipal services necessary
for the construction, occupancy and operation of the Improvements are now
available at the Land (or will be so available as necessary for such
purposes), including water supply, storm and sanitary sewer facilities,
electricity, gas (if applicable) and telephone facilities. All binding
agreements, allocations or commitment letters required to ensure the
connection of the Improvements to such services have been obtained or will
be available from the utility companies and/or governmental authorities
providing such services, and all impact, connection or other requisite
fees therefor have been paid or are included in the Budget.

N. ACCESS. All public and private roads necessary for the
utilization of the Improvements for their intended purposes after
construction are now completed and available for vehicular ingress to and
egress from the Land (or will be so completed and available by the date
Lender opens its store for business). All utility, private roadway,
parking, access (including curb cuts), and similar easements and covenants
and permits required for the Project have been granted or issued or can be
obtained when required by the applicable stage of construction of the
Improvements.

O. FULL DISCLOSURE. To Borrower's knowledge, all factual
information relating to Borrower or the Project previously or concurrently
furnished to Lender in writing or on behalf of Borrower in connection with
the Loan pursuant to the requirements of the Loan Documents is true and
accurate in every material respect on the date which such information is
dated or certified, and is not incomplete by omitting to state any
material fact necessary to make such information not misleading.

P. PURPOSE OF LOAN. Borrower is obtaining the Loan from
Lender for the purpose of holding, developing and managing real estate for
profit, and, pursuant to the provisions of Section 6.1-330.76 of the Code
of Virginia, the Loan is therefore exempt from the provisions of Virginia
laws which might otherwise impose a maximum rate of interest on the Loan.

Q. NO DEFAULT. Except as otherwise previously or
concurrently disclosed to and approved by Lender in writing, to Borrower's
knowledge no uncured Event of Default exists under this Agreement, any
other Loan Document, the Lease, or any of the Other Leases and Borrower is
in compliance with all terms and conditions contained in this Agreement,
the Lease, the Other Leases, and all other Loan Documents (but this
paragraph shall apply to the Other Leases only if the representations and
warranties contained in the article of the Lease captioned "OTHER
TENANCIES" shall be rendered inaccurate thereby).

R. BINDING OBLIGATIONS. The Loan Documents executed by
Borrower constitute the valid and legally binding obligations of Borrower
enforceable in accordance with their terms, subject, as to enforcement, to
bankruptcy and other laws of general applicability relating to or
affecting creditors' rights.

III. COVENANTS OF BORROWER. So long as any amount remains payable
with respect to the Loan or otherwise pursuant to any Loan Document,
Borrower hereby covenants and agrees with Lender as follows:

A. PAYMENTS. Borrower shall pay when due and owing all sums
payable to Lender under the Note, this Agreement, and any other Loan
Document executed by Borrower.

B. COSTS AND EXPENSES. Borrower shall pay all reasonable
costs and expenses incurred to third parties by Lender as set forth in
Section 3.6 hereof, including those incurred in connection with (a) the
preparation and execution of this Agreement and the other Loan Documents
(and any amendments required or proposed from time to time), (b) the
collection or disbursement or administration of the Loan, including the
fees and expenses of Lender's outside local counsel, (c) the fees and
charges of Lender's representative or architect for periodic inspections
of the Improvements and the review of the Plans and Specifications, (d)
appraisal and survey costs, title insurance charges and premiums, transfer
taxes and mortgage taxes (if any), (e) costs associated with the
Subdivision, including reasonable attorney's fees, and (f) recording and
filing fees for Loan Documents. Borrower shall pay all costs and expenses
incurred by Lender, including reasonable attorney's fees, if payment of
the Loan or performance under any Loan Document is enforced by or through
an attorney at law, whether or not involving appellate, administrative or
bankruptcy proceedings. Borrower's obligations under this Section shall
survive any termination of this Agreement.

C. EXISTENCE, FRANCHISES, PERMITS. Borrower shall do or
cause to be done at all times all things necessary to maintain and
preserve its existence under the laws of its jurisdiction of organization
and in the Commonwealth of Virginia, and to preserve, protect, renew and
extend any and all franchises, permits, licenses, privileges, concessions
and other material rights (including those relating to land use and
development, construction, access, water rights and use, noise, waste
disposal and pollution control) that are or may be applicable from time to
time to Borrower or that have been or may be granted for the Project or
the use thereof.

D. FINANCIAL REPORTS. Borrower shall furnish or cause to be
furnished to Lender copies of the following financial statements, reports
and information:

1. promptly when available and in any event within 120
days after the close of each fiscal year, a balance sheet dated as of the
close of such fiscal year, and statements of earnings, and source and
application of funds for such fiscal year of Borrower and General Partner.
Borrower's financial statements shall be certified by an officer of the
managing general partner of General Partner. General Partner's financial
statements shall be audited and certified by a firm of independent public
accountants of recognized standing, without any qualification or exception
which is of a "going concern" or similar nature, or which relates to the
limited scope of examination of matters relevant to the financial
statements so certified.

2. promptly when available and in any event within 90
days after the close of each quarter of each fiscal year, after
commencement of operations in the Improvements, a balance sheet at the
close of such quarter, and a statement of earnings (or operations), and
source and application of funds (or cash flows) for the period commencing
at the close of the previous fiscal year and continuing through the close
of such quarter, of Borrower, certified by an officer of the managing
general partner of General Partner.

3. from time to time, such other information with
respect to the financial condition and operations of Borrower as Lender
may reasonably request.

E. TAXES. Borrower shall pay and discharge, or cause to be
paid and discharged, before the same become delinquent and before any
applicable penalty may be imposed thereon, all federal, state and local
taxes, assessments and other governmental charges or levies against the
Property or any part thereof, or against the Note or the Deed of Trust or
any other instrument evidencing or securing any of the Loan, or against
the trustee(s) under the Deed of Trust. Borrower shall provide Lender
with receipted tax bills or canceled checks or other evidence of payment
of all such taxes or assessments or charges within sixty (60) days after
the delinquency date for each such payment or installment thereof.
Notwithstanding the foregoing, Borrower may in good faith, by appropriate
proceedings, contest the validity, applicability, or amount of any
asserted tax or assessment or charge, and pending such contest Borrower
shall not be deemed in default hereunder if:

1. prior to delinquency of the asserted tax or
assessment or charge, Borrower either posts security required by the
applicable authority in order to properly contest such tax or assessment
or charge, or establishes an escrow, bond or other assurance or security
reasonably acceptable to Lender adequate to cover the payment of such tax
or assessment or charge with interest, cost and penalties and a reasonable
additional sum to cover possible costs, interest and penalties (which
escrow, if held by Lender, shall be returned to Borrower upon payment of
all such taxes, assessments, charges, interest and penalties); and

2. Borrower promptly causes to be paid any amount
adjudged by final unappealable judgment by a court of competent
jurisdiction to be due, with all costs, penalties and interest thereon,
promptly after such judgment becomes final;

provided however, that in any event such contest shall be concluded and
the tax, assessment, charge, penalties, interest and costs shall be paid
prior to the date any writ or order is issued under which the Property or
any portion thereof may be sold.

F. LIENS AND ENCUMBRANCES. Except as permitted in this
Section or otherwise provided in this Agreement or any other Loan
Document, Borrower shall not, without the prior written consent of Lender,
create, place or permit to be created or placed, or through any act or
failure to act voluntarily acquiesce in the placing of, or allow to
remain, any deed of trust, mortgage, voluntary or involuntary lien
(whether statutory, constitutional or contractual), encumbrance or charge,
security interest, financing statement, equipment lease, chattel mortgage,
conditional bill of sale, title retention contract, or other security
device or instrument, against or covering the Property or any part
thereof, regardless of whether the same are expressly or otherwise
subordinate to the lien or security interest of the Deed of Trust. If any
of the foregoing become attached hereafter in any manner to any part of
the Property without the prior written consent of Lender and are not
otherwise permitted under this Agreement or any other Loan Document, then
Borrower will cause the same to be promptly discharged and released;
provided, however, that Borrower may contest in good faith any involuntary
lien claimed against any part of the Property, so long as Borrower
deposits with the appropriate governmental authority any amounts necessary
to contest such lien pursuant to applicable law or deposits with Lender a
bond or other assurance or security in such amount reasonably acceptable
to Lender, and such lien is discharged and released promptly upon entry of
a final unappealable judgment establishing the validity of such lien.

G. COMPLIANCE. Borrower shall comply at all times with all
terms and conditions of the Loan Documents. Borrower shall comply or
cause compliance at all times with all laws, rules, regulations,
ordinances and other requirements of any federal, state, county, municipal
or other governmental authorities relating to the Property, other than
those for which Lender is responsible pursuant to the Lease.

H. INSURANCE. Borrower shall maintain or cause to be
maintained in force insurance coverage at the times and to the extent
required to be maintained under the Loan Documents and the Lease and shall
furnish to Lender upon request at reasonable intervals a certificate or
certificates from the respective insurer(s) setting forth the nature and
extent of all insurance maintained by Borrower in accordance with the Loan
Documents and the Lease.
1. Not later than ten (10) days before the expiration
date of any such insurance policy, Borrower shall deliver or cause to be
delivered to Lender a binder or certificate of the insurer evidencing the
renewal or replacement of that policy.

