Exhibit 3.3


                                                  Amended through: July 15, 1999
                                                  ------------------------------



                                       BYLAWS

                                         OF

                        CORNERSTONE REALTY INCOME TRUST, INC.


                                  TABLE OF CONTENTS


ARTICLES:                                                                Page
- --------                                                                 ----

ARTICLE I
THE COMPANY; DEFINITIONS ................................................. 1
1.1   Name ............................................................... 1
1.2   Nature of Company  ................................................. 1
1.3   Definitions......................................................... 1

ARTICLE II
MINIMUM CAPITAL........................................................... 6
2.1   Minimum Capital..................................................... 6

ARTICLE III
OFFICES; FISCAL YEAR ..................................................... 6
3.1   Principal Office.................................................... 6
3.2   Other Offices....................................................... 6
3.3   Fiscal Year......................................................... 6

ARTICLE IV
MEETINGS OF SHAREHOLDERS.................................................. 7
4.1   Place of Meetings................................................... 7
4.2   Annual Meetings..................................................... 7
4.3   Special Meetings.................................................... 8
4.4   Notice; Affidavit of Notice......................................... 8
4.5   Record Date for Shareholder Notice, Voting and Giving Consents...... 9
4.6   Adjourned Meetings; Notice......................................... 10
4.7   Voting at Meetings of Shareholders................................. 10
4.8   Quorum............................................................. 10
4.9   Waiver of Notice or Consent of Absent Shareholders................. 11
4.10  Action Without Meeting............................................. 11
4.11  Proxies............................................................ 11
4.12  Inspectors of Election............................................. 12

                                      i


ARTICLE V
DIRECTORS................................................................ 13
5.1   Powers............................................................. 13
5.2   Number, Tenure and Qualifications.................................. 13
5.3   Nomination of Directors............................................ 14
5.4   Vacancies.......................................................... 15
5.5   Place of Meeting................................................... 16
5.6   Organization Meeting............................................... 17
5.7   Special Meetings................................................... 17
5.8   Adjournment........................................................ 17
5.9   Notice of Adjournment.............................................. 17
5.10  Entry of Notice.................................................... 17
5.11  Waiver of Notice................................................... 17
5.12  Quorum............................................................. 18
5.13  Fees and Compensation.............................................. 18
5.14  Action Without Meeting............................................. 18
5.15  Independent Directors.............................................. 18
5.16  Removal of Director for Cause...................................... 20
5.17  Removal of Director Without Cause.................................. 21
5.18  Committees......................................................... 21
5.19  Fiduciary Relationship............................................. 22
5.20  Preferred Shares and Other Securities.............................. 22

ARTICLE VI
OFFICERS................................................................. 22
6.1   Officers........................................................... 22
6.2   Election........................................................... 22
6.3   Subordinate Officers............................................... 22
6.4   Removal and Resignation............................................ 23
6.5   Vacancies.......................................................... 23
6.6   Chairman of the Board.............................................. 23
6.7   President.......................................................... 23
6.8   Vice Presidents.................................................... 23
6.9   Secretary.......................................................... 23
6.10  Assistant Secretaries.............................................. 24
6.11  Chief Financial Officer............................................ 24
6.12  Assistant Chief Financial Officers................................. 24

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ARTICLE VII
SHARES OF STOCK.......................................................... 24
7.1   Registered Ownership, Share Certificates and Shares in
      "Unissued Certificate" Form........................................ 25
7.2   Transfer of Shares................................................. 26
7.3   Disclosures by Holders of Shares; Redemption of Shares............. 26
7.4   Right to Refuse to Transfer the Shares............................. 27
7.5   Limitation on Acquisition of Shares.................................27
7.6   Lost or Destroyed Certificates..................................... 30
7.7   Dividend Record Date and Closing Stock Books....................... 30
7.8   Dividend Reinvestment Plan......................................... 30

ARTICLE VIII
EMPLOYMENT OF ADVISOR, LIMITATION
ON EXPENSES AND LEVERAGE................................................. 31
8.1   Employment of Advisor.............................................. 31
8.2   Term............................................................... 32
8.3   Other Activities of Advisor........................................ 32
8.4   Limitation on Offering and Organization Expenses and
      Acquisition Fees and Expenses...................................... 33
8.5   Limitation on Operating Expenses................................... 33
8.6   Limitation on Real Estate Brokerage Commissions on
      Purchase and Resale of Property.................................... 33
8.7   Limitation on Incentive Fees....................................... 34
8.8   Limitations on Leverage.............................................34

ARTICLE IX
RESTRICTIONS ON INVESTMENTS AND ACTIVITIES............................... 35
9.1   Restrictions....................................................... 35


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ARTICLE X
TRANSACTIONS WITH AFFILIATES; CERTAIN DUTIES AND LIABILITIES
OF DIRECTORS, SHAREHOLDERS, ADVISOR AND AFFILIATES....................... 36
10.1  Transactions with Affiliates....................................... 36
10.2  Restriction of Duties and Liabilities.............................. 38
10.3  Persons Dealing with Directors or Officers......................... 38
10.4  Reliance........................................................... 39
10.5  Income Tax Status...................................................39

ARTICLE XI
MISCELLANEOUS............................................................ 39
11.1  Competing Programs................................................. 40
11.2  Corporate Seal..................................................... 40
11.3  Inspection of Bylaws............................................... 40
11.4  Inspection of Corporate Records.................................... 40
11.5  Checks, Drafts, Etc................................................ 40
11.6  Contracts, Etc., How Executed...................................... 41
11.7  Representation of Shares of Other Corporations..................... 41
11.8  Annual Report...................................................... 41
11.9  Quarterly Reports.................................................. 42
11.10 Other Reports...................................................... 42
11.11 Provisions of the Company in Conflict with Law or Regulation....... 42
11.12 Voluntary Dissolution.............................................. 43
11.13 Distributions...................................................... 43
11.14 Shareholder Liability.............................................. 43
11.15 Return of Offering Proceeds........................................ 43
11.16 Certain New York Stock Exchange Requirements....................... 43

ARTICLE XII
AMENDMENTS TO BYLAWS..................................................... 43
12.1  Amendments......................................................... 43

                                       iv



                                   ARTICLE I
                          THE COMPANY; DEFINITIONS

1.1 Name. The name of the corporation is CORNERSTONE  REALTY INCOME TRUST,  INC.
and is referred to in these Bylaws as the "Company." As far as  practicable  and
except as otherwise  provided in the  Organizational  Documents,  the  Directors
shall  direct the  management  of the business and the conduct of the affairs of
the  Company,  execute  all  documents  and sue or be  sued  in the  name of the
Company.  If  the  Directors  determine  that  the  use  of  that  name  is  not
practicable,  legal or  convenient,  they may use such other  designation or may
adopt  another name under which the Company may hold  property or conduct all or
part of its activities.

1.2 Nature of Company. The Company is a corporation  organized under the laws of
the  Commonwealth  of Virginia.  It is intended  that the Company shall carry on
business as a "real estate investment trust" ("REIT").

1.3  Definitions.  Whenever  used in these  Bylaws,  the terms  defined  in this
Section 1.3 shall,  unless the context otherwise  requires,  have the respective
meanings  specified in this Section 1.3. In these Bylaws,  words in the singular
number include the plural and in the plural number include the singular.

(a) Acquisition Expenses. The total expenses, including but not limited to legal
fees and expenses,  travel and  communications  expenses,  costs of  appraisals,
non-refundable  option  payments on property not acquired,  accounting  fees and
expenses,  title insurance,  and miscellaneous expenses related to selection and
acquisition of properties,  whether or not acquired.  Acquisition Expenses shall
not include Acquisition Fees.

(b) Acquisition Fees. The total of all fees and commissions paid by any party in
connection  with the purchase or  development  of real  property by the Company,
except a  development  fee paid to a person not  Affiliated  with the Sponsor in
connection  with the actual  development  of a project after  acquisition of the
land by the Company.  Included in the  computation  of such fees or  commissions
shall  be  any  real  estate   commission,   selection  fee,   development  fee,
nonrecurring management fee, or any fee of a similar nature, however designated.



(c) Adjusted Net Asset Value. The net assets of the Company (total assets before
deducting  depreciation or non-cash reserves less total  liabilities)  valued at
fair market value as  determined  by qualified  appraisals  or valuations of the
assets.

(d) Advisor.  The Person  responsible for directing or performing the day-to-day
business  affairs  of the  Company,  including  a Person  to which  the  Advisor
subcontracts substantially all such functions.

(e)  Affiliate.  Means  (i)  any  Person  directly  or  indirectly  controlling,
controlled  by or under  common  control with  another  Person,  (ii) any Person
owning  or  controlling  10% or more of the  outstanding  voting  securities  or
beneficial interests of such other Person, (iii) any officer,  director, trustee
or general partner of such Person,  and (iv) if such other Person is an officer,
director,  trustee or partner of another entity,  then the entity for which that
Person acts in any such  capacity.  "Affiliated  " means being an Affiliate of a
specified Person.

(f)     Annual Report.  As set forth in Section 11.8.

(g)     Appraisal.  The values as of the  date of the  appraisal or valuation of
property in its existing state or in a state to be created, as determined by the
Directors, the Advisor or by another person, who is a member in good standing of
the  American  Institute of Real Estate  Appraisers  (M.A.I.) or who in the sole
judgment of the  Directors is properly  qualified to make such a  determination.
The Directors may in good faith rely on a previous  Appraisal  made on behalf of
another  Person,  provided (i) it meets the standards of this definition and was
made in connection  with an investment in which the Company  acquires the entire
or a participating interest, and (ii) it was prepared not earlier than two years
prior to the  acquisition  by the Company of its  interest in the  property.  In
appraising  properties,  appraisers  may  take  into  consideration  each of the
specific  terms and  conditions of a purchase,  including any leaseback or other
guarantee  arrangement.  The  Appraisal may not  necessarily  represent the cash
value of the property but may consider the value of the income  stream from such
property  plus the  discounted  value of the fee interest and other terms of the
purchase.  Such  Appraisal  shall  be  obtained  from an  independent  qualified
appraiser  if a  majority  of the  Independent  Directors  so  decides or if the
transaction  is with the  Advisor,  Directors or any of their  Affiliates.  Each
Appraisal  shall be maintained  in the  Company's  records for a minimum of five
years and shall be available for inspection and duplication by any Shareholder.

(h) Articles of  Incorporation.  The Articles of  Incorporation  of the Company,
including all amendments, restatements or modifications thereof.


