JMB INCOME PROPERTIES LTD XI, 10-Q, 1994-11-14

JMB INCOME PROPERTIES LTD XI
10-Q, 1994-11-14
REAL ESTATE

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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, 1994 Commission file number 0-15966

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

Illinois 36-3254043
(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 . . . . . . . . . . . . . 16

PART II OTHER INFORMATION

Item 3. Defaults Upon Senior Securities . . . . . . . . 21

Item 5. Other Information . . . . . . . . . . . . . . . 22

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . 23
<TABLE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

BALANCE SHEETS

SEPTEMBER 30, 1994 AND DECEMBER 31, 1993

(UNAUDITED)

ASSETS
------

<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . $ 496,611 267,127
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . 23,916,900 23,681,340
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . 1,894,461 1,690,050
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,687 317,552
Escrow deposits (note 2(c)). . . . . . . . . . . . . . . . . . . . . . 11,642,944 --
------------ ------------

Total current assets . . . . . . . . . . . . . . . . . . . . . . 38,251,603 25,956,069
------------ ------------

Investment properties, at cost (notes 2 and 3):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,563,638 4,563,638
Building and improvements. . . . . . . . . . . . . . . . . . . . . . . 65,003,753 53,218,947
------------ ------------

69,567,391 57,782,585
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . 19,034,860 17,673,020
------------ ------------

Total investment properties, net of
accumulated depreciation . . . . . . . . . . . . . . . . . . . 50,532,531 40,109,565
Investment in unconsolidated ventures,
at equity (notes 1, 3 and 5) . . . . . . . . . . . . . . . . . . . . . 22,293,258 22,127,541
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 495,743 198,627
------------ ------------

$111,573,135 88,391,802
============ ============
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

BALANCE SHEETS - CONTINUED

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

SEPTEMBER 30, DECEMBER 31,
1994 1993
------------ -----------

Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . $ 9,948,930 9,837,354
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,877 255,474
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 739,219 105,239
------------ ------------

Total current liabilities. . . . . . . . . . . . . . . . . . . . 10,855,026 10,198,067
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 73,767 61,304
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . 35,515,318 11,297,315
------------ ------------

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 46,444,111 21,556,686
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 5,242,237 5,233,888
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (6,631,429) (6,631,429)
------------ ------------
(1,388,192) (1,396,541)
------------ ------------
Limited partners (173,411 interests):
Capital contributions, net of offering costs . . . . . . . . . . . . 156,493,238 156,493,238
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 24,630,066 24,783,808
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (114,606,088) (113,045,389)
------------ ------------
66,517,216 68,231,657
------------ ------------

Total partners' capital accounts (deficits). . . . . . . . . . . 65,129,024 66,835,116
------------ ------------
Commitments and contingencies (notes 2, 3 and 4)
$111,573,135 88,391,802
============ ============

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

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . $ 3,321,514 3,814,768 9,856,633 9,993,015
Interest income. . . . . . . . . . . . . . 265,282 152,522 628,064 645,944
----------- ---------- ---------- ----------
3,586,796 3,967,290 10,484,697 10,638,959
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . 745,126 598,456 1,930,148 1,832,603
Depreciation . . . . . . . . . . . . . . . 453,947 383,679 1,361,840 1,180,969
Property operating expenses. . . . . . . . 1,949,373 1,751,898 6,570,312 5,892,647
Professional services. . . . . . . . . . . 26,551 25,229 282,210 242,655
Amortization of deferred expenses. . . . . 17,229 28,246 47,195 80,016
General and administrative . . . . . . . . 49,328 40,921 186,924 137,434
----------- ---------- ---------- ----------
3,241,554 2,828,429 10,378,629 9,366,324
----------- ---------- ---------- ----------
Operating earnings . . . . . . . . . 345,242 1,138,861 106,068 1,272,635
Partnership's share of operations of
unconsolidated ventures (note 1) . . . . . 663,633 (7,026,169) 1,955,330 (5,332,501)
----------- ---------- ---------- ----------
Net operating earnings before
extraordinary item . . . . . . . . 1,008,875 -- 2,061,398 --
Extraordinary items (note 2(c)). . . . . . . (2,206,791) -- (2,206,791) --
----------- ---------- ---------- ----------
Net loss . . . . . . . . . . . . . . $(1,197,916) (5,887,308) (145,393) (4,059,866)
=========== ========== ========== ==========
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 - CONTINUED
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ---------- ----------- -----------

Net earnings (loss) per
limited partnership
interest (note 1):
Net operating earnings. . . . . . $ 5.50 (32.60) 11.33 (22.48)
Extraordinary items . . . . . . . (12.22) -- (12.22) --
----------- ---------- ---------- ----------
Net loss . . . . . . . . . . . . $ (6.72) (32.60) (.89) (22.48)
=========== ========== ========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . . . $ 3.00 3.00 9.00 9.00
=========== ========== ========== ==========

<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993

(UNAUDITED)

<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (145,393) (4,059,866)
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361,840 1,180,969
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . 47,195 80,016
Amortization of discounts on long-term debt. . . . . . . . . . . . . 101,110 128,071
Partnership's share of operations of
unconsolidated ventures, net of
distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . (165,717) 7,762,501
Extraordinary items (note 2(c)). . . . . . . . . . . . . . . . . . . 2,206,791 --
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . (204,411) 452,927
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 16,865 (157,807)
Escrow deposits (note 2(c)). . . . . . . . . . . . . . . . . . . . . (464,302) --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . (88,597) (129,324)
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . 633,980 (2,523)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . 12,463 (11,035)
------------ -----------

Net cash provided by
operating activities . . . . . . . . . . . . . . . . . . . . . 3,311,824 5,243,929
------------ -----------

Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments. . . . . . . . . . . . . . . . . . . . . . (235,560) (4,907,465)
Additions to investment properties . . . . . . . . . . . . . . . . . . (11,784,806) (1,314,922)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . (258,170) (13,333)
------------ -----------

Net cash used in investing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . (12,278,536) (6,235,720)
------------ -----------
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

STATEMENTS OF CASH FLOWS - CONTINUED

1994 1993
------------ -----------

Cash flows from financing activities:
Cash proceeds from refinancing of long-term debt
(note 2(c)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,102,785 --
Bank overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 334,495
Principal payments on long-term debt . . . . . . . . . . . . . . . . . (345,890) (318,671)
Distributions to limited partners. . . . . . . . . . . . . . . . . . . (1,560,699) (1,560,699)
------------ -----------

Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . . 9,196,196 (1,544,875)
------------ -----------

Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 229,484 (2,536,666)
============ ===========

Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . $ 1,190,929 1,707,055
============ ===========
Non-cash investing and financing activities:
Refinancing of long-term debt, note 2(c):
Proceeds from refinancing, net of
refinancing costs . . . . . . . . . . . . . . . . . . . . . . . . $ 35,913,859 --
Retirement of debt, net of discount. . . . . . . . . . . . . . . . (12,983,269) --
Proceeds escrowed. . . . . . . . . . . . . . . . . . . . . . . . . (11,178,642) --
Prepayment penalty . . . . . . . . . . . . . . . . . . . . . . . . (649,163) --
------------ -----------

Cash proceeds from refinancing
of long-term debt. . . . . . . . . . . . . . . . . . . . . . . $ 11,102,785 --
============ ===========

<FN>
See accompanying notes to financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 1994 AND 1993

(UNAUDITED)

Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1993
which are included in the Partnership's 1993 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.

(1) BASIS OF ACCOUNTING

The equity method of accounting has been applied in the accompanying
financial statements with respect to the Partnership's interest in Royal
Executive Park II ("Royal Executive") and JMB/San Jose Associates ("San
Jose"). Accordingly, the accompanying financial statements do not include
the accounts of Royal Executive and San Jose.

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to present the Partnership's accounts
in accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Partnership. The net
effect of these items is summarized as follows for the nine months ended
September 30:

1994 1993
----------------------- -----------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings
(loss). . . . . $(145,393) (38,015) (4,059,866) 1,650,596
Net earnings
(loss)
per limited
partnership
interest. . . . $ (.89) (.21) (22.48) 9.14
========= ======= ========== =========

The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of each
period (173,411). Deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and income
tax purposes.

Certain amounts in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.

Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies cash receipts and
payments according to whether they stem from operating, investing or
financing activities. The required information has been segregated and
accumulated according to the classifications specified in the pronounce-
ment. Partnership distributions from unconsolidated ventures are
considered cash flow from operating activities only to the extent of the
Partnership's cumulative share of net earnings. The Partnership records
amounts held in U.S. Government obligations at cost, which approximates
market. For the purposes of these statements, the Partnership's policy is

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

to consider all such amounts held with original maturities of three months
or less as cash equivalents with any remaining amounts (generally with
original maturities of one year or less) reflected as short-term
investments being held to maturity. None of the Partnership's investments
in U.S. Government obligations were classified as cash equivalents at
September 30, 1994 and December 31, 1993.

In response to the uncertainties relating to the San Jose joint
venture's ability to recover the net carrying value of certain buildings
within the Park Center Plaza investment property through future operations
or sale, San Jose, as a matter of prudent accounting practice, recorded a
provision for value impairment at September 30, 1994 on the 100-130 Park
Center Plaza buildings and certain parking areas, and the 170 Almaden
building of $944,335, in the aggregate, to reduce the net carrying values
to the then outstanding balances of related non-recourse debt. San Jose
also recorded a provision for value impairment on the 150 Almaden and 185
Park Avenue buildings and certain parking areas of $15,549,935 at September
30, 1993 to reduce the net carrying value to the then outstanding balance
of the related non-recourse debt. These provisions are in addition to
similar provisions for other portions of the complex taken in earlier years
and previously reported. Reference is made to note 3(b) for further
discussion of the current status of this investment property.

Due to uncertainty about the ability to recover the net carrying value
of the property through future operations and sale, Royal Executive has
made a provision for value impairment of $25,378,893. Such provision at
September 30, 1994 was recorded to reduce the net carrying value of the
property to the then estimated valuation. The provision for value
impairment has been allocated fully to the venture partner to reflect their
subordination to the Partnership in distributions with regard to future
operation and sale or financing proceeds as discussed in note 3(c).

No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the investors rather than the
Partnership. However, in certain circumstances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.

(2) INVESTMENT PROPERTIES

(a) General

The Partnership has acquired, either directly or through joint
ventures, two shopping centers and three office complexes. In June 1990,
the Partnership sold its interest in Genesee Valley Shopping Center. All
of the remaining properties were in operation at September 30, 1994.

(b) Bank of Delaware - office building

A major tenant in the building brought a lawsuit against the
Partnership which sought reimbursement from the Partnership for certain
improvements made by the tenant to its space in the building. The lawsuit
was sent to arbitration and was decided in 1990 in the tenant's favor. The
Partnership reimbursed the tenant approximately $722,000 in 1991 and
$80,000 in 1992. The tenant may be entitled to reimbursement for further
amounts depending upon its future remodeling programs.

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

In addition, a major tenant, E.I. duPont de Nemours ("duPont"),
comprising approximately 27% of the building, vacated their space upon
expiration of their lease in December 1993. The property has cumulatively
operated at a cash deficit due to the significant costs incurred in
connection with the re-leasing of vacant space and certain capital
improvements. Due to the competitive nature of this marketplace, the
Partnership estimates the costs associated with re-leasing any vacant space
during the next few years, including those costs to remove remaining
asbestos in tenant space, will be substantial. As a result of these
leasing concerns, the Partnership commenced discussions with the building's
first mortgage lender in order to seek a loan modification. In connection
with these discussions, effective February 1994, the Partnership has
suspended payment of debt service to the lender. As a result,
approximately $657,000 of interest has been accrued but not paid as of
September 30, 1994. The Partnership has decided not to voluntarily commit
any additional amounts to the property. In response to the foregoing, the
lender has accelerated its mortgage loan and has commenced proceedings to
acquire title to the property. In turn, the Partnership has commenced
discussions to possibly transfer title to the property to the lender via a
deed in lieu of foreclosure. Accordingly, the entire balance of the loan
is reflected as a current liability in the accompanying financial
statements. When the lender proceeds to realize upon its security and
obtain title to the property, the Partnership expects to recognize a gain
for financial reporting purposes and a loss for federal income tax
purposes. Under the terms of a mortgage and security agreement, the
Partnership, in its capacity as mortgagor of the building, agreed to
indemnify the mortgage lender, under certain circumstances, against
damages, claims, liabilities and expenses incurred by or asserted against
the mortgage lender in relation to asbestos in the building. Asbestos has
been abated or encapsulated in approximately 62% of the building's space.
The Partnership does not believe that any remaining asbestos in the
building presents a hazard and does not believe that such asbestos
currently is required to be removed. The Partnership estimates that the
current cost of asbestos abatement that could be required under certain
circumstances in a portion of the building in the future is approximately
$800,000. However, the Partnership currently does not believe that it will
likely be required to incur (or to indemnify the mortgage lender against)
any such cost, although there is no assurance that the Partnership will not
ultimately be required to make such payment. In view of this situation,
the Partnership has had discussions with the lender concerning a complete
release from its potential obligations under this indemnity for a fee
considerably less than the above amount. There can be no assurance the
Partnership and the lender will be able to finalize such discussions in a
satisfactory manner.

The Partnership is proceeding with its plans to renovate and
remerchandise the center. In connection with the renovation, the
Partnership, in early 1994, signed 15-year operating covenant extensions
with both Saks and Bloomingdales, the latter of which owns their own store.
In return for the additional 15-year commitment to the center, the
Partnership reimbursed Saks for their recent store renovation in the amount
of $6,100,000 and is obligated to pay Bloomingdales $5,000,000 toward their
upcoming store renovation. In connection with the payment to Saks, the
Partnership also acquired title to the Saks building which had previously
been owned by Saks. The Partnership is also required to complete a
renovation of the mall, with an additional estimated cost of approximately
$12,000,000. The Partnership is still considering expanding the mall at
some point in the future as well. Furthermore, the Partnership has
commenced a $7,500,000 restoration of the parking deck. During the third

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

quarter of 1994, the Partnership finalized a refinancing of the existing
mortgage loan with a new loan in the amount of $36,000,000. The new loan
has an initial interest rate of 8.35% per annum, requires monthly principal
and interest payments of $286,252 beginning September 1, 1994, and matures
December 1, 2006, when the unpaid principal and interest balance is due.
The refinancing resulted in net proceeds of approximately $22,300,000
(after retirement of the previous mortgage loan with an outstanding balance
of approximately $13,000,000 and payment of a prepayment penalty of
approximately $650,000). Of such proceeds, approximately $11,200,000 has
been escrowed by the lender pursuant to the loan agreement and will be
released, including interest, to fund certain costs of the renovation and
restoration as discussed above. The remaining $11,100,000 represents
reimbursement to the Partnership for amounts paid or to be paid to Saks and
Bloomingdales for tenant allowances as discussed above. In connection with
the negotiations relating to the refinancing, the Partnership had escrowed
approximately $801,000 to serve as collateral to secure a letter of credit.
Such funds were refunded to the Partnership in September 1994 in connection
with the loan funding. Additionally, the Partnership has recorded an
extraordinary loss on refinancing of $2,206,791 representing the write-off
of unamortized discount on the original mortgage loan of $1,557,628 and the
$649,163 prepayment penalty as discussed above.

The Partnership is continuing to attempt to lease the vacant space in
the mall, but the competitive nature of the surrounding retail area and the
fact that the mall is in need of a renovation have extended the time period
required to re-lease space in the mall as tenant leases expire and are not
renewed. On January 7, 1994, Conran's, a tenant occupying approximately
28,000 square feet or 12% of the building, filed for protection pursuant to
a Chapter 11 bankruptcy petition. The Partnership bought the rights to the
Conran's lease for $475,000 at the bankruptcy auction and is now in control
of the space. The Partnership is reviewing its possible alternatives with
respect to replacement tenants for the Conran's lease which was originally
scheduled to expire in January 2000.

(3) VENTURE AGREEMENTS

(a) General

Under certain circumstances, either pursuant to the venture agreements
or due to the Partnership's obligations as a general partner, the
Partnership may be required to make additional cash contributions to the
ventures. There are certain risks associated with the Partnership's
investments made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.

(b) San Jose

The Partnership has acquired, through San Jose, an interest in an
existing office building complex in San Jose, California (Park Center
Financial Plaza) consisting of ten office buildings, a parking and retail
building (185 Park Avenue) and two parking garage structures.

The partners of San Jose are the Partnership and JMB Income
Properties, Ltd.-XII, another partnership sponsored by the Managing General
Partner of the Partnership ("JMB-XII"). The terms of San Jose's
partnership agreement generally provide that contributions, distributions,
cash flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership and JMB-XII in their respective
50% ownership percentages.

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex, for an
approved Agency project for $4,090,000. The price offered is deemed by the
Agency to be just compensation in compliance with applicable State and
Federal laws. San Jose is currently investigating its options with regard
to the Agency's offer, including the impact of any purchase on garage
spaces leased to tenants of other Partnership properties in the complex.
Should the Agency proceed to purchase the property, San Jose would likely
recognize a gain for financial reporting and Federal income tax purposes.
However, there can be no assurance that this proceeding will be consummated
on any terms.

San Jose notified the tenants in and invitees to the Park Center Plaza
complex that some of the buildings, particularly the 100-130 Park Center
Plaza Buildings and the garage below them, could pose a life safety hazard
under certain unusually intense earthquake conditions. While the buildings
and the garage were designed to comply with the applicable codes for the
period in which they were constructed, and there is no legal requirement to
upgrade the buildings for seismic purposes, San Jose is working with
consultants to analyze ways in which such a potential life safety hazard
could be eliminated. In addition, tenants occupying approximately 110,000
square feet (approximately 26% of the building) of the Park Center Plaza
investment property have leases that expire in 1995, for which there can be
no assurance of renewals. However, since the costs of both re-leasing
space and any seismic program could be substantial, San Jose has commenced
discussions with the appropriate lender for additional loan proceeds to pay
for all or a portion of these costs. San Jose is also continuing to
discuss terms for a possible loan extension (which would likely include a
partial paydown of the outstanding principal balance of approximately $2.5
million) with the mortgage lender on the 150 Almaden and 185 Park Avenue
buildings and certain parking areas as the mortgage loan secured by this
portion of the complex matured October 1, 1993 and was only extended to
December 1, 1993. San Jose and the lender have been able to agree, in
principle, upon mutually acceptable terms for a further loan extension.
However, San Jose still must negotiate terms to an acceptable set of loan
documents before the loan can be extended. Should a final loan agreement
not be reached and as San Jose does not have its share of the outstanding
loan balance in its reserves in order to retire the loan, it is possible
that the lender would exercise its remedies and seek to acquire title to
this portion of the complex. Furthermore, should lender assistance be
required to fund significant costs at the 100-130 Park Center Plaza
buildings but not be obtained, San Jose has decided not to commit any
additional significant amounts to this portion of the complex since the
likelihood of recovering such funds through increased capital appreciation
is remote. The result would be that San Jose would no longer have an
ownership interest in this portion of the complex.

As a result, there is uncertainty about the ability to recover the net
carrying value of the property through future operations and sale and
accordingly, San Jose has made provisions for value impairment on the 100-
130 Park Center Plaza buildings and certain parking areas and the 170
Almaden building of $944,335 in the aggregate. Such provisions at
September 30, 1994 were recorded to reduce the net carrying values of these
buildings to the then outstanding balances of the related non-recourse
financing. Additionally, at September 30, 1993, San Jose recorded a
provision for value impairment on the 150 Almaden and 185 Park Avenue
buildings and certain parking areas of $15,549,935 to reduce the net
carrying value of these buildings to the then outstanding balance of
related non-recourse financing. In the event the lender on any portion of
the complex exercised its remedies as discussed above, the result would
likely be that San Jose would no longer have an ownership interest in such
portion.

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONTINUED

The property is managed by an affiliate of the General Partners of the
Partnership for a fee calculated as 3% of gross receipts.

Commencing January 1, 1989 and until certain rental achievement levels
are attained, the Partnership is entitled to a cumulative preferred annual
return equal to $2,430,000 per year. The next $2,439,732 of annual cash
flow is distributable to the joint venture partners, on a non-cumulative
basis, with any remaining cash flow distributable 49.9% to the Partnership
and 50.1% to the joint venture partners. Therefore, the Partnership's
receipt of cash distributions is subject to the actual operations of the
property. The Partnership is entitled to any deficiency in its preferred
annual return plus interest at 9% on a cumulative basis as an annual
priority distribution from future available operating cash flow. The
cumulative deficiency in the preferred annual return was approximately
$4,713,000 and $4,956,000 at September 30, 1994 and December 31, 1993,
respectively. The Royal Executive venture agreement further provides that
distributions of net sale or financing proceeds shall be allocated first to
the Partnership to the extent of the cumulative deficiency in the preferred
annual return plus its initial capital investment in the venture.

Operating profits of the joint venture, in general, will be allocated
in proportion to, and to the extent of, distributions and then based on
relative ownership percentages. Operating losses, in general, will be
first allocated to the joint venture partners to the extent of any
additional contributions made to fund operations. Remaining losses, if
any, will be allocated based upon relative ownership interests.
Depreciation and amortization will be allocated based upon the relative
ownership interests. Effective July 1, 1994, management and leasing
activities at the complex were transferred from an affiliate of the venture
partner to an affiliate of the General Partners of the Partnership.

(4) TRANSACTIONS WITH AFFILIATES

Certain of the Partnership's properties are managed by affiliates of
the General Partners. In October 1994, one of the affiliated property
managers agreed to sell substantially all of its assets to an unaffiliated
third party. In addition, substantially all of the management personnel of
the property manager will also become management personnel of the purchaser
or its affiliates if the sale is completed. The sale is subject to certain
closing conditions. In the event that the sale is completed, it is
expected that the successor to the affiliated property manager's assets
would act as the property manager of the Bank of Delaware building after
the sale (through the date of title transfer - note 2(b)) on the same terms
that existed prior to the sale.

Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of September
30, 1994 and for the nine months ended September 30, 1994 and 1993 are as
follows:

JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS - CONCLUDED

Unpaid at
September 30,
1994 1993 1994
-------- -------- -------------
Property management
and leasing fees. . . . . . . $207,543 218,735 --
Insurance commissions. . . . . 34,130 56,235 --
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . . . 4,393 17,110 56
-------- ------- --

$246,066 292,080 56
======== ======= ==

The Managing General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Managing General Partner and its affiliates relating to the
administration of the Partnership and the operation of the Partnership's
investment properties. The amount of such salaries and direct expenses
aggregated $35,877 and $87,649 for the nine months ended September 30, 1994
and the twelve months ended December 31, 1993, respectively, all of which
has been paid as of September 30, 1994.

The General Partners have deferred receipt of certain of their
distributions of net cash flow of the Partnership. The amount of such
deferred distributions was approximately $1,266,000 as of September 30,
1994. The amount is being deferred in accordance with the subordination
requirements of the Partnership Agreement. This amount or amounts
currently payable do not bear interest and may be paid in future periods.

(5) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION

The summary income statement information for the JMB/San Jose
Associates and Royal Executive Park II for the nine months ended September
30, 1994 and 1993 is as follows:

1994 1993
----------- ----------
Total income. . . . . . . . . $ 8,567,245 12,085,313
=========== ==========
Operating loss. . . . . . . . $23,100,564 13,097,603
=========== ==========
Net earnings (loss) to
the Partnership . . . . . . $ 1,955,330 (5,332,501)
=========== ==========

(6) ADJUSTMENTS

In the opinion of the Managing General Partner, all adjustments (con-
sisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1994 and for the three and nine months ended September 30, 1994 and 1993.

PART I. FINANCIAL INFORMATION

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

LIQUIDITY AND CAPITAL RESOURCES

All references to "Notes" are to Notes to Financial Statements
contained in this report.

At September 30, 1994, the Partnership had cash and cash equivalents
of approximately $497,000. Such funds and short-term investments of
approximately $23,917,000 may be utilized for distributions to partners and
for working capital requirements including operating deficits, re-leasing
costs of vacant space and certain capital improvements currently being
incurred at the Riverside Square Mall. Additionally, funds may be utilized
for the Partnership's share of re-leasing costs and capital improvements at
certain portions of the Park Center Financial Plaza and any costs
associated with the proposed transfer of title at the Bank of Delaware
office building as described below. The Partnership and its consolidated
ventures have currently budgeted in 1994 approximately $1,763,000 for
tenant improvements and other capital expenditures excluding amounts
budgeted for the renovation at Riverside Square Mall as discussed below.
The Partnership's share of such items for its unconsolidated ventures for
1994 is currently budgeted to be approximately $397,000. Actual amounts
expended in 1994 may vary depending on a number of factors including actual
leasing activity, results of property operations, liquidity considerations
and other market conditions over the course of the year. The General
Partners have been deferring receipt of distributions in accordance with
the subordination requirement of the Partnership Agreement. The source of
capital for such items and for both short-term and long-term future
liquidity and distributions is expected to be through net cash generated by
the Partnership's investment properties and through the sale and/or
refinancing of such investments. The Partnership's and its ventures'
mortgage obligations are all non-recourse. Therefore, the Partnership and
its ventures are not obligated to pay mortgage indebtedness unless the
related property produces sufficient net cash flow from operations or sale.

During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex, for an
approved Agency project for $4,090,000. The price offered is deemed by the
Agency to be just compensation in compliance with applicable State and
Federal laws. San Jose is currently investigating its options with regard
to the Agency's offer including the impact of any purchase on garage spaces
leased to tenants of other Partnership properties in the complex. Should
the Agency proceed to purchase the property, San Jose would likely
recognize a gain for financial reporting and Federal income tax purposes.
However, there can be no assurance that this proceeding will be consummated
on any terms.

San Jose is also continuing to discuss terms for a possible loan
extension (which would likely include a partial paydown of the outstanding
principal balance of approximately $2.5 million) with the mortgage lender
on the 150 Almaden and 185 Park Avenue buildings and certain parking areas
as the mortgage loan secured by this portion of the complex matured on
October 1, 1993 and was only extended to December 1, 1993. San Jose and
the lender have been able to agree, in principle, upon mutually acceptable
terms for a further loan extension. However, San Jose still must negotiate
terms to an acceptable set of loan documents before the loan can be
extended. Should a final loan agreement not be reached and as San Jose
does not have its share of the outstanding loan balance in its reserves in
order to retire the loan, it is possible that the lender would exercise its
remedies and seek to acquire title to this portion of the complex.
Furthermore, should lender assistance be required to fund significant costs
at the 100-130 Park Center Plaza buildings but not be obtained, San Jose
has decided not to commit any additional amounts to this portion of the
complex since the likelihood of recovering such funds through increased
capital appreciation is remote. The result would be that San Jose would no
longer have an ownership interest in this portion of the complex.

Riverside Square Mall has been experiencing decreasing sales levels as
well as increasing competition for new tenants since a competing regional
retail center expanded its operations in 1990. Occupancy at the mall has
decreased from 81% at December 31, 1993 to 60% at September 30, 1994. In
an effort to improve the property's competitive position, the Partnership
is proceeding with its plans to renovate and remerchandise the center. In
connection with the planned renovation, the Partnership, in early 1994,
signed 15-year operating covenant extensions with both Saks and
Bloomingdales, the latter of which owns their own store. In return for the
additional 15-year commitment to the center, the Partnership reimbursed
Saks for their recent store renovation in the amount of $6,100,000 and is
obligated to pay Bloomingdales $5,000,000 toward their upcoming store
renovation (which payment is expected to occur in 1995). In connection
with the payment to Saks, the Partnership also acquired title to the Saks
building which had previously been owned by Saks. The Partnership is also
required to complete a renovation of the mall, with an additional estimated
cost of approximately $12,000,000. The Partnership is still considering
expanding the mall at some point in the future as well. Furthermore, the
Partnership, has commenced a $7,500,000 restoration of the parking deck.
This restoration should be completed over the course of the next two years.
During the third quarter of 1994, the Partnership finalized a refinancing
of the existing mortgage loan with a new loan in the amount of $36,000,000.
The new loan has an initial interest rate of 8.35% per annum, requires
monthly principal and interest payments of $286,252 beginning September 1,
1994, and matures December 1, 2006, when the unpaid principal and interest
balance is due. The refinancing resulted in net proceeds of approximately
$22,300,000 (after retirement of the previous mortgage loan with an
outstanding balance of approximately $13,000,000, and payment of a
prepayment penalty of approximately $650,000 which has been reflected as an
extraordinary item in 1994 in the accompanying financial statements). Of
such proceeds, approximately $11,200,000 has been escrowed by the lender
pursuant to the loan agreement and will be released, including interest,
to fund certain costs of the renovation and restoration as discussed above.
The remaining $11,100,000 represents reimbursement to the Partnership for
amounts paid or to be paid to Saks and Bloomingdales for tenant allowances
as discussed above. In connection with the negotiations relating to the
refinancing, the Partnership had escrowed approximately $801,000 to serve
as collateral to secure a letter of credit. Such funds were refunded to
the Partnership in September 1994 in connection with the loan funding.

The Partnership is continuing to attempt to lease the vacant space in
the mall, but the competitive nature of the surrounding retail area and the
fact that the mall is in need of a renovation have extended the time
period required to re-lease space in the mall as tenant leases expire and
are not renewed. On January 7, 1994, Conran's, a tenant occupying
approximately 28,000 square feet or 12% of the building, filed for
protection pursuant to a Chapter 11 bankruptcy petition. The Partnership
bought the rights to the Conran's lease for $475,000 through the bankruptcy
auction and is in control of the space. The Partnership is reviewing its
possible alternatives with respect to replacement tenants for the Conran's
lease which was originally scheduled to expire in January 2000.