2. If Borrower fails to obtain, effect or maintain (or
cause to be obtained, effected or maintained) the insurance required under
the Loan Documents and the Lease, then (i) Borrower will indemnify and
hold Lender harmless from and against any damage, loss, liability or
expense resulting from all risks that would have been covered by the
required insurance if so maintained; and (ii) Lender shall have the right
(but not the obligation) to obtain such insurance at Borrower's expense,
and in such event Borrower shall reimburse Lender for the full amount so
expended by Lender, together with interest at the Default Rate set forth
in the Note.

I. RESTORATION AND RECONSTRUCTION. In the event any of the
Improvements are destroyed or damaged by fire, explosion, windstorm, hail
or any other casualty against which insurance is required under this
Agreement, the Lease or any of the Loan Documents, or in the event any of
the Land or Improvements is condemned or taken under power of eminent
domain, then all insurance proceeds (other than those relating to loss of
rent) or condemnation proceeds shall be paid directly to Lender and
applied first to reimburse Lender and the trustee(s) under the Deed of
Trust for all reasonable costs and expenses, including reasonable
attorney's fees, incurred in connection with the collection of such
proceeds. Thereafter, if no Event of Default then exists under any of the
Loan Documents, then the balance of the proceeds (after payment of such
collection expenses) shall be applied by Lender to the restoration or
reconstruction of the Improvements, and to the extent there are proceeds
remaining, such proceeds shall be applied to reduce the balance of the
Loan, and Borrower may keep any surplus proceeds remaining after such
restoration or reconstruction and reduction of the Loan; if an Event of
Default then exists Lender may elect whether to apply such proceeds to the
restoration or reconstruction of the Improvements or to apply such
proceeds in reduction of the Loan. If the election is made to apply the
insurance or condemnation proceeds to the restoration or reconstruction of
the Improvements (or if such application is otherwise required, as set
forth above), then Lender shall disburse the proceeds for restoration or
reconstruction costs in accordance with the provisions of this Agreement
governing advances of Loan funds.

J. PLANS. No construction shall be undertaken on the Land
except as shown in the Plans and Specifications, as changed or
supplemented from time to time in accordance with this Agreement.
Further, all construction shall be in accordance with the terms and
provisions of the Construction Contract and Borrower shall not breach or
default in its obligations under the Construction Contract. Without
Lender's prior written consent, which shall not be unreasonably withheld,
Borrower shall not modify or amend the Construction Contract. To the
extent assignable, Borrower hereby assigns to Lender and grants Lender a
security interest in all of the Plans and Specifications, the Construction
Contract, and all changes thereto (regardless of whether so approved) as
collateral for the Loan and agrees that the Plans and Specifications, the
Construction Contract, and all such changes are covered by the security
agreement provisions of the Deed of Trust. To the extent assignable,
Borrower hereby assigns to Lender and grants Lender a security interest in
all licenses, permits and approvals pertaining to the construction or
operation of the Improvements, as changed or supplemented from time to
time, as collateral for the Loan and agrees that the same are covered by
the security agreement provisions of the Deed of Trust.

K. CONSTRUCTION. Borrower shall construct or cause
construction of the Improvements on the Land with materials of high
quality and with diligence and continuity, and shall complete the same in
a good and workmanlike manner in accordance with the Plans and
Specifications and free and clear of any mechanic's liens or claims or
lien. On demand of Lender or any governmental authority, Borrower shall
promptly, in accordance with good construction practices, commence to
correct any structural defects in the Improvements or any substantial
departures from the Plans or Specifications or any encroachments revealed
by any survey of the Improvements and not shown in the Plans and
Specifications and Borrower shall diligently complete such correction.

L. ASSIGNMENT BY BORROWER. Borrower shall not assign or
transfer Borrower's rights under any Loan Document or any proceeds of the
Loan without the prior written consent of Lender, which may be withheld in
Lender's sole discretion, and any such unpermitted assignment or purported
assignment shall constitute a default.

M. USE OF LOAN FUNDS. Borrower agrees that all materials and
equipment contracted or purchased for the construction of the
Improvements, and all labor hired or contracted therefor and paid for with
Loan funds, shall be used and employed solely on the Project and for no
other purpose. Borrower shall use the Loan funds only for the specific
purposes for which Lender advances them, and Borrower shall receive all
such funds and shall hold the right to receive them as a trust fund for
the sole purpose of paying the specific costs of the Project in accordance
with this Agreement.

N. FURTHER ASSURANCES. Borrower shall sign and deliver to
Lender such documents, instruments, assignments and other writings, and do
such other acts necessary to preserve and protect the collateral at any
time securing or intended to secure the Loan or to perfect the lien
thereof and to carry out the intents and purposes of the Loan Documents,
as Lender may reasonably require in writing.

IV. ENVIRONMENTAL MATTERS. Borrower and Lender agree as follows
with respect to (a) any Environmental Claims made with respect to the
Property and (b) any raw materials, products, waste, or other substances
classified as hazardous or toxic under any applicable Environmental Law,
excluding materials in small quantities normally found in retail stores or
shopping centers (the "HAZARDOUS MATERIALS"):

A. ENVIRONMENTAL LAWS. As used in this Agreement, the term
"ENVIRONMENTAL LAWS" means any present or future federal, state or local
laws, ordinances, rules or regulations pertaining to any Hazardous
Materials affecting the Property from time to time, or pertaining to air
or water or noise pollution, underground tanks, asbestos, or radon, as
such laws, ordinances, rules and regulations may be amended from time to
time.

B. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender as follows:

1. The firm of ATEC Environmental Consultants was
engaged by Borrower to perform an environmental site assessment of the
Land in order to identify the evidence of any Hazardous Materials which
may have been used, stored or disposed of on the Land, and Borrower has
delivered to Lender a true and correct copy of the environmental report
titled "Phase 1 Environmental Site Assessment/Asbestos Bulk Survey" dated
January 25, 1990 prepared by said firm in connection with its site
assessment (the "ENVIRONMENTAL REPORT").

2. Except as otherwise previously or concurrently
disclosed to Lender in the Environmental Report or in any other writing,
Borrower has no knowledge to indicate that the Land was ever used for, and
during Borrower's period of ownership of the Land Borrower has not used or
knowingly permitted the Land to be used for industrial or manufacturing
purposes, for landfill, dumping or other waste disposal activities or
operations, for storage of Hazardous Materials in violation of any
Environmental Laws, for underground storage tanks used for petroleum
products or chemicals, or for any other use that is likely to give rise to
the release of Hazardous Materials on the Land.

3. Except as otherwise previously or concurrently
disclosed to Lender in writing, Borrower has not received any notice or
other communication from any governmental agency with respect to any
Environmental Claims, and to Borrower's knowledge no inspection, audit,
inquiry or other investigation has been or is being proposed or conducted
by any governmental authority concerning the presence or discharge of
Hazardous Materials at the Land or concerning whether conditions at the
Land are in violation of any Environmental Laws.

4. Except as otherwise previously or concurrently
disclosed to Lender in writing, to Borrower's knowledge the present
condition of the Land does not violate any Environmental Laws and the use
of the Land by Borrower contemplated in the Loan Documents complies and
will comply with all applicable Environmental Laws.

C. KNOWN VIOLATIONS. Borrower shall not knowingly permit the
Property to be used in violation of any applicable Environmental Laws, and
after obtaining actual knowledge of any such violation by any person or
entity, Borrower shall make a reasonable investigation and inquiry as to
the nature and extent of the violation and shall use its reasonable
efforts, based upon that investigation and inquiry, to cause such person
or entity to curtail such violation and undertake any necessary remedial
actions within a reasonable period of time (but in any event within the
time required by applicable Environmental Laws).

D. ENVIRONMENTAL CLAIMS. Borrower shall promptly advise
Lender in writing of any Environmental Claims as soon as Borrower first
obtains knowledge thereof. Without Lender's prior written consent, which
shall not be unreasonably withheld or delayed, Borrower shall not enter
into any settlement, consent or compromise with respect to any
Environmental Claim which is likely, in Lender's judgment, to impair the
value of Lender's security under the Deed of Trust. Lender shall have the
right to join and participate in, as a party if Lender so elects, any
legal proceedings or action initiated in connection with any Environmental
Claims and to have its reasonable attorneys' fees and expenses in
connection therewith paid by Borrower, or be defended by Borrower from and
against any Environmental Claims.

E. REMEDIAL ACTIONS. Without first notifying Lender in
writing, Borrower shall not take any remedial action in response to the
presence of any Hazardous Materials on, under, or about the Property if,
in Lender's judgment, the remedial action is likely to impair the value of
Lender's security under the Deed of Trust. In the case of a remedial
action that, in Lender's judgement, is likely to impair the value of
Lender's security under the Deed of Trust, Lender's prior consent shall be
required but shall not be withheld if, upon the advice of professionals
who are duly qualified and trained to make such judgments, there is no
reasonable alternative to such remedial action which would result in less
impairment of Lender's security under the Deed of Trust, but only if and
to the extent that remediation is required to be performed by the
Environmental Protection Agency or another governmental agency with
jurisdiction over environmental matters relating to the Property. Lender
shall reasonably cooperate with Borrower, at no cost or expense to Lender,
in connection with any remedial action required by any applicable
governmental authority. If Lender has possession of the Land, such
cooperation shall include providing reasonable access to the Land so that
Borrower may, without additional delay or cost, undertake and complete the
remedial action and obtain confirmation of the same from the applicable
governmental authority; provided, however, that Borrower's written request
for such access shall specify the precise nature of the remedial action
required and Borrower shall upon request provide such funds or other
security or assurances as Lender reasonably deems appropriate to protect
Lender from any cost or expense and to protect the Land and Improvements
from loss or damage in connection with the remedial action.