(i) Average  Invested  Assets.  The average of the  aggregate  book value of the
assets of the Company invested,  directly or indirectly,  in equity interests in
and loans secured by real estate,  before reserves for depreciation or bad debts
or other  similar  non-cash  reserves,  computed  by taking the  average of such
values at the end of each month during any period.


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(j)  Bylaws.   These  Bylaws,   including  all   amendments,   restatements   or
modifications hereof.

(k) Competitive Real Estate Commission.  The real estate or brokerage commission
paid for the purchase or sale of a property which is  reasonable,  customary and
competitive in light of the size, type and location of such property.

(l) Contract  Price.  The amount  actually  paid or  allocated to the  purchase,
development,   construction  or  improvement  of  real  property   exclusive  of
Acquisition Fees and Acquisition Expenses.

(m) Directors.  As of any particular  time, the directors of the Company holding
office at such time.

(n) Dividend  Reinvestment  Plan. The program  adopted by the Board of Directors
pursuant  to Section  5.1 hereof  and  available  to  Shareholders  to  reinvest
dividends in Shares available under the Liquidity Matching Program.

(o)  Independent  Director.  A Director of the  Company  who is not  Affiliated,
directly or  indirectly,  with the Advisor,  whether by ownership of,  ownership
interest in, employment by, any material  business or professional  relationship
with,  or serving as an officer or director  of, the Advisor,  or an  Affiliated
business  entity of the Advisor (other than as an Independent  Director of up to
three other real estate investment trusts advised by the Advisor or an Affiliate
of the Advisor).  An Independent  Director may perform no other services for the
Company, except as a Director.  Notwithstanding anything to the contrary herein,
any  member  of  a  law  firm  whose  only  material  business  or  professional
relationship  with the  Company,  the Advisor and their  Affiliates  is as legal
counsel to any of such entities shall constitute an Independent Director (unless
such  person  serves as a director  for more than three REITs  organized  by the
Advisor and its Affiliates).  The independence of any Independent  Director must
be  maintained throughout his term as Director. An "indirect"  affiliation shall
be deemed to refer to circumstances in which a member of the "immediate  family"
of a Director is Affiliated with the Advisor,  and a person's "immediate family"
shall  mean such  person's  spouse,  parents,  children,  siblings,  mother  and
father-in-law, sons and daughters-in-law and brothers and sisters-in-law.

(p)  Initial  Investment.  That  portion of the  initial  capitalization  of the
Company contributed by the Sponsor or its Affiliates.

(q) Leverage.  The  aggregate  amount of  indebtedness  of the Company for money
borrowed (including


                                     3


purchase  money  mortgage  loans)  outstanding  at any time,  both  secured  and
unsecured.

(r) Liquidity  Matching  Program.  The program adopted by the Board of Directors
pursuant to Section 5.1 hereof under which  Shareholders  may tender  Shares for
resale to participants in the Dividend Reinvestment Plan.

(s) Net Assets.  The total assets of the Company (other than intangible  assets)
at cost before  deducting  depreciation  or other  non-cash  reserves less total
liabilities, calculated at least quarterly on a basis consistently applied.

(t) Net Income.  The total  revenues  of the  Company  for any period,  less the
expenses  applicable  to such  period  other  than  additions  to  reserves  for
depreciation or bad debts or other similar  non-cash  reserves.  For purposes of
calculating Operating Expenses,  Net Income shall exclude any gain from the sale
of the Company's assets.

(u) Offering and Organization  Expenses.  Those expenses  incurred in connection
with the  formation  and  registration  of the  Company  and in  qualifying  and
marketing  the Shares  under  applicable  federal  and state law,  and any other
expenses   actually   incurred  and  directly  related  to  the   qualification,
registration,  offer and sale of the Shares,  including such expenses as (i) all
marketing  expenses and  payments  made to  broker-dealers  as  compensation  or
reimbursement for all costs of reviewing the offering,   including due diligence
investigations  and fees and expenses of their attorneys,  accountants and other
experts;  (ii)  registration  fees,  filing  fees and taxes;  (iii) the costs of
printing,  amending,  supplementing and distributing the registration  statement
and Prospectus;  (iv) the costs of obtaining regulatory  clearances of, printing
and  distributing  sales materials used in connection with the offer and sale of
the Shares;  (v) the costs related to investor and broker-dealer  sales meetings
concerning  the   offering;  and (vi)  accounting  and legal  fees  incurred  in
connection with any of the foregoing.

(v) Operating Expenses.  All operating,  general and administrative  expenses of
the  Company  as  determined  under  generally  accepted  accounting  principles
(including regular compensation payable to the Advisor), excluding, however, the
following:

        (i)     expenses of raising capital;

        (ii)    interest payments;

        (iii)   taxes;

                                       4



         (iv) non-cash expenditures, such as depreciation,  amortization and bad
debt reserve;

         (v) incentive fees paid to the Advisor, if any; and

         (vi)  costs  related  directly  to  asset  acquisition,  operation  and
disposition.

(w) Organizational Documents. The Articles of Incorporation and these Bylaws.

(x) Person. An individual, corporation, partnership, joint venture, association,
company, trust, bank or other entity, or government and any agency and political
subdivision of a government.

(y)  Prospectus.  Shall  mean a  Prospectus  as  that  term  is  defined  by the
Securities Act of 1933, including a preliminary Prospectus, an offering circular
as described in Rule 256 of the General Rules and Regulations  promulgated under
the  Securities  Act of 1933 and, in the case of an  intra-state  offering,  any
document,  by whatever  name  known,  utilized  for the purpose of offering  and
selling securities to the public.

(z) REIT.  A real  estate  investment  trust,  as defined in Section  856 of the
Internal Revenue Code of 1986, as amended.

(aa) REIT  Provisions  of the Internal  Revenue Code.  Part II,  Subchapter M of
Chapter 1, of the  Internal  Revenue  Code of 1986,  as  amended,  or  successor
statutes, and regulations and rulings promulgated thereunder.

(ab)  Securities.   Any  stock,  shares,   voting  trust  certificates,   bonds,
debentures,  notes or other  evidences of  indebtedness,  secured or  unsecured,
convertible,  subordinated or otherwise,  or in general any instruments commonly
known as "securities" or any certificates of interest,  shares or participations
in  temporary or interim  certificates  for,  receipts  (or,  guarantees  of, or
warrants,  options or rights to  subscribe  to,  purchase  or acquire any of the
foregoing).

(ac) Shares or Common  Shares.  All of the common shares of the Company,  no par
value.

(ad)  Shareholders.  As of  any  particular  date,  all  holders  of  record  of
outstanding Common Shares at such time.

(ae) Sponsor.  Any Person  directly or indirectly  instrumental  in  organizing,
wholly or in part,  the Company or any Person who will manage or  participate in
the management of the

                                       5


Company, and any Affiliate of any such Person, but not including a Person who is
an Independent  Director or whose only  relationship with the Company is that of
an independent  property manager,  whose only compensation is as such, or wholly
independent third parties such as attorneys,  accountants and underwriters whose
only compensation is for professional services. No Independent Director shall be
deemed to be a Sponsor.

(af)  Unimproved   Real  Property.   Property  which  has  the  following  three
characteristics:  (i) an equity  interest in property which was not acquired for
the  purpose  of  producing  rental  or  other  operating  income,  (ii)  has no
development or construction in process on such land, and (iii) no development or
construction on such land is planned in good faith to commence within one year.


                                  ARTICLE II
                                MINIMUM CAPITAL

2.1 Minimum Capital.  Prior to the public offering of the Shares, the Sponsor or
Affiliates of the Sponsor  purchased 10 Common Shares for an aggregate  purchase
price of $100, as an Initial  Investment.  The Sponsor or its Affiliates may not
withdraw the Initial Investment for a period of one year following completion of
the offering.


                                  ARTICLE III
                             OFFICES; FISCAL YEAR

3.1 Principal  Office.  The principal  executive  office of the Company shall be
located at 306 East Main  Street,  Richmond,  Virginia  23219,  until  otherwise
established by a vote of a majority of the Board of Directors.

3.2 Other Offices.  Other offices may at any time be established by the Board of
Directors at any place or places they deem appropriate.

3.3 Fiscal  Year.  The fiscal year of the  Company  shall end on the 31st day of
December.

                                       6


                                  ARTICLE IV
                           MEETINGS OF SHAREHOLDERS

4.1 Place of Meetings.  All annual and all other meetings of Shareholders  shall
be held at such place,  either within or outside of the Commonwealth of Virginia
as from time to time may be fixed by the President or by the Board of Directors.

4.2 Annual Meetings.  The annual meetings of Shareholders  shall be held on such
date as is fixed by the  Directors;  provided,  however,  that the first  annual
meeting of  Shareholders  who purchase Shares in the public offering made by the
Prospectus  shall be held in the year  following  the year in which the  Initial
Closing (as defined in the Prospectus)  occurs; and provided further,  that such
date  fixed by the  Directors  shall not be less than 30 days after the Board of
Directors  shall have caused to be sent to the  Shareholders an Annual Report as
provided in Section 11.8 of these Bylaws,  but if no such date and time is fixed
by the  President or the Board of  Directors,  the meeting for any calendar year
shall be held on the first  Tuesday in May in such year,  if not a legal holiday
under the laws of  Virginia.  If the date  fixed by the  Directors  falls upon a
legal holiday, then any annual meeting of Shareholders shall be held at the same
time and place on the next day  which is not a legal  holiday.  At each   annual
meeting of  Shareholders,  only such business shall be conducted as is proper to
consider and has been brought  before the meeting (i) pursuant to the  Company's
notice of the meeting, (ii) by or at the direction of the Board of Directors, or
(iii) by a  Shareholder  who is a  Shareholder  of  record  of a class of Shares
entitled to vote on the business such Shareholder is proposing, both at the time
of the giving of the Shareholder's notice hereinafter  described in this Section
4.2 and on the record date for  such annual  meeting,  and who complies with the
notice procedures set forth in this Section 4.2.

In order to bring before an annual  meeting of  Shareholders  any business which
may properly be considered  and which a Shareholder  has not had included in the
Company's  proxy  statement  for  the  meeting,  a  Shareholder  who  meets  the
requirements  set forth in the preceding  paragraph must give the Company timely
written notice.  To be timely, a Shareholder's  notice must be given,  either by
personal delivery to the Secretary of the Company at the principal office of the
Company,  or by first class United States  mail, with postage  thereon  prepaid,
addressed  to the  Secretary  of the  Company  at the  principal  office  of the
Company.  Any such  notice  must be received  (i) on or after  February  1st and
before March 1st of the year in which the meeting  will be held,  if clause (ii)
is not applicable,  or (ii) not less than 60 days before the date of the meeting
if the date of such  meeting is earlier  than May 1 or later than May 31 in such
year.

