ML EQ REAL ESTATE PORTFOLIO L P, 10-K405, 1999-03-31

ML EQ REAL ESTATE PORTFOLIO L P
10-K405, 1999-03-31
LESSORS OF REAL PROPERTY, NEC

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]

Commission File Number 0-17684

ML/EQ REAL ESTATE PORTFOLIO, L.P.

(Exact name of registrant as specified in governing instrument)

Delaware 58-1739523
(State of organization) (IRS Employer Identification No.)

3424 Peachtree Road, N.E., Suite 800
Atlanta, Georgia 30326
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (404) 239-5002

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

Beneficial Assignee Certificates ("BACs")
representing assignments of Limited Partnership Interests
(Title of Class)

Limited Partnership Interests underlying BACs
(Title of Class)

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
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant.

Not Applicable

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DOCUMENTS INCORPORATED BY REFERENCE

Selected portions of the Prospectus of the Registrant dated April 23, 1987, as
supplemented by supplements dated March 3, 1988 and March 17, 1988 (File No.
33-11064) filed pursuant to Rule 424 of the Securities Act of 1933, as amended,
are incorporated by reference in Parts I and II of this Annual Report on Form
10-K.

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PART I.

ITEM 1. BUSINESS

Certain of the statements contained in this Annual Report on Form 10-K
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements include, without limitation,
statements regarding future capital expenditures relating to renovation and
development activities, and statements regarding expectation of future sales of
the Properties. These forward-looking statements are included in this Annual
Report on Form 10-K based on the intent, belief or current expectations of the
Partnership (as hereinafter defined). However, such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Although the
Partnership believes that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be achieved. Factors that could cause actual results to
differ materially from the Partnership's current expectations include general
local market conditions, the investment climate for particular property types,
individual property issues, construction delays due to unavailability of
materials, leasing activities, weather conditions or other causes, and the other
risks detailed from time to time in the Partnership's reports filed with the
Securities and Exchange Commission (the "SEC") .

General. The registrant, ML/EQ Real Estate Portfolio, L.P. (the
"Partnership"), is a limited partnership formed on December 22, 1986 under the
Revised Uniform Limited Partnership Act of the State of Delaware. The
Partnership operates pursuant to the Amended and Restated Agreement of Limited
Partnership dated as of April 23, 1987 as amended as of February 9, 1988 (the
"Partnership Agreement"), which is included as an exhibit to this annual report.
Capitalized terms used in this annual report that are not defined herein have
the same meaning as in the Partnership Agreement.

The Partnership's two general partners are EREIM Managers Corp., a
Delaware corporation (the "Managing General Partner"), and MLH Real Estate
Associates Limited Partnership, a Delaware limited partnership (the "Associate
General Partner" and, together with the Managing General Partner the "General
Partners"). The Managing General Partner is an indirect, wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States ("Equitable") and
the general partner of the Associate General Partner is an affiliate of Merrill
Lynch & Co., Inc. ("Merrill Lynch").

The Managing General Partner was a wholly-owned subsidiary of Equitable
Real Estate Investment Management, Inc. ("Equitable Real Estate"), which was a
wholly owned subsidiary of Equitable. On June 10, 1997, Equitable sold Equitable
Real Estate to a subsidiary of Lend Lease Corporation Limited. The shares of the
Managing General Partner were not included in the sale and

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the Managing General Partner continues to be a wholly-owned indirect subsidiary
of Equitable. Lend Lease Corporation Limited merged its existing U.S. real
estate investment advisor, The Yarmouth Group, Inc., into Equitable Real Estate
and changed the name of Equitable Real Estate to ERE Yarmouth, Inc. ("ERE
Yarmouth"). On July 13, 1998, Lend Lease Corporation Limited changed the name of
ERE Yarmouth to Lend Lease Real Estate Investments, Inc. ("Lend Lease"). Lend
Lease was retained by the Managing General Partner, at the Managing General
Partner's expense, to continue providing the same services with respect to the
Partnership, EML Associates (the "Venture"), a joint venture with EREIM LP
Associates, a New York general partnership between Equitable and EREIM LP Corp.,
a wholly-owned subsidiary of Equitable, and the properties that Equitable Real
Estate has historically provided to the Managing General Partner. The Venture
was formed in March 1988. See "Advisory Agreement."

The Partnership offered to the public $150,000,000 of Beneficial
Assignee Certificates (the "BACs"), which evidence the economic rights
attributable to limited partnership interests in the Partnership (the
"Interests"), in an offering (the "Offering") which commenced in 1987. The
Offering was made pursuant to a Prospectus dated April 23, 1987, as supplemented
by Supplements dated December 29, 1987 (the "December Supplement"), March 3,
1988 (the "March 3 Supplement") and March 17, 1988 (the "March 17 Supplement"),
filed with the SEC in connection with a Registration Statement on Form S-11 (No.
33-11064). The Prospectus as supplemented is hereinafter referred to as the
"Prospectus." The Offering terminated on March 29, 1988. On March 10, 1988, the
Partnership's initial investor closing occurred at which time the Partnership
received $92,190,120, representing the proceeds from the sale of 4,609,506 BACs.
On May 3, 1988, the Partnership's final investor closing occurred at which time
the Partnership received $16,294,380, representing the proceeds from the sale of
an additional 814,719 BACs. In total, the Partnership realized gross proceeds of
$108,484,500 from the Offering, representing the sale of 5,424,225 BACs.

Following its investor closings, the Partnership contributed the net
proceeds of the Offering to the Venture. The capital of the Venture was provided
approximately 80% by the Partnership and approximately 20% by EREIM LP
Associates.

Effective as of January 1, 1997, the Partnership entered into an
amendment to the Joint Venture Agreement of the Venture between the Partnership
and EREIM LP Associates pursuant to which EREIM LP Associates agreed to defer,
without interest, its rights to receive 20% of the Venture's distributions of
sale or financing proceeds until the Partnership has received aggregate
distributions from the Venture in an amount equal to the capital contributions
made to the Partnership by the BAC holders plus a noncompounded cumulative
return computed at the rate of 9.75% per annum on contributions outstanding from
time to time. Prior to the amendment, EREIM LP Associates had a right to receive
20% of all of the Venture's distributions of sale or financing proceeds on a
pari passu basis with the Partnership. The amendment has the effect of
accelerating the return of original contributions to BAC holders to the extent
that sale or financing proceeds are realized prior to the dissolution of the
Partnership.

Business of the Partnership. The Partnership was formed to invest in a
diversified portfolio of properties and mortgage loans. The Partnership
considers its business to represent one industry segment, investment in real
property.

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Following the Offering, the Venture acquired a diversified portfolio of
real properties and mortgage loans secured by real properties. Based on original
acquisition prices, approximately 52% of the Venture's original contributed
capital was invested in existing income-producing real properties acquired
without permanent mortgage indebtedness, approximately 25% of such capital was
invested in zero coupon or similar mortgage notes (the "Zero Notes"), and the
balance was invested in fixed-rate first mortgage loans. The Properties and the
properties that secured the mortgage loans included commercial, industrial,
residential, retail and warehouse/distribution properties. The Venture has an
undivided interest in one property ("Northland Center") as a tenant in common
with Equitable, which was transferred to the Venture and Equitable on July 22,
1994. All references herein to the Venture's ownership of Northland Center shall
be deemed to refer to the Venture's undivided interest as a tenant in common
with Equitable unless otherwise indicated. The Venture's interest in Northland
Center represented approximately 49%, 37% and 31% of the real estate investments
owned by the Venture as of December 31, 1998, 1997 and 1996, respectively, and
approximately 53%, 42% and 46% of total revenues of the Venture for the years
ended December 31, 1998, 1997 and 1996, respectively.

At December 31, 1998, the Venture owned three real properties and an
undivided interest in Northland Center (collectively, the "Properties") and one
mortgage loan on a real property. Two of the Properties (Richland Mall and 16/18
Sentry Park West) were purchased at an aggregate cost of approximately $39.6
million. Two of the Properties, Northland Center and 300 Delaware (originally
properties that secured a Zero Note and a fixed rate first mortgage loan (the
"Mortgage Loan"), respectively, were transferred to the Venture during 1994 in
separate deed in lieu of foreclosure transactions. The estimated fair market
value of the Venture's undivided interest in the Northland Center Zero Coupon
Mortgage Note Receivable immediately preceding the transfer was approximately
$32.2 million and the estimated fair market value of the 300 Delaware Mortgage
Loan immediately preceding the transfer was approximately $8.5 million. In
addition, at December 31, 1998, the Venture owned one remaining Mortgage Loan in
the principal amount of $6.0 million. (Amounts identified are exclusive of
closing costs.) The Morgage Loan matured and was paid in full on February 1,
1999. Reference is made to Item 2. PROPERTIES for information concerning the
Properties and the Mortgage Loan.

The Partnership continues to evaluate appropriate strategies for the
ownership of each of the Properties in order to achieve maximum value. As a
result of the evaluation, (i) on November 24, 1998, the Venture completed the
sale of 1200 Whipple Road and 1345 Doolittle Drive as a package for $26.5
million, (ii) on December 18, 1998, the Venture completed the sale of 1850
Westfork for $2.6 million and (iii) on January 27, 1999, the Venture completed
the sale of Richland Mall for $9.01 million. In addition, the Partnership
decided to market for sale the 300 Delaware and 16/18 Sentry Park West
properties.

Real estate investments are recorded at historical cost less
accumulated depreciation. For purposes of financial statement presentation, the
Properties are stated at cost, unless it is determined that the value of the
Properties has been impaired to a level below depreciated cost. Impairment is
determined by calculating the sum of the estimated undiscounted future cash
flows including the projected undiscounted future net proceeds from sale of the
Property. In the event this sum is less

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than the depreciated cost of the Property, the Property will be written down to
estimated fair market value.

Individual real estate properties held for sale, including deferred
leasing costs and deferred rent concessions, are recorded at lower of cost or
estimated fair market value, less estimated costs to sell. Depreciation is not
recorded for properties classified as held for sale.

Neither the Partnership nor the Venture has any real property
investments located outside the United States. The Partnership has no employees.

Leasing Information. See Item 2. PROPERTIES for information regarding
percentages of space under lease for each of the Properties and the property
that secured the Mortgage Loan, as well as information relating to the
percentage of rentable space at each Property covered by leases that are
scheduled to expire in each of the years 1999 to 2001.

Competition. The Properties may compete with other properties in the
areas in which they are located for, among other things, desirable tenants.
Competitors may include properties owned or managed directly or indirectly by
Equitable or Lend Lease or their subsidiaries or affiliates or by affiliates of
the Associate General Partner. Owners of some of these properties may have
greater resources than the Venture and/or may be willing or able to make greater
concessions (e.g., lower rent or higher allowances for tenant improvements) to
attract tenants. Similarly, tenants of the Properties may compete for business
with other businesses in the area. Such competition may adversely affect the
business (and, in some cases, the viability) of such tenants and, particularly
in the case of retail tenants, may reduce the amount of rent received by the
Venture under percentage rent provisions.

The Venture's income from Properties may be affected by many factors,
including reductions in rental income due to an inability to maintain occupancy
levels, adverse changes in general economic conditions, adverse local conditions
(such as decreases in demand for similar or competing facilities or competitive
over-building, adverse changes in tax, real estate, zoning and environmental
laws or decreases in employment), energy shortages or increased energy costs, or
acts of God (such as earthquakes and floods). See Item 2. PROPERTIES for a
description of difficulties experienced by certain of the Properties.

As described above, the Partnership continues to evaluate appropriate
strategies for the ownership of each of the Properties in order to achieve
maximum value. In this regard, the Partnership considers capital and investment
market conditions for real estate; local market conditions; future capital
needs, including potential lease exposure for specific properties; prevailing
interest rates; the availability of mortgage financing at the time that the
Properties are offered for sale and other issues that impact property
performance. As described in the Partnership Agreement, liquidation or
dissolution of the Venture will be delayed until the sale, retirement or other
disposition of the Mortgage Loan and Properties held by the Venture (other than
purchase money notes from the sale of a property) or the liquidation of the
Partnership, but not beyond December 31, 2002. While the Partnership Agreement
provides that the term of the Partnership may extend until December 31, 2002,
the Partnership's present intention is to sell the three remaining properties in
advance of the

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foregoing date. However, there is no guaranty that the three remaining
properties will be sold in advance of December 31, 2002. See INVESTMENT GUARANTY
AGREEMENT AND RELATED MATTERS below.

Conflicts of Interest. Equitable and its subsidiaries and affiliates
and its advisor, Lend Lease, are among the largest owners and managers of real
estate assets in the country and certain activities in which they currently or
in the future may engage will be competitive with the Partnership and the
Venture. As Managing General Partner of the managing partner of the Venture,
EREIM Managers Corp. may encounter various conflicts of interest in managing the
Partnership's and the Venture's businesses. These conflicts may, for example,
arise in connection with the allocation of leasing or sale opportunities,
selection of service providers such as property managers (including whether to
retain an affiliate or a non-affiliate), determination to exercise or forbear
exercise of certain rights (e.g., eviction or foreclosure), or the timing of
investment dispositions or liquidations. While EREIM Managers Corp. believes
that it will be able to resolve such conflicts in an equitable manner, it is
possible that such conflicts may not be resolved in favor of the Partnership or
the Venture.

Compass Management and Leasing, Inc. ("Compass") and ERE Yarmouth
Retail, Inc. ("Retail"), affiliates of Lend Lease, which until June 10, 1997
were affiliates of Equitable, manage certain of the Venture's properties. The
property management agreements are at market rates but not in excess of the
rates permitted under the Partnership Agreement. Compass and Retail earned
approximately $293,000, $396,000 and $407,000 in property management fees for
properties managed for the nine months ended September 30, 1998, and the years
ended December 31, 1997 and 1996, respectively. On September 30, 1998, Compass
and Retail were sold to LaSalle Partners Incorporated ("LaSalle"). LaSalle
continues to manage the three remaining properties. Leasing commissions are
based on a percentage of the rent payable during the term of the lease as
specified in each lease agreement. Leasing commissions paid by the Venture to
Compass and Retail were approximately $59,000, $276,000 and $124,000 during
1998, 1997 and 1996, respectively. Leasing commissions are capitalized in
deferred leasing costs on the balance sheet or expensed in real estate operating
expenses on the statements of operations in accordance the Venture's
capitalization policy. The Venture reimbursed Compass and Retail for payroll
incurred of approximately $1.3 million, $1.8 million and $1.7 million during
1998, 1997 and 1996, respectively. Payroll reimbursements are included in real
estate operating expenses on the statements of operations. Additionally, the
Venture paid construction management fees to Compass and Retail of approximately
$0, $12,000 and $92,000 during 1998, 1997 and 1996, respectively. The
construction management fees have been capitalized as a portion of the
construction projects to which they relate.

The General Partners or their affiliates are entitled to receive
various recurring fees for the supervision and administration of partnership
assets and for providing the guaranty of minimum return to BAC holders and to be
reimbursed for certain expenses incurred on behalf of the Partnership. At
December 31, 1998, 1997 and 1996 the accrued balance for these fees and
reimbursements totaled approximately $480,000, $630,000 and $608,000,
respectively. Supervisory and mortgage loan servicing fees paid by the
Partnership to the Managing General Partner were approximately $612,000,
$747,000 and $687,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. These amounts, which were then paid by the Managing General
Partner at its sole expense to Lend Lease or its predecessor as asset management
fees, are included in the

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statements of operations as asset management fees and as components of general
and administrative expense.

Advisory Agreement. On June 10, 1997, in connection with Lend Lease
Corporation Limited's purchase of Equitable Real Estate, the Managing General
Partner entered into a real estate investment advisory agreement with Equitable
Real Estate whereby Equitable Real Estate (currently known as Lend Lease) agreed
to perform, at the Managing General Partner's sole expense, certain duties and
obligations in respect of the Partnership. The agreement automatically
terminates upon such date as (i) all of the Properties are sold, (ii) all
Mortgage Loans are paid and discharged and (iii) the affairs of the Partnership
and the Venture are fully wound up, unless sooner terminated by the Managing
General Partner. The agreement is terminable by the Managing General Partner (a)
upon a material breach by Lend Lease, (b) for any reason or without cause upon
ten days prior written notice to Lend Lease by the Managing General Partner or
(c) upon the termination of the investment advisory agreement between Lend Lease
and Equitable with respect to Equitable's general account.

Working Capital Reserves. The Partnership intends to maintain adequate
working capital reserves to meet short and long-term commitments. The
Partnership's reserves may be increased or decreased from time to time based
upon the Managing General Partner's determination as to their adequacy. See Item
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

Insurance. The Properties are covered under insurance contracts that
provide comprehensive general liability as well as physical damage protection.
Such insurance contracts also cover other properties in which Equitable, its
subsidiaries, or its insurance company separate accounts have an ownership
interest.

Although the Venture carries comprehensive insurance on the Properties
and the terms of the Venture's Mortgage Loan requires the borrower to obtain and
maintain general liability, property damage and certain other insurance in
specified amounts, there are certain risks (such as earthquakes, floods and
wars) that may be uninsurable or not fully insurable at a cost believed to be
economically feasible. Moreover, there can be no assurance that particular risks
that are currently insurable will continue to be so, or that current levels of
coverage will continue to be available at a cost believed to be economically
feasible. The Managing General Partner, on behalf of the Partnership as managing
partner of the Venture, will use its discretion in determining the scope of
coverage, limits and deductible provisions on insurance, with a view to
maintaining appropriate insurance on the Properties at an appropriate cost.
Similarly, the Managing General Partner will use its discretion in determining
whether and when to permit the borrower under the Mortgage Loan to obtain and
maintain coverage that differs from the requirements of the mortgage, with a
view to requiring appropriate insurance on the property which secures the
Mortgage Loan in light of prevailing insurance market, economic, and other
factors. This may result in insurance which will not cover the full extent of a
loss or claim.

Investment Guaranty Agreement and Related Matters. Under an investment
guaranty agreement dated March 10, 1988 by and between EREIM LP Associates and
the Venture (the

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"Guaranty Agreement"), EREIM LP Associates has guaranteed to pay the Venture, if
necessary, ninety days after the earlier of the sale, retirement, or other
disposition of the Mortgage Loan and Properties or the liquidation of the
Partnership, an amount which when added to all distributions from the
Partnership to the holders of BACs ("BAC Holders") will enable the Partnership
to provide the BAC Holders with a minimum return (the "Minimum Return") equal to
their Capital Contributions plus a simple annual return equal to 9.75%
multiplied by their Adjusted Capital Contributions (as defined in the Guaranty
Agreement), calculated from the investor closing at which the BAC Holder
acquired its BACs. The unpaid cumulative minimum return under the Guaranty
Agreement as of December 31, 1998 was $23.16 per BAC, which was reduced by $2.06
per BAC, after the February 26, 1999 distributions and $1.11 per BAC after the
March 12, 1999 distribution. The unpaid cumulative minimum return under the
Guaranty Agreement does not necessarily represent the price at which a BAC may
be purchased or sold.

While the Partnership Agreement provides that the term of the
Partnership may extend until December 31, 2002, the Partnership's present
intention is to sell the three remaining properties in advance of the foregoing
date. With that in mind, the Partnership is continuing its efforts to sell or
position for sale these remaining properties. However, there is no certainty as
to when the remaining properties will be sold.

The Venture has assigned the Guaranty Agreement to the Partnership in
exchange for the Partnership's assumption of the Venture's obligations
thereunder, including the obligation to pay the Guaranty Fee. Any moneys
distributed by the Partnership to BAC Holders and/or limited partners of the
Partnership ("Limited Partners") on account of payments made under the Guaranty
Agreement will be distributed to BAC Holders and/or Limited Partners based on
the total number of BACs or Interests owned by each BAC Holder and/or Limited
Partner as of the date the Minimum Return is calculated.

If the Venture holds a purchase money note from the sale of a Property
at the time all other investments of the Partnership and the Venture have been
disposed of and the proceeds distributed, any remaining obligation of EREIM LP
Associates under the Guaranty Agreement will be reduced by (i) the aggregate
amount of all cash payments to BAC Holders and Limited Partners and (ii) the
discounted value (at the market rate of interest of a U.S. Treasury security
having a comparable term) of principal and interest payments on the purchase
money note. EREIM LP Associates will be required to either purchase the purchase
money note from the Venture at its discounted value or guarantee timely payment
of principal and interest under the note, but only to the extent such note
reduces obligations under the Guaranty Agreement and so long as the note does
not reduce obligations below zero. If the Venture sells a purchase money note at
a premium over the discounted value of the note, the premium will be paid to
EREIM LP Associates to the extent of any payments made under the Guaranty
Agreement. Moreover, EREIM LP Associates will be entitled to receive any cash
payments paid to the Partnership (other than payments from a purchase money note
guaranteed by EREIM LP Associates) to the extent that it has made any payment
under the Guaranty Agreement.

The obligation of EREIM LP Associates to pay the Minimum Return is
subject to reduction for (i) any Federal, state or local corporate income or
franchise tax imposed upon the Partnership or

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the Venture, and (ii) any Federal, state or local income, gross receipts,
value-added, excise or similar tax imposed on the Partnership or the Venture not
imposed under law at the time of the Offering, other than any such local tax
imposed as a result of owning real property in the locality. All _ distributions
from the Partnership to BAC Holders from whatever source will reduce the amount
of EREIM LP Associates' obligation under the Guaranty Agreement. The obligations
of EREIM LP Associates under the Guaranty Agreement will terminate in the event
that upon the written consent or the affirmative vote of BAC Holders or Limited
Partners owning more than 50% of the Interests either (i) EREIM Managers Corp.
is removed as the Managing General Partner of the Partnership or (ii) the
Partnership is dissolved without the consent of EREIM Managers Corp. The
Guaranty Agreement states that the maximum liability of EREIM LP Associates
under the Guaranty Agreement is $271,211,250. If there were no distributions
until December 31, 2002, the expiration of the term of the Partnership, and
subject to the foregoing description of the Guaranty Agreement, the obligations
of EREIM LP Associates under the Guaranty Agreement as of December 31, 1998
would be limited to $142,918,111 plus the value of EREIM LP Associates' interest
in the Venture less any amounts contributed by EREIM LP Associates to the
Venture to fund cash deficits.

As described above, the general partners of EREIM LP Associates are
EREIM LP Corp., a wholly-owned subsidiary of Equitable, and Equitable. The
obligations of EREIM LP Associates under the Guaranty Agreement are nonrecourse
to Equitable but are recourse as to EREIM LP Corp. Equitable has entered into an
agreement dated as of March 10, 1988 (the "Keep Well Agreement") with EREIM LP
Corp. which provides that Equitable will make capital contributions to EREIM LP
Corp. in such amounts as to permit EREIM LP Corp. to pay its obligations with
respect to the Guaranty Agreement as they become due; provided, however, that
the maximum liability of Equitable under the Keep Well Agreement is an amount
equal to the lesser of (i) two percent of the total admitted assets of Equitable
(as determined in accordance with New York Insurance Law) or (ii) $271,211,250.
If there were no distributions until December 31, 2002, the expiration of the
term of the Partnership, and subject to the foregoing description of the
Guaranty Agreement, the obligations of Equitable under the Keep Well Agreement
as of December 31, 1998 would be limited to $142,918,111. The Keep Well
Agreement provides that only EREIM LP Corp. and its successors will have the
right to enforce Equitable's obligations thereunder.

The Keep Well Agreement is an unsecured contractual liability of
Equitable and is not a policy of insurance. Since the Guaranty Agreement is
nonrecourse as to Equitable and the obligation under the Keep Well Agreement to
pay all obligations of EREIM LP Corp. is not for the benefit of third parties,
including the Partnership and BAC Holders, BAC Holders will have no direct cause
of action against Equitable to enforce the obligations of Equitable under the
Keep Well Agreement. However, if the assets of EREIM LP Associates and EREIM LP
Corp. are insufficient to satisfy EREIM LP Associates' obligations under the
Guaranty Agreement, a proceeding in bankruptcy could be commenced against EREIM
LP Corp. In such event the debtor-in-possession or trustee in bankruptcy would
have a claim against Equitable to compel performance under the Keep Well
Agreement. If the Managing General Partner, which is an affiliate of Equitable,
did not commence an involuntary bankruptcy proceeding against EREIM LP Corp. on
behalf of the Partnership, MLH Real Estate Assignor Inc., the initial limited
partner of the Partnership (the "Initial Limited Partner"), on behalf of BAC
Holders would have a right to compel the Partnership to commence such
involuntary bankruptcy proceeding.

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The New York Insurance Law contains provisions limiting the amount of
an investment by a New York life insurance company, such as Equitable, in
certain of its subsidiaries and in real estate. The Keep Well Agreement provides
that Equitable's obligation thereunder is subject to compliance with any
applicable limitation on investment contained in the New York Insurance Law.

At December 31, 1998, 1997 and 1996, Equitable's total surplus,
calculated in accordance with the statutory method of accounting, was
approximately $3.17 billion, $2.46 billion and $2.26 billion, respectively. At
December 31, 1998, 1997 and 1996, Equitable's total consolidated capital,
calculated in accordance with the statutory method of accounting and consisting
of surplus and the Asset Valuation Reserve, was approximately $4.72 billion,
$3.91 billion and $3.56 billion, respectively.

The Equitable Companies Incorporated (the "Holding Company"), a
Delaware corporation, owns all of Equitable's outstanding capital stock.
Equitable and the Holding Company are subject to the informational requirements
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith file reports and other information, including financial
statements, with the Securities Exchange Commission under Commission File No.
0-25280 and 1-11166, respectively. Such reports and other information filed by
Equitable and the Holding Company can be inspected and copied at the public
reference facilities maintained by the SEC in Washington, D.C. and at certain of
its Regional Offices, and copies may be obtained from the Public Reference
Section of the SEC, Washington, D.C. 20549, at prescribed rates.

Equitable is a diversified financial service organization serving a
broad spectrum of insurance, investment management and investment banking
customers. It has been in business since 1859. In 1992, it converted from a
mutual life insurance company into a stock life insurance company through a
process called "demutualization."

ITEM 2. PROPERTIES

At December 31, 1998, approximately 67.9% of the aggregate rentable
square feet of the Venture's Properties was leased. Leases covering
approximately 10.9%, 18.3% and 11.6% of the Properties rentable square feet are
scheduled to expire in 1999, 2000 and 2001, respectively.

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Set forth below is a brief description of each of the Venture's
investments at December 31, 1998. Reference is made to Notes 3 and 4 of the
Notes to Consolidated Financial Statements in Item 8. FINANCIAL STATEMENTS. The
Venture has fee ownership of the land and improvements relating to each of the
Properties.

<TABLE>
<CAPTION>
Name, Location and Approximate Date of Year of
Type of Property Size Acquisition Completion
------------------ ----------- ----------- ----------

<S> <C> <C> <C>
Richland Mall 185,794(1) 7/19/88 1976
Bucks County, PA sq. ft.
shopping center

16/18 Sentry Park West 186,140 12/22/88 1988
Montgomery County, PA sq. ft.
office buildings

Northland Center 586,573(2) 7/22/94 1954
Southfield, MI sq. ft.
regional mall

300 Delaware 314,313 11/15/94 1970
Wilmington, DE sq. ft.
office building
</TABLE>

(1) Property was sold on January 27, 1999.

(2) Excludes square feet of property owned by certain anchor stores.

Annual Aggregate Lease Payments to be Received (in dollars)(a)

<TABLE>
<CAPTION>
Name of Property 1999 2000 2001 2002 2003 Thereafter Total
- --------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
Richland Mall (b) $ 1,015,274 $ 988,899 $ 933,036 $ 931,978 $ 965,027 $ 8,033,333 $12,867,547
16/18 Sentry Park West 3,199,767 2,593,702 1,628,396 1,405,686 1,053,439 1,378,221 11,259,211
Northland Center 3,790,193 3,453,531 3,162,551 2,701,535 1,999,312 5,211,304 20,318,427
300 Delaware 2,068,461 2,078,363 1,905,425 1,781,297 1,452,136 3,854,197 13,139,879
----------- ---------- ---------- ---------- ---------- ----------- -----------
$10,073,695 $9,114,495 $7,629,408 $6,820,496 $5,469,914 $18,477,055 $57,585,064
=========== ========== ========== ========== ========== =========== ===========
</TABLE>

(a) Lease payments to be received under noncancelable operating leases in
effect as of December 31, 1998.
(b) Property was sold on January 27, 1999. Total lease payments received in
1999 prior to the sale was $72,000

Range of Lease Expirations

<TABLE>
<CAPTION>
Name of Property Years
---------------- -----

<S> <C>
Richland Mall 1999-2017
16/18 Sentry Park West 1999-2007
Northland Center 1999-2014
300 Delaware 1999-2013
</TABLE>

-12-

<PAGE> 13

Major Tenants

The following list sets forth major tenants for the Properties together
with percentage of space used by such tenants as of December 31, 1998:

<TABLE>
<CAPTION>
Properties Major Tenants Percentage of Leasable Space
---------- ------------- ----------------------------

<S> <C> <C>
Richland Mall Bon Ton Department Store 45.3%(1)
Redner's Market 29.2%(1)

16/18 Sentry Park West Liberty Mutual 15.1%
J&B Software 10.7%

Northland Center Hudson's Department Store (2)
J.C. Penney (2)
Target (2)

300 Delaware PNC Bank 32%
</TABLE>

(1) Property was sold on January 27, 1999.