F. INDEMNITY. Borrower hereby agrees to indemnify and defend
Lender and hold Lender(in its capacity as Lender but not in its capacity
as tenant under the Lease), its directors, officers, employees, agents,
shareholders, successors and assigns, and the trustee(s) under the Deed of
Trust, harmless from and against any and all claims, losses, actual
damages (including consequential damages), liabilities, fines, penalties,
charges, administrative and judicial proceedings and orders, liens,
judgments, remedial action requirements, enforcement actions of any kind,
and all costs and expenses incurred in connection therewith (including
reasonable attorneys' fees and expenses), arising in whole or in part from
any Environmental Claims or from:

1. the presence on, under or about the Land of any
Hazardous Materials, or any releases or discharges of any Hazardous
Materials on, under or from the Land;

2. any required or necessary repair, cleanup or
detoxification of the Land, including any remediation contemplated under
Section 6.5 above, and the preparation and implementation of any closure,
remedial or other required plans;

3. compliance with the requirements of any
Environmental Laws in connection with any sale, transfer, closure or
termination of operations with respect to the Land, including any of the
same in connection with any foreclosure action or deed in lieu thereof; or

4. any activity carried on or undertaken on the Land
prior to or during the term of the Loan, by Borrower or any predecessor in
title or any tenants, employees, agents or contractors of Borrower or any
predecessor in title or any third persons at any time occupying or present
on the Land lawfully and with the permission of Borrower or any
predecessor in title, other than Lender and any Permitted Occupant
(defined below), in connection with the handling, treatment, removal,
storage, decontamination, cleanup, transport or disposal of any Hazardous
Materials at any time located or present on, under or about the Land.

Neither this indemnity nor any of Borrower's other obligations under this
Section 6 shall apply with respect to any of the foregoing matters to the
extent that (i) the release or discharge of the Hazardous Material giving
rise to such foregoing matter first occurs after the earlier to occur of
full repayment of the Loan and the compliance with all of Borrower's other
obligations under all of the Loan Documents or the release of the Deed of
Trust, or (ii) such matter arises from the negligence, willful misconduct
or other acts or omissions of Lender or the tenant under the Lease or
their respective contractors, agents, employees, subtenants or
concessionaires (collectively, the "PERMITTED OCCUPANTS"), excepting such
matters to the extent arising from or as a result of any act or omission
or negligence of Borrower or its agents, contractors, servants or
employees.

G. SECURITY AND SURVIVAL. The indemnity set forth in this
Article is included in the Loan and is secured by the Deed of Trust and
all other Loan Documents securing the Loan from time to time. This
indemnity shall survive the repayment of the Loan and the satisfaction or
reconveyance of the Deed of Trust, or the transfer of title to the Land
through foreclosure sale or trustee's sale or pursuant to a deed in lieu
thereof.

V. DEFAULT AND REMEDIES.

A. EVENTS OF DEFAULT

Borrower will be in default under this Agreement upon the
occurrence of any one or more of the following events ("EVENTS OF
DEFAULT"):

1. Borrower fails to make any payment of principal or
interest under the Note when due and does not cure such failure within ten
(10) days after written notice thereof from Lender, or Borrower fails to
make any payment of any other amount required to be paid under the Note,
the Deed of Trust or any other Loan Document, as the same shall become due
and payable, whether at maturity or when accelerated or otherwise, and
Borrower does not cure such failure within ten (10) days after written
notice thereof from Lender; or

2. A receiver, trustee, or custodian is appointed for
all or substantially all of the Land or the Property in any proceeding
brought by Borrower or any of its partners, or any such receiver or
trustee shall be appointed in any proceeding brought against Borrower or
any of its partners and not discharged within sixty (60) days after such
appointment; or

3. Borrower or any of its partners shall file a
petition under any section or chapter of the Federal Bankruptcy Reform
Act, as amended, or under any similar law or statute of the United States
or any State thereof regarding bankruptcy, insolvency or creditors'
rights, or Borrower or any of its partners shall be adjudged bankrupt or
insolvent in proceedings filed against Borrower or any of its partners, or
a petition or answer proposing the adjudication of Borrower or any of its
partners as a bankrupt or insolvent or its reorganization under any
present or future federal or state bankruptcy or insolvency or similar law
shall be filed in any court and (in the case of an involuntary action)
such petition or answer shall not be discharged or denied within
sixty (60) days after the filing thereof; or

4. Any representation or warranty made or given in any
of the Loan Documents by Borrower, or in the Lease by Landlord, proves to
be false or misleading in any material respect; or

5. Borrower fails to timely and properly observe, keep
or perform any covenant, agreement, warranty or condition required in any
of the Loan Documents to be observed, kept or performed, other than those
referred to elsewhere in this Section 7.1, if such failure continues for
thirty (30) days after notice thereof from Lender, provided that if such
failure cannot be cured during the initial thirty (30) day period, and if
Borrower commences to cure such failure within said thirty (30) day period
and diligently and continuously pursues the cure to completion, then such
thirty (30) day period shall be extended for an additional sixty (60) days
or such longer period that Borrower demonstrates to Lender's reasonable
satisfaction is reasonably necessary for the completion of the cure; or

6. Borrower fails to deliver to Lender any financial
statements, reports, insurance policies or insurance certificates as
required hereunder and such failure continues for ten (10) days following
notice thereof from Lender; or

7. A judgment, order, or decree is entered against
Borrower which (i) permanently enjoins or otherwise prevents or declares
invalid or unlawful Borrower's construction, occupancy, maintenance or
operation of the Improvements, or (ii) orders the sale or seizure of the
Land, Improvements or the Project or any part thereof under writ of
execution or other process of law; or

8. A levy is made under any process on the Property or
any portion thereof, or the Property or any portion thereof is taken on
execution or other process of law in any action against Borrower; or

9. Any person obtains an order or decree in any court
of competent jurisdiction enjoining or prohibiting Borrower from
performing this Agreement or any of the Loan Documents, and such
proceedings are not properly contested or such decree is not vacated
within sixty (60) days after the granting thereof; or

10. Without Lender's prior written consent, Borrower
creates, places, permits to be created or placed, or through any act or
failure to act voluntarily acquiesces in the placing of, or allows to
remain, any deed of trust, mortgage, voluntary or involuntary lien
(whether statutory, constitutional or contractual), encumbrance or charge,
security interest, financing statement, equipment lease, chattel mortgage,
conditional bill of sale, or other security device or instrument, against
or covering the Land, the Improvements, the Project, or any part thereof,
regardless whether the same are expressly or otherwise subordinate to the
lien or security interest of the Deed of Trust and the other Loan
Documents but subject to Borrower's contest rights if and to the extent
provided for in this Agreement; or

11. Without Lender's prior written consent, Borrower
shall dissolve or liquidate, or the partnership interest in Borrower of
any partner of Borrower shall be sold, assigned or transferred,
voluntarily or involuntarily, to a party other than the other current
partners pursuant to the partnership agreement creating Borrower or
General Partner(including any transfer resulting from any foreclosure of
or realization upon any lien or security interest with respect to any such
partnership interest), or General Partner shall dissolve or liquidate (but
a merger or consolidation with or into another entity shall not be a
default provided substantially all of the assets are transferred to the
surviving entity); or

12. Borrower sells, transfers or otherwise disposes of
the Land, the Improvements, the Project, or any portion thereof, or,
whether in one or more than one transaction, all or substantially all of
the Entire Premises (as defined in the Lease) unless at the closing of
such sale or transfer transaction Borrower pays to Lender all amounts
outstanding under the Loan Documents (which Borrower hereby agrees to do);
or

13. Borrower fails to cure any default on the part of
Borrower under the Construction Contract within seven (7) days following
the contractor's issuance of a notice of default thereunder or a notice to
terminate the Construction Contract, or Borrower voluntarily materially
amends, materially modifies or terminates the Construction Contract
without the prior written consent of Lender (which Lender may grant or
withhold in its reasonable discretion); or

14. The holder of any lien or security interest on the
Land, the Improvements or the Project, or any part thereof (without hereby
implying the consent of Lender to the existence or creation of any such
lien or security interest)institutes foreclosure or other proceedings for
the enforcement of its remedies thereunder; or

15. Borrower fails to comply with any requirement of any
governmental authority within thirty (30) days after receipt of notice
thereof; or

16. Borrower modifies, amends or terminates any of the
Other Leases without Lender's consent (but this shall apply only if the
representations and warranties contained in the article of the Lease
captioned "OTHER TENANCIES" shall be rendered inaccurate thereby); or

17. Under any of the Loan Documents or the Lease or any
of the Other Leases (but this shall apply to the Other Leases only if the
representations and warranties contained in the article of the Lease
captioned "OTHER TENANCIES" shall be rendered inaccurate thereby), a
default (taking into account applicable notice and cure periods) by
Borrower occurs; or

18. Borrower fails to pursue construction diligently and
such failure would permit the tenant under the Lease to terminate the
Lease pursuant to Paragraph B. IX of the article of the Lease entitled
"Improvements to be Constructed by Landlord"; or

19. Any construction of the Improvements or materials,
articles or fixtures used in connection therewith be not in accordance
with the Plans and Specifications, or Borrower amends or modifies the
Plans and Specifications in violation of this Agreement and, in either
case Borrower fails to cure such violation within the time period set
forth in (e) above, subject to the extension provided for therein; or

20. Borrower is unable or fails to satisfy any condition
of Borrower's right to receive disbursements hereunder for a period in
excess of one hundred twenty (120) days after Lender's refusal to make any
future advances.