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Each such Shareholder's notice shall set forth as to each matter the Shareholder
proposes to bring before the annual  meeting (i) the name and  address,  as they
appear on the Company's  stock  transfer  books,  of the  Shareholder  proposing
business,  (ii)  the  class  and  number  of  Shares  of  stock  of the  Company
beneficially  owned  by such  Shareholder,  (iii)  a  representation  that  such
Shareholder  is a Shareholder  of record at the time of the giving of the notice
and  intends  to appear in  person  or by proxy at the  meeting to  present  the
business  specified  in the notice,  (iv) a brief  description  of the  business
desired to be brought  before the meeting,  including  the complete  text of any
resolutions  to be  presented  and the  reasons  for  wanting  to  conduct  such
business, and (v) any interest which the Shareholder may have in such business.

The Secretary of the Company shall  deliver each  Shareholder's  notice that has
been timely received to the Chairman for review.

4.3 Special Meetings.  Special meetings of the Shareholders may be called at any
time for any purpose or purposes  whatsoever by the President,  by a majority of
the Board of Directors,  by a majority of Independent Directors, by the Chairman
of the  Board or by one or more  Shareholders  holding  not less than 10% of the
eligible  votes.  If a meeting is called by any Person or Persons other than the
Board of Directors,  the Chairman of the Board or the President, a request shall
be made in writing, specifying the time of the meeting and the general nature of
the business  proposed to be  transacted,  and shall be delivered  personally or
sent by registered mail or by telegraphic or other facsimile transmission to the
Chairman of the Board,  the  President,  or the  Secretary of the  Company.  The
officer  receiving  the request  shall cause notice to be promptly  given to the
Shareholders entitled to vote, in accordance with the provisions of Section 4.4.

4.4 Notice;  Affidavit of Notice.  Notice of meetings of the Shareholders of the
Company shall be given in writing to each Shareholder  entitled to vote thereat,
either  personally  or by first class  mail,  or, if the Company has 500 or more
Shareholders,  by  third-class  mail,  or other means of written  communication,
charges  prepaid,  addressed to the Shareholder at his address  appearing on the
books of the Company or given by the  Shareholder to the Company for the purpose
of  notice.  Notice of any such  meeting of  Shareholders  shall be sent to each
Shareholder  entitled  thereto not less than 10 nor more than 60 days before the
meeting;  provided,  however,  that within 10 business days after receipt by the
Company, in person, or by registered mail, of a written request for a meeting by
Shareholders  holding not less than 10% of the  outstanding  Shares  entitled to
vote at such meeting,  the Company shall provide  written notice of such meeting
to all Shareholders, and such

                                       8


meeting shall be held not less than 20 nor more than 60 days after the Company's
receipt of such written Shareholder request; and, provided further, that if such
notice is not given within 10 business  days after  receipt of the request,  the
Person or Persons requesting the meeting may give the notice.  Nothing contained
in this Section 4.4 shall be construed as limiting, fixing or affecting the time
when a meeting of Shareholders called by action of the Board of Directors may be
held.  All notices given  pursuant to this Section  shall state the place,  date
and hour of the meeting  and, (i) in the case of special  meetings,  the general
nature  of  the  business  to be  transacted,  and  no  other  business  may  be
transacted,  or (ii) in the case of annual  meetings,  those  matters  which the
Board of Directors, at the time of the mailing of the notice, intends to present
for action by the  Shareholders,  and (iii) in the case of any  meeting at which
Directors are to be elected,  the names of the nominees  intended at the time of
the  mailing  of the notice to be  presented  by  management  for  election.  An
affidavit   of  the  mailing  or  other  means  of  giving  any  notice  of  any
Shareholders' meeting shall be executed by the Secretary, Assistant Secretary or
any  transfer  agent of the Company  giving the  notice,  and shall be filed and
maintained in the minute book of the Company.

4.5 Record Date for Shareholder Notice, Voting and Giving Consents. For purposes
of determining the Shareholders  entitled to notice of any meeting or to vote or
entitled to give consent to  corporate  action  without a meeting,  the Board of
Directors  may fix, in advance,  a record date,  which shall not be more than 60
days nor less than 10 days  before the date of any meeting nor more than 60 days
before any  action  without a meeting,  and in this event only  Shareholders  of
record  on the date so fixed  are entitled  to  notice  and  to  vote or to give
consents, as the case may be,  notwithstanding any transfer of any Shares on the
books of the Company after the record date.

If the Board of Directors does not so fix a record date:

(a) The record  date for  determining  Shareholders  entitled to notice of or to
vote at a  meeting  of  Shareholders  shall be at the close of  business  on the
business  day next  preceding  the day on which notice is given or, if notice is
waived,  at the close of business on the business day next preceding the date on
which the meeting is held.

(b) The record date for  determining  Shareholders  entitled to give  consent to
corporate  action in writing without a meeting,  (i) when no prior action by the
Board has been  taken,  shall be the day on which the first  written  consent in
given,  or (ii) when prior  action of the Board has been taken,  shall be at the
close of business on the day on which the

                                       9


Board adopts the resolution  relating to that action, or the 60th day before the
date of the other action, whichever is later.

4.6 Adjourned Meetings;  Notice. Any Shareholders'  meeting,  annual or special,
whether or not a quorum is present,  may be  adjourned  from time to time by the
vote of the majority of the Shares,  the holders of which are either  present in
person or represented by proxy, but in the absence of a quorum no other business
may be transacted at the meeting.

When any Shareholders' meeting,  either annual or special, is adjourned for more
than 45 days or if after  the  adjournment  a new  record  date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given as in the case
of a special meeting.  In all other cases, it shall not be necessary to give any
notice of an  adjournment  or of the business to be  transacted at any adjourned
meeting other than by  announcement  at the meeting at which the  adjournment is
taken.

4.7  Voting at  Meetings  of  Shareholders.  Subject  to the  provisions  of the
Virginia  Stock  Corporation  Act,  and  subject  to the  right of the  Board of
Directors to provide  otherwise,  only Persons in whose name Shares  entitled to
vote  standing  on the stock  records of the Company on the record date shall be
entitled  to the  notice  of and to vote  at the  meeting,  notwithstanding  any
transfer of any Shares on the books of the Company after the record date.

The vote may be via voice or by ballot;  provided,  however,  that all elections
for  Directors  must be by ballot  upon demand  made by any  Shareholder  at any
election and before the voting  begins.  Except as provided in this Section 4.7,
each outstanding Share shall be entitled to one vote on each matter submitted to
a vote of Shareholders.

4.8  Quorum.  The  presence  in person or by proxy of a  majority  of the Shares
entitled to vote at any meeting shall constitute a quorum for the transaction of
business.  Except as otherwise  expressly  provided in these Bylaws, if a quorum
exists, action on a matter, other than the election of Directors, is approved if
the votes cast  favoring  the action  exceed the votes cast  opposing the action
unless a vote of a greater  number is required by the Articles of  Incorporation
or  by  the  Virginia  Stock  Corporation Act.  Directors  shall be elected by a
plurality of the votes cast by the Shares  entitled to vote in the election at a
meeting at which a quorum is present.  The Shareholders present at a duly called
or held meeting at which a quorum is present may  continue to do business  until
adjournment, notwithstanding the withdrawal of enough Shareholders to leave less
than a quorum,  if any action taken (other than  adjournment)  is approved by at
least a majority of the Shares required to constitute a quorum.

                                       10


4.9 Waiver of Notice or Consent of Absent Shareholders.  The transactions of any
meeting of Shareholders,  either annual or special,  however called and noticed,
shall be as valid as though made at a meeting  duly held after  regular call and
notice,  if a quorum is  present  either  in  person or by proxy and if,  either
before or after the  meeting,  each of the  Shareholders  entitled to vote,  not
present in person or by proxy,  signs a written waiver of notice or a consent to
the holding of the meeting or an  approval of the minutes. All waivers, consents
or  approvals  shall be filed with the  corporate  records or made a part of the
minutes of the meeting.

4.10  Action  Without  Meeting.  Any action  which may be taken at any annual or
special  meeting of  Shareholders  may be taken  without a meeting  and  without
action by the Board of Directors, if the action is taken by all the Shareholders
entitled to vote on the action.  The action  shall be  evidenced  by one or more
written  consents  describing the action taken,  signed by all the  Shareholders
entitled to vote on the action,  and  delivered to the  Secretary of the Company
for inclusion in the minutes or filing  with the corporate records. Action taken
under  this  Section  4.10  shall  be  effective  when all  consents  are in the
possession of the Company,  unless the consent  specifies a different  effective
date and states the date of  execution  by each  Shareholder,  in which event it
shall be  effective  according to the terms of the consent.  A  Shareholder  may
withdraw  consent  only be  delivering  a written  notice of  withdrawal  to the
Company  prior  to the time  that  all  consents  are in the  possession  of the
Company.

The record date for determining  Shareholders  entitled to take action without a
meeting is the date the first  Shareholder  signs the consent  described  in the
preceding paragraph.

Any form of written consent  distributed to 10 or more  Shareholders must afford
the Person whose consent is thereby solicited an opportunity to specify a choice
among approval,  disapproval or abstention as to each matter or group of related
matters presented, other than elections of Directors or officers.

4.11 Proxies.  Every Person entitled to vote or execute  consents shall have the
right to do so either in person or by one or more agents authorized by a written
proxy  executed by such Person or his duly  authorized  agent and filed with the
Secretary of the Company,  provided  that no such proxy shall be valid after the
expiration  of 11  months  from the date of its  execution,  unless  the  Person
executing it specifics in the proxy the length of time for which the proxy is to
continue in force.

A proxy shall be deemed signed if the Shareholder's  name is placed on the proxy
(whether by manual signature,

                                       11


typewriting,  telegraphic  transmission  or otherwise) by the Shareholder or the
Shareholder's  attorney in fact. A validly  executed  proxy which does not state
that it is irrevocable shall continue in full force and effect unless revoked by
the Person  executing it before the vote pursuant to that proxy by (i) a writing
delivered to the Company stating that the proxy is revoked,  (ii) execution of a
subsequent proxy, (iii) attendance at the meeting and voting in person (but only
as to any items on which  the  Shareholder  chooses to vote in person),  or (iv)
transfer of the Shares  represented  by the proxy to a transferee  who becomes a
Shareholder  of record  prior to the record  date  established  for the vote.  A
validly  executed proxy  otherwise may be revoked by written notice of the death
or incapacity of the maker of that proxy received by the Company before the vote
pursuant to that proxy is counted.

Any proxy  distributed to 10 or more  Shareholders must afford the Person voting
an opportunity to specify a choice among approval,  disapproval or abstention as
to each matter or group of related matters,  other than election of Directors or
officers.