(2) Hudson's Department Store, J.C. Penney, and Target independently
constructed and operate their stores at Northland Center and each
contributes common area maintenance payments for operating expenses and
real estate taxes under separate agreements. These stores covering
511,509 square feet, 294,507 square feet and 117,000 square feet,
respectively, are not included in the gross leasable area of the mall.
In addition, J.C. Penney pays ground rent.

Description of Properties

Richland Mall is located in Richland Township, Pennsylvania. On January
27, 1999, the Venture sold Richland Mall for $9.01 million. Prior to
its sale, it was converted to a community shopping center in 1997. The
primary tenants include Bon Ton Department Store, Redner's Market
Grocery Store, CVS, and Radio Shack. At December 31, 1998, the Mall was
approximately 85.6% leased with 26,778 square feet vacant. Excluding
the two anchor stores, the Mall was 40.5% leased.

16/18 Sentry Park West are two four-story office buildings located
approximately 15 miles northwest of the Philadelphia central business
district. Tenants include Liberty Mutual Insurance Company, J&B
Software, United Healthcare, Legg Mason and Prudential Insurance. At
December 31, 1998, the property was 99.6% leased. Leases covering
approximately 16.7%, 28.0% and 23.2% of the space are scheduled to
expire in 1999, 2000
and 2001, respectively.

Northland Center, which was transferred to the Venture and Equitable by
a deed in lieu of foreclosure on July 22, 1994, is a regional enclosed
mall located in Southfield, Michigan. Major tenants include Hudson's
Department Store, J.C. Penney and Target. As of December 31, 1998, the
portion of the Center owned by the Venture was approximately 50.0%
leased.

-13-

<PAGE> 14

Excluding the anchor space, the inline tenant space was approximately
74.0% occupied. Leases covering approximately 10.7%, 15.2% and 6.4% of
the space (excluding the anchor stores) are scheduled to expire in
1999, 2000 and 2001, respectively.

In July 1997, Montgomery Ward, a former tenant, declared bankruptcy.
The Partnership is taking steps to lease 117,500 square feet of the
space vacated by Montgomery Ward. Discussions with a national
department store to fill this vacancy have been ongoing, but no
agreement has been reached. In addition to the Montgomery Ward vacancy,
70,000 square feet of the space previously occupied by Kohl's
department store has been vacant since March 1995. A significant amount
of capital may be required to retenant this vacant space. These anchor
vacancies, as well as the age of the mall, place Northland Mall at a
competitive disadvantage.

In 1998, the Venture spent $178,000 on common area upgrades and
maintenance, and approximately $275,000 on leasing costs. In 1999,
anticipated capital costs include $1,195,000 for HVAC/central plant,
$115,000 for parking lots and sidewalk repairs and $102,000 for
furniture, fixtures and equipment.

300 Delaware, which was transferred to the Venture by deed in lieu of
foreclosure on November 15, 1994, is a seventeen story office building
in Wilmington, Delaware. PNC Bank, a major tenant, occupies 100,000
square feet, or 32% of the building. PNC's lease expires in May 2005
and contains an option to renew. PNC's rent is substantially below
market rates. As of December 31, 1998, the building was approximately
72% leased. Management has removed asbestos from all vacant space in
the building. However, asbestos has not been removed from 36,642 square
feet of occupied space, 31,287 square feet of which is occupied by PNC.
Removal of this asbestos will not occur until this space is vacated.
The majority of deferred maintenance has been corrected, and thus the
anticipated future capital expenditures will generally be for asbestos
abatement, tenant improvements and leasing commissions in connection
with actual leasing. Leases covering approximately 0.1%, 3.3% and 3.0%
are scheduled to expire in 1999, 2000 and 2001 respectively.

Management established an enhancement/stabilization and renovation
program for 300 Delaware. See Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for further
information regarding this renovation program.

Jericho Village Loan is a first mortgage loan to the Wilcon Company
secured by an apartment complex in Weston, Massachusetts, which
matured, and was paid in full on February 1, 1999. Interest-only
payments on the loan in the amount of $51,250 were due monthly in
arrears during the term of the loan. On March 12, 1999, the Partnership
distributed the proceeds from the payoff of the loan to BAC holders of
record on February 1, 1999. See ITEM 5 MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.

-14-

<PAGE> 15

Brookdale Center

Brookdale Zero Note was a first mortgage note secured by Brookdale
Center, a regional shopping mall located approximately five miles
northwest of the central business district of Minneapolis, Minnesota.
The Venture acquired its 71.66% participation interest in 1988 from
Equitable which held the remaining 28.34% interest. The Venture's
participation interest had a fair value (including accrued interest) at
the time of acquisition of approximately $12.3 million. The borrower
was Midwest Real Estate Shopping Center, L.P. ("Midwest"), formerly
Equitable Real Estate Shopping Center, L.P. The note had an implicit
interest rate of 10.2% compounded semiannually, with the Venture's
portion of the principal and accrued interest totaling approximately
$25.3 million due June 30, 1995.

Management discontinued the accrual of interest relating to the
Brookdale note beginning with the second quarter of 1995 as the
accreted value of the mortgage approximated the estimated fair market
value of the Brookdale Center. The Venture's share of the note plus
accrued interest at the time was approximately $24.7 million.

An internal review of the property, performed for the Venture as of
September 30, 1995, estimated the fair market value of Brookdale Center
to be approximately $30.0 million. The Venture recorded a valuation
allowance of approximately $3.2 million to value its interest in the
Brookdale Zero Note at an amount equal to the Venture's participation
interest in the note multiplied by the estimated fair market value of
the Center, or approximately $21.5 million. This valuation allowance
was presented on the consolidated balance sheets as a decrease in
assets and partners' capital and on the consolidated statements of
operations as a provision for impairment on zero coupon mortgage. See
ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS."

On December 16, 1996, Brookdale Center was transferred to the Venture
and Equitable, as tenants in common pursuant to a Chapter 11 bankruptcy
plan for Midwest that was approved by the Bankruptcy Court on November
25, 1996. The consideration for this transfer was (i) release of
Midwest from its obligations under the Brookdale zero coupon note and
(ii) payment to Midwest of $500,000, of which the Venture's portion was
approximately $358,000. An internal review of the property, performed
for the Venture as of the date of transfer, estimated the fair market
value of Brookdale Center to be approximately $21.7 million, of which
the Venture's portion was approximately $15.6 million. Following the
transfer, Brookdale Center was reclassified from zero coupon mortgage
note receivable to rental properties and income and expenses were
recorded from that date. The Venture recognized a loss of approximately
$6.2 million to record Brookdale Center at its estimated fair market
value. The Venture recorded its proportionate share of the assets,
liabilities, revenues, and expenses of the undivided interest in
Brookdale Center in accordance with the Participation Agreement dated
March 3, 1988 between the Venture and Equitable, as amended on March
10, 1988, which is included as an exhibit to this annual report.

-15-

<PAGE> 16

In November 1997, the Venture sold Brookdale Center to Talisman
Brookdale L.L.C. for approximately $24.8 million, of which the
Partnership's portion was approximately $17.8 million. The Partnership
made a special distribution of the net proceeds in December 1997.

Midwest is subject to the informational requirements under the Exchange
Act, and in accordance therewith files reports and other information,
including financial statements, with the Securities Exchange Commission
under Commission File No. 1-9331. Such reports and other information
filed by Midwest can be inspected and copied at the public reference
facilities maintained by the SEC in Washington, D.C. and at certain of
its Regional Offices, and copies may be obtained from the Public
Reference Section of the SEC, Washington, D.C. 20549, at prescribed
rates.

ITEM 3. LEGAL PROCEEDINGS

The Partnership is a defendant in a consolidated action brought in the
Court of Chancery of the State of Delaware entitled IN RE: ML/EQ Real Estate
Partnership Litigation. The consolidated action results from two related cases.
Scher v. ML/EQ Real Estate Portfolio, L.P., et al., was served on the
Partnership on July 14, 1997. On September 8, 1997, the Partnership was named as
a defendant in Folette v. ML/EQ Real Estate Portfolio, L.P., et al., a
substantially similar complaint, also brought in the Court of Chancery of the
State of Delaware. The cases were consolidated pursuant to a stipulation between
the parties by order of the court on October 3, 1997. In addition to the
Partnership, the complaint names as defendants the Managing General Partner,
Equitable, Equitable Real Estate, EREIM L.P. Corp. and EREIM LP Associates.

The Plaintiffs purport to sue on behalf of a class of all limited
partners of the Partnership who purportedly have been or will be adversely
affected by the conduct of the defendants. The complaint alleges that the
defendants have caused the Venture to accumulate excessive cash rather than
distribute it to the limited partners, and that defendants' motive in so doing
was (i) to manipulate the Partnership's cash flow so as to limit certain
defendants' exposure under the guarantee agreement and (ii) to secure for
certain defendants additional fees. The complaint also alleges that defendants
have utilized the Venture to provide liquidity for illiquid assets and to
acquire and continue to hold under-performing properties. The complaint purports
to state claims for breach of fiduciary duties, breach of contract, and aiding
and abetting breach of fiduciary duties. The complaint requests, among other
things, money damages in an unspecified amount and orders that defendants
distribute to the purported class the cash which defendants have allegedly
wrongfully failed to distribute and disgorge all earnings, profits, interests
and other benefits which they have realized on account of their allegedly
wrongful conduct. The Partnership intends to defend vigorously against these
claims. On November 6, 1997, defendants answered the complaint, denying any
wrongdoing. Additionally, defendants have noticed a motion to dismiss a portion
of the case on the pleadings in the Delaware Court of Chancery. Although the
outcome of any litigation cannot be predicted with certainty, the Partnership's
management believes that the ultimate resolution of the litigation will not have
a material adverse effect on the financial condition of the Partnership. The
Partnership's management cannot make an estimate of loss, if any, or predict
whether or not such litigation will have a material adverse effect on the
Partnership's results of operations in any particular period.

-16-

<PAGE> 17

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

No matter was submitted during the fourth quarter of the fiscal year to
a vote of BAC Holders.

-17-

<PAGE> 18

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

No public trading market for BACs or Interests exists nor is it
expected that one will develop. Accordingly, accurate information as to the
market value of a BAC at any given date is not available.
BACs are transferable as provided in Article Seven of the Partnership
Agreement. Subject to certain restrictions, the General Partners are authorized
to impose restrictions on the transfer of BACs or Interests (or take such other
action as they deem necessary or appropriate) so that the Partnership is not
treated as a "publicly-traded partnership" as defined in Section 7704(b) of the
Internal Revenue Code of 1986 (or any similar provision of succeeding law) which
could result in adverse tax consequences. See "AMENDMENTS TO PARTNERSHIP
AGREEMENT--TRANSFER OF INTERESTS" in the March 3, 1988 Supplement.

The number of BAC Holders at February 1, 1999 was 10,844.

The Partnership is a limited partnership and, accordingly, does not pay
dividends. It does, however, make distributions of cash to its BAC Holders and
General Partners. BAC Holders are entitled to receive cash distributions,
allocations of taxable income and tax loss and guaranty proceeds as provided in
Article Four of the Partnership Agreement. For information regarding the
Guaranty Agreement, see Item 1. BUSINESS. Since inception, the Partnership has
made the following distributions:

<TABLE>
<CAPTION>
Period Ended Date Paid Distribution per BAC
------------ --------- --------------------
<S> <C> <C>
December 31, 1990 February 28, 1991 $0.25
June 30, 1991 August 31, 1991 $0.50
December 31, 1991 February 28, 1992 $0.50
June 30, 1992 August 31, 1992 $0.662(1)
December 31, 1992 February 28, 1993 $0.40
June 30, 1993 -- $0.00
December 31, 1993 February 28, 1994 $0.10(2)
June 30, 1994 August 31, 1994 $0.10(2)
December 31, 1994 February 28, 1995 $0.15(2)
June 30, 1995 August 31, 1995 $0.15(2)
December 31, 1995 February 29, 1996 $0.10(2)
June 30, 1996 August 29, 1996 $0.10(2)
December 31, 1996 February 28, 1997 $0.15(2)
June 30, 1997 August 29, 1997 $2.70(3)
November 30, 1997 December 23, 1997 $3.26(4)
December 31, 1997 February 27, 1998 $2.75(5)
June 30, 1998 August 31, 1998 $0.25
November 30, 1998 December 21, 1998 $4.82(6)
December 31, 1998 February 26, 1999 $0.45(7)
January 31, 1999 February 26, 1999 $1.61(8)
February 26, 1999 March 12, 1999 $1.11(9)
</TABLE>

-18-

<PAGE> 19

- --------------------
(1) The distribution made on August 31, 1992 to holders of record on June
30, 1992 includes a $0.162 distribution of sale or financing proceeds
associated with the termination of the lease with Saab-Scania of
America, Inc. ("Saab") at 1850 Westford Drive.
(2) All of the distributions made from 1994 through February 28, 1997
constitute distributions of sale or financing proceeds derived from a
portion of the proceeds from the pay-off of the Mortgage Loan to the
Second Merritt Seven Joint Venture on November 22, 1993.
(3) The August 29, 1997 distribution represents a distribution of
distributable cash from operations. The Partnership made a decision to
distribute a major portion of the monies previously held following its
decision to sell Brookdale Center.
(4) The December 23, 1997 distribution constitutes distributions of sale or
financing proceeds derived from the sale of Brookdale Center.
(5) The February 27, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of the Chicago Industrial
Properties during 1997, remaining proceeds from both the sale of
Brookdale Center and the pay-off of the mortgage loan to the Second
Merritt Seven Joint Venture and early lease termination payments.
(6) The December 21, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of 1200 Whipple Road and 1345
Doolittle Drive.
(7) The distribution made on February 26, 1999 to holders of record on
December 18, 1998 represents sale or financing proceeds from the sale
of 1850 Westfork Drive.
(8) The distribution made on February 26, 1999 to holders of record on
January 27, 1999 represents sale or financing proceeds from the sale of
Richland Mall.
(9) The distribution made on March 12, 1999 to holders of record on
February 1, 1999 constitutes distributions of the proceeds from the
payoff of the Jericho Village loan.

See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS for further information regarding cash distributions.

-19-

<PAGE> 20

ITEM 6. SELECTED FINANCIAL DATA

The following sets forth the selected financial data for the
Partnership on a consolidated basis for the years ended December 31, 1994, 1995,
1996, 1997 and 1998:

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 20,602,189 $ 25,206,185 $ 24,982,922 $ 24,374,185 $ 25,922,117

Net income $ 3,266,840 $ 8,112,151 $ 2,225,866 $ 4,760,605 $ 7,543,402

Net income
per BAC $ 0.57 $ 1.42 $ 0.39 $ 0.83 $ 1.32

Cash distributions
paid per BAC $ 7.82 $ 6.11 $ 0.20 $ 0.30 $ 0.20

Total assets $105,777,298 $145,738,182 $171,967,228 $171,924,760 $168,009,262
</TABLE>

The above selected financial data for the years 1994 through 1998
should be read in conjunction with the financial statements and the related
notes appearing elsewhere in this annual report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Liquidity and Capital Resources

At December 31, 1998, the Partnership had cash and cash equivalents of
approximately $1.3 million. Such cash and cash equivalents are expected to be
utilized for general working capital requirements and for capital needs at the
Venture's Properties including, to the extent that scheduled lease expirations
occur, shortfalls associated with such lease expirations on the Properties until
such time as such leases can be replaced, possible costs to be incurred to
increase tenancy at Northland Mall, and, to the extent required, to increase
tenancy at the other Properties. In addition, to the extent that cash
distributions from the Partnership's interest in the Venture are insufficient,
the payment or reimbursement of fees and expenses to the General Partners and
their affiliates will be paid out of such cash and short-term investments.
Amounts which the Managing General Partner determines are not needed for general
working capital requirements will be available for distribution.

The Partnership's policy is to maintain adequate cash reserves (taking
into consideration reserves of the Venture) to enable it to meet short and
long-term requirements. The Partnership's working capital reserves may be
increased or decreased, from time to time, depending on the Managing General
Partner's determination as to their adequacy.

The Partnership owns an 80% interest in the Venture. At December 31,
1998, the Venture owned three real properties, an undivided interest in
Northland Center as a tenant in common with

-20-

<PAGE> 21

Equitable and one Mortgage Loan on a real property. Two of the Properties,
Richland Mall and 16/18 Sentry Park West, were purchased at an aggregate cost of
approximately $39.6 million. Two of the Properties, Northland Center and 300
Delaware (originally properties that secured a Zero Note and a Fixed-Rate
Mortgage Loan, respectively), were transferred to the Venture during 1994 in
separate deed in lieu of foreclosure transactions. The estimated fair market
value of the Venture's undivided interest in the Northland Center Zero Coupon
Mortgage Note Receivable immediately preceding the transfer was approximately
$32.2 million and the estimated fair market value of the 300 Delaware Mortgage
Note immediately preceding the transfer was approximately $8.5 million.
Brookdale Center (originally a property that secured a Zero Note) was
transferred to the Venture during December 1996 pursuant to a Chapter 11
bankruptcy plan for Midwest. The estimated fair market value of the Venture's
undivided interest in the Zero Note immediately preceding the transfer was
approximately $15.6 million. Brookdale Center was sold by the Venture in
November 1997. At December 31, 1998 the Venture also had approximately $10.7
million in cash and cash equivalents of which $2.4 million was distributed to
the Partnership in February 1999 for distribution to BAC holders. For 1998,
1997 and 1996, the Partnership received distributions from the Venture totaling
approximately $43.1 million, $34.5 million and $2.4 million, respectively.

All of the Venture's Properties and the Mortgage Loan were acquired
without mortgage indebtedness, and neither the Venture nor the Partnership has
incurred any borrowings. In aggregate, the Venture's Properties and its Mortgage
Loan are currently producing operating cash flow to the Venture which, net of
expenses of the Venture and the establishment or increase of reserves, is
distributable 80% to the Partnership and 20% to EREIM LP Associates as provided
in the Joint Venture Agreement.

The Partnership continues to evaluate appropriate strategies for the
ownership of each of the assets in its portfolio in order to achieve maximum
value. In this regard, the Partnership considers capital and investment market
conditions for real estate; local market conditions; future capital needs,
including potential lease exposure for specific properties; and other issues
that impact property performance. Among other things, this analysis will provide
the basis for hold/sell recommendations for the properties. While the
Partnership Agreement provides that the term of the Partnership may extend until
December 31, 2002, the Partnership's present intention is to sell the three
remaining properties in advance of the foregoing date. However, there is no
guaranty that the three remaining properties will be sold in advance of
December 31, 2002.

On December 16, 1996, Brookdale Center was transferred to the Venture
and Equitable, as tenants in common (collectively, the "Owners"), following
default by the borrower on the mortgage note securing the property. The Owners
considered alternative strategies for Brookdale Center and ultimately determined
that the best course of action was to sell the property. In July 1997, the
Owners received an offer to purchase Brookdale Center and subsequently executed
a binding purchase and sale agreement in October whereby Talisman Brookdale
L.L.C. agreed to purchase Brookdale Center for approximately $24.8 million, of
which the Venture's portion was approximately $17.8 million. In November 1997,
the Partnership sold Brookdale Center to Talisman Brookdale L.L.C. and made a
special distribution of the net proceeds in December 1997. Based on the
amendment to the Joint Venture Agreement effective as of January 1, 1997, EREIM
LP Associates agreed to defer, without interest, its right to receive 20% of the
Venture's distribution

-21-

<PAGE> 22

of sale and financing proceeds, thereby entitling the Partnership to receive
currently 100% of the sale and financing proceeds attributable to the sale.

Management established an enhancement, stabilization and renovation
program for 300 Delaware which was transferred to the Venture by deed in lieu of
foreclosure on November 15, 1994. Estimated costs for this program total $4.4
million, of which $1.6 million was incurred in 1995, $1.2 million was incurred
in 1996, $398,000 was incurred in 1997, $1.1 million was incurred in 1998 and
the remaining balance is expected to be expended through 1999. As of December
31, 1998, approximately $4.1 million of these costs have been expended.

Included in the estimated $4.4 million of renovation expenditures is
approximately $2.3 million for asbestos abatement which has been completed for
the budgeted work. Approximately 36,642 square feet of occupied space still
contains asbestos, but removal of this asbestos was not contemplated in this
budget and will not occur until this space is vacated. Also included in the $4.4
million is $400,000 for sprinkler installation, $400,000 for exterior deferred
maintenance and $600,000 for interior and exterior common area cosmetic
upgrades. The cosmetic upgrades have given the building a fresher, more inviting
look. Additional costs not included in the above figures are estimated tenant
improvements of $3.0 million. The tenant improvement costs are directly
associated with actual leasing and will only be expended as leasing transactions
occur in the building. As of December 31, 1998, approximately $2.0 million had
been expended for tenant improvements. The remaining tenant improvement costs of
approximately $1.0 million are expected to be expended over the next few years
to lease the currently vacant space.

At Northland Center, the Venture and Equitable now have control of the
Montgomery Ward building and have been attempting to fill this vacancy. In the
event that a replacement tenant is found for this space, a significant amount of
capital may be required to retenant the space. In 1998, the Venture spent
$178,000 on common area upgrades and maintenance, and approximately $275,000 on
leasing costs. In 1999, anticipated capital costs include $1,195,000 for
HVAC/central plant, $115,000 for parking lots and sidewalk repairs and $102,000
for furniture, fixtures and equipment.

Cash provided by operating activities increased approximately $1.3
million, or 17.6%, from $7.5 million in 1997 to $8.8 million in 1998. This
increase is due to (i) a decrease of approximately $3.2 million in cash paid for
operating activities and (ii) a decrease of approximately $3.1 million in cash
distributions to minority interest, offset by a decrease of approximately $4.3
million in tenant rentals received and a decrease of approximately $747,000 in
interest received. The decrease in cash paid for operating activities and tenant
rentals received is primarily due to the sale of Brookdale Center and the
Chicago Industrial properties in late 1997. The decrease in interest received is
due to lower cash balances held by the Venture during 1998 as compared to 1997.

Cash provided by operating activities decreased approximately $5.2
million, or 41%, from $12.7 million in 1996 to $7.5 million in 1997. This
decrease is due to (i) a decrease of approximately $3.3 million in interest
received, (ii) an increase of approximately $2.4 million in cash paid for
operating activities and (iii) an increase of approximately $3.2 million in cash
distributions to minority interest, offset by an increase of approximately $3.7
million in tenant

-22-

<PAGE> 23

rentals received. The decrease in interest received is due primarily to the
reclassification of Brookdale Center from a zero coupon mortgage note receivable
to a rental property in December 1996, compared to the receipt of approximately
$4.9 million of interest in 1996, of which the Venture's portion was
approximately $3.5 million, that was remitted under the terms of the
receivership for the Brookdale Zero Note. The increase in cash paid for
operating activities and tenant rentals received is also due to the
reclassification of Brookdale Center from a zero coupon mortgage note receivable
to a rental property in December 1996. Tenant rentals received at Brookdale
Center are offset by a decrease in the receipt of tenant rentals at Richland
Mall during 1997 in connection with the enhancement program and the timing of
receipts at the various other properties. Net cash flows received from Brookdale
Center during 1997 were approximately $3.2 million, of which the Venture's
portion was approximately $2.3 million.

Distributable Cash from operations is distributed in accordance with
the terms of the Partnership Agreement, which provides that such amounts will be
distributed 95% to the BAC Holders and Limited Partners and 5% to the General
Partners with the BAC Holders and Limited Partners entitled to a non-cumulative
preferred 6% simple return on their Adjusted Capital Contribution during each
period. Since inception, the Partnership has made the following distributions:

<TABLE>
<CAPTION>
Period Ended Date Paid Distribution per BAC
------------ --------- --------------------

<S> <C> <C>
December 31, 1990 February 28, 1991 $0.25
June 30, 1991 August 31, 1991 $0.50
December 31, 1991 February 28, 1992 $0.50
June 30, 1992 August 31, 1992 $0.662(1)
December 31, 1992 February 28, 1993 $0.40
June 30, 1993 -- $0.00
December 31, 1993 February 28, 1994 $0.10(2)
June 30, 1994 August 31, 1994 $0.10(2)
December 31, 1994 February 28, 1995 $0.15(2)
June 30, 1995 August 31, 1995 $0.15(2)
December 31, 1995 February 29, 1996 $0.10(2)
June 30, 1996 August 29, 1996 $0.10(2)
December 31, 1996 February 28, 1997 $0.15(2)
June 30, 1997 August 29, 1997 $2.70(3)
November 30, 1997 December 23, 1997 $3.26(4)
December 31, 1997 February 27, 1998 $2.75(5)
June 30, 1998 August 31, 1998 $0.25
November 30, 1998 December 21, 1998 $4.82(6)
December 31, 1998 February 26, 1999 $0.45(7)
January 31, 1999 February 26, 1999 $1.61(8)
February 26, 1999 March 12, 1999 $1.11(9)
</TABLE>

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<PAGE> 24

- ----------------
(1) The distribution made on August 31, 1992 to holders of record on June
30, 1992 includes a $0.162 distribution of sale or financing proceeds
associated with the termination of the lease with Saab at 1850 Westfork
Drive.
(2) All of the distributions made from 1995 through February 28, 1997
constitute distributions of sale or financing proceeds derived from a
portion of the proceeds from the pay-off of the Mortgage Loan to the
Second Merritt Seven Joint Venture on November 22, 1993.
(3) The August 29, 1997 distribution represents a distribution of
distributable cash from operations. The Partnership made a decision to
distribute a major portion of the monies previously held following its
decision to sell Brookdale Center.
(4) The December 23, 1997 distribution constitutes distributions of sale or
financing proceeds derived from the sale of Brookdale Center.
(5) The February 27, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of the Chicago Industrial
Properties during 1997, remaining proceeds from both the sale of
Brookdale Center and the pay-off of the mortgage loan to the second
Merritt Seven Joint Venture and early lease termination payments.
(6) The December 21, 1998 distribution constitutes distributions of sale or
financing proceeds derived from the sale of 1200 Whipple Road and 1345
Doolittle Drive.
(7) The distribution made on February 26, 1999 to holders of record on
December 18, 1998 represents sale or financing proceeds from the sale
of 1850 Westfork Drive.
(8) The distribution made on February 26, 1999 to holders of record on
January 27, 1999 represents sale or financing proceeds from the sale of
Richland Mall.
(9) The distribution made on March 12, 1999 to holders of record on
February 1, 1999 constitutes distributions of the proceeds from the
payoff of the Jericho Village loan.

The determination to withhold the 1995 distributions of distributable
cash was based on the uncertainty regarding the level and timing of expenditures
relating to Brookdale Center as well as the likelihood of significant capital
expenditures for the renovation of 300 Delaware. The determination to withhold
the 1996 distributions of distributable cash was based on uncertainty regarding
Brookdale Center expenditures, the needs of the Venture to fund significant
capital expenditures for the renovation of 300 Delaware and costs incurred at
Richland Mall to increase tenancy. The levels of future cash distributions
principally will be dependent on the distributions to the Partnership by the
Venture, which in turn will be dependent on returns from the Venture's
investments and future reserve requirements for capital expenditures at the
Venture's Properties.

During 1996, 1997 and 1998, the Venture received approximately
$179,000, $133,000 and $13,000, respectively, for early lease termination
payments, of which the Partnership's share was approximately $143,000, 133,000
and $13,000, respectively. These early lease termination payments were
classified as sale or financing proceeds and were distributed in 1998. See
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. The amount and timing of distributions from sale or financing proceeds
depend upon payments of the Mortgage Loan and maturity schedule, the timing of
disposition of Properties as well as the need to allocate such funds to increase
reserves.

The Partnership is intended to be self-liquidating in nature, meaning
that proceeds from the sale of properties or principal repayments of loans will
not be reinvested but instead will be

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<PAGE> 25

distributed to BAC Holders and partners, subject to certain limitations. Under
the terms of the Guaranty Agreement which has been assigned to the Partnership,
following the earlier of the sale or other disposition of all of the Properties
and Mortgage Loans or the liquidation of the Partnership, EREIM LP Associates
has guaranteed to pay an amount which, when added to all distributions from the
Partnership to the BAC Holders, will enable the Partnership to provide the BAC
Holders with a minimum return equal to their original capital contributions plus
a simple annual return equal to 9.75% simple interest per annum multiplied by
their adjusted capital contributions calculated from the investor closing at
which an investor acquired his BACs, subject to certain limitations. Capital
contributions by the BAC Holders totaled $108,484,500. As of December 31, 1998,
the cumulative 9.75% simple annual return was $109,072,988. As of December 31,
1998, cumulative distributions by the Partnership to the BAC Holders totaled
$91,897,206, or $16.94 per BAC, of which $27,663,548 is attributable to income
from operations and $64,233,658 is attributable to sales of Venture assets,
principal payments on Mortgage Loans and other capital events. Another
$11,173,904 and $6,020,890 in capital proceeds was distributed to the BAC
Holders in February and March, 1999, respectively.

Financial Condition

The Partnership's financial statements include the consolidated
statements of the Partnership and the Venture, through which the Partnership
conducts its business of investment in real property. Although the Partnership
was formed in 1986, it did not commence operations until March 1988, following
receipt of the first proceeds of its offering of BACs. Thereafter, utilizing the
net proceeds of the Offering, the Partnership (through the Venture) began its
acquisition of real estate investments. The Partnership substantially completed
its acquisition phase in 1989.