B. EXCUSED DEFAULTS. Notwithstanding anything to the
contrary contained herein or in any other Loan Document, in the event
Borrower is unable to perform any obligation set forth in this Agreement
or any other Loan Document (other than the payment of amounts due to
Lender under the Loan Documents) by reason of circumstances which are
caused by Lender's failure to perform the tenant's obligations under the
Lease, such failure by Borrower shall not be deemed to be an Event of
Default hereunder or under any other Loan Document until such time as
Lender has performed such obligations under the Lease and Borrower, within
thirty (30) days thereafter, fails to commence to perform its obligations
under the Loan Documents or thereafter fails to diligently proceed to
perform such obligations.

C. REMEDIES.

1. If an Event of Default occurs under this Agreement,
Lender may exercise any right or remedy which it has under any of the Loan
Documents, or which is otherwise available at law or in equity or by
statute, and all of Lender's rights and remedies shall be cumulative,
except as otherwise expressly set forth herein. If any Event of Default
occurs, Lender's obligation to lend funds under the Loan Documents shall
immediately terminate, and Lender in its sole discretion may withhold any
one or more disbursements. No disbursement of Loan funds by Lender shall
cure any default of Borrower, unless Lender agrees otherwise in writing in
each instance. Upon the occurrence of any Event of Default, all of
Borrower's obligations under the Loan Documents may, at Lender's option at
any time, become immediately due and payable without notice of default,
presentment or demand for payment, notice of acceleration or of intent to
accelerate, protest or notice of nonpayment or dishonor, or other notices
or demands of any kind or character, all at Lender's option, exercisable
in its sole discretion.

2. Upon the maturity of the Loan, whether at the stated
maturity date or through acceleration by Lender for an Event of Default,
Lender shall have the right to foreclose the Deed of Trust and cause the
sale of the Property as set forth in the Loan Documents and to pursue all
other remedies provided therein or under applicable law. All such rights
and remedies are and shall be separate, distinct and cumulative, and no
single, partial or full exercise of any right or remedy shall exhaust the
same or preclude Lender from thereafter exercising in full or in part the
same right or remedy or from concurrently or thereafter exercising any
other right or remedy available to Lender, at law or in equity, and each
and every such right and remedy may be exercised at any time or from time
to time, unless otherwise expressly provided to the contrary in the Loan
Documents. In no event shall any provision of this Agreement or any other
Loan Document be construed to permit "tacked" or cumulative grace or cure
periods for the benefit of Borrower. No waiver by Lender of any such
default or Event of Default, nor of any term or condition in any Loan
Document, shall be deemed a waiver of any subsequent default or Event of
Default of the same or any other kind nor a waiver of any other term or
condition in any Loan Document. No such waiver shall be effective or
deemed to exist unless evidenced by a writing duly executed by Lender, and
then only to the extent expressly stated in such writing.

3. During the continuation of any Event of Default that
exists prior to the completion of the Project, Lender shall have the right
(in addition to any other rights or remedies provided in this Agreement or
any other Loan Document), with or without the appointment of a receiver,
to take over Borrower's obligations under the Construction Contract, to
enter into possession of the Project, to perform any and all work and
labor necessary to complete the Improvements, and/or to employ watchmen to
protect the Project and all materials and supplies therefor. All sums
expended by Lender for such purposes shall be included in the Loan, shall
bear interest at the Default Rate set forth in the Note, shall be payable
ten (10) days after demand therefor, and shall be secured by the Loan
Documents. Lender shall advise Borrower of the amount so expended by
Lender, together with reasonably detailed evidence of the amount and
purpose of the expenditure. Additionally, Lender shall have the right to
make advances directly to subcontractors and contractors, and the
execution of this Agreement by Borrower shall and hereby does constitute
an irrevocable direction and authorization to do so and advance the funds.

Such advances shall be secured by the Deed of Trust and all other liens
and security interests securing the Loan, as fully as if made to Borrower,
regardless of the disposition thereof by such contractors and
subcontractors. Borrower hereby constitutes and appoints Lender as its
true and lawful attorney in fact, with special powers to complete the
Improvements in Borrower's name, place and stead, such special powers to
be as follows: (a) to use for completion of the Improvements any casualty
or condemnation proceeds held by Lender; (b) to make all such changes,
additions or corrections in the Plans and Specifications, which Lender
shall deem necessary or desirable, in its sole discretion, for the
completion of the Improvements; (c) to employ such contractors,
subcontractors, agents, supervisors, managers, inspectors, architects and
other persons required for such completion, in Lender's exclusive
judgment, even if such persons may be otherwise related to Lender; (d)
provided that Borrower is released from any claim against Borrower by a
third party with which Lender is settling pursuant to this subsection (d),
to pay, settle or compromise all existing bills and claims which are or
may become liens against all or any part of the Property or which Lender
may determine in its sole discretion to pay, settle or compromise to
facilitate the completion of the Property or the clearance of title; (e)
to execute all applications, certificates and other writings which may be
required by any construction contract or other contract or governmental
authority; (f) to prosecute and defend all actions or proceedings in
connection with the Property, and to take such actions and require such
performances as Lender may deem necessary in its sole discretion; and (g)
to do any and every act with respect to the construction and leasing of
the Improvements which Borrower could do on Borrower's own behalf.
Notwithstanding anything to the contrary set forth in this Section 7.3(c)
or otherwise set forth in the Loan Documents, Lender shall have no rights
to perform any of such acts in Borrower's name or as Borrower's attorney
in fact unless each and every party with whom Lender deals in connection
with the exercise of its rights or the performance of such acts agrees in
writing that Borrower's liability is limited as set forth in Section 8.14
hereof; provided, however, that the foregoing agreement in writing shall
not be required with respect to work performed by Lender or any other
exercise by Lender of its rights under this Section 7.3(c) to the extent
that Borrower shall not be obligated thereby to a third party.

VI. MISCELLANEOUS PROVISIONS.

A. NO WAIVER; CONSENTS. Each waiver by Lender must be in
writing and signed by Lender, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from Lender's delay in
exercising or failure to exercise any right or remedy against Borrower or
any security, whether on account of any default of Borrower or otherwise.
Consent by Lender to any act or omission by Borrower shall not be
construed as a consent to any other or subsequent act or omission or as a
waiver of the requirement for Lender's consent to be obtained in any
future or other instance.

B. PURPOSE AND EFFECT OF LENDER APPROVAL. Lender's approval
of any matter in connection with the Loan shall be for the sole purpose of
protecting Lender's security and rights. No such approval shall result in
a waiver of any default or Event of Default of Borrower. In no event
shall Lender's approval be a representation of any kind with regard to the
matter being approved.

C. NOTICES. All notices given under this Agreement must be
in writing and shall be effectively served upon delivery, or if mailed,
upon the first to occur of receipt or the expiration of three (3) days
after deposit in certified United States mail, return receipt requested,
postage prepaid, sent to the party at its address appearing below its
signature or, in the case of a Draw Request, sent to Lender at the
following address:

Mr. Richard O'Leary
J. C. Penney Company, Inc.
P.O. Box 10001
Dallas, Texas 75301-2114

Those addresses may be changed by either party by ten (10) days' written
notice to the other party.

D. ATTORNEYS' FEES. If any lawsuit is commenced which arises
out of or relates to this Agreement, the Loan Documents or the Loan, the
prevailing party shall be entitled to recover from each other party such
sums as the court or referee may adjudge to be reasonable attorneys' fees
in the action, in addition to costs and expenses otherwise allowed by law.

Additionally, Borrower agrees to pay all costs and expenses incurred by
Lender in any effort to enforce any of the obligations under this
Agreement or any of the Loan Documents, including but not limited to
reasonable legal fees and disbursements, whether or not any lawsuit is
filed.

E. APPLICABLE LAW. This Agreement shall be governed by
Virginia law, without regard to any choice of law rules.

F. SUCCESSORS AND ASSIGNS. Lender may not assign this
Agreement without the prior written consent of Borrower except to a
Related Corporation (as that term is defined in the Lease) or to a
successor corporation by reason of merger, consolidation or sale of
substantially all of Lender's assets. Borrower may not assign this
Agreement without the prior written consent of Lender. Subject to the
foregoing, the terms of this Agreement shall bind and benefit the heirs,
legal representatives, successors and assigns of the parties.

G. FORCE MAJEURE. If the work of construction is directly
affected and delayed by an Unavoidable Delay, as that term is defined in
the Lease, Borrower must notify Lender in writing within ten (10) business
days after the event occurs which causes the delay. So long as no Event
of Default has occurred and is continuing and such notice is given in a
timely manner, Lender shall extend by a period of time equal to the period
of the delay only those time periods stated in the Completion Schedule for
completing construction which are directly affected and delayed by the
event. No such extension shall affect the time for performance of, or
otherwise modify, any of Borrower's other obligations under the Loan
Documents or the maturity of the Note.

H. SEVERABILITY. The invalidity or unenforceability of any
one or more provisions of this Agreement shall in no way affect any other
provision.

I. INTERPRETATION. Whenever the context requires, all words
used in the singular will be construed to have been used in the plural,
and vice versa, and each gender will include any other gender. The
captions of the sections of this Agreement are for convenience only and do
not define or limit any terms or provisions. The word "include(s)" means
"include(s), without limitation," and the word "including" means
"including, but not limited to." Time is of the essence in the
performance of this Agreement by Borrower. The exhibits to this Agreement
are hereby incorporated in this Agreement.

J. AMENDMENTS. This Agreement may not be modified or amended
except by a written agreement signed by the parties.

K. COUNTERPARTS. This Agreement and any attached consents or
exhibits requiring signatures may be executed in counterparts, and all
counterparts shall constitute but one and the same document.

L. LANGUAGE OF AGREEMENT. The language of this Agreement
shall be construed as a whole according to its fair meaning, and not
strictly for or against any party.

M. INTEGRATION OF DOCUMENTS. The Loan Documents integrate
all the terms and conditions mentioned in or incidental to this Agreement,
supersede all oral negotiations and prior writings with respect to their
subject matter, and are intended by the parties as the final expression of
the agreement with respect to the terms and conditions set forth in those
documents and as the complete and exclusive statement of the terms agreed
to by the parties. No representation, understanding, promise or condition
shall be enforceable against any party unless it is contained in the Loan
Documents or the Lease. If there is any conflict between the terms,
conditions and provisions of this Agreement and those of any other
agreement or instrument other than the Lease, including any other Loan
Document, the terms, conditions and provisions of this Agreement shall
prevail.

N. NON RECOURSE.

1. Prior to Completion (as defined below), paragraph
(b) of this Section 8.14 shall be applicable. From and after Completion,
paragraph (c) of this Section 8.14 shall be applicable. "Completion" shall
mean completion of the Improvements by Borrower and delivery of possession
thereof to Lender as tenant under the Lease, except for punch list items
(if any) which will cost no more than $50,000 to complete, as certified in
writing by Borrower's Architect.

2. Notwithstanding anything to the contrary in this
Agreement or in any other Loan Document, the only entities with financial
or any other obligation under this Agreement or any other Loan Document,
at law or in equity, are Borrower and General Partner, and Lender agrees
to look solely to the assets of Borrower and General Partner (including
but not limited to (i) the Escrow Amount [as defined in Section 8.15(a)
hereof], (ii) Borrower's interest in the Property, (iii) the proceeds of
sale receivable from any execution of any judgments against Borrower's
interest in the Property and/or General Partner's interest in any of its
assets, (iv) any consideration receivable by Borrower and/or General
Partner from the sale or other disposition of all or any part of its
right, title and interest in the Property or any of its assets, and (v)
rents and other income from the Property and other assets receivable by
Borrower and/or General Partner) to satisfy any claims under this
Agreement or any other Loan Document, at law or in equity. No present or
future direct or indirect constituent partner (other than General Partner)
in or agent of Borrower or General Partner (an "OTHER PARTNER") nor any
present or future advisor, trustee, director, officer, employee,
beneficiary, shareholder, participant, representative or agent of any
corporation or trust that is or becomes an Other Partner (including, but
not limited to JMB Realty Corporation, Judd D. Malkin and Neil G. Bluhm),
shall have any personal liability, directly or indirectly, under or in
connection with this Agreement or any other Loan Document, or any
instrument or certificate securing or otherwise executed in connection
with this Agreement or any other Loan Document, or any amendment or
amendments to any of the foregoing made at any time or times, heretofore
or hereafter. Lender and its successors and assigns and, without
limitation, all other persons and entities, shall look solely to the
assets of Borrower and General Partner for the payment of any claim or for
any performance under the Loan Documents, at law or in equity.
Notwithstanding anything to the contrary contained in this Agreement or
any other Loan Document, each of the following shall not for any purpose
be deemed to be an asset or the property of Borrower or General Partner
(or any Other Partner): (i) any negative capital account of any
partnership and (ii) any obligation to restore a negative capital account
of, or to contribute capital to, any partnership. The foregoing
limitations are in addition to, and not in limitation of, any other
limitation on liability contained in this Agreement or in any other Loan
Document or provided by law.

(c) Notwithstanding anything to the contrary in this
Agreement or in any other Loan Document, neither Borrower nor any Other
Partner, nor any shareholder, officer, director, employee, trustee,
beneficiary or agent of any entity that is or becomes an Other Partner
(including, but not limited to JMB Realty Corporation, Judd D. Malkin and
Neil G. Bluhm), shall be personally liable, directly or indirectly, under
or in connection with this Agreement or any other Loan Document, or any
instrument or certificate securing or otherwise executed in connection
with this Agreement or any other Loan Document, or any amendments or
modifications to any of the foregoing made at any time or times,
heretofore or hereafter. The recourse of the Lender and each of its
successors and assignees under or in connection with this Agreement, any
other Loan Document and such instruments and certificates, and any such
amendments or modifications, shall be limited only to (i) Borrower's
interest in the Property, (ii) the proceeds of sale receivable from any
execution of any judgments against Borrower's interest in the Property,
(iii) any consideration receivable by Borrower from the sale or other
disposition of all or any part of Borrower's right, title and interest in
the Property, and (iv) rents and other income from the Property receivable
by Borrower, and no other assets or property of Borrower shall be subject
to levy, execution or other procedures for the satisfaction of Lender's
remedies.

(d) The provisions of this Section 8.14 shall not be
deemed to deny to Lender, or limit its right to obtain, injunctive relief
or specific performance of Borrower's covenants or obligations under this
Agreement or to avail itself of any other right or remedy (not involving
personal liability of Borrower in excess of the limits of personal
liability fixed by the terms set forth in this Section) which may be
accorded Lender by law or under the terms of this Agreement or the other
Loan Documents by reason of Borrower's failure to perform its obligations
thereunder.

(e) Notwithstanding anything to the contrary contained
in this Section 8.14, Borrower and General Partner shall be fully liable
to Lender to the same extent that they would be liable absent the
foregoing provisions of this Section for: (i) fraud or wilful
misrepresentations of Borrower or General Partner and (ii) the fraudulent
misapplication by Borrower or General Partner of either (x) any sums
advanced under the Loan, (y) any proceeds paid under any insurance
policies by reason of damage, loss or destruction to any portion of the
Property, or (z) any proceeds or awards resulting from the condemnation or
taking for public or private use of all or any part of the Property.

(f) This provision shall have no effect on the provision
of the Lease captioned "Limitation of Landlord's Liability" and the
tenant's rights under the Lease with respect thereto.

O. ESCROW AGREEMENT.

1. Prior to the first advancement of funds by Lender
under the Loan, Lender and Borrower shall enter into an escrow agreement
(the "ESCROW AGREEMENT") in accordance with the terms and conditions set
forth in this Section. The escrowee ("ESCROWEE") shall be Chicago Title
Insurance Company or another mutually satisfactory institutional third
party escrow holder. Borrower shall deposit into the escrow (the
"ESCROW") the amount of $1,000,000.00. Such amount, as it may be reduced
from time to time as set forth below, is called the "ESCROW AMOUNT". Such
amount was calculated by adding $732,600.00 to the $267,400.00
("BORROWER'S CONTRIBUTION") to be paid by Borrower pursuant to Section
1.3(c). The Escrow Amount shall be placed in an interest bearing account
or otherwise invested pursuant to instructions to be given to Escrowee by
Borrower and reasonably acceptable to Lender (but the Escrow Agreement
shall contain, if Borrower so elects, a list of mutually satisfactory
permissible investments which may be made from time to time without
additional consent from Lender), with interest accruing to Borrower.

2. The Escrow Amount shall be reduced by payment to
Borrower by Escrowee of the respective amounts set forth below within five
(5) days after its receipt of joint instructions as to such reduction from
Lender and Borrower or thirty (30) days after its receipt of a letter from
Borrower to Escrowee and Lender confirming that the requirement for such
payment set forth in (1), (2) or (3) below, as the case may be, has been
satisfied (unless Lender disputes such satisfaction by a letter to
Escrowee and Borrower which is received by Escrowee and Borrower prior to
the expiration of such thirty (30) day period); provided, however that
such letter from Borrower shall contain, in bold face type and capital
letters, a warning stating that Escrowee will be automatically authorized
to reduce the Escrow Amount by payment to Borrower within thirty (30)
days, unless Lender objects to such reduction and payment by simultaneous
delivery of written notice thereof to both Escrowee and Borrower prior to
the expiration of such thirty (30) day period.

a. The Escrow Amount shall be reduced to
$517,400.00 ($250,000.000 plus Borrower's Contribution) by payment to
Borrower of $482,600.00 upon at least fifty percent (50%) completion of
the Improvements, as certified by Borrower's Architect.

b. The Escrow Amount shall be reduced to
$250,000.00 when the principal amount of the Loan has reached
$4,665,200.00 and Borrower is required to pay Borrower's Contribution in
connection with construction costs for the Project (or if Borrower is
required to pay only a portion of Borrower's Contribution, then the Escrow
Amount shall be reduced to the extent necessary to make such payment).

c. The Escrow Amount shall be reduced to zero by
payment to Borrower of the balance of the Escrow Amount, and the Escrow
shall be terminated, upon Completion (as defined in Section 8.14(a)
above).

3. If Lender forecloses under the Deed of Trust after
an Event of Default by Borrower under the Loan Documents or if Lender
exercises its right under this Agreement to complete the construction of
the Project, the Additional Building Costs (as defined below) shall be
paid by Escrowee to Lender from (and to the extent of) the Escrow Amount
from time to time based upon certificates of Lender's architect as to
expenditures of the Additional Building Costs. "Additional Building
Costs" shall mean the amount by which the costs of completing the
Improvements by Lender exceed the Remaining Budgeted Amount (as defined
below). The "Remaining Budgeted Amount" shall mean the total amount set
forth in the Budget, as of the date Lender first seeks to withdraw amounts
from Escrow, less the Borrower's Costs previously expended by Borrower to
construct the Improvements.

P. NO PARTNERSHIP OR JOINT VENTURE. Notwithstanding
anything to the contrary herein contained, Lender, by entering into this
Agreement or by any action taken pursuant hereto, will not be deemed a
partner or joint venturer with Borrower. Borrower and Lender hereby agree
that they have no intention to create a partnership or joint venture.
Additionally, Borrower and Lender hereby agree that they shall not
represent to third parties that this Agreement creates a partnership or
joint venture.

Q. MAXIMUM INTEREST RATE. Regardless of any provision
contained in this Agreement or in any of the Loan Documents, Lender shall
never be entitled to receive, collect or apply as interest on the Note,
any amount in excess of interest calculated at the maximum rate, allowed
under applicable law, if any, (the "MAXIMUM RATE"), and, if Lender ever
receives, collects or applies as interest any such excess, then the amount
that would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such; and, if the
principal amount of the Note is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether the interest paid
or payable, under any specific contingency exceeds interest calculated at
the Maximum Rate, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any nonprincipal payment
as an expense or fee rather than as interest; (ii) exclude voluntary
prepayments and the effects thereof; and (iii) amortize, prorate, allocate
and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of the Note; provided that, if the Note is paid
and performed in full before the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds interest calculated at the Maximum Rate, then Lender shall
refund to Borrower the amount of the excess or credit the amount of the
excess against the principal amount of the Note and, in such event, Lender
shall not be subject to any penalties provided by any laws for contracting
for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.

== ACKNOWLEDGMENT OF REMEDIES. Notwithstanding the fact
that Lender is the same entity as the tenant under the Lease and Borrower
is the same entity as the landlord under the Lease, the remedies available
upon default pursuant to the terms of the Lease are separate and distinct
from the remedies available upon default under the Loan Documents, and
vice versa, and a default under the Lease shall give rise only to the
remedies enumerated in the Lease and shall not give rise to a remedy set
forth in any of the Loan Documents unless such default is a default under
the Loan Documents or except as otherwise specifically stated in the
Lease. Similarly, a default under any of the Loan Documents shall give
rise only to the remedies enumerated in the Loan Documents and shall not
give rise to a remedy set forth in the Lease unless such default is a
default under the Lease or except as otherwise specifically stated in the
Loan Documents.

S. ESTOPPEL CERTIFICATES. Either party shall deliver to the
other, within thirty (30) days after a request therefor by such other
party, an estoppel certificate, duly acknowledged, stating whether the
Loan Documents are in full force and effect and whether they have been
amended, the amount advanced to Borrower under this Agreement, the amounts
due on the Note, whether all payments on the Loan are current, whether any
notice of a default has been given, and whether any offsets or defenses
exist under or against the Loan.

T. WAIVER OF TRIAL BY JURY. To the extent legally permissible,
the undersigned waives any right to trial by jury in any litigation
relating to transactions arising hereunder, whether sounding in contract,
tort or otherwise.

VII. EFFECT OF BANKRUPTCY OR INSOLVENCY PROCEEDING ON THE LOAN AND
THE LEASE. Notwithstanding any other provision of this Agreement or the
Lease, the following provisions shall apply in any insolvency or
bankruptcy proceeding filed by or against Borrower pursuant to any
applicable state or federal law or statute.

A. REJECTION OF THE LEASE UNDER BANKRUPTCY CODE SECTION 365.
In the event of a rejection of the Lease pursuant to the provisions of
Bankruptcy Code Section 365(h)(1), Lender shall have such rights as are
provided for in Section 365(h)(1)(A) and (B) of the Bankruptcy Code,
specifically including, without limitation, the right of Lender to offset
against any rent otherwise due by Lender as tenant under the Lease any
payments due by Borrower under the Lease or the Loan Documents in an
amount equal to the value of any damage caused by Borrower's
non-performance under the Lease after the date of such rejection. Upon
rejection, Borrower's failure to make any payments provided for under the
Loan Documents shall constitute an event of default and non-performance
under the Lease and Lender may exercise such rights of setoff as provided
for in this Agreement, any other Loan Document, or the Lease as damages
for Borrower's default and/or non-performance.

B. ASSUMPTION OF THE LEASE UNDER BANKRUPTCY CODE SECTION
365(A). In the event Borrower assumes the Lease (the "Assumed Lease")
pursuant to Bankruptcy Code Section 365(a), and subsequently defaults or
fails to perform under the Assumed Lease, Lender may exercise such rights
as it may have available to it under the Lease, the Loan Documents, or
applicable non-bankruptcy law, notwithstanding the status or pendency of
Borrower's bankruptcy case.

C. MISCELLANEOUS PROVISIONS.

(a) Upon the execution of the Loan Documents, the
obligations of the parties to the Loan Documents will be considered
materially performed for purposes of this Section 9.

(b) To the extent necessary, Borrower hereby agrees to
the entry of an order in favor of Lender granting Lender relief from the
automatic stay in bankruptcy in the event of the filing of a bankruptcy
petition by or against Borrower and the enforcement by Lender of its
rights under the Loan Documents or the Lease.

LENDER:

J.C. PENNEY COMPANY, INC.

By: ___________________________________
Name: _____________________________
Title: Vice President

Address:

P.O. Box 10001
Dallas, Texas 75301-2105
Attn: Real Estate Counsel

BORROWER:

BRISTOL MALL ASSOCIATES,
an Illinois general partnership

By: JMB INCOME PROPERTIES, LTD.-V,
an Illinois limited partnership,
Managing General Partner

By: JMB REALTY CORPORATION,
a Delaware corporation,
Managing General Partner

By:________________________
Name:______________________
Title:_____________________

Address: Bristol Mall Associates
900 North Michigan Avenue
Chicago, Illinois 60611
Attention: Mr. Glenn Emig

ACKNOWLEDGEMENTS

LENDER:

STATE OF TEXAS

COUNTY OF COLLIN, to-wit:

The foregoing instrument was acknowledged before me in my jurisdiction
this _____ day of ____________________, 1996, by Michael Lowenkron, a Vice
President of J. C. PENNEY COMPANY, INC., a Delaware corporation, on behalf
of said corporation.

[AFFIX NOTARIAL SEAL]

_________________________________
Notary Public

My commission expires: ____________________.

BORROWER:

STATE OF ILLINOIS

COUNTY OF COOK, to-wit:

The foregoing instrument was acknowledged before me in my jurisdiction
aforesaid this _____ day of _______________, 1996, by
______________________________________, who is _________________ of JMB
REALTY CORPORATION, a Delaware corporation, the Managing General Partner
of JMB INCOME PROPERTIES, LTD.-V, an Illinois limited partnership, the
Managing General Partner of BRISTOL MALL ASSOCIATES, an Illinois general
partnership, for and on behalf of the corporation and the partnerships.

[AFFIX NOTARIAL SEAL]

_________________________________
Notary Public

My commission expires: ____________________.

EXHIBIT "A"

LEGAL DESCRIPTION OF THE PROPERTY

[TO BE ATTACHED]

EXHIBIT "B"

PROMISSORY NOTE SECURED BY DEED OF TRUST

$5,165,200.00 July 25, 1996

_______________________________________________________________

1. PRINCIPAL. FOR VALUE RECEIVED, BRISTOL MALL ASSOCIATES,
an Illinois general partnership ("BORROWER"), promises to pay to J.C.
PENNEY COMPANY, INC., ("LENDER"), at P.O. Box 10001, Dallas, Texas 75301-
2102, Attn: Mr. Ron Romesberg, or at such other place as Lender from time
to time may designate, the principal sum of Five Million One Hundred Sixty
Five Thousand Two Hundred Dollars ($5,165,200.00) (the "MAXIMUM LOAN
AMOUNT") or so much of that sum as may be advanced from time to time under
this promissory note ("NOTE") in accordance with the "Loan Agreement" (as
such term is defined below), plus interest as specified in this Note
payable all as specified herein. This Note evidences a construction loan
("LOAN") from Lender to Borrower.

2. SECURITY; BACKGROUND.

(a) This Note is secured by, among other things, a
Credit Line Deed of Trust and Security Agreement ("DEED OF TRUST")
covering certain real and personal property, as therein described (the
"PROPERTY"), an absolute Assignment of Leases and Rents (the "ASSIGNMENT
OF LEASES AND RENTS"), UCC-1 Financing Statements in the form prescribed
by the Commonwealth of Virginia, an Assignment of Construction Contracts
and Warranties covering all contracts for the designing, planning and
construction of the Improvements, including all agreements with architects
and all construction warranties assigned to Borrower (the "ASSIGNMENT OF
CONSTRUCTION DOCUMENTS"), and such other documents as Lender deems
necessary to preserve or protect its lien and any and all renewals,
modifications and extensions of any of the foregoing (collectively with
the Note, the "LOAN DOCUMENTS"). This Note, the Deed of Trust, the
Assignment of Leases and Rents and the other Loan Documents are of even
date herewith and are entered into pursuant to the terms of that certain
Construction Loan Agreement of even date herewith ("LOAN AGREEMENT")
between Lender and Borrower. Some or all of the Loan Documents, including
the Loan Agreement, contain provisions for the acceleration of the
maturity of this Note. All capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.

(b) Pursuant to the Lease, Borrower is to prepare the
site for and to construct a J.C. Penney store including, but not limited
to, the shell and core thereof and all building, mechanical, electrical
and other operating systems (herein referred to as the "IMPROVEMENTS") as
described and identified in the Plans and Specifications. Lender has
agreed to make the Loan to Borrower for certain hard costs in excess of
$1,000,000 paid by Borrower for preparing the site and constructing the
Improvements in accordance with the terms and provisions of the Loan
Agreement and the Lease.

(c) Upon completion of the Improvements, they will be
occupied by Lender pursuant to the terms of that certain Lease between
Borrower, as landlord, and Lender, as tenant, dated as of November 29,
1989, a Memorandum of which was recorded in the Clerk's Office of the
Circuit Court of the City of Bristol, Virginia, in Book 279, Page 607,
which Lease was amended by that certain First Amendment of Lease dated as
of the date hereof (as amended and supplemented, the "LEASE"). The date
upon which Lender opens its "Main Store Building" (as defined in the
Lease) to the public for business pursuant to the terms of the Lease is
hereinafter referred to as the "OPENING DATE".

3. INTEREST RATE. Commencing on the date hereof and
continuing until the "Maturity Date" (as such term is defined below), the
principal sum outstanding from time to time under this Note shall bear
interest at 10% per annum or the maximum rate allowed under applicable law
(the "MAXIMUM RATE"), if any, whichever is lower (the "INTEREST RATE") and
shall be payable in accordance with Section 4 below.

4. PAYMENT.

(a) Commencing on the date hereof and continuing until
the last day of the month preceding the Opening Date Borrower shall be
obligated to make no payments pursuant to the terms of this Note.

Interest shall accrue upon funds advanced by Lender under the Note from
the date of each such advance, and all accrued but unpaid interest shall
be added to the principal balance of the Note on the Payment Commencement
Date (defined in paragraph (b) below).

(b) Commencing on the first day of the first full month
following the Opening Date (the "PAYMENT COMMENCEMENT DATE") and
continuing until the date that is 59 months subsequent to the Payment
Commencement Date, Borrower shall make payments of interest only in
arrears (the "MONTHLY INTEREST PAYMENT") on the first day of each calendar
month. The day following the 60th payment of interest pursuant to this
subparagraph shall hereinafter be referred to as the "AMORTIZATION DATE".

(c) Commencing on the first day of the first full month
following the Amortization Date, and continuing on the first day of each
and every month thereafter until the Maturity Date (on which date any
unpaid interest and principal and all other sums due under this Note shall
be paid in full), Borrower shall make equal monthly payments of principal
and interest (the "MONTHLY AMORTIZED PAYMENT") on the first day of each
calendar month in an amount necessary to fully amortize the outstanding
principal balance of the Loan as of the Amortization Date based on a
10-year amortization schedule at the rate of 10% per annum, as calculated
by Lender and provided to Borrower by written notice.

On the Maturity Date, the entire balance of principal and all accrued but
unpaid interest under the Note shall be due and payable.

(d) Notwithstanding anything to the contrary contained
herein, Borrower and Lender agree that Lender shall credit against each
Monthly Interest Payment and each Monthly Amortized Payment, as the case
may be, the amount due from Lender to Borrower under the Lease on the
payment date (including fixed minimum rental, contingent rental, common
area maintenance or similar charges, taxes and any other amounts due)
following the exercise of any and all recoupment or offset rights of
Lender under the Lease, and Borrower shall be obligated to pay the amount
by which such Monthly Interest Payment or Monthly Amortized Payment, as
the case may be, exceeds such credit. Additionally, if the credit for a
particular month exceeds the Monthly Interest Payment or the Monthly
Amortized Payment, as the case may be, for that month, the excess credit
shall be applied to the principal balance of the Note.

5. CALCULATION PERIOD. Interest hereunder shall be
calculated on the basis of a 360-day year and actual days elapsed.

6. MATURITY DATE. All principal and all accrued and unpaid
interest shall be due and payable on the date (the "MATURITY DATE") which
is the earlier of ten (10) years after the Payment Commencement Date or
August 30, 2010.

7. MAXIMUM AMOUNT. Lender shall not be required to make any
advance if that would cause the outstanding principal of this Note
(inclusive of all initial accrued interest and any amounts paid by Lender
under the Loan Documents which are deemed additional principal or interest
thereunder) to exceed the Maximum Loan Amount.

8. PREPAYMENT. Borrower may prepay some or all of the
principal under this Note at any time or times, without penalty or premium
of any kind or nature.

9. DEFAULT RATE. If Borrower fails to make any payment of
principal or interest under this Note within five (5) days after it
becomes due and payable Borrower agrees to pay interest on all outstanding
interest and all outstanding principal at an annual rate (the "Default
Rate") equal to two percent (2%) per annum in excess of the Interest Rate,
from the date the payment initially becomes due until Borrower pays in
full all principal and accrued and unpaid interest. If Borrower fails to
make any payment of any other sums or amounts under this Note or any of
the other Loan Documents when due and payable and fails to cure such
default within ten (10) days after written notice from Lender, Borrower
agrees to pay interest on all such amounts at the Default Rate from the
date the payment initially becomes due until Borrower pays in full all
such amounts due.

10. AFTER MATURITY. From and after the date of maturity of
this Note, whether by acceleration or otherwise, all sums then due and
payable from Borrower to Lender under this Note and the other Loan
Documents, including all principal and all accrued and unpaid interest,
shall bear interest until paid in full at the Default Rate.

11. EVENTS OF DEFAULT. If any of the following "EVENTS OF
DEFAULT" occurs, any obligation of the holder of this Note to make
advances under this Note or the Loan Agreement shall terminate, and at the
holder's option, exercisable in its sole discretion, all sums of principal
and interest and other sums due under this Note and the other Loan
Documents shall become immediately due and payable without notice of
default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, notice of acceleration or intent to accelerate, or
other notices or demands of any kind or character except any notice which
may be required by law:

(a) Borrower fails to make any payment of principal or
interest under this Note when due and does not cure such failure within
ten (10) days after written notice thereof from Lender, or Borrower fails
to make any payment of any other amount required to be paid under this
Note, the Deed of Trust or any other Loan Document, as the same shall
become due and payable, whether at maturity or when accelerated or
otherwise, and Borrower does not cure such failure within ten (10) days
after written notice thereof from Lender; or

(b) Borrower fails to timely and properly observe, keep
or perform any covenant, agreement, warranty or condition required in any
of the Loan Documents to be observed, kept or performed, if such failure
continues for thirty (30) days after notice thereof from Lender, provided
that if such failure cannot be cured during the initial thirty (30) day
period, and if Borrower commences to cure such failure within said thirty
(30) day period and diligently and continuously pursues the cure to
completion, then such thirty (30) day period shall be extended for an
additional sixty (60) days or such longer period that Borrower
demonstrates to Lender's reasonable satisfaction is reasonably necessary
for the completion of the cure; or

Borrower waives demand, presentment for payment, notices of intention to
accelerate the maturity hereof, acceleration, diligence in collecting,
protest and notice of protest, and unless and to the extent that the same
may be required by law, acceleration as to this Note and as to each, every
and all installments hereof, and agrees to all renewals, extensions and
partial payments before or after maturity without prejudice to Lender.

12. FORM OF PAYMENT. All amounts payable under this Note are
payable in lawful money of the United States during normal business hours
on a "Banking Day" (as such term is defined below).

13. ATTORNEYS' FEES. If any lawsuit is commenced which arises
out of or relates to this Note, the Loan Documents or the Loan, the
prevailing party shall be entitled to recover from each other party such
sums as the court or referee may adjudge to be reasonable attorneys' fees
in the action, in addition to costs and expenses otherwise allowed by law.

Additionally, Borrower agrees to pay all costs and expenses incurred by
Lender in any effort to collect upon or enforce any of the obligations
under this Note or any of the Loan Documents, including but not limited to
reasonable legal fees and disbursements, whether or not any lawsuit is
filed.

14. GOVERNING LAW. This Note is governed by the laws of the
Commonwealth of Virginia, without regard to the choice of law rules of
that State.

15. LENDER DELAYS. If Lender delays in exercising or fails to
exercise any of its rights under this Note, that delay or failure shall
not constitute a waiver of any of Lender's rights, or of any breach,
default or failure of condition of or under this Note or the other Loan
Documents. No waiver by Lender of any of its rights, or of any such
breach, default or failure of condition shall be effective, unless the
waiver is expressly stated in a writing signed by Lender, and then only to
the extent expressly stated in such writing. No waiver by Lender of any
such breach, default, Event of Default or failure of condition of or under
this Note, nor of any term or condition in the Note, shall be deemed a
waiver of any subsequent breach, default, Event of Default or failure of
condition of the same or any other kind nor a waiver of any other term or
condition in the Note or any Loan Document. All of Lender's remedies in
connection with this Note or under applicable law shall be cumulative
(except as expressly set forth herein to the contrary), and Lender's
exercise of any one or more of those remedies shall not constitute an
election of remedies.

16. SUCCESSORS AND ASSIGNS. Lender may not assign this Note
without the prior written consent of Borrower except to a successor
corporation by reason of merger, consolidation or sale of substantially
all of Lender's assets or to a Related Corporation, as that term is
defined in the Lease. Borrower may not assign this Note without the prior
written consent of Lender. Subject to the foregoing, the terms of this
Note shall bind and benefit the heirs, legal representatives, successors
and assigns of the parties.

17. CERTAIN DEFINED TERMS. As used in this Note, the terms
"Lender," "holder" and "holder of this Note" are interchangeable. As used
in this Note, the word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not limited
to." The term "BANKING DAY" is defined to mean a day other than a
Saturday or Sunday, on which Lender is open for business in its corporate
headquarters in Plano, Texas.

18. NOTICES. All notices given hereunder must be in writing
and shall be effective upon delivery, or if mailed, upon the first to
occur of receipt or the expiration of three (3) days after deposit in the
United States mail, certified, return receipt requested, postage prepaid,
sent to the party at the following addresses:

If to Borrower: Bristol Mall Associates
900 North Michigan Avenue
Chicago, Illinois 60611
Attn: Mr. Glenn Emig

If to Lender: J.C. Penney Company, Inc.
P.O. Box 10001
Dallas, Texas 75301-2105
Attn: Real Estate Counsel

With a duplicate copy sent to Lender at the address listed in
the first paragraph of this Note.

Those addresses may be changed by ten (10) days' written notice to the
other parties.

19. MAXIMUM INTEREST RATE. Regardless of any provision contained
in this Agreement or in any of the Loan Documents, Lender shall never be
entitled to receive, collect or apply as interest on the Note, any amount
in excess of interest calculated at the Maximum Rate, and, if Lender ever
receives, collects or applies as interest any such excess, then the amount
that would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such; and, if the
principal amount of the Note is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether the interest paid
or payable, under any specific contingency exceeds interest calculated at
the Maximum Rate, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any nonprincipal payment
as an expense or fee rather than as interest; (ii) exclude voluntary
prepayments and the effects thereof; and (iii) amortize, prorate, allocate
and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of the Note; provided that, if the Note is paid
and performed in full before the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds interest calculated at the Maximum Rate, then Lender shall
refund to Borrower the amount of the excess or credit the amount of the
excess against the principal amount of the Note and, in such event, Lender
shall not be subject to any penalties provided by any laws for contracting
for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.

20. CONFLICTS. To the extent that the terms, conditions and
provisions of this Note conflict with the terms, conditions or provisions
of any other Loan Document, the terms, conditions and provisions of the
Loan Agreement shall govern.

21. WAIVER OF JURY TRIAL. To the extent legally permissible, the
undersigned waives any right to trial by jury in any litigation relating
to transactions arising hereunder, whether sounding in contract, tort or
otherwise.

22. NON-RECOURSE.

(a) Prior to Completion (as defined below), paragraph (b) of
this Section 22 shall be applicable. From and after Completion, paragraph
(c) of this Section 22 shall be applicable. "Completion" shall mean
completion of the Improvements (as defined in the Loan Agreement) by
Borrower and delivery of possession thereof to Lender as tenant under the
Lease, except for punch list items (if any) which will cost no more than
$50,000 to complete, as certified in writing by Borrower's Architect (as
defined in the Loan Agreement).

(b) Notwithstanding anything to the contrary in this Note or
in any other Loan Document, the only entities with financial or any other
obligation under this Note or any other Loan Document, at law or in
equity, are Borrower and General Partner (as defined in the Loan
Agreement), and Lender agrees to look solely to the assets of Borrower and
General Partner (including, but not limited to, (i) the Escrow Amount [as
defined in the Loan Agreement], (ii) Borrower's interest in the Property,
(iii) the proceeds of sale receivable from any execution of any judgments
against Borrower's interest in the Property and/or General Partner's
interest in any of its assets, (iv) any consideration receivable by
Borrower and/or General Partner from the sale or other disposition of all
or any part of its right, title and interest in the Property or any of its
assets, and (v) rents and other income from the Property and other assets
receivable by Borrower and/or General Partner) to satisfy any claims under
this Note or any other Loan Document, at law or in equity. No present or
future direct or indirect constituent partner (other than General Partner)
in or agent of Borrower or General Partner (an "OTHER PARTNER") nor any
present or future advisor, trustee, director, officer, employee,
beneficiary, shareholder, participant, representative or agent of any
corporation or trust that is or becomes an Other Partner (including, but
not limited to JMB Realty Corporation, Judd D. Malkin and Neil G. Bluhm),
shall have any personal liability, directly or indirectly, under or in
connection with this Note or any other Loan Document, or any instrument or
certificate securing or otherwise executed in connection with this Note or
any other Loan Document, or any amendment or amendments to any of the
foregoing made at any time or times, heretofore or hereafter. Lender and
its successors and assigns and, without limitation, all other persons and
entities, shall look solely to the assets of Borrower and General Partner
for the payment of any claim or for any performance under the Loan
Documents, at law or in equity. Notwithstanding anything to the contrary
contained in this Note or any other Loan Document, each of the following
shall not for any purpose be deemed to be an asset or the property of
Borrower or General Partner (or any Other Partner): (i) any negative
capital account of any partnership and (ii) any obligation to restore a
negative capital account of, or to contribute capital to, any partnership.

The foregoing limitations are in addition to, and not in limitation of,
any other limitation on liability contained in this Note or in any other
Loan Document or provided by law.

(c) Notwithstanding anything to the contrary in this Note or
in any other Loan Document, neither Borrower nor any Other Partner, nor
any shareholder, officer, director, employee, trustee, beneficiary or
agent of any entity that is or becomes an Other Partner (including, but
not limited to JMB Realty Corporation, Judd D. Malkin and Neil G. Bluhm),
shall be personally liable, directly or indirectly, under or in connection
with this Note or any other Loan Document, or any instrument or
certificate securing or otherwise executed in connection with this Note or
any other Loan Document, or any amendments or modifications to any of the
foregoing made at any time or times, heretofore or hereafter. The
recourse of Lender and each of its successors and assignees under or in
connection with this Note, any other Loan Document and such instruments
and certificates, and any such amendments or modifications, shall be
limited only to (i) Borrower's interest in the Property, (ii) the proceeds
of sale receivable from any execution of any judgments against Borrower's
interest in the Property, (iii) any consideration receivable by Borrower
from the sale or other disposition of all or any part of Borrower's right,
title and interest in the Property, and (iv) rents and other income from
the Property receivable by Borrower, and no other assets or property of
Borrower shall be subject to levy, execution or other procedures for the
satisfaction of Lender's remedies.

(d) The provisions of this Section 22 shall not be deemed to
deny to Lender, or limit its right to obtain, injunctive relief or
specific performance of Borrower's covenants or obligations under this
Note or to avail itself of any other right or remedy (not involving
personal liability of Borrower in excess of the limits or personal
liability fixed by the terms set forth in this Section) which may be
accorded Lender by law or under the terms of this Note or the other Loan
Documents by reason of Borrower's failure to perform its obligations
thereunder.

(e) Notwithstanding anything to the contrary contained in
this Section 22, Borrower and General Partner shall be fully liable to
Lender to the same extent that they would be liable absent the foregoing
provisions of this Section for: (i) fraud or wilful misrepresentations of
Borrower or General Partner and (ii) the fraudulent misapplication by
Borrower or General Partner of either (x) any sums advanced under the
Loan, (y) any proceeds paid under any insurance policies by reason of
damage, loss or destruction to any portion of the Property, or (z) any
proceeds or awards resulting from the condemnation or taking for public or
private use of all or any part of the Property.

(f) This provision shall have no effect on the provision of
the Lease captioned "Limitation of Landlord's Liability" and the tenant's
rights under the Lease with respect thereto.

(g) The foregoing limitations are in addition to, and not in
limitation of, any other limitation on liability contained in this Note or
in any other Loan Document or provided by law.

IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
above written.

BORROWER:

BRISTOL MALL ASSOCIATES,
an Illinois general partnership

By: JMB INCOME PROPERTIES, LTD.-V,
an Illinois limited partnership, Managing
General Partner

By: JMB REALTY CORPORATION,
a Delaware corporation,
Managing General Partner

By:________________________
Name:______________________
Title:_____________________

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996

<CASH> 9,758,518
<SECURITIES> 0
<RECEIVABLES> 1,312,736
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,071,254
<PP&E> 34,739,772
<DEPRECIATION> 18,392,145
<TOTAL-ASSETS> 27,820,759
<CURRENT-LIABILITIES> 22,523,513
<BONDS> 5,548,330
<COMMON> 0
0
0
<OTHER-SE> (12,136,181)
<TOTAL-LIABILITY-AND-EQUITY> 27,820,759
<SALES> 7,011,813
<TOTAL-REVENUES> 7,374,561
<CGS> 0
<TOTAL-COSTS> 4,100,261
<OTHER-EXPENSES> 149,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,788,350
<INCOME-PRETAX> 1,336,780
<INCOME-TAX> 0
<INCOME-CONTINUING> 516,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,827
<EPS-PRIMARY> 13.02
<EPS-DILUTED> 13.02

</TABLE>