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                                                                    EXHIBIT 10.7


This document was prepared outside of the Commonwealth of Virginia


                              SPECIAL WARRANTY DEED

         THIS DEED, made and entered into this ____ day of October, 1998 by and
between A&A GREENBRIER, INC., a Virginia corporation ("Grantor"), with an
address of c/o Cambridge Holdings Limited Partnership, 560 Herndon Parkway,
Suite 210, Herndon, Virginia 20170, and AMERICAN INDUSTRIAL PROPERTIES REIT, a
Texas real estate investment trust ("Grantee"), with an address of 6210 North
Beltline Road, Suite 170, Irving, Texas 75063-2656.

                                   WITNESSETH:

         That for and in consideration of the sum of Ten Dollars ($10.00) in
hand paid and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Grantor does hereby grant, bargain, sell and
convey unto Grantee, in fee simple, with Special Warranty of title, that certain
real property located in the City of Chesapeake, Virginia and more particularly
described in Exhibit A attached hereto and made a part hereof.

         Together with all improvements located thereon, and all title, right,
privilege, alleys, ways, easements, appurtenances and advantages thereunto
belonging, or in anywise appertaining thereto.

         Subject only to those matters set forth and identified on Exhibit B
attached hereto and made a part hereof.

         AND FURTHER SUBJECT TO (pursuant to Grantee's assumption thereof) that
certain promissory note in the original principal amount of $7,400,000, dated
November 12, 


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1996, executed by Grantor and payable to the order of Jackson National Life
Insurance Company (the "Note") and secured by a Deed of Trust, Security
Agreement and Financing Statement, dated of even date therewith, and recorded on
November 13, 1996 in Deed Book 3424, Page 104 in the Clerk's Office of the
Circuit Court of the City of Chesapeake, Virginia (the "Deed of Trust") upon
which Note there now remains an outstanding principal balance of $7,219,922.06.

         To have and to hold the property hereby conveyed to the Grantee, its
successors and assigns, in fee simple forever.

         IN TESTIMONY WHEREOF, the said Grantor has, as of the date first
written above, caused these presents to be signed, acknowledged and delivered,
under seal, by its duly authorized representative as its act and deed.

                                               A&A Greenbrier, Inc., a
                                               Virginia corporation


                                               By:
                                                        ----------------------
                                                        Dr. Louai Alassar
                                                        President




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DISTRICT OF        )
                   )     SS:
COLUMBIA           )

         The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that Dr. Louai Alassar, the President of A&A Greenbrier,
Inc./Virginia, Inc., a Virginia corporation, known to me (or satisfactory
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same on behalf of A&A Greenbrier, Inc., for
the purpose therein contained.

         GIVEN under my hand and seal _____ this day of October, 1998.


                                                                      (SEAL)
                                                   -------------------
                                                   Notary Public


My commission expires:
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                                    EXHIBIT A

                               (Legal Description)






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                                    EXHIBIT B

                            (Permitted Encumbrances)