Total real estate investments decreased approximately $27.5 million, or
23.8%, from $115.3 million in 1997 to $87.8 million in 1998. This decrease is
due to (i) the sale of 1200 Whipple Road, 1345 Doolittle Drive and 1850 Westfork
properties in late 1998 with a combined net book value of $19.8 million and (ii)
valuation losses of $9.6 million which were recorded on the Richland Mall and
300 Delaware properties during 1998.

Total real estate investments decreased approximately $20.1 million, or
14.8%, from $135.4 million in 1996 to $115.3 million in 1997. This decrease is
due to the sale of Brookdale Center and the Chicago Industrial properties in
1997 with a combined net book value of approximately $23.1 million and is offset
by capital additions in 1997 of approximately $3.2 million at Richland Mall to
increase tenancy and $1.4 million at 300 Delaware for the enhancement,
stabilization and renovation project.

Other assets decreased approximately $12.5 million, or 40.9%, from
$30.5 million in 1997 to $18.0 million in 1998 due primarily to a decrease in
cash and cash equivalents. Cash and cash equivalents decreased approximately
$9.3 million as a result of the Partnership making a cash distribution of $14.9
million in February 1998, partially offset by approximately $2.5 million in net
proceeds received in December, 1998 from the sale of the 1850 Westfork property.

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<PAGE> 26

Other assets decreased approximately $6.2 million, or 16.8%, from $36.6
million in 1996 to $30.5 million in 1997 primarily due to a decrease in cash and
cash equivalents. Cash and cash equivalents decreased approximately $6.1 million
as a result of the Partnership distributing excess cash reserves of
approximately $14.6 million during 1997 previously held to fund capital
improvements at Brookdale Center. This decrease is partially offset by
approximately $7.6 million in net proceeds received on December 31, 1997 from
the sale of the Chicago Industrial properties.

Total liabilities decreased approximately $13.8 million, or 70.3%, from
$19.6 million in 1997 to $5.8 million in 1998. The decrease is due primarily due
to $14.9 million in distributions declared in 1997 compared to $2.4 million in
distributions declared in 1998.

Total liabilities increased approximately $14.3 million, or 268.5%,
from $5.3 million in 1996 to $19.6 million in 1997. This increase is due
primarily to the distribution declared as of December 31, 1997, which was
approximately $14.1 million greater than the distribution declared as of
December 31, 1996.

Results of Operations

Rental income decreased approximately $4.5 million, or 18.3 %, from
$24.5 million in 1997 to $20 million in 1998. The decrease is due primarily to
the sale of Brookdale Center and the Chicago Industrial properties during late
1997. Rental income for Brookdale Center and the Chicago industrial properties
for 1997 was approximately $5.9 million, offset by an increase in rental income
at 300 Delaware, Richland Mall and Northland Mall of approximately $700,000,
$300,000 and $500,000, respectively. Rental income increased approximately $3.8
million, or 18.1%, from $20.7 million in 1996 to $24.5 million in 1997. This
increase is due primarily to an increase in rental income from Brookdale Center
of approximately $6.5 million, of which the Venture's portion was approximately
$4.7 million. This increase is partially offset by a decrease in rental income
during 1997 at Northland Mall of approximately $1.1 million, of which the
Venture's portion is approximately $806,000, and a decrease in rental income
during 1997 at Richland Mall of approximately $558,000.

Lease termination rental income decreased approximately $120,000, or
90.5%, from $133,000 in 1997 to $13,000 in 1998. The decrease is due to
approximately $13,000 of lease termination income recognized during 1998 at 300
Delaware compared to approximately $133,000 of lease termination income
recognized during 1997 at Richland Mall. Lease termination rental income
decreased approximately $46,000, or 25.8%, from $179,000 in 1996 to $133,000 in
1997. This decrease is due to approximately $133,000 of lease termination rental
income recognized during 1997 at Richland Mall compared to approximately
$179,000 of lease termination rental income recognized during 1996 at Northland
Mall and 16/18 Sentry Park West.

Interest on loans receivable did not change from 1997 to 1998. Interest
on loans receivable decreased approximately $3.5 million, or 85.0%, from $4.1
million in 1996 to $615,000 in 1997 due to the reclassification of Brookdale
Center from a Zero Coupon Mortgage Note Receivable to a rental property in
December 1996.

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<PAGE> 27

Operating expenses decreased approximately $4.2 million, or 24.1%, from
$17.6 million in 1997 to $13.3 million in 1998. This decrease is due primarily
to the sale of Brookdale Center and the Chicago Industrial properties during
late 1997. Operating expenses for Brookdale Center and the Chicago Industrial
properties totaled $3.4 million during 1997. There was an additional decrease in
depreciation and amortization expense of $1.0 million due to the
reclassification of properties held for sale during 1998, on which the
recognition of depreciation expense was suspended. Operating expenses increased
approximately $ 2.4 million, or 15.8%, from $15.2 million in 1996 to $17.6
million in 1997. This increase is due primarily to the reclassification of
Brookdale Center from a zero coupon mortgage note receivable to a rental
property in December 1996, as well as an increase in real estate operating
expenses at Brookdale Center of approximately $4.0 million, of which the
Venture's portion was approximately $2.9 million. This increase is partially
offset by a decrease in real estate operating expenses of approximately $814,000
at Northland Mall, of which the Venture's portion is approximately $583,000.
This decrease at Northland Mall is primarily due to a decrease in utility and
HVAC expense associated with a new contract with the local electric company, the
initiation of an energy conservation program and additional HVAC repairs and
maintenance expense incurred in 1996 and the successful tax appeal lowering the
property's real estate taxes.

Total other income (expense), net decreased approximately $5.7 million,
or 196.5%, from income of $2.9 million in 1997 to expense of $2.8 million in
1998. This decrease is due to the $8.5 million gain on sale in 1998 relating to
the sales of 1200 Whipple Road and 1345 Doolittle Drive, compared to the $3.3
million gain in 1997 relating to the sale of Brookdale Center and the Chicago
Industrial properties. The gain is offset by the $10.2 million loss on
write-down of real estate assets relating to the write-downs of 300 Delaware,
Richland Mall and 1850 Westfork of $4.4 million, $5.2 million and $650,000,
respectively, compared to no write-downs recorded during 1997. Total other
income (expense), net increased approximately $9.5 million, or 144.0%, from
expense of $6.6 million in 1996 to income of $2.9 million in 1997. This increase
is primarily due to the $3.3 million gain recorded by the Venture on the sale of
Brookdale Center and the Chicago Industrial properties during 1997 and the loss
on write down of zero coupon mortgage of $6.2 million in 1996.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices, and equity prices. As
of December 31, 1998, the Partnership had no material exposure to market risk.

Year 2000

The inability of computers, software and other equipment to recognize
and properly process data fields containing a two-digit year is commonly
referred to as the Year 2000 compliance issue ("Y2K"). As the year 2000
approaches, such systems may be unable to accurately process certain date-based
information.

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<PAGE> 28
\

The Partnership and the Venture rely on the services of third-party
providers, including Merrill Lynch and Lend Lease, for all their computing
needs. Additional Y2K exposures of the Partnership and the Venture continue to
be assessed. Potential critical exposures include reliance on third-party
vendors and building systems that are not Y2K compliant. The Venture has begun
to communicate with our third party service vendors such as Lend Lease, Merrill
Lynch and property managers in an effort to assess their Y2K compliance status
and the adequacy of their Y2K efforts.

Each property owned by the Venture is being assessed in an effort to
identify critical Y2K issues specific to each property. Required remediation
strategies will depend on the outcome of the assessments and we expect the
majority of critical property assessments to be completed and remediation
efforts to be underway by the end of the second quarter of 1999.

The Partnership and the Venture have incurred costs to date relating to
Y2K of approximately $13,000. These costs were not material and therefore not
accrued as of December 31, 1998. Total property assessment costs to the Venture
are expected to be approximately $55,000. Remediation efforts may vary
significantly from one building to the next. Therefore remediation costs can not
be reasonably estimated until the assessments are complete and remediation
strategies determined.

The failure to adequately address the Year 2000 issue may result in the
closure of buildings owned by the Venture, a delay or temporary suspension of
certain building services or delays in distributions to BAC Holders. In order to
reduce the potential impact on the operations of the Partnership and the
Venture, contingency plans will be developed once critical Y2K exposures have
been assessed.

Building contingency plans will be developed on a property by property
basis once assessments have been completed. This will allow the efficient
development of contingency plans that take into account individual circumstances
surrounding each property. Contingency plans may involve the engagement of
additional security services, implementation of temporary systems modifications,
and the identification and engagement of alternate service vendors. Additional
contingency plans may be developed as circumstances warrant.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements are included in Item 14 of this
annual report:

Independent Auditors' Report.

Consolidated Balance Sheets, December 31, 1998 and 1997.

Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.

Consolidated Statements of Partners' Capital for the years
ended December 31, 1998, 1997 and 1996.

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.

Notes to Consolidated Financial Statements.

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<PAGE> 29

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

-29-

<PAGE> 30

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership is a limited partnership and has no directors or
officers.

For informational purposes only, certain information regarding the
General Partners and their respective directors and officers is set forth below.

Managing General Partner

The Managing General Partner was a wholly-owned subsidiary of Equitable
Real Estate, which was a wholly owned subsidiary of Equitable. On June 10, 1997,
Equitable sold Equitable Real Estate to a subsidiary of Lend Lease Corporation
Limited. The shares of the Managing General Partner were not included in the
sale and the Managing General Partner continues to be a wholly-owned indirect
subsidiary of Equitable. Lend Lease Corporation Limited merged its existing U.S.
real estate investment advisor, The Yarmouth Group, Inc., into Equitable Real
Estate and changed the name of Equitable Real Estate to ERE Yarmouth., Inc.
("ERE Yarmouth"). On July 13, 1998, Lend Lease Corporation Limited changed the
name of ERE Yarmouth to Lend Lease Real Estate Investments, Inc. ("Lend Lease").
Lend Lease was retained by the Managing General Partner, at the Managing General
Partner's expense, to continue providing the same services with respect to the
Partnership, EML Associates (the "Venture"), a joint venture with EREIM LP
Associates, a New York general partnership between Equitable and EREIM LP Corp.,
a wholly-owned subsidiary of Equitable, and the properties that Equitable Real
Estate has historically provided to the Managing General Partner. The sale did
not affect the ownership of EREIM LP Associates, the guarantor under the
Guaranty Agreement. The obligations of EREIM LP Associates under the Guaranty
Agreement and of Equitable under the Keep Well Agreement were not affected by
the sale.

The names and titles of the directors and officers of the Managing
General Partner as of ___________, 1999 are as follows: [UPDATE]

<TABLE>
<CAPTION>
Name Age Office
- ---- --- ------

<S> <C> <C>
Peter D. Noris....................... 44 Director
Anthony C. Pasquale.................. 52 Director
John H. Kirst........................ 38 President, Chief Executive Officer
and Director
Patricia C. Snedeker................. 43 Vice President, Controller and Treasurer
J. Mark Hillis....................... 35 Vice President
Michael L. Jacobson.................. 45 Vice President
Bruce Polifka ....................... 41 Vice President
Thomas A. McKean..................... 37 Secretary
</TABLE>

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<PAGE> 31

The business experience of the directors and executive officers of the
Managing General Partner is set forth below.

Peter D. Noris has been Executive Vice President and Chief Investment
Officer of Equitable, since May 1995. In this position, he manages Equitable's
General Account investment portfolio backing the company's traditional life
insurance and annuity business, and oversees certain accounts managed for third
parties by Equitable's investment subsidiary, Alliance Capital Management. Mr.
Noris joined Equitable in 1995. Prior thereto, he was Vice President and Manager
at Salomon Brothers Inc. from November 1992 to May 1995, where he provided
investment and asset/liability expertise to insurance companies. Before joining
Salomon in 1992, Mr. Noris was Principal of Morgan Stanley & Co., Inc. where he
worked since 1984 in its Insurance Group and its Synthetic Equity Group.

Anthony C. Pasquale has been Senior Vice President of Equitable, since
June 1991. He has held numerous managerial positions within Pension and
Investment Organizations of Equitable since joining the Equitable in 1965. Mr.
Pasquale has been working in the Chief Investment Office for the last eight
years where he brings professional expertise along with experience and knowledge
of each business segment, investment subsidiaries and Equitable's General
Account. He is responsible for all investment financial reporting to the
Investment Committee of Equitable's Board which includes forecasting investment
income, capital gains and losses and assets under management and he is Chairman
of the Investments Under Surveillance Committee.

John H. Kirst has been Senior Vice President of Equitable since
September 1997. In this position he oversees the investment strategy and
management of Equitable's $8 billion real estate and mortgage portfolio. Mr.
Kirst joined Equitable in 1997. Prior thereto, he was Managing Director of
Landauer Associates, Inc. from 1996 through August 1997 and Managing Director of
Sutton Advisors throughout 1995, in both capacities, providing advisory and
transaction counseling services to institutional investors. Mr. Kirst was
previously affiliated with NLI Properties, Inc., the U.S. real estate subsidiary
of Nippon Life Insurance Company, where as Vice President and Director of Asset
Management from 1992 through 1994, he managed a $2.5 billion portfolio of
office, retail and hotel investments. Mr. Kirst worked for ten years at IBM
where he was responsible for joint venture development projects across the
country and for overseeing the planning, leasing, design and construction of IBM
facilities.

Patricia C. Snedeker has been Vice President, Controller and Treasurer
of the Managing General Partner since January 1995 and Chief Financial Officer
from June 1994 to June 1997. Mrs. Snedeker is also a Senior Vice President of
Lend Lease responsible for overseeing the Investor Reporting Department which
handles the accounting and financial reporting for all of the organization's
real estate portfolios. Mrs. Snedeker has been with Lend Lease since October
1982.

J. Mark Hillis has been Vice President of the Managing General Partner
since 1997. Mr. Hillis is a Vice President of Lend Lease , in the disposition
group, where he is responsible for dispositions of client assets including the
Partnership's assets. Previously he was assistant

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<PAGE> 32

portfolio manager for several limited partnerships including the partnership.
Mr. Hillis joined in August 1994 as Director of Appraisal, where he was
responsible for preparing annual valuations of properties owned by Equitable.
Before he joined , he was employed by Price Waterhouse in their Real Estate
Valuation Group since 1991, where he was responsible for audit valuation
compliance, general real estate appraisal and due diligence services.

Bruce Polifka has been Vice President of the Managing General Partner
since 1998. Mr. Polifka is a Vice President of Lend Lease, where he is currently
employed in several capacities. He is an assistant portfolio manager, as well as
the chief appraiser responsible for overseeing the valuation of Equitable's
General Account portfolio. Mr. Polifka joined Lend Lease in the Dallas region in
1993 where he performed various functions including asset management, appraisal
and acquisitions. Prior to joining Lend Lease Mr. Polifka had 10 years of
diverse real estate experience including appraisal, leasing and real estate
development.

Michael L. Jacobson has been Vice President of the Managing General
Partner since 1997. Mr. Jacobson has been a Senior Vice President of since 1989,
where he is responsible for overseeing fund and joint venture investments for
certain Japanese accounts and Equitable's general account. Mr. Jacobson joined
Lend Lease in 1976 in the accounting area and has held various management
positions.

Thomas A. McKean became Secretary of the Managing General Partner in
early 1998. He has been a Vice President and Secretary of Lend Lease since
January 1, 1999 and a member of the legal department at Lend Lease since
January, 1993.

Associate General Partner

The Associate General Partner is a limited partnership and has no
directors or officers. The general partner of the Associate General Partner is
MLH Real Estate Inc., a wholly-owned subsidiary of MLH Group Inc., which is a
wholly-owned subsidiary of Merrill Lynch, Hubbard Inc. ("MLH"). MLH is a
wholly-owned subsidiary of Merrill Lynch Group, Inc., which is a wholly-owned
subsidiary of Merrill Lynch.

The names and dates of election of the directors and executive officers
of the general partner of the Associate General Partner as of March 31, 1999 are
as follows:

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<PAGE> 33

<TABLE>
<CAPTION>
Name Age Office
- ---- --- ------

<S> <C> <C>
Allen N. Jones....................... 57 Chairman, Chief Executive Officer
and Director
James V. Caruso...................... 47 Executive Vice President and Director
Rosalie Y. Goldberg.................. 61 President, Chief Operating Officer and
Director
Michael E. Lurie..................... 55 Vice President and Director
Steven N. Baumgarten................. 43 Vice President and Director
Michael A. Gabriel................... 42 Vice President and Treasurer
</TABLE>

The business experience of the directors and executive officers of the
general partner of the Associate General Partner is set forth below.

Allen N. Jones has been Chairman, Chief Executive Officer and Director
of the Associate General Partner since January 1997. Mr. Jones joined Merrill
Lynch in 1973. From June 1992 through February 1994, Mr. Jones was the President
and Chief Executive Officer of Merrill Lynch Insurance Group, Inc., and he
currently serves on its Board of Directors. Since June 1992, Mr. Jones has held
the position of Senior Vice President of Merrill Lynch, Pierce, Fenner & Smith
("MLPF&S") where he has held various senior executive responsibilities.

James V. Caruso has been Executive Vice President and Director of the
Associate General Partner since December, 1998. Mr. Caruso joined Merrill Lynch
in 1975 and is a Director in its Investment Banking Group ("IBK"). Since
September 1992, he has been responsible for managing the IBK Finance Department
and the Controller's area of the Partnership Analysis & Finance Group. Mr.
Caruso also serves as the Chief Financial Officer for certain Merrill Lynch
limited partnerships for which Merrill Lynch affiliates serve as general
partner.

Steven N. Baumgarten has been a Vice President and Director of the
Associate General Partner since December 1998. Mr. Baumgarten first joined
Merrill Lynch in 1986 and is a Vice President in its Private Client Group. Prior
to 1998, Mr. Baumgarten worked in Merrill Lynch's Partnership Management
department where he was involved with the ongoing management of various
project-related limited partnerships for which Merrill Lynch affiliates act as
general partner.

Rosalie Y. Goldberg has been President and Chief Operating Officer
since December 1998, was Vice President since January 1997 and a Director of the
Associate General Partner since February 1997. Ms. Goldberg joined Merrill Lynch
in 1975 and is a Director in its Private Client Group. Since February 1995, she
has served as Manager of the Special Investments Group. Ms. Goldberg is also a
Director of certain other Merrill Lynch affiliates which serve as general
partners to certain Merrill Lynch limited partnerships.

Michael E. Lurie has been Vice President since January 1997 and a
Director of the Associate General Partner since February 1997. Mr. Lurie joined
Merrill Lynch in 1970 and is

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<PAGE> 34

a First Vice President of its Corporate Credit Department and the Director of
the Asset Recovery Management Group. Prior to his present position, Mr. Lurie
has held several senior positions at Merrill Lynch.

Michael A. Gabriel has been a Vice President and Treasurer of the
Associate General Partner since December 1998. Mr. Gabriel first joined Merrill
Lynch in 1985 and has been a Tax Specialist in Merrill Lynch's Partnership
Analysis and Finance Group at MLPF&S since June 1998 where he also serves as
Treasurer of certain Merill Lynch limited partnerships for which Merill Lynch
affiliates act as general partner.

There is no family relationship among any of the above-listed directors
and officers of the Managing General Partner and the general partner of the
Associate General Partner. All of the directors have been elected to serve until
the next annual meeting of the shareholder of the Managing General Partner or
general partner of the Associate General Partner, respectively, or until their
successors are elected and qualify. All of the officers have been elected to
serve until their successors are elected and qualify.

ITEM 11. EXECUTIVE COMPENSATION

The General Partners are entitled to receive a share of cash
distributions and a share of taxable income or tax loss as provided in Article
Four of the Partnership Agreement which is incorporated herein by reference.

The General Partner and their affiliates may be paid certain fees and
commissions and reimbursed for certain out-of-pocket expenses. Information
concerning such fees, commissions and reimbursements is set forth under
"Compensation and Fees" in the Prospectus and Note 8 to notes to Consolidated
Financial Statements in Item 8. FINANCIAL STATEMENTS, which is incorporated
herein by reference.

All of the directors and officers of the Managing General Partner are
employees of Equitable or Lend Lease and are not separately compensated for
services provided to the Managing General Partner or, on behalf of the Managing
General Partner, to the Partnership. All of the directors and officers of the
general partner of the Associate General Partner are employees of Merrill Lynch
or its subsidiaries and are not separately compensated for services provided to
the Associate General Partner or, on behalf of the Associate General Partner, to
the Partnership.

The Partnership Agreement indemnifies the General Partners and the
Initial Limited Partner against liability for losses resulting from errors in
judgment or other action or inaction, whether or not disclosed, if such course
of conduct did not constitute negligence or misconduct (see Section 5.7 of the
Partnership Agreement). As a result of such indemnification provisions, a
purchaser of BACs may have a more limited right of legal action than he would
have if such provision were not included in the Partnership Agreement. In the
opinion of the Securities and Exchange Commission, indemnification for
liabilities arising under the Federal Securities laws is against public policy
and therefore unenforceable. Indemnification of general partners

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<PAGE> 35

involves a developing and changing area of the law and since the law relating to
the rights of assignees of limited partnership interests, such as BAC Holders,
is largely undeveloped, investors who have questions concerning the duties of
the General Partners should consult their own counsel.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The Initial Limited Partner, an affiliate of the Associate General
Partner, is the record owner of substantially all of the Interests in the
Partnership, although it has assigned such Interests to BAC Holders. In its
capacity as record owner of the Interests, the Initial Limited Partner has no
authority to transact business for, or to participate in the activities and
decisions of, the Partnership. As of February 28, 1999, MLPF&S was the record
owner of approximately 69% of the BACs, holding such BACs in a nominee capacity
and having no beneficial interest in the BACs. Otherwise, there is no person
known to the Partnership who owns beneficially or of record more than five
percent of the BACs of the Partnership. Neither of the General Partners owns any
BACs of the Partnership. The directors and officers of the Managing General
Partner and the general partner of the Associate General Partner, as a group,
own no BACs.

There are no arrangements known to the Partnership, the operation of
which may, at a subsequent date, result in a change in control of the
Partnership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

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<PAGE> 36

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. The following financial statements are filed with this report on
the pages indicated:

<TABLE>
<CAPTION>
Page
----

<S> <C>
Independent Auditors' Report....................................................................... 1

Consolidated Balance Sheets, December 31, 1998 and 1997............................................ 2

Consolidated Statements of Operations for the years
ended December 31, 1998, 1997 and 1996.......................................................... 3

Consolidated Statements of Partners' Capital for the
years ended December 31, 1998, 1997 and 1996.................................................... 4

Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996.......................................................... 5

Notes to Consolidated Financial Statements......................................................... 6
</TABLE>

2. The following audited financial statement schedules are filed
with this report on the pages indicated:
<TABLE>
<CAPTION>
Page
----

<S> <C>
Consolidated Supplemental Schedules:

Real Estate and Accumulated Depreciation as of December 31, 1998 and for the
years ended December 31, 1998, 1997 and 1996
(Schedule III).................................................................................. 18

Mortgage Loans on Real Estate as of
December 31, 1998 and for the years
ended December 31, 1998, 1997 and
1996 (Schedule IV).............................................................................. 19
</TABLE>

All schedules except those indicated above have been omitted as the
required information is not applicable or the information is shown in the
financial statements or notes thereto.

-36-

<PAGE> 37

3. Exhibits
See Item 14(c) below.

(b) The Partnership filed a Current Report on Form 8-K on December 8, 1998,
pursuant to which the sale of two of the Properties, 1200 Whipple Road
and 1345 Doolittle Drive, were reported. The following Financial
Statements were filed with the Current Report on Form 8-K: (i) Pro
Forma condensed consolidated balance sheet dated September 30, 1998
(unaudited); and (ii) Pro Forma consolidated statement of operations
for the nine months ended September 30, 1998 (unaudited) and the year
ended December 31, 1997 (unaudited).

4. (a) Amended and Restated Agreement of Limited Partnership
dated April 23, 1987. Included as an Exhibit to the
Prospectus (see Exhibit 99(a)).

(b) Amendment to Amended and Restated Agreement of
Limited Partnership dated February 9, 1988
(incorporated by reference to Exhibit 4(b) to the
Partnership's Annual Report on Form 10-K for the
Fiscal Year Ended December 31, 1987 (File No.
33-11064) (the "1987 10-K")).

10. Material Contracts.

(a) Purchase and Sale Agreement between EML Associates
and Weingarten Properties, Inc. dated November 19,
1998, as amended.

(b) Purchase and Sale Agreement between EML Associates
and SPP Real Estate (USA), Inc. dated September 28,
1998 (incorporated by reference to Exhibit 10(a) to
10-K for the quarterly period ended September 30,
1998).

(c) Purchase and Sale Agreement between EML Associates
and Glenn E. Wyatt, Jr. dated _____, 1998
(incorporated by reference to Exhibit 10(b) to 10-Q
for the quarterly period ended September 30, 1998).

(d) Real Estate Investment Advisory Agreement by and
between EREIM Managers Corp. and Equitable Real
Estate Investment Management, Inc. (currently Lend
Lease, Inc.) dated as of June 10, 1997 (incorporated
by reference to Exhibit 10(a) to the 1997 10-K).

(e) Purchase and Sale Agreement by and between The
Equitable Life Assurance Society of the United States
and Talisman Brookdale L.L.C., dated September 2,
1997 (incorporated by reference to Exhibit 10(b) to
the 1997 10-K).

(f) Purchase and Sale Agreement by and between EML
Associates and SPP Real Estate (O'Hare), Inc., dated
December 31, 1997 (incorporated by reference to
Exhibit 10(c) to the 1997 10-K).

(g) Form of Beneficial Assignee Certificate (incorporated
by reference to Exhibit 10(a) to Pre-Effective
Amendment No. 1 to the Registration Statement of the
Partnership (File No. 33-11064)).

(h) Agreement Between General Partners (incorporated by
reference to Exhibit 10(c) to the 1987 10-K).

(i) Joint Venture Agreement of EML Associates
(incorporated by reference to Exhibit 10(d) to the
1987 10-K).

(j) Investment Guaranty Agreement between the Venture and
EREIM LP Associates (incorporated by reference to
Exhibit 10(e) to the 1987 10-K).

(k) Assignment Agreement between Registrant and Venture
(incorporated by reference to Exhibit 10(f) to the
1987 10-K).

-37-

<PAGE> 38

(l) Keep Well Agreement between The Equitable Life
Assurance Society of the United States and EREIM LP
Corp. (incorporated by reference to Exhibit 10(g) to
the 1987 10-K).

(m) Amended and Restated Agreement of General Partnership
of EREIM LP Associates (incorporated by reference to
Exhibit 10(h) to the 1987 10-K).

(n) Form of Participation Agreement between The Equitable
Life Assurance Society of The United States and EML
Associates dated September 27, 1988 (incorporated by
reference to Exhibit No. 2 to Form 8-K dated
September 27, 1988 of ML/EQ Real Estate Portfolio,
L.P. (File No. 33-11064)).

(o) Note and Mortgage and Security Agreement dated
January 31, 1989 relating to loan by EML to The
Wilcon Company (incorporated by reference to Exhibit
No. 4 to Form 8-K dated December 27, 1988 of ML/EQ
Real Estate Portfolio, L.P. (File No. 33-11064)).

27. Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.

99. Additional Exhibits.

(a) Prospectus dated April 23, 1987, as supplemented by
supplements dated December 29, 1987, March 3, 1988
and March 17, 1988 (incorporated by reference to
Exhibit 28 to the 1987 10-K).

(b) Amendment to Joint Venture Agreement dated as of
January 1, 1997 between ML/EQ Real Estate Portfolio,
L.P. and EREIM LP Associates (incorporated by
reference to Exhibit 99(i) of the Form 10-K of the
Partnership for the year ended December 31, 1996)

-38-
<PAGE> 39

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997, AND FOR THE
YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996,

CONSOLIDATED SUPPLEMENTAL SCHEDULES
AS OF DECEMBER 31, 1998 AND FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996,
AND INDEPENDENT AUDITORS' REPORT
<PAGE> 40

ML/EQ REAL ESTATE PORTFOLIO, L.P.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT................................ 1
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998
AND 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997,
AND 1996:
Balance Sheets............................................ 2
Statements of Operations.................................. 3
Statements of Partners' Capital........................... 4
Statements of Cash Flows.................................. 5
Notes to Consolidated Financial Statements................ 6
CONSOLIDATED SUPPLEMENTAL SCHEDULES AS OF DECEMBER 31, 1998
AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996:
Schedule III -- Real Estate and Accumulated
Depreciation........................................... 18
Schedule IV -- Mortgage Loans on Real Estate.............. 19
</TABLE>

i
<PAGE> 41

INDEPENDENT AUDITORS' REPORT

ML/EQ REAL ESTATE PORTFOLIO, L.P.:

We have audited the accompanying consolidated balance sheets of ML/EQ Real
Estate Portfolio L.P. (the "Partnership") as of December 31, 1998 and 1997, and
the related consolidated statements of operations, partners' capital, and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedules listed in the table of
contents as consolidated supplemental schedules. These financial statements and
supplemental schedules are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
supplemental schedules based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of ML/EQ Real Estate Portfolio,
L.P. at December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also in our opinion,
such consolidated supplemental schedules, when considered in relation to the
basic consolidated financial statements, present fairly in all material respects
the information shown therein.

February 19, 1999
<PAGE> 42

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
REAL ESTATE INVESTMENTS:
Rental properties, net of accumulated depreciation (Note
3)..................................................... $ 39,873,242 $109,281,710
Rental properties, held for sale (Note 4)................. 41,915,300
Mortgage loan receivable (Note 6)......................... 6,000,000 6,000,000
------------ ------------
Total real estate investments..................... 87,788,542 115,281,710
OTHER ASSETS:
Cash and cash equivalents................................. 11,939,314 21,256,903
Accounts receivable and accrued investment income, net of
allowance for doubtful accounts of $598,018 in 1998 and
$759,545 in 1997....................................... 2,892,290 3,364,216
Deferred rent concessions................................. 809,836 2,159,595
Guaranty fee, net of accumulated amortization of
$2,669,713 in 1998 and $2,401,462 in 1997 (Notes 7 and
8)..................................................... 1,073,002 1,341,253
Deferred leasing costs, net of accumulated amortization of
$137,636 in 1998 and $781,403 in 1997.................. 302,184 1,399,382
Prepaid expenses and other assets......................... 875,369 807,596
Interest receivable....................................... 96,112 116,937
Due from affiliates....................................... 649 10,590
------------ ------------
Total other assets................................ 17,988,756 30,456,472
------------ ------------
$105,777,298 $145,738,182
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued real estate expenses......... $ 1,758,841 $ 1,817,435
Accrued capital expenditures.............................. 788,395 1,566,226
Distributions declared.................................... 2,440,901 14,916,619
Due to affiliates (Notes 7 and 8)......................... 480,453 629,533
Security deposits and unearned rent....................... 343,922 683,546
------------ ------------
Total liabilities................................. 5,812,512 19,613,359
MINORITY INTEREST IN THE VENTURE............................ 32,023,757 31,508,850
COMMITMENTS AND CONTINGENCIES
(Notes 7 and 12)
PARTNERS' CAPITAL:
General partners.......................................... 2,713,299 2,549,957
Initial limited partner................................... 6,507 6,427
Limited partners (5,424,225 BACs issued and
outstanding)........................................... 65,221,223 92,059,589
------------ ------------
Total partners' capital........................... 67,941,029 94,615,973
------------ ------------
$105,777,298 $145,738,182
============ ============
</TABLE>

See notes to consolidated financial statements.

2
<PAGE> 43

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Rental income (Note 10)............................... $19,974,688 $24,458,345 $20,702,439
Lease termination income (Note 10).................... 12,501 132,840 179,149
Interest on loans receivable (Notes 5 & 6)............ 615,000 615,000 4,101,334
----------- ----------- -----------
Total revenue................................. 20,602,189 25,206,185 24,982,922
OPERATING EXPENSES:
Real estate operating expenses........................ 8,125,398 9,664,185 8,289,903
Depreciation and amortization......................... 2,907,869 4,282,026 4,046,483
Real estate taxes..................................... 1,867,477 3,076,092 2,365,348
Property management fees (Note 8)..................... 434,224 554,471 477,385
----------- ----------- -----------
Total operating expenses...................... 13,334,968 17,576,774 15,179,119
----------- ----------- -----------
INCOME FROM PROPERTY OPERATIONS......................... 7,267,221 7,629,411 9,803,803
OTHER INCOME (EXPENSE):
Gain on sale of real estate (Note 3).................. 8,501,691 3,288,138
Loss on write-down of zero coupon mortgage (Note 5)... (6,211,644)
Loss on write-down of real estate assets (Note 4)..... (10,243,677)
Interest and other nonoperating income................ 605,329 1,369,424 1,221,906
Asset management fees (Note 8)........................ (611,923) (747,302) (686,658)
Amortization of guarantee fee (Note 8)................ (268,251) (268,251) (268,251)
General and administrative, including $364,034 in
1998, $513,696 in 1997, and $521,815 in 1996 to
affiliates (Note 8)................................ (797,052) (725,258) (685,524)
----------- ----------- -----------
Total other income (expense) -- net........... (2,813,883) 2,916,751 (6,630,171)
----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST......................... 4,453,338 10,546,162 3,173,632
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED VENTURE.................................. (1,186,498) (2,434,011) (947,766)
----------- ----------- -----------
NET INCOME.............................................. $ 3,266,840 $ 8,112,151 $ 2,225,866
=========== =========== ===========
ALLOCATION OF NET INCOME:
General partners...................................... $ 163,342 $ 405,608 $ 111,293
Initial limited partner............................... 143 355 97
Limited partners...................................... 3,103,355 7,706,188 2,114,476
----------- ----------- -----------
$ 3,266,840 $ 8,112,151 $ 2,225,866
=========== =========== ===========
NET INCOME PER BENEFICIAL ASSIGNEE
CERTIFICATE........................................... $ 0.57 $ 1.42 $ 0.39
=========== =========== ===========
WEIGHTED AVERAGE BENEFICIAL ASSIGNEE
CERTIFICATES OUTSTANDING.............................. 5,424,225 5,424,225 5,424,225
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

3
<PAGE> 44

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
INITIAL
GENERAL LIMITED LIMITED
PARTNERS PARTNER PARTNERS TOTAL
---------- ------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE -- December 31, 1995................... 2,033,056 6,650 130,839,982 132,879,688
Net income................................... 111,293 97 2,114,476 2,225,866
Cash distributions........................... (542,423) (542,423)
Distributions declared....................... (813,634) (813,634)
---------- ------ ------------ ------------
BALANCE -- December 31, 1996................... 2,144,349 6,747 131,598,401 133,749,497
Net income................................... 405,608 355 7,706,188 8,112,151
Cash distributions........................... (675) (32,328,381) (32,329,056)
Distributions declared....................... (14,916,619) (14,916,619)
---------- ------ ------------ ------------
BALANCE -- December 31, 1997................... 2,549,957 6,427 92,059,589 94,615,973
Net income................................... 163,342 143 3,103,355 3,266,840
Cash distributions........................... (63) (27,500,820) (27,500,883)
Distributions declared....................... (2,440,901) (2,440,901)
---------- ------ ------------ ------------
BALANCE -- December 31, 1998................... $2,713,299 $6,507 $ 65,221,223 $ 67,941,029
========== ====== ============ ============
</TABLE>

See notes to consolidated financial statements.

4
<PAGE> 45

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Tenant rentals received................................... $20,321,183 $24,621,341 $20,891,345
Interest received......................................... 1,241,154 1,987,680 5,353,277
----------- ----------- -----------
Cash received from operations....................... 21,562,337 26,609,021 26,244,622
Cash paid for operating activities........................ (12,101,580) (15,312,228) (12,938,809)
Cash distributions to minority interest................... (671,591) (3,820,000) (600,000)
----------- ----------- -----------
Net cash provided by operating activities........... 8,789,166 7,476,793 12,705,813
INVESTING ACTIVITIES:
Net proceeds from sales of real estate properties......... 28,587,487 25,383,260
Purchases and additions to rental properties.............. (3,966,097) (5,157,525) (5,350,466)
Expenditures for deferred leasing costs................... (310,643) (613,395) (698,540)
----------- ----------- -----------
Net cash provided by (used in) investing
activities........................................ 24,310,747 19,612,340 (6,049,006)
FINANCING ACTIVITIES -- Cash distributions to limited
partners.................................................. (42,417,502) (33,142,690) (1,084,846)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (9,317,589) (6,053,557) 5,571,961
CASH AND CASH EQUIVALENTS:
Beginning of year......................................... 21,256,903 27,310,460 21,738,499
----------- ----------- -----------
End of year............................................... $11,939,314 $21,256,903 $27,310,460
=========== =========== ===========
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income................................................ $ 3,266,840 $ 8,112,151 $ 2,225,866
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization........................... 3,176,120 4,550,277 4,314,734
Minority interest in Venture operations................. 1,186,498 2,434,011 947,766
Cash distributions to minority interest................. (671,591) (3,820,000) (600,000)
Loss on write-down of zero coupon mortgage.............. 6,211,644
Loss on write-down of real estate assets................ 10,243,677
Gain on sale of real estate............................. (8,501,691) (3,288,138)
Changes in assets (increase) decrease:
Accounts receivable and accrued investment income..... 471,926 28,043 129,517
Interest receivable................................... 20,825 3,258 30,038
Deferred rent concessions............................. 201,692 (155,855) (147,644)
Due from affiliates................................... 9,941 (5,330) 3,773
Prepaid expenses and other assets..................... (67,773) (123,676) (31,760)
Changes in liabilities increase (decrease):
Accounts payable and accrued real estate expenses..... (58,594) (437,242) (404,597)
Due to affiliates..................................... (149,080) 21,326 (1,408)
Security deposits and unearned rent................... (339,624) 157,968 27,884
----------- ----------- -----------
Total adjustments................................... 5,522,326 (635,358) 10,479,947
----------- ----------- -----------
Net cash provided by operating activities........... $ 8,789,166 $ 7,476,793 $12,705,813
=========== =========== ===========
</TABLE>

SUPPLEMENTAL INFORMATION REGARDING NONCASH INVESTING ACTIVITIES:

The Venture accrued $788,395 and $1,566,226 in capital expenditures that
were not paid before December 31, 1998 and 1997, respectively.

The Venture reclassified $15,550,364 relating to Brookdale Center from zero
coupon mortgage note receivable to rental properties as a result of Brookdale
Center being conveyed to the Venture and Equitable on December 16, 1996.

See notes to consolidated financial statements.

5
<PAGE> 46

ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997, AND FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

1. ORGANIZATION

ML/EQ Real Estate Portfolio, L.P., a Delaware limited partnership (the
"Partnership"), was formed on December 22, 1986. The Partnership was formed to
invest in existing income-producing real properties, zero coupon or similar
mortgage notes, and fixed-rate mortgage loans through a joint venture, EML
Associates (the "Venture"). The Venture was formed on March 10, 1988 with EREIM
LP Associates, an affiliate of The Equitable Life Assurance Society of the
United States ("Equitable"). The Partnership owns an 80% interest in the
Venture.

The Managing General Partner of the Partnership is EREIM Managers Corp.
(the "Managing General Partner"), an affiliate of Equitable, and the Associate
General Partner is MLH Real Estate Associates Limited Partnership (the
"Associate General Partner"), an affiliate of Merrill Lynch, Hubbard Inc. The
initial limited partner is MLH Real Estate Assignor, Inc., an affiliate of
Merrill Lynch, Hubbard Inc.

The Partnership's Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement") authorized the sale of up to 7,500,000 Beneficial
Assignee Certificates ("BACs") at $20 per BAC. The BACs evidence the economic
rights attributable to limited partnership interests in the Partnership. On
March 10, 1988, the Partnership's initial investor closing occurred, at which
time the Partnership received $92,190,120 representing the proceeds from the
sale of 4,609,506 BACs. On May 3, 1988, the Partnership had its second and final
investor closing. The Partnership received $16,294,380 representing the proceeds
from the sale of an additional 814,719 BACs.

Total capital contributions to the Partnership are summarized as follows:

<TABLE>
<S> <C>
General partners........................................... $ 25,000
Initial limited partner.................................... 5,000
Limited partners........................................... 108,484,500
------------
Total............................................ $108,514,500
============
</TABLE>

The Managing General Partner was a wholly-owned subsidiary of Equitable
Real Estate Investment Management, Inc. ("ERE"), which was a wholly-owned
subsidiary of Equitable. On June 10, 1997, Equitable sold ERE to a subsidiary of
Lend Lease Corporation Limited. The shares of the Managing General Partner were
not included in the sale and the Managing General Partner continues to be a
wholly owned indirect subsidiary of Equitable. Lend Lease Corporation Limited
merged its existing U.S. real estate investment advisor, The Yarmouth Group,
Inc. into ERE and changed the name of ERE to ERE Yarmouth, Inc. ("ERE
Yarmouth"). On July 13, 1998, Lend Lease Corporation Limited changed the name of
ERE Yarmouth to Lend Lease Real Estate Investments, Inc. ("Lend Lease"). Lend
Lease was retained by the Managing General Partner, at the Managing General
Partner's expense, to continue providing the same services with respect to the
Partnership, the Venture and the properties that ERE has historically provided
to the Managing General Partner. The sale did not affect the ownership of EREIM
LP Associates, the guarantor under the Guaranty Agreement, as ERE had no
interest therein. The obligations of EREIM LP Associates under the Guaranty
Agreement and of Equitable under the Keep Well Agreement were not affected by
the sale.

6
<PAGE> 47
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Partnership and the Venture. EREIM LP Associates'
20% ownership in the Venture is reflected as a minority interest in the
Partnership's consolidated financial statements. All significant intercompany
accounts are eliminated in consolidation.

The Venture records its proportionate share of the assets, liabilities,
revenues, and expenses of the undivided interests in Northland Center and
Brookdale Center.

Allocation of Partnership Income -- Partnership net income was allocated
99% to the limited partners as a group and 1% to the general partners until 1990
at which time the Partnership paid the final portion of the
acquisition/syndication fees to the general partners. Since 1990, partnership
net income has been allocated 95% to the limited partners as a group and 5% to
the general partners, consistent with the provisions in the limited partnership
agreement for the allocation of distributable cash (see Note 9).

Rental Properties -- Rental properties are stated at cost. Cost is
allocated between land and buildings based upon preacquisition appraisals of
each property. Impairment is determined by calculating the sum of the estimated
undiscounted future cash flows including the projected undiscounted future net
proceeds from sale of property. In the event such sum is less than the
depreciated cost of the property, the property will be written down to estimated
fair market value.

Rental Properties Held for Sale -- Individual real estate properties held
for sale, including deferred leasing costs and deferred rent concessions, are
recorded at lower of cost or estimated fair market value, less estimated costs
to sell. Depreciation is not recorded for properties classified as held for
sale.

Depreciation -- Depreciation of buildings and building improvements is
provided using the straight-line method over estimated useful lives of five to
forty years. Tenant improvements and leasing commissions are amortized using the
straight-line method over the life of the related lease.

Rental Income -- Rental income is recognized on a straight-line basis over
the terms of the leases.

Zero Coupon Mortgage Note Receivable -- The Venture measured impairment of
the zero coupon mortgage note receivable based upon the estimated fair market
value of the underlying collateral. If the Venture's portion of the estimated
fair market value of the collateral declined below the recorded investment in
the loans, impairment was recognized through the creation of a valuation
allowance. The Venture recorded interest received on the cash method (see Note
5).

7
<PAGE> 48
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Mortgage Loan Receivable -- The mortgage loan receivable is stated at cost
(see Note 6).

Offering Costs -- Offering costs, including the acquisition/syndication fee
payable to the general partners and other offering and issuance costs of the
BACs totaling $11,037,537, were charged against the limited partners' capital in
accordance with the provisions of the Partnership Agreement, following the
investor closings in 1988.

Guaranty Fees -- Guaranty fees are being recognized as expense over the
estimated life of the Partnership through a combination of the amortization of
the nonrecurring portion of the fees incurred during the first three years of
the Partnership and the expense of the recurring portion of the fees as incurred
(Note 8).

Cash and Cash Equivalents -- Cash equivalents include cash, demand
deposits, money market accounts, and highly liquid short-term investments
purchased with original maturities of three months or less.

Income Taxes -- No provisions for income taxes have been made since all
income and losses are allocated to the partners for inclusion in their
respective tax returns.

Fair Value of Financial Instruments -- Management has reviewed the various
assets and liabilities of the Partnership and has concluded that the estimated
fair market value of the Partnership's financial instruments, including the
mortgage loan receivable, have terms such that the carrying value approximates
the estimated fair market value.

Reclassifications -- Certain prior year amounts have been reclassified to
conform with the 1998 presentation.

3. RENTAL PROPERTIES

As of December 31, 1998, the Partnership's rental properties consisted of
the following:

<TABLE>
<CAPTION>
RENTABLE
SQUARE FEET PERCENTAGE
(UNAUDITED) LEASED
----------- ----------
<S> <C> <C> <C>
OFFICE
16/18 Sentry Park West* Montgomery County, Pennsylvania 186,140 99%
300 Delaware* Wilmington, Delaware 314,413 72%
RETAIL
Richland Mall* Richland Township, Pennsylvania 185,794 86%
Northland Center Southfield, Michigan 586,573 50%
</TABLE>

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

* See Note 4, Rental properties held for sale

8
<PAGE> 49
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The costs related to Northland Center are summarized below:

<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Land....................................................... $ 7,424,476 $ 22,768,048
Buildings and Improvements................................. 38,035,394 104,898,591
----------- ------------
Total............................................ 45,459,870 127,666,639
Accumulated depreciation................................... (5,586,628) (18,384,929)
----------- ------------
Net rental properties............................ $39,873,242 $109,281,710
=========== ============
Office..................................................... $ 42,464,446
Retail..................................................... $45,459,870 61,397,477
Industrial................................................. 23,804,716
----------- ------------
Total............................................ $45,459,870 127,666,639
Accumulated depreciation................................... (5,586,628) (18,384,929)
----------- ------------
Net rental properties.................................... $39,873,242 $109,281,710
=========== ============
</TABLE>

During 1998, the Venture consummated the sale of 1200 Whipple Road, 1345
Doolittle Drive, and 1850 Westfork Drive. Information related to these
transactions is as follows:

<TABLE>
<CAPTION>
GAIN (LOSS)
PROPERTY SALES PRICE COST TO SELL NET PROCEEDS ON SALE
- -------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
1200 Whipple Road and 1345 Doolittle
Drive.............................. $26,512,375 $413,288 $26,099,087 $8,543,703
1850 Westfork Drive.................. 2,600,000 111,600 2,488,400 (19,785)
Other selling costs.................. 22,227 (22,227)
----------- -------- ----------- ----------
$29,112,375 $547,115 $28,587,487 $8,501,691
=========== ======== =========== ==========
</TABLE>

During 1997, the Venture consummated the sale of Brookdale Center and the
Chicago Industrial properties. Brookdale Center was sold for a cash price of
$24,830,000, of which the Venture's portion was $17,793,352. Prior to the sale,
the Venture held a 71.66% interest in Brookdale Center.

<TABLE>
<CAPTION>
PROPERTY SALES PRICE COST TO SELL NET PROCEEDS GAIN ON SALE
- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Brookdale Center..................... $17,793,352 $ 59,092 $17,734,260 $1,918,951
Chicago Industrials.................. 7,860,000 211,000 7,649,000 1,369,187
----------- -------- ----------- ----------
$25,653,352 $270,092 $25,383,260 $3,288,138
=========== ======== =========== ==========
</TABLE>

4. RENTAL PROPERTIES HELD FOR SALE

At December 31, 1998, Richland Mall, 300 Delaware, and 16/18 Sentry Park
West properties are classified as held for sale. The carrying values of Richland
Mall and 300 Delaware were adjusted to the lower of cost or estimated net
realizable value, resulting in losses of $5,155,515 and $4,438,162,
respectively, recorded during 1998.

9
<PAGE> 50
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rental properties held for sale consist of the following at December 31,
1998

<TABLE>
<S> <C>
Office...................................................... $10,235,545
Retail...................................................... 8,736,450
Industrial.................................................. 22,943,305
-----------
Total............................................. $41,915,300
===========
</TABLE>

5. ZERO COUPON MORTGAGE NOTES RECEIVABLE

Brookdale Center

The Venture held a 71.66% participation interest in a zero coupon mortgage
note. The property which secured this first mortgage note is Brookdale Center
which is located outside of Minneapolis, Minnesota. The Venture acquired its
participation interest in 1988 from Equitable which held the remaining 28.34%
interest. The Venture's participation interest had an estimated fair market
value (including accrued interest) at the time of acquisition of $12,278,885.
The borrower was Midwest Real Estate Shopping Center L.P. ("Midwest"), a
publicly traded limited partnership, (formerly Equitable Real Estate Shopping
Centers, L.P.). The note had an implicit interest rate of 10.2% compounded
semiannually with the Venture's portion of the entire amount of principal and
accrued interest totaling $25,345,353 due on June 30, 1995.

Midwest defaulted on its obligation to repay the Brookdale zero note in
full on the maturity date. Notice of default was given to Midwest. For book
purposes, beginning with the second quarter of 1995, Management discontinued the
accrual of interest on the Brookdale zero note as the accreted value of the
mortgage approximated the estimated fair market value of Brookdale Center.
Equitable and the Venture (collectively referred to as "Lender") commenced
foreclosure by advertisement proceedings and a court appointed receiver was
named. The receiver was responsible for collecting rent proceeds from the
tenants at Brookdale Center and applying the proceeds to payments of operating
costs at Brookdale Center. Any remaining funds were paid to Lender on account of
the Brookdale zero note. The Venture recorded cash received from the operation
of Brookdale Center on a cash basis as interest income. During 1996 and 1995,
approximately $1,975,000 and $700,000, respectively, was remitted under the
terms of the receivership. The Venture's portion of these payments was
approximately $1,415,000 and $502,000, respectively.

As of September 30, 1995, an internal review of the Brookdale Center was
performed for the Venture. Based on this review, the estimated fair market value
of Brookdale Center was $30,000,000. The Venture recorded a valuation allowance
of $3,232,210 to value the note at an amount equal to the Venture's
participation interest in the note multiplied by the estimated fair market value
of Brookdale Center, or $21,498,199.

In April 1996, the Lender agreed in principle to a workout arrangement with
Midwest on the Brookdale zero note under which Midwest would file for Chapter 11
bankruptcy protection and, with the support of the Lender, submit a plan of
reorganization to Bankruptcy Court for approval. The workout arrangement was
memorialized in a nonbinding letter agreement dated April 11, 1996 (the "Letter
Agreement") between Midwest and Equitable and approved by the Board of Directors
of EREIM Managers Corp., the general partner of the Partnership, on behalf of
the Venture.

10
<PAGE> 51
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 20, 1996, Midwest filed a voluntary petition for Chapter 11
bankruptcy protection, as contemplated by the Letter Agreement, staying the
Brookdale foreclosure proceeding and terminating the receivership arrangement.
As further contemplated by the Letter Agreement, Midwest subsequently obtained
Bankruptcy Court approval to retain the management company that had served as
receiver prior to the bankruptcy filing as Brookdale's property manager.

In addition, the Bankruptcy Court, with the agreement of Midwest and
Lender, entered a cash collateral order as contemplated by the Letter Agreement,
pursuant to which all positive cash flow generated by the property in excess of
property-related expenses and certain administrative costs of the bankruptcy,
not to exceed $25,000, was paid to the Lender during the bankruptcy. The Venture
recorded cash received from the operation of Brookdale Center as interest
income. During 1996, approximately $2,890,000 was remitted under the terms of
the cash collateral order. The Venture's portion of these payments was
approximately $2,071,000.

On December 16, 1996, Brookdale Center was transferred to the Venture and
Equitable, as tenants in common, pursuant to a Chapter 11 bankruptcy plan for
Midwest that was approved by the Bankruptcy Court on November 25, 1996. The
consideration for this transfer was (i) release of Midwest from its obligations
under the Brookdale Zero Note, and (ii) payment to Midwest of $500,000, of which
the Venture's portion was $358,303. An internal review of the property,
performed for the Venture as of the date of transfer, estimated the fair market
value of the Brookdale Center to be $21,700,000, of which the Venture's portion
was $15,550,364. Following the transfer, Brookdale Center was reclassified from
zero coupon mortgage note receivable to rental properties and income and
expenses were recorded from that date. In connection with the December 1996
transfer the Venture recognized a loss of $6,211,644 to record Brookdale Center
at its fair market value. In November 1997, the Venture sold Brookdale Center to
Talisman Brookdale L.L.C. for $24,830,000, of which the Venture's portion was
approximately $17,793,000.

Northland Center

Until July 22, 1994, the Venture also held a 71.66% participation interest
in a zero coupon mortgage note and the first mortgage on Northland Center which
is located outside of Detroit, Michigan. The borrower was Midwest.

On July 22, 1994, Midwest transferred Northland Center to the Venture and
Equitable in proportion to their respective undivided interests in the Northland
Center mortgage. Following the transfer, which was retroactive as of January 1,
1994, Northland Center was reclassified from other real estate assets to rental
properties and income and expenses were adjusted as of that date. The Venture
records its proportionate share of the assets, liabilities, revenues, and
expenses of the undivided interests in Northland Center in accordance with the
tenancy in common arrangements in the Participation Agreement between the
Venture and Equitable.

6. MORTGAGE LOAN RECEIVABLE

In 1989, the Venture made a $6,000,000 nonrecourse first mortgage loan
bearing interest at 10.25% per annum. The loan was collateralized by an
apartment complex in Weston, Massachusetts. This note subsequently matured and
was paid in full on February 1, 1999.

11
<PAGE> 52
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. GUARANTY AGREEMENT

EREIM LP Associates has entered into a guaranty agreement with the Venture
to provide a minimum return to the Partnership's limited partners on their
contributions. The Venture has assigned its rights under the guaranty agreement
to the Partnership. Payments on the guaranty are due 90 days following the
earlier of the sale or other disposition of all the properties and mortgage
loans and notes or the liquidation of the Partnership. The minimum return will
be an amount which, when added to the cumulative distributions to the limited
partners, will enable the Partnership to provide the limited partners with a
minimum return equal to their capital contributions plus a simple annual return
of 9.75% on their adjusted capital contributions calculated from the dates of
the investor closings. Adjusted capital contributions are the limited partners'
original cash contributions reduced by distributions of sale or financing
proceeds and by distributions of certain funds in reserves, as more particularly
described in the Partnership Agreement. The limited partners' original cash
contributions have been adjusted by that portion of distributions paid through
December 31, 1998, resulting from cash available to the Partnership as a result
of sale or financing proceeds paid to the Venture. The minimum return is subject
to reduction in the event that certain taxes, other than local property taxes,
are imposed on the Partnership or the Venture, and is also subject to certain
other limitations set forth in the prospectus. If there were no distributions
until December 31, 2002, the expiration of the term of the Partnership, the
maximum liability of EREIM LP Associates to the Venture under the guaranty
agreement as of December 31, 1998, would be limited to $142,918,111, plus the
value of EREIM LP Associates' interest in the Venture less any amounts
contributed by EREIM LP Associates to the Venture to fund cash deficits.

Capital contributions by the BAC holders totaled $108,484,500. As of
December 31, 1998, the cumulative 9.75% simple annual return was $109,072,988.
As of December 31, 1998, cumulative distributions by the Partnership to the BAC
holders totaled $91,897,206, of which $27,663,548 is attributable to income from
operations and $64,233,658 is attributable to sales of Venture assets, principal
payments on mortgage loans and other capital events. Another $11,173,904 and
$6,020,890 in sale or financing proceeds was subsequently to be distributed to
BAC holders in February 1999 and March 1999, respectively. To the extent that
future cash distributions to the limited partners are insufficient to provide
the specified minimum return, any shortfall will be funded by the guarantor, up
to the above described maximum.

Effective as of January 1, 1997, the Partnership entered into an amendment
to the Joint Venture Agreement of the Venture between the Partnership and EREIM
LP Associates pursuant to which EREIM LP Associates agreed to defer, without
interest, its rights to receive 20% of the Venture's distributions of sale or
financing proceeds until the Partnership has received aggregate distributions
from the Venture in an amount equal to the capital contributions made to the
Partnership by the BAC holders plus a noncompounded cumulative return computed
at the rate of 9.75% per annum on contributions outstanding from time to time.
Prior to the amendment, EREIM LP Associates had a right to receive 20% of all
the Venture's distributions of sale or financing proceeds on a pari passu basis
with the Partnership. The amendment has the effect of accelerating the return of
original contributions to BAC holders to the extent that sale or financing
proceeds are realized prior to the dissolution of the Partnership.

12
<PAGE> 53
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMPENSATION AND FEES

Acquisition/Syndication Fee -- The acquisition/syndication fee was paid to
the general partners for initial acquisition, management, and administrative
services to the Partnership. The fee was 8.7% of the proceeds from the offering
of BACs, which amounted to $9,438,152 based upon the total number of BACs sold
and has been included in the offering costs charged to limited partners'
capital. The outstanding balance of this fee was paid to the general partners in
August 1990.

Asset Management Fees:

Venture Supervisory Fee -- The Venture supervisory fee is payable to
the Managing General Partner for supervising the Partnership's investment
in the Venture. The fee is payable semiannually in an amount equal to .75%
per annum of the Partnership's allocable share of the acquisition price of
properties owned by the Venture. For each of the years ended December 31,
1998, 1997, and 1996, the total expense for this fee was $602,323,
$737,702, and $658,271, respectively.

Mortgage Loan Servicing Fee -- The mortgage loan servicing fee is
payable to the Managing General Partner for servicing mortgage loans owned
by the Venture. The fee is payable semiannually in an amount equal to .20%
per annum of the outstanding principal amount of the Partnership's
allocable share of fixed-rate first mortgage loans and .20% per annum of
the Partnership's allocable share of the accreted amount of zero coupon
mortgage notes at the time of acquisition or contribution to the Venture.
For each of the years ended December 31, 1998, 1997, and 1996, the total
expense for this fee was $9,600, $9,600, and $28,387, respectively.

Partnership Administration Fee -- The Partnership administration fee is
payable to the Associate General Partner as compensation for providing investor
services limited to processing investor information and disseminating
Partnership reports and tax information. The fee is payable on a semiannual
basis at an annual rate of .15% per annum of the average annual adjusted capital
contributions of the offering of BACs. For the years ended December 31, 1998,
1997, and 1996, the total expense for this fee was $109,210, $154,109, and
$156,389, respectively.

Property Management Fees -- Properties are managed and leased by
third-party managing and leasing agents, including Compass Management and
Leasing, Inc. ("Compass") and ERE Yarmouth Retail, Inc. ("Retail"), affiliates
of Lend Lease. As discussed in Note 1, until June 10, 1997, ERE, the predecessor
company to Lend Lease, was an affiliate of Equitable. Property management fees
are generally established at specified percentages of 1% to 5% of the gross
receipts of the properties as defined in the management agreements. Compass and
Retail earned approximately $292,713, $396,440, and $406,995 in property
management fees for properties managed for the nine months ended September 30,
1998, and the years ended December 31, 1997 and 1996, respectively. On September
30, 1998, Compass and Retail were sold to LaSalle Partners Incorporated
("LaSalle"). LaSalle continues to manage the properties.

Leasing commissions are based on a percentage of the rent payable during
the term of the lease as specified in each lease agreement. Leasing commissions
paid by the Venture to Compass and Retail were $58,698 for the nine months ended
September 30, 1998, and $276,314 and $123,611, for the years ended December 31,
1997 and 1996, respectively. Leasing commissions are capitalized in deferred
leasing costs on

13
<PAGE> 54
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the balance sheet or expensed in real estate operating expenses on the statement
of operations in accordance with the Venture's capitalization policy. The
Venture has reimbursed Compass and Retail for payroll incurred of $1,321,615,
$1,785,133, and $1,678,348 in 1998, 1997, and 1996, respectively. Payroll
reimbursements are included in real estate operating expenses on the statement
of operations. Additionally, the Venture has paid construction management fees
to Compass and Retail of $0 for the nine months ended September 30, 1998, and
$11,829 and $92,024, in 1997 and 1996, respectively. The construction management
fees have been capitalized as a portion of the construction projects to which
they relate.

Guaranty Fee -- The guaranty fee is payable to the Venture in consideration
of the assignment of the guaranty agreement. The fee was initially paid in six
semiannual installments, which commenced on June 30, 1988 and ended on December
31, 1990, at an annual rate of 1.15% of gross proceeds plus .35% of average
annual adjusted capital contributions. Subsequent to December 31, 1990, the fee
is payable on a semiannual basis at an annual rate of .35% of the average annual
adjusted capital contributions of the offering of BACs. The guaranty fee is
assigned to EREIM LP Associates. The total of the recurring portion of the
guaranty fee which is included in general and administrative expense on the
statement of operations was $254,824, $359,587, and $365,426, for the years
ended December 31, 1998, 1997, and 1996, respectively. The amortization expense
on the nonrecurring portion of the fee was $268,251 in each of the years ended
December 1998, 1997, and 1996.

Disposition Fee -- The disposition fee is payable to the Managing General
Partner in the case of a sale of a property. Upon distribution of the proceeds
of the sale to the limited partners, the fee is payable in the amount of 1.50%
of the aggregate gross proceeds received by the Partnership. The Managing
General Partner will not receive any portion of the disposition fee which, when
combined with amounts paid to all other entities as real estate brokerage
commissions in connection with the sale, exceeds 6% of the aggregate gross sale
proceeds. Such amounts shall not be payable until such time as the BAC holders
and limited partners as a class have received distributions of sale or financing
proceeds in a cumulative amount equal to their capital contributions. The
disposition fees related to all of the properties sold during 1998 and 1997 have
been deferred, without interest, until such time as the required distributions
to BAC holders and limited partners are met, and therefore, have not been
accrued.

9. PARTNERSHIP AGREEMENT

The general partners are liable for all general obligations of the
Partnership to the extent not paid by the Partnership. The limited partners are
not liable for the obligations of the Partnership beyond the amount of their
contributed capital.

After payment of the acquisition/syndication fee to the general partners,
which has been charged to the limited partners' capital, distributable cash from
operations, less any amounts set aside for reserves, will be distributed
semiannually on the basis of 95% to the BAC holders and limited partners as a
group and 5% to the general partners. Distributions to the general partners for
any semiannual period will be deferred until the limited partners have received
a 6% per annum simple return on their adjusted capital contribution during the
period.

Taxable income and loss will generally be allocated 1% to the general
partners and 99% to the limited partners.
14
<PAGE> 55
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Distributions from sale or financing proceeds, if applicable during a
period, will be distributed on a semiannual basis with priority return given to
the limited partners. An exception in the agreement provides that the
distribution of sale or financing proceeds may be delayed if the purpose for
withholding such a distribution is to supplement cash reserves. Subsequent to a
complete return of the limited partners' capital contributions and the receipt
of the minimum return by the limited partners, as defined in the Partnership
Agreement, sales proceeds will be allocated to the general partners to the
extent of any distributable cash that has been deferred, net of disposition fees
paid to the Managing General Partner. The balance will be allocated 85% to the
limited partners and 15% to the general partners.

10. LEASES

Future minimum rentals to be received for the properties under
noncancellable operating leases in effect as of December 31, 1998 are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999........................................................ $10,073,695
2000........................................................ 9,114,495
2001........................................................ 7,629,408
2002........................................................ 6,820,496
2003........................................................ 5,469,914
Thereafter.................................................. 18,477,055
-----------
Total............................................. $57,585,063
===========
</TABLE>

In addition to the minimum lease amounts, certain leases provide for
escalation charges to tenants for common area maintenance and real estate taxes.
The amount of escalation charges included in rental income totaled $6,948,710,
$9,172,055, and $7,686,606, for the years ended December 31, 1998, 1997, and
1996, respectively.

In the case of retail tenants, certain leases provide for percentage rents.
Contingent rentals which include percentage rents included in rental income for
the years ended December 31, 1998, 1997, and 1996 totaled $532,987, $621,290,
and $615,400, respectively.

Information with respect to significant individual leases is as follows:

- Hudson's Department Store, J. C. Penney, and Target operate stores at
Northland Center and each contributes common area maintenance payments
for operating expenses and real estate taxes under separate
agreements. These stores, covering 511,509 square feet, 294,507 square
feet, and 117,000 square feet, respectively, are not included in the
gross leasable area of the mall.

- PNC Bank occupies approximately 32% (100,451 square feet) of The Bank
of Delaware Building. The majority of the lease commitment expires in
May 2005.

- Bon-Ton and Redner's Market occupies approximately 45% and 29%,
(84,405 and 54,471 square feet), respectively, of Richland Mall. The
Bon-Ton and Redner's Market leases expire December 2006 and November
2017, respectively.

15
<PAGE> 56
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. TAXABLE NET INCOME AND TAX NET WORTH

The following is a reconciliation of the Partnership's financial net income
to taxable net income and a reconciliation of partners' capital for financial
reporting purposes to net worth on a tax basis:

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Financial net income....................... $ 3,266,840 $ 8,112,151 $ 2,225,866
Net book to tax difference from investment
in joint venture......................... 9,937,073 1,899,092 (1,686,777)
----------- ----------- ------------
Taxable net income.................. $13,203,913 $10,011,243 $ 539,089
=========== =========== ============
Capital balance, financial reporting....... $67,941,028 $94,615,973 $133,749,497
Cumulative book to tax income differences
from investment in joint venture......... 12,909,840 2,972,767 1,073,675
----------- ----------- ------------
Net worth, tax basis................ $80,850,868 $97,588,740 $134,823,172
=========== =========== ============
</TABLE>

12. LEGAL PROCEEDINGS

The Partnership is a defendant in a consolidated action brought in the
Court of Chancery of the State of Delaware entitled IN RE: ML/EQ Real
Estate Partnership Litigation. The consolidated action results from two
related cases. Scher v. ML/EQ Real Estate Portfolio, L.P., et al., was
served on the Partnership on July 14, 1997. On September 8, 1997, the
Partnership was named as a defendant in Folette v. ML/EQ Real Estate
Portfolio, L.P., et al., a substantially similar complaint, also brought in
the Court of Chancery of the State of Delaware. The cases were consolidated
pursuant to a stipulation between the parties by order of the court on
October 3, 1997. In addition to the Partnership, the complaint names as
defendants EREIM Managers Corp., Equitable, ERE, EREIM L.P. Corp., and
EREIM LP Associates.

The Plaintiffs purport to sue on behalf of a class of all limited
partners of the Partnership who purportedly have been or will be adversely
affected by the conduct of the defendants. The complaint alleges that the
defendants have caused the Venture to accumulate excessive cash rather than
distribute it to the limited partners, and that defendants' motive in so
doing was (i) to manipulate the Partnership's cash flow so as to limit
certain defendants' exposure under the guarantee agreement, and (ii) to
secure for certain defendants additional fees. The complaint also alleges
that defendants have utilized the Venture to provide liquidity for illiquid
assets and to acquire and continue to hold under-performing properties. The
complaint purports to state claims for breach of fiduciary duties, breach
of contract, and aiding and abetting breach of fiduciary duties. The
complaint requests, among other things, money damages in an unspecified
amount and orders that defendants distribute to the purported class the
cash which defendants have allegedly wrongfully failed to distribute and
disgorge all earnings, profits, interests, and other benefits, which they
have realized on account of their allegedly wrongful conduct. The
Partnership intends to defend vigorously against these claims. On November
6, 1997, defendants answered the complaint, denying any wrongdoing.
Additionally, defendants have noticed a motion to dismiss the case on the
pleadings in the Delaware Court of Chancery. Although the outcome of any
litigation cannot be

16
<PAGE> 57
ML/EQ REAL ESTATE PORTFOLIO, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

predicted with certainty, the Partnership's management believes that the
ultimate resolution of the litigation will not have a material adverse
effect on the financial condition of the Partnership.

13. SUBSEQUENT EVENT

On January 27, 1999, the Venture consummated the sale of the Richland Mall
property at a sales price of $9,010,000. The net sales proceeds received were
$8,718,106, which resulted in a loss of $71,562.

14. SEGMENT REPORTING

The Partnership owns or has owned real estate investments in the retail,
office and industrial sectors, and mortgage loan investments. Revenues,
depreciation and amortization, loss on write-down of assets, income before
minority interest, identifiable assets and capital expenditures are as follows:

<TABLE>
<CAPTION>
MORTGAGE CORPORATE/
RETAIL OFFICE INDUSTRIAL LOANS OTHER TOTAL
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
1998........................ 12,459,404 5,421,059 2,106,726 615,000 20,602,189
1997........................ 16,640,481 4,561,285 3,389,419 615,000 25,206,185
1996........................ 13,312,356 4,269,324 3,299,908 4,101,334 24,982,922
Depreciation and amortization
1998........................ 1,752,972 872,814 282,083 268,251 3,176,120
1997........................ 2,060,390 1,504,364 717,272 268,251 4,550,277
1996........................ 1,916,729 1,395,416 734,338 268,251 4,314,734
Loss on write-down of assets
1998........................ 5,155,515 4,438,162 650,000 10,243,677
1997........................
1996........................ 6,211,644 6,211,644
Income before minority
interest
1998........................ (1,604,845) (2,550,793) 9,174,617 615,000 (1,180,641) 4,453,338
1997........................ 6,446,193 512,146 3,468,153 615,000 (495,330) 10,546,162
1996........................ 3,210,779 777,023 1,962,350 (2,188,738) (587,782) 3,173,632
Identifiable assets
1998........................ 53,639,378 34,106,638 73,906 6,000,000 11,957,376 105,777,298
1997........................ 59,299,579 37,123,336 21,325,610 6,000,000 21,989,657 145,738,182
1996........................ 72,891,248 36,315,861 28,274,094 6,000,000 28,486,025 171,967,228
Capital expenditures
1998........................ 902,537 2,572,687 23,685 3,498,909
1997........................ 4,014,796 2,106,168 95,386 6,216,350
1996........................ 2,087,905 2,108,628 326,177 4,522,710
</TABLE>

Mortgage loans transferred to the retail segment were transferred at the
lower of cost or market value at such time that the venture gained control of
the underlying asset.

17
<PAGE> 58

CONSOLIDATED SUPPLEMENTAL SCHEDULES
(SEE INDEPENDENT AUDITORS' REPORT)

SCHEDULE III

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND
1996

<TABLE>
<CAPTION>
GROSS COST AT WHICH
COSTS CARRIED AT END OF THE
INITIAL COST TO COMPANY CAPITALIZED YEAR
------------------------ SUBSEQUENT TO ------------------------
BUILDINGS ACQUISITION BUILDINGS
AND ------------- AND
DESCRIPTION LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- ----------- --------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Northland Center, Southfield, Michigan...... 7,424,476 24,822,493 13,212,901 7,424,476 38,035,394
(continued below)
</TABLE>

<TABLE>
<CAPTION>
GROSS COST
AT WHICH
CARRIED
AT END
OF THE YEAR
------------ ACCUMULATED DATE OF DATE
TOTAL DEPRECIATION CONSTRUCTION ACQUIRED
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Northland Center, Southfield, Michigan.................. 45,459,870 5,586,628 1954 7/22/94
</TABLE>

<TABLE>
<CAPTION>
RECONCILIATION OF BEGINNING AND ENDING BALANCES 1998 1997 1996
- ----------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Rental Properties:
Balance at beginning of year....................... $127,666,639 $145,257,804 $126,396,402
Properties reclassified to held for sale........... (61,582,516)
Cost of real estate sold........................ (23,812,519) (23,154,113)
Brookdale Center Acquisition.................... 15,550,364
Improvements.................................... 3,188,266 5,562,948 3,311,038
------------ ------------ ------------
Balance at end of year............................. $ 45,459,870 $127,666,639 $145,257,804
============ ============ ============
Accumulated Depreciation:
Balance at beginning of year....................... $ 18,384,929 $ 15,898,604 $ 12,431,678
Depreciation for year.............................. 2,736,796 2,486,325 3,466,926
Real estate sold................................... (4,283,456)
Properties reclassed held for sale................. (11,251,641)
------------ ------------ ------------
Balance at end of year............................. $ 5,586,628 $ 18,384,929 $ 15,898,604
============ ============ ============
</TABLE>

18
<PAGE> 59

SCHEDULE IV

CONSOLIDATED SUPPLEMENTAL SCHEDULES
(SEE INDEPENDENT AUDITOR'S REPORT)

ML/EQ REAL ESTATE PORTFOLIO, L.P.

CONSOLIDATED SCHEDULE OF MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 1998 AND FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
CARRYING BALLOON
FINAL PERIODIC FACE AMOUNT PAYMENT
INTEREST MATURITY PAYMENT AMOUNT OF OF AT
DESCRIPTION RATE DATE TERMS MORTGAGES MORTGAGES MATURITY
- ----------- -------- ------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First mortgage loan on
apartment complex in
Massachusetts......... 10.25% February 1999 (d) $ 6,000,000 $6,000,000(a)(c) $6,000,000
============ ========== ==========
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996
------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period.... $ 6,000,000 $6,000,000 $ 27,498,199
Write-down of zero
coupon mortgage....... (b) (6,211,644)
Loans reclassified as rental
properties...................... (15,286,555)
------------- ---------- ------------
Balance at end of year............ $ 6,000,000 $6,000,000 $ 6,000,000
============= ========== ============
</TABLE>

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

Notes:
(a) This loan is not subject to any delinquencies.
(b) On December 16, 1996, upon acquiring its undivided interest in the shopping
mall securing the zero coupon mortgage, the Venture recorded a loss of
$6,211,644 and recorded the property on its balance sheet at an amount equal
to the Venture's participation interest in the property multiplied by the
estimated fair market value of the property.
(c) The aggregate tax basis is $6,000,000.
(d) Payments of interest only of $51,250 are due monthly until the maturity date
of February 1999. The note was subsequently paid in full on February 1,
1999.

19
<PAGE> 60
SIGNATURES

Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 31st day of
March, 1999.

ML/EQ REAL ESTATE PORTFOLIO, L.P.

By: EREIM MANAGERS CORP.

(Managing General Partner)

By: /s/ John H. Kirst
------------------------------------------------
JOHN H. KIRST
President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 31, 1999.

/s/John H. Kirst
----------------------------------------------------
JOHN H. KIRST
President, Chief Executive Officer and Director
of EREIM Managers Corp. (principal executive officer)

/s/Patricia C. Snedeker
----------------------------------------------------
PATRICIA C. SNEDEKER
Vice President, Controller and Treasurer
of EREIM Managers Corp. (principal financial officer)

/s/Peter D. Noris
----------------------------------------------------
PETER D. NORIS
Director of EREIM Managers Corp.

/s/Anthony C. Pasquale
----------------------------------------------------
ANTHONY C. PASQUALE
Director of EREIM Managers Corp.

<PAGE> 61

EXHIBIT INDEX

Exhibit

4. (a) Amended and Restated Agreement of Limited Partnership
dated April 23, 1987. Included as an Exhibit to the
Prospectus (see Exhibit 99(a)).

10. Material Contracts.

(a) Purchase and Sale Agreement between EML Associates
and Weingarten Properties, Inc. dated November 19,
1998, as amended.

(b) Purchase and Sale Agreement between EML Associates
and SPP Real Estate (USA), Inc. dated September 28,
1998 (incorporated by reference to Exhibit 10(a) to
10-Q for the quarterly period ended September 30,
1998)

(c) Purchase and Sale Agreement between EML Associates
and Glenn E. Wyatt, Jr. dated _________, 1998
(incorporated by reference to Exhibit 10(b) to 10-Q
for the quarterly period ended September 30, 1998)

(f) Purchase and Sale Agreement by and between EML
Associates and SPP Real Estate (O'Hare), Inc., dated
December 31, 1997 (incorporated by reference to
Exhibit 10(c) to the 1997 10-K).

(g) Form of Beneficial Assignee Certificate (incorporated
by reference to Exhibit 10(a) to Pre-Effective
Amendment No. 1 to the Registration Statement of the
Partnership (File No. 33-11064)).

(h) Agreement Between General Partners (incorporated by
reference to Exhibit 10(c) to the 1987 10-K).

(i) Joint Venture Agreement of EML Associates
(incorporated by reference to Exhibit 10(d) to the
1987 10-K).

(j) Investment Guaranty Agreement between the Venture and
EREIM LP Associates (incorporated by reference to
Exhibit 10(e) to the 1987 10-K).

(k) Assignment Agreement between Registrant and Venture
(incorporated by reference to Exhibit 10(f) to the
1987 10-K).

<PAGE> 62

(l) Keep Well Agreement between The Equitable Life
Assurance Society of the United States and EREIM LP
Corp. (incorporated by reference to Exhibit 10(g) to
the 1987 10-K).

(m) Amended and Restated Agreement of General Partnership
of EREIM LP Associates (incorporated by reference to
Exhibit 10(h) to the 1987 10-K).

27. Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.

99. Additional Exhibits.

(a) Prospectus dated April 23, 1987, as supplemented by
supplements dated December 29, 1987, March 3, 1988
and March 17, 1988 (incorporated by reference to
Exhibit 28 to the 1987 10-K).

<PAGE> 1
EXHIBIT 10A

RICHLAND MALL
QUAKERTOWN, PENNSYLVANIA

PURCHASE AND SALE AGREEMENT

BETWEEN

EML ASSOCIATES
a New York general partnership

AS SELLER

AND

WEINGARTEN PROPERTIES, INC.
a Pennsylvania Corporation

AS PURCHASER

As of November 19, 1998

<PAGE> 2

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of the 19th day of
November, 1998, by and between EML ASSOCIATES, a New York general partnership
("Seller"), having an office at 1290 Avenue of the Americas, New York, New York
10104, and Weingarten Properties, Inc, a Pennsylvania corporation ("Purchaser")
having an office at One Wynnewood Road, Suite 200, Wynnewood, PA 19096.

WITNESSETH:

ARTICLE I

PURCHASE AND SALE

1.1 Agreement of Purchase and Sale. Subject to the terms and
conditions hereinafter set forth, Seller agrees to sell and convey and
Purchaser agrees to purchase the following:

(a) that certain tract or parcel of land situated in
Quakertown, Richland Township, Bucks County, Pennsylvania, more particularly
described on Exhibit A attached hereto and made a part hereof, together with
all and singular the rights and appurtenances pertaining to such property,
including any right, title and interest of Seller in and to adjacent streets,
alleys, easements or rights-of-way (the property described in clause (a) of
this Section 1. 1 being herein referred to collectively as the "Land");

(b) the buildings, structures, fixtures and other
improvements on the Land, including specifically, without limitation, that
certain shopping center located thereon having a street address of 309 West End
Boulevard (the property described in clause (b) of this Section 1.1 being
herein referred to collectively as the "Improvements");

(c) all of Seller's right, title and interest in and to
all tangible personal property upon the Land or within the Improvements,
including specifically, without limitation, appliances, furniture, carpeting,
draperies and curtains, tools and supplies, and other items of personal
property (excluding cash) used exclusively in connection with the operation of
the Land and the Improvements and only as specifically described on Exhibit B
attached hereto and made a part hereof (the property described in clause (c) of
this Section 1.1 being herein referred to collectively as the "Personal
Property");

(d) all of Seller's right, title and interest in and to
all agreements listed and described on Exhibit C (the "Lease Schedule")
attached hereto and made a part hereof, pursuant to which any portion of the
Land or Improvements is used or occupied by anyone other than

<PAGE> 3

Seller (the property described in clause (d) of this Section 1.1 being herein
referred to collectively as the "Leases"); and

(e) all of Seller's right, title and interest in and to
(i) all assignable contracts and agreements (collectively, the "Operating
Agreements") listed and described on Exhibit D (the "Operating Agreements
Schedule") attached hereto and made a part hereof, relating to the upkeep,
repair, maintenance or operation of the Land, Improvements or Personal Property
which will extend beyond the date of Closing (as such term is defined in
Section 4.1 hereof), including specifically, without limitation, all assignable
equipment leases, (ii) all assignable existing warranties and guaranties
(expressed or implied) issued to Seller in connection with the Improvements or
the Personal Property, (iii) all assignable names and other identifying
materials used in connection with the Property except those owned by tenants of
the Property, which Seller has the right to use and (iv) all assignable
governmental permits, approvals or licenses granted with respect to the
ownership, construction, use, occupancy and operation of the Property which are
in the name of Seller (the property described in this Section 1. 1 (e) being
sometimes herein referred to collectively as the "Intangibles").

1.2 Property Defined. The Land, the Improvements, the Personal
Property, the Leases and the Intangibles are hereinafter sometimes referred to
collectively as the "Property."

1.3. Permitted Exceptions. The Property shall be conveyed subject
to the matters which are, or are deemed to be, Permitted Exceptions pursuant to
Article II hereof (herein referred to collectively as the "Permitted
Exceptions").

1.4 Purchase Price. Seller is to sell and Purchaser is to
purchase the Property for a total of NINE MILLION, ONE HUNDRED THOUSAND DOLLARS
($9,100,000.00) (the "Purchase Price").

1.5 Payment of Purchase Price. The Purchase Price, as increased
or decreased by prorations and adjustments as herein provided, shall be payable
in full at Closing in cash by wire transfer of immediately available federal
funds to a bank account designated by Seller in writing to Purchaser prior to
the Closing.

1.6 Earnest Money. Simultaneously with the execution and delivery
of this Agreement, Purchaser is depositing with Commonwealth Land Title
Insurance Company ("Escrow Agent"), having its office at Two Logan Square,
Suite 500, Philadelphia, PA, Attention: Robert Hassel, the sum of Two Hundred
Thousand and No/100 Dollars ($200,00.00) (the "Earnest Money") in good funds,
either by certified bank or cashier's check or by federal wire transfer. The
Escrow Agent shall hold the Earnest Money in an interest-bearing account in
accordance with the terms and conditions of an escrow agreement entered into
among Seller, Purchaser and Escrow Agent simultaneously with the execution of
this Agreement. All interest accruing on such sum shall become a part of the
Earnest Money and

2-
<PAGE> 4

shall be distributed as Earnest Money in accordance with the terms of this
Agreement.

1.7 Independent Contract Consideration. In addition to the
Earnest Money, Purchaser shall, concurrently with its execution hereof, deliver
to Seller a check in the amount of ONE HUNDRED DOLLARS AND NO/100 ($100.00),
which amount Seller and Purchaser agree has been bargained for as consideration
for Seller's execution and delivery of this Agreement and Purchaser's right to
inspect the Property pursuant to Article III. Such sum is in addition to and
independent of any other consideration or payment provided for in this
Agreement and is nonrefundable in all events.

ARTICLE II

TITLE AND SURVEY

2.1 Title Examination, Commitment for Title insurance. Seller has
obtained and delivered, or shall obtain and deliver, at Purchaser's expense if
Closing is completed, to Purchaser and the surveyor preparing the Survey, from
Commonwealth Land Title Insurance Company acting through its agent, Royal
Abstract of New York, LLC (the "Title Company"), an ALTA title insurance
commitment (the "Title Commitment") covering the Property and a copy of each
document referenced in the Title Commitment as an exception to title the
Property. Purchaser shall have until the date (the "Title Exam Deadline"),
which is 10 days prior to the expiration of the Inspection Period (defined in
Section 3.1 hereof) to review the Title Commitment and at Closing, at
Purchaser's expense, obtain from the Title Company an Owner's Policy of Title
Insurance in the full amount of the Purchase Price pursuant to Section 2.4
hereof. Notwithstanding the foregoing, if the Survey is not delivered to
Purchaser at least (15) days prior to the Title Exam Deadline, the Title Exam
Deadline shall be extended to a date which is fifteen (15) day's after
Purchaser's receipt of the Survey.

2.2 Survey. Seller has obtained and delivered, or shall obtain
and deliver to Purchaser and the Title Company, at the Purchaser's expense if
Closing is completed from a surveyor or surveying firm licensed by the state in
which the Property is located, an ALTA survey of the Property (the "Survey")
reflecting the total area of the Property, the location of all improvements,
recorded easements and encroachments, if any, located thereon and other matters
of record with respect thereto. The cost of the survey shall be $4,200 plus any
additional sums that may be incurred if Purchaser or its lender requires any
additional survey work.

2.3 Title Objections: Cure of Title Objections.

(a) Purchaser shall have until the Title Exam Deadline
to notify Seller in writing of such objections as Purchaser may have to any
exceptions to title disclosed in the Title Commitment or the Survey. Any item
contained in the Title Commitment or matter shown on

3-
<PAGE> 5

the Survey to which Purchaser does not object prior to the Title Exam Deadline
by timely written notice shall be deemed a Permitted Exception. Time is of the
essence with respect to the provisions of this Section 2.3.

(b) In the event Purchaser shall notify Seller of
objections to title or matter of survey shown on the Survey prior to the Title
Exam Deadline, Seller shall have the right, but not the obligation, to cure
such objections. Within five (5) days after receipt of Purchaser's notice of
objections, Seller shall notify Purchaser in writing whether Seller elects to
attempt to cure such objections. If Seller elects to attempt to cure, and
provided that Purchaser shall not have terminated this Agreement in accordance
with Section 3.2 hereof, Seller shall have until the date of Closing to attempt
to remove, satisfy or cure the same and for this purpose Seller shall be
entitled to a reasonable adjournment of the Closing if additional time is
required, but in no event shall the adjournment exceed thirty (30) days after
the date for Closing set forth in Section 4.1 hereof. If Seller elects not to
cure any objections specified in Purchaser's notice, or if Seller is unable to
effect a cure prior to the Closing (or any date to which the Closing has been
adjourned), Purchaser shall have the following options: (i) to accept a
conveyance of the Property subject to the Permitted Exceptions, specifically
including any matter objected to by Purchaser which Seller is unwilling or
unable to cure, and without reduction of the Purchase Price; (ii) to terminate
this Agreement by sending written notice thereof to Seller, and upon delivery
of such notice of termination, this Agreement shall terminate and the Earnest
Money shall be returned to Purchaser as Purchaser's sole remedy; and thereafter
neither party hereto shall have any further rights, obligations or liabilities
hereunder except to the extent that any right, obligation or liability set
forth herein expressly survives termination of this Agreement, or (iii)
notwithstanding anything contained herein to the contrary, Seller shall be
required to remove all mortgages which are recorded against the Property and to
either cure or cause the Title Company to insure Purchaser free of any
judgments or other monetary liens of an ascertainable amount against Seller. If
Seller notices Purchaser that Seller does not intend to attempt to cure any
title objection; or if, having commenced attempts to cure any objection, Seller
later notifies Purchaser that Seller will be unable to effect a cure thereof,
Purchaser shall, within five (5) days after such notice has been given, notify
Seller in writing whether Purchaser shall elect to accept the conveyance under
clause (i) or to terminate this Agreement under Clause (ii). If Purchaser fails
to give timely notice of its election to terminate this Agreement, Purchaser
shall be deemed to have elected to accept title subject to such exception
without adjustment of the Purchase Price.

2.4 Conveyance of Title. At Closing, Seller shall convey and
transfer to Purchaser such title to the Property as shall be good and
marketable as will enable the Title Company to issue to Purchaser, at
Purchaser's expense, an ALTA 1992 Owner's Policy of Title Insurance (the "Title
Policy") covering the Property, in the full amount of the Purchase Price, at
regular rates provided, however, Purchaser agrees to accept title to the
Property subject to judgments and unsettled taxes against Seller provided the
Title Company insures Purchaser free of such judgments and unsettled taxes.
Notwithstanding anything contained herein to the contrary, the

4-
<PAGE> 6

Property shall be conveyed subject to the following matters, which shall be
deemed to be Permitted Exceptions:

(a) the rights of tenants, as tenants only, under the
Leases and any new Leases entered into between the Effective Date and Closing
and, where required, approved by Purchaser in accordance with the terms of this
Agreement;

(b) the lien of all ad valorem real estate taxes and
assessments not yet due and payable as of the date of Closing, subject to
adjustment as herein provided;

(c) items appearing of record or shown on the Survey
and, in either case, not objected to by Purchaser or waived or deemed to be
waived by Purchaser in accordance with Sections 2.3 or 2.5 hereof; and

(d) any and all assessments becoming liens subsequent to
the date hereof, and in addition if at the date hereof the Property or any part
thereof shall be or shall have been affected by any assessment or assessments
which are payable in installments or may be paid in installments without
penalty (other than interest), Purchaser shall pay all such installments which
shall become due and payable or which may be paid without penalty (other than
interest) after the date hereof, except that any installment relating to the
current fiscal year (with any interest thereon) shall be apportioned between
the parties at Closing.