4.12 Inspectors of Election.  Before any meeting of  Shareholders,  the Board of
Directors  may appoint any Persons,  other than  nominees for office,  to act as
inspectors  of election at the meeting or its  adjournment.  If no inspectors of
election are so  appointed,  the Chairman of the meeting may, and on the request
of any  Shareholder  or a  Shareholder's  proxy  shall,  appoint  inspectors  of
election at the meeting.  The number of inspectors shall be either one or three.
If  inspectors  are   appointed  at a  meeting  on the  request  of one or  more
Shareholders  or proxies,  the holders of a majority of Shares or their  proxies
present at the meeting shall determine whether one or three inspectors are to be
appointed.  If any Person  appointed  as  inspector  fails to appear or fails or
refuses to act,  the  Chairman of the meeting  may,  and upon the request of any
Shareholder  or a  Shareholder's  proxy  shall,  appoint  a Person  to fill that
vacancy.

These inspectors shall:

(a) Determine the number of Shares outstanding and the voting power of each, the
Shares  represented  at  the  meeting,  the  existence  of  a  quorum,  and  the
authenticity, validity and effect of proxies;

(b) Receive votes, ballots or consents;

(c) Hear and  determine  all  challenges  and  questions  in any way  arising in
connection with the right to vote;

(d) Count and tabulate all votes or consents;

                                       12



(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct  the  election  or vote with
fairness to all Shareholders.


                                  ARTICLE V
                                  DIRECTORS

5.1 Powers.  Subject to limitations  contained in the Articles of Incorporation,
these Bylaws and the Virginia Stock  Corporation Act relating to action required
to be  authorized  or  approved  by the  Shareholders,  or by the  holders  of a
majority of the  outstanding  Shares,  and subject to the duties of Directors as
prescribed by these Bylaws,  all corporate powers shall be exercised by or under
the  authority  of,  and the  business  and  affairs  of the  Company  shall  be
controlled by,  the Board of Directors.  The Board of Directors may delegate the
management  of the  day-to-day  operation  of the business of the Company to the
Advisor,  provided that the business and affairs of the Company shall be managed
and all corporate powers shall be exercised under the ultimate  direction of the
Board  of  Directors.  The  Board  of  Directors  shall  establish  policies  on
investments  and  borrowings  and shall monitor the  administrative  procedures,
investment  operations and performance of the Company and the Advisor, to assure
that such policies  are carried out. In addition, and unless otherwise contained
in the Articles of Incorporation, these Bylaws or the Virginia Stock Corporation
Act, the Board of Directors  has the ability to adopt,  renew,  modify,  extend,
consolidate  or cancel the Dividend  Reinvestment  Plan and  Liquidity  Matching
Program.

Each individual  Director,  including each Independent  Director,  may engage in
other  business  activities  of the type  conducted  by the  Company  and is not
required to present to the Company any  investment  opportunities  presented  to
them even  though  the  investment  opportunities  may be within  the  Company's
investment policies.

5.2 Number, Tenure and Qualifications. The authorized number of Directors of the
Board of  Directors  shall be not less  than  three nor more than 15 as shall be
determined from time to time by resolution of the Board of Directors.

Commencing with the 1996 Annual Meeting of Shareholders,  the Board of Directors
shall be divided into three classes,  denominated as Class I, Class II and Class
III,  each as nearly equal in number to the other two as  possible.  At the 1996
Annual Meeting of Shareholders, Directors of Class I shall be

                                       13


elected  to hold  office  for a term  expiring  at the 1997  Annual  Meeting  of
Shareholders,  Directors  of Class II shall be elected to hold office for a term
expiring at the 1998 Annual Meeting of Shareholders,  and Directors of Class III
shall be elected to hold office for a term  expiring at the 1999 Annual  Meeting
of  Shareholders.  At each  Annual  Meeting  of  Shareholders  after  1996,  the
successors  to the class of  Directors  whose terms  shall then expire  shall be
identified  as being of the same class of  Directors  they  succeed and shall be
elected  to hold  office  for a term  expiring  at the third  succeeding  Annual
Meeting of  Shareholders.  When the number of  Directors  is changed,  any newly
created  directorships or any decrease in directorships  shall be so apportioned
among the  classes by the Board of  Directors  as to make all  classes as nearly
equal in number as possible.  If any such Annual Meeting of  Shareholders is not
held or the  Directors  are not  elected,  the  Directors  may be elected at any
special meeting of  Shareholders held for that purpose. Each Director shall hold
office until his death,  resignation  or removal or until his  successor is duly
elected.

Each individual  Director,  including each Independent  Director,  shall have at
least  three  years of  relevant  experience  demonstrating  the  knowledge  and
experience required  successfully to acquire and manage the type of assets being
acquired  by the  Company,  and as set  forth  in  Section  5.15  at  least  one
Independent Director shall have relevant real estate experience.  Directors need
not be Shareholders.

Except as provided in Section 5.3, the  Directors  elected by the holders of the
Shares at a meeting of  Shareholders at which a quorum is present shall be those
persons who receive the greatest number of votes even though they do not receive
a  majority  of the votes  cast.  No  individual  shall be named or elected as a
Director without his prior consent.

5.3  Nomination  of  Directors.  No person  shall be eligible  for election as a
Director  at a meeting  of  Shareholders  unless  nominated  (i) by the Board of
Directors or any committee thereof or (ii) by a Shareholder who is a Shareholder
of record of a class of Shares  entitled to vote for the election of  Directors,
both at the time of the giving of the Shareholder's notice hereinafter described
in this  Section  5.3 and on the  record  date  for the  meeting  at  which  the
nominee(s) will be voted upon, and who  complies with the notice  procedures set
forth in this Section 5.3.

In order to nominate for election as Directors at a meeting of Shareholders  any
persons who are not listed as nominees in the Company's  proxy statement for the
meeting,  a Shareholder  who meets the  requirements  set forth in the preceding
paragraph  must  give  the  Company  timely  written  notice.  To be  timely,  a
Shareholder's notice must be given, either by personal

                                       14


delivery to the Secretary of the Company at the principal office of the Company,
or by first class United States mail, with postage thereon prepaid, addressed to
the  Secretary of the Company at the principal  office of the Company.  Any such
notice must be received (i) on or after February 1st and before March 1st of the
year in which the meeting will be held if the meeting is to be an annual meeting
and  clause  (ii) is not  applicable,  or (ii) not less  than 60 days  before an
annual  meeting,  if the date  of the applicable  annual meeting is earlier than
May 1 or later  than May 31 in such  year,  or (iii) not later than the close of
business on the tenth day following the day on which notice of a special meeting
of Shareholders  called for the purpose of electing  Directors is first given to
Shareholders.

Each such  Shareholder's  notice  shall set forth the  following:  (i) as to the
Shareholder  giving the notice,  (a) the name and address of such Shareholder as
they appear on the Company's stock transfer  books,  (b) the class and number of
Shares  of  the  Company   beneficially   owned  by  such  Shareholder,   (c)  a
representation  that such  Shareholder is a Shareholder of record at the time of
giving the notice and  intends to appear in person or by proxy at the meeting to
nominate the person or persons  specified in the  notice,  and (d) a description
of all arrangements or understandings, if any, between such Shareholder and each
nominee and any other person or persons (naming such person or persons) pursuant
to which  the  nomination  or  nominations  are to be made;  and (ii) as to each
person whom the Shareholder  wishes to nominate for election as a Director,  (a)
the name, age,  business address and residence  address of such person,  (b) the
principal  occupation or employment of such person,  (c) the class and number of
Shares of the Company which are beneficially  owned by such person,  and (d) all
other  information  that is required to be disclosed about nominees for election
as Directors in solicitations of proxies for the election of Directors under the
rules and  regulations of the Securities and Exchange  Commission.  In addition,
each such notice shall be  accompanied  by the written  consent of each proposed
nominee  to serve as a Director  if elected  and such  consent  shall  contain a
statement from the proposed nominee to the effect that the information about him
or her contained in the notice is correct.

5.4  Vacancies.  Vacancies in the Board of Directors may be filled by a majority
of the remaining  Directors,  though less than a quorum,  or by a sole remaining
Director, except that a vacancy created by the removal of a Director by the vote
or written  consent of the  Shareholders or by court order may be filled only by
the vote of a majority of the Shares entitled to vote represented at a duly held
meeting at which a quorum is present,  or by the written consent of holders of a
majority of the outstanding Shares entitled to vote. Each Director so

                                       15


elected  shall  hold  office  until his  successor  is elected at an annual or a
special meeting of the Shareholders.

A vacancy or  vacancies  in the Board of  Directors  shall be deemed to exist in
case of the death,  resignation  or removal of any Director or if the authorized
number of Directors is increased or if the  Shareholders  fail, at any annual or
special  meeting of Shareholders at which any Director or Directors are elected,
to  elect  the full  authorized  number  of  Directors  to be voted  for at that
meeting.

Any Director may resign  effective on giving  written  notice to the Chairman of
the  Board,  the  President,  the  Secretary,  or the  Board of  Directors.  The
Shareholders  may elect a Director or  Directors at any time to fill any vacancy
or vacancies  not filled by the  Directors.  Any election by written  consent to
fill a vacancy shall require the consent of a majority of the outstanding Shares
entitled to vote.

If the Board of Directors accepts the resignation of a Director tendered to take
effect at a future time, the Board or the  Shareholders  shall have the power to
elect a successor to take office when the  resignation  is to become  effective;
provided,  however,  that any remaining  Independent  Directors  shall  nominate
replacements for vacancies among the Independent Director positions.

No reduction  of the  authorized  number of  Directors  shall have the effect of
removing any Director prior to the expiration of his term of office.

If the number of vacancies  occurring during a year is sufficiently large that a
majority of the  Directors in office has not been  elected by the  Shareholders,
the holders of 5% or more of the outstanding  Shares entitled to vote may call a
special meeting of Shareholders to elect the entire Board of Directors.

5.5 Place of Meeting.  Regular  meetings of the Board of Directors shall be held
at any place  within or without  the  Commonwealth  of  Virginia  which has been
designated  from time to time by the Chairman of the Board or by written consent
of all members of the Board. In the absence of a designation,  regular  meetings
shall be held at the principal  office of the Company.  Special  meetings of the
Board may be held either at a place so designated  or at the  principal  office.
Members of  the Board may  participate in a  meeting  through use of  conference
telephone  or  similar   communication   equipment,   so  long  as  all  members
participating  in such meeting can hear one another.  Participation in a meeting
by telephone or similar  communication  equipment shall  constitute  presence in
person at the meeting.