At the Bank of Delaware Building, a major tenant, E.I. duPont de
Nemours ("duPont"), comprising approximately 27% of the building, vacated
their space upon expiration of their lease in December 1993. The property
has cumulatively operated at a cash deficit due to the significant costs
incurred in connection with the re-leasing of vacant space and certain
capital improvements. Due to the competitive nature of this marketplace,
the Partnership estimates the costs associated with re-leasing any vacant
space during the next few years, including those costs to remove remaining
asbestos, will be substantial. As a result of these leasing concerns, the
Partnership commenced discussions with the building's first mortgage lender
in order to seek a loan modification. In connection with these
discussions, effective February 1994, the Partnership has suspended payment
of debt service to the lender. As a result, approximately $657,000 of
interest has been accrued but not paid as of September 30, 1994. The
Partnership has decided not to voluntarily commit any additional amounts to
the property. In response to the foregoing, the lender has accelerated its
mortgage loan and has commenced proceedings to acquire title to the
property. In turn, the Partnership has commenced discussions to possibly
transfer title to the property to the lender via a deed in lieu of
foreclosure. Accordingly, the entire balance of the loan is reflected as a
current liability in the accompanying financial statements. When the
lender proceeds to realize upon its security and obtain title to the
property, the Partnership expects to recognize a gain for financial
reporting purposes and a loss for federal income tax purposes. Under the
terms of a mortgage and security agreement, the Partnership, in its
capacity as mortgagor of the building, agreed to indemnify the mortgage
lender, under certain circumstances, against damages, claims, liabilities
and expenses incurred by or asserted against the mortgage lender in
relation to asbestos in the building. Asbestos has been abated or
encapsulated in approximately 62% of the building's space. The Partnership
does not believe that any remaining asbestos in the building presents a
hazard and does not believe that such asbestos currently is required to be
removed. The Partnership estimates that the current cost of asbestos
abatement that could be required under certain circumstances in a portion
of the building in the future is approximately $800,000. However, the
Partnership currently does not believe that it will likely be required to
incur (or to indemnify the mortgage lender against) any such cost, although
there is no assurance that the Partnership will not ultimately be required
to make such payment. In view of this situation, the Partnership has had
discussions with the lender concerning a complete release from its
potential obligations under this indemnity for a fee considerably less than
the above amount. There can be no assurance the Partnership and the lender
will be able to finalize such discussions in a satisfactory manner.

JWP, Inc. leased approximately 78,000 square feet of space
(approximately 29% of the property) at Royal Executive Park II in August
1992. As a result of the JWP, Inc. lease, the Partnership has received its
preferred level of return for 1993 and in addition, recovered a portion of
the cumulative shortfall in this return since 1989. The Partnership
expects to receive its preferred level of return for 1994 in addition to a
partial recovery of its cumulative shortfall in this return since 1989.
However, in early 1994, JWP filed for protection pursuant to a Chapter 11
bankruptcy petition and in August 1994, JWP vacated its remaining space.
However, JWP had subleased approximately 62,000 square feet of its space
and these subtenants have assumed the terms of JWP's lease and have become
primary tenants. The manager, an affiliate of the venture partner,
continued an aggressive marketing program to lease the remaining vacant
space but the competitive nature of the market continued to extend the time
period required to lease space to initial tenants. Effective July 1, 1994,
management and leasing activities at the complex were transferred to an
affiliate of the General Partners of the Partnership.

There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.

Though the economy has recently shown signs of improvement and
financing is generally becoming more available for certain types of higher-
quality properties in healthy markets, real estate lenders are typically
requiring a lower loan-to-value ratio for mortgage financing than in the
past. This has made it difficult for owners to refinance real estate
assets at their current debt levels unless the value of the underlying
property has appreciated significantly. As a consequence, and due to the
weakness of some of the local real estate markets in which the
Partnership's properties operate, the Partnership is taking steps to
preserve its working capital.

RESULTS OF OPERATIONS

The aggregate increase in cash and cash equivalents and short-term
investments as of September 30, 1994 as compared to December 31, 1993 is
primarily due to the receipt of $11,100,000 in loan proceeds from the
refinancing of long-term debt at the Riverside Square Mall property
partially offset by funds utilized in 1994 for improvements to Saks Fifth
Avenue, a major tenant space, and renovation work as described above at
Riverside Square Mall.

The increase in rents and other receivables at September 30, 1994 as
compared to December 31, 1993 is primarily due to the timing of rents
received from certain tenants at the Riverside Square Mall property.

The increase in escrow deposits as of September 30, 1994 as compared
to December 31, 1993 is primarily due to approximately $11,200,000 of loan
proceeds being escrowed which will be utilized to fund the renovation at
the Riverside Square mall property. Reference is made to Note 2(c).

The increase in building and improvements as of September 30, 1994 as
compared to December 31, 1993 and the increase in related depreciation for
the three and nine months ended September 30, 1994 as compared to the three
and nine months ended September 30, 1993 is primarily due to tenant
improvements and renovation work of $11,782,000 incurred in 1994 at
Riverside Square Mall as discussed above.

The increase in deferred expenses at September 30, 1994 as compared to
December 31, 1993 is primarily due to $312,000 of certain costs associated
with the August 31, 1994 refinancing of the mortgage loan at the Riverside
Square Mall property.

The increase in accrued interest at September 30, 1994 as compared to
December 31, 1993 is primarily due to the February 1994 suspension of debt
service payments at the Bank of Delaware property. Reference is made to
Note 2(b).

The increase in long-term debt, less current portion at September 30,
1994 as compared to December 31, 1994 and the increase in mortgage and
other interest expense for the three and nine months ended September 30,
1994 as compared to the three and nine months ended September 30, 1993 is
due to the refinancing of the debt at the Riverside Square Mall property.
Reference is made to Note 2(c).

The decrease in rental income for the three and nine months ended
September 30, 1994 as compared to the three and nine months ended September
30, 1993 is primarily due to lower average occupancy in 1994 at the Bank of
Delaware building and Riverside Square Mall.

The decrease in interest income for the nine months ended September
30, 1994 as compared to the nine months ended September 30, 1993 is
primarily due to a lower average invested balance in U.S. Government
obligations primarily due to the expenditures for capital improvements as
discussed above. This is partially offset by the increase for the three
months ended September 30, 1994 as compared to the three months ended
September 30, 1993 which is primarily due to the interest earned on the net
loan proceeds related to the refinancing at Riverside Square Mall received
September 1, 1994 as more fully discussed in Note 2(c).

The increase in property operating expenses for the nine months ended
September 30, 1994 as compared to the nine months ended September 30, 1993
is primarily due to an increase of approximately $113,000 of snow removal
costs (partially recoverable from tenants), an increase in provision for
doubtful accounts of approximately $406,000, and an increase in real estate
taxes (partially recoverable from tenants) of approximately $117,000 at the
Riverside Square Mall property.

The Partnership's share of operations of unconsolidated ventures
increased for the three and nine months ended September 30, 1994 as
compared to the three and nine months ended September 30, 1993 primarily
due to a provision for value impairment recorded at the San Jose investment
property at September 30, 1993 of which the Partnership's share was
approximately $7,775,000, partially offset by the provision for value
impairment recorded at the San Jose investment property at September 30,
1994, of which the Partnership's share is approximately $472,000. See note
3(b).

The extraordinary items for the three and nine months ended September
30, 1994 is due to the refinancing of long-term debt at Riverside Square
Mall. See Note 2(c).<PAGE>
PART II. OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Effective February 1994, the Partnership has suspended payment of debt
service on the $9.5 million mortgage on the Bank of Delaware property. As
a result, approximately $657,000 of interest has been accrued but not paid.
Equitable Life Assurance Society has commenced proceedings to acquire title
to the property. Reference is made to Note 2(b) and to the Liquidity and
Capital resources contained in the Management's Discussion and Analysis of
Financial Condition section of this Report for a discussion of the mortgage
loan and the Partnership's efforts to obtain a modification of such loan.
<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>
1993 1994
------------------------------- ------------------------------
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. Park Center Financial Plaza
San Jose, California . . . . . . . . . 89% 88% 84% 84% 83% 83% 83%

2. Riverside Square Mall
Hackensack, New Jersey . . . . . . . . 83% 83% 80% 81% 80% 65% 60%

3. Bank of Delaware Building
Wilmington, Delaware . . . . . . . . . 92% 90% 90% 61% 61% 61% 61%

4. Royal Executive Park II
Rye Brook, New York. . . . . . . . . . 92% 92% 93% 92% 92% 93% 89%
<PAGE>
PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits.

4-A. Mortgage loan agreement, Mortgage and Security
Agreement, Secured Promissory Note B, Secured
Promissory Note A and Assignment of Leases and
Rents between the Partnership and Principal
Mutual Life Insurance Company dated August 30,
1994 is filed herewith.

4-B. Mortgage loan agreement between the Partnership
and Equitable Real Estate Investment Management,
Inc. dated February 28, 1989 relating to the Bank
of Delaware is hereby incorporated herein by
reference to Exhibit 4-B to the Partnership's
report for December 31, 1992 on Form 10-K (File
No. 0-15966) dated March 19, 1993.

4-C. Mortgage loan agreement between San Jose and
Connecticut General Life Insurance Co. dated June
20, 1985 relating to Park Center Plaza are hereby
incorporated by reference to the Partnership's
report on Form 8-K (File No. 0-15966) dated June
20, 1985.

10-A. Acquisition documents relating to the purchase by
the Partnership of Riverside Square in
Hackensack, New Jersey are hereby incorporated by
reference to the Partnership's Prospectus on Form
S-11 (File No. 2-90503) dated July 11, 1984.

10-B. Acquisition documents relating to the purchase by
the Partnership of the Bank of Delaware Office
Building in Wilmington, Delaware are hereby
incorporated by reference to the Partnership's
report on Form 8-K (File No. 0-15966) dated
December 27, 1984.

10-C. Acquisition documents including the venture
agreement relating to the purchase by the
Partnership of Park Center Plaza in San Jose,
California are hereby incorporated by reference
to the Partnership's report on Form 8-K (File No.
0-15966) dated June 20, 1985.

27. Financial Data Schedule

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

Although certain additional long-term debt instruments of
the Registrant have been excluded from Exhibit 4 above,
pursuant to Rule 601(b)(4)(iii), the Registrant commits to
provide copies of such agreements to the Securities and
Exchange Commissions upon request.

(b) The following reports on Form 8-K were filed since the
beginning of the last quarter of the period covered by
this report

(i) None

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. - XI

BY: JMB Realty Corporation
(Managing General Partner)

By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 10, 1994

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 10, 1994

</TABLE>

LOAN AGREEMENT

AGREEMENT, executed this 30th day of August, 1994, between PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation, having an office located
at 711 High Street, Des Moines, Iowa 50392, hereinafter called the ("Lender"),
and JMB INCOME PROPERTIES, LTD.-XI, an Illinois limited partnership, having
its principal place of business at c/o JMB Realty Corporation, 900 N. Michigan
Avenue, Chicago, Illinois 60611-1575, hereinafter called the "Borrower".

PREAMBLE

This Agreement specifies the terms and conditions pursuant to which a
portion of a loan (the "Loan") from Lender to Borrower in the total amount of
Thirty Six Million Dollars ($36,000,000) will be held in escrow by Lender and
disbursed to Borrower from time to time for the sole purpose of renovating
portions of a regional shopping mall containing, 234,486 square feet of gross
leasable space for mall tenants and 400,346 square feet of gross leasable
space occupied by anchor tenants (of which, 293,346 square feet of space
occupied by Bloomingdale's is not part of the security for the Loan and is not
a part of the Premises as defined below) and an attached parking deck,
situated on land in the City of Hackensack, Bergen County, New Jersey, as more
fully described in Exhibit A attached hereto and made a part hereof (the
"Premises"), in accordance with certain Drawings referred to hereinafter.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:

I. DEFINITIONS

1. "Advance" or "Advances" shall include all payments of money from
Lender to the Borrower with respect to the Loan at any time and in any amount
and regardless of whether in accordance with the terms of this agreement.

2. "Agreement" shall mean this Agreement and all other Loan
Documents, as herinafter defined, executed in connection with the transaction
described above and herein; and any other instrument or document executed by
Borrower in connection with this Loan, together with all amendments or
supplements to any or all of them.

3. "Architect" shall mean Cooper, Carry & Associates with respect to
the Mall Renovation Improvements, as hereinafter defined, and "Engineer" shall
mean Desman Associates with respect to the Parking Deck Improvements, as
hereinafter defined.

4. "Construction Monitor" means Inspection & Valuation International,
a New York Corporation, or any successor Construction Monitor selected by
Lender in its sole discretion. The Lender shall notify Borrower, in writing,
of any change in the Construction Monitor.

5. "Drawings" means the plans, specifications and other drawings
listed on Exhibit B annexed hereto and made a part hereof. Drawings prepared
by Desman Associates are hereinafter referred to as the "Parking Deck
Drawings", and the Drawings prepared by Cooper, Carry & Associates, Madiley
Structural Engineers, Inc. and Barrett, Woodyard & Associates, Inc. are
hereinafter referred to as the "Mall Renovation Drawings". The Drawings have
been delivered by the Borrower to the Lender and have been and are to be used
in the construction of the Project as hereinafter defined as the same may be
amended or modified by a "Change Order" (as hereinafter defined).

6. "Financing Statements" shall mean the Uniform Commercial Code
financing statements required to be filed with (i) the Office of the Secretary
of State of New Jersey; (ii) the office of the Clerk of Bergen County; (iii)
the office of the Secretary of State of Iowa; and (iv) the Office of the
Secretary of State of Illinois; in order to perfect the security interest
granted to the Lender by the Mortgage and this Agreement.

7. "General Contractor" shall mean (i) Torcon, Inc., with respect to
the Mall Renovation Improvements, or any contractor having a contract with
Borrower which replaces Torcon, Inc., or any contractor which directly enters
into a contract with Borrower, to perform a portion of the Mall Renovation
Improvements, and (ii) Epic Incorporated, with respect to the Parking Deck
Improvements or any contractors having a contract with the Borrower which
replaces Epic Incorporated, or any contractor which directly enters into a
contract with Borrower to perform a portion of the Parking Deck Improvements.

8. "Lender" shall mean Principal Mutual Life Insurance Company, its
successors or assigns.

9. "Loan Documents" shall mean this Agreement, Notes (as defined
below), the Mortgage (as defined below), the Assignment of Leases and Rents
from Borrower to Lender further securing the Notes (the "Assignment") and any
other certificate or instrument executed as of the date hereof or in the
future by the Borrower and delivered by the Borrower to the Lender which by
its terms further secures the Notes, or either of them, as any of the
aforesaid instruments may be amended or modified by a written agreement
executed by both Borrower and Lender. Loan Documents shall be referred to
individually as a "Loan Document".

10. "Mall Renovation Improvements" means the improvements constructed
or to be constructed in accordance with the Mall Renovation Drawings.

11. "Mortgage" shall mean the Mortgage and Security Agreement of even
date herewith given by the Borrower to the Lender to secure the Loan.

12. "Note" or "Notes" shall mean the two Secured Promissory Notes of
even date herewith made by the Borrower and delivered to the Lender as
evidence for the Loan.

13. "Overall Project" means the Project and certain tenant improvement
work constructed or to be constructed on the Premises.

14. "Parking Deck Improvements" means the improvements constructed or
to be constructed in accordance with the Parking Deck Drawings.

15. "Personal Property" shall mean the personal property and fixtures
intended to be encumbered by the Lender's security interest granted hereunder
and under the Mortgage.

16. "Project" shall mean the Mall Renovation Improvements and Parking
Deck Improvements.

17. "Overall Costs" shall mean all hard (referenced as Construction
Costs in the Budget as defined herein,) and soft (referenced as Development
costs in the Budget) costs and expenses associated with the Overall Project,
including but not limited to costs associated with the Mall Renovation
Improvements and Parking Deck improvements, the Saks store allowance, the mall
tenant store allowances and all other tenant improvement costs and leasing
commissions.

18. "Project Costs" means that portion of the Overall Costs relating
solely to the mall Renovation Improvements and Parking Deck Improvements.

II. ESCROW AND DISBURSEMENTS

1. On the date hereof, Lender has advanced to Borrower the sum of
Thirty Six Million ($36,000,000) Dollars toward Overall Costs, of which
$11,178,641.72 is being placed in escrow with Lender as additional security
for the Loan and the Notes evidencing the Loan. The escrowed funds may be
commingled with other monies of Lender and shall be held in an account
selected by Lender in its sole discretion. Interest shall be charged on the
escrowed funds at the rate set forth in the Notes, and when debt service
payments pursuant to the Notes are calculated and paid, the escrowed funds
shall be included as part of the outstanding principal amount of the Notes.
As long as no "Event of Default" (as hereinafter defined) has occurred under
this Agreement, the Notes, Mortgage or any other Loan Document, interest shall
be credited for the benefit of Borrower on the average balance of the escrowed
funds at a rate equal to the 30-day average of the daily Federal Reserve
Composite Commercial Paper Rate, as published in the Wall Street Journal or
similar financial publications; provided, however, that interest to be
credited for less than one calendar month shall be credited at the average of
the daily Federal Reserve Composite Commercial Paper Rate for such period.
Any interest credited on the escrowed funds shall be paid by Lender to
Borrower no more often than following the end of each calendar quarter and
shall be included in the next monthly disbursement processed after the end of
such quarter.

2. To secure payment of the Notes, the Borrower has simultaneously
herewith executed and delivered the Mortgage to the Lender encumbering the
Premises. The Mortgage shall be considered a part of this Agreement as though
fully set forth herein, and the terms of this Agreement shall be considered
part of said Mortgage as though fully set forth therein. In addition to the
aforementioned Mortgage, Borrower hereby gives and grants to the Lender an
exclusive security interest in and to all right, title and interest of
Borrower in and to (i) all items of personal property now owned or hereafter
acquired by Borrower with respect to the Premises including, but not limited
to furnaces, boilers, oil burners, radiators and piping, plumbing and bathroom
fixtures, heating refrigeration, air conditioning and sprinkler systems and
fixtures, washtubs, sinks, toilets, gas and electric fixtures, stoves, ranges,
awnings, screens, window shades, elevators, motors, dynamos, refrigerators,
kitchen cabinets, counter tops, vanities, ovens, incinerators, pipes ductwork,
plants and shrubbery and all other equipment and machinery, tools, appliances,
fittings, fixtures and building materials of any kind and nature whatsoever
and whether or not affixed to the realty located at the Premises; (ii) the
Drawings and construction contracts regarding the ongoing and contemplated
renovations to the Premises; (iii) all approvals, authorizations of
governmental entities as to such renovations; and (iv) the escrowed funds,
including interest, being held by lender pursuant to this loan Agreement and
Borrower agrees to execute any and all documents including financing
statements which may be required by the Lender to perfect the security
interest granted hereby. FOR THESE PURPOSES, THIS AGREEMENT SHALL BE DEEMED
TO BE A SECURITY AGREEMENT WITHIN THE MEANING OF THE UNIFORM COMMERCIAL CODE
OF NEW JERSEY.

3. After the date hereof, applications for disbursements from the
escrow account under this Agreement may be made by Borrower to the Lender no
more often than once per calendar month.

4. With respect to the Mall Renovation Improvements and Parking Deck
Improvements, the Loan proceeds will be disbursed generally in accordance with
the budget annexed hereto and made a part hereof as Exhibit C (the "Budget").
(The Budget makes reference to the Mall Renovation Improvements under Section
I. entitled "Renovation," and makes reference to the Parking Deck Improvements
under Section II . entitled "Deck Restoration".) The Borrower shall have the
right to reallocate line items in the Budget (without increasing the total
amount of the Budget) without the prior written consent of Lender, provided,
however, that the amount by which any line item is increased shall be treated
as a "Cost Overrun," (as hereinafter defined), unless Borrower can demonstrate
to Lender's satisfaction that the corresponding reduction in any line item(s)
shall not reduce the scope or quality of the overall Project. Use of the
"overall contingency" ("Overall Contingency") set forth in the Budget shall be
subject to the same retainages as apply to other disbursements from escrow
toward Project Costs, which retainages are set forth in Article II, paragraph
5, below. The Overall contingency set forth in the Budget shall be available
for disbursement subject to the following terms and conditions:

(i) The overall Contingency shall only be available for
allocation between the Mall Renovation Improvements and Parking Deck
Improvements;

(ii) The Overall Contingency shall only be available (a)
for the hard costs attributable to the (i) Mall Renovation Improvements, and
Parking Deck Improvements; and (b) in a maximum amount, not to exceed $200,000
for the costs of (i) the design professionals, (only the Architect or
Engineer), (ii) the builder's risk insurance, and (iii) testing and
inspection, attributable solely to the Mall Renovation Improvements and
Parking Deck Improvements;

(iii) The requested contingency allocation amount at any
given draw request shall not exceed the proportion of the amount of the Mall
Renovation Improvements or Parking Deck Improvements disbursed to such date,
over the total budgeted amount (exclusive of tenant allowances) for the Mall
Renovation Improvements or Parking Deck Improvements, as applicable.

5. (A) Disbursements from the escrow account toward Project Costs
during construction and renovation shall be limited to the value of the
portions of the work satisfactorily completed as determined by the Lender's
inspector or Construction Monitor, minus a retainage as follows: Except as
set forth hereinbelow to the contrary, the retainage for each portion of the
Project (each contract for Mall Renovation Improvements or Parking Deck
Improvements) shall be ten percent (10%) of the then respective contract sum
at the time of each disbursement, after giving effect to all Change Orders and
Cost Overruns, (as hereinafter defined) until such portion of the Project is
fifty percent (50%) complete. Notwithstanding the foregoing, no retainage
shall be held for the amount of the General Conditions of the respective
General Contracts. Except as set forth hereinbelow to the contrary, when each
portion of the Project is fifty percent (50%) complete, there shall be no
retainage held on future disbursements, such that, upon Substantial Completion
(as hereinafter defined) of each portion of the Project, the total retainage
then being held in escrow by Lender shall be five percent (5%), (fifty percent
of each portion of the Project at 10% retainage and fifty percent without any
retainage, equals 5% total retainage). The respective General Contractor's
fee shall be retained in accordance with their General Contract, until
Substantial Completion (as hereinafter defined). After Substantial Completion
of the Mall Renovation Improvements or the Parking Deck Improvements, the
retainage for such portion of the Project which is Substantially Complete
shall be 200% of the cost of completing punchlist items, as such punchlist
costs are approved by Lender and the Construction Monitor. The punchlists
shall be certified to Lender to be true, accurate and complete by the
Borrower, the General Contractor and (i) the Architect (as to the Mall
Renovation Improvements) or (ii) the Engineer (as to the Parking Deck
Improvements). Upon Substantial Completion of each portion of the Project
(the reference to each portion of the Project means the Mall Renovation
Improvements portion and the Parking Deck Improvement portion) (which by
definition excludes tenant improvement construction) and upon satisfaction of
the prerequisites set forth in Article II, Paragraph 8A below, the remaining
balance of the escrow funds, less the retainage for punchlist items, shall be
disbursed from escrow. Upon final completion of the punchlist items and
satisfaction of the prerequisites to an advance for each portion of the
Project pursuant to Article II, Paragraphs 7 and 8 below, the punchlist
retainage for each portion of the Project shall be disbursed from escrow. The
date on which Borrower has achieved Substantial Completion of the entire
Project and satisfied the prerequisites set forth in Article II, Paragraph 7
and Paragraph 8 below is hereinafter referred to as the "Substantial
Completion Date". Notwithstanding anything else to the contrary contained in
this Agreement, in the event of a "Cost Overrun" (as hereinafter defined),
Lender shall not be obligated to make any further disbursements from the
escrow unless and until Borrower funds such Cost Overrun, as more particularly
described in Paragraph 5 (B) below of this Article. Borrower shall furnish,
as requested, a projection of work progress with respect to the project in such
form at such times as may be reasonably requested by the Lender or the
Construction Monitor. Parts or the
whole of any disbursement provided for herein may, in the discretion of the
Lender, be disbursed before the time when due, but all such disbursements, if
made, shall be deemed to have been made pursuant to this Agreement and not in
modification thereof. Disbursements shall be made for materials purchased or
manufactured for incorporation into the improvements but which, at the time a
disbursement is requested, are not yet incorporated into the improvements (the
"Unincorporated Materials"); provided:

(i) the Unincorporated Materials, whether stored on or off
the Premises, or are in transit, shall be secured, segregated and identifiable
in a manner satisfactory to the Construction Monitor or Lender;

(ii) the Construction Monitor shall be given the complete
address of the place of storage of any Unincorporated Materials stored off the
Premises;

(iii) The Construction Monitor and Lender shall be provided
with insurance (or evidence of insurance coverage satisfactory to the Lender)
with respect to any Unincorporated Materials stored off the Premises or in
transit, of kinds, in form and amount and written by insurers satisfactory to
the Lender and covering the Lender as an insured;

(iv) the Construction Monitor shall have received evidence
satisfactory to it that Borrower has good title to the Unincorporated
Materials, free from any lien or encumbrance;

(v) the Construction Monitor shall have received copies of
any documents of title and warehouse receipts that evidence title to the
Unincorporated Materials;

(vi) the Construction Monitor shall have received such
documents and instruments, including, without limitation, financing
statements, security agreements, consents of manufacturing, vendors,
warehousemen and bailees, as the Construction Monitor may require, to evidence
or perfect the Lender's lien on the Unincorporated Materials;

(vii) the Construction Monitor shall have received evidence
satisfactory to it that all specially fabricated Unincorporated Materials have
been fabricated in accordance with the Drawings;
(viii) the Borrower shall have delivered to the
Construction Monitor a completed Schedule I-A to the Requisition Form, as
hereinafter defined;

(ix) if the Unincorporated Materials are not in transit,
stored on the Premises, or with the manufacturer and the Unincorporated
Materials are stored in a bonded warehouse, in which event Borrower shall have
delivered to Lender such documentation evidencing said bond and receipt of the
materials as shall be reasonably required by Lender, and said bond shall be
reasonably required by Lender, and said bond shall be in form and substance
reasonably satisfactory to Lender; and

(x) the Architect as to the Mall Renovation Improvements,
the Engineer as to the Parking Deck Improvements or the Construction Monitor
is entitled to review the Unincorporated Materials for conformity with the
Drawings as reasonably required by Lender.

(B) Notwithstanding anything to the contrary contained in any of
the other Loan Documents, Borrower (but no "Other Holder, as defined in the
Note,) shall be personally liable for "Cost Overruns", (as hereinafter
defined) but only to the extent of Borrower's (but no Other Holder's) assets.
Borrower's personal liability for Cost Overruns shall continue in full force
and effect until the Substantial Completion Date, as defined in Article II,
Paragraph 5A, above. In the event of any Event of Default hereunder prior to
the Substantial Completion Date, the Borrower shall continue to be personally
liable for Cost Overruns, but only to the extent of Borrower's assets. As
used herein, "Cost Overruns" means, as of a particular date, the amount, if
any, by which the actual costs to complete the Project exceed the costs to
complete the Project as set forth in the Budget. Borrower shall be entitled
to no further disbursements hereunder unless and until it pays, in full, for
any Cost Overrun. The Borrower's failure to pay any Cost Overruns within
fifteen (15) days of notice from Lender shall constitute an Event of Default
under this Agreement.

6. As prerequisites to the initial Advance of a portion of the Loan
toward Project Costs, the Lender shall have received from Borrower, at
Borrower's sole cost and expense:

(a) An original paid up Builder's risk casualty insurance policy
covering risk of loss or damage to the Project due to fire or other casualties
as Lender may require in a minimum amount of all hard costs constituting a
part of the Project Costs (provided Borrower has delivered to Lender a
certificate of insurance evidencing an "all risk" form of insurance policy on
all buildings and improvements on the Premises, which policy contains both a
replacement cost and an agreed amount endorsement), written by an insurance
company approved by Lender and containing a mortgagee clause in favor of
Lender in form acceptable to Lender; and certificates evidencing (i) liability
insurance and workmen's compensation coverage insurance covering the General
Contractor and the Borrower and (as to the liability policy) naming Lender as
an additional insured, (ii) liability insurance of Borrower in amounts of not
less than $1,000,000 for each person, $3,000,000 for each<PAGE>
occurrence and
$1,000,000 for property damage and naming Lender as an
additional insured, and (iii) professional liability insurance covering each
architect or engineer performing design services with respect to the Project,
in an amount not less than $2,000,000 per occurrence or claim made with
respect to the Mall Renovation Improvements and not less than $1,000,000 per
occurrence or claim made with respect to the Parking Deck Improvements.
Notwithstand-ing the foregoing, Lender acknowledges that Cooper, Carry &
Associates, the Architect with respect to the Mall Renovation Improvements
carries $2,000,000 professional liability insurance, in the aggregate. Lender
agrees that such insurance shall satisfy the professional liability insurance
requirement under this paragraph, but solely as to Cooper Carry & Associates.

(b) Two copies of the Drawings and any amendments thereto, for
the proposed renovations on the Premises. Said Drawings shall:

(i) have been referenced as the approved Plans in a letter
(or letters) issued in favor of Lender, by the applicable General Contractor
and/or Borrower; and

(ii) thereafter, not be changed without the prior written
approval of the Lender and the appropriate governmental authorities.
Notwithstanding the foregoing, Borrower may, without Lender's consent, (w)
authorize a change order if such change order will not result in a deviation
from the Budget (whether due to an increase or decrease in cost) of
more than $25,000, and the aggregate amount of all prior change orders,
together with such change order, does not exceed $200,00; (x) authorize
emergency field work for safety purposes which must be implemented to avoid
injury to persons or prop-erty; (y) authorize work due to abate or avoid code
violations; or (z) authorize work due to unantici-pated field conditions,
provided (1) Lender is notified in writing by Borrower of such deviation from
the Drawings within ten (10) working days (Monday through Friday except
federal holidays) (said notice to set forth a detailed explanation of the
basis for the change and the scope and dollar amount of the change order so
issued), and (2) provided further that the change order shall not reduce in
any material respect the quality of construction of, or the materials used in,
the Project. Any change to the Drawings approved by Lender or permitted by
the foregoing provisions of this subparagraph to be implemented without the
prior approval of Lender is herein called a "Change Order". No disbursement
shall be made for any Change Order unless the Change Order has been signed by a
duly authorized officer of the General Contractor and the duly authorized
representative of the Borrower and the appropriate Architect and/or Engineer
of record.

(i) the design of the renovation and/or construc-tion of
the proposed improvements as shown in the Drawings prepared by such
architect(s) or engi-neer(s), is in compliance with all applicable
governmental laws and requirements;

(ii) any and all changes in the Drawings prepared by such
architect or engineer that are required by the governmental authorities having
jurisdiction will be made; and

(iii) the Lender is authorized, upon an Event of Default
with respect to the Loan, to use the Draw-ings prepared by such architect or
engineer without cost to the Lender.

(d) Copies of the Borrower's contracts currently existing with
all contractors, if any, who will supply labor, material and/or equipment for
the renovation and/or construction of the proposed improvements on the
Premises. Such contracts shall be conditionally assigned to the Lender by an
instrument in the form of Exhibit G annexed hereto and made apart hereof. The
Borrower shall also deliver copies of all subcontracts relating to the Project
if reasonably available to Borrower.

(e) Intentionally Deleted

(f) Copies of agreements with all the architects and engineers
and statements of account paid to date.

(g) Copies of all permits and approvals required for the
renovation or construction of the proposed improvements on the Premises in
accordance with the Drawings. Borrower shall be required to deliver to the
Lender building permits satisfactory to the Lender, prior to any disbursement
from the escrowed funds and prior to any Advance toward Project Costs.

(h) Assurance that no proceedings have been threatened, to the
best of Borrower's knowledge, or commenced by any authority under a power of
eminent domain, other than a strip of land containing approximately 1,000
square feet to the New Jersey Department of Transportation for road widening
purposes.

(i) A requisition authorization, which shall not be revocable
except with Borrower's prior written notice to the Lender, designating the
person or persons on behalf of Borrower authorized to execute the requisition
forms.

(j) The Lender's required requisition form, in the form of
Exhibit D annexed hereto and made a part hereof (the "Requisi-tion Form")
completed by the Borrower and signed by the Borrower's authorized
representative, together with supporting documentation, such as invoices.

(k) The Payment Application, General Contractor's Draw Request
and Design Architect's/Engineer's Draw Request Certifica-tin form for the
Project certified by the appropriate Architect and/or Engineer and the General
Contractor in the form of Exhibit E annexed hereto and made a part hereof.
The Lender may also require Borrower to submit any other documents or
information which it reasonably deems necessary for its review and approval of
requests for disbursements and advances. Requests for disbursement of
escrowed funds and Advances will be reviewed and approval of same shall be
conditioned upon the Lender, being satisfied with the costs, progress and
status of construction as required pursuant to the terms of this Agreement.
Any disapproval by Lender shall be accompanied by a detailed description of
the reason(s) for such disapproval. The Lender will disburse only that amount
which Lender is obligated to disburse under this Agreement.

(l) An Owner's Affidavit in the form annexed hereto and made a
part hereof as Exhibit F (the "Owner's Affidavit"), completed by the Borrower
and executed by the Borrower's authorized representative on behalf of
Borrower.

(m) Such waivers, subordinations, releases and discharg-es of
mechanics' and materialmen's notices, claims, liens, lien rights and stop
notices as Lender or the title insurance company insuring the Mortgage (the
"Title Company") may reasonably require.

(n) Any documents evidencing compliance with all other terms and
conditions of this Agreement, reasonably required by the Lender.

(o) A complete construction and/or development schedule and
cost breakdown showing the General Contractor , all subcontrac-tors and
materialmen who will perform services upon or supply materials for the
proposed renovations and/ or improvements on the Premises, and the amounts
certified by the Borrower to be due to each in connection with their services.

(p) A certified rent roll.

(q) An Assignment of Construction Contract and Contract-or's
Acknowledgment and Consent from each General Contractor in the form of Exhibit
G annexed hereto and made a part hereof.

(r) Any other items set forth in Lender's Project Review
Checklist, a copy of which is annexed hereto as Exhibit H.

(s) An inspection report from Lender's Construction Monitor
evidencing approval of satisfactory completion of renova-tin work on the
Premises to the extent of the work completed and for which a disbursement has
been requested. The Construction Monitor shall provide a report to Lender
within (5) business days after the Construction Monitor's receipt of all
of the foregoing prerequisites from Borrower.

7. As prerequisites to any subsequent disbursement of any portion of
the escrowed funds, the Lender shall have received from the Borrower at
Borrower's sole cost and expense (unless otherwise expressly provided):

(a) At Lender's sole cost and expense, an inspection report from
Lender's Construction Monitor evidencing approval of satisfactory completion
of renovation work on the Premises to the extent of the work completed and for
which a disbursement has been requested. Lender is to cause the Construction
Monitor to provide the report to Lender within five (5) business days after
the Construction Monitor's receipt of all of the prerequisites from Borrower
set forth Below.

(b) The Requistion Form, completed by the Borrower in the form
of Exhibit D annexed hereto and made a part hereof and signed by the
Borrower's authorized representative, together with supporting documentation,
such as invoices.

(c) The Payment Application, General Contractor's Draw Request
and Design Architect's/Engineer's Draw Request Certifica-tin for the Project
certified by the appropriate Architect and/or Engineer and the General
Contractor in the form of Exhibit E annexed hereto and made a part hereof.
The Lender may also require Borrower to submit any other documents or
information which it reasonably deems necessary for its review and approval of
the disbursement. Disbursements will be reviewed and approval of same shall
be conditioned upon the Lender, being satisfied with the costs, progress and
status of renovation and construction as required pursuant to the terms of
this Agreement. Any disapproval by Lender shall be accompanied by a detailed
description of the reason(s) for such disapproval. The Lender will disburse
only that amount which Lender is obligated to disburse under this Agreement.

(d) The Owner's Affidavit completed by the Borrower and executed
by the Borrower's authorized representative on behalf of Borrower in the form
of Exhibit F hereto.

(e) A clear rundown search to the Mortgagee Title Insurance
Policy and/or endorsement to the Mortgagee Title Insurance Policy insuring
that the Mortgage, without exception, continues to be a first lien on the
Premises.

(f) Such waivers, stipulations, subordinations, release and
discharges of mechanics' and materialmen' notices, claims, liens, lien rights
and stop notices as Lender or the Title Company may reasonably require.

(g) Affidavits from the Borrower and the General Contract that
all money previously disbursed from the escrowed funds has been paid in
accordance with prior requisitions; provided, however, to the extent that a
General Contractor delivers to Lender an unconditional lien waiver as to all
prior disburse-meats, the General Contractor shall not be required to deliver
the Affidavit required by this subparagraph.

(h) Any documents evidencing compliance with all other terms and
conditions of this Agreement, reasonably satisfactory to the Lender.

(i) Copies of Borrower's contracts with all contractors, if any,
not previously supplied to the Lender, who will supply labor, material and/or
equipment for the proposed renovation or construction of the improvements on
the Premises. Such contracts shall be conditionally assigned to Lender by an
instrument in the form of Exhibit G annexed hereto and such contractors shall
execute and deliver an Acknowledgement and Consent to the Assignment in the
form of Exhibit G annexed hereto. If reasonably available to Borrower, the
Borrower shall also deliver copies of all subcon-tracts pertaining to the
Project and not previously delivered to Lender.

(j) A revised and complete construction schedule and cost
breakdown showing the General Contractor, all subcontractors and materialmen
who will perform services upon or supply materials for the proposed
improvements and renovations on the Premises and the amounts certified by the
Borrower to be due to each in connection with their services, and

(k) Complete and accurate responses by Borrower to the
Construction Monitor's "Plans & Specifications Review Comments" mailed to
Borrower on July 27, 1994. Such responses shall be subject to the review and
approval of Lender and the Construction Monitor.

(l) A certified list of all contractors and subcontract-tars who
will supply labor and/or material with respect to the Project. Said list to
be provided in accordance with Section 37 of the New Jersey Construction Lien
Law, P.L. 1993, C.318.

Disbursements will be made by Lender, subject to the other terms and
conditions of this Agreement, within ten (10) business days after satisfaction
of all the prerequisites set forth in Article II, paragraph 6 above, this
paragraph 7, or paragraph 8 below.

8. A. Upon "Substantial Completion" (as hereinafter defined) of
each portion of the Project (the reference to each portion of the Project,
means the Mall Renovation Improvements portion and the Parking Deck
Improvements portion) (which by definition excludes tenant improvement
construction) and upon Borrower's satisfaction of the additional prerequisites
set forth below as subparagraphs (a) through (f) in this paragraph a, with
respect to the applicable portion of the Project, the Lender will disburse to
Borrower the remaining balance of any escrow funds (less a retainage in the
amount of 200% of the cost of completing punchlist items) with respect to such
portion of the Project and any accrued and unpaid interest thereon, provided
that Borrower has satisfied the prerequisites set forth in Paragraph 7 above
and this Paragraph 8A. As set forth herein, "Substantial Completion" means
(i) completion of each portion of the Project (a) sufficient for it to be
utilized legally and practically for its intended purposes, (b) in a
workmanlike manner as determined by Lender based on standard industry
practice, and (c) in accordance with the Drawings; and (ii) the issuance of a
Certificate of Substantial Completion (AIA G704) certified by the Architect or
Engineer who prepared the Drawings for such portion of the Project.
Substantial Completion may be achieved even though there are minor items of a
punchlist nature which remain to be completed.

As additional prerequisites to disbursement of the remaining balance of
the escrowed funds (less the retainage amount of 200% of the cost of
completing punchlist items) with respect to the Mall Renovation Improvements
portion of the Project and/or the Parking Deck Improvements portion of the
Project, Borrower, at its sole cost and expense, shall have delivered the
following items to Lender and its Construction Monitor at the time of
Borrower's submission to Lender and its Construction Monitor of the requisi-
tin form for such remaining portion of the escrow;

(a) To the extent obtainable by Borrower pursuant to its
existing contracts with the General Contractors, Architect and/or Engineer,
and upon the request of Lender, "as-built drawings", which shall be plans
prepared after construction is complete and showing all work as actually
installed;

(b) A Certificate of Substantial Completion (AIA G704) certified
by the Architect or Engineer who prepared the Drawings for such portion of the
Project;

(c) A final and unconditional Certificate of Occupancy issued by
the appropriate governmental authority having jurisdic-tion or such other
forms as provided by the local jurisdiction evidencing that
the new improvements have been inspected and approved and may be legally
occupied and/or used for their intended purposes. Notwithstanding the
foregoing, a temporary Certificate of Occupancy or such other form as provided
by the local jurisdic-tin evidencing that the new improvements have been
inspected and approved and may be legally occupied and/or used for their
intended purposes will be acceptable to Lender, provided the only items
requiring completion under the temporary Certificate of Occupancy are the same
items referenced in the applicable punchlists for which a 200% retainage is
being held in escrow;

(d) Final and unconditional lien waivers from any General
Contractor or subcontractor as to which Lender and the Construction Monitor
had previously received only partial or conditional lien waivers, excluding,
however, lien waivers with respect to punchlist items;

(e) A certification from the Architect or Engineer, as
applicable, that the punchlist items are true, accurate and complete; and

(f) An unconditional discharge of any mechanics' liens, notices
of intention, materialmen's liens, notices, claims, construction liens, rights
and notices, if any, relating to the Mall Renovation Improvements and/or the
Parking Deck Improvements, as applicable.

B. Upon final completion of the punchlist items, Lender shall
disburse to Borrower the retainage for the punchlist items, with respect to
each portion of the Project, provided Borrower delivers to Lender and its
Construction Monitor at Borrower's sole cost and expense, the following items,
together with the final requisition forms:

(a) A Contractor's Certificate of Compliance with Plans and
Specifications, certified by the General Contractor that performed the work
for which the final advance is being requested, in the form annexed hereto and
made a part hereof as Exhibit E;

(b) The appropriate Architect's or Engineer's certified copy of
the final punchlist of itemized work stating that each item payment been
completed or otherwise resolved for acceptance;

(d) A final and unconditional Certificate of Occupancy issued by
the appropriate governmental authority having jurisdic-tin or such other form
as provided by local jurisdiction evidenc-ing that the new improvements have
been inspected and approved and may be legally occupied and/or used their
intended purposes;

(e) A certification from the Borrower that all close-out
requirements pursuant to its contracts with the General Contrac-tars,
including but not limited to as-built drawings, if any, warranties, manuals,
keys, etc. have been received, reviewed as necessary and approved for each
General Contractor and subcontract-tor. and

(f) Final and unconditional lien waivers from any General
Contractor or subcontractor as to which Lender and the Construction Monitor
had previously received only partial or unconditional lien waivers.

9. Borrower shall be entitled to a disbursement draw from the escrow
amount in a maximum amount of $2,790,596 for tenant improvement costs and/or
leasing commissions provided Borrower satisfies the following prerequisites
with respect to any such disbursement from the escrow:

(a) The Borrower shall have delivered to Lender a notice setting
forth (i) a description of the lease for which the tenant improvement costs or
leasing commission has been incurred, (ii) the amount of the tenant
improvement costs and leasing commission being requested and (iii) a
certification from the Borrower that the tenant improvement costs or leasing
commission has been incurred in accordance with applicable lease; and

(b) The Lender shall have approved the lease as to which the
tenant improvement costs or leasing commission is being requested, said
approval to be pursuant to the terms and conditions of the Assignment.

10. No disbursement of escrowed funds shall be due or payable while
there is any lien, or encumbrance or other cloud upon title to said Premises
other than the Mortgage and the permitted Exceptions set forth on Exhibit I,
attached hereto and made a part hereof ("Permitted Exceptions"); provided,
however, that as to mechanics liens or other construction liens, during the
prior of any bona fide contest of same, Borrower may provide to lender a bond
or affirmative title insurance endorsement, in form and substance satisfactory
to lender and its counsel, in which event the disbursement of escrowed funds
shall be made as otherwise contemplated by this Agreement.

11. Nothing contained herein or in any other documents and agreements
contemplated hereby or executed approximately simultaneously herewith shall
impose upon the lender any obligation to see to the proper application of
Advances, including, without limitation, disbursements of escrowed funds, by
the Borrower, contractor or subcontractors, and nothing shall prevent the
lender, at its option, from deducting from and Advance, including disbursement
of escrowed funds, any sums due to it from the Borrower beyond any applicable
grace or cure period for unpaid interest or for sums paid and expended by the
lender for taxes or assessments, for insurance, and similar expenses pursuant
to its rights under the terms of this Agreement, the Notes or the Mortgage.

III. REPRESENTATIONS, WARRANTIES AND COVENANTS

To induce the Lender to enter into this Agreement and to make
disbursements hereunder, Borrower represents, warrants and covenants to the
lender that:

1. The Borrower agrees to complete the Project on the aforesaid
Premises, in accordance with the Drawings and standard industry practice, and
to satisfy all other preconditions to the disbursement of all escrowed funds,
on or before twelve months from the date hereof, subject to delays due to
"force majeure". "Force majeure" shall mean strikes, lockouts, earthquakes,
floods or other natural disasters, war, riot, civil insurrection, government
moratorium or similar governmental action (not due to the failure of Borrower
to comply with the Drawings or all applicable laws), or the bankruptcy of the
General Contractor and/or any material subcontractor. In the vent of such a
force majeure, then the period to complete the Project and satisfy all other
preconditions for the disbursement of all escrowed funds shall be extended by
the number of days that satisfaction of such obligations is delayed due to the
force majeure as reasonably determined by Lender, but in no event shall such
extension apply if it would permit either Bloomingdale's or Saks Fifth Avenue
to cancel their respective extensions or obligations to extend their
respective operating covenants for 15 years each. The Drawings shall be
delivered to and held by the Lender and when so delivered shall govern on all
matters that may arise with respect thereto. All requests for changes in the
Drawings must be in writing, signed by the Borrower, and shall be conditioned
upon acceptance by the lender, which the Lender, in its reasonable discretion
may prescribe, it being understood that the lender at all times has the right
to require compliance with the original Drawings subject, however, to Article
II, Paragraph 6(b) (ii).

2. The Borrower is a limited partnership duly organized, validly
existing and in good standing under the laws of Illinois and has the power to
execute, deliver and carry out the terms of this Agreement, the Notes, and the
Mortgage and the Financing Statements, and all of its general partners have
duly authorized and approved the terms of the Loan and the taking of any and
all action contemplated hereunder by the Borrower. At all times throughout
the term of the Loan Agreement, Borrower (i) shall maintain its limited
partnership existence and all rights, privileges, franchises, licenses and
other authority necessary to<PAGE>
conduct it business, and (ii) shall not liquidate
or dissolve without the prior express written consent of the Lender.

3. The execution of this Agreement, the Notes, the Mortgage,
Financing Statements and every other instrument or document required to be
executed in connection herewith or which the Lender may reasonably deem
advisable in connection herewith does not violate any provisions of the
Certificate of Limited Partnership of the Borrower or of any agreement or
undertaking to which the Borrower is a party or by which the Borrower is bound
in any manner.

4. Borrower and its general partner have taken all limited
partnership and corporate action required by law on their part to validate and
make this Agreement, the Notes, Mortgage, Financing Statements and any other
documents required in connection herewith enforceable, and will deliver
approximately simultaneously herewith certification of such limited
partnership and corporate action.

5. Borrower has, and at all times while any amount of the Loan
remains outstanding will have, good and marketable title in fee simple to the
Premises.

6. All construction and renovation heretofore performed on the
Premises will continue with reasonable diligence and has been and will
continue to be performed inaccordance with the Drawings.

7. Borrower will execute and deliver any further mortgages or any
other documents or instruments necessary to achieve and maintain at all times
the balance due to the lender as a valid first lien on the Premises and the
Personal Property, subject to the Permitted Exceptions.

8. Subject to the terms of the Mortgage, Borrower agrees to pay all
fees, expenses and charges incident to the procuring and making of said Loan,
including but not limited to the charges for the examination of the title of
the Premises, title insurance premiums, surveys, reasonable legal fees and
expenses, recording fees and for all searches which may be required by the
Lender to assure the Lender that the Mortgage is a first lien (but Borrower
shall not be required to pay the fees of Lender's Construction Monitor), and
if not so paid, the Lender may make such payments as Advances or disbursements
of the funds escrowed hereunder.

9. Borrower agrees that it will receive all disbursements hereunder
as a trust fund to be applied for the purpose of paying for the cost of the
Overall Project, but nothing herein shall impose upon the Lender any
obligation to see to the proper application of such disbursements by the
Borrower.

10. Borrower agrees:(i) that said Project shall be constructed and
completed in accordance with all applicable ordinances and statutes and
in accordance with the requirements of all
regulatory authorities having jurisdiction (after giving effect to any
variances obtained by Borrower or any grandfathering available to Borrower)
and in conformity with the requirements of the Board of Fire Underwriters or
similar body; (ii) that said project shall be constructed entirely on the
aforesaid Premises and will not encroach upon or overhang any easement or
right-of-way nor upon the land of others, and that the renovations and
improvements shall be wholly within the building restriction and set-back
lines and will not violate applicable use or other restrictions of record,
zoning ordinances or regulations; and (iii) that it will furnish from time to
time as reasonably requested by Lender satisfactory evidence with respect
thereto, together with a survey certified by a licensed surveyor or engineer
showing the renovations and improvements to be entirely on said land and free
from such violations as aforesaid.

11. Borrower represents and warrants that all necessary approvals,
consents and permits for the construction and completion of the Project have
been obtained from all governmental agencies or authorities having
jurisdiction including, but not limited to, all environmental approvals, all
building or construction permits, zoning, site plan or subdivision approvals,
and all time periods to appeal said permits, consents and approvals have
expired with no appeal having been filed. Borrower represents, warrants and
covenants that all of such approvals and permits are legally valid, in full
force and effect and shall continue in full force and effect until completion
of the Project. The Borrower shall not change or amend any of the
governmental approvals regarding the Project without the prior written consent
of the Lender; provided, however, the Lender will not withhold its consent to
any change or amendment not materially affecting the scope of the Project or
the quality of construction or if the materials used in the Project. In
addition, the Borrower shall comply with all of its obligations pursuant to
all governmental approvals.

12. Except as may be otherwise set forth in the Mortgage, Borrower
agrees to provide or cause to be provided worker's compensation insurance and
public liability insurance, builders risk, and other insurance required by
applicable law with respect to the Project. Except as may be otherwise set
forth in the Mortgage, all such policies shall be with such companies and in
such form and amounts as shall be satisfactory to the Lender. The originals
thereof shall be deposited with the Lender. All such policies shall contain a
provision to the effect that such policies shall not be canceled, altered or
in any way limited in coverage or reduced in amount unless the Lender is
notified in writing at least thirty (30) days prior to such cancellation,
alteration, limitation or reduction. Except as may be otherwise set forth in
the Mortgage, at least thirty (30) days prior to the expiration of any such
policies, the borrower shall furnish evidence satisfactory to
the lender that the policies have been renewed or replaced (together with
proof of payment of premium).

13. Except as may be otherwise set forth in the Mortgage, Borrower
agrees that it will not assign this Agreement or any Advance or disbursement
to be made hereunder or any part thereof, nor convey, nor encumber the
Premises or the Personal Property, or any of them or any part thereof, without
the Lender's prior written consent.

14. Borrower agrees and does assign to the Lender the general
contracts with the General Contractor upon the occurrence of an Event of
Default hereunder.

15. The Borrower agrees to promptly comply with all statutes, rules,
regulations and orders applicable to the Project including without limitation,
those rules,regulations and orders concerning the environment.

16. The Lender and its agents, including but not limited to any
Construction Monitor designated by Lender, shall, during regular hours of
construction and renovation, have the right of entry and free access to the
Project and the right to inspect all work done, labor performed and materials
furnished in and about the Project and to inspect contracts, subcontracts,
books and records of the Borrower and to have prompt access to any and all
information reasonably required by Lender, its agents and/or Construction
Monitor relating to the Project and the performance thereof. The Borrower
shall promptly provide Lender or its Construction Monitor with all items set
forth on Lender's Project Review Checklist. Borrower shall provide Lender or
its Construction Monitor with reasonable prior notice of all meetings relating
to performance of the Project, and the Lender or its Construction Monitor
shall have the right to attend all such meetings. The Borrower shall advise
Lender or its Construction Monitor of all relevant schedules as Lender or the
Construction Monitor deem necessary to monitor the Project. All documents and
reports relating to the Project requested by Lender or its Construction
Monitor shall be promptly provided by Borrower in a timely manner to the
extent available or obtainable by Borrower. The Borrower shall provide daily
work force logs. The Borrower shall also provide to the Construction Monitor
from time to time, upon the Construction Monitor's request, which shall not be
more frequently than monthly, anticipated job costs reports, outlining the
Borrower's estimate of costs to complete the Project.

17. The Borrower hereby assigns to Lender as further security for the
Loan, all governmental approvals, construction and building permits, licenses
and contracts relating to the Premises, including but not limited to, all
environmental approvals, all approvals for sewer, water and other utilities,
zoning site plan or subdivision approvals, each as may be permitted by the
entity issuing such <PAGE>
approvals, permits, licenses and contracts, or to the
extent permitted by law.

18. Borrower shall at all times have and maintain all payment,
performance and other bonds and insurance required by any state, federal or
municipal government or agency.

19. As reasonably required by Lender at reasonable intervals during
the course of construction and renovation, Borrower shall provide the Lender
with the most current as-built drawings available to Borrower. Lender agrees
to accept a mark-up of the most current as-built drawings, prior to
Substantial Completion. At the request of Lender, upon Substantial Completion
of each portion of the Project, Borrower shall provide Lender with a current
as-built drawing. At the request of Lender, upon Substan-tial Completion of
the entire Project, Borrower shall also provide Lender with a current as-built
drawing.

20. The Borrower shall execute and deliver to Lender any and all
documentation reasonably required by lender so as to render the Lender a
beneficiary under any and all bonds delivered in connect-tion with the
Project.

21. Borrower, at its sole cost and expense, shall promptly replace or
repair any work not performed in accordance with this Agreement which is
rejected by the Lender or its Construction Monitor.

22. Borrower shall deliver to Lender a certified rent roll on every
October 1, January 1, April 1 and July 1 after the date hereof.

23. The improvements on or which may be erected or renovated on said
Premises shall not encroach upon the street or upon adjoining property or
violate restrictive covenants of record or local zoning ordinances.

24. The fixtures, or articles to be used in the construction or
renovation of any of the improvements shall be purchased by the owner of the
Premises, so that the ownership thereof will vest in said owner free from all
encumbrances on delivery to the Premises.

25. With respect to any disbursement made to Borrower from the escrow
for a tenant improvement cost:

(a) Borrower shall deliver to Lender a tenant estoppel
certificate, if required by the lease, evidencing unconditional acceptance of
all work by any tenant for whose benefit the work was performed and certifying
as to other matters reasonably required by Lender;

(b) Borrower shall deliver to Lender, if applicable, final and
unconditional lien waivers from any general contractor or subcontractor
performing all or a portion of such tenant improve-ments;

(c) Borrower shall provide Lender and it Construction Monitor
the right to inspect the leased premises to verify that the tenant
improvements have been substantially completed; and

(d) Borrower shall provide Lender and its Construction Monitor,
the right to review (but not approve), copies of the Borrower's budgets for
tenant improvements and leasing commissions.

26. No tenant improvements shall adversely affect the building
structure.

IV. EVENTS OF DEFAULT

The occurrence of any of the following events shall constitute an Event
of Default hereunder:

1. The occurrence of an Event of Default under any of the Loan
Documents.

2. The Borrower shall have failed to duly observe or perform any
covenant, condition, term, undertaking or agreement on the part of the
Borrower to be observed or performed pursuant to this Agreement, other than
those described in other paragraphs of this Article IV, and such default shall
have remained uncured for a period of thirty (30) days after notice thereof to
the Borrower by the Lender; provided, however, that if any such default shall
be of such nature that it cannot be cured or remedied within thirty (30) days,
Borrower shall be entitled to a reasonable period of time to cure or remedy
such default, provided Borrower commences the cure or remedy thereof within
the thirty-day period following the giving of notice and thereafter proceeds
with diligence to complete such cure or remedy.

3. Any representation or warranty made by Borrower in this Agreement,
in the Notes or Mortgage, or in any other Loan Document shall have been untrue
or inaccurate in any material respect.

4. Upon failure for thirty (30) days to comply with any law,
ordinance, order, rule or regulation of any governmental authority having
jurisdiction over work of the type as herein contemplated to be erected or
performed, or upon refusal for a period of thirty (30) days to remove any work
condemned or rejected by any of the said authorities or prohibited by law;
provided, however, that if any such default shall be such nature that it
cannot be cured or remedied within thirty (30) days, Borrower shall be entitled
to a reasonable period of time to cure or remedy such default, provided Borrower
commences the cure or remedy thereof within the thirty-day period following the
giving of notice and thereafter proceeds with diligence to complete such cure or
remedy.

5. The Borrower shall have failed to present to the Lender evidence
that all such persons, firms or corporations who have performed labor or
furnished material have been paid in full, and such default shall have
remained uncured for a period of thirty (30) days after notice thereof to the
Borrower by the Lender.

6. A mechanic's lien, stop notice, notice of intention or any other
notice, lien or encumbrance shall have been filed against the Premises, with
respect to the work performed or to be per-formed, or labor or materials
furnished or to be furnished, as contemplated herein, and the Borrower shall
have failed to procure within thirty (30) days after the same is filed, a
postponement or cancellation of the said lien or encumbrance, or a discharge
thereof, in the manner and form provided by law, or bonding or title insurance
coverage satisfactory to Lender, and such default shall have remained uncured
for a period of thirty (30) days after notice thereof to the Borrower by the
Lender.

7. Subject to force majeure if Borrower shall (i) at any time prior
to the completion of the Project, abandon the same or cease to work thereon
for a period of more than twenty (20) consecutive days, or (ii) fail to
complete the erection of the Project in accordance with the Drawings within
twelve (12) months from the date hereof or (iii) make changes in the Drawings
without first securing written approval of the Lender, except as may be
permitted under Article II, Paragraph 6b(ii).

8. Except as may be permitted in the Mortgage, Borrower shall have
caused or permitted a security interest, perfected or otherwise, other than
the security interest specifically provided for or permitted hereunder or
under the Mortgage to be created in any collateral provided for hereby or
thereby, or shall have failed to take any action requested by the Lender to
perfect or protect the security interests provided for herein or therein
within ten (10) days after such request.

9. The Borrower shall have transferred or caused to have been
transferred title to the Premises, or any part thereof, to any person, entity
or otherwise, whether voluntarily, involuntarily or by operation of law,
except as may be permitted by the Mortgage.

10. The Borrower shall have assigned or attempted to assign any of its
rights or obligations under this Agreement except as may be permitted by the
Mortgage.

11. The Borrower shall have failed to pay any Cost Overrun in full
within fifteen (15) days after notice from Lender.

V. CONSEQUENCES OF DEFAULT

In case any Event of Default shall have occurred, then and in every such
Event of Default, the Lender may take any or all of the following actions in
addition to those actions allowed in the Notes, the Mortgage and any other
Loan Document securing or evidencing the Loan, at the same time or at
different times:

1. Declare all loans and sums owing to the Lender from Borrower under
this Agreement, the Notes, the Mortgage and/or any other Loan Document to be
immediately due and Payable, whereupon all such sums shall immediately become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by Borrower.

2. Enter into possession of the Premises (either itself or through an
agent or receiver, or in the name of Borrower as set forth below) and perform
any and all work and labor necessary to complete the improvements and
renovations substantially according to the Drawings and employ watchmen to
protect the Premises from injury; all sums so expended by the Lender shall be
deemed paid to Borrower and secured by the Mortgage, and the escrowed funds or
funds of the Lender, at Lender's sole option, may be used for such purpose.
For this purpose, the Borrower hereby constitutes and appoints the Lender its
true and lawful attorney-in-fact with full power of substitution in the
Premises, to complete the Project in the name of the Borrower, and hereby
empowers said attorney or attorneys as follows:

(a) To use any funds of the Borrower, including any balance
which may be held in escrow, or any portion thereof, for the purpose of
completing the Project in the manner contemplated by the Drawings;

(b) To make such additions and changes and corrections in the
Drawings which shall be necessary or desirable to complete the Project in
substantially the manner contemplated by the Drawings;

(c) To employ such contractors, subcontractors, and agents,
architects, engineers and inspectors as shall be required for said purposes;
to pay, settle or compromise all existing bills and claims which may be liens
against the said Project, or as may be necessary or desirable for the
completion of the job, or for the clearance of title;

(d) To execute all applications and certificates in the name of
the Borrower which may be required by any of the contract documents and to do
any and every act which the Borrower might do in its own behalf. It is
further understood and agreed that this power of attorney shall be deemed to
be a power coupled with an interest and cannot be revoked. The Lender, as
attorney-in-fact, shall also have power to prosecute and defend all actions or
proceedings in connection with the construction or performance of the Project.

The Borrower hereby assigns and quitclaims to the Lender all sums unadvanced
under said Mortgage and all sums held in escrow conditioned upon the use of
said sums in escrow for the completion of the Project (or to be applied
against the Lender's expenses of collection, accrued but unpaid interest, the
principal amount of the Notes, or payment of taxes and/or insurance premiums,
as the Lender may elect), such assignment to become effective only in the case
of the occurrence of an Event of Default hereunder. In no event, however,
shall Lender (nor any successor or assignee of Lender) execute any document
which purports to create any personal liability of Borrower to third parties
pursuant to the foregoing power of attorney or otherwise, and every document
executed pursuant to such provisions shall contain an exculpation clause to
that effect. Provided, however, that nothing contained in this subparagraph
or in any document executed pursuant hereto shall affect the liability of
Borrower to Lender under this Agreement as described in paragraphs 12 and 12.1
of the Note, which have been incorporated into this Agreement pursuant to
Article VII, paragraph 15.

3. To apply the escrowed funds and all interest earned thereon, or
any portion of said funds and/or interest, against the obligations of the
Borrower under the Notes, Mortgage or any other Loan Document, and in the
event of the application of such monies toward the principal due under the
Notes, also toward the Make Whole Premium as defined in the Notes.

4. To institute and maintain foreclosure proceedings. In case of the
foreclosure of the Mortgage prior to the time when the improvements shall
fully completed or renovated, it is hereby expressly agreed between the
parties hereto that all work remaining to be done and materials still to be
furnished shall be considered as work necessary for the conservation and
preservation of the subject matter secured by said Mortgage, to wit: the
Project contemplated to be renovated and constructed under this Agreement.

5. To institute proceedings to collect the amount of any Coast
Overrun(s).

6. Take any of the remedies otherwise available to it as a matter of
law or equity.

7. The Lender shall not be required to make any Advances or
disbursements of escrowed funds during the existence of an Event of<PAGE>
Default,
provided, however, the Lender may, in its sole discretion, make
Advances or disbursements of escrowed funds notwithstanding the existence of
such an Event of Default or the occurrence of any such event, and any Advance
or disbursement of escrowed funds so made shall be deemed to have been made
pursuant to this Agreement.

8. Take any action, without the requirement of foreclosure
proceedings, directly against the Borrower.

9. Take any action available under any of the Loan Documents.

VII. MISCELLANEOUS

1. Following an Event of Default, Lender shall be entitled to
reimbursement from Borrower for its reasonable expenses incurred in the
enforcement or liquidation of any debt due hereunder, or for the enforcement
of payment of the Loan, or for its administration of the Loan, and those
expenses shall, without limitation, including reasonable attorneys' fees, be
secured herein, and are to be added to the Loan, and secured by the Mortgage.
Until paid by Borrower, said amounts shall bear interest at a rate equal to
the lesser of (i) four percent (4%) per annum above the then applicable rate
of interest payable under the Notes or (ii) the maximum rate allowed by
applicable law (the "Post-Default Rate").

2. Borrower agrees that no delay on the part of the Lender in
exercising any power or right hereunder shall operate as a waiver of any such
power or right, preclude other or further exercise thereof, or the exercise of
any other power or right. No waiver whatsoever shall be valid unless in
writing and signed by the Lender and then only to the extent set forth
therein.

3. Borrower waives presentment, dishonor and notice of dishonor,
protest and notice of protest of all commercial papers at any time held by the
Lender on which the Borrower is in any way liable.

4. The provisions of this Agreement shall be in addition to those of
the Mortgage, Notes and other writings held by the Lender relating to this
Loan, all of which shall be constructed as one instrument.

5. This Agreement shall be binding upon the parties hereto, their
respective successors and assigns and shall inure to the benefit of the Lender
and its successors and assigns. Borrower shall have no right to assign its
rights and obligations under this Agreement except as may be set forth in the
Mortgage. Any attempted assignment of same shall be void and shall constitute
an Event of Default under this Agreement.

6. The rights and remedies herein expressed to be vested in or
conferred upon the Lender shall be cumulative and shall be in addition to and
not in substitution for or in derogation of the rights and remedies conferred
by any applicable law.

7. All notices to be given to any party hereunder shall be given to
such party and shall be effective in accordance with the notice provisions of
the Mortgage.

8. Nothing herein contains shall impose upon the Lender any
obligation to enforce any terms, covenants or conditions contained herein.
Failure of the Lender, in any one or more instances, to insist upon strict
performance by the Borrower of any terms, covenants or conditions of this
Agreement shall not be deemed to be a waiver or relinquishment of any such
terms, covenants and conditions.

9. All conditions of the obligation of the Lender to make advances or
disbursements of escrowed funds hereunder are imposed solely and exclusively
for the benefit of the Lender and its assigns and no other person or persons
shall have standing to require satisfaction of such conditions in accordance
with their terms or be entitled to assume that Lender will refuse to make
advances or disbursements of escrowed funds in the absence of strict
compliance with any or all thereof and no other person or persons shall, under
any circumstances, be deemed to be a benefi-ciary or beneficiaries of such
conditions, any and all of which may be waived in whole or in part by the
Lender if in its sole discretion it deems it advisable to do so.

10. This Agreement and all rights and obligations hereunder may be
assigned or otherwise transferred by the Lender to anyone of its choosing.

11. This Agreement, the loans made hereunder and the rights of the
parties shall be construed and enforced under the laws of the State of New
Jersey.

12. Borrower agrees that it shall defend, hold harmless, and indemnify
the Lender from and against any and all losses, damages, claims, judgements,
liens, costs, and expenses (including all reasonable attorney's fees and
expenses) of any nature whatsoever arising out of or in any manner relating to
the Project or the construction, renovation or financing thereof or any other
activities at the Premises except to the extent resulting from the gross
negligence or wrongful acts of Lender, Construction Monitor or their
respective agents or representatives.

13. The parties do not intend the benefits of this Agreement to inure
to any third party other than their respective permitted successors and
assigns as may be set forth herein. Notwithstanding anything contained herein
or in the Mortgage, the Notes, or any of the Loan Document or any course of
conduct by either of the parties or their affiliates, agents or employees,
this Agreement shall not be construed as creating any rights, claims or causes
of action against Lender in favor of any general contractor, subcontractor,
supplier of labor or materials or their respective creditors or any person or
entity. Without limitation, the payment by Lender to any general contractor,
subcontractor or supplier of labor or materials shall not be deemed a
recognition by Lender of a third-party beneficiary status of such person or
entity.

14. The parties expressly agree that the relationship of Lender to
Borrower is that of lender only, and the Lender is not a partner or a co-
venturer of Borrower. Lender's sole interest in the Premises and the Project
is for the purposes of security for repayment of the Loan in accordance with
the terms of this Agreement, the Mortgage and the Notes.

15. The provisions of paragraphs 12 and 12.1 of the Notes are hereby
incorporated by reference as if set forth at length.

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

JMB INCOME PROPERTIES, LTD.-XI,
an Illinois limited partnership

Witness: By: JMB Realty Corporation,
a Delaware Corporation
its managing general partner

By:
Name: Name:Elizabeth Kogen
Title: Vice-President

Witness: PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY

By:
Name: Name:Jane A.B. Eppink
Title: Counsel

By:
Name: Name:Clint Woods
Title: Counsel

MORTGAGE AND SECURITY AGREEMENT

$36,000,000.00

THIS MORTGAGE AND SECURITY AGREEMENT made as of August 30, 1994, by
and between JMB Income Properties, Ltd.-XI, a limited partnership of the
State of Illinois, having its principal place of business and post office
address at 900 North Michigan Avenue, Chicago, Illinois 60611-1575
Attention: Mr. Stephen Lovelette, herein called Mortgagor, and Principal
Mutual Life Insurance Company, an Iowa corporation, having a principal
place of business at 711 High Street, Des Moines, Iowa 50392 herein called
Mortgagee,

WITNESSETH:

THAT Mortgagor is justly indebted to Mortgagee for money borrowed in
the principal sum of THIRTY TWO MILLION DOLLARS ($32,000,000.00) evidenced
by Mortgagor's Secured Promissory Note-A and to Mortgagee for money
borrowed in the principal sum of FOUR MILLION DOLLARS ($4,000,000.00)
evidenced by Mortgagor's Secured Promissory Note-B with each of said Notes
bearing even date herewith, made payable and delivered to Mortgagee, in
each of which notes Mortgagor promises to pay to Mortgagee the said
principal sums or so much thereof as may be advanced from time to time by
Mortgagee, together with interest at the rate, at the times, and in
installments as in each note provided, until the entire principal and
accrued interest have been paid, but in any event, the unpaid balance (if
any) remaining due on the Note shall be due and payable on the first day of
December, 2006 ("Maturity Date"). Each note is equally and ratably secured
by this Mortgage, without priority of one over the other. Both notes,
i.e., the Secured Promissory Note-A in the amount of $2,000,000.00 and the
Secured Promissory Note-B in the amount of $4,000,000.00, are hereinafter
collectively referred to as the "Note".

NOW, THEREFORE, to secure the payment of the said indebtedness in the
amount of $36,000,000.00, in accordance with the terms and conditions
hereof and of the Note, and all extensions, modifications, recastings and
renewals thereof and the performance of the covenants and agreements
contained herein, and also to secure the payment of any and all other
indebtedness, direct or contingent, that may now or hereafter become owing
from Mortgagor to Mortgagee under the terms of the "Loan Documents" as
defined in the Note, and in consideration of Ten Dollars in hand paid,
receipt of which is hereby acknowledged, Mortgagor does by these presents
gives, grants, bargains, sells, enfeoffs, conveys and confirms unto
Mortgagee, its successors and assigns forever, that certain real estate and
all of Mortgagor's estate, right, title and interest therein, located in
the County of Bergen, State of New Jersey, more particularly described in
Exhibit A attached hereto and made a part hereof, which real estate,
together with the following described property, rights and interests, is
collectively referred to herein<PAGE>
- 2 -

as the "Premises".

Together with Mortgagor's interest as lessor in and to all leases of
the said Premises, or any part thereof, heretofore or hereafter made and
entered into by Mortgagor during the life of this mortgage or any extension
or renewal hereof and all rents, issues, proceeds and profits accruing and
to accrue from the Premises (which are pledged primarily and on a parity
with the real estate and not secondarily and are sometimes collectively
referred to herein as the "Leases").

Together with all and singular the tenements, hereditaments,
easements, appurtenances, passages, waters, water courses, riparian rights,
other rights, liberties and privileges thereof or in any way now or
hereafter appertaining to the Premises, including homestead and any other
claim at law or in equity as well as any after-acquired title, franchise or
license and the reversion and reversions and remainder and remainders
thereof.

Together with all right, title and interest of Mortgagor in any and
all buildings and improvements of every kind and description now or
hereafter erected or placed on the said real estate and all material
intended for construction, reconstruction, alteration and repairs of such
buildings and improvements now or hereafter erected thereon, all of which
materials shall be deemed to be included within the Premises immediately
upon the delivery thereof to the Premises, and all fixtures now or
hereafter owned by Mortgagor and attached to or contained in and used in
connection with the Premises including, but not limited to, all machinery,
motors, elevators, fittings, radiators, awnings, shades, screens, and all
plumbing, heating, lighting, ventilating, refrigerating, incinerating, air-
conditioning and sprinkler equipment and fixtures and appurtenances
thereto; and all items of furniture, furnishings, equipment and personal
property owned by Mortgagor used or useful in the operation of the
Premises; and all renewals or replacements thereof or articles in
substitution therefor, whether or not the same are or shall be attached to
said buildings or improvements in any manner; it being mutually agreed,
intended and declared that all the aforesaid property owned by Mortgagor
and placed by it on the real estate or used in connection with the
operation or maintenance of the Premises shall, so far as permitted by law,
be deemed to form a part and parcel of the real estate and for the purpose
of this mortgage to be real estate and covered by this mortgage, and as to
any of the property aforesaid which does not so form a part and parcel of
the real estate or does not constitute a "fixture" (as such term is defined
in the Uniform Commercial Code) this mortgage is hereby deemed to be, as
well, a Security Agreement under the Uniform Commercial Code for the
purpose of creating hereby a security interest in such property which
Mortgagor hereby grants to Mortgagee as Secured Party. Mortgagor agrees to
execute any and all documents, including financing statements which may be
reasonably required by Mortgagee to perfect the security interest

-3-

granted hereby. Mortgagee is hereby appointed Mortgagor's Attorney-in-Fact
to do all acts and things which Mortgagee may deem necessary or expedient
solely to perfect and continue the perfection of the security interest
created hereby.

In no event, however, shall Mortgagee (nor any successor or assignee
of Mortgagee) execute any document which purports to create any personal
liability of Mortgagor to third parties pursuant to the foregoing power of
attorney or otherwise, and every document executed pursuant to such
provisions shall contain an exculpation clause to that effect. Provided,
however, that nothing contained in this paragraph or in any document
executed pursuant hereto shall affect the liability of Mortgagor to
Mortgagee under this Mortgage as described in paragraphs 12 and 12.1 of the
Note, which have been incorporated into this Mortgage pursuant to paragraph
39 hereof.

Together with all right, title and interest of Mortgagor, now or
hereafter acquired, in and to any and all strips and gores of land adjacent
to and used in connection with the Premises and all right, title and
interest of Mortgagor, now owned or hereafter acquired, in, to, over and
under the ways, streets, sidewalks and alleys adjoining the Premises.

TO HAVE AND TO HOLD the same unto the Mortgagee, its successors and
assigns forever, for the purposes and uses herein set forth.

THIS IS A FIRST MORTGAGE.

Mortgagor represents that it is the absolute owner in fee simple of
the Premises described in Exhibit A, which Premises are free and clear of
any liens or encumbrances except as set out in Exhibit B attached hereto
(the "Permitted Exceptions"), and except for taxes which are not yet due or
delinquent. Mortgagor shall forever warrant and defend the title to the
Premises against all claims and demands of all persons whomsoever and will
on demand execute any additional instrument which may be reasonably
required to give Mortgagee a valid first lien on all of the Premises,
except as stated in Exhibit B.

Except for matters set forth in the "Environmental Report", as
hereinafter defined, Mortgagor further represents that: (i) the Premises is
not subject to any casualty damage; (ii) to "the best of Mortgagor's
knowledge", as hereinafter defined there is no Hazardous Material (as
hereinafter defined) on the Premises (except for the use and storage of
supplies for cleaning and maintenance and standard office supplies in
commercially reasonable amounts, provided that such items are incidental to
the use of the Premises and are stored and used in compliance with all
laws, ordinances, rules and regulations governing Hazardous Materials), nor
has any Hazardous Material been discharged from the Premises or penetrated
any surface or subsurface rivers or streams crossing or adjoining

-4-

the Premises or the aquifer underlying the Premises in violation of any
Environmental Law; (iii) Mortgagor has complied and caused the Premises to
comply with all statutes, laws, ordinances, rules and regulations of all
local, state or federal authorities having jurisdiction over the Premises
or its use relative to any Hazardous Material; and (iv) there is no other
property in the State of New Jersey presently owned or used by Mortgagor
from which the existence or discharge of Hazardous Material would result in
any charge or lien upon the Premises. Hazardous Material as used in this
mortgage means any hazardous or toxic material, substance pollutant,
contaminant or waste which is defined by those or similar terms or is
regulated as such under any statute, law, ordinance, rule or regulation of
any local, state or federal authority having jurisdiction over the Premises
or its use, including but not limited to: the New Jersey Industrial Site
Recovery Act, P.L. 1993 c. 139 ("ISRA"), formerly the New Jersey
Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 ET SEQ ("ECRA"),
the New Jersey Spill Compensation and Control Act, as amended, N.J.S.A.
58:10-23.11 ET SEQ. (the "Spill Act"), the New Jersey Underground Storage
of Hazardous Substances Act, as amended, N.J.S.A. 58:10A-21 ET SEQ.
("USTA"), the Comprehensive Environmental Response, Compensation and
Liability act, as amended, 42 U.S.C.A. Subsection 9601 ET SEQ. ("CERCLA"), the
Resource Conservation and Recovery Act, as amended, 42 U.S.C.A. Subsection
6901 ET SEQ. ("RCRA"), the Federal Water Pollution Control Act, as amended, 33
U.S.C.A. Subsection 1251 ET SEQ. ("FWPCA") and the Federal Clean Air Act,
as amended, 42 U.S.C.A. Subsection 7401 ET SEQ. ("FCAA"), (hereinafter
referred to collectively as "Environmental Laws"). As used in the context of
any environmental matter, the phrase "the best of Mortgagor's knowledge" or any
similar phrase means (a) Mortgagor's actual knowledge without inquiry and
investigation and (b) Mortgagor's knowledge based on its review of the
following report:

Phase I Environmental Assessment, prepared by Versar, Inc. dated June 7,
1994.

MORTGAGOR COVENANTS AND AGREES AS FOLLOWS:

1. Mortgagor shall

(a) pay each item of indebtedness secured by this mortgage
when due according to the terms hereof and of the Note;

(b) pay a late charge equal to four percent (4%) of any
payment of principal, interest or premium which is not paid when due, to
cover the expense involved in handling such late payment (Notwithstanding
the foregoing, Mortgagee will waive the foregoing requirement of a later
fee, not more than once during each calendar year, if payment is received
by
-5-

Mortgagee not later than the business day immediately
following oral notice as to such payment to a representative of the
Mortgagor previously designated by the Mortgagor in writing as authorized
to receive such notice.);

(c) subject to subparagraph (f) below, pay on or before the
due date thereof any indebtedness which may be secured by a lien or charge
on the Premises, and upon request of Mortgagee exhibit satisfactory
evidence of the discharge thereof;

(d) complete within a reasonable time the construction of any
building at any future time in process of construction upon the real estate
and complete the current construction of renovations to the Premises in
accordance with the Loan Agreement of even date between the parties ("Loan
Agreement");

(e) make no material alteration or new construction to the
Premises without the prior written consent of Mortgagee, except such as are
required by law or ordinance or by the Leases, the Loan Agreement, the
Permitted Exceptions or any other agreement approved by Mortgagee;

(f) remove or demolish no building or other improvement at
any time a part of the Premises except as may be required by the Leases,
the Loan Agreement, the Permitted Exceptions or any other agreement
approved by Mortgagee, and shall keep the Premises, including the buildings
and improvements, in good condition and repair, without waste, and free
from mechanics' liens and other liens or claims for liens and encumbrances
(provided however that in lieu of payment when due of the liens and
encumbrances described in this subparagraph (f), subparagraph (c) above,
and subparagraphs (k) and (l) below, and during Mortgagor's bona fide
contest of same, Mortgagor may provide to Mortgagee a bond or affirmative
title insurance endorsement as determined by Mortgagee, satisfactory to
Mortgagee and counsel. In the event, however, of a determination in such
contest adverse to Mortgagor, Mortgagor shall immediately pay off and
discharge such mechanics or other lien or claim);

(g) comply, and use reasonable efforts to cause each lessee
or other user of the Premises to comply, with all requirements of law and
ordinance, and all rules and regulations, now or hereafter enacted, by
authorities having jurisdiction of the Premises and the use thereof, all
orders and directions of the

-6-

National Fire Protection Association or similar body, and
all restrictions of record pertaining to the Premises, including the
buildings and improvements, and the use thereof;

(h) not cause or permit any change to be made in the use of
the Premises as an enclosed regional shopping mall without Mortgagee's
prior written consent;

(i) observe and comply with, and shall not amend or modify
without the consent of Mortgagee, all conditions and requirements necessary
to preserve and extend any and all rights, licenses, permits, certificates
(including but not limited to a master certificate of occupancy, zoning
variances, special exceptions and nonconforming uses), privileges,
franchises and concessions which are applicable to the Premises or which
have been granted to or contracted for by Mortgagor in connection with any
existing or presently contemplated use of the Premises.

(j) make or permit no use of the Premises that could with the
passage of time result in the creation of any right of use, or any claim of
adverse possession or easement on, to or against any part of the Premises
in favor of any person or the public;

(k) Subject only to the availability of insurance proceeds if
Mortgagee is obligated to release the same to Mortgagor hereunder, promptly
repair, restore or rebuild any buildings or improvements now or hereafter a
part of the Premises which may become damaged or be destroyed by any cause
whatsoever, so that upon completion of the repair, restoration and
rebuilding of the buildings and improvements there will be no liens of any
nature arising out of the construction subject to subparagraph (f) above
and the Premises will be of substantially the same character and will have
a commercial value at least as great as the commercial value thereof prior
to the damage or destruction;

(l) subject to subparagraph (f) above not, directly or
indirectly, due to transfer of corporate stock, assignment of beneficial
interests under a trust, or assignment of partnership interests or
otherwise, cause or permit any sale, transfer or conveyance of the Premises
or create, suffer or permit any encumbrance or lien on the Premises other
than the lien hereof subject to subparagraph (f) above (and whether prior
to subsequent to the lien hereof), the leases of the Premises assigned to
Mortgagee and other

-7-

exceptions and transfers expressly referred to and
permitted herein, it being understood and agreed that the indebtedness
evidenced by the Note and its terms are personal to Mortgagor and in
accepting the same Mortgagee has relied upon what it perceived as the
willingness and ability of Mortgagor to perform its obligations hereunder,
under the Note, and as lessor under leases of the Premises; Mortgagee may
consent to a sale, transfer, conveyance or encumbrance and expressly waive
this provision in writing to Mortgagor however any such consent and waiver
shall not constitute any consent or waiver of this provision as to any
sale, transfer, conveyance or encumbrance other than that for which the
consent and waiver was expressly granted; Mortgagee's ability to consent to
any sale, transfer, conveyance or encumbrance and waive this provision
implies no standard of reasonableness in determining whether or not such
consent shall be granted and the same may be based upon what Mortgagee
solely deems to be in its best interest; without limiting Mortgagee's right
to withhold its consent and waiver entirely, such consent and waiver may be
conditioned upon an increase in the rate of interest under the Note and the
imposition of other terms and conditions thereunder or hereunder; any sale,
transfer, conveyance or encumbrance made, created or permitted in violation
of this provision shall be null and void and in addition to the other
rights and remedies available to Mortgagee hereunder, Mortgagee shall have
the option of declaring the unpaid principal balance of the Note, together
with all accrued and unpaid interest, premium, if any and all other sums
and charges evidenced thereby or owing hereunder, immediately due and
payable;

(1) Notwithstanding the foregoing after Mortgagor
shall have performed in all material respects all of its obligations under
the Loan Agreement, Mortgagee will allow a single transfer of the Premises
and assumption of the Mortgagor's obligations under the Note, this Mortgage
and other documents executed and delivered by Mortgagor to Mortgagee and
stating that it secures the Note ("Loan Documents") with all existing terms
and conditions, subject to review and reasonable approval of the proposed
purchaser by Mortgagee and Mortgagee's receipt of an assumption fee of 1%
of the outstanding principal balance. Mortgagee's review of the proposed
purchaser shall encompass various factors, including but not limited to,

-8-

purchaser's creditworthiness, financial
strength, and real estate management expertise.

(2) In addition, after Mortgagor shall have
performed, in all material respects all of its obligations under the Loan
Agreement, Mortgagee will allow a single transfer of the Premises to and
assumption of Mortgagor's obligations under the Loan Documents by, and the
transfer of ownership interest in the Mortgagor to, any of the following
subject to satisfaction of the following requirements:

i) JMB Realty Corporation, a Delaware
corporation ("JMB");

ii) an affiliate or subsidiary of JMB (As
used herein an "affiliate" includes any corporation in which JMB or its
shareholders, individually or collectively, own or control, directly or
indirectly, more than 50% of the common stock);

iii) JMB Group Trusts I through V, trusts
created pursuant to those Agreements of Trust dated August 1, 1979, May 1,
1982, December 1, 1983, August 1, 1985 and May 1, 1988, respectively,
pursuant to the laws of Illinois ("Trust");

iv) a general or limited partnership in
which either Mortgagor, Trust, of JMB or an affiliate or subsidiary of JMB
is a general partner;

v) a real estate investment trust in which
JMB or an affiliate or subsidiary of JMB is the manager;

vi) any trust or common fund in which JMB
or an affiliate of subsidiary of JMB is an advisor;

vii) any real estate investment trust, or
partnership or other entity in which JMB, Trust or an affiliate of JMB has
a 25% ownership interest, including without limitation, that certain real
investment trust, created on May 12, 1993, pursuant

-9-

to the laws of Maryland, known as
"Urban Shopping Centers, Inc.".

Mortgagee shall receive written notice
of such transfer within thirty days following the consummation of such
transfer, which shall include a listing of all owners of general
partnership interests and owners of 5% or greater limited partnership
interests in Mortgagor along with the respective percentages of ownership
interests held by such owners subsequent to the transfer. Mortgagee shall
receive a reasonable fee for handling each transaction, not to exceed
$1,000 per transaction, and Mortgagor shall pay all reasonable out of
pocket costs, fees, including reasonable attorney's fees, and expenses
actually incurred by Mortgagee with regard to each transaction.

(3) Notwithstanding anything to the contrary
contained herein, there shall be no restrictions or transfers by limited
partners of Mortgagor of their limited partner interests therein.

(m) not caused or permit any Hazardous Material to
exist on or discharge from the Premises, and promptly: (i) pay any finally
adjudicated claim against Mortgagor or the Premises after continuous and
diligent efforts to contest same, and, (ii) remove any charge or lien upon
the Premises, and, in general, comply with all Environmental Laws and cause
all tenants to comply with all Environmental Laws, provided, however, that
notwithstanding the provisions of this subparagraph (m), Mortgagor and/or
tenant under any lease on the Premises which has been approved in writing
by Mortgagee (or is in conformity with requirements in the Assignment of
Leases, as defined in subparagraph 10(f) below) shall be entitled to use
and store supplies for cleaning and maintenance and standard office
supplies in commercially reasonable amounts, provided, however, that such
items are incidental to the use of the Premises and are stored and used in
compliance with all laws and regulations governing Hazardous Materials;

(n) not caused or permit any Hazardous Material to
exist on or discharge from any property in the State of New Jersey owned or
used by Mortgagor which would result in any charge or lien upon the
Premises;

-10-

(o) notify Mortgagee of any Hazardous Material that
exists on or is discharged from the Premises within ten (10) days after
Mortgagor first has knowledge of such existence or discharge;

(p) indemnify and defend against any claim ("Claim")
asserted against Mortgagee by anyone (other than Mortgagee) for loss,
penalties, fines or damage resulting from Hazardous Material on the
Premises or discharged from the Premises, together with Mortgagee's bona
fide costs, expenses, and reasonable attorney's fees with regard to such
Claim. This obligation to pay and indemnify shall continue notwithstanding
payment in full of the indebtedness, completion of foreclosure or receipt
of a deed in lieu of foreclosure (the date of the earliest to occur of the
foregoing is hereinafter referred to as the "Cut Off Date") (but only as to
Claims arising or accruing prior to the Cut Off Date). However, no claim
may be made by Mortgagee with regard to a Claim after the earlier to occur
of (i) Mortgagee's sale of the Premises after its receipt of title thereto
in foreclosure or by deed in lieu of foreclosure or (ii) 3 years after the
Cut Off Date.

(q) upon Mortgagee's written request, deliver to
Mortgagee within thirty (30) days after request, such coverage which has
generally become available, at market rates, from an ALTA member title
insurance company doing business in the State of New Jersey, a new title
policy, endorsement or amendment in form and substance acceptable to
Mortgagee which provides Mortgagee with affirmative coverage against loss
of priority of the lien of this mortgage resulting from the existence of
any Hazardous Material on the Premises;

(r) do all things necessary to preserve and keep in
full force and effect its existence, franchises, rights and privileges
under the laws of the state of its formation and, if other than its state
of formation, the state where the Premises is located; and

(s) do all things necessary to preserve and keep in
full force and effect Mortgagee's title insurance coverage insuring the
lien of this mortgage as a first and prior lien, subject only to the
exceptions stated in Exhibit B, including without limitation, delivering to
Mortgagee not less than 30 days prior to the effective date of any rate
adjustment, modification or extension of the Note any new policy or
endorsement which may be required to assure Mortgagee of such continuing
coverage.

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(t) not commit, or allow to exist, waste on the
Premises.

2. (a) Subject to Mortgagor's rights under subparagraph
2(b) below, Mortgagor shall pay when due and before any penalty attaches or
interest accrues all general taxes, special taxes, assessments (including
assessments for benefits from public works or improvements whenever begun
or completed), water charges, sewer service charges, vault or space charges
and all other like charges against or affecting the Premises or against any
property or equipment located on the Premises, or which might become a lien
on the Premises, and shall, within 30 days following the last day on which
any such tax, assessment or charge may be paid without incurring any
penalty or interest for nonpayment thereof, furnish to Mortgagee a
duplicate receipt of such payment. If any such tax, assessment or charge
may legally be paid in installments, Mortgagor may, at its option, pay such
tax, assessment or charge in installments.

(b) To prevent default hereunder Mortgagor shall pay in
full, under protest in the manner provided by law, any tax, assessment or
charge which Mortgagor may desire to contest; PROVIDED, HOWEVER, that

(i) if contest of any tax, assessment or charge
may be made without the payment thereof, and

(ii) such contest shall have the effect of
preventing the collection of the tax, assessment or charge so contested and
the sale or forfeiture of the Premises or any part thereof or any interest
therein to satisfy the same.

Mortgagor may at its option and in its discretion
and upon the giving of written notice to Mortgagee of its intended action
and upon the furnishing to Mortgagee of such security or bond as Mortgagee
may require, contest any such tax, assessment or charge in good faith and
in the manner provided by law. All costs and expenses incidental to such
contest shall be paid by Mortgagor. In the event of a ruling or
adjudication adverse to Mortgagor, Mortgagor shall promptly pay such tax,
assessment or charge. Mortgagor shall indemnify and save harmless the
Mortgagee and the Premises from any loss or damage arising from such
contest and shall, if necessary to prevent sale, forfeiture or any other
loss or damage to the Premises or to the Mortgagee, pay such tax,
assessment or charge or take whatever action is necessary to prevent any
sale, forfeiture or loss.

-12-

3. Mortgagor shall at all times keep all buildings and
improvements which now are or hereafter become a part of the Premises
insured under an 'all risk' form of insurance policy containing both a
replacement cost and an agreed amount endorsement (and against all other
hazards as reasonably may be required by Mortgagee, which may include,
without limitation, insurance against loss or damage by flood, earthquake
and war risk but if and only to the extent that such insurance is
customarily carried on property similar to the Premises) and, if requested
by Mortgagee, shall procure and maintain in force boiler insurance (if any
building or improvement has a boiler) and rent insurance against loss of
rent due to fire or other casualties named in standard policies of
insurance against loss of rent. All insurance shall be in form, content
and amounts approved by Mortgagee and written by an insurance company or
companies or governmental agency or instrumentality approved by Mortgagee
and with industry ratings required by Mortgagee. The policies for such
insurance shall have attached thereto standard mortgagee clauses in favor
of and permitting Mortgagee to collect any and all proceeds payable under
all such insurance. All such policies or certificates thereof shall be
delivered to and held by Mortgagee as further security for the payment of
the Note and other moneys herein mentioned, with evidence of renewal
coverage delivered to Mortgagee at least 30 days before the expiration date
of any policy. Mortgagee acknowledges that coverage as described in
policies or certificate supplied to it as of the date hereof are
satisfactory to it and in compliance with this paragraph 3. Mortgagor
shall also carry public liability insurance protecting Mortgagor and any
tenant or other user of the Premises against liability for injuries to
persons and property occurring in or on the Premises, or adjacent to the
Premises (to the extent relating to the operation of the Premises), in
forms, companies and amounts satisfactory to Mortgagee with the policy or
policies evidencing such insurance to contain a 10 day notice of
cancellation clause in favor of Mortgagee. Mortgagor shall not carry
separate insurance, concurrent in kind or form and contributing in the
event of loss, with any insurance required herein.

4. Mortgagor shall deposit with and pay to Mortgagee, on
each payment date specified in the Note secured by this mortgage, a sum
equivalent to: (1) the taxes and assessments assessed or levied against
and next due on the Premises divided by the number of payments that will
become due and payable under the Note before the date when such taxes and
assessments will become due and payable, PLUS (2) the premiums that will
next become due and payable for insurance required by this mortgage to be

-13-

furnished by Mortgagor divided by the number of payments
that will become due and payable under the Note before the date when such
premiums will become due and payable. Mortgagee shall use such deposits to
pay the taxes, assessments and premiums when the same become due.
Mortgagee shall not be liable for interest on such deposits. Mortgagor
shall procure and deliver to Mortgagee, in advance, statements for such
charges. If the total payments made by Mortgagor under this paragraph
exceed the amount of payments actually made by Mortgagee for taxes,
assessments and insurance premiums, such excess shall be credited by
Mortgagee on subsequent deposits to be made by Mortgagor. If, however, the
deposits are insufficient to pay the taxes, assessments and insurance
premiums when the same shall be due and payable, Mortgagor will pay to
Mortgagee any amount necessary to make up the deficiency, on or before the
date when payment of such taxes, assessments and insurance premiums shall
be due. If at any time Mortgagor shall tender to Mortgagee, in accordance
with the provisions of the Note secured by this mortgage, full payment of
the entire indebtedness represented thereby, Mortgagee shall, in computing
the amount of such indebtedness, credit to the account of Mortgagor any
balance remaining in the funds accumulated and held by Mortgagee under the
provisions of this paragraph. If there is an Event Default under any of
the provisions of this mortgage resulting in a public sale of the Premises,
or if Mortgagee otherwise acquires the Premises after an Event of Default,
Mortgagee shall apply, at the time of commencement of such proceedings, or
at the time the Premises is otherwise acquired, the balance then remaining
in the funds accumulated under this paragraph as a credit on the interest
accrued and unpaid and the balance to the principal then remaining unpaid
under the Note. The enforceability by Mortgagee against Mortgagor of the
covenants relating to taxes, assessments and insurance premiums provided
for in this mortgage shall not be affected except to the extent that said
obligations have been actually met by Mortgagor's compliance with this
paragraph, and payment to Mortgagee, (and in which event Mortgagor's
obligations under the covenants shall be correspondingly reduced).

5. In the event of any damage to or destruction of the
buildings or improvements which are a part of the Premises:

(a) Mortgagor will immediately notify Mortgagee thereof
in the manner provided in this mortgage for the giving of notices. As to
casualty damage estimated by Mortgagee to be $500,000 or greater, Mortgagee
may in its discretion (and it is hereby authorized to) either

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settle jointly with Mortgagor and adjust with
Mortgagor any claim under such insurance policies, or allow Mortgagor to
agree with the insurance company or companies on the amount to be paid upon
the loss. In either case, the proceeds shall be paid to Mortgagee and
Mortgagee is authorized to collect and to give receipts therefor. As to
casualty damage of $500,000 or less, Mortgagor shall be entitled to settle
and adjust any claim, and shall notify Mortgagee of all such action.

(b) Subject to Mortgagee's compliance with paragraph
5(c) below, Mortgagor acknowledges that regardless of the cause of the
damage or destruction or the availability or sufficiency of insurance
proceeds until all indebtedness secured hereby shall be fully paid, it is
obligated to repair, restore and rebuild any buildings or improvements so
damaged or destroyed. Repair and restoration of the buildings and
improvements shall be commenced promptly after the occurrence of the loss
and shall be prosecuted to completion diligently, and the buildings and
improvements shall be so restored and rebuilt as to be of at least equal
value and substantially the same character as prior to such damage and
destruction. As to proceeds of insurance, Mortgagee shall have the
obligations described in subparagraph 5(c)(1) and (2) below.

(1) In the event insurance proceeds resulting
form casualty damage equal or exceed $500,000.00, such proceeds shall be
held by Mortgagee without any allowance of interest and shall be made
available to reimburse Mortgagor for the actual cost of the building or
restoration of buildings and improvements on the Premises subject to the
following conditions: (i) There shall be no Event of Default hereunder;
(ii) the annual net operating income from all executed leases in effect on
the Premises, shall equal or exceed annual debt service under the Note;
annual net operating income shall include rental insurance proceeds
attributable to rental income to the extent that rental income to which
such rental insurance proceeds apply resumes after completion of rebuilding
or restoration (iii) Mortgagee reasonably approves the plans and
specifications of such work before such work is commenced (iv) Mortgagor
provides suitable completion or performance bonds and builder's all risk
insurance; (v) no issurer asserts any defense

-15-

against Mortgagor or a tenant under a lease
which is carrying the casualty insurance covering all or any portion of the
Premises pursuant to any insurance policies covering the improvements on
the Premises which is not otherwise covered by insurance carried by
Mortgagor, or Mortgagor deposits with Mortgagee a lump sum in the amount of
such insurance proceeds from the policy held by the insurer asserting such
defense, to be held by Mortgagee without any allowance of interest; (vi)
there shall be sufficient funds on deposit with Mortgagee at all times to
complete the repair and restoration, as certified from time to time by an
inspecting architect approved by Mortgagee; (vii) Mortgagee is supplied
with satisfactory evidences of the estimated cost of completion thereof and
such architect's certificates, waivers of lien, contractor's sworn
statements, and other evidence of cost and of payment and of the continued
priority of the lien hereof over any potential liens of mechanics and
materialmen as Mortgagee may require and approve; (viii) Mortgagee may, in
its discretion, impose such other conditions to such disbursements as would
be customarily required by a construction lender doing business in the
geographic area in which the Premises are located.

(2) If the amount of the insurance proceeds
resulting from damage to the Premises is less than $500,000.00, Mortgagee
shall not hold the insurance proceeds, and shall make such proceeds
available to Mortgagor for the rebuilding or restoration of buildings and
improvements on the Premises subject to the satisfaction of the following
conditions; (i) There shall be no Event of Default hereunder; (ii) the
annual net operating income from all executed leases in effect on the
Premises, shall equal or exceed annual debt service under the Note; annual
net operating income shall include rental insurance proceeds attributable
to rental income to the extent that rental income to which such rental
insurance proceeds apply resumes after completion of rebuilding or
restoration; (iii) no insurer asserts any defense against Mortgagor or a
tenant under a lease which is carrying the casualty insurance covering all
or any portion of the Premises pursuant to any insurance policies covering
the improvements on the Premises, which is not otherwise covered by
insurance carried by Mortgagor.

-16-

(d) If the conditions described in Section (c)
above shall not have been complied with by Mortgagor, such proceeds, after
deducting therefrom any expenses incurred in the collection thereof,
including reasonable attorneys' fees and costs, shall be applied at the
option of Mortgagee either to the cost of rebuilding and restoring the
buildings and improvements on the Premises or in reduction of the
indebtedness secured hereby whether or not then due and payable, provided
however, that if no Event of Default then exists such reduction shall be
without premium. Any excess proceeds remaining after said indebtedness is
fully paid shall be remitted to Mortgagor.

(e) Should such damage or destruction occur after
foreclosure proceedings have been instituted, the proceeds of any such
insurance policy or policies, if not applied in rebuilding or restoration
of the buildings or improvements on the Premises, shall be used to pay the
amount due in accordance with any decree of foreclosure or deficiency
judgment that may be entered in connection with such proceedings, and the
balance, if any, shall be paid to the owner of the equity of redemption if
it shall then be entitled to the same, or otherwise as any court having
jurisdiction may direct. Following any foreclosure sale, or other sale of
the Premises by Mortgagee pursuant to the terms hereof, Mortgagee is
authorized without the consent of Mortgagor to assign any and all insurance
policies to the purchaser at the sale and to take such other steps as
Mortgagee may deem advisable to cause the interests of such purchaser to be
protected by any of such insurance policies.

6. Mortgagor hereby assigns, transfers and sets over
to Mortgagee the entire proceeds of any award or claim for damage to any of
the Premises taken or damaged under the power of eminent domain or by
condemnation. In the event of the commencement of any eminent domain or
condemnation proceedings affecting the Premises;

(a) Mortgagor shall notify Mortgagee thereof in
the manner provided in this mortgage for the giving of notices. Mortgagee
may participate in such proceeding, and Mortgagor shall deliver to
Mortgagee all documents requested by it to permit such participation.

(b) Mortgagee may elect to apply the proceeds of
the award upon or in reduction of the indebtedness secured hereby whether
or not then due and payable, provided however, that if no Event of Default
has occurred and

-17-

Mortgagee has not otherwise accelerated the
whole or any part of the indebtedness secured hereby, such reduction shall
be without premium, or require Mortgagor to restore or rebuild, in which
event the proceeds shall be held by Mortgagee and used to reimburse
Mortgagor for the cost of restoring and rebuilding all buildings and
improvements in accordance with plans and specifications to be submitted to
and approved by Mortgagee.

(c) In the event Mortgagee elects to reimburse
Mortgagor for the costs of restoring and rebuilding the Premises, then the
proceeds of the award shall be paid out in the same manner as provided in
this mortgage for the payment of insurance proceeds in reimbursement of the
costs of rebuilding and restoration. If the amount of such award is
insufficient to cover the cost of restoring and rebuilding, Mortgagor shall
pay such cost in excess of the award before being entitled to reimbursement
out of the award. Any proceeds remaining after payment of cost of
restoring and rebuilding shall, at the option of Mortgagee, either be
applied on account of the indebtedness secured hereby or be paid to
Mortgagor.

7. If by the laws of the United States of America or of any
state or governmental subdivision having jurisdiction of Mortgagor or of
the Premises or of the transaction evidenced by the Note and this mortgage,
any tax or fee is due or becomes due as against Mortgagor or Mortgagee in
respect of the issuance of the Note hereby secured or the making, recording
and registration of this mortgage, Mortgagor covenants and agrees to pay
such tax or fee in the manner required by such law, and to hold harmless
and indemnify Mortgagee, it successors and assigns, against any liability
incurred by reason of the Mortgagor's failure to pay any such tax or fee.

8. In the event of the enactment after the date hereof of
any applicable law deducting from the value of land for the purpose of
taxation any lien thereon, or imposing upon Mortgagee the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Mortgagor, or changing in any way the laws relating
to the taxation of mortgages or debts secured by mortgages or Mortgagee's
interest in the Premises, or the manner of collection of taxes, so as to
affect this mortgage or the debt secured hereby or the holder thereof, then
and in any such event Mortgagor shall, upon demand by Mortgagee, pay such
taxes or assessments or reimburse Mortgagee therefor; PROVIDED, HOWEVER,
that, if in the opinion of counsel for Mortgagee (a) it could reasonably
be expected to be unlawful to require Mortgagor to make such payment or (b)
the making of such payment could reasonably be expected to be construed as
imposing a rate of interest beyond the maximum permitted by law, then and
in such event Mortgagee may elect to declare all of the indebtedness
secured hereby to be and become due and payable, but without penalty or
premium of any nature on the date which is the later to occur of 90 days
from the giving of written notice of such election to Mortgagor or 10 days
prior to the date on which such law would impose a penalty on Mortgagee.

9. (a) Upon the occurrence of any Event of Default or upon
notice, after any event, the occurrence of which would, with the lapse of
time or the giving of notice or both, constitute an Event of Default under
this Mortgage, Mortgagee may, but need not, make any payment or perform any
act herein required of Mortgagor, in any form and manner deemed expedient
and may, but need not, make full or partial payments of principal or
interest on prior encumbrances, if any, and purchase, discharge, compromise
or settle any tax lien or other prior lien or title or claim thereof, or
redeem from any tax sale or forfeiture affecting said Premises, or contest
any tax or assessment. All moneys paid for any of the purposes herein
authorized and all reasonable expenses paid or incurred in connection
therewith, including reasonable attorneys' fees and costs and attorneys'
fees and costs on appeal, and any other money advanced by Mortgagee to
protect the Premises and the lien hereof, shall be additional indebtedness
secured hereby and shall become immediately due and payable without notice
and with interest thereon at the Default Rate (as hereinafter defined) from
the date of expenditure or advance until paid.

(b) In making any payment hereby authorized under
subparagraph 8(a) above or relating to taxes or assessments or for the
purchase, discharge, compromise or settlement of any prior lien, Mortgagee
may make such payment according to any bill, statement or estimate secured
from the appropriate public office without inquiry into the accuracy
thereof or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof or without inquiry as to the validity or
amount of any claim for lien which may be asserted.

10. If one or more of the following events (herein called
"Events of Default") shall have occurred:

-19-

(a) default shall be made in the payment of any
principal, interest or premium, taxes or assessments referred to in this
mortgage or insurance premiums for the insurance required pursuant to this
mortgage when due under the Note or this mortgage, and such default shall
have continued for 10 days after written notice specifying such default
shall have been given by Mortgagee to Mortgagor; or

(b) Mortgagor shall be dissolved, or a decree or order
for relief shall be entered by a court having jurisdiction in the Premises
in respect of Mortgagor in a voluntary or involuntary case under the
Federal Bankruptcy Code as now or hereafter constituted, or Mortgagor shall
file a voluntary petition in bankruptcy or for reorganization or an
arrangement or any composition, readjustment, liquidation, dissolution or
similar relief pursuant to any similar present or future state or federal
bankruptcy law, or shall be adjudicated a bankrupt or become insolvent or

(c) a petition or answer shall be filed proposing the
adjudication of Mortgagor as a bankrupt or its reorganization or
arrangement, or any composition, readjustment, liquidation, dissolution or
similar relief with respect to it pursuant to any present or future federal
or state bankruptcy or similar law, and such petition or answer shall not
be discharged within 90 days after the filing thereof; or

(d) by the order of a court of competent jurisdiction,
a receiver, trustee or liquidator of the Premises or any part thereof or of
Mortgagor or of substantially all of its assets shall be appointed and
shall not be discharged or dismissed within 90 days after such appointment
or

(e) subject to the extension described in the last
subparagraph of this paragraph 10, with respect to the matters not
described in the other subparagraphs of this paragraph 10, default shall be
made in the due observance or performance of any covenant, condition or
agreement of the Mortgagor contained in this Mortgage or in the Note, or in
any other Loan Document, and such default shall have continued for 30 days
after notice specifying such default is given by Mortgagee to Mortgagor, or

(f) any representation or warranty made by Mortgagor
herein or in the Note, an Assignment of Leases and Rents of even date from
Mortgagor to Mortgagee ("Assignment of Leases"), Loan Agreement or in any

-20-

other Loan Document shall prove to be untrue or
inaccurate in any material respect; or

(g) an Event of Default shall have occurred under the
Loan Agreement.

then, in each and every such case, the whole of said
principal sum hereby secured shall, at the option of the Mortgagee and
without further notice to Mortgagor, become immediately due and payable
together with accrued interest thereon and a Make Whole Premium calculated
in accordance with the provisions of the Note, and whether or not Mortgagee
has exercised said option, interest shall accrue on the entire principal
balance and any interest or premium then due, at the Default Rate until
fully paid or if Mortgagee has not exercised said option, for the duration
of any Event of Default.

If any Event of Default under "(e)" above shall be of
such nature that it cannot be cured or remedied within 30 days, Mortgagor
shall be entitled to a reasonable period of time to cure or remedy such
Event of Default, provided Mortgagor commences the cure or remedy thereof
within the 30 day period following the giving of notice and thereafter
proceeds with diligence to complete such cure or remedy.

11. Mortgagor agrees that if Mortgagee accelerates the whole
or any part of the principal sum hereby secured, or applies any proceeds as
if such application had been made as a result of such acceleration,
pursuant to the provisions hereof, Mortgagor waives any right to prepay the
principal sum hereby secured in whole or in part without premium and agrees
to pay, as yield maintenance protection and not as a penalty, a "Make Whole
Premium", determined in accordance with paragraph 4 of the Note.

12. Upon the occurrence of any Event of Default, Mortgagee
shall have the right to foreclose the lien hereof, and to the extent
permitted herein and by applicable law to sell the Premises by sale
independent of the foreclosure proceedings. In any suit to foreclose the
lien hereof, and in any sale of the Premises, there shall be allowed and
included as additional indebtedness payable by Mortgagor to Mortgagee and
secured hereby all expenditures and expenses which may be paid or incurred
by or on behalf of Mortgagee for attorneys' fees and costs, including
attorneys' fees and costs on appeal, appraisers' fees, expenditures for
documentary and expert evidence, stenographer's charges, publication and
advertising costs, survey costs and costs (which may be estimated as to
items to be expended after the entry of any decree) of procuring

-21-

all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates and similar
data and assurances with respect to title as Mortgagee deems reasonably
necessary either to prosecute such suit or to consummate such sale or to
evidence to bidders at any sale the true condition of the title to or the
value of the Premises.

13. The proceeds of any foreclosure sale, or other sale of
the Premises in accordance with the terms hereof or as permitted by law,
shall be distributed and applied in the following order of priority:
First, to the payment of all costs and expenses incident to the foreclosure
and/or sale proceedings, including all items as are mentioned in any
preceding or succeeding paragraph hereof; second, to the payment of all
other items which under the terms hereof constitute secured indebtedness in
addition to that evidenced by the Note, with interest thereon as herein
provided; third, to the payment of all principal and accrued interest
remaining unpaid on the Note; fourth, any overplus to the Mortgagor, its
successors or assigns, as their rights may appear.

14. During the continuance of any event of Default, Mortgagor
shall forthwith upon demand of Mortgagee surrender to Mortgagee possession
of the Premises, and Mortgagee shall be entitled to take actual possession
of the Premises or any part thereof personally or by its agents or
attorneys, as for condition broken, and Mortgagee in its discretion may,
with or without force and with or without process of law, enter upon and
take and maintain possession of all or any part of the Premises together
with all documents, books, records, papers and accounts of the Mortgagor or
the then owner of the Premises relating thereto, and may exclude Mortgagor,
its agents or assigns wholly therefrom, and may as attorney-in-fact or
agent of the Mortgagor, or in its own name as Mortgagee and under the
powers herein granted:

(a) hold, operate, manage or control the Premises and
conduct the business, if any, thereof, either personally or by its agents,
and with full power to use such measures, legal or equitable, as in its
discretion it deems proper or necessary to enforce the payment or security
of the income, rents, issues and profits of the Premises, including actions
for the recovery of rent, actions in forcible detainer and actions in
distress for rents, hereby granting full power and authority to exercise
each and every of the rights, privileges and powers herein granted at any
and all times hereafter, without notice to Mortgagor;

-22-

(b) cancel or terminate any lease or sublease for any
cause or on any ground which would entitle Mortgagor to cancel the same;

(c) elect to cancel any lease or sublease made
subsequent to this mortgage unless this mortgage has specifically been made
subordinate to such lease or sublease or subordinated to the lien hereof;

(d) extend or modify any then existing leases and make
new leases, which extensions, modifications or new leases may provide for
terms to expire, or for options to lessees to extend or renew terms to
expire, beyond the Maturity Date of the Note and the issuance of a deed or
deeds to a purchaser or purchasers at a foreclosure sale, it being
understood and agreed that any such leases, and the options or other such
provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Premises are subject to the lien hereof and
shall be binding also upon the purchaser or purchasers at any foreclosure
sale, notwithstanding any redemption from sale, discharge of the
indebtedness secured hereby, satisfaction of any foreclosure decree, or
issuance of any certificate of sale or deed to any purchaser;

(e) make all necessary or proper repairs, decorating,
renewals, replacements, alterations, additions betterments and improvements
to the Premises as it may deem judicious, insure and reinsure the same and
all risks incidental to Mortgagee's possession, operation and management
thereof, and receive all income, rents, issues and profits.

Mortgagee shall not be obligated to perform or discharge,
nor does it hereby undertake to perform or discharge, any obligation, duty
or liability under any lease, and the Mortgagor shall and does hereby agree
to indemnify and to hold Mortgagee harmless of and from all liability, loss
or damage which it might incur under said leases or under or by reason of
the assignment thereof, and of and from any and all claims or demand
whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in said leases, except if, and to
the extent that, any of the same results from Mortgagee's gross negligence
or misconduct. Should Mortgagee incur any such liability, loss or damage
under any of said leases, or under or by reason of the assignment thereof,
or in the defense of any claims or demands, the amount thereof, including
costs, expenses and reasonable attorneys' fees and costs, including
attorneys'

-23-

fees and costs on appeal, shall be secured hereby and
Mortgagor shall reimburse Mortgagee therefor immediately upon demand,
together with interest at the Default Rate from the date of payment by
Mortgagee to the date of reimbursement.

15. Mortgagee in the exercise of the rights and powers
hereinabove conferred upon it under paragraphs 12, 13 and 14 above shall
have the full power to use and apply the avails, rents, issues and profits
of the Premises to the payment of or on account of the following, in such
order as Mortgagee may determine:

(a) to the payment of the expenses of operating the
Premises, including cost of management and leasing thereof (which shall
include reasonable compensation to Mortgagee and its agent or agents if
management is delegated to an agent or agents, and shall also include lease
commissions and other compensation and expenses of seeking and procuring
tenants and entering into leases), established claims for damages, if any,
and premiums on insurance as hereinabove authorized;

(b) to the payment of taxes and special assessments now
due or which may hereafter become due on the Premises;

(c) to the payment of all repairs, decorating,
renewals, replacements, alterations, additions, betterments and
improvements of the Premises and of placing the Premises in such condition
as will in the judgment of Mortgagee make it readily rentable; and/or

(d) to the payment of any indebtedness secured hereby
or any deficiency which may result from any foreclosure sale.

16. During the continuance of any Event of Default under this
mortgage, Mortgagee may apply to any court having jurisdiction of the
Premises for the appointment of a receiver of the Premises. Such
appointment may be made without regard to the solvency or insolvency of
Mortgagor at the time of application for such receiver and without regard
to the then value of the Premises or the adequacy of Mortgagee's security.
Mortgagor, or any person who may be legally or equitably liable to pay
money secured hereby, waive proof as to the foregoing and consent to the
appointment of such receiver. Mortgagee or any holder of the Note may be
appointed as such receiver. The receiver shall have power to collect the
rents, issues and profits of the Premises during the pendency of any
foreclosure proceedings and, in case of a sale, during the full redemption
period, if any, as well as during any further

-24-

times when Mortgagor, except for the intervention of such
receiver, would be entitled to collect such rents, issues and profits. In
addition, the receiver shall have all other powers which shall be necessary
or are usual in such cases for the protection, possession, control,
management and operation of the Premises during the whole of said period.
The court from time to time may authorize the receiver to apply the net
income in his hands in payment in full or in part of:

(a) the indebtedness secured hereby or provided by any
decree foreclosing this mortgage, or any tax, special assessment or other
lien which may be or become superior to the lien hereof or of such decree,
provided such application is made prior to foreclosure sale; and

(b) the deficiency in cash of a sale and deficiency.

17. (a) Mortgagor agrees that all reasonable costs, charges
and expenses, including reasonable attorneys' fees, incurred or expended by
Mortgagee arising out of or in connection with any action, proceeding or
hearing, legal, equitable or quasi-legal, including the preparation
therefor and any appeal therefrom, in any way affecting or pertaining to
this mortgage, the Note or the Premises, shall be promptly paid by
Mortgagor. All such sums not promptly paid by Mortgagor shall be added to
the indebtedness secure hereby and shall bear interest at the Default Rate
from the date of such advance and shall be due and payable on demand.

(b) Mortgagor hereby waives any notice of default,
demand for payment and notice of intent to accelerate the maturity of all
or any portion of the indebtedness secured hereby, except as may be
otherwise expressly herein provided. Mortgagor hereby agrees that upon the
occurrence of an Event of Default and the acceleration of the principal sum
secured hereby pursuant to this mortgage, to the full extent that such
rights can be lawfully waived, Mortgagor hereby waives and agrees not to
insist upon, plead, or in any manner take advantage of, any notice of
acceleration, any stay, extension, exemption, homestead, marshaling or
moratorium law or any law providing for the valuation or appraisement of
all or any part of the Premises prior to any sale or sales thereof under
any provision of this mortgage or before or after any decree, judgement or
order of any court or confirmation thereof, or claim or exercise any right
to redeem all or any part of the Premises so sold and hereby expressly
waives to the full extent permitted

-25-

by applicable law on behalf of itself and each and
every person or entity acquiring any right, title or interest in or to the
all or any part of the Premises, all benefit and advantage of any such laws
which would otherwise be available to Mortgagor or any such person or
entity, and agrees that neither Mortgagor nor any such person or entity
will invoke or utilize any such law to otherwise hinder, delay or impede
the exercise of any remedy granted or delegated to Mortgagee herein but
will permit the exercise of such remedy as though any such laws had not
been enacted. Mortgagor hereby further expressly waives to the full extent
permitted by applicable law on behalf of itself and each and every person
or entity acquiring any right, title or interest in or to all or any part
of the Premises any and all rights of redemption from any sale or any order
to decree of foreclosure obtained pursuant to provisions of this mortgage.

(c) In the event of a foreclosure sale of the Premises,
the Premises may, at the option of Mortgagee, be sold in one of several
parcels.

(d) During the continuance of any Event of Default,
Mortgagee may apply on account of the unpaid indebtedness, or on account of
any balance due to the Mortgagee after a foreclosure sale of the Premises,
any unexpended monies still retained by the Mortgagee that were paid by
Mortgagor to the Mortgagee for the payment of, or as security for the
payment of, taxes or insurance premiums, if any, or paid by Mortgagor
specifically in order to secure the performance of certain acts by the
Mortgagor under the Loan Documents, as may be agreed to by Mortgagor and
Mortgagee.

(e) During the continuance of any Event of Default,
Mortgagee may exercise its rights and remedies under the Assignment of
Leases, the Loan Agreement and/or any other rights and remedies available
at law or in equity.

18. Mortgagor hereby assigns to Mortgagee directly and
absolutely, and not merely collaterally, the rents, issues, profits,
royalties, and payments payable under any lease of the Premises, or portion
thereof, including any oil, gas or mineral lease, or any installments of
money payable pursuant to any agreement or any sale of the Premises or any
part thereof. Mortgagee, without regard to the adequacy of any security
for the indebtedness hereby secured, shall be entitled to (a) collect such
rents, issues, profits, royalties, payments and

-26-

installments of money and apply the same as more
particularly set forth in this paragraph, all without taking possession of
the Premises, or (b) enter and take possession of the Premises or any part
thereof, in person, by agent, or by a receiver to be appointed by the court
and to sue for or otherwise collect such rents, issues, profits, royalties,
payments and installments of money. Mortgagee may apply any such rents,
issues, profits, royalties, payments and installments of money so
collected, less costs and expenses of operation and collection, including
reasonable attorneys' fees and costs and attorneys' fees and costs on
appeal, upon any indebtedness secured hereby, in such order as Mortgagee
may determine, and, if such costs and expenses and attorneys' fees and
costs shall exceed the amount collected, the excess shall be immediately
due and payable. The collection of such rents, issues, profits, royalties,
payments and installments of money and the application thereof as aforesaid
shall not cure or waive any Event of Default or notice of default hereunder
or invalidate any act done pursuant to such notice, except to the extent
any such Event of Default or notice of default hereunder or invalidate any
act done pursuant to such notice, except to the extent any such Event of
Default is fully cured. Failure or discontinuance of Mortgagee at any
time, or from time to time, to collect any such moneys shall not impair in
any manner the subsequent enforcement by Mortgagee of the right, power and
authority herein conferred on Mortgagee. Nothing contained herein,
including the exercise of any right, power or authority herein granted to
Mortgagee, shall be, or be construed to be, an affirmation by Mortgagee of
any tenancy, lease or option, or an assumption of liability under, or the
subordination of the lien or charge of this Mortgage to any such tenancy,
lease or option. Mortgagor hereby agrees that, in the event Mortgagee
exercises its rights as in this paragraph provided, Mortgagor waives any
right to compensation for the use of Mortgagor's furniture, furnishings or
equipment in the Premises for the period such assignment of rents or
receivership is in effect, it being understood that the rents, issues,
profits, royalties, payments and installments of money derived from the use
of any such items shall be applied to Mortgagor's obligations hereunder as
above provided. With regard to the foregoing, however, and notwithstanding
anything to the contrary contained herein, Mortgagee does acknowledge
Mortgagor's license to collect rents, enforce leases and to act as lessor
under the Leases pursuant to paragraph 7 of the Assignment of Leases and
subject to all provisions of the Assignment of Leases.

19. (a) Mortgagor has executed and delivered that certain
Assignment of Leases and Rents of even date herewith assigning to Mortgagee
directly and absolutely, and

-27-

not merely collaterally, the interest of mortgagor
as lessor under the existing leases of the premises, as well as all other
leases which may hereafter be made in respect of the premises, and the
rents and other income arising thereunder and from the use of the premises.

Said Assignment of Leases and Rents grants to mortgagee specific rights and
remedies in respect of said leases and the collection of rents and other
income thereunder and from the use of the premises, and such rights and
remedies so granted shall be cumulative of those granted herein.

(b) Mortgagor shall keep and perform all terms,
conditions and covenants required to be performed by it as lessor under the
aforesaid leases; shall promptly advise Mortgagee in writing of any claim
of default by Mortgagor made by a lessee under any such lease or of any
default thereunder by a lessee; and shall promptly provide Mortgagee with a
copy of any notice of default or other notice served upon Mortgagor by any
such lessee. Mortgagor will not cancel, modify or alter, or accept the
surrender of, any existing or future lease of the Premises or any part
thereof without first obtaining written consent of Mortgagee.

20. (a) All rights and remedies granted to Mortgagee herein
or in the Note or any other Loan Document shall be in addition to and not
in limitation of any rights and remedies to which it is entitled in equity,
at law or by statute, and the invalidity of any right or remedy herein
provided by reason of its conflict with applicable law or statute shall not
affect any other valid right or remedy afforded to Mortgagee. No waiver of
any Event of Default or of any default in the performance of any covenant
contained in the Note or any other instrument securing the Note shall at
any time thereafter be held to be a waiver of any rights of the Mortgagee
hereunder, nor shall any waiver of a prior Event of Default or default
operate to waive any subsequent Event of Default or default. All remedies
provided for herein, in the Note and in any other Loan Document are
cumulative and may, at the election of Mortgagee, be exercised
alternatively, successively, or concurrently. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision or to proceed against one portion of the
Premises to the exclusion of any other portion.

(b) This mortgage is upon any existing statutory
condition and upon the further condition that all covenants and agreements
of Mortgagor herein shall be fully or timely performed, time being of the
essence under this mortgage, and that no breach of any such condition or
agreement shall be permitted, and this mortgage shall be subject to
foreclosure as provided by law.

21. By accepting payment of any sum secured hereby after its
due date, Mortgagee does not waive its right either to require prompt
payment when due of all other sums or installments so secured or to declare
a default for failure to pay such other sums or installments.

22. Notwithstanding anything herein or in the Note to the
contrary, no provision contained herein or in the Note which purports to
obligate Mortgagor to pay any amount of interest or any fees, costs or
expenses which are in excess of the maximum permitted by applicable law,
shall be effective to the extent that it calls for the payment of any
interest or other sums in excess of such maximum. Any such excess shall,
at the option of Mortgagee, either be paid to Mortgagor or be credited to
principal on the Note. All agreements between Mortgagor and Mortgagee with
respect to the Premises and the indebtedness secured by the Mortgagee,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of demand for
payment of or acceleration of the maturity of any of the indebtedness
secured hereby or otherwise, shall the interest contracted for, charged or
received by Mortgagee exceed the maximum amount permissible under
applicable law. If, for any circumstance whatsoever, interest would
otherwise be payable to Mortgagee in excess of the maximum lawful amount,
the interest payable to Mortgagee shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance Mortgagee
shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive
interest shall at Mortgagee's option, be refunded to Mortgagor or be
applied to the reduction of the principal balance of the indebtedness
secured hereby and not to the payment of interest or, if such excessive
interest exceeds the unpaid balance of principal of the indebtedness
secured hereby, such excess shall be refunded to Mortgagor. This paragraph
shall control all agreements between Mortgagor and Mortgagee.

23. In the event one or more provisions of this mortgage or
of the Note shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality and unenforceability shall not affect
any other provision hereof, and this mortgage shall be construed as if any
such provision had never been contained herein.

-29-

24. If the payment of the indebtedness secured hereby or of any
part thereof shall be extended or varied, or if any part of the security be
released, all persons now or at any time hereafter liable therefor, or
interest in said Premises, shall be held to assent to such extension,
variation or release, and their liability and the lien and all provisions
hereof shall continue in full force, the right of recourse against all such
persons being expressly reserved by Mortgagee notwithstanding such
variation or release.

25. Upon payment in full of the indebtedness secured hereby and the
performance by Mortgagor of all of the obligations imposed on Mortgagor
herein and in the Note, these presents shall be null and void, and
Mortgagee shall release this mortgage and the lien hereof and all other
recorded Loan Documents by proper instrument executed in recordable form.

26. If no Event of Default has occurred and is continuing under
this mortgage, Mortgagor shall have the privilege of making prepayments on
the principal of the Note (in addition to the required payments) if and
only to the extent and upon the terms and conditions, if any, expressly set
forth in the Note. If not expressly so set forth, the Note is not subject
to such prepayment.

27. Mortgagee, its agents, employees or assigns, shall have the
right to inspect the Premises at all reasonable times and access thereto
shall be permitted for that purpose.

28. Within 15 days after any written request by Mortgagee,
Mortgagor shall certify to its actual knowledge, by a written statement
duly acknowledge, the amount of principal and interest then owing on the
Note and whether any offsets or defenses exist against the indebtedness
secured hereby. Within 20 days after any written request by Mortgagor,
Mortgagee shall certify to its actual knowledge (by a written statement,
duly acknowledged), the outstanding principal and interest of the
indebtedness, amount of escrow monies held, and whether there are any
outstanding and uncured written notices of default.

29. Mortgagor shall furnish to Mortgagee within 120 days after the
end of each fiscal year of Mortgagor the following: a detailed and
analytical financial report in form and substance acceptable to Mortgagee
covering the full and complete operation of the Premises, including without
limitation: (i) income and expense statements with a listing of sales
volumes attained by Lessees of the Premises under percentage leases for the
immediately preceding year, and, (ii) a report of the leasing status

-30-

of the Premises as of the end of such year, identifying the
lessee, square footage leased, rental amount, rental concessions and/or
rental deferments, if any, and expiration date under each lease of the
Premises. Such reports shall be prepared by an accountant who may be an
employee of Mortgagor, or of an affiliate of Mortgagor, reasonably
acceptable to Mortgagee. In addition to the reports referred to herein,
Mortgagor shall promptly supply any additional information or records
relating to the Premises or its operation as Mortgagee may from time to
time request and (iii) financial statements as to the Borrower, consisting
of a balance sheet and an income and expense statement, in form and
substance acceptable to Mortgagee.

30. At the time of an interest rate adjustment, pursuant to the
terms of the Note, Mortgagor shall provide Mortgagee at its expense, an
updated endorsement of the then existing title insurance policy, or, if the
insurer under the existing loan policy is not an economically viable
insurer based on current requirements of institutional lenders for similar
projects, a new ALTA standard title insurance policy in the full amount of
the loan in form and by an insurer satisfactory to Mortgagee. The policy
shall insure the Mortgage at the adjusted interest rate to be a first and
prior lien, subject only to those exceptions that have been previously
approved by Mortgagee and insure against usury (if available) and
construction liens.

31. On August 1, 1995 and annually thereafter, Mortgagor shall pay
to Mortgagee an administration and inspection fee in the amount of
$2,500.00.

32. Any notice which any party hereto may desire or be required to
give to the other shall be given in writing. Service shall be made by
either (i) registered or certified mail, postage prepaid, in which case
notice shall be deemed to have been received three (3) business days
following deposit to the mail; or (ii) nationally recognized overnight air
courier, next day delivery, prepaid, in which case such notice shall be
deemed to have been received one (1) business day following delivery to
such courier. All notices shall be addressed to Mortgagor at its address
given on the first page hereof or to Mortgagee at 711 High Street, Des
Moines, Iowa 50392, Attn: Commercial Real Estate Loan Administration, Loan
No. D 750363, or to such other place as either party may by written notice
to the other hereafter designate as a place for service of notice.

33. Mortgagor hereby grants to Mortgagee and its respective

-31-

agents, attorneys, employees, consultants and contractors, an
irrevocable license and authorization to enter upon and inspect the
Premises and all facilities located thereon, and to perform such tasks,
including without limitation, subsurface testing, soil and ground water
testing, and other tests which may physically invade the Premises or
facilities, as Mortgagee, in its sole discretion, determines as necessary
to (i) investigate the condition of the Premises, (ii) protect the security
interests created under this Mortgage or (iii) determine compliance with
all laws relating to Hazardous Materials, the provisions of this Mortgage
and other matters relating thereto. Mortgagee agrees that any
investigation hereunder shall be at its cost and expense unless same shall
be conducted after notice to Mortgagor of the occurrence of an event which
would, with the lapse of time or the giving of notice or both, constitute
an Event of Default under this Mortgage.

Mortgagee shall employ qualified and duly authorized
contractors to perform any such review. In conducting any such review,
Mortgagee shall, and shall cause its consultants to, comply with all
applicable laws, rules, regulations and orders associated with its review.
Prior to any such inspection, Mortgagee will provide Mortgagor at least
three business day advance written notice of its intent to inspect the
Premises, unless in emergent circumstances. Mortgagor shall have the
opportunity, at its option, to cause a representative of Mortgagor to be
present at all inspections and examinations which form a part of such
review. On written requests, Mortgagee shall provide Mortgagor all test
reports, results or date generated by such review. Mortgagee agrees to
indemnify, hold harmless and defend Mortgagor from and against any and all
claims, liabilities, costs, fees and expenses for loss or damage to the
Premises and for injury to or death of persons arising out of such
inspection and review, except to the extent any of the same is caused by
Mortgagor.

34. This mortgage and all the provisions hereof shall extend to and
be binding upon Mortgagor and all persons claiming by, under or through
Mortgagor, and the word "Mortgagor" when used herein shall include all such
persons and all persons liable for the payment of the indebtedness secured
hereby or any part thereof, whether or not such persons have executed the
Note or this mortgage. The word "Mortgagee" as used herein shall include
the successors and assigns of the Mortgagee named herein, and the holder or
holders from time to time of the Note secured hereby (subject to the
servicing provision contained in paragraph 19 of the Note).

-32-

35. This mortgage shall be governed by and construed in accordance
with the laws of the State of New Jersey.

36. As used herein, the term "Default Rate" means a rate equal to
the lesser of (i) four (4%) per annum above and then applicable interest
rate payable under the Note or (ii) the maximum rate allowed by applicable
law. The Default Rate is not a penalty, but rather a rate of interest
negotiated by the parties to compensate Mortgagee additionally in the event
of default.

37. Notwithstanding any provision of this Mortgage, the Note or any
other instruments evidencing or securing the loan evidenced by the Note
which might be construed to the contrary, the assignment of rents and other
amounts provided for herein is an absolute assignment and not merely a
collateral assignment or a security interest, and is effective whether or
not any Event of Default occurs hereunder, subject only to a license, if
any, granted by Mortgagee to Mortgagor with respect thereto prior to the
occurrence of an Event of Default hereunder. It is the intention of
Mortgagor and Mortgagee that the assignment effectuated by this Mortgage
with respect to such rents and other amounts payable under the leases shall
be a direct and currently effective assignment and shall not constitute
merely the granting of a lien, security interest or pledge for the purpose
of securing the indebtedness secured hereby. In the event that a court of
competent jurisdiction determines that, notwithstanding such expressed
intent of the parties, Mortgagee's interest in the rents and other amounts
payable under the leases constitutes a lien on or security interest in or
pledge thereof, it is agreed and understood that the forwarding of a notice
to Mortgagor after the occurrence of an Event of Default, advising
Mortgagor of the revocation of any license then in favor of Mortgagor to
collect such rents or other amounts payable under the leases, or of the
existence of an Event of Default, shall be sufficient action by Mortgagee
to (i) perfect such lien on or security interest in or pledge of the rents
and other amounts payable under the leases, (ii) take possession thereof,
and (iii) entitle Mortgagee to immediate and direct payment of the rents
and other amounts payable under the leases, for application as provided in
this Mortgage, all without the necessity of any further action by
Mortgagee, including, without limitation, any action to obtain possession
of the land, improvements or any other portion of the premises.
Notwithstanding the direct and absolute assignment of the rents and other
amounts payable under the leases as herein described, there shall be no pro
tanto reduction in any portion of the indebtedness secured by this Mortgage
except with respect to rents and

-33-

other amounts payable under the leases actually received by
Mortgagee and applied by Mortgagee toward payment of the indebtedness.
Mortgagee may, upon written notice to Mortgagor, elect to (i) exclude from
the assignment provided in this Mortgage any of the leases as specified in
such notice so that the interest under such indicated lease is not assigned
to Mortgagee, and (ii) subordinate the lien and other terms and provisions
of this Mortgage to any of the leases as indicated in said notice to
Mortgagor.

38. Mortgagor waives, to the extent permitted by law, trial by jury
in any actions brought by Mortgagor or Mortgagee in connection with this
Mortgage or the indebtedness secured hereby.

39. The provisions contained in paragraphs 12 and 12.1 of the Note
are hereby incorporated herein as if set forth at length.

40. This mortgage and the indebtedness secured hereby is for the
sole purpose of conducting or acquiring a lawful business, professional or
commercial activity or for the acquisition, expansion, rehabilitation or
management of real or personal property as a commercial investment, and all
proceeds of such indebtedness shall be used for said business or commercial
investment purpose. Such proceeds will not be used for the purchase of any
security within the meaning of the Securities Exchange Act of 1934, as
amended, or any regulation issued pursuant thereto, including without
limitation, Regulation G, T and X of the Board of Governors of the Federal
Reserve System. This is not a purchase money mortgage and the Premises
secured hereby is not a residence or homestead or used for mining,
grazing, agriculture, timber or farming purposes.

41. Mortgagor and Mortgagee may agree to change the interest rate,
maturity date, or other term or terms of this Mortgage, of any of the
documents referred to herein or of the Indebtedness. Any such agreement
shall be in writing, duly executed by both Mortgagor and Mortgagee. In the
event that any such agreement shall occur, it shall, to the extent
permitted by law, be deemed a "modification" as defined in N.J.S.A. 46:9-
8.1 ET SEQ., and this Mortgage shall be subject to, and the Mortgagee shall
be the beneficiary of, the mortgage lien priority provisions of such
statute.

42. Unless Mortgagee shall otherwise direct in writing, Mortgagor
shall appear in and defend all actions or proceedings purporting to affect
the security hereunder, or any right or power of the Mortgagee. The
Mortgagee

-34-

shall have the right to appear in such actions or proceedings.
Mortgagor shall save Mortgagee harmless from all costs and expenses,
including reasonable attorneys' fees and costs of a title search,
continuation of abstract and preparation of survey, incurred by reason of
any action, suit, proceeding, hearing, motion or application before any
court or administrative body in and to which Mortgagee may be or become a
party by reason hereof. Such proceedings shall include but not be limited
to condemnation, bankruptcy, probate and administration proceedings, as
well as any other action, suit, proceeding, right, motion or application
wherein proof of claim is by law required to be filed or in which it
becomes necessary to defend or uphold the terms of this Mortgage or
otherwise purporting to affect the security hereof or the rights or powers
of Mortgagee. All money paid or expended by Mortgagee in that regard,
together with interest thereon from date of such payment at the Default
Rate shall be additional indebtedness secured hereby and shall be
immediately due and payable by Mortgagor without notice.

43. If an Event of Default shall occur, all rents, issues and
profits collected or received by Mortgagor shall be accepted and held for
Mortgagee in trust and shall not be commingled with the funds and property
of Mortgagor, but shall be promptly paid over to the Mortgagee. Upon an
Event of Default, upon demand by Mortgagee, Mortgagor shall immediately
assemble the personalty and make available to Mortgagee at a place
reasonably convenient to both parties.

IN WITNESS WHEREOF, Mortgagor has caused this mortgage to be duly
executed and delivered as of the date first above written.

JMB Income Properties, LTD.-XI,
an Illinois limited partnership

By: JMB Realty Corporation,
a Delaware corporation
Its Managing General Partner

By: ELIZABETH KOGEN
Name: Elizabeth Kogen
Title: Vice President

SECURED PROMISSORY NOTE-A

$32,000,000.00 Newark, New Jersey
August 30, 1994

FOR VALUE RECEIVED, the Undersigned, JMB Income Properties, Ltd.-XI, a
limited partnership of the State of Illinois, hereby promises to pay to the
order of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation, (the
term "Obligee" being used hereafter to refer to the Principal Mutual Life
Insurance Company or to such successors, assigns, or subsequent holders, as
the case may be) at the Home Office of Obligee at 711 High Street, Des
Moines, Iowa 50392, or at such other place as the Obligee may designate,
the principal sum of Thirty Two Million Dollars ($32,000,000.00) or so much
thereof as shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from August 31, 1994 at the rate
of Eight and Thirty-Five Hundredths percent (8.35%) per annum, computed on
the basis of a 360 day year composed of twelve 30-day months, in
installments as follows:

Beginning on October 1, 1994, principal and interest shall be
due and payable in installments of Two Hundred Fifty Four Thousand Four
Hundred Forty Six Dollars and 06 Cents ($254,446.06), with an installment
in a like amount due and payable on the same day of each month thereafter
until said principal and interest are fully paid, except that all remaining
principal and interest shall be due and payable on December 1, 2006
("Maturity Date"). The foregoing is subject to adjustment as provided in
this Note. Each installment shall be credited first upon interest then
accrued and the remainder upon principal, and interest shall cease to
accrue upon principal so credited. If on the date of the first
installment, interest is accrued for more or less than one installment
period, the amount of said installment shall be increased or decreased by
the amount that the interest accrued exceeds or is less than the interest
for one installment period based on the actual number of days elapsed to
the date of said installment. All principal and interest shall be paid in
lawful money of the United States of America, by wire transfer of
immediately available funds to Obligee at Norwest Bank, Iowa, N.A., 7th and
Walnut Streets, Des Moines, Iowa 50304 for credit to Principal Mutual Life
Insurance Company, Collection Account No. 706-9975, re D 750363, with
reference to the Undersigned.

The term the "Other Note" as used herein shall mean that
certain Secured Promissory Note-B of even date herewith in the original
principal amount of $4,000,000.00 given by the Undersigned to Obligee. Any
default by the Undersigned under the Other Note shall constitute a default
under this Note.

-2-

1. As security for the payment of the moneys owing hereon
(sometimes referred to as the "Loan"), the undersigned has executed and
delivered to Obligee a mortgage and security agreement (the "Mortgage") on
lands in the City of Hackensack, County of Bergen and State of New Jersey,
commonly referred to as "Riverside Square", (the "Mortgaged Premises") and
an assignment of leases and rents (the "Assignment"). In addition, Obligee
and the Undersigned have entered into a Loan Agreement (the "Loan
Agreement"). All of the above documents are of even date herewith. Any
default in the covenants and conditions of the Mortgage, the Assignment or
the Loan Agreement (which covenants and conditions are made a part hereof
as though set forth herein at length), shall be a default of this Note.
The Mortgage, the Assignment, the Loan Agreement and this Note together
with any other instrument executed as of the date hereof or in the future
by the Undersigned and delivered by the Undersigned to Obligee which by its
terms, further secures this Note, as any of the same may be amended or
modified by a written agreement executed by both Obligor and Obligee is
herein referred to as the "Loan Documents".

2. The following provisions relate to interest rate adjustment:

a. The monthly payments of principal and interest described above
are based on the annual interest rate of 8.35% and a 25 year amortization
schedule, and shall be due and payable through and including November 1,
1998.

the selection date shall not be prior to August 1, 1998; shall not be
earlier than the date on which notice is provided to Obligee; and shall be
no later than September 15, 1998. If Obligee shall not have received the
Undersigned's notice of selection before September 15, 1998, Obligee shall
establish the First Adjusted Rate on September 15, 1998 using the then
current yield in effect on Treasury Issue I as of September 15, 1998 plus
Point Spread I rounded up to the nearest 1/1000 of 1%, and Obligee shall
notify the Undersigned in writing of the First Adjusted Rate by October 15,
1998, and such rate shall be effective on November 1, 1998. If the
Undersigned shall not have received such notice by October 15, 1998, it
shall promptly notify Obligee, who in response thereto will notify the
Undersigned and the revised rate

-3-
shall be effective on December 1, 1998. In the event Obligee
shall have received the Undersigned's notice of selection as specified
herein, the First Adjusted Rate shall be established on the date specified
in the Undersigned's notice of selection and shall be equal to the yield on
U.S. Treasury I which is in effect at the close of business on the date
specified plus Point Spread I and rounded up to the nearest 1/1000 of 1%;
and shall become effective on November 1, 1998. For the purposes of notice
of selection Obligee will accept a telecopy notice of selection at
(515)248-8090 or telephone notice at (515)246-7584 followed by an overnight
delivered written notice of selection, sent in accordance with the notice
provisions of the mortgage. The monthly payments of principal and interest
commencing December 1, 1998 and continuing through November 1, 2002, shall
be determined using the First Adjusted Rate and the continuation of the
original amortization schedule.

c. Obligee shall adjust the interest rate to be in effect on
November 1, 2002, and continuing to maturity ("Second Adjusted Rate").
Obligee shall notify the Undersigned in writing of the U.S. Treasury Issue
selected by Obligee ("Treasury Issue II") and the basis point spread
established by Obligee ("Point Spread II") to be used in the calculation of
the Second Adjusted Rate no later than May 1, 2002. If the Undersigned
accepts Point Spread II, then the Undersigned shall notify Obligee in
writing of its acceptance of Point Spread II and pay to Obligee a $5,000
transaction fee no later than June 1, 2002. If Obligee shall not have
received written acceptance and the $5,000 transaction fee on or before
June 1, 2002, the indebtedness hereunder shall become due and payable in
full without Premium or other penalty or premium on December 1, 2002. In
the event Obligee shall have received the Undersigned's written acceptance
and the transaction fee as specified herein, the Undersigned shall notify
Obligee in writing of the date on which to establish the Second Adjusted
Rated, which selection date shall be subject to Obligee's approval and
shall comply with the following: the date selected shall not be prior to
August 1, 2002; shall not be earlier than the date on which notice is
provided to Obligee; and shall be no later then September 15, 2002. If
Obligee shall not have received the Undersigned's notice of selection
before September 15, 2002, Obligee shall establish the Second Adjusted Rate
on September 15, 2002, using the then current yield in effect as of
September 15, 2002, on Treasury Issue II and Point Spread II rounded up to
the nearest 1/1000 of 1% and Obligee shall notify the Undersigned in
writing of the Second Adjusted Rate by October 15, 2002, and such rate
shall be effective on November 1, 2002. If the Undersigned shall not have
received such notice by October 15, 2002, it shall promptly notify Obligee
of same, who in response thereto will notify the Undersigned and the
revised rate shall be effective on December 1, 2002. In the event Obligee
shall have received the Undersigned's notice of selection as specified
herein, the Second Adjusted Rate shall be established on the date specified
in the Undersigned's notice of selection and shall be equal to the yield on
U.S. Treasury II which is in effect at the close of business on the date
specified plus Point Spread II and rounded up to the nearest 1/1000 of 1%;
and shall become effective on November 1, 2002. For the purposes of notice
of selection Obligee will accept a telecopy notice of selection at
(515)248-8090 or telephone notice at (515)246-7484 followed by an overnight
delivered written notice of selection, sent in accordance with the notice
provisions of the Mortgage. The monthly payments of principal and interest
commencing Decmeber

- 4 -

1, 2002, and continuing through maturity shall be determined
using the Second Adjusted Rate and the continuation of the original
amortization schedule.

3. No privilege is reserved by the Undersigned to prepay any
principal of this Note prior to the Maturity Date except in the following
instances and provided there is paid all principal and interest to the date
of payment under this Note and the Other Note, along with all sums,
amounts, advances, or charges due under all Loan Documents and provided
that the Undersigned simultaneously exercises it right to prepay the Other
Note as provided for therein. In those instances under this Note in which
the "Premium" as described in paragraph 4 shall apply, it shall apply
notwithstanding any default by the Undersigned and acceleration of the Loan
by Obligee.

a. In the event Obligee shall notify the Undersigned of the First
Adjusted Rate and Obligee shall not have received the Undersigned's written
acceptance and the $5,000 transaction fee as provided in paragraph 2 of
this Note, this Note shall become due and payable in full, without Premium,
including accrued and unpaid interest to the date of prepayment on December
1, 1998.

b. In the event Obligee shall notify the Undersigned of the Second
Adjusted Rate and Obligee shall not have received the Undersigned's written
acceptance and the $5,000 transaction fee as provided in paragraph 2 of the
note, this Note shall become due and payable in full, without Premium,
including accrued and unpaid interest to the date of prepayment on December
1, 2002.

c. The Undersigned shall have the privilege, at its option, to
prepay this Note in full, including accrued and unpaid interest to the date
of prepayment, with a Premium calculated in accordance with paragraph 4 of
this Note commencing on November 1, 1994, and continuing through October 1,
2006, upon 60 days prior written notice to Obligee.

d. The Undersigned shall have the privilege, at its option, to
prepay this Note in full, including accrued and unpaid interest to the date
of prepayment, without any Premium, during the periods commencing on
October 1, 1998, and continuing to December 1, 1998, and commencing on
October 1, 2002, and continuing to December 1, 2002, and commencing On
October 1, 2006, and continuing through maturity, upon 60 days prior
written notice to Obligee.

4. The Make Whole Premium ("Premium") shall be the greater of one
percent (1%) of the principal amount to be a prepaid or a premium
calculated as follows:

(1) Determine the "Reinvestment Yield." The Reinvestment Yield
will be equal to the yield on the respective U.S. Treasury Issue ("primary
issue") for the appropriate prepayment period as indicated in the table
below, published two weeks prior to the date of prepayment and converted to
an equivalent monthly compounded nominal

- 5 -
yield;

(2) Calculate the "Present Value of the Mortgage." The Present
Value of the Mortgage is the present value of the payments to be made in
accordance with this Note (all installment payments and any remaining
payment due on the maturity date) discounted at the Reinvestment Yield for
the number of months remaining from the date of prepayment to the end of
the respective prepayment period as indicated in the table below.

(3) Subtract the amount of the prepaid proceeds from the Present
Value of the Mortgage as of the date of prepayment. Any positive
differential shall be the Premium.

TABLE

U.S. TREASURY ISSUE
PREPAYMENT PERIOD
Commencing on the Continuing to
5 1/8 November 1998n date of funding November 1, 1998

Commencing on Continuing to
11 5/8 November 2002n November 1, 1998 November 1, 2002

See subparagraph Commencing on Continuing through
c, below November 1, 2002 maturity

a. In the event there is no market activity involving the primary issue
at the time of prepayment, the Obligee shall choose a comparable Treasury
Bond, Note or Bill ("secondary issue") which the Obligee deems to be
similar to the primary issue's characteristics (i.e., rate, remaining time
to maturity, yield).

c. At this time there is not a U.S. Treasury Issue for this prepayment
period. At the time of prepayment, Mortgagee shall select a U.S. Treasury
Issue with similar remaining time to

- 6 -

maturity as the Note secured hereby.

5. The Undersigned agrees that if the Obligee accelerates the whole or
any part of the principal sum evidenced hereby pursuant to paragraph 7
hereof, or applies any escrowed funds pursuant to the Loan Agreement or
applies any proceeds to the payment of this Note as if such application had
been made as a result of such acceleration, pursuant to the provisions of
the Mortgage, the Undersigned waives any right to prepay said principal sum
in whole or in part without Premium and agrees to pay, as liquidated
damages and not as a penalty, the Premium calculated in accordance with
paragraph 4 of this Note, on the amount accelerated or applied, as the case
may be.

6. If any payment of principal, interest or premium is not made when
due, damages will be incurred by the Obligee including additional expense
in handling overdue payments, the amount of which is difficult and
impractical to ascertain. The Undersigned therefore agrees to pay, upon
demand, the sum of four cents ($.04) for each one dollar ($1.00) of each
said payment which becomes overdue as a reasonable estimate of the amount
of said damages, subject, however, to the limitations contained in the
second immediately succeeding paragraph.

(Notwithstanding the foregoing, Obligee will waive the foregoing
requirement of a late fee, not more than once during each calendar year, if
payment is received by Obligee not later than the business day immediately
following oral notice as to such payment to a representative of the
Undersigned previously designated by the Undersigned in writing as
authorized to receive such notice. The Undersigned hereby designates any
of Stephen Lovelette (312)915-2856 or Marsha Capodano (312)915-2372 or
Howard Kogen (312)915-1500, as such representatives, unless Obligee is
otherwise notified in writing.

7. If any default in the payment of principal, interest or premium under
this Note or the Other Note is not cured with in 10 days following written
notice of said default or if any Event of Default has occurred or is
continuing under any Loan Document, the entire principal balance, interest
then accrued, and Premium calculated in accordance with paragraph 4 of this
Note, whether or not otherwise then due, shall at the option of Obligee,
become immediately due and payable without demand or notice. Whether or
not the Obligee has exercised said option, interest shall accrue on the
entire principal balance, interest then accrued, and any premium than die,
at a rate equal to the lesser of (i) four percent (4%) per annum above the
then applicable rate of interest payable under this Note or (ii) the
maximum rate allowed by applicable law until fully paid or if the holder of
this Note has not exercised said option, for the duration of such Event of
Default.

8. Notwithstanding anything herein or in any instrument by which this
Note may be secured to the contrary, no provision contained herein or
therein which purports to obligate the Undersigned to pay any amount of
interest or any fees, costs or expenses which are in excess of the maximum
permitted by applicable law, shall be effective to the extent if calls for
the payment of any interest or other amount in excess of such maximum. Any
such excess shall, at the option of the Obligee, either be paid to the
Undersigned or be credited to principal. All agreements between the
Undersigned and

- 7 -

the Obligee with respect to the loan, whether now existing or hereafter
arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand for payment of acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged or
received by the Obligee exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to the Obligee in excess of the maximum lawful amount,
the interest payable to the Obligee shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the Obligee
shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive
interest shall, at the option of the Obligee, be applied to the reduction
of the principal hereof and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal hereof such
excess shall be refunded to the Undersigned. This paragraph shall control
all agreements between the Undersigned and the Obligee with respect to the
Loan.

9. Except as otherwise expressly set forth herein the Undersigned and
any endorsers or guarantors waive presentment, protest and demand, notice
of protest, demand and dishonor and nonpayment, and notice of default,
notice of intent to accelerate maturity and notice of acceleration of
maturity and agree the due date of this Note or any installment may be
extended without affecting any liability hereunder, and further promise to
pay all reasonable costs and expenses, including reasonable attorney's
fees, incurred by the Obligee in connection with any default, Event of
Default, or in any judicial proceeding to interpret and/or enforce any
provision of this Note or any instrument by which it is secured.

10. No release of the undersigned from liability here under shall release
any other maker, endorser or guarantor hereof. Obligee acknowledges that,
as of the date hereof, there is no "other maker, endorser or guarantor
hereof."

11. This Note is secured by the Loan Documents, creating among other
things legal and valid encumbrances on and an assignment of all of the
Undersigned's interest in any leases of the Mortgaged Premises. Terms used
herein which are defined in such Loan Documents and not otherwise defined
herein have the same definition as in such instruments and agreements. In
no event shall such documents be construed inconsistently with the terms of
this Notes, and in the event of any discrepancy between any such documents
and this Note, the terms hereof shall govern. The proceeds of this Note
are to be used for business, commercial, investment or other similar
purposes, and no portion thereof will be used for any personal, family or
household use.

- 8 -

limitation on the foregoing, neither the negative capital account of any
Other Holder nor any obligation of any Other Holder to restore a negative
capital account or to contribute capital to the Undersigned or to any Other
Holder shall at any time be deemed to be the property or an asset of the
Undersigned or any such Other Holder (and neither Obligee nor any of its
successors or assignees shall have any right to collect, enforce or proceed
against or with respect to any such negative capital account or partner's
obligation to restore or contribute). For the purposes of the foregoing,
Other Holders is defined as: (i) any present or future limited or general
partner in the Undersigned; (ii) any present or future limited or general
partner in any partnership that has or shall acquire a direct or indirect
interest (through any one or more partnerships) in the Undersigned or (iii)
any shareholder, officer, director, employee, trustee, beneficiary or agent
of a corporation or trust that acquires a direct or ultimate partnership
interest in the Undersigned as described in items (i) and (ii) above.

(a) The provisions of this paragraph, however, shall not:

(i) limit or impair the Undersigned's liability for (y) "cost
overruns" as described in paragraph 5 of Section II of the loan Agreement
but subject to the limitations set forth therein or (z) its obligations
under that certain environmental indemnity provision contained in
subparagraph 1(p) of the Mortgage.

(ii) limit or impair the lien or enforcement of the Mortgage and any
other Loan Document or the right of Obligee to collect all sums due
hereunder or thereunder except as expressly limited by this paragraph;

(iii) cause the failure of the Undersigned to make all payments of
principal, interest and premium or to perform any obligation under the
Mortgage and any other Loan Document within the time periods provided
herein or therein from being an Event of Default thereunder;

(iv) limit the Undersigned's personal liability for:

(1) any rents (including prepaid rents or other similar sums) or other
income from the Premises received by the Undersigned after an Event of
Default which are not applied to the fixed and operating expenses, capital
expenditures and debt service of the Mortgaged Premises;

(2) any security deposits of tenants held by the Undersigned (and not
applied or used by the Undersigned in accordance with the applicable
leases) and not turned over to the Obligee upon foreclosure or sale
pursuant to power of sale or after an Event of Default, for any
misapplication of security deposits (i.e., to the extent not applied or
used by the Undersigned in accordance with the applicable leases);

(3) any waste committed by the Undersigned with respect to the Mortgaged
Premises;

- 9 -

(4) any insurance or condemnation proceeds or other funds or payments which
are require to be applied in a specific manner in the Mortgage and other
Loan Documents and are not applied by the Undersigned in the manner
expressly provided or required in the Mortgage and other Loan Documents.

In the event of any of the exceptions in subparagraph (1) above, the
recourse of the Obligee shall be limited solely to the assets of the
Undersigned (including, but not limited to, the Mortgaged Premises), but
only to the extent of the misapplication of funds, and indemnification, and
other harm caused by the foregoing items, along with all reasonable costs,
charges and expenses incurred or expended by Obligee in connection with the
enforcement of such action. In no event, however, shall the Other Holders
be liable therefore.

(b) In the event of the following two occurrences, the agreement not to
pursue recourse liability shall become null and void and the Undersigned
(but not the Other Holders shall have liability, which liability shall be
limited to the assets of the Undesigned (including, but not limited to, the
Mortgaged Premises).

(i) there shall be any breach or violation of the Undersigned's
agreement not to, directly or indirectly, due to assignment of beneficial
interest under a trust, partnership interest in a partnership, or
otherwise, cause or permit any sale, transfer or conveyance of the
Mortgaged Premises or create, suffer or permit any encumbrance or lien on
the Mortgaged premises other than the lien of the Mortgage and any other
instrument or agreement by which this Note is secured, the leases of the
Mortgaged Premises assigned to Obligee and such other transfers, liens, or
encumbrances, if any, as are expressly permitted under the Mortgage or any
other instrument or agreement by which this Note is secured (and other than
a non-material breach or violation of such paragraphs such as the filing of
a non-material mechanic's lien affecting the Mortgaged Premises, the
granting of any utility or other easement or servitude burdening the
Mortgaged Premises, or any other transfer or encumbrance not in the nature
of transfer, reduction or impairment of any material economic interest in
the Mortgaged Premises);

(ii) the Undersigned should file, or there should be filed against
the Undersigned by a person other than Obligee (and the same is not
dismissed within 90 days), a petition in bankruptcy or insolvency or
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
bankruptcy laws of the United States or under any other applicable federal,
state or other statute or law, or a receiver, trustee, or liquidator should
be appointed with respect to the Undersigned by a person other than
Obligee;

(c) In the event of any fraud or willful misrepresentation by the
Undesigned regarding the Premises, or the making or delivery of this Note
or any other Loan Document or in any written materials or information
provided by the undersigned in connection with the loan evidenced hereby
and materially relied upon by Obligee in making this loan, the agreement
not to pursue recourse liability shall become null and void and

- 10 -

shall have no further force and effect. (Obligee acknowledges that
it did not materially rely on financial projections entitled "Requests for
Financing Proposal - Riverside Square Shopping Center Hackensack, New
Jersey," furnished to it by the Undersigned). The Undersigned, including
the General Partners (but not the "Other Holders" other than the General
Partners) shall have liability, which shall include the assets of the
Undersigned (including, but no limited to the Mortgaged Premises, and the
assets of the General Partners. The Obligee may pursue assets of the
General Partners only to the extent that the liability to the Obligee shall
remain unsatisfied after Obligee has exhausted its remedies against the
assets of the Undersigned. Any applicable statues of limitations regarding
causes of action against the General Partners under this section shall not
be deemed to have run until one year after Obligee shall have exhausted its
remedies against the assets of the Undersigned.

12.1 In the event that the Undersigned transfers the Mortgaged Premises in
accordance with paragraph 11 (1) of the Mortgage, then the provisions of
paragraph 12 of this Note shall continue to apply to the Undersigned as to
events, acts and circumstances which shall have occurred prior to such
transfer and any events, acts and circumstances under subparagraph
12(a)(iv) which may have been caused by the Undersigned after such
transfer, and the provisions of this paragraph 12.1 shall apply to a
transferee. (References in this paragraph 12.1 to the Undersigned refer to
a transferee.) Anything in this Note or any other Loan Document or any
instrument or certificate executed in connection therewith, to the contrary
notwithstanding, the Undersigned shall have no personal liability directly
or indirectly for the payment of any principal, interest or premium due
under this Note or the performance of any other obligation under the Loan
Documents, and the Obligee shall not seek any deficiency judgement against
the Undersigned or make any resort therefor to any property of the
Undersigned other than the Mortgaged Premises and the rents, issues,
proceeds and profits thereof.

(a) The provisions of this paragraph, however, shall not:

(i) limit or impair the Undersigned's liability regarding its
obligations under that certain environmental indemnity provision contained
in subparagraph 1(p) of the Mortgage.

(iv) limit the Undersigned's personal liability for:

(1) any rents (including prepaid rents or other similar sums) or
other income

- 11 -

from the Mortgaged Premises received by the Undersigned after an Event of
Default which are not applied to the fixed and operating expenses, capital
expenditures and debt service of the Mortgaged Premises;

(2) for any security deposits of tenants held by the Undersigned (and
not applied or used by the Undersigned in accordance with the applicable
leases) and not turned over to the Obligee upon foreclosure or sale
pursuant to power of sale or after an Event of Default, for any
misapplication of security deposits (i.e., to the extent not applied or
used by the Undersigned in accordance with the applicable leases);

(3) any waste committed by the Undersigned with respect to the
Mortgaged Premises;

(4) any insurance or condemnation proceeds or other funds or payments
which are required to be applied in a specific manner in the Mortgage and
other Loan Documents and are not applied by the Undersigned in the manner
expressly provided or required in the Mortgage and other Loan Documents.

(b) In the event of the following three occurrences, the agreement
not to pursue recourse liability shall become null and void and the
Undersigned shall have liability, which liability shall be limited to the
assets of the Undersigned (including, but not limited to, the Mortgaged
Premises).

(i) there shall be any breach or violation of the Undersigned's
agreement not to, directly or indirectly, due to assignment of beneficial
interest under a trust, partnership interest in a partnership, or
otherwise, cause or permit any sale, transfer or conveyance of the
Mortgaged Premises or create, suffer or permit any encumbrance or lien on
the Mortgaged Premises other than the lien of the Mortgage and any other
instrument or agreement by which this Note is secured, the leases of the
Mortgaged Premises assigned to Obligee and such other transfers, liens, or
encumbrances, if any, as are expressly permitted under the Mortgage or any
other instrument or agreement by which this Note is secured (and other than
a non-material breach or violation of such paragraphs such as the filing of
a non-material mechanic's lien affecting the Mortgaged Premises, the
granting of any utility or other easement or servitude burdening the
Mortgaged Premises, or any other transfer or encumbrance not in the nature
of transfer, reduction or impairment of any material economic interest in
the Mortgaged Premises);

- 12 -

(ii) the Undersigned should file, or there should be filed against
the Undersigned by a person other than Obligee (and the same is not
dismissed within 90 days), a petition in bankruptcy or insolvency or a
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
bankruptcy laws of the United States or under any other applicable federal,
state or other statute or law, or a receiver, trustee, or liquidator should
be appointed with respect to the Undersigned by a person other than
Obligee;

(iii) In the event of any fraud or willful misrepresentation by the
Undersigned regarding the Mortgaged Premises, or the making or delivery of
this Note or any other Loan Document or in any materials or information
provided by the Undersigned in connection with the loan evidenced hereby.

13. If more than one, all obligations and agreements of the Undersigned are
joint and several. The lability of all general partners of the Undersigned
shall be joint and several.

14. The remedies of Obligee, as provided herein shall be cumulative and
concurrent and may be pursued singly, successively or together, at the sole
discretion of Obligee, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in
no event be construed as a waiver or release thereof.

15. This Note shall be construed and enforced in accordance with the
substantive law of the State of New Jersey; the Courts of New Jersey shall
have exclusive jurisdiction over suits as to the indebtedness and the other
documents described above; and the Undersigned hereby consents to the
jurisdiction of the Courts of New Jersey.

16. This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement of
any waiver, change modification or discharge is sought. All of the rights,
privileges and obligations hereunder shall inure to the benefit of the
heirs, successors and assigns of the Obligee and shall bind the heirs,
successors and assigns of the Undersigned.

17. If any provision of this Note shall, for any reason, by held to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as if
such invalid or unenforceable provision had never been contained herein.

18. Monthly installment payments of principal and interest shall be made
by bank wire transfer to an account or accounts designated by Obligee.

- 13 -

19. Nothing herein shall limit, restrict or prohibit Obligee's ability to
sell, assign or transfer all or a portion of its interest in the Loan and
the Loan Documents. A single servicer (the "Servicer") shall be authorized
to act on behalf of any lender or lenders (the "Lender") holding an
interest in the Loan, in accordance with the terms of any agreement between
the Lender and Servicer, throughout the term of this loan provided no Event
of Default exists under the Loan Documents. Principal Mutual Life
Insurance Company is hereby designated as Servicer as of the date hereof,
and will remain the Servicer until completion of the Project, as defined in
the Loan Agreement. Any notices, requests, approval, consents, deliveries,
or other forms of communication between the Undersigned and Servicer shall
be deemed adequate and sufficient as if given by or to Lender. In the
event Principal Mutual Life Insurance Company ceases to service this loan,
a new Servicer will be appointed by the Lender and the Undersigned will be
provided with written notice as to who the new Servicer will be.

JMB Income Properties, Ltd.-XI,
an Illinois limited partnership

By: JMB Realty Corporation
a Delaware corporation
Its Managing General Partner

By:
Name: Elizabeth Kogen
Title: Vice President

SECURED PROMISSORY NOTE-B

$4,000,000.00 Newark, New Jersey
August 30, 1994

FOR VALUE RECEIVED, the Undersigned, JMB Income Properties, Ltd.-XI, a
limited partnership of the State of Illinois, hereby promises to pay to the
order of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation, (the
term "Obligee" being used hereafter to refer to the Principal Mutual Life
Insurance Company or to such successors, assigns, or subsequent holders, as
the case may be) at that Home office of Obligee at 711 High Street, Des
Moines, Iowa 50392, or at such other place as the Obligee may designate,
the principal sum of Four Million Dollars ($4,000,000.00) or so much
thereof as shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from August 31, 1994 at the rate
of Eighth and Thirty-Five Hundredths percent (8.35%) per annum, computed on
the basis of a 360 day year composed of twelve 30-day months, in
installments as follows:

Beginning on October 1, 1994, principal and interest shall be due and
payable in installments of Thirty One Thousand Eight Hundred Five Dollars
and 76 Cents ($31,805.76), with an installment in a like amount due and
payable on the same day of each month thereafter until said principal and
interest are fully paid, except that all remaining principal and interest
shall be due and payable on December 1, 2006 ("Maturity Date"). The
foregoing is subject to adjustment as provided in this Note. Each
installment shall be credited first upon interest than accrued and the
remainder upon principal, and interest shall cease to accrue upon principal
so credited. If on the date of the first installment, interest is accrued
for more or less than one installment period, the amount of said
installment shall be increased or decreased by the amount that the interest
accrued exceeds or is less than the interest for one installment period
based on the actual number of days elapsed to the date of said installment.

All principal and interest shall be paid in lawful money of the United
States of America, by wire transfer of immediately available funds to
Obligee at Norwest Bank, Iowa, N.A., 7th and Walnut Streets, Des Monies,
Iowa 50304 for credit to Principal Mutual Life Insurance Company,
Collection Account No. 706?9975, re D 750363, with reference to the
Undersigned

The term the "Other Note" as used herein shall mean the certain
Secured Promissory Note-A of even date herewith in the original principal
amount of $32,000,000.00 given by the Undersigned to Obligee.

- 2 -
Any default by the Undersigned under the other Note sale
constitute a default under this Note.

1. As security for the payment of the moneys owning hereon
(sometimes referred to as the "Loan"), the Undersigned has executed and
delivered to Obligee a mortgage and security agreement (the "Mortgage") on
lands in the City of Hackensack, County of Bergen and State of New Jersey,
commonly referred to as "Riverside Square", (the "Mortgaged Premises") and
an assignment of leases and rents (the "Assignment"). In addition, Obligee
and the Undersigned have entered into a Loan Agreement (the "Loan
Agreement"). All of the above documents are of even date herewith. Any
default in the covenants and conditions of the Mortgage, the Assignment or
the Loan Agreement (which covenants and conditions are made a part hereof
as though set forth herein at length), shall be a default of this Note.
The Mortgage, the Assignment, the Loan Agreement and this Note together
with any other instrument executed as of the date hereof or in the future
by the Undersigned and delivered by the Undersigned to Obligee which by it
terms, further secures this Note, as any of the same may be amended or
modified by a written agreement executed by both Obligor and Obligee is
herein referred to as the "Loan Documents."

2. The following provisions relate to interest rate adjustment:

a. The monthly payment of principal and interest described above are
based on the annual interest rate of 8.35% and a 25 year amortization
schedule, and shall be due and payable through and including November 1,
1998.

b. Obligee shall adjust the interest rate to be in effect on November 1,
1998 and continuing to October 30, 2002 ("First Adjusted Rate"). Obligee
shall notify you in writing of the U.S. Treasury Issue selected by Obligee
("Treasury Issue I") and the basis point spread established by Obligee
("Point Spread I") to be used in the calculation of the First Adjusted
Rate, no later than May 1, 1998. If the Undersigned accepts Point Spread
I, then the Undersigned shall notify Obligee in writing of its acceptance
of Point Spread I and pay to Obligee a $5,000 transaction fee no later than
June 1, 1998. If Obligee shall not have received written acceptance and
the $5,000 transaction fee on or before June 1, 1998, the indebtedness
hereunder shall become due and payable in full without the premium as
described in paragraph 4 of this Note or any other penalty or premium on
December 1, 1998. In the event Obligee shall have received the
Undersigned's written acceptance and the transaction fee as specified
herein, the Undersigned shall notify Obligee in writing of the date on
which to establish the First Adjusted Rated, which selection date shall be
subject to Obligee's approval and shall comply with the following: the
selection date shall not be prior to August 1, 1998; shall not be earlier
than the date on which notice is provided to Obligee; and shall be no later
than September 15, 1998. If Obligee shall not have received the
Undersigned's notice of selection before September 15, 1998, Obligee shall
establish the First Adjusted Rate on September 15, 1998, using the then
current yield in effect on Treasury Issue I as of September 15, 1998 plus
Point Spread I rounded up to the nearest 1/1000 of 1 %, and Obligee shall
notify the Undersigned

- 3 -

in writing of the First Adjusted Rate by October 15, 1998, and such
rate shall be effective on November 1, 1998. If the Undersigned shall not
have received such notice by October 15, 1998, it shall promptly notify
Obligee, who in response thereto will notify the Undersigned and the
revised rate shall be effective on December 1, 1998. In the event Obligee
shall have received the Undersigned's notice of selection as specified
herein, the First Adjusted Rate shall be established on the date specified
in the Under signed's notice of selection and shall be equal to the yield
on U.S. Treasury I which is in effect at the close of business on the date
specified plus Point Spread I and rounded up to the nearest 1/1000 of 1%;
and shall become effective on November 1, 1998. For the purposes of notice
of selection Obligee will accept a telecopy notice of selection at
(515)248-8090 or telephone notice 15 (515)246-7584 followed by an overnight
delivered written notice of selection, sent in accordance with the notice
provisions of the Mortgage. The monthly payments of principal and interest
commencing December 1, 1998 and continuing through November 1, 2002, shall
be determined using the First Adjusted Rate and the continuation of the
original amortization schedule.

c. Obligee shall adjust the interest rate to be in effect on November 1,
2002, and continuing to maturity ("Second Adjusted Rate"). Obligee shall
notify the Undersigned in writing of the U.S. Treasury Issue selected by
Obligee ("Treasury Issue II") and the basis point spread established by
Obligee ("Point Spread II") to be used in the calculation of the Second
Adjusted Rate no later than May 1, 2002. If the Undersigned accepts Point
Spread II, then the Undersigned shall notify Obligee in writing of its
acceptance of Point Spread II and pay to Obligee a $5,000 transaction fee
no later than June 1, 2002. If Obligee shall not have received written
acceptance and the $5,000 transaction fee on or before June 1, 2002, the
indebtedness here under shall become due and payable in full without
Premium or other penalty or premium on December 1, 2002. In the event
Obligee shall have received the Undersigned's written acceptance and the
transaction fee as specified herein, the Undersigned shall notify Obligee
in writing of the date on which to establish the Second Adjusted Rate,
which selection date shall be subject to Obligee's approval and shall
comply with the following: the date selected shall not be prior to August
1, 2002; shall not be earlier than the date on which notice is provided to
Obligee; and shall be no later then September 15, 2002. If Obligee shall
not have received the Undersigned's notice of selection before September
15, 2002, Obligee shall establish the Second Adjusted Rate on September 15,
2002, using the then current yield in effect as of September 15, 2002, on
Treasury Issue II and Point Spread II rounded up to the nearest 1/1000 of
1% and Obligee shall notify the Undersigned in writing of the Second
Adjusted Rate by October 15, 2002, and such rate shall be effective on
November 1, 2002. If the Undersigned shall not have received such notice
by October 15, 2002, it shall promptly notify Obligee of same, who in
response thereto will notify the Undersigned and the revised rate shall be
effective on December 1, 2002. In the event Obligee shall have received
the Undersigned's notice of selection as specified herein, the Second
Adjusted Rate shall be established on the date specified in the
Undersigned's notice of selection and shall be equal to the yield on U.S.
Treasury II which is in effect at the close of business on the date
specified plus Point Spread II and rounded up to the nearest 1/1000 of 1%;
and shall become effective on November 1, 2002. For the purposes of notice
selection Obligee will accept a telecopy

- 4 -
notice of selection at (515)248-8090 or telephone notice at (515)246-
7484 followed by an overnight delivered written notice of selection,
sent in accordance with the notice provisions of the Mortgage. The monthly
payments of principal and interest commencing Decemeber 1, 2002, and
continuing through maturity shall be determined using the Second Adjusted
Rate and the continuation of the original amortization schedule.

3. No privilege is reserved by the Undersigned to prepay any
principal of this Note prior to the Maturity Date except in the following
instances and provide there is paid all principal and interest to the date
of payment under this Note and the Other Note, along with all sums,
amounts, advances, or charges due under all Loan Documents and provided
that the Undersigned simultaneously exercises it right to prepay the Other
Note as provided for therein. In those instances under this Note in which
the "Premium" as described in paragraph 4 shall apply, it shall apply
notwithstanding any default by the Undersigned and acceleration of the Loan
by Obligee.

a. In the event Obligee shall notify the Undersigned of the First
Adjusted Rate and Obligee shall not have received the Undersigned's written
acceptance and the $5,000 transaction fee as provide din paragraph 2 of
this Note, this Note shall become due and payable in full, without Premium,
including accrued and unpaid interest to the date of prepayment on December
1, 1998.

4. The Make Whole Premium ("Premium") shall be the greater of one
percent (1%) of the principal amount to be a prepaid or a premium
calculated as follows:

(1) Determine the "Reinvestment Yield." The Reinvestment Yield
will be equal to the
- 5 -

yield on the respective U.S. Treasury Issue ("primary issue")
for the appropriate prepayment period as indicated in the table below,
published two weeks prior to the date of prepayment and converted to an
equivalent monthly compounded nominal yield;

(3) Subtract the amount of the prepaid proceeds from the Present
Value of the Mortgage as of the date of prepayment. Any positive
differential shall be the Premium.

TABLE

U.S. TREASURY ISSUE
PREPAYMENT PERIOD
Commencing on the Continuing to
5 1/8 November 1993n date of funding November 1, 1998

Commencing on Continuing to
11 5/8 November 2002n November 1, 1998 November 1, 2002

See subparagraph Commencing on Continuing through
c, below November 1, 2002 maturity

b. In the event of a partial prepayment, the Present Value of the
Mortgage shall be calculated in accordance with (2) above multiplied by the
fraction which results from dividing the amount of the prepaid proceeds by
the principal balance immediately prior to prepayment. All prepayments
shall be made on a regular installment date in multiples of $1,000.00, and
shall be first applied to any payments in inverse order due and not defer
the due date of any payments.
- 6 -
c. At this time there is not a U.S. Treasury Issue for this prepayment
period. At the time of prepayment, Mortgagee shall select a U.S. Treasury
Issue with similar remaining time to maturity as the Note secured hereby.

Notwithstanding the foregoing, Obligee will waive the foregoing
requirement of a late fee, not more than once during each calendar year, if
payment is received by Obligee not lager than the business day immediately
following oral notice as to such payment to a representative of the
Undersigned previously designated by the Undersigned in writing as
authorized to receive such notice. The Undersigned hereby designates any
of Stephen Lovelette (312)915-2856 or Marsha Capodano (312)915-2372 or
Howard Kogen (312)915-1500, as such representatives, unless Obligee is
otherwise notified in writing.

7. If any default in the payment of principal, interest or premium under
this Note or the either Note is not cured within 10 days following written
notice of said default or if any Event of Default has occurred or is
continuing under any Loan Document, the entire principal balance, interest
then accrued, and Premium calculated in accordance with paragraph 4 of this
Note, whether or not otherwise then due, shall at the option of Obligee,
become immediately due and payable without demand or notice. Whether or
not the Obligee has exercised said option, interest shall accrue on the
entire principal balance, interest then accrued, and any premium than due,
at a rate equal to the lesser of (i) four percent (4%) per annum above the
then applicable rate of interest payable under this Note or (ii) the
maximum rate allowed by applicable law until fully paid or if the holder of
this Note has not exercised said option, for the duration of such Event of
Default.

8. Notwithstanding anything here or in any instrument by which this Note
may be secured to the contrary, no provision contained herein or therein
which purports to obligate the Undersigned to pay any amount of interest
or any fees, cost or expenses which are in excess of the maximum permitted
by applicable law, shall be effective to the extent if calls for the
payment of any interest or

- 7 -
other amount in excess of such maximum. Any such excess shall, at the
option of the Obligee, either be paid to the Undersigned or be credited to
principal. All agreements between the Undersigned and the Obligee with
respect to the loan, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by
reason of demand for payment or acceleration of the maturity hereof or
otherwise, shall the interest contracted for, charged or received by the
Obligee exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever, interest would otherwise be payable to
the Obligee in excess of the maximum lawful amount, the interest payable to
the Obligee shall be reduced to the maximum amount permitted under
applicable law; and if from any circumstance the Obligee shall ever receive
anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall, at
the option of the Obligee, be applied to the reduction of the principal
hereof and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal hereof such excess shall be
refunded to the Undersigned. This paragraph shall control all agreements
between the Undersigned and the Obligee with respect to the Loan.

11. This Note is secured by the Loan Documents, creating among other
things legal and valid encumbrances on and an assignment of all the
Undersigned's interest in any leases of the Mortgaged Premises. Terms used
herein which are defined in such Loan Documents and not otherwise defined
herein have the same definition as in such instruments and agreements. In
no event shall such documents be construed inconsistently with the terms of
this Note, and in the event of any discrepancy between any such documents
and this Note, the terms hereof shall govern. The proceeds of this Note
are to be used for business, commercial, investment or other similar
purposes, and no portion thereof will be used for any personal, family or
household use.

12. Anything in this Note or any other Loan Document or any instrument or
certificate executed in connection therewith, to the contrary
notwithstanding, the Undersigned and the "Other Holders" shall have no
personal liability directly or indirectly for the payment of any principal,
interest or premium due under this Note or the performance of any other
obligation under the Loan Documents, and the Obligee shall not seek any
deficiency judgement against the Undersigned or the
Other Holders or make any resort therefore to any property of the
Undersigned or the Other Holders other than the Mortgage Premises and the
rents, issues, proceeds and profits thereof. Without limitation on the
foregoing, neither the negative capital account of any Other Holder nor any
obligation of any Other Holder to restore a negative capital account or to
contribute capital to the Undersigned or to any Other Holder shall at any
time be deemed to be the property or an asset of the Undersigned or any
such Other Holder (and neither Obligee nor any of its successors or
assignees shall have any right to collect, enforce or proceed against or
with respect to any such negative capital account or partner's obligation
to restore or contribute). For the purposes of the foregoing, Other
Holders is defined as: (i) any present or future limited or general
partner in the Undersigned; (ii) any present or future limited or general
partner in any partnership that has or shall acquire a direct or indirect
interest (through any one or more partnership's) in the Undersigned or
(iii) any shareholder, officer, director, employee, trustee, beneficiary or
agent of a corporation or trust that acquires a direct or ultimate
partnership interest in the Undersigned as described in items (i) and (ii)
above.

(a) The provisions of this paragraph, however, shall not:

(iv) limit the Undersigned's personal liability for:

(1) any rents (including prepaid rents or other similar sums) or
other income from the Premises received by the Undersigned after an Event
of Default which are not applied to the fixed and operating expenses,
capital expenditures and debt service of the Mortgaged Premises;

(3) any waste committed by the Undersigned with respect to the
Mortgaged Premises;

(4) any insurance or condemnation proceeds or other fund or payments
which are require to be applied in a specific manner in the Mortgage and
other Loan Documents and are not applied by the Undersigned in the manner
expressly provided or required in the Mortgage and other Loan Documents.

In the event of any of the exceptions in subparagraph (1) above, the
recourse of the Obligee shall be limited solely to the assets of the
Undersigned (including, but not limited to, the Mortgaged Premises), but
only to the extent of the misapplication of funds, and indemnification, and
other harm caused by the foregoing items, along with all reasonable costs,
charges and expenses incurred or expended by Obligee in connection with the
enforcement of such action. In to event, however, shall the Other Holders
be liable therefore.

(i) there shall be any breach or violation of the Undersigned's
agreement not to, directly or indirectly, due to assignment of beneficial
interest under a trust, partnership interest in a partnership, or
otherwise, cause or permit any sale, transfer or conveyance of the
Mortgaged Premises or create, suffer or permit any encumbrance or lien on
the Mortgaged premises other than the lien of the Mortgage and any other
instrument or agreement by which this Note is secured, the leases of the
Mortgaged Premises assigned to Obligee and such other transfers,liens, or
encumbrances, if any, as are expressly permitted under the Mortgage or any
other instrument or agreement by which this Note is secured (and other than
a non-material breach or violation of such paragraphs such as the filing of
a non-material mechanic's lien affecting the Mortgaged Premises, the
granting of any utility or other easement or servitude burdening the
Mortgaged Premises, or any other transfer or encumbrance not in the nature
of transfer, reduction or impairment of any material economic interest in
the Mortgaged Premises);

(c) In the event of any fraud or willful misrepresentation by the
Undesigned regarding the Premises, or the making or delivery of this Note
or any other Loan Document or

- 10 -
in any written materials or information provide by the undersigned in
connection with the loan evidenced hereby and material relied upon by
Obligee in making this loan, the agreement not to pursue recourse liability
shall become null and void and shall have no further force and effect.
(Obligee acknowledges that it did not materially rely on financial
projections entitled "Requests for Financing Proposal - Riverside Square
Shopping Center Hackensack, New Jersey," furnished to it by the
Undersigned). The Undersigned, including the General Partners (but not the
"Other Holders" other than the General Partners) shall have liability,
which shall include the assets of the Undersigned including, but no limited
to the Mortgaged Premises, and the assets of the General Partners. The
Obligee may pursue assets of the General Partners only to the extent that
the liability to the Obligee shall remain unsatisfied after Obligee has
exhausted its remedies against the assets of the Undersigned. Any
applicable statues of limitations regarding causes of action against the
General Partners under this section shall not be deemed to have run until
one year after Obligee shall have exhausted its remedies against the assets
of the Undersigned.

12.1 In the event that the Undersigned transfers the Mortgaged Premises in
accordance with paragraph 1 (1) of the Mortgage, then the provisions of
paragraph 12 of this Note shall continue to apply to the Undersigned as to
events, acts and circumstances which shall have occurred prior to such
transfer and any events, acts and circumstances under subparagraph
12(a)(iv) which may have been caused by the Undersigned after such
transfer, and the provisions of this paragraph 12.1 shall apply to a
transferee. (References in this paragraph 12.1 to the Undersigned refer to
a transferee.) anything in this Note or any other Loan Document or any
instrument or certificate executed in connection therewith, to the contrary
notwithstanding, the Undersigned shall have no personal liability directly
or indirectly for the payment of any principal, interest or premium due
under this Note or the performance of any other obligation under the Loan
Documents, and the Obligee shall not seek any deficiency judgement against
the Undersigned or make any resort therefor to any property of the
Undersigned other than the Mortgaged Premises and the rents, issues,
proceeds and profits thereof.

(a) The provisions of this paragraph, however, shall not:

(i) limit or impair the Undersigned's liability regarding its
obligations under that certain environmental indemnity provision contained
in subparagraph 1(p) of the Mortgage.

- 11 -

(iv) limit the Undersigned's personal liability for:

(1) any rents (including prepaid rents or other similar sums) or
other income from the Mortgaged Premises received by the Undersigned after
an Event of Default which are not applied to the fixed and operating
expenses, capital expenditures and debt service of the Mortgaged Premises;

(3) any waste committed by the Undersigned with respect to the
Mortgaged Premises;

(4) any insurance or condemnation proceeds or other funds or payments
which are required to be applied in a specific manner in the Mortgage and
other Loan Documents and are no applied by the Undersigned in the manner
expressly provided or required in the Mortgage and other Loan Documents.

(i) there shall be any breach or violation of the Undersigned's
agreement not to, directly or indirectly, due to assignment of beneficial
interest under a trust, partnership interest in a partnership, or
otherwise, cause or permit any sale, transfer or conveyance of the
Mortgaged Premises or create, suffer or permit any encumbrance or lien on
the Mortgaged Premises other than the lien of the Mortgage and any other
instrument or agreement by which this Note is secured, the leased of the
Mortgage Premises assigned to Obligee and such other transfers, liens, or
encumbrances, if any, as are expressly permitted under the Mortgage or any
other instrument or agreement by which this Note is secured (and other than
a non-material breach or violation of such paragraphs such as the filing of
a non-material mechanic's lien affecting the Mortgaged Premises, the
granting of any utility or other easement or servitude burdening the
mortgaged Premises, or any other transfer or

- 12 -

encumbrance not in the nature of transfer, reduction or impairment of
any material economic interest in the Mortgaged Premises);

(ii) the Undersigned should file, or there should be filed against
the Undersigned by the person other than Obligee ( and the same is not
dismissed within 90 days), a petition in bankruptcy or insolvency or a
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the
bankruptcy laws of the United States or under any other applicable federal,
state or other statute or law, or a receiver, trustee, or liquidator should
be appointed with respect to the Undersigned by a person other than
Obligee;

(iii) In the event of any fraud or willful misrepresentation by the
Undersigned regarding the Mortgaged Premises, or the making or delivery of
this Note or any other Loan Document or in any material or information
provided by the Undersigned in connection with the loan evidenced hereby.

13. If more than one, all obligations and agreements of the Undersigned are
joint and several. The liability of all general partners of the
Undersigned shall be joint and several.

14. The remedies of Obligee, as provided herein shall be cumulative and
concurrent and may be pursued singly, successively or together, at the sole
discretion of Obligee, and may be exercised as often as occasion therefore
shall occur; and the failure to exercise any such right or remedy shall in
no event be construed as a waiver or release thereof.

- 13 -
18.Monthly installment payments of principal and interest shall be make by
bank wire transfer to an account or accounts designated by Obligee.

19. Nothing herein shall limit, restrict or prohibit Obligee's ability to
sell, assign or transfer all or a portion of its interest in the Loan and
the Loan Documents. A single servicer (the "Servicer") shall be authorized
to act on behalf of any lender or lenders (the "Lender") holding an
interest in the Loan, in accordance with the terms of any agreement between
the Lender and Servicer, throughout the term of this loan provided no Event
of Default exists under the Loan Documents. Principal Mutual Life
Insurance Company is here by designated as Servicer as of the date hereof,
and will remain the Servicer until completion of the Project, as defined in
the Loan Agreement. Any notices, requests, approval, consents, deliveries,
or other forms of communication between the Undersigned and Servicer shall
be deemed adequate and sufficient as if given by or to Lender. In the
event Principal Mutual Life Insurance Company ceases to service this loan,
a new Servicer will be appointed by the Lender and the Undersigned will be
provided with written notice as to who the new Servicer will be.

JMB Income Properties, Ltd.-XI,
an Illinois limited partnership

By: JMB Realty Corporation
a Delaware corporation
Its Managing General Partner

By:
Name: Elizabeth Kogen
Title: Vice President

ASSIGNMENT OF
LEASES AND RENTS

THIS ASSIGNMENT, made as of August 30, 1994, by JMB Income Properties,
Ltd.-XI a limited partnership of the State of Illinois, having a post office
address at 900 North Michigan Avenue, Chicago, Illinois 60611-1575, Attention:
Mr. Stephen Lovelette, as Assignor ("Assignor" to be construed as "Assignors"
if the context so requires, to PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an
Iowa corporation having its principal place of business and post office
address at 711 High Street, Des Moines, Iowa 50392, as Assignee,

WITNESSETH THAT:

WHEREAS, Assignor to evidence and secure a loan indebtedness in the
principal amount of $36,000,000.00 has made and delivered to Assignee a
Secured Promissory Note-A in the principal amount of $32,000,000.00 and a
Secured Promissory Note-B in the principal mount of $4,000,000.00 with each of
said notes bearing even date herewith and finally maturing on December 1,
2006. Principal and interest is payable as provided for in each of the
respective notes (said notes are hereinafter collectively referred to as the
"Note"). The Note is secured by a Mortgage bearing the aforesaid date (the
"Mortgage") to secure the Note and creating a lien on Assignor's interest in
certain real estate in the County of Bergen, State of New Jersey, more
particularly described in Exhibit A attached hereto and made a part hereof,
including the improvements now or hereafter thereon and the easements, rights
and appurtenances thereunto belonging, all of which are hereinafter called the
"Mortgaged Premises:; and

WHEREAS, Assignor is the lessor under those certain written leases of
the Mortgaged Premises (which Assignor represents to be all of the leases
relating to the Mortgaged Premises as of the date hereof) as described on
Exhibit B attached hereto and made a part hereof (the "Rent Roll"), and
Assignor may hereafter make other leases of the Mortgaged Premises or parts
thereof; and

WHEREAS, Assignee has required the assignment hereafter made as a
condition to making the above described loan;

NOW, THEREFORE, Assignor, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, does hereby
absolutely and directly (and note merely collaterally) assign, bargain, sell,
transfer, convey, set over and deliver unto Assignee, all rights of the lessor
under the above described lease and all other leases, tenancies, rental
arrangements, and subleases affecting the Mortgaged Premises, or any part
thereof, now existing or which may be executed at any time in the future
during the life of this Assignment, and all amendments, extensions and
renewals of said leases and subleases and any of them, all of which may now or
hereafter be or called the "Leases," an all rents, income and other payments
which may now or hereafter be or become due or owing under the Leases, and any
of them, or on account of the use of the Mortgaged Premises. It is intended
hereby to establish to present incomplete transfer, and direct and absolute
assignment of all the Leases and all rights of the lessor thereunder and all
the rents, and other payments arising thereunder on account of the use of the
Mortgaged Premises unto Assignee, with the right, but without the obligation,
to collect all of said rents, income and other payments which may become due
during the life of this Assignment. Assignor agrees to deposit with Assignee
copies of all leases of all or any portion of the Mortgaged Premises.

1. a. Assignor appoints Assignee the true and lawful attorney of
Assignor with full power of substitution and with power for it and in its
name, place and stead, to demand, collect, receipt and give complete
acquittance for any and all rents and other amounts herein assigned which may
be or become due and payable by the lessees and other occupants of the
Mortgaged Premises, and at its discretion to file any claim or take any other
action or proceeding and make any settlement of any claims, either in its own
name or in the name of Assignor or otherwise, which Assignee my deem necessary
to desirable in order to collect and enforce the payment of any and all rents
and other amounts herein assigned.
(1) In no event, however, shall Assignees (nor any
successor or assignee of Assignee) execute any document which purports to
create any personal liability of Assignor to third parties pursuant to the
foregoing power of attorney or otherwise, and every document executed pursuant
to such provisions shall contain an exculpation clause to that effect.
Provided, however, that nothing contained in this subparagraph (1) or in any
document executed pursuant hereto shall affect the liability of Assignor to
Assignee under this Assignment as described in paragraphs 12 and 12.1 of the
Note, which have been incorporated into this Assignment pursuant to paragraph
23 hereof.

(2) Lessees of the Mortgaged Premises, or any part
thereof, are hereby expressly authorized and directed to pay all rents and
other amounts herein assigned to Assignee or such nominee as Assignee, after
revocation of the license contained in paragraph 8 hereunder, may designate in
writing delivered to and received by such lessees, who are expressly relieved
of any and all duty, liability or obligation to Assignor in respect of all
payments so made.

b. Assignor hereby appoints Assignee as its true and lawful
attorney whereby Assignee may, at its election, perform any of Assignor's
obligations to the lessees or tenants under the Leases, exercise any of
Assignor's rights, powers or privileges under the Leases, modify the Leases,
and execute new leases or enter other rental arrangements for any or all
property covered by the Leases. All obligations created by the exercise of
such agency shall be those of Assignor and not those of Assignee except as
otherwise provided herein. Assignor hereby ratifies and confirms all that
Assignee shall lawfully do or cause to be done by virtue hereof. Assignor
agrees to execute and deliver to Assignee upon demand any further or
supplemental assignments necessary to effect the intentions of this
Assignment, and Assignor hereby appoints Assignee as Attorney-in-Fact of
Assignor to execute and deliver any such assignment on behalf of Assignor and
to deliver to the lessees to whose lease such assignment relates written
notice thereof.

2. Assignee is hereby vested with full power to use all measures, legal and
equitable, deemed by it necessary or proper to enforce this Assignment and to
collect the rents and other amounts assigned hereunder, including the right to
enter upon the Mortgaged Premises, or any part thereof, and take possession
thereof forthwith to the extent necessary to effect the cure of any default on
the part of Assignor as lessor in any of the Leases. Assignor hereby grants
full power and authority to Assignee to exercise all rights, privileges and
powers herein granted an any and all times hereafter, without notice to
Assignor, with full power to use and apply all of the rents and other amounts
assigned thereunder to the payment of the costs of managing and operating the
Mortgaged Premises and any indebtedness or liability of Assignor to Assignee,
including but not limited to the payment of taxes, special assessments,
insurance premiums, damage claims, the costs of maintaining, repairing,
rebuilding and restoring the improvements on the Mortgaged Premises or of
making same rentable, reasonable attorney fees and costs incurred in
connection with the interpretation and/or enforcement of this Assignment, and
of principal and interest payments due from Assignor to Assignee on the Note
and the Mortgage, all in such order as Assignee may determine. Assignee shall
be under no obligation to press any of the rights or claims assigned to it
hereunder or to perform or carry out any of the obligations of the lessor
under any of the Leases and does not assume any of the liabilities in
connection with or arising or growing out of the covenants and agreements of
Assignor in the Leases; and Assignors covenants and agrees that it will
faithfully perform all of the obligations imposed under any and all of the
Leases and hereby agrees to indemnify Assignee and to hold it harmless from
any liability, attorney's fees, costs, loss or damage which may or might be
incurred by it under the leases or by reason of this Assignment, and from any
and all claims and demands whatsoever which may be asserted against Assignee
by reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any of the
Leases. This Assignment shall to operate to place responsibility of the
control, care, management or repair of the mortgaged Premises, or parts
thereof, upon Assignee nor shall it operate to make Assignee liable for the
carrying out of any of the terms and conditions of any of the Leases, or for
any waste of the Mortgaged Premises by the lessee under any of the leases or
any other party, or for any dangerous or defective condition of the Mortgaged
Premises or for any negligence in the management, upkeep, repair or control
thereof resulting in loss or injury or death to any lessee, licensee, employee
or stranger, provided, however, that Assignee shall be responsible for its
gross negligence and misconduct with respect to the mortgaged Premises.

The manner of the application of rentals, the reasonableness of the
costs and charges to which such rentals are applied and the item or items
which shall be credited thereby shall be within the sole and unlimited
discretion of Assignee.

3. Any amounts collected hereunder to Assignee which are in excess of those
applied to any in full the aforesaid liabilities and indebtedness at the time
due shall be promptly paid to Assignor.

4. Assignor hereby represents and warrants to Assignee that it is the sole
owner of the entire lessor's interest in each of the Leases as set forth on
the Rent Roll; that as to the Leases set forth in the Rent Roll, it has
performed its obligations thereunder and, to the best of its knowledge, the
lessees thereunder have not committed defaults, and the Leases as set forth in
the Rent Roll are valid and enforceable and have not been altered, modified or
amended in any manner whatsoever except as expressly mentioned in the Rent
Roll; that all conditions precedent to the effectiveness of the Leases have
been satisfied; that Assignor has not heretofore transferred assigned the
Leases as set forth in the Rent Roll or any of the rents thereunder or any
right or interest therein, nor has it collected rents more than one month in
advance or anticipated any of the rents thereunder; and Assignor represents
and warrants that it is not indebted to the lessees as set forth in the Rent
Roll under the leases in any manner whatsoever so as to give rise to any right
of set-off against, or reduction of, the rents payable under the Leases.

4.1 Assignor covenants as to future Leases relating to the Mortgaged
Premises that (except as to specific facts and conditions that may be
disclosed to Assignee at the time of submission for approval of such Leases),
Assignor shall be the sole owner of the entire lessor's interest in each
Lease, and that such Leases shall be valid and enforceable.

5. Except for the provisions of paragraph 6 hereunder regarding certain
permitted actions by Assignor as to "Qualified Leases," as defined therein,
Assignor covenants not to alter, modify, amend or change the terms of the
leases or give any consent or permission or exercise any option required or
permitted by the terms thereof or waive any obligation required to be
performed by any lessee or execute, cancel or terminate any of the Leases or
accept a surrender thereof to enter into leases after the date hereof without
prior written consent of Assignee, and Assignor will not make any further
transfer or assignment thereof, or attempt to pledge, assign or encumber any
of the Leases or rents or other amounts payable thereunder, or convey or
transfer or suffer a conveyance or transfer of the Mortgaged Premises or of
any interest therein so as to effect, directly or indirectly, a merger of the
estates and rights of, or a termination or diminution of the obligations of,
any lessee thereunder.

(a) Assignor further covenants to deliver to Assignee, promptly
upon receipt thereof, copies of any and all demands, claims and notices of
default received by it from any lessee under any of the Leases assigned
herein. If requested by Assignee, Assignor shall enforce the Leases and all
remedies available to Assignor against the lessees thereunder in case of
default under the Leases by such lessees.

(b) Except as the "Qualified Leases," described and defined in
paragraph 6 below, all future leases of portions of the Improvements shall be
submitted by Assignor to Assignee prior to execution, for approval.
Assignee's response will be given to Assignor in writing with ten (10)
business days of Assignee's receipt of the proposed lease and request for
approval. If Assignee shall not disapprove and state reasons for disapproval
in writing within such ten (10) business day period (and there has been
specified in the request for approval that approval is requested within 10
business days), then Assignee will be deemed to have approved the proposed
lease.

6. For the purposes of this paragraph, a "Qualified Lease" is hereby
defined as a lease having all of the following elements: less than 5,000
square feet, with a term of 5 years or more, arising out of an arms-length
transaction, requiring payment of market rents and executed on (and without
material deviation from) a shopping center lease form which shall have been
previously approved by Assignee. Assignor may (i) enter into qualified Leases
of the Mortgaged Premises subsequent to the date hereof (ii) may cancel,
modify, alter or accept the surrender of such Qualified Leases (including
leases in existence on the date hereof, as shown on the Rent Roll, which meet
the foregoing requirements of Qualified Leases), and (iii) may make tenant
improvements and alterations in connection with said Qualified Leases,
provided Assignor does all of the foregoing {(i) to (iii)} consistently with
good business practice in the normal course of business and sound, prudent
real estate management practices. Assignor shall give Assignee notice of any
Qualified Lease entered into, cancelled, modified, altered or surrendered
pursuant to this paragraph, or of any tenant improvements or alterations made
hereunder, together with a complete copy of such Qualified Lease, or such
cancellation, modification or alteration or any documentation related to such
improvements and alterations, including without limitation any drawings and
plans, not later than ten (10) days after the execution or approval thereof.
If Assignee determines, in its sole discretion, that Assignor, in taking any
action in connection with any Qualified Lease pursuant to this paragraph, is
not doing so consistently with good business practices in the normal course of
business, or sound, prudent real estate management practices, Assignee may
revoke its pre-approval hereunder as to Qualified Leases, and, thereafter,
Assignor shall be required to obtain Assignee's prior written consent before
entering into any lease of the Mortgaged Premises, or any cancellation,
modification or alteration thereof, or accepting the surrender of any lease,
or making any tenant improvements or alterations.

Assignor may enter into month-to-month leases under all of the
requirements (excepts as to term) and conditions of the foregoing paragraph.

Upon payment in full of the principal sum, interest and other
indebtedness secured hereby, and by any other Loan Documents, this Assignment
shall be and become null and void; otherwise, it shall remain in full force
and effect as herein provided and, with the covenants, warranties and power of
attorney herein contained, shall inure to the benefit of Assignee and any
subsequent holder of the Note, and shall be binding upon Assignor, and its
heirs, legal representatives, successors and assigns, and any subsequent owner
of the Mortgaged Premises. Subject to the servicing provision contained in
paragraph 19 of the Note, Assignee shall have the right to assign the interest
acquired hereby to any subsequent holder of the Mortgage and to any person
acquiring title to the Premises thought foreclosure or otherwise. After
Assignor shall have been barred and foreclosed of all right, title, interest
and equity of redemption in the Premises, no such assignee shall be liable to
account to Assignor for the rents, income and profits thereafter accruing.
Notwithstanding any variation of the terms of the Note or the Mortgage,
including increase or decrease in the principal amount of the Note or in the
rate of interest payable thereunder, any extension of time for payment
thereunder, any other modification thereof or any release of part of parts of
the real estate subject to the Mortgage, the Leases and the benefits hereby
assigned shall continue as security in accordance with the terms of this
Assignment.

8. Notwithstanding any provision herein to the contrary, prior to an "Event
of Default" as defined in the Mortgage or a default by Assignor beyond any
applicable cure period in any of the Leases, Assignee hereby grants to
Assignor the license to collect as the same become due and payable, but in any
event for not more than one calendar month in advance, all rents and other
income arising under the Leases and from the Mortgaged Premises, to act with
full and sole authority as Lessor under each respective lease and to enforce
all provisions contained in the Leases. Assignor shall render such accounts
of collections as Assignee may require. The license herein granted to Assignor
shall terminate immediately and automatically, without further action or
documentation, upon any Event of Default pursuant to the Mortgage or any other
Loan Document or a default beyond any applicable cure period in the
performance of any obligation, covenant or agreement of Assignor contained in
any of the Leases; and upon written notice of Assignor's Event of Default at
any time hereafter given by Assignee to any lessee, all rentals thereafter
payable and all agreements and covenants thereafter to be performed by the
lessee shall be paid and performed by the lessee directly to Assignee in the
same manner as if the above license had not been granted, without prosecution
of any legal or equitable remedies under the Mortgage. Any lessee of the
Mortgaged Premises or any part thereof is authorized and directed to pay to
Assignor any rent herein assigned currently for not more than one calendar
month in advance and any payment so made prior to receipt by such lessee of
notice of Assignor's Event of Default shall constitute a full acquittance to
lessee therefor.

9. Concurrently with the execution of any lease covering the Mortgaged
Premises, Assignor will notify the lessee, by U.S. Certified Mail, of the
existence of this Assignment and will deliver an executed copy of this
Assignment to such lessee, directing such lessee to make all payments under
its lease to Assignee or its nominee in accordance with the terms of this
Assignment.

10. It is understood and agreed that this Assignment shall become effective
concurrently with the Note and the Mortgage. This Assignment shall be
governed by and construed in accordance with the laws of the State where the
Mortgage Premises is located.

11. It is the intention of Assignee and Assignor that the assignment
effectuated by this Assignment with respect to the rents and other amounts due
under the Leases shall be a direct and currently effective assignment and
shall not constitute merely the granting of a lien, security interest or
pledge for the purpose of securing the indebtedness secured by the Mortgage.
In the event that a court of competent jurisdiction determines that,
notwithstanding such expressed intent of the parties, Assignee's interest in
the rents or other amounts due under the Leases constitutes a lien on or
security interest in or pledge of the rents or other amounts due under the
Leases, it is agreed and understood that the forwarding of a notice to
Assignor after the occurrence of an Event of Default, advising Assignor of the
revocation of Assignor's license to collect such rents and other amounts due
under the Leases, shall be sufficient action by Assignee to (i) perfect such
lien on or security interest in or pledge of the rents and other amounts due
under the Leases, (ii) take possession thereof, and (iii) entitle Assignee to
immediate and direct payment of the rents and other amounts due under the
Leases, for application as provided in the Note or Mortgage, all without the
necessity of any further action by Assignee, including, without limitation,
any action to obtain possession of the land, improvements or any other portion
of the Mortgaged Premises. Notwithstanding the direct and absolute assignment
of the rents and other amounts as herein described, there shall be no prot
tanto reduction of any portion of the indebtedness secured by the Mortgage
except with respect to rents or other amounts actually received by Assignee
and applied by Assignee toward payment of such indebtedness.

12. Notwithstanding anything in this Assignment to the contrary, Assignee
may, upon written notice to Assignor, elect (i) exclude from the assignment
provided in this Assignment of any of the Leases as specified in such notice
so that the interest under such indicated Lease is not assigned to Assignee,
and (ii) subordinate the lien and other terms and provisions of the Mortgage
to any of the Leases as indicated in said notice to Assignor.

13. The rights and remedies of Assignee under this instrument are
cumulative, are not in lieu of but are in addition to, any their exercise of
or the failure to exercise them shall not constitute a waiver of, any other
rights and remedies which the Assignee shall have under the Note, the
Mortgage or any other Loan Document or instrument
securing the Note. The rights and remedies of Assignee hereunder may be
exercised from time to time and as often as such exercise is deemed expedient.

14. No security deposited by any tenant with the landlord under the terms of
any of the Leases has been transferred to Assignee, and Assignee assumes no
liability for any security so deposited.

15 Assignor shall, without charge, at any time and from time to tome,
within thirty (30) days after request by Assignee (which will be no more
frequently than once in any 12 month period), execute, acknowledge and deliver
to Assignee its certification, with respect to any or all of the Leases as to
the following:

(a) The dates of the Leases, the dates when the terms thereof
commenced and the dates when any rents, charges and other sums payable by
lessees thereunder commenced to be payable thereunder;

(b) That the Leases are unmodified and in full force and effect;
or, if there have been any modifications, that the leases are in full force
and effect as modified and stating the modifications and the dates thereof;

(c) To Assignor's actual knowledge, whether or not there are
then existing any valid and enforceable setoffs or defenses against the
enforcement of any of the terms and/or conditions of the Leases (or of
amendments or modifications of the Leases, if any) upon the part of the
lessees thereunder to be performed or complied with and, if so, specifying the
same;

(d) The dates, if any, to which any rents, charges and other
sums on the part of the lessees to be paid under the Leases have been paid in
advance;

(e) The dates of expiration of the terms of the leases; and

(f) The rate or rates of rent (including a break-down thereof
into annual rent, percentage rents and any other additional rents and charges
provided for in the Leases).

16. Similarly, upon request as stated in paragraph 14 above, but not more
frequently than once in any 24 month period, Assignor shall also use good
faith efforts to procure and deliver to Assignee, within the aforesaid time
period, certifications of all the foregoing by the lessees, or any or all of
the lessees, under the Leases.

17. Notwithstanding the license in Assignor to collect rents contained
herein, Assignee, and not Assignor, shall be deemed to be the creditor or each
lessee in respect of assignments for the benefit of creditors and bankruptcy,
reorganization, insolvency, dissolution or receivership proceedings affecting
such lessee, without obligation on the part of Assignee, however, to file or
make timely filings of claims in such proceedings otherwise to pursue
creditor's rights therein, and with an option to Assignee to apply any money
received by Assignee as such creditor in reduction of the aforesaid principal
or interest or any other indebtedness secured by or to be paid pursuant to the
Mortgage.

18. In the event that Assignor files a petition in bankruptcy or becomes the
subject of an involuntary petition in bankruptcy, Assignor acknowledges and
agrees that all income form the Mortgaged Premises or any part thereof
("Property Income"), whether now due or becoming due after the date of such
filing, together with all other Property Income previously collected and held
by or on behalf of Assignor or Assignee, shall not be property of the
Assignor's bankruptcy estate with the meaning of Section 541 or the United
States Bankruptcy Code (11 U.S.C. Subsection 101 et seq.), as amended (as so
amended, from time to time, the "Code"). Assignor hereby further covenants
and agrees that the automatic stay provided for under Section 362 of the Code
shall not apply to Assignee's right to collect and apply Property Income. To
the extent the Property Income or any part thereof (whether now due or
becoming due after the date hereof) is held to be property of the bankruptcy
estate with the meaning of Section 541 of the Code, all such Property Income,
whether earned or received prior to or after the filing of a bankruptcy
petition by the Assignor, shall be cash collateral of Assignee with the
meaning of Section 363 of the Code. Assignee hereby declares that it does not
consent to the use of cash collateral, and that, in the event Assignee elects
(in its sole discretion) to give such consent, it may be conditioned on such
terms as Assignee may require and shall only be effective if given in writing.

Assignor shall have no right to use or apply (or require the use of
application of) such Property Income, unless Assignor shall have received a
court order authorizing use of such Property Income, and Assignor shall have
provided adequate protection to Assignee as required by Section 363 of the
Code.

19. Assignee may take security in addition to the security already given
Assignee for the payment of the principal and interest provided to be paid in
or by the Note or by the Mortgage, or may release such other security, any
release any party primarily or secondarily liable on the Note, may grant or
make extensions, renewals, modifications or indulgences with respect to the
Note or Mortgage, which extensions, renewals, modifications and indulgences
may be on the same or on different terms from the present terms of the Note or
Mortgage, and may apply any other security specifically held by Assignee as
security for the Note to the satisfaction of the Note or Mortgage without
prejudice to any of Assignee's rights hereunder.

20 No change, amendment, modification, abridgment, cancellation or
discharge hereof or of any part hereof, shall be valid unless consented to in
writing by Assignee.

21. Assignor shall from time to time execute and deliver to Assignee such
further instruments as Assignee may deem necessary to make this Assignment and
any further assignment effective subject, however, to the limitations on
liability set forth in paragraph 12 of the Note.

22. If any provision of this Assignment shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Assignment shall be construed as if such
invalid or unenforceable provision had never been contained herein.

23. As used herein, word importing a particular gender mean and include
every other gender and words include the singular number mean and include the
plural number and Vice Versa.

24. The provisions of paragraphs 12 and 12.1 of the Note are hereby
incorporated by reference as if set forth as length.

IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed and delivered as of the date first hereinabove written.

JMB Income Properties, Ltd.-XI
an Illinois limited partnership

By: JMB Realty Corporation
a Delaware corporation
Its Managing General Partner

BY:_________________________
Name: Elizabeth Kogen
Title: Vice President

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<CIK> 0000744437
<NAME> JMB INCOME PROPERTIES, LTD. - XI

<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994

<CASH> 496,611
<SECURITIES> 23,916,900
<RECEIVABLES> 13,838,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,251,603
<PP&E> 69,567,391
<DEPRECIATION> (19,034,860)
<TOTAL-ASSETS> 111,573,135
<CURRENT-LIABILITIES> (10,855,026)
<BONDS> (35,515,318)
<COMMON> 0
0
0
<OTHER-SE> (65,129,024)
<TOTAL-LIABILITY-AND-EQUITY>(111,573,135)
<SALES> (9,856,633)
<TOTAL-REVENUES> (10,484,697)
<CGS> 0
<TOTAL-COSTS> 7,979,347
<OTHER-EXPENSES> 469,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,930,148
<INCOME-PRETAX> (106,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,061,398)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,206,791
<CHANGES> 0
<NET-INCOME> 145,393
<EPS-PRIMARY> .89
<EPS-DILUTED> 0

</TABLE>