2.5 Pre-Closing "Gap" Title Defects. Whether or not Purchaser
shall have furnished to Seller any notice of title objections pursuant to the
foregoing provisions of this Agreement, Purchaser may, at or prior to Closing,
notify Seller in writing of any objections to title first raised by the Title
Company or the Surveyor between (a) the date which is the earlier of (i) the
effective date of Purchaser's Title Commitment referred to above or (ii) the
expiration of the Inspection Period, and (b) the date on which the transaction
contemplated herein is scheduled to close. With respect to any material
objections to title set forth in such notice, Seller shall have the same option
to cure and Purchaser shall have the same option to accept title subject to
such matters or to terminate this Agreement as those which apply to any notice
of objections made by Purchaser before the expiration of the Inspection Period.
If Seller elects to attempt to cure any such matters, the date for Closing
shall be automatically extended by a reasonable additional time to effect such
a cure, but in no event shall the extension exceed thirty (30) days after the
date for Closing set forth in Section 4.1 hereof.

ARTICLE III

INSPECTION PERIOD

3.1 Right of Inspection. During the period beginning upon the
Effective Date and ending at 5:00 p.m. (local time at the Property) on December
20, 1998 (hereinafter referred to as

5-
<PAGE> 7

the "Inspection Period"), Purchaser shall have the right to make a physical
inspection of the Property and to examine at such place or places at the
Property, in the offices of the property manager or elsewhere as the same may
be located, any operating files maintained by Seller or its property manager in
connection with the leasing, current maintenance and/or management of the
Property, including, without limitation, the Leases, lease files, Operating
Agreements, insurance policies, bills, invoices, receipts and other general
records relating to the income and expenses of the Property, correspondence,
surveys, plans and specifications, warranties for services and materials
provided to the Property, environmental audits and similar materials, but
excluding materials not directly related to the leasing, current maintenance
and/or management of the Property such as, without limitation, Seller's
internal memoranda, financial projections, budgets, appraisals, accounting and
tax records and similar proprietary, elective or confidential information.
Purchaser understands and agrees that any on-site inspections of the Property
shall be conducted upon at least twenty-four (24) hours' prior written notice
to Seller and in the presence of Seller or its representative. Such physical
inspection shall not unreasonably interfere with the use of the Property by
Seller or its tenants nor shall Purchaser's inspection damage the Property in
any respect. Such physical inspection shall not be invasive in any respect
(unless Purchaser obtains Seller's prior written consent), and in any event
shall be conducted in accordance with standards customarily employed in the
industry and in compliance with all governmental laws, rules and regulations.
Following each entry by Purchaser with respect to inspections and/or tests on
the Property. Purchaser shall restore the Property to a condition which is as
near to its original condition as existed prior to any such inspections and/or
tests. Seller shall cooperate with Purchaser in its due diligence but shall not
be obligated to incur any liability or expense in connection therewith.
Purchaser shall not contact any tenants of the Property without obtaining
Seller's prior written consent which will not be unreasonably withheld,
conditioned or delayed, and shall be conditioned on Seller or its agent
accompanying Purchaser at such meeting with any tenant. and shall not disrupt
Seller's or Seller's tenants' activities on the Property. Purchaser agrees to
indemnify against and hold Seller harmless from any claim for liabilities,
costs, expenses (including reasonable attorneys' fees actually incurred)
damages or injuries arising out of or resulting from the inspection of the
Property by Purchaser or its agents, and notwithstanding anything to the
contrary in this Agreement, such obligation to indemnify and hold harmless
Seller shall survive Closing or any termination of this Agreement. All
inspections shall occur at reasonable times agreed upon by Seller and
Purchaser. In order to aid Purchaser in the investigation, Seller shall
promptly deliver or make available such reasonable information included in the
scope of this Section 3.1 which is requested by the Purchaser, including, but
not limited to, copies of leases and copies of income and expenses statements
for 1996 through 1998.

3.2 Right of Termination. Seller agrees that in the event
Purchaser determines (such determination to be made in Purchaser's sole and
absolute discretion) that the Property is not suitable for its purposes,
Purchaser shall have the right to terminate this Agreement by giving written
notice thereof to Seller prior to the expiration of the Inspection Period. If
Purchaser gives such notice of termination within the Inspection Period, this
Agreement shall terminate and the

6-
<PAGE> 8

Earnest Money shall be returned to Purchaser. Time is of the essence with
respect to the provisions of this Section 3.2. If Purchaser fails to give
Seller a notice of termination prior to the expiration of the Inspection
Period, Purchaser shall no longer have any right to terminate this Agreement
under this Section 3.2 and (subject to the provisions of Section 2.5) shall be
bound to proceed to Closing and consummate the transaction contemplated hereby
pursuant to the terms of this Agreement.

3.3 No Liens Permitted. Nothing contained in this Agreement shall
be deemed or construed in any way as constituting the consent or request of
Seller, express or implied by inference or otherwise, to any party for the
performance of any labor or the furnishing of any materials to the Property or
any part thereof, nor as giving Purchaser any right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any liens against the Property
or any part thereof. Prior to permitting any party to enter the Property prior
to closing for the purpose of performing any services or supplying any
materials for which such party could claim a mechanic's lien against the
Property or any part thereof, Purchaser shall cause to be filed in the
applicable public filing office, a waiver of mechanic's liens in form
satisfactory to Seller by each of the parties performing such work.

ARTICLE IV

CLOSING

4.1 Time and Place. The consummation of the transaction
contemplated hereby ("Closing") shall be held at the offices of Wolf, Block,
Schorr and Solis-Cohen LLP at 12th Floor Packard Building, 15th & Chestnut
Streets at 10:00 a.m. on January 20, 1999 or at such earlier date as Seller and
Purchaser may mutually agree upon in writing; at Purchaser's option, Purchaser
may close by mailing all documents and wiring all funds to the Title Company
prior to the date of Closing. At Closing, Seller and Purchaser shall perform
the obligations set forth in, respectively, Section 4.2 and Section 4.3, the
performance of which obligations shall be concurrent conditions.

4.2 Seller's Obligations at Closing. At Closing, Seller shall:

(a) deliver to Purchaser a duly executed special
warranty deed (the "Deed") in recordable form, conveying the Land and
Improvements, subject only to the Permitted Exceptions; the warranty of title
in the Deed will be only as to claims made by, through or under Seller and not
otherwise;

7-
<PAGE> 9

(b) deliver to Purchaser a duly executed bill of sale
conveying the Personal Property with special warranty of title against Seller's
acts however without warranty, expressed or implied, as to merchantability and
fitness for any purpose;

(c) assign to Purchaser, and Purchaser shall assume, the
landlord/lessor interest in and to the Leases by duly executed assignment and
assumption agreement pursuant to which (i) Seller shall indemnify Purchaser and
hold Purchaser harmless from and against any and all claims pertaining to the
Leases arising prior to Closing and (ii) Purchaser shall indemnify Seller and
hold Seller harmless from and against any and all claims pertaining to the
Leases arising from and after the Closing, including without limitation, claims
made by tenants with respect to tenants' security deposits to the extent paid,
credited or assigned to Purchaser;

(d) to the extent assignable, assign to Purchaser, and
Purchaser shall assume, Seller's interest in the Operating Agreements and the
other Intangibles by duly executed assignment and assumption agreement pursuant
to which (i) Seller shall indemnify Purchaser and hold Purchaser harmless from
and against any and all claims pertaining to the Operating Agreements or the
other Intangibles arising prior to Closing and (ii) Purchaser shall indemnify
Seller and hold Seller harmless from and against any and all claims pertaining
to the Operating Agreements or the other Intangibles arising from and after the
Closing;

(e) deliver to Purchaser such Tenant Estoppels (as
defined in Section 5.4(b) hereof) as are in Seller's possession;

(f) join with Purchaser to execute a notice in form and
content reasonably satisfactory to Purchaser and Seller which Purchaser shall
send to each tenant under each of the Leases informing such tenant of the sale
of the Property and of the assignment to Purchaser of Seller's interest in, and
obligations under, the Leases (including, if applicable, Purchaser's assumption
of Seller's obligations with respect to any security deposits) and directing
that all rent and other sums payable after the Closing under each such Lease
shall be paid as set forth in the notice;

(g) deliver to Purchaser a certificate, dated as of the
date of Closing and executed on behalf of Seller by a duly authorized officer
thereof, stating that the representations and warranties of Seller contained in
this Agreement are true and correct in all material respects as of the date of
Closing (with appropriate modifications of those representations and warranties
made in Sections 5.1(b)(c)(e)(g)(h) and (i) hereof to reflect any changes
therein including, without limitation, any changes resulting from actions under
Section 5.4 hereof) or identifying any representation or warranty which is not,
or no longer is, true and correct and explaining the state of facts giving rise
to the change. In no event shall Seller be liable to Purchaser for, or be
deemed to be in default hereunder by reason of, any breach of representation or
warranty which results from any change that (i) occurs between the Effective
Date and the date of Closing and (ii) is expressly permitted under the terms of
this Agreement or is beyond the reasonable control

8-
<PAGE> 10

of Seller to prevent; provided, however, that the occurrence of a material or
adverse change which is beyond the reasonable control of Seller to prevent
shall, if it arises under Sections 5.1(b) subsequent to the Inspection Period,
5.1(c) subsequent to the Inspection Period except for future tenant defaults,
5.1(d), 5.1(g) subsequent to the Inspection Period, and 5.1 (i) subsequent to
the Inspection Period and 5.1(k), constitute the non-fulfillment of the
condition set forth in Section 4.6(b) entitling Purchaser to terminate this
Agreement; if, despite changes or other matters described in such certificate,
the Closing occurs, Seller's representations and warranties set forth in this
Agreement shall be deemed to have been modified by all statements made in such
certificate;

(h) deliver to Purchaser such evidence as Purchaser's
counsel and/or the Title Company may reasonably require as to the authority of
the person or persons executing documents on behalf of Seller;

(i) deliver to Purchaser an affidavit duly executed by
Seller stating that Seller is not a "foreign person" as defined in the Federal
Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform
Act;

(j) deliver to Purchaser the originals (if available) of
the Leases, Operating Agreements and licenses and permits, if any, in the
possession of Seller or Seller's agents, together with such leasing and
property files and records which are material in connection with the continued
operation, leasing and maintenance of the Property. Purchaser shall cooperate
with Seller for a period of seven (7) years after Closing in case of Seller's
need in response to any legal requirement, a tax audit, tax return preparation
or litigation threatened or brought against Seller, by allowing Seller and its
agents or representatives access, upon reasonable advance notice (which notice
shall identify the nature of the information sought by Seller), at all
reasonable times to examine and make copies of any and all instruments, files
and records, which right shall survive the Closing;

(k) deliver to Purchaser possession and occupancy of the
Property, subject to the Permitted Exceptions; and

(1) deliver such additional documents as shall be
reasonably required to consummate the transaction contemplated by this
Agreement.

(m) deliver a closing statement setting forth all
credits, adjustments and prorations made at the Closing in form and content
reasonably satisfactory to Purchaser and Seller;

(n) deliver a certified updated Rent Roll for the
Property in some format as that set forth in Exhibit C attached hereto.

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4.3 Purchaser's Obligations at Closing. At Closing, Purchaser
shall:

(a) pay to Seller the full amount of the Purchase Price,
as increased or decreased by prorations and adjustments as herein provided, in
immediately available wire transferred funds pursuant to Section 1.5 above, it
being agreed that at Closing the Earnest Money shall be delivered to Seller and
applied towards payment of the Purchase Price;

(b) join Seller in execution of the instruments
described in Sections 4.2(c), 4.2(d), and 4.2(f) above;

(c) deliver to Seller a letter duly executed by
Purchaser, confirming that Purchaser is not acquiring the Property in whole or
part with the assets of an employee benefit plan (an "Employee Benefit Plan")
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and, in the event Purchaser is unable or unwilling
to make such a representation, Purchaser shall be deemed to be in default
hereunder, and Seller shall have the right to terminate this Agreement and to
receive and retain the Earnest Money;

(d) deliver to Seller such evidence as Seller's counsel
and/or the Title Company may reasonably require as to the authority of the
person or persons executing documents on behalf of Purchaser; and

(e) deliver such additional documents as shall be
reasonably required to consummate the transaction contemplated by this
Agreement.

4.4 Credits and Prorations.

(a) The following shall be apportioned with respect to
the Property as of 12:01 a.m., on the day of Closing, as if Purchaser were
vested with title to the Property during the entire day upon which Closing
occurs:

(i) rents, if any, as and when collected (the
term "rents" as used in this Agreement includes all payments due and payable by
tenants under the Leases);

(ii) taxes (including personal property taxes on
the Personal Property) and assessments levied against the Property;

(iii) payments under the Operating Agreements;

(iv) gas, electricity and other utility charges
for which Seller is liable, if any, such charges to be apportioned at Closing
on the basis of the most recent meter reading occurring prior to Closing; and

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(v) any other operating expenses or other items
pertaining to the Property which are customarily prorated between a purchaser
and a seller in the area in which the Property is located.

(b) Notwithstanding anything contained in the foregoing
provisions:

(i) At Closing, (A) Seller shall, at Seller's
option, either deliver to Purchaser any security deposits actually held by
Seller pursuant to the Leases or credit to the account of Purchaser the amount
of such security deposits (to the extent such security deposits are not applied
against delinquent rents or otherwise as provided in the Leases prior to the
Effective Date), and (B) Purchaser shall credit to the account of Seller all
refundable cash or other deposits posted with utility companies serving the
Property, or, at Seller's option, Seller shall be entitled to receive and
retain such refundable cash and deposits. Between the Effective Date and
Closing, Seller shall not apply any security deposits to defaults by tenants
without first obtaining the prior written consent of Purchaser, which consent
shall not be unreasonably withheld, conditioned or delayed.

(ii) Any taxes paid at or prior to Closing shall
be prorated based upon the amounts actually paid. If taxes and assessments for
the current year have not been paid before Closing, Seller shall be charged at
Closing an amount equal to that portion of such taxes and assessments which
relates to the period before Closing and Purchaser shall pay the taxes and
assessments prior to their becoming delinquent. Any such apportionment made
with respect to a tax year for which the tax rate or assessed valuation, or
both, have not yet been fixed shall be based upon 102% of the tax rate and/or
assessed valuation last fixed. To the extent that the actual taxes and
assessments for the current year differ from the amount apportioned at Closing,
the parties shall make all necessary adjustments by appropriate payments
between themselves following Closing.

(iii) Charges referred to in Section 4.4(a) above
which are payable by any tenant to a third party shall not be apportioned
hereunder, and Purchaser shall accept title subject to any of such charges
unpaid and Purchaser shall look solely to the tenant responsible therefor for
the payment of the same. If Seller shall have paid any of such charges on
behalf of any tenant, and shall not have been reimbursed therefor by the time
of Closing, Purchaser shall credit to Seller an amount equal to all such
charges so paid by Seller.

(iv) Seller shall receive the entire advantage
of any discounts for the prepayment by it of any taxes, water rates or sewer
rents.

(v) As to gas, electricity and other utility
charges referred to in Section 4.4(a)(iv) above, Seller may on notice to
Purchaser elect to pay one or more of all of said items accrued to the date
hereinabove fixed for apportionment directly to the person or entity entitled

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thereto, and to the extent Seller so elects, such item shall not be apportioned
hereunder, and Seller's obligation to pay such item directly in such case shall
survive the Closing.

(vi) The Personal Property is included in this
sale, without further charge, except that (A) Purchaser agrees to purchase from
Seller, at Seller's cost, and pay for at Closing, the fuel and any supplies
which are in unopened containers on the Property at the time of Closing, the
amount of fuel and such supplies and the cost thereof to be determined as of
the day before the date of Closing by a certificate of an agent or employee of
Seller, and (B) Purchaser shall pay to Seller the amount of any and all sales
or similar taxes payable in connection with the Personal Property and Purchaser
shall execute and deliver any tax returns required of it in connection
therewith, said obligations of Purchaser to survive Closing.

(vii) Purchaser shall be responsible for the
payment of (A) all Tenant Inducement Costs (as hereinafter defined) and leasing
commissions which become due and payable (whether before or after Closing) (1)
as a result of any renewals or expansions of existing Leases, approved or
deemed approved in accordance with Section 5.4 hereof, between the Effective
Date and the date of Closing, and (2) under any new Leases, approved or deemed
approved in accordance with Section 5.4 hereof, entered into between the
Effective Date and the date of Closing, and (B) all Tenant Inducement Costs and
leasing commissions which become due and payable from and after the date of
Closing. If, as of the date of Closing, Seller shall have paid any Tenant
Inducement Costs or leasing commissions for which Purchaser is responsible
pursuant to the foregoing provisions, Purchaser shall reimburse Seller therefor
at Closing. For purposes hereof, the term "Tenant Inducement Costs" shall mean
any out-of-pocket payments required under a Lease to be paid by the landlord
thereunder to or for the benefit of the tenant thereunder which is in the
nature of a tenant inducement, including specifically, without limitation,
tenant improvement costs, lease buy out costs, and moving, design,
refurbishment and club membership allowances. The term "Tenant Inducement
Costs" shall not include loss of income resulting from any free rental period,
it being agreed that Seller shall bear the loss resulting from any free rental
period until the date of Closing and that Purchaser shall bear such loss from
and after the date of Closing.

(viii) Unpaid and delinquent rent collected by
Seller and Purchaser after the date of Closing shall be delivered as follows:
(a) if Seller collects any unpaid or delinquent rent for the Property, Seller
shall, within fifteen (15) days after the receipt thereof, deliver to Purchaser
any such rent which Purchaser is entitled to hereunder relating to the date of
Closing and any period thereafter, and (b) if Purchaser collects any unpaid or
delinquent rent from the Property, Purchaser shall, within fifteen (15) days
after the receipt thereof, deliver to Seller any such rent which Seller is
entitled to hereunder relating to the period prior to the date of Closing.
Seller and Purchaser agree that (i) all rent received by Seller or Purchaser
shall be applied first to current rentals and then to delinquent rentals, if
any, in inverse order of maturity (i.e., most recent rent first). Purchaser
will make a good faith effort after Closing to collect all rents in the usual
course of Purchaser's operation of the Property, but Purchaser will not be
obligated to

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<PAGE> 14

institute any lawsuit or other collection procedures to collect delinquent
rents. In the event that there shall be any rents or other charges under any
Leases which, although relating to a period prior to Closing, do not become due
and payable until after Closing or are paid prior to Closing but are subject to
adjustment after Closing (such as year end common area expense reimbursements
and the like), then any rents or charges of such type received by Purchaser or
its agents or Seller or its agents subsequent to Closing shall, to the extent
applicable to a period extending through the Closing, be prorated between
Seller and Purchaser as of Closing and Seller's portion thereof shall be
remitted promptly to Seller by Purchaser.

4.5 Closing Costs. Seller shall pay (a) the fees of any counsel
representing it in connection with this transaction and (b) one-half (1/2) of
any escrow fee which may be charged by the Escrow Agent or Title Company (c)
one-half of any transfer tax, documentary stamp tax or similar tax which
becomes payable by reason of the transfer of the Property. Purchaser shall pay
(u) the fees of any counsel representing Purchaser in connection with this
transaction; (v) pay, or reimburse Seller for, the fee for the title
examination and the Title Commitment and the premium for the Owner's Policy of
Title Insurance to be issued to Purchaser by the Title Company at Closing; (w)
pay or reimburse Seller for the cost of the Survey; (x) the fees for recording
the deed conveying the Property to Purchaser; (y) one-half any transfer tax,
documentary stamp tax or similar tax which becomes payable by reason of the
transfer of the Property; and (z) one-half (1/2) of any escrow fees charged by
the Escrow Agent or Title Company. All other costs and expenses incident to
this transaction and the closing thereof shall be paid by the party incurring
same.

4.6 Conditions Precedent to Obligation of Purchaser. The
obligation of Purchaser to consummate the transaction hereunder shall be
subject to the fulfillment on or before the date of Closing of all of the
following conditions, any or all of which may be waived by Purchaser in its
sole discretion:

(a) Seller shall have delivered to Purchaser all of the
items required to be delivered to Purchaser pursuant to the terms of this
Agreement, including but not limited to, those provided for in Section 4.2.

(b) All of the representations and warranties of Seller
contained in this Agreement shall be true and correct in all material respects
as of the date of Closing (with appropriate modifications permitted under this
Agreement or not adverse to Purchaser).

(c) Seller shall have performed and observed, in all
material respects, all covenants and agreements of this Agreement to be
performed and observed by Seller as of the date of Closing.

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(d) Seller shall have paid and/or satisfied any
mortgages which are recorded against the Property and cured or caused the Title
Company to insure Purchaser free of any judgments or other monetary liens of an
ascertainable amount against Seller.

4.7 Conditions Precedent to Obligation of Seller. The obligation
of Seller to consummate the transaction hereunder shall be subject to the
fulfillment on or before the date of Closing of all of the following
conditions, any or all of which may be waived by Seller in its sole discretion:

(a) Seller shall have received the Purchase Price as
adjusted pursuant to and payable in the manner provided for in this Agreement.

(b) Purchaser shall have delivered to Seller all of the
items required to be delivered to Seller pursuant to the terms of this
Agreement, including but not limited to, those provided for in Section 4.3.

(c) All of the representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects as of the date of Closing.

(d) Purchaser shall have performed and observed, in all
material respects, all covenants and agreements of this Agreement to be
performed and observed by Purchaser as of the date of Closing.

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Representations and Warranties of Seller. Seller hereby makes
the following representations and warranties to Purchaser as of the Effective
Date:

(a) Organization and Authority. Seller has been duly
organized and is validly existing under the laws of New York. Seller has the
full right and authority to enter into this Agreement and, subject to the
provisions of Section 10.6 hereof, to transfer all of the Property to be
conveyed by Seller pursuant hereto and to consummate or cause to be consummated
the transactions contemplated herein to be made by Seller. The person signing
this Agreement on behalf of Seller is authorized to do so.

(b) Pending Actions. To Seller's knowledge, there is no
action, suit, arbitration, unsatisfied order or judgment, governmental
investigation or proceeding pending against the Property or the transaction
contemplated by this Agreement, which, if adversely determined, could
individually or in the aggregate have a material adverse effect on title to the

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Property or any portion thereof or which could in any material way interfere
with the consummation by Seller of the transaction contemplated by this
Agreement.

(c) Leases. Seller is the lessor or landlord or the
successor lessor or landlord under the Leases. Except as set forth in the Lease
Schedule, to Seller's knowledge, there are no other leases or occupancy
agreements to which Seller is a party affecting the Property. Except as
otherwise set forth in the Leases or on the Lease Schedule, to Seller's
knowledge, no presently effective rent concessions have been given to any
tenants and no rent has been paid in advance by any tenants respecting a period
subsequent to the Closing. Except as may be disclosed on the Lease Schedule, to
Seller's knowledge no tenants have asserted in writing any claims, defenses or
offsets to rent accruing from and after the date of Closing. To Seller's
knowledge, except as disclosed to Purchaser or set forth in the Lease Schedule,
no material default, delinquency or breach exists on the part of any tenant.
There are no material defaults or breaches on the part of the landlord under
any Lease. In the event that any Tenant Estoppel delivered to Purchaser with
respect to any Lease shall contain any statement of fact, information or other
matter which is inconsistent with the matters stated in Seller's
representations in this Section 5.1(c), the Tenant Estoppel shall control and
Seller shall have no liability for any claim based upon a breach of
representation regarding such statement of fact, information or other matter
contained in the Tenant Estoppel. Notwithstanding anything to the contrary
contained in this Agreement, Seller does not represent or warrant that any
particular Lease will be in force or effect at Closing or that the tenants
under the Leases will have performed their obligations thereunder, but Landlord
will warrant that Landlord has fulfilled its material obligations under the
Leases between the Effective Date and Closing. The termination of any Lease
prior to Closing by reason of the tenant's default shall not affect the
obligations of Purchaser under this Agreement to complete closing in any manner
or entitle Purchaser to an abatement of or credit against the Purchase Price or
give rise to any other claim on the part of Purchaser. Seller cannot terminate,
amend, modify or cancel between the expiration of the Inspection Period and
Closing, any lease for the Property, even for default, without the consent of
Purchaser, which consent shall not be unreasonably withheld, conditioned or
delayed and shall be deemed approved if not disapproved within five (5) days
after Purchaser's receipt of notice of Seller's intention to terminate.

(d) Lease Brokerage. To Seller's knowledge, there are no
lease brokerage agreements, leasing commission agreements or other agreements
providing for payments of any amounts for leasing activities or procuring
tenants with respect to the Property as of the Effective Date which would be
payable subsequent to Closing, other than as disclosed in the Leases, the Lease
Schedule, or in the Lease files to be made available to Purchaser during the
Inspection Period.

(e) No Violations. To Seller's knowledge, Seller has not
received prior to the Effective Date any written notification from any
governmental or public authority (i) that the Property is in violation of any
applicable fire, health, building, use, occupancy or zoning laws

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<PAGE> 17

where such violation remains outstanding and, if unaddressed, would have a
material adverse effect on the use of the Property as currently owned and
operated or (ii) that any work is required to be done upon or in connection
with the Property, where such work remains outstanding and, if unaddressed,
would have a material adverse effect on the use of the Property as currently
owned and operated.

(f) Taxes and Assessments. True and complete copies of
the most recent real estate tax bills for the Property received by Seller have
been delivered to Purchaser. Except as disclosed to Purchaser, Seller has not
filed, and has not retained anyone to file, notices of protests against, or to
commence action to review, real property tax assessments against the Property.

(g) Condemnation. To Seller's knowledge, no condemnation
proceedings relating to the Property are pending or threatened.

(h) Insurance. To Seller's knowledge, Seller has not
received any written notice from any insurance company or board of fire
underwriters of any defects or inadequacies in or on the Property or any part
or component thereof that would materially and adversely affect the
insurability of the Property or cause any material increase in the premiums for
insurance for the Property that have not been cured or repaired.

(i) Environmental Matters. Except as set forth in the
environmental report of Earth Tech, dated September 15, 1998, a copy of which
has been delivered to Purchaser or as otherwise disclosed to Purchaser, to
Seller's knowledge, Seller has received no written notification that any
governmental or quasi governmental authority has determined that there are any
violations of environmental statutes, ordinances or regulations affecting the
Property or any underground tanks located on the Property. As used herein,
"Hazardous Substances" means all hazardous or toxic materials, pollutants,
contaminants or wastes currently identified as hazardous substance or waste in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (commonly known as "CERCLA"), as amended, the Superfund Amendments and
Reauthorization Act (commonly known as "SARA"), the Resource Conservation and
Recovery Act (commonly known as "RCRA"), or any other federal, state or local
legislation or ordinances applicable to the Property.

(j) Contracts. There are no service or other contracts
affecting the Property except (i) those Operating Agreements set forth on
Exhibit D; (ii) those that will be terminated as of Closing (including the
current management contract for the Property) or (iii) those other contracts if
any, that are made available to Purchaser during the Inspection Period.

(k) Tenant Improvements. All tenant improvement work for
Leases in effect as of the Effective date shall have been completed and shall
be paid in full by the date of Closing.

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(l) Documents. The documents Seller shall make available
to Purchaser pursuant to Section 3.1 of this Agreement shall be true and
complete in all material respects.

(m) Tenant Inducements. All free rent periods moving
expense reimbursements, tenant improvement allowances and similar tenant
inducements for the current Leases will have expired by the date of Closing.

5.2 Knowledge Defined. References to the "knowledge" of Seller
shall refer only to the actual knowledge of the Designated Employees (as
hereinafter defined) of Lend Lease Real Estate Investments, Inc. ("Lend
Lease"), the manager of this asset for Seller, and shall not be construed, by
imputation or otherwise, to refer to the knowledge of Seller, Lend Lease or any
affiliate of either of them, to any property manager, or to any other officer,
agent, manager, representative or employee of Seller or Lend Lease or any
affiliate thereof or to impose upon such Designated Employees any duty to
investigate the matter to which such actual knowledge, or the absence thereof,
pertains. As used herein, the term "Designated Employees" shall refer to David
Denney and Mark Hillis. Mark Hillis has been assistant portfolio manager of the
Property for approximately the last eighteen (18) months.

5.3 Survival of Seller's Representations and Warranties.

(a) Except as otherwise provided in subsection (b)
below, the representations and warranties of Seller set forth in Section 5.1 as
updated by the certificate of Seller to be delivered to Purchaser at Closing in
accordance with Section 4.2(g) hereof, shall survive Closing for a period of
six (6) months. No claim for a breach of any representation or warranty of
Seller shall be actionable or payable (a) if the breach in question results
from or is based on a condition, state of facts or other matter of which
Purchaser had actual written knowledge prior to Closing, (b) unless the valid
claims for all such breaches collectively aggregate more than Fifty Thousand
Dollars ($50,000), in which event the full amount of such claims shall be
actionable, and (c) unless written notice containing a description of the
specific nature of such breach shall have been given by Purchaser to Seller
prior to the expiration of said six (6) month period and an action shall have
been commenced by Purchaser against Seller within thirty (30) days after the
termination of the six (6) month survival period provided for above in this
Section 5.3. Purchaser agrees to first seek recovery under any insurance
policies, service contracts and Leases prior to seeking recovery from Seller,
and Seller shall not be liable to Purchaser if Purchaser's claim is satisfied
from such insurance policies, service contracts or Leases. As used herein, the
term "Cap" shall mean the total aggregate amount of Five Hundred Thousand
Dollars ($500,000). In no event shall Seller's aggregate liability to Purchaser
for breach of any representation or warranty of Seller in this Agreement, the
certificate to be delivered by Seller at Closing pursuant to Section 4.2(g)
hereof and for any other claim, cause of action, or liability of any kind,
arising out of or relating directly or indirectly to this Agreement (whether in
contract, tort or otherwise) exceed the amount of the Cap. If Purchaser has to
commence litigation to

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collect any sums under this Section 5.3(a), Purchaser shall also be entitled to
collect its reasonable attorney fees and court costs if Purchaser prevails in
such litigation.

(b) Notwithstanding any provision to the contrary set
forth in this Agreement, the warranties and representations of Seller set forth
in Sections 5.1(c) with respect to Leases for which a Tenant Estoppel is
delivered pursuant to Section 5.4(b) and in Sections 5.1(e) and (g) above (all
herein called the "Non-Surviving Warranties") shall not survive Closing. If
Purchaser determines or should reasonably have determined that any of the
surviving warranties or any of the Non-Surviving Warranties are breached prior
to the Closing, Purchaser's sole right and remedy shall be to terminate this
Agreement by giving to Seller written notice of such termination within ten
(10) days after Purchaser has actual written knowledge of the breach of such
warranty. If Purchaser fails to give such written termination notice to Seller
within such time period, Purchaser shall be deemed to have waived any right or
remedy (including, without limitation, any right under this Agreement to
terminate this Agreement) against Seller by reason of the breach of such
warranty. Purchaser shall, prior to the Closing, make its own independent
investigation and determination as to the truth and accuracy of the
Non-Surviving Warranties. If Purchaser shall complete Closing under this
Agreement, Purchaser shall be deemed to have conclusively determined that the
Non-Surviving Warranties are true and correct, and Purchaser shall be deemed to
have waived any claim against Seller by reason of a breach of any of the
Non-Surviving Warranties.

5.4 Covenants of Seller. Seller hereby covenants with Purchaser
as follows:

(a) From the Effective Date hereof until the Closing or
earlier termination of this Agreement, Seller shall use reasonable efforts to
operate and maintain the Property in a manner generally consistent with the
manner in which Seller has operated and maintained the Property prior to the
date hereof. Purchaser shall accept the Property at the time of Closing in the
same condition as the same are as of the date of this Agreement, as such
condition shall have changed by reason of normal wear and tear. Notwithstanding
that Seller has no obligation to make any structural repairs or any
replacements required by reason of wear and tear, Seller may, at its option,
make any such structural repairs and any replacements prior to the Closing if
Seller believes such structural repairs and any replacements are necessary to
comply with its obligations under one or more of the Leases, or legally
required to protect the Property, but Seller shall first give written notice
thereof to Purchaser specifying the nature of the work, the cost and the
contractor and obtain Purchaser's prompt approval thereof or Purchaser's
approval with such changes as Purchaser deems necessary. The reasonable cost of
such structural repairs and any replacements shall be added to the Purchase
Price and shall be payable by Purchaser to Seller at Closing. Seller shall
continue, at Seller's expense, through Closing making any repairs normally made
in the ordinary course of business.

(b) Seller shall use reasonable efforts (but without
obligation to incur any cost or expense) to obtain and deliver to Purchaser
prior to Closing, a written estoppel certificate in

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the form of Exhibit E attached hereto or any similar form required by
Purchaser's lender and made a part hereof signed by each tenant occupying space
in the Improvements. The signed certificates are referred to herein as the
"Tenant Estoppels". Notwithstanding the foregoing, Purchaser may terminate this
Agreement and have the Earnest Money returned if Seller fails to deliver to
Purchaser by Closing Tenant Estoppels from (i) Bon Ton Department Stores, CVS
Pharmacy, Redner's and First Union Bank (collectively, "Major Tenants") and
(ii) one-half in number of the other tenants of the Improvements. Purchaser
agrees not to object to (i) any non-material (as determined in Purchaser's
reasonable judgment) qualifications or modifications which a tenant may make to
the form of Tenant Estoppel and (ii) any modification to a tenant estoppel to
conform the Tenant Estoppel to the form of tenant estoppel certificate the
tenant is required to give under its lease and (iii) a statement by tenant that
it is made to the tenant's knowledge. Purchaser's obligations under this
Agreement to complete Closing and pay the Purchase Price shall not be relieved
if Seller is unable to obtain any Tenant Estoppel required to be delivered for
non-major tenants after using its reasonable efforts to obtain it if Seller
instead, at Seller's sole option, executes a Tenant Estoppel for such required
non-major tenant. If any such tenant does have a claim which would entitle it
to set-off the amount of the claim against rent due under the lease and the
amount of such claim is ascertainable, Seller shall have the right, at its sole
option, to give Purchaser a credit against the cash portion of the Purchase
Price in the amount of the claim; and, in such event, Purchaser shall complete
Closing and take subject to such claim. If Seller has delivered a Seller Tenant
Estoppel to Purchaser for one or more required non-major tenants and within
ninety (90) days following Closing, Seller or Purchaser receives an acceptable
Tenant Estoppel from any such tenant, then the Landlord's Tenant Estoppel for
such required non-major tenant shall be deemed null and void. Seller agrees to
send Subordination Non-Disturbance and Attornment Agreements to all the tenants
required by Purchaser's lender, but Seller shall not be responsible for the
tenants execution of them and their execution shall not be a condition of
Closing.

(c) A copy of any renewal or expansion of an existing
Lease or of any new Lease which Seller wishes to execute between the Effective
Date and the date of Closing will be submitted to Purchaser prior to execution
by Seller. Purchaser agrees to notify Seller in writing within five (5)
business days after its receipt thereof of either its approval or disapproval,
including all Tenant Inducement Costs and leasing commissions to be incurred in
connection therewith. In the event Purchaser informs Seller that Purchaser does
not approve the renewal or expansion of the existing Lease or the new Lease,
which approval shall not be unreasonably withheld or conditioned, Seller shall
have the option to cancel this Agreement by written notice thereof to Purchaser
within five (5) business days after Seller's receipt of written notice of
Purchaser's disapproval thereof, and upon refund and payment of the Earnest
Money to Purchaser, neither party shall have any further liability or
obligation hereunder. Purchaser has the right to void Seller's termination by
agreeing to approve the lease or amendment in question within three (3) days of
Seller's Notice of Termination. In the event Purchaser fails to notify Seller
in writing of its approval or disapproval within the five (5) day time period
for such purpose set forth above, such failure shall be deemed the approval by
Purchaser. At Closing,

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<PAGE> 21

Purchaser shall reimburse Seller for any Tenant Inducement Costs, leasing
commissions or other expenses, including legal fees, incurred by Seller
pursuant to a renewal, an expansion or a new Lease approved (or deemed
approved) by Purchaser.

5.5 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller:

(a) Purchaser is not acquiring the Property with the
assets of an employee benefit plan as defined in Section 3(3) of ERISA.

(b) Purchaser has the full right, power and authority to
purchase the Property as provided in this Agreement and to carry out
Purchaser's obligations hereunder, and all requisite action necessary to
authorize Purchaser to enter into this Agreement and to carry out its
obligations hereunder have been, or by the Closing will have been, taken. The
person signing this Agreement on behalf of Purchaser is authorized to do so.

(c) There is no action, suit, arbitration, unsatisfied
order or judgment, government investigation or proceeding pending against
Purchaser which, if adversely determined, could individually or in the
aggregate materially interfere with the consummation of the transaction
contemplated by this Agreement.

5.6 Survival of Purchaser's Representations and Warranties. The
representation and warranties of Purchaser set forth in Section 5.5(a) shall
survive Closing and shall be a continuing representation and warranty without
limitation. All other representations and warranties of Purchaser shall survive
Closing for a period of 180 days.

5.7 Covenants of Purchaser. Purchaser hereby covenants with
Seller that Purchaser shall, in connection with its investigation of the
Property during the Inspection Period, inspect the Property for the presence of
Hazardous Substances (as defined in Section 5. 1 (i) hereof), and shall furnish
to Seller copies of any reports received by Purchaser in connection with any
such inspection. Purchaser hereby assumes full responsibility for such
inspections and, except for claims based on representations or warranties
contained in Section 5.1(i), irrevocably waives any claim against Seller
arising from the presence of Hazardous Substances on the Property. Purchaser
shall also furnish to Seller copies of any other reports received by Purchaser
relating to any other inspections of the Property conducted on Purchaser's
behalf, if any (including, specifically, without limitation, any reports
analyzing compliance of the Property with the provisions of the Americans with
Disabilities Act ("ADA"), 42 U.S.C. SS.12101, et seq., if applicable).

5.8 Purchaser Assumption. Purchaser shall be responsible to
comply with any notices concerning the existence of an uncorrected violation of
law issued by any public authority after the date of this Agreement (including
any fines, interest or penalties thereon due to non-

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<PAGE> 22

compliance therewith), and Purchaser shall indemnify, defend and exonerate and
save Seller harmless from any claims therefor or any liability, loss, cost or
expense arising therefrom, and, if such compliance must occur prior to the date
of Closing to protect the Property, or to prevent the imposition of any fine or
penalty, Seller may effect such compliance, and the reasonable cost thereof
shall be deemed added to the Purchase Price and paid at Closing. Purchaser
shall also be responsible for payment of any municipal assessment against the
Property which is levied after the date of this Agreement. Purchaser shall have
the same obligations to Seller with respect to any such violation notice or
municipal assessment made after the date of Closing to the extent that the
assessing entity claims that Seller shall have personal liability.
Notwithstanding the foregoing, if the cost (as determined by an engineer
selected by Seller and reasonably satisfactory to Purchaser) to correct
violations of law issued after the date of this Agreement but prior to Closing
would exceed $25,000, Purchaser shall have the right to terminate this
Agreement by giving written notice thereof to Seller within five (5) days after
Purchaser learns of such violations unless Seller agrees, within five (5) days
after Seller's receipt of Purchaser's termination notice, to pay the cost in
excess of $25,000. Purchaser agrees not to directly or indirectly request any
governmental official to perform an inspection of the Property or to issue
violation notices, but Purchaser may request during the Inspection Period a
governmental official to disclose whether that official's records include any
existing violation notices.

ARTICLE VI

DEFAULT

6.1 Default by Purchaser. If Purchaser defaults under this
Agreement, Seller, as its sold remedy, shall have the right to terminate this
Agreement and receive and retain the Earnest Money hereunder.

6.2 Default by Seller. In the event that Seller fails to
consummate obligations this Agreement for any reason other than Purchaser's
default or the permitted termination of this Agreement by Seller or Purchaser
as herein expressly provided, Purchaser shall be entitled, as its sole remedy,
either (a) to receive the return of the Earnest Money, which return shall
operate to terminate this Agreement and release Seller from any and all
liability hereunder, or (b) to enforce specific performance of Seller's
obligation to execute the documents required to convey the Property to
Purchaser, it being understood and agreed that the remedy of specific
performance shall not be available to enforce any other obligation of Seller
hereunder. Except as set forth in this Section to the contrary, Purchaser
expressly waives its rights to seek damages in the event of Seller's default
hereunder. Purchaser shall be deemed to have elected to terminate this
Agreement and receive back the Earnest Money if Purchaser fails to file suit
for specific performance against Seller in a court having jurisdiction in the
county and state in which the Property is located, on or before fifteen (15)
days following the date upon which Closing was to have occurred.

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<PAGE> 23

ARTICLE VII

RISK OF LOSS

7.1 Minor Damage. In the event of loss or damage to the Property
or any portion thereof which is not "major" (as hereinafter defined), this
Agreement shall remain in full force and effect provided Seller performs any
necessary repairs or, at Seller's option, assigns to Purchaser all of Seller's
right, title and interest to any claims and proceeds Seller may have with
respect to any casualty insurance policies or condemnation awards relating to
the premises in question. In the event that Seller elects to perform repairs
upon the Property, Seller shall use reasonable efforts to complete such repairs
promptly and the date of Closing shall be extended a reasonable time in order
to allow for the completion of such repairs not to exceed sixty (60) days,
provided said extension does not cause Purchaser's financing to lapse or the
rate of said financing to increase. If Seller elects to assign a casualty claim
to Purchaser, the Purchase Price shall be reduced by an amount equal to the
deductible amount under Seller's insurance policy. Upon Closing, full risk of
loss with respect to the Property shall pass to Purchaser.

7.2 Major Damage. In the event of a "major" loss or damage,
either Seller or Purchaser may terminate this Agreement by written notice to
the other party, in which event the Earnest Money shall be returned to
Purchaser. If neither Seller nor Purchaser elects to terminate this Agreement
within ten (10) days after Seller sends Purchaser written notice of the
occurrence of major loss or damage, then Seller and Purchaser shall be deemed
to have elected to proceed with Closing, in which event Seller shall, at
Seller's option, either (a) perform any necessary repairs, or (b) assign to
Purchaser all of Seller's right, title and interest to any claims and proceeds
Seller may have with respect to any casualty insurance policies or condemnation
awards relating to the premises in question. In the event that Seller elects to
perform repairs upon the Property, Seller shall use reasonable efforts to
complete such repairs promptly and the date of Closing shall be extended a
reasonable time in order to allow for the completion of such repairs not to
exceed sixty (60) days, provided said extension does not cause Purchaser's
financing to lapse or the rate of said financing to increase. If Seller elects
to assign a casualty claim to Purchaser, the Purchase Price shall be reduced by
an amount equal to the deductible amount under Seller's insurance policy. Upon
Closing, full risk of loss with respect to the Property shall pass to
Purchaser.

7.3 Definition of "Major" Loss or Damage. For purposes of
Sections 7.1 and 7.2, "major" loss or damage refers to the following: (i) loss
or damage to the Property or any portion thereof such that the cost of
repairing or restoring the premises in question to a condition substantially
identical to that of the premises in question prior to the event of damage
would be, in the opinion of an architect selected by Seller and reasonably
approved by Purchaser, equal to or greater than Two Hundred Fifty Thousand
Dollars ($250,000.00), and (ii) any loss due to a condemnation which
permanently and materially impairs the current use of the Property. If

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<PAGE> 24

Purchaser does not give notice to Seller of Purchaser's reasons for
disapproving an architect within five (5) business days after receipt of notice
of the proposed architect, Purchaser shall be deemed to have approved the
architect selected by Seller.

ARTICLE VIII

COMMISSIONS

8.1 Brokerage Commissions. In the event the transaction
contemplated by this Agreement is consummated, but not otherwise, Seller agrees
to pay to Landauer Associates, Inc. (the "Broker") at Closing a brokerage
commission pursuant to a separate written agreement between Seller and Broker.
Each party agrees that should any claim be made for brokerage commissions or
finder's fees by any broker or finder other than the Broker by, through or on
account of any acts of said party or its representatives, said party will
indemnify and hold the other party free and harmless from and against any and
all loss, liability, cost, damage and expense in connection therewith. The
provisions of this paragraph shall survive Closing or earlier termination of
this Agreement.

ARTICLE IX

DISCLAIMERS AND WAIVERS

9.1 No Reliance on Documents. Except as expressly stated herein,
Seller makes no representation or warranty as to the truth, accuracy or
completeness of any materials, data or information delivered by Seller to
Purchaser in connection with the transaction contemplated hereby. Purchaser
acknowledges and agrees that all materials, data and information delivered by
Seller to Purchaser in connection with the transaction contemplated hereby are
provided to Purchaser as a convenience only and that any reliance on or use of
such materials, data or information by Purchaser shall be at the sole risk of
Purchaser, except as otherwise expressly stated herein. Without limiting the
generality of the foregoing provisions, Purchaser acknowledges and agrees that
(a) any environmental or other report with respect to the Property which is
delivered by Seller to Purchaser shall be for general informational purposes
only, (b) Purchaser shall not have any right to rely on any such report
delivered by Seller to Purchaser, but rather will rely on its own inspections
and investigations of the Property and any reports commissioned by Purchaser
with respect thereto, and (c) neither Seller, any affiliate of Seller nor the
person or entity which prepared any such report delivered by Seller to
Purchaser shall have any liability to Purchaser for any inaccuracy in or
omission from any such report.

9.2 DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING

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<PAGE> 25

AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT
NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S
LIMITED WARRANTY OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX
CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES,
OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE
COMPLIANCE OF THE PROPERTY WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR
COMPLETENESS OF THE PROPERTY DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR
ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE
PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL
AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE
IS, WITH ALL FAULTS" EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS
AGREEMENT. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT,
PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR
BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR RELATING THERETO
(INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PROPERTY INFORMATION PACKAGES
DISTRIBUTED WITH RESPECT TO THE PROPERTY) MADE OR FURNISHED BY SELLER, THE
MANAGER OF THE PROPERTY, OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR
PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR
INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS
AGREEMENT. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL
CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT
NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER
DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND THE
EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY
HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE PROPERTY, AND WILL RELY
SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF
SELLER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE EXPRESSLY SET FORTH
IN THIS AGREEMENT. UPON CLOSING, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED
OTHERWISE IN THIS AGREEMENT, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE
MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE
PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S

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<PAGE> 26

INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED,
RELINQUISHED AND RELEASED SELLER (AND SELLER'S OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES,
DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT
COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER
MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER'S OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR
ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL
CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION,
ANY ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS,
CIRCUMSTANCES OR MATTERS REGARDING THE PROPERTY. PURCHASER AGREES THAT SHOULD
ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER
ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER THE DATE OF CLOSING,
SUCH CLEANUP, REMOVAL OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL
BE PERFORMED AT THE SOLE COST AND EXPENSE OF PURCHASER.

9.3 Effect and Survival of Disclaimers. Seller and Purchaser
acknowledge that the compensation to be paid to Seller for the Property has
been decreased to take into account that the Property is being sold subject to
the provisions of this Article IX. Seller and Purchaser agree that the
provisions of this Article IX shall survive Closing.

9.4 Representation by Counsel. Purchaser acknowledges that
Purchaser has been represented by independent legal counsel of Purchaser's
selection and Purchaser is granting the release set forth in Section 9.2 of its
own violation and after consultation with Purchaser's counsel.

ARTICLE X

MISCELLANEOUS

10.1 Confidentiality. Purchase and its representatives shall hold
in strictest confidence all data and information obtained with respect to
Seller or its business, whether obtained before or after the execution and
delivery of this Agreement, and shall not disclose the same to others;
provided, however, that it is understood and agreed that Purchaser may disclose
such data and information to the employees, consultants, accountants and
attorneys of Purchaser provided that such persons agree in writing to treat
such data and information confidentially. In the event this Agreement is
terminated or Purchaser fails to perform hereunder, Purchaser shall promptly

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<PAGE> 27

return to Seller any statements, documents, schedules, exhibits or other
written information obtained from Seller in connection with this Agreement or
the transaction contemplated herein. It is understood and agreed that, with
respect to any provision of this Agreement which refers to the termination of
this Agreement and the return of the Earnest Money to Purchaser, such Earnest
Money shall not be returned to Purchaser unless and until Purchaser has
fulfilled its obligations to return to Seller the materials described in the
preceding sentence. In the event of a breach or threatened breach by Purchaser
or its agents or representatives of this Section 10.1, Seller shall be entitled
to an injunction restraining Purchaser or its agents or representatives from
disclosing, in whole or in party, such confidential information. Nothing herein
shall be construed as prohibiting Seller from pursuing any other available
remedy at law or in equity for such breach of threatened breach. The provisions
of this Section 10.1 shall survive Closing.

10.2 Public Disclosure. Prior to Closing, any release to the
public of information with respect to the sale contemplated herein or any
matters set forth in this Agreement will be made only in the form approved by
Purchaser and Seller and their respective counsel.

10.3 Discharge of Obligations. The acceptance of the Deed by
Purchaser shall be deemed to be a full performance and discharge of every
representation and warranty made by Seller herein and every agreement and
obligation on the part of Seller to be performed pursuant to the provisions of
this Agreement, except those which are herein specifically stated to survive
Closing.

10.4 Assignment. Purchaser may not assign its rights under this
Agreement to anyone other than a Permitted Assignee (as hereinafter defined)
without first obtaining Seller's written approval which may be given or
withheld in Seller's sole discretion. Subject to the conditions set forth in
this Section 10.4, Purchaser may assign its rights under this Agreement to a
Permitted Assignee without the prior written consent of Seller. In the event
that Purchaser desires to assign its rights under this Agreement to a Permitted
Assignee, Purchaser shall sent written notice to Seller at least two (2)
business days prior to the effective date of such assignment stating the name
and, if applicable, the constituent persons or entities of the Permitted
Assignee. Such assignment shall not become effective until such Permitted
Assignee executes an instrument reasonably satisfactory to Seller in form and
substance whereby the Permitted Assignee expressly assumes each of the
obligations of Purchaser under this Agreement, including specifically, without
limitation, all obligations concerning the Earnest Money. No assignment shall
release or otherwise receive Purchaser from any obligations hereunder. For
purposes of this Section 10.4 the term "Permitted Assignee" shall mean (a) a
corporation in which Purchaser owns or controls a majority of the stock
entitled to vote for directors, (b) a general partnership in which Purchaser is
a general partner owning a majority of the total partnership interests therein,
(c) a limited partnership in which Purchaser is the sole general partner, or
(d) a limited partnership of which Purchaser or a principal of Purchaser or any
parent,

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<PAGE> 28

affiliate or any wholly owned subsidiary of Purchaser is a general partner or
to a limited liability company of which Purchaser or any principal of Purchaser
or any parent, affiliate or any wholly owned subsidiary of Purchaser is a
managing member. Notwithstanding anything to the contrary contained herein,
Purchaser shall not have the right to assign this Agreement to any assignee
which, in the reasonable judgment of Seller, will cause the transaction
contemplated hereby or any party thereto to violate the requirement of ERISA.
In order to enable Seller to make such determination, Purchaser shall cause to
be delivered to Seller such information as is requested by Seller with respect
to a proposed assignee and the constituent persons or entities of any proposed
assignee, including specifically, without limitation, any pension or
profit-sharing plans related thereto.

10.5 Notices. Any notice pursuant to this Agreement shall be given
in writing by (a) personal delivery, or (b) reputable overnight delivery
service with proof of delivery, or (c) United States Mail, postage prepaid,
registered or certified mail, return receipt requested, or (d) legible
facsimile transmission sent to the intended addressee at the address set forth
below, or to such other address or to the attention of such other person as the
addressee shall have designated by written notice sent in accordance herewith,
and shall be deemed to have been given either at the time of personal delivery,
or, in the case of expedited delivery service or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or, in the
case of facsimile transmission, as of the date of the facsimile transmission
provided that an original of such facsimile is also sent to the intended
addressee by means described in clauses (a), (b) or (c) above. Unless changed
in accordance with the preceding sentence, the addresses for notices given
pursuant to this Agreement shall be as follows:

If to Seller:

The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, NY 10104
Attention: Law Department - Real Estate
Telecopy: 212-707-7977

with a copies to:

Lend Lease Real Estate Investments, Inc.
Monarch Tower
3424 Peachtree Road, N.E.
Suite 800
Atlanta, GA 30326
Attention: Mark Hillis
Telecopy: 404-848-8902

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<PAGE> 29

Lend Lease Real Estate Investments, Inc.
5775 Peachtree Dunwoody Road
Suite 2000
Atlanta, GA 30342
Attention: David Denney
Telecopy: 404-705-5840

AND

Wolf, Block, Schorr and Solis-Cohen LLP
12th Floor Packard Building
Philadelphia, PA 19102
Attention: James S. Burns
Telecopy: 215-977-2346

If to Purchaser:

Weingarten Properties, Inc.
One Wynnewood Road, Suite 200
Wynnewood, PA 19096
Attn: Bryan S. Weingarten
Telecopy: (610) 896-9681

with a copy to:

Weingarten Properties, Inc.
One Wynnewood Road, Suite 200
Wynnewood, PA 19096
Attn: Jerry Rosenberg, General Counsel
Telecopy: (610) 896-9681

10.6 Binding Effect. This Agreement shall not be binding in any
way upon Seller unless and until (a) Seller shall execute and deliver the same
to Purchaser, (b) each stage of Seller's investment approval process has
approved this transaction, and (c) Seller's Investment Committee has thereafter
given its written approval thereof. If Seller has not given Purchaser written
notice (the "Approval Notice") of such approvals on or before December 9, 1998
(the "Approval Deadline"), or if prior to the Approval Deadline Seller notifies
Purchaser in writing that this Agreement has been disapproved by the persons or
entities referred to in clauses (b) or (c) of the preceding sentence, then this
Agreement shall be deemed terminated and Purchaser shall be entitled to the
return of the Earnest Money. It is understood and agreed that at each stage

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<PAGE> 30

of Seller's investment approval process, Seller or its investment advisor, Lend
Lease, shall each have the right, in its unfettered discretion, to disapprove
the transaction contemplated by this Agreement for any reason whatsoever,
without obligation thereafter to proceed to the next stage of Seller's
investment approval process. Seller's approval of this Agreement shall be
evidenced only by both Seller's execution of this Agreement and Seller's
sending of the Approval Notice to Purchaser prior to the Approval Deadline and,
accordingly, Purchaser acknowledges and agrees that Purchaser cannot and will
not rely upon any other statement or action of Seller or its representatives as
evidence of Seller's approval of this Agreement or the subject matter hereof.

10.7 Modifications. This Agreement cannot be changed orally, and
no executory agreement shall be effective to waive, change, modify or discharge
it in whole or in part unless such executory agreement is in writing and is
signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.

10.8 Tenant Notification Letters. Purchaser shall deliver to each
and every tenant of the Property under a Lease thereof a signed statement
acknowledging Purchaser's receipt and responsibility for each tenant's security
deposit (to the extent delivered by Seller to Purchaser at Closing), if any,
all in compliance with and pursuant to the applicable provisions of applicable
law. The provisions of this paragraph shall survive Closing.

10.9 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described in this Agreement, the day of the act or
event after which the designated period of time begins to run is not to be
included and the last day of the period so computed is to be included, unless
such last day is a Saturday, Sunday or legal holiday under the laws of the
State in which the Property is located, in which event the period shall run
until the end of the next day which is neither a Saturday, Sunday or legal
holiday. The final day of any such period shall be deemed to end at 5 p.m.,
local time.

10.10 Successors and Assigns. The terms and provisions of this
Agreement are to apply to and bind the permitted successors and assigns of the
parties hereto.

10.11 Entire Agreement. This Agreement, including the Exhibits,
contains the entire agreement between the parties pertaining to the subject
matter hereof and fully supersedes all prior written or oral agreements and
understandings between the parties pertaining to such subject matter.

10.12 Further Assurances. Each party agrees that it will without
further consideration execute and deliver such other documents and take such
other action, whether prior or subsequent to Closing, as may be reasonably
requested by the other party to consummate more effectively the purposes or
subject matter of this Agreement. Without limiting the generality of the
foregoing, Purchaser shall, if requested by Seller, execute acknowledgments of
receipt with

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<PAGE> 31

respect to any materials delivered by Seller to Purchaser with respect to the
Property. The provisions of this Section 10. 12 shall survive Closing.

10.13 Counterparts. This Agreement may be executed in counterparts,
and all such executed counterparts shall constitute the same agreement. It
shall be necessary to account for only one such counterpart in proving this
Agreement.

10.14 Severability. If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Agreement shall nonetheless remain in full force and
effect.

10.15 Applicable Law. This Agreement is performable in the state in
which the Property is located and shall in all respects be governed by, and
construed in accordance with, the substantive federal laws of the United States
and the laws of such state. Seller and Purchaser hereby irrevocably submit to
the jurisdiction of any state or federal court sitting in the state in which
the Property is located in any action or proceeding arising out of or relating
to this Agreement and hereby irrevocably agree that all claims in respect of
such action or proceeding shall be heard and determined in a state or federal
court sitting in the state in which the Property is located. Purchaser and
Seller agree that the provisions of this section 10. 15 shall survive the
Closing of the transaction contemplated by this Agreement.

10.16 No Third Party Beneficiary. The provisions of this Agreement
and of the documents to be executed and delivered at Closing are and will be
for the benefit of Seller and Purchaser only and are not for the benefit of any
third party, and accordingly, no third party shall have the right to enforce
the provisions of this Agreement or of the documents to be executed and
delivered at Closing.

10.17 Exhibits and Schedules. The following schedules or exhibits
attached hereto shall be deemed to be an integral part of this Agreement:

<TABLE>

<S> <C> <C>
(a) Exhibit A Legal Description of the Land
(b) Exhibit B Personal Property
(c) Exhibit C Lease Schedule
(d) Exhibit D Operating Agreements Schedule
(e) Exhibit E Tenant Estoppel Form
(f) Schedule 4.2(a) Deed
(g) Schedule 4.2(b) Bill of Sale
(h) Schedule 4.2(c) Assignment of Leases and Contracts
(i) Schedule 4.2(f) Tenant Notice
(j) Schedule 4.2(i) FIRPTA Affidavit
(k) Schedule 4.2(c) ERISA Statement
</TABLE>

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<PAGE> 32

10.18 Captions. The section headings appearing in this Agreement
are for convenience of reference only and are not intended, to any extent and
for any purpose, to limit or define the text of any section or any subsection
hereof.

10.19 Construction. The parties acknowledge that the parties and
their counsel have reviewed and revised this Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement or any exhibits or amendments hereto.

10.20 Termination of Agreement. It is understood and agreed that if
either Purchaser or Seller terminates this Agreement pursuant to a right of
termination granted hereunder, such termination shall operate to relieve Seller
and Purchaser from all obligations under this Agreement, except for such
obligations as are specifically stated herein to survive the termination of
this Agreement.

10.21 Survival. The provisions of this Article 10 and of the
following Sections of this Agreement shall survive Closing or any termination
of this Agreement prior thereto and shall not be merged into the execution and
delivery of the Deed: 3. 1; 4.2(j); 4.4; 5.3; 5.6; 8.1, 9.3, 10.1, 10.8, 10.12
and 10.5 The foregoing is in addition to and not in exclusion of any survival
provisions elsewhere set forth in this Agreement.

10.22 No Recordation. Neither this Agreement nor any memorandum of
the terms hereof shall be recorded or otherwise placed of public record and any
breach of this covenant shall, unless the party not placing same of record is
otherwise in default hereunder, entitle the party not placing same of record to
pursue its rights and remedies under Article VI.

10.23 Limited Liability. The obligations of Seller arising by
virtue of this Agreement shall be limited to the interest of Seller in the
Property and the proceeds of any sale or other transfer of Seller's interest in
the Property and resort shall not be held to any other assets of Seller.

10.24 Waiver of Tender of Deed and Purchase Monies. The tender of
an executed Deed by Seller and the tender by Purchaser of the portion of the
Purchase Price payable at Closing are hereby mutually waived except as
otherwise provided in Sections 4.2 and 4.3; provided, however, nothing herein
contained shall be construed as a waiver of Seller's obligation to deliver the
Deed and/or of the concurrent obligation of Purchaser to pay the Purchase Price
payable at closing.

10.25 Effective Date. The Effective Date shall be the date this
Agreement has been executed by both Purchaser and Seller.

31-
<PAGE> 33

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.

SELLER:

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By: /s/ J. Mark Hills
-------------------------------
Name: J. Mark Hills
Title: Vice President

PURCHASER:

Weingarten Properties, Inc.

By: /s/ Bryan S. Weingarten
-------------------------------------
Name: Bryan S. Weingarten
Title: President

32-

<PAGE> 34
ATTACHED TO AND FORMING A PART OF TITLE INSURANCE COMMITMENT
Order No.: D214690MA
DAL98-012075

SCHEDULE C

DESCRIPTION and RECITAL

ALL THOSE CERTAIN premises located in Richland Township, Bucks County,
Pennsylvania as surveyed by Hopkins and Scott, Inc., Registered Surveyors, more
fully described as follows, to wit:

BEGINNING at a point on the center line of the West End Boulevard (PA L.R.
#153-Section 22, U.S. Rt. #309, width varies), said point being the
Southwesterly corner of the herein described lands and the Northwesterly right
of way line of "Quakers Way"; thence from said beginning point and being along
the center line of the West End Boulevard North Seventeen degrees, Six minutes,
Fifty-eight seconds West, One Thousand Two Hundred Twenty-four and Twelve
One-hundredths feet to a point, having crossed over Beaver Run, said point
being a corner of lands of Quakertown East, Inc.; thence leaving the West End
Boulevard and being along lands of Quakertown East, Inc., re-crossing Beaver
Run, North Seventy-eight degrees, Fifty-six minutes, Six seconds East, Eight
Hundred Fifty-four and Thirty-one One-hundredths feet to an iron pin, a corner
of lands of Quakertown East, Inc. and Quakers Green; thence along lands of
Quakers Green South Five degrees Fifty minutes Twenty seconds East, One
Thousand Ninety-nine and Three One-hundredths feet to an iron pin, an angle
point; thence still along lands of Quakers Green South Two degrees, Nine
minutes, Twenty-eight seconds East, Sixty and Eight-one One-hundredths feet to
an iron pin on the Northerly side line of proposed Quakers Way (Sixty feet
wide); thence being partly along the Northerly side line of proposed Quakers
Way South Seventy-three degrees, Seven minutes, Two seconds West, Six Hundred
Eighteen and Ninety Three One-hundredths feet to the first mentioned point and
place of beginning.

BEING: Richland Mall, Richland Township, Bucks County, PA.

BEING COUNTY PARCEL NO. 36-17-23

BEING the same premises which Richland Mall Associates, a Pa. Limited
Partnership by Deed dated 7/19/1988 and recorded in Bucks County, in Deed Book
2029 page 743 conveyed unto E.M.L. Associates, a N.Y. General Partnership, in
fee.

<PAGE> 35
RICHLAND MALL

Equipment List

4 2-way radios & chargers. Motorola Radius SP50
3 Inside trash cans
3 Outside trash cans
2 Trash bins
6 Ladders various sizes
12 50lb boxes of salt
1 Line painting machine with paint & stencils
2 Flat bed carts
1 Large trailer shed
1 Lawn tractor with plow & mower attachments
1 Snow blower
1 Push mower
1 Box 48" light bulbs
12 1,000 watt parking lot lights
1 150 watt high hat lights
3 Ballast for parking lot lights
1 Electric hedge trimmer
1 Weed wacker
1 Leaf blower
1 Fire proof paint cabinet
1 Work bench
1 Floor machine with 5 gallon floor stripper
1 Marquee pole with letters
1 Tool box
</TABLE>

Other miscellaneous hand tools and office equipment (each item is approximately
valued under $100).

EXHIBIT "A"
<PAGE> 36
PRIME PROPERTY FUND
RICHLAND MALL
QUAKERTOWN, PA

SCHEDULE OF LEASES
As of October 29, 1998

1. BON-TON DEPARTMENT STORES, INC.

(a) Landlord's Waiver and Consent dated March 31, 1997 by and among EML
Associates ("Landlord"), The Bon-Ton Department Stores, Inc.
("Company") and General Electric Capital Corporation ("Agent").
(b) Lease dated December 9, 1975 between Richland Mall Associates
("Lessor") and Hess's, Inc. ("Lessee").
(b) Amendment Agreement dated November 21, 1977 between Richland Mall
Associates ("Lessor") and Hess's, Inc. ("Lessee").
(c) Modification of Lease Agreement dated June 30, 1978 between Richland
Mall Associates ("Lessor") and Hess's, Inc. ("Lessee").
(d) Estoppel Certificate dated September 23, 1994 from EML Associates,
consented to by Hess's Department Stores, Inc. and joined by The
Bon-Ton Stores, Inc.
(e) Assignment and Assumption of Lease dated September 30, 1994 between
Hess's Department Stores, Inc. and The Bon-Ton Stores, Inc.

2. CVS

(a) Lease dated March 27, 1997 between EML Associates ("Landlord") and
Quakertown CVP, Inc. ("Tenant").
(b) Guaranty dated March 27, 1997 from CVS Corporation ("Guarantor) to EML
Associates ("Landlord").

3. CORESTATES BANK

(a) Lease dated November 10, 1975 between Montgomery Development Company
("Agent") for Richland Mall Associates ("Landlord") and First National
Bank ("Tenant").

(b) Merger of CoreStates Bank and First Union National Bank effective
April 28, 1998.

4. FOOTLOCKER

(a) Lease dated June 29, 1990 between EML Associates ("Landlord") and
Kinney Shoe Corporation d/b/a Footlocker ("Tenant").

5. LARMON PHOTO

(a) Lease dated July 9, 1991 between EML Associates ("Landlord") and
Larmon Photo, Inc. d/b/a/ Larmon Photo ("Tenant").

(b) Letter Amendment dated January 15, 1996 between EML Associates
("Landlord") and Larmon Photo ("Tenant").

6. PEARLE VISION, INC.

(a) Lease dated December 13, 1991 between EML Associates ("Landlord") and
Pearle Vision, Inc. d/b/a Pearl Vision Center ("Tenant").

7. RADIO SHACK

(a) Lease dated February 18, 1997 between EML Associates ("Landlord")
and Tandy Corporation d/b/a/ Radio Shack ("Tenant").

8. REDNER'S MARKET

(a) Lease dated November 1, 1996 between EML Associates ("Landlord") and
Redner's Markets, Inc. d/b/a Redner's Market ("Tenant").

EXHIBIT "B"
<PAGE> 37
List of Service Contracts for Richland Mall

Blooming Glen Contractors (snow removal)
P.O. Box 55
Skippack, PA 19474
Phone (610) 584-2975
Fax (610) 584-5432
Contact: Stephen M. Nelson

American Building Maintenance Company
444 E. City Line Avenue
Bala Cynwyd, PA 19004
Contact: James Scranton

BudTel Associates (pay telephones)
10050 Roosevelt Boulevard
Suite 9 & 10
Philadelphia, PA 19116
Phone (215) 698-9900
Fax (215) 698-2851

SecurityLink (sprinkler monitoring)
111 Windsor Drive
Oak Brook, Illinois 60521-9670
Phone (717) 455-9414

EXHIBIT "C"
<PAGE> 38

Exhibit E

TENANT ESTOPPEL FORM

__________________, 199_

[PURCHASER]

Re: Lease dated ________________________________________________,199 _ (the
"Lease") executed between ___________________________________________
("Landlord"), and ("Tenant"), for those premises located at ___________________
__________________________________

Gentlemen:

The undersigned Tenant understands that you or your assigns intend to
acquire that property located at ___________________________ (the "Property")
from EML Associates ("Seller"). The undersigned Tenant does hereby certify to
you as follows:

A. The Lease consists only of the documents identified in Items
1 and 2 on Schedule A attached hereto ("Schedule A").

B. The Lease is in full force and effect and has not been
modified, supplemented, or amended as indicated in Item 2 on
Schedule A.

C. Tenant has not given Landlord written notice of any dispute
between Landlord and Tenant or that Tenant considers Landlord
in default under the Lease.

D. Tenant does not claim any offsets or credits against rents
payable under the Lease.

E. Tenant has not paid a security or other deposit with respect
to the Lease, except as shown on Item 3 of Schedule A.

F. Tenant has fully paid rent on account of the month of
_________, 199__; the current base rent under the Lease is
shown on Item 4 of Schedule A.

G. Tenant has not paid any rentals in advance except for the
current month of ______________________, 199_.

H. The term of the Lease will terminate on the date indicated in
Item 4 on Schedule A.

<PAGE> 39

I. Except as shown in Item 6 on Schedule A, Tenant has no
options to renew or extend the term of the Lease right of
first refusal or option to purchase the Property or any part
thereof .

This certificate may be relied upon by you, your mortgagee and Seller
in completing the sale of the Property.

Very truly yours,

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

By:
---------------------------------

Title:
------------------------------

2-
<PAGE> 40

Schedule A

1. Lease:

Landlord:
Tenant:
--------------------
Suite #:
--------------------
Date:
--------------------

2. Modifications and/or Amendments

(a) Date:
--------------------
(b) Date:
--------------------
(c) Date:
--------------------

3. Security Deposit
(currently held by
Landlord) $
-------------------

4. Monthly Base Rent
for current term
of Lease $
-------------------

5. Commencement Date:
--------------------
Termination Date
--------------------

6. Right of First refusal to Lease to Purchase
or option
----------- -------------
(if none, state "None")
If "yes", does such right or option still exist or has such right or
option been exercised or waived?

Still Exists Exercised Waived
----- ------ ------

3-
<PAGE> 41

Schedule 4.2(a)

SPECIAL WARRANTY DEED

COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF PHILADELPHIA :

KNOW ALL MEN BY THESE PRESENTS:

THAT EML ASSOCIATES a New York general partnership (hereinafter
referred to as "Grantor"), for and in consideration of the sum of ____________
Dollars ($_____________.00) and other good and valuable consideration to it in
hand paid by _________________________________________, a __________________
(hereinafter referred to as "Grantee"), whose mailing address
is___________________________, the receipt and sufficiency of which
consideration are hereby acknowledged, and upon and subject to the exceptions
hereinafter set forth on Exhibit B hereto, has GRANTED, BARGAINED, SOLD and
CONVEYED, and by these presents does hereby GRANT, BARGAIN, SELL and CONVEY,
unto Grantee all of the real property situated in ______________ County,
______________, described on Exhibit A attached hereto and made a part hereof
for all purposes, together with all and singular the rights, benefits,
privileges, easements, tenements, hereditaments and appurtenances thereon or in
any wise appertaining thereto, and together with all improvements located
thereon and any right, title and interest of Grantor in and to adjacent streets,
alleys and rights-of-way (said land, rights, benefits, privileges, easements,
tenements, hereditaments, appurtenances, improvements and interests being
hereinafter referred to as the "Property").

This conveyance is made subject and subordinate to those agreements,
easements, restrictions, encumbrances and other exceptions to title (the
"Permitted Exceptions") set forth on Exhibit B attached hereto and made a part
hereof.

TO HAVE AND TO HOLD the Property, subject to the Permitted Exceptions,
as aforesaid, unto Grantee, its successors and assigns, forever; and Grantor
does hereby bind itself and its successors, to WARRANT AND FOREVER DEFEND all
and singular the Property unto Grantee, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same, or any part
thereof, by, through or under Grantor, but not otherwise.

IN WITNESS WHEREOF, this Special Warranty Deed has been executed by
Grantor to

<PAGE> 42

be effective as of the ________ day of January, 1999.

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By:
---------------------------
Name:
Title:

<PAGE> 43

COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF PHILADELPHIA :

On the ___ day of January, 1999, before me, the subscriber, a Notary
Public in and for the State and County aforesaid, personally appeared _________
___________________, who acknowledge himself/herself to be a __________________
of EML Associates, a New York general partnership, and that he/she being
authorized to do so executed the foregoing instrument on behalf of such general
partnership for the purposes therein contained and desired that it may be
recorded.

WITNESS my hand and seal the day and year aforesaid.

------------------------------
Notary Public

My Commission Expires:

<PAGE> 44

EXCEPTIONS TO BE AGREED UPON PRIOR TO THE
EXPIRATION OF THE TITLE EXAM DEADLINE

EXHIBIT B

<PAGE> 45

Schedule 4.2(b)

BILL OF SALE AND ASSIGNMENT

THAT this BILL OF SALE AND ASSIGNMENT (this "Bill of Sale") is made
from EML ASSOCIATES, a New York general partnership ("Assignor") to ___________
__________________________,

RECITALS

A. Concurrently with the execution and delivery of this Bill of
Sale, Assignor is conveying to Assignee, by Special Warranty Deed (the "Deed")
that certain tract of land (the "Land") more particularly described on Exhibit
A attached hereto and made a part hereof for all purposes, together with the
improvements located thereon (the "Improvements").

B. Assignor desires to assign, transfer and convey to Assignee,
and Assignee desires to obtain the Assigned Properties (as hereafter defined),
subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the receipt of Ten and No/100
Dollars ($10.00) and other good and valuable consideration in hand paid by
Assignee to Assignor, the receipt and sufficiency of which are hereby
acknowledged by Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER, and
DELIVER to Assignee the following (collectively, the "Assigned Properties"):

(a) The personal property owned by Assignor upon the
Land or within the Improvements, including specifically, without limitation,
heating, ventilation and air conditioning systems and equipment, appliances,
furniture, carpeting, draperies and curtains, tools and supplies, and other
items of personal property (excluding cash) used in connection with the
operation of the Land and the Improvements (collectively, the "Personal
Property"); and

(b) All of Assignor's right, title and interest in and
to all assignable warranties and guaranties (express or implied) issued in
connection with the Improvements or the Personal Property (collectively, the
"Warranties"); provided, however, that Assignor makes no representation or
warranty with respect to the existence, availability or assignability of any
Warranties.

ASSIGNOR MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE IN RESPECT OF THE PERSONAL PROPERTY, AND THE SAME IS SOLD IN
"AS IS, WHERE IS" CONDITION, WITH ALL FAULTS. BY

<PAGE> 46

EXECUTION OF THIS BILL OF SALE, ASSIGNEE AFFIRMS THAT IT HAS NOT RELIED ON
ASSIGNOR'S SKILL OR JUDGMENT TO SELECT OR FURNISH THE PERSONAL PROPERTY FOR ANY
PARTICULAR PURPOSE, AND THAT ASSIGNOR MAKES NO WARRANTY THAT THE PERSONAL
PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE, AND THAT THE PERSONAL PROPERTY IS
BEING SOLD TO ASSIGNEE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS,
IMPLIED OR STATUTORY.

This Bill of Sale is made by Assignor and accepted by Assignee subject
to the "Permitted Exceptions" described in the Deed, to the extent that same
are validly existing and affect the Assigned Properties.

TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its
successors and assigns, forever, and Assignor does hereby bind itself and its
successors to WARRANT AND FOREVER DEFEND, all and singular, title to the
Assigned Properties unto Assignee, its successors and assigns, against every
person whomsoever lawfully claiming or to claim the same, or any part thereof
by, through or under Assignor, but not otherwise, subject to the Permitted
Exceptions described in the Deed.

EXECUTED to be effective as of the _____________ day of January, 1999.

ASSIGNOR:

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By:
---------------------------
Name:
Title:

ASSIGNEE:
-----------------------------,
a
----------------------------

By:
---------------------------
Name:
----------------------
Title:
---------------------

2-
<PAGE> 47

Schedule 4.2(c)

ASSIGNMENT AND ASSUMPTION OF CONTRACTS

THAT this ASSIGNMENT AND ASSUMPTION OF CONTRACTS (this "Assignment")
is made by and between EML ASSOCIATES, a New York general partnership
("Assignor"), and __________________________, a ______________________________,
("Assignee").

RECITALS

A. Concurrently with the execution and delivery of this
Assignment, Assignor is conveying to Assignee by Special Warranty Deed (the
"Deed") that certain tract of land (the "Land") more specifically described in
Exhibit A attached hereto and made a part hereof for all purposes, together
with the improvements located thereon (the "Improvements") and the personal
property owned by Assignor upon the Land or within the Improvements (the
"Personal Property").

B. Assignor desires to assign, transfer and convey to Assignee,
and Assignee desires to obtain, all of Assignor's right, title and interest in
and to the Contracts (as hereinafter defined), subject to the terms and
conditions set forth herein.

NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration to Assignor in hand
paid by Assignee, the receipt and sufficiency of which are hereby acknowledged,
Assignor does hereby SELL, ASSIGN, CONVEY, TRANSFER, SET-OVER and DELIVER unto
Assignee all of Assignor's right, title and interest in and to the following
(collectively, the "Contracts").

(a) all oral or written agreements pursuant to which any
portion of the Land or Improvements is used or occupied by anyone other than
Assignor (collectively, the "Leases"), all of such Leases being more
particularly described in Exhibit B attached hereto and made a part hereof; and

(b) the contracts and agreements Assignee has agreed to
assume relating to the upkeep, repair, maintenance or operation of the Land,
Improvements or Personal Property, including specifically, without limitation,
all service contracts, leasing commission agreements and assignable equipment
leases (collectively, the "Operating Agreements"), such Operating Agreements
being more fully described in Exhibit C attached hereto and made a part hereof;
provided, however, that Assignor makes no representation or warranty with
respect to the assignability of any of the Operating Agreements.

<PAGE> 48

This Assignment is made by Assignor and accepted by Assignee subject
to the "Permitted Exceptions" described in the Deed, to the extent that same
are validly existing and affect the Contracts.

By execution of this Assignment, Assignee assumes and agrees to
perform all of the covenants, agreements and obligations under the Contracts
listed on Exhibits B and C binding on Assignor or the Land, Improvements, or
Personal Property (such covenants, agreements and obligations being herein
collectively referred to as the "Contractual Obligations"), as such Contractual
Obligations shall arise or accrue from and after the date of this Assignment.
Without limiting the generality of the preceding sentence, Assignee
acknowledges the receipt of all security deposits described in the Leases and
agrees to apply same in accordance with the terms of the Leases. Assignee
hereby agrees to indemnify, hold harmless and defend Assignor from and against
any and all third party obligations, liabilities, costs and claims (including
reasonable attorney's fees) with respect to any of the Contractual Obligations
that arise or accrue after the date of this Assignment.

Assignor agrees to indemnify, hold harmless and defend Assignee from
and against any and all third party obligations, liabilities, costs and claims
(including reasonable attorney's fees) with respect to any of the Contractual
Obligations that arise or accrue prior to the date of this Assignment except as
otherwise provided in the Purchase and Sale Agreement dated November ___, 1998
between Assignor and Assignee ("Purchase Agreement").

ASSIGNEE ACKNOWLEDGES THAT IT HAS INSPECTED THE CONTRACTS AND THAT
THIS ASSIGNMENT IS MADE BY ASSIGNOR AND ACCEPTED BY ASSIGNEE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, AND
WITHOUT RECOURSE AGAINST ASSIGNOR, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN
THE PURCHASE AGREEMENT.

TO HAVE AND TO HOLD all and singular the Contracts unto Assignee, its
successors and assigns, and Assignor does hereby bind itself and its successors
to WARRANT AND FOREVER defend all and singular the Contracts unto Assignee, its
successors and assigns, against every person whomsoever lawfully claiming or
attempting to claim the same, or any part thereof, by, through or under
Assignor, but not otherwise, subject to the Permitted Exceptions described in
the Deed.

2-
<PAGE> 49

EXECUTED to be effective as of the __ day of January, 1999.

ASSIGNOR:

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By:
--------------------------
Name:
Title:

ASSIGNEE:

-----------------------------,
a
----------------------------

By:
---------------------------
Name:
-------------------------
Title:
------------------------

3-
<PAGE> 50

Schedule 4.2(f)

TENANT NOTIFICATION LETTER

January, 1999

[Name and Address of Tenant]

Re: Sale of Richland Mall

Gentlemen:

Please be advised that _____________________________________
("Purchaser") has purchased the captioned property, in which you occupy space
as a tenant pursuant to a lease dated ________________________________, 199_
(the "Lease), from EML ASSOCIATES ("EML"), the previous owner thereof. In
connection with such purchase, Equitable has assigned its interest as landlord
in the Lease to Purchaser and has transferred your security deposit in the
amount of $ ____________________ (the "Security Deposit") to Purchaser.
Purchaser specifically acknowledges the receipt of and responsibility for the
Security Deposit, the intent of Purchaser and EML being to relieve EML of any
liability for the return of the Security Deposit.

All rental and other payments that become due subsequent to
the date hereof should be payable to __________________________________________
and should be addressed as follows:

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

In addition, all notices from you to the landlord concerning
any matter relating to your tenancy should be sent to

<PAGE> 51

_____________________________________________________ at the address above.

Very truly yours,

[NAME OF PURCHASER]

By:
----------------------------------

Name:
--------------------------------
Title:
-------------------------------

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By:
--------------------------
Name:
Title:

2-
<PAGE> 52

Schedule 4.2(i)

FIRPTA AFFIDAVIT

COMMONWEALTH OF PENNSYLVANIA :
: SS.
COUNTY OF PHILADELPHIA :

KNOW ALL MEN BY THESE PRESENTS:

Section 1445 of the Internal Revenue Code provides that a transferee
of a U.S. real property interest must withhold tax if the transferor is a
foreign person. To inform
______________________________, a _______________________ ("Transferee"), that
withholding of tax is not required upon the disposition of a U.S. real property
interest by EML Associates ("Transferor"), the undersigned hereby certifies as
follows:

1. Transferor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);

2. Transferor's U.S. employer identification number is:
# ________________ ;

3. Transferor's office address is 1290 AVENUE OF THE AMERICAS,
NEW YORK, NEW YORK 10019.

Transferor understands that this certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury, the undersigned, in the capacity set forth
below, hereby declares that he has examined this certification and to the best
of his knowledge and belief it is true, correct, and complete, and the
undersigned further declares that he has authority to sign this document in
such capacity.

<PAGE> 53

EXECUTED effective as of the __________ day of January, 1999.

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP,
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By:
------------------------
Name:
Title:

SWORN TO AND SUBSCRIBED BEFORE ME this ______ day of January,
1999.

-------------------------------
Notary Public in and for the
Commonwealth of Pennsylvania

[Printed or Typed Name of Notary]

My Commission Expires:

2-
<PAGE> 54

Schedule 4.3(c)

ERISA STATEMENT

January ___, 1999

EML Associates
1290 Avenue of the Americas
New York, New York 10019

Re: Sale of Richland Mall, Quakertown, PA

Gentlemen:

In connection with the sale of the above captioned property
(the "Property") more particularly described on Exhibit A attached hereto by
EML Associates to _______________________, a _________________, the undersigned
hereby represents and certifies that it is not acquiring the Property with the
assets of an employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA").

Very truly yours,

----------------------------------
a
----------------

By:
-------------------------------

Name:
-----------------------------

Title:
----------------------------

<PAGE> 55
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

THIS AGREEMENT made this 23rd day of December, 1998, between EML ASSOCIATES,
a New York general partnership, as Seller, and WEINGARTEN PROPERTIES, INC., a
Pennsylvania corporation, as Purchaser.

BACKGROUND OF TRANSACTION

A. Seller and Purchaser entered into an Agreement of Purchase and Sale
dated as of November 19, 1998 ("Purchase Agreement").

B. Purchaser has requested an adjustment of the Purchase Price to
reflect certain deferred maintenance and other deficiencies Purchaser believes
to exist at the Property. Seller and Purchaser wish to amend certain provisions
of the Agreement of Sale as more specifically set forth below:

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows.

1. Adjustment of Purchase Price. The Purchase Price is hereby reduced
from $9,100,000 to $9,060,000.

2. Bon Ton Payment. If Closing is completed, Seller shall assign to
Purchaser the $45,000 payment of delinquent CAM Charges that Bon Ton Department
Stores is obligated to pay Seller pursuant to a proposed Lease Amendment No. 3
("Proposed Amendment") assuming the Proposed Amendment is approved by Seller,
Purchaser and Bon Ton Department Stores and executed. If Seller collects the
$45,000 Bon Ton payment prior to Closing, Seller will deliver that payment to
Purchaser at closing by a credit against the Purchase Price. If the proposed
Amendment is executed prior to Closing, Seller shall pay to Bon Ton Department
Stores the $12,793.15 reimbursement referred to in the Proposed Amendment. The
Proposed Amendment entitles Bon Ton Department Stores to be reimbursed by the
Landlord for $10,000 of mall improvements. If Closing is completed, Purchaser
shall be responsible for the $10,000 reimbursement. Seller and Purchaser agree
to cooperate in good faith with each other to finalize the Proposed Amendment.
If the Proposed Amendment is not executed by Closing, Seller shall give
Purchaser a $12,793.15 credit against the Purchase Price.

3. Approvals. Purchaser agrees that it has approved the Title
Commitment and the Survey and that the Deed will contain as title exceptions
the exceptions set forth on Schedule B-2 of Purchaser's Title Commitment,
except that exception 10 will be deleted and replaced by a paragraph referring
to tenants under written leases. Purchaser confirms that it has satisfied itself
<PAGE> 56
with respect to the Property and Leases and has elected not to terminate the
Purchase Agreement pursuant to Section 3.2 of the Purchase Agreement.

4. No Default. Purchaser confirms that Seller has delivered to
Purchaser all documents that Purchaser has requested pursuant to Section 3.1 or
elsewhere in the Purchase Agreement. Purchaser agrees and confirms that Seller
is not currently in default under the Purchase Agreement.

5. Extension of Closing Date. The Closing Date is extended from January
20, 1999 to January 27, 1999. Time is of the essence.

6. Ratification. Except as expressly amended hereby, the terms and
conditions of the Purchase Agreement shall remain in full force and effect, and
the parties hereto ratify the effectiveness of the Purchase Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.

SELLER:

EML ASSOCIATES, a New York general
partnership

By: ML/EQ REAL ESTATE PORTFOLIO, LP.
its Managing Venturer

By: EREIM MANAGERS CORP., its
General Partner

By: /s/ J. Mark Hillis
---------------------------
Name: J. Mark Hillis
Title: Vice President

PURCHASER:

Weingarten Properties, Inc.

By: /s/ Bryan S. Weingarten
-------------------------------------
Name: Bryan S. Weingarten
President

-2-

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF ML/EQ REAL ESTATE FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,939,314
<SECURITIES> 0
<RECEIVABLES> 3,587,069
<ALLOWANCES> 598,018
<INVENTORY> 0
<CURRENT-ASSETS> 15,803,734
<PP&E> 8,375,170
<DEPRECIATION> 5,586,628
<TOTAL-ASSETS> 105,777,298
<CURRENT-LIABILITIES> 5,468,590
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 67,941,029
<TOTAL-LIABILITY-AND-EQUITY> 105,777,298
<SALES> 0
<TOTAL-REVENUES> 29,709,209
<CGS> 0
<TOTAL-COSTS> 10,427,099
<OTHER-EXPENSES> 2,907,869
<LOSS-PROVISION> 10,243,677
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,453,338
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,266,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,266,840
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0

</TABLE>