                                       16


5.6  Organization   Meeting.   Immediately  following  each  annual  meeting  of
Shareholders,  the  Board of  Directors  shall  hold a regular  meeting  for the
purpose of  organization,  election of  officers  and the  transaction  of other
business. Notice of that meeting is hereby dispensed with.

5.7 Special Meetings. Special meetings of the Board of Directors for any purpose
or  purposes  shall be  called at any time by the  Chairman  of the Board or the
President or Vice President or the Secretary or any two Directors.

Written  notice of the time and place of  special  meetings  shall be  delivered
personally to the Directors or sent to each Director by mail or by other form of
written  communication,  charges prepaid,  addressed to him at his address as it
appears  upon the  records  of the  Company  or, if it is not so shown or is not
readily  ascertainable,  at the place in which the  meetings  of  Directors  are
regularly  held.  In case the notice is  mailed,  it shall be  deposited  in the
United States mail in the place in which the  principal office of the Company is
located at least four days prior to the time of the meeting.  In case the notice
is delivered  personally,  telegraphed or communicated  by electronic  means, it
shall be delivered,  deposited  with the telegraph  company or  communicated  at
least  48  hours  prior to the time of the  meeting.  Mailing,  telegraphing  or
delivery,  as above  provided,  shall be due  legal and  personal  notice to the
Director.

5.8 Adjournment. A majority of the Directors present, whether or not a quorum is
present, may adjourn any Directors' meeting to another time and place.

5.9 Notice of  Adjournment.  If a meeting is  adjourned  for more than 24 hours,
notice of any  adjournment  to another time or place shall be given prior to the
time of the adjourned  meeting to the Directors who were not present at the time
of adjournment.

5.10 Entry of Notice.  Whenever  any  Director  has been absent from any special
meeting of the Board of  Directors,  an entry in the  minutes to the effect that
notice has been duly given shall be  conclusive  and  incontrovertible  evidence
that due notice of the special meeting was given to that Director as required by
law and the Bylaws of the Company.

5.11  Waiver  of  Notice.  The  transactions  of any  meeting  of the  Board  of
Directors,  however called and noticed,  or wherever held,  shall be as valid as
though had at a meeting  duly held after  regular call and notice if a quorum is
present and if,  either  before or after the meeting,  each of the Directors not
present signs a written waiver of notice of or consent to holding the meeting or
an approval of the minutes. All waivers, consents

                                       17


or  approvals  shall be filed with the  corporate  records or made a part of the
minutes of the meeting.

5.12 Quorum. A majority of the authorized number of Directors shall be necessary
to  constitute a quorum for the  transaction  of business,  except to adjourn as
provided  below or to fill a vacancy.  Every act or  decision  done or made by a
majority of the  Directors  at a meeting  duly held at which a quorum is present
shall be regarded as an act of the Board of Directors unless a greater number be
required by law or by the Articles of Incorporation or these Bylaws.  However, a
meeting  at  which  a quorum  is initially  present  may  continue  to  transact
business  notwithstanding  the  withdrawal of Directors,  if any action taken is
approved by at least a majority of the required quorum for the meeting.

5.13 Fees and  Compensation.  The  Directors  shall be entitled to receive  such
reasonable compensation for their services as Directors as the Directors may fix
or  determine  from  time to time  by  resolution  of the  Board  of  Directors;
provided, however, that Directors and officers of the Company who are Affiliated
with the  Advisor  shall not  receive  compensation  from the  Company for their
services as Directors or officers of the Company. The Directors, either directly
or  indirectly,  shall also be entitled  to receive  remuneration  for  services
rendered to the  Company in any other  capacity.  Those  services  may  include,
without limitation,  services as an officer of the Company, legal, accounting or
other  professional  services,  or  services  as a  broker,  transfer  agent  or
underwriter,  whether  performed by a Director or any Person  Affiliated  with a
Director.

5.14 Action Without Meeting. Any action required or permitted to be taken by the
Board of Directors under the Virginia Stock Corporation Act and these Bylaws may
be  taken  without  a  meeting  if all  members  of the  Board  individually  or
collectively consent in writing to such action. The consent or consents shall be
filed with the minutes of the meetings of the Board.  Any  certificate  or other
document filed under the provision of the Virginia Stock  Corporation  Act which
relates to action so  taken  shall state that the action was taken by  unanimous
written consent of the Board of Directors without a meeting.

5.15  Independent  Directors.  At all times after Initial Closing (as defined in
the Prospectus),  a majority of the Directors of the Company,  and a majority of
the members of any Board committee, will be Independent Directors, except during
the 60 days  following  the  departure  of an  Independent  Director.  Successor
Independent Directors will be nominated by any remaining Independent  Directors.
At least one of the  Independent  Directors shall have had three years of actual
direct  experience  in  acquiring  or  managing  the type of real  estate  to be
acquired

                                       18


by the Company for his or her account or as an agent.  The Directors  shall,  in
good  faith,  determine  for all  purposes  which  persons  constitute  or would
constitute  Independent  Directors  and  which  persons  do  not  or  would  not
constitute Independent  Directors.  Notwithstanding any other provision of these
Bylaws,  the Independent  Directors,  in addition to their other duties,  to the
extent that they may legally do so, shall:

(a) Monitor the  relationship  of the Company with the Advisor.  In this regard,
the  Independent  Directors as a group, in addition to all Directors as a group,
will  monitor  the  Advisor's  performance  of the  advisory  contract  and will
determine at least  annually  that the Advisor's  compensation  is reasonable in
relation  to the nature and quality of services  performed.  This  determination
will be based on (i) the size of the advisory fee in  relationship  to the size,
composition  and   profitability  of the  invested assets;  (ii) the  investment
opportunities  generated  by the  Advisor;  (iii)  advisory  fees  paid to other
advisors  by other real  estate  investment  trusts and to  advisors  performing
similar  services by investors other than real estate  investment  trusts;  (iv)
additional  revenues  realized by the Advisor and its  Affiliates  through their
relationship with the Company,  including loan  administration,  underwriting or
broker commissions,  servicing, engineering,  inspection and other fees, whether
paid by the Company or by others with whom the Company  does  business;  (v) the
quality  and extent of service and advice  furnished  by the  Advisor;  (vi) the
performance  of the  investment  portfolio  of the  Company,  including  income,
conservation or appreciation  of capital,  frequency of problem  investments and
competence in dealing with distress  situations;  (vii) quality of the portfolio
of the Company in relationship  to the investments  generated by the Advisor for
its own  account;  and (viii) all other  factors the  Independent  Directors may
deem relevant.  The Independent Directors will also determine that the Advisor's
compensation is within the limits prescribed by Sections 8.5, 8.6 and 8.7.

The Independent Directors shall approve all transactions between the Company and
the Advisor or any  Affiliates of the Advisor (other than as provided in Section
10.1  herein).  The  material  terms  and  circumstances  of all  such  approved
transactions  shall be fully  disclosed  in the Annual  Report of the Company as
required  by Section  11.8,  and the  Independent  Directors  shall  examine and
comment in the Annual Report on the fairness of such transactions.

(b) Review at least annually the Company's investment policies to determine that
they  remain in the best  interests  of the  Shareholders.  The  findings of the
Independent Directors shall be set forth in the minutes of meetings of the Board
of Directors.  Such investment  policies may be altered from time to time by the
Board of Directors with the consent of a majority of the  Independent  Directors
and without approval of the

                                       19


Shareholders upon a determination that such a change is in the best interests of
the Company and the Shareholders.

(c)  Take  reasonable  steps  to  ensure  that  the  Annual  Report  is  sent to
Shareholders and that the annual meeting is conducted pursuant to Article IV.

(d) Determine at least  annually that the total fees and expenses of the Company
are  reasonable  in light  of its Net  Assets  and Net  Income,  the  investment
experience of the Company,  and the fees and expenses of comparable  advisors in
real estate. In this regard,  the Independent  Directors will have the fiduciary
responsibility of limiting  Operating Expenses to amounts that do not exceed the
limitation set forth in Section 8.5, unless they conclude that a higher level of
expense is  justified for such a year based on unusual and nonrecurring  factors
which they deem sufficient.

Within 60 days after the end of any  fiscal  quarter  of the  Company  for which
Operating  Expenses  (for the 12 months then ended) exceed the  limitations  set
forth  in  Section  8.5,  there  shall  be sent to the  Shareholders  a  written
disclosure  of  such  fact  together  with an  explanation  of the  factors  the
Independent  Directors  considered in arriving at the conclusion that the higher
Operating  Expenses  were  justified.  In the  event the  Independent  Directors
determine  that the  excess  expenses  are  not  justified,  the  Advisor  shall
reimburse  the Company at the time and in the manner set forth in the  Company's
agreement with the Advisor.

(e) The  Independent  Directors  shall review at least  quarterly  the aggregate
borrowings, secured and unsecured, of the Company to determine that the relation
of such  borrowings to Net Assets does not exceed the  limitations  set forth in
Sections 8.8 and 9.1(k) and (l) of these Bylaws.  Any excess in borrowings  over
the  limitations  set forth in  Sections  9.1(k) and (l) shall be  approved by a
majority of the Independent  Directors and disclosed to Shareholders in the next
quarterly report of the Company, along with a justification of the excess.

(f) For all  purposes,  a  transaction  which  is  subject  to  approval  by the
Independent  Directors shall be approved if the Independent  Directors voting to
approve  the  transaction  in any  vote  of  the  Directors  or the  Independent
Directors  constitute an absolute majority of all Independent  Directors serving
at such time.

5.16 Removal of Director for Cause.  The Board of Directors  may declare  vacant
the office of a Director  who has been  declared of unsound  mind by an order of
court,  or who has pled  guilty or nolo  contendere  to or been  convicted  of a
felony involving moral turpitude. In addition, throughout the term of

                                       20


the  existence of the  Company,  any Director may be removed for cause by: (i) a
vote or written  consent of all  Directors  other than the Director who is to be
removed, or (ii) the vote of the holders of a majority of the outstanding Shares
of the Company at a meeting of the  Shareholders  called for such  purpose.  The
notice for such special meeting of Shareholders shall state that the purpose, or
one of the  purposes,  of the  meeting is to vote on the  removal of a Director.
"For cause" shall mean, for purposes of this Section, a willful violation of the
Articles  of  Incorporation  or  these  Bylaws,   or  gross  negligence  in  the
performance of a Director's duties.

5.17 Removal of Director  Without  Cause.  Any or all  Directors  may be removed
without cause upon the affirmative vote of a majority of the outstanding  Shares
entitled  to vote.  A  Director  may be removed  by the  Shareholders  only at a
meeting called for the purpose of removing him and the meeting notice must state
that the  purpose,  or one of the  purposes  of the  meeting,  is removal of the
Director.  Any reduction of the authorized number of Directors shall not operate
to remove any Director prior to the expiration such Director's term of office.

5.18 Committees. The Board of Directors may, by resolution adopted by a majority
of the authorized  number of Directors,  designate one or more committees,  each
consisting of three or more Directors,  to serve at the pleasure of the Board of
Directors.  The  Board of  Directors  may  designate  one or more  Directors  as
alternate  members of any  committee,  who may replace any absent  member at any
meeting of the committee.  The appointment of members or alternate  members of a
committee  requires   the  vote  of a  majority  of  the  authorized  number  of
Directors.  Any such committee,  to the extent provided in the resolution of the
Board of  Directors,  shall have all the  authority of the Board of Directors in
the  management  of the  business  and  affairs of the  Company,  except that no
committee  shall  have  authority  to take any  action  with  respect to (i) the
approval  of any action  requiring  Shareholders'  approval  or  approval of the
outstanding Shares, (ii) the filling of vacancies of the Board or any committee,
(iii) the fixing of  compensation  of  Directors  for  serving on the Board or a
committee,  (iv) the  adoption,  amendment  or repeal of these  Bylaws,  (v) the
amendment or repeal of any  resolution of the Board that by its express terms is
not so amendable or repealable, (vi) a distribution to Shareholders, except at a
rate or in a periodic  amount or within a price range  determined  by the Board,
and (vii)  the  appointment  of other  committees  of the  Board or the  members
thereof.  A majority of the  Directors  on all  committees  must be  Independent
Directors  and only  Independent  Directors  may serve as alternate  members for
Independent Directors on committees.  However,  notwithstanding  anything to the
contrary in these  Bylaws,  the Board of  Directors  may appoint a committee  to
administer any stock incentive plan adopted by the Company, which committee may

                                       21



have as few as two (2) Directors,  and each of whose  Directors may be either an
Independent  Director  or not  an  Independent  Director,  except  as  otherwise
provided in the applicable stock incentive plan.

5.19  Fiduciary  Relationship.  The  Directors  of the Company  have a fiduciary
relationship to the  Shareholders as provided by applicable  Virginia law, which
includes a fiduciary duty to the  Shareholders to supervise the  relationship of
the Company  with the  Advisor.  A majority of the  Independent  Directors  must
approve  matters  which these  Bylaws  state are subject to the  approval of the
Independent Directors.

5.20  Preferred  Shares and Other  Securities.  Notwithstanding  anything to the
contrary  in this  Article  V or  elsewhere  in  these  Bylaws,  holders  of any
preferred  shares  or other  Securities  of the  Company  who,  pursuant  to the
documents duly creating such preferred shares or other  Securities,  are granted
voting rights, including rights to nominate and elect Directors, shall have such
rights as set forth in the  documents  creating such  preferred  shares or other
Securities.  Furthermore,  notwithstanding  anything  to the  contrary  in these
Bylaws,  the  Directors  may  interpret  these  Bylaws and may propose and adopt
amendments  to these Bylaws as they deem  necessary or convenient to give effect
to the foregoing provision of this Section 5.20.


                                  ARTICLE VI
                                   OFFICERS

6.1 Officers. The officers of the Company shall be as determined by the Board of
Directors  and shall  include  a  President  and  Secretary,  and may  include a
Chairman  of the  Board,  Chief  Financial  Officer  (Treasurer)  and such other
officers with such titles and duties as may be appointed in accordance  with the
provisions of Section 6.3 of this Article.  Any number of offices may be held by
the same person.

6.2  Election.  The  officers of the  Company,  except  such  officers as may be
appointed in  accordance  with the  provisions  of Section 6.3 or Section 6.5 of
this Article, shall be chosen annually by the Board of Directors to serve at the
pleasure  of the Board of  Directors,  and each shall  hold his office  until he
shall  resign or shall be  removed  or  otherwise  disqualified  to serve or his
successor shall be elected and qualified.  All officers serve at the will of the
Board of  Directors  and  nothing in these By laws shall  give any  officer  any
expectation or vesting of employment.

6.3 Subordinate  Officers.  The Board of Directors may appoint other officers as
the business of the Company may require,  each of whom shall hold office for the
period,  have the


                                       22



authority and perform the duties as are provided in these Bylaws or as the Board
of Directors may from time to time determine.

6.4 Removal and Resignation.  Any officer may be removed, either with or without
cause,  by a majority of the Directors at the time in office,  at any regular or
special  meeting of the Board or, except in the case of an officer chosen by the
Board of  Directors,  by any  officer  upon whom such  power of  removal  may be
conferred by the Board of Directors.

Any  officer  may  resign at any time by giving  written  notice to the Board of
Directors or to the Chairman,  the President or to the Secretary of the Company.
A resignation  shall take effect at the date of the receipt of the notice or any
later time  specified  in the  notice;  and,  unless  otherwise  specified,  the
acceptance of the resignation shall not be necessary to make it effective.

6.5 Vacancies. A vacancy in any office because of death,  resignation,  removal,
disqualification  or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to such office.

6.6  Chairman  of the  Board.  The  Chairman  of the  Board  shall be the  Chief
Executive Officer of the Company, and, if present, shall preside at all meetings
of the Board of Directors  and  Shareholders  and exercise and perform all other
powers  and duties as may from time to time be  assigned  to him by the Board of
Directors or prescribed by these Bylaws.

6.7 President.  The President  shall,  subject to the Board of Directors and the
supervisory  powers of the  Chairman  of the Board,  have  general  supervision,
direction  and  control of the  business  of the  Company.  He shall  preside at
meetings of the  Shareholders  or at meetings of the Board of  Directors  if the
Chairman  is absent.  He shall  have  general  powers and duties of  management,
together  with any other powers and duties as may be  prescribed by the Board of
Directors.

6.8 Vice  Presidents.  In the absence or disability of the  President,  the Vice
Presidents  in order of their rank as fixed by the Board of Directors or, if not
ranked, the Vice President  designated by the Board of Directors,  shall perform
all the duties of the President  and, when so acting,  shall have all the powers
of and be  subject  to all  the  restrictions  upon,  the  President.  The  Vice
Presidents  shall have any other powers and shall  perform  other duties as from
time to time may be prescribed for them  respectively  by the Board of Directors
or these Bylaws.

6.9 Secretary.  The Secretary shall keep, or cause to be kept, a book of minutes
at the principal office, or any other place as the Board of Directors may order,
of all meetings of

                                      23


Directors or Shareholders,  with the time and place of holding,  whether regular
or special and, if special, how authorized,  the notice thereof given, the names
of those  present  at  Directors'  meetings,  the  number of Shares  present  or
represented at Shareholders' meetings and the proceedings of meetings.

The Secretary shall keep, or cause to be kept, at the principal office or at the
office of the Company's  transfer  agent, a Share register or a duplicate  Share
register showing the names of the  Shareholders and their addresses,  the number
and  classes  of  Shares  held by each  (whether  in  certificate  or  "unissued
certificate" form), the number and the date of certificates  issues, if any, and
the  number  and date of  cancellation  of  every  certificate  surrendered  for
cancellation.

The Secretary  shall give,  or cause to be given,  notice of all the meetings of
the  Shareholders  and of the Board of Directors  required by these Bylaws or by
law to be given, shall keep the seal of the Company (if any) in safe custody and
shall  have such  other  powers and shall  perform  such other  duties as may be
prescribed by the Board of Directors or these Bylaws.

6.10 Assistant Secretaries.  In the absence or disability of the Secretary,  the
Assistant  Secretaries in order of their rank as fixed by the Board of Directors
or, if not ranked, the Assistant Secretary designated by the Board of Directors,
shall  perform all the duties of the Secretary  and, when so acting,  shall have
all the powers of and be subject to all the  restrictions  upon,  the Secretary.
The  Assistant  Secretaries  shall have any other powers and shall perform other
duties as from time to time may be prescribed for them by the Board of Directors
or these Bylaws.

6.11 Chief Financial Officer. The Chief Financial Officer may also be designated
by the alternate  title of "Treasurer."  The Chief Financial  Officer shall have
custody of all moneys and securities of the Company and shall keep regular books
of account.  Such officer shall  disburse the funds of the Company in payment of
the just  demands  against  the  Company,  or as may be  ordered by the Board of
Directors,  taking proper vouchers for such  disbursements,  and shall render to
the Board of Directors from time to time as may be required of such officer,  an
account of all  transactions  as Chief  Financial  Officer and of the  financial
condition of the Company. Such officer shall perform all duties incident to such
officer  or which are  properly  required  by the  President  or by the Board of
Directors.

6.12  Assistant  Chief  Financial  Officers.  The  Assistant  Treasurer  or  the
Assistant Treasurers, in the order of their seniority,  shall, in the absence or
disability of the Chief  Financial  Officer,  or in the event of such  officer's
refusal to act, perform the duties and exercise the powers of the Chief

                                       24


Financial  Officer,  and shall have such powers and discharge such duties as may
be assigned from time to time by the President or by the Board of Directors.


                                  ARTICLE VII
                                SHARES OF STOCK

7.1  Registered   Ownership,   Share   Certificates   and  Shares  in  "Unissued
Certificate" Form.

(a)  Certificates  shall be issued  and  transferred  in  accordance  with these
Bylaws,  but need not be issued  if the  Shareholder  elects to have his  Shares
maintained  in  "unissued   certificate"   form.  The  Persons  in  whose  names
certificates  of Shares in "unissued  certificate"  form are  registered  on the
records  of the  Company  shall be deemed  the  absolute  owners  of the  Shares
represented thereby for all purposes of the Company; but nothing in these Bylaws
shall be deemed to  preclude  the  Directors  or  officers,  or their  agents or
representatives, from inquiring as to the actual ownership of Shares. The Shares
are  non-assessable.  Until a transfer  is duly  effected  on the records of the
Company,  the Directors shall not be affected by any notice of transfer,  either
actual or  constructive.  The receipt by the Person in whose name any Shares are
registered on the records of the Company or of the duly authorized agent of that
Person, or if the Shares are so registered in the names of more than one Person,
the  receipt by any one of these  Persons,  or by the duly  authorized  agent of
that Person,  shall be a sufficient discharge for all dividends or distributions
payable or  deliverable  in respect of the Shares and from all  liability to see
the application of those funds.  The certificates of Shares of the capital stock
of the  Company,  if any,  shall be in a form  consistent  with the  Articles of
Incorporation  and the laws of the Commonwealth of Virginia as shall be approved
by the Board of Directors.  All certificates shall be signed by (i) the Chairman
of the Board or the President or a Vice  President and (ii) the Treasurer or the
Secretary or any Assistant  Secretary,  certifying  the number of Shares and the
class or series of Shares owned by the Shareholder. Any or all of the signatures
on the certificate may be facsimile signatures.

(b) Notwithstanding anything to the contrary in this Section 7.1 or elsewhere in
these  Bylaws,  if the documents  duly  creating any  preferred  shares or other
Securities of the Company provide that such preferred shares or other Securities
of the Company are to be  "uncertificated,"  certificates  need not be issued in
respect of such preferred  shares or other  Securities.  The provisions of these
Bylaws  addressing  Shares held in  uncertificated  form shall apply to any such
preferred shares or other Securities . Notwithstanding  anything to the contrary
in these Bylaws, the Directors may interpret these Bylaws and may

                                       25


propose  and adopt such  amendments  to these  Bylaws as shall be  necessary  or
convenient to give effect to the foregoing provisions of this Section 7.1(b).

7.2 Transfer of Shares.  Subject to the  provisions  of law and of Sections 7.3,
7.4 and 7.5,  Shares shall be transferable on the records of the Company only by
the record  holder or by his agent  thereunto  duly  authorized  in writing upon
delivery to the Directors or a transfer agent of the certificate or certificates
(unless held in "unissued  certificate"  form,  in which case an executed  stock
power duly  guaranteed must be delivered),  properly  endorsed or accompanied by
duly  executed  instruments  of  transfer  and   accompanied  by  all  necessary
documentary   stamps   together  with  evidence  of  the   genuineness  of  each
endorsement,  execution or authorization  and of other matters as may reasonably
be required by the  Directors or transfer  agent.  Upon  delivery,  the transfer
shall be  recorded  in the  records of the  Company  and a new  certificate,  if
requested,  for the Shares so transferred  shall be issued to the transferee and
in  case  of a  transfer  of  only  a  part  of the  Shares  represented  by any
certificate  or account,  a  new  certificate  or  statement  of account for the
balance shall be issued to the transferor.  Any Person becoming  entitled to any
Shares in consequence of the death of a Shareholder or otherwise by operation of
law shall be  recorded  as the  holder of such  Shares  and shall  receive a new
certificate, if requested, but only upon delivery to the Directors or a transfer
agent of  instruments  and  other  evidence  required  by the  Directors  or the
transfer agent to demonstrate that  entitlement,  the existing  certificate  (or
appropriate  instrument of transfer if held in "unissued  certificate" form) for
the Shares and any necessary releases from applicable governmental  authorities.
Nothing in these Bylaws shall impose upon the Directors or a transfer  agent any
duty or limit their rights to inquire into adverse claims.

7.3 Disclosures by Holders of Shares;  Redemption of Shares.  The Holders of the
Shares shall upon demand  disclose to the Directors in writing such  information
with respect to direct and indirect  ownership of their Shares as the  Directors
deem  necessary to comply with the  provisions  of the Internal  Revenue Code of
1986, as amended, and applicable regulations,  as amended, or to comply with the
requirements of any taxing authority.  If the Directors shall at any time and in
good faith be of the opinion  that direct or indirect ownership of the Shares of
the Company has or may become  concentrated to an extent which would prevent the
Company  from  qualifying  as a REIT under the REIT  provisions  of the Internal
Revenue Code,  the  Directors  shall have the power by lot or other means deemed
equitable by them to prevent the transfer and/or call for redemption of a number
of the Shares  sufficient  in the opinion of the  Directors to maintain or bring
the  direct or  indirect  ownership  of  the  Shares  into  conformity  with the
requirements for a REIT. The redemption

                                       26


price  shall be (i) the last  reported  sale  price  of the  Shares  on the last
business day prior to the redemption date on the principal  national  securities
exchange on which the Shares are listed or  admitted to trading,  or (ii) if the
Shares are not so listed or admitted to trading,  the average of the highest bid
and lowest  asked  prices on such last  business  day as reported by the NASDAQ,
National Quotation Bureau or a similar organization  selected by the Company for
that purpose, or (iii) otherwise, as determined  in good faith by the Directors.
The holders of any Shares so called for redemption  shall be entitled to payment
of such redemption  price within 21 days of the redemption  date. From and after
the date fixed for  redemption,  the  holders of such  Shares  shall cease to be
entitled to  dividends,  distributions,  voting  rights and other  benefits with
respect to the  Shares,  excepting  only the right to payment of the  redemption
price  fixed as  described  above.  The  redemption  date  with  respect  to any
Shareholders shall be  the  date  specified by the  Directors  which is not less
than one week after the date  postmarked  on the  disclosure  demand made by the
Directors under this Section 7.3, or, if such date is not a business day, on the
next  business  day  thereafter.  For the purpose of this  Section 7.3, the term
"individual" shall be construed as provided in Section 542(a)(2) of the Internal
Revenue Code of 1986, as amended, or any successor provisions and "ownership" of
Shares shall be determined  as provided in  Section 544 of the Internal  Revenue
Code of 1986, as amended, or any successor provision.

7.4 Right to Refuse to Transfer the Shares.  Whenever it is deemed by them to be
reasonably necessary to protect the tax status of the Company, the Directors may
require  statements  or  affidavits  from any holder of the  Shares or  proposed
transferee of the Shares or warrants to purchase such Shares,  setting forth the
number of Shares (and warrants to purchase such Shares) already owned by him and
any related  Person  specified in the form  prescribed by the Directors for that
purpose. If, in the opinion of the Directors, which shall be conclusive upon any
proposed  transferor or proposed  transferee of Shares,  or warrants to purchase
such Shares,  any proposed  transfer or exercise would  jeopardize the status of
the Company as a REIT under the Internal  Revenue Code of 1986, as amended,  the
Directors may refuse to permit the transfer or exercise.  Any attempted transfer
or exercise as to which the  Directors  have refused their  permission  shall be
void and of no  effect  to  transfer  any legal or  beneficial  interest  in the
Shares.  All contracts for the sale or other  transfer or exercise of the Shares
or warrants to purchase such Shares, shall be subject to this provision.

7.5     Limitation on Acquisition of Shares.

(a)(i) Subject to the provisions of Section 7.5(b),  no Person may own in excess
of 9.8% of the total number of the issued and outstanding Shares of any separate
class or

                                       27


series,  and no Shares  shall be  transferred  (or  issued)  to any  person  if,
following the transfer or issuance, the Person's direct or indirect ownership of
Shares would exceed this limit.  For the purpose of this Section 7.5,  ownership
of Shares shall be computed in accordance  with  Internal  Revenue Code Sections
856(h), 542(a)(2) and 544. The term "transfer" shall include any sale, transfer,
gift,  assignment,  devise or other disposition of Shares,  whether voluntary or
involuntary,  whether of  record,  constructive  or  beneficial,  and whether by
operation of law or otherwise.

(ii) In the event any  Person  acquires  Excess  Shares  (as  defined  below) in
contravention  of the  limitation on  acquisition of Shares set forth in Section
7.5(a)(i),  such Excess Shares may be redeemed by the Company at the  discretion
of the Board of Directors. The redemption price for redeemed Excess Shares shall
be the  lesser of (i) the price  paid for the  Excess  Shares (or if there is no
purchase  price,  at a price to be determined by the Board of Directors,  in its
sole discretion, but no lower than the lowest market price for the Common Shares
during the year prior to the date the Company exercises its purchase option) and
(ii) the fair market value of such Excess Shares, which shall be the fair market
value of the Shares as determined in good faith by the Board of Directors or, if
the Shares  are listed on a national  securities  exchange,  the  closing  price
(average of closing bid and asked  prices if the Shares are quoted on the NASDAQ
National  Market System) on the last business day prior to the redemption  date.
To redeem Excess Shares,  the Directors shall give a notice of redemption to the
holder of such Excess Shares not less than one week before the date fixed by the
Directors for redemption.  The holder of such Excess Shares may sell such Excess
Shares before the date fixed for redemption. The redemption right granted to the
Company by this Section  7.5(a)(ii) shall be in addition to any other redemption
right granted by these Bylaws or by law.

(b) If Shares  are  purportedly  acquired  by any  Person in  violation  of this
Section  7.5,  the  acquisition  shall be valid  only to the  extent it does not
result in a violation of this Section 7.5, and the acquisition shall be null and
void with respect to the excess ("Excess  Shares")  unless the Person  acquiring
the Excess Shares provides the  Independent  Directors with evidence so that the
Independent  Directors are satisfied that the Company's  qualification as a REIT
will not be  jeopardized.  Excess  Shares  shall be deemed to have been acquired
and to be held on behalf of the  Company,  and,  as the  equivalent  of treasury
shares for that purpose, shall not be considered to be outstanding for quorum or
voting purposes, and shall not be entitled to receive dividends, interest or any
other distribution.  Holders of Excess Shares are not entitled to voting rights,
dividends  or  distributions.  If, after the  purported  transfer or other event
resulting in an exchange of

                                       28


Common  Shares for Excess  Shares and before  discovery  by the  Company of such
exchange,  (i) voting rights are  purportedly  exercised  with respect to Common
Shares which have become Excess Shares,  or (ii) dividends or distributions  are
paid with respect to Common Shares that were exchanged for Excess  Shares,  then
(A) any votes  attributable  to such Excess Shares will be deemed  rescinded and
void ab initio,  and (B) such dividends or distributions are to be repaid to the
Company upon demand.

(c) This  Section  7.5  shall  apply to the  acquisition  of Shares  only  after
conclusion  of the  Company's  initial  public  offering  of its  Shares,  and a
Shareholder  will not be required to dispose of Excess Shares  acquired prior to
the conclusion of that  offering.  So long as any Person holds more than 9.8% of
the  outstanding  Shares,  a lower  percentage  limit may be  established by the
Directors to the extent  necessary to assure,  to the extent  possible,  that no
five persons own in the aggregate more than 50% of the outstanding Shares.

(d) The Company  shall,  if deemed  necessary  or  desirable  to  implement  the
provisions  of any portion of this Article  VII,  include on the face or back of
each Share certificate issued by the Company an appropriate legend referring the
holder of the certificate to the  restrictions  contained in any portion of this
Article VII and stating that the complete  text of Article VII, or these Bylaws,
is on file with the  Secretary of the Company at the Company's  offices,  and/or
will be furnished without charge by the Company to any Shareholder.

(e) Subject in all  respects to Section  11.16  hereof,  nothing in these Bylaws
(other than such  Section  11.16)  shall limit the ability of the  Directors  to
impose,  or to seek judicial or other  imposition of additional  restrictions if
deemed  necessary or  advisable to protect the Company and the  interests of its
Shareholders by preservation of the Company's status as a qualified REIT.

(f) If any provision of this Section 7.5 is  determined to be invalid,  in whole
or in part, by any federal or state court having  jurisdiction,  the validity of
the  remaining  provisions  shall not be  affected  and the  provision  shall be
affected only to the extent  necessary to comply with the  determination  of the
court.

(g) For purposes of Section 7.3, 7.4 and 7.5,  "Shares"  means the Common Shares
of the  Company  and any other  stock of the  Company  (as "stock" is defined in
applicable   Internal   Revenue  Code  Sections   addressing   stock   ownership
requirements for REITs).

(h) The Advisor and its  Affiliates  shall not purchase in the offering  made by
the Company's Prospectus dated

                                       29


December  31,  1992 more than  2.5% of the total  number of Shares  sold in such
offering.  This  limitation  shall not apply to any Shares issued  pursuant to a
stock incentive plan duly adopted by the Company.

(i) The Company shall have the right to issue fractional Shares.

7.6 Lost or Destroyed  Certificates.  The holder of any Shares shall immediately
notify the Company of any loss or destruction of the Share certificates, and the
Company may issue a new certificate in the place of any  certificate  alleged to
have been lost or destroyed  upon approval of the Board of Directors.  The Board
may, in its  discretion,  as a condition  to  authorizing  the issue of such new
certificate,  require  the owner of the lost or  destroyed  certificate,  or his
legal  representative,  to make proof  satisfactory to the Board of Directors of
the loss or  destruction  and to give the Company a bond or other  security,  in
such  amount and with such surety or  sureties,  as the Board of  Directors  may
determine as indemnity against any claim that may be made against the Company on
account of the certificate alleged to have been lost or destroyed.

7.7 Dividend Record Date and Closing Stock Books. The Board of Directors may fix
a date in the future as a record date for the  determination of the Shareholders
entitled to receive any dividend or  distribution  or any allotment of rights or
to exercise rights with respect to any change, conversion or exchange of Shares.
The  record  date so fixed  shall  not be more than 60 days or less than 10 days
prior to the date of the event  for the  purposes  of which it is fixed.  When a
record  date is so  fixed,  only  Shareholders  of  record  on that day shall be
entitled to receive the  dividend,  distribution  or  allotment  of rights or to
exercise  the rights,  as the case may be,  notwithstanding  any transfer of any
Shares on the books of the Company after the record date.

7.8 Dividend  Reinvestment Plan. The Company's Dividend  Reinvestment Plan shall
provide that:

(a) all material  information  regarding the distribution to the Shareholder and
the effect of  reinvesting  such  distribution,  including the tax  consequences
thereof, shall be provided to the Shareholder at least annually, and

(b) each Shareholder  participating in the Dividend Reinvestment Plan shall have
a reasonable  opportunity  to withdraw  from the Dividend  Reinvestment  Plan at
least  annually after receipt of the  information  required by Section 7.8(a) of
these Bylaws.

                                       30




                                  ARTICLE VIII
                      EMPLOYMENT OF ADVISOR, LIMITATION
                          ON EXPENSES AND LEVERAGE

8.1 Employment of Advisor.  The Directors have absolute and exclusive control of
the management of the Company,  its property and the  disposition  thereof.  The
Directors  are  responsible  for the  general  policies  of the  Company and for
general  supervision  of the business of the Company  conducted by all officers,
agents, employees,  advisors, managers or independent contractors of the Company
as may be necessary to insure that the business  conforms to the  provisions  of
these Bylaws. However, the Directors shall not be required personally to conduct
all the business of the Company, and subject to their ultimate responsibility as
stated above, the Directors shall have the power to appoint,  employ or contract
with  any  Person  (including  one or more  of  themselves  or any  corporation,
partnership, or company in which one or more of them may be directors, officers,
stockholders,  partners or directors)  as the  Directors  may deem  necessary or
proper for the  transaction  of the business of the Company.  The Directors  may
employ or contract  with such a Person and the  Directors  may grant or delegate
authority to any such Person as the Directors may in their sole  discretion deem
necessary or  desirable  without  regard to whether  that  authority is normally
granted or delegated by Directors.

The  Directors  (subject to the  provisions of this Article VIII) shall have the
power to determine the terms and compensation of the Advisor or any other Person
whom they may employ or with whom they may contract; provided, however, that any
determination  to employ or contract  with any Director or any Person of which a
Director is an Affiliate,  shall be valid only if made,  approved or ratified by
the  Independent  Directors.  The  Directors  may exercise  broad  discretion in
allowing the Advisor to administer  and regulate the  operations of the Company,
to act as agent for the Company,  to execute documents on behalf of the Company,
and to make executive  decisions  which conform to general  policies and general
principals previously established by the Directors.  The Directors must evaluate
the performance of the Advisor and the criteria used in such evaluation shall be
reflected in the minutes of the meeting.

Notwithstanding  anything  to the  contrary  in the  advisory  contract or these
Bylaws,  the Advisor shall not be required to, and shall not, advise the Company
as to any  investments in  securities,  except when, and to the extent that, the
Advisor and the Company  specifically  agree (i) that such advice is  desirable,
and (ii) that such advice can be rendered  consistently  with  applicable  legal
requirements,  including  any  applicable  provisions  of  relevant  "investment
advisor"  laws.  The Directors and officers of the Company shall be  responsible
for decisions as to investments in securities, except insofar as the

                                       31


Directors elect to consult with (i) the Advisor in compliance with the preceding
sentence, or (ii) any other Person in compliance with any applicable laws.

8.2 Term.  The  Directors  shall not enter into any advisory  contract  with the
Advisor unless the contract has a term of no more than one year and provides for
annual  renewal or extension  thereafter,  except that the initial  contract may
have a term ending one year after Final  Closing,  where "Final  Closing" is the
last  closing of the sale of Shares  offered by the  Prospectus.  The  Directors
shall not enter into a similar  contract  with any Person of which a Director is
an   Affiliate  unless the  contract  provides for renewal or  extension  by the
Independent Directors.  The advisory contract with the Advisor may be terminated
by the Advisor upon 60 days' written  notice or by the Company  without cause by
action of the Independent Directors of the Company upon 60 days' written notice,
in a manner to be set  forth in the  advisory  contract  with the  Advisor.  The
advisory  contract  shall also require the Advisor to cooperate with the Company
to provide an orderly management transition after any termination. The Directors
shall  determine  that any  successor   Advisor  (i) is  qualified   to  perform
advisory  functions  for the  Company  and (ii)  can  justify  the  compensation
provided for in the advisory contract.

8.3 Other Activities of Advisor. The Advisor shall not be required to administer
the investment  activities of the Company as its sole and exclusive function and
may have other business  interests and may engage in other activities similar or
in addition to those  relating to the  Company,  including  the  performance  of
services and advice to other  Persons  (including  other real estate  investment
companies) and the management of other investments (including investments of the
Advisor and its Affiliates).  The Directors may request the Advisor to engage in
other activities which complement the Company's investment,  and the Advisor may
receive  compensation  or commissions  for those  activities from the Company or
other Persons.

The Advisor  shall be required to use its best  efforts to present a  continuing
and suitable  investment  program to the Company  which is  consistent  with the
investment  policies and objectives of the Company,  but neither the Advisor nor
any  Affiliate  of the  Advisor  shall be  obligated  generally  to present  any
particular investment opportunity to the Company even if the opportunity is of a
character  which,  if presented  to the Company,  could be taken by the Company,
and, subject to the forgoing,  shall be  protected in taking for its own account
or recommending to others the particular investment opportunity.

Upon  request of any  Director,  the  Advisor  and any Person who  controls,  is
controlled by, or is under common  control with the Advisor,  shall from time to
time promptly furnish the

                                       32


Directors with information on a confidential  basis as to any investments within
the  Company's  investment  policies made by the Advisor or the other Person for
its own account.

8.4 Limitation on Offering and  Organization  Expenses and Acquisition  Fees and
Expenses.  The  Offering  and  Organization  Expenses  paid  by the  Company  in
connection  with the Company's  formation or the offering of its Shares or other
Securities  shall in each case be  reasonable  and in no event  exceed an amount
equal to 15% of the gross proceeds raised in any such offering.

The total of all Acquisition  Fees and Acquisition  Expenses paid by the Company
in  connection  with the  purchase  of real  property  by the  Company  shall be
reasonable  and shall in no event  exceed an amount  equal to 6% of the Contract
Price for such real  property,  or, in the case of a  mortgage  loan,  6% of the
funds advanced,  unless a majority of the Directors (including a majority of the
Independent  Directors) not otherwise  interested in the transaction approve the
transaction  as  being  commercially  competitive,  fair and  reasonable  to the
Company.

Any Offering  and  Organization  Expenses or  Acquisition  Fees and  Acquisition
Expenses  incurred by the Company in excess of the permitted limits set forth in
this Section 8.4 shall be payable by the Advisor  immediately upon demand of the
Company.

8.5  Limitation  on  Operating  Expenses.  The total  Operating  Expenses of the
Company,  including  fees paid to the Advisor,  shall not exceed in any year the
greater of 2% of the total Average  Invested Assets of the Company or 25% of the
Net Income of the Company for such year.  Subject to the determination  referred
to in Section 5.14(d), the Advisor shall reimburse the Company at least annually
for the  amount by which  Operating  Expenses  of the  Company  exceed the above
limitations.  All figures used in the foregoing  computation shall be determined
in  accordance  with  generally  accepted  accounting  principals  applied  in a
consistent  basis.  The  compensation  of the  Advisor  shall be  computed by an
independent  certified public accountant at the end of each year and there shall
be made any necessary  adjustments between the compensation so computed and that
already paid.

8.6  Limitation on Real Estate  Brokerage  Commissions on Purchase and Resale of
Property.  If the Advisor,  any  Director or any  Affiliate  thereof  provides a
substantial  amount of the  services  in the effort to purchase or sell the real
property of the Company, then such Person may receive a real estate or brokerage
commission which is reasonable,  customary and competitive in light of the size,
type and location of such  property;  provided  that such  commission  shall not
exceed an amount  equal to 2% of the  contracted for purchase or sales price for
such property. In the event such real estate or brokerage

                                       33


commissions  are also payable to any other party pursuant to such  transactions,
the  Advisor,  any Director or any  Affiliate  may receive up to one-half of the
brokerage commission paid but in no event to exceed an amount equal to 2% of the
contracted  for  purchase or sales price for such  property.  In  addition,  the
amount  paid  when  added to the sums  paid to  unaffiliated  parties  in such a
capacity shall not exceed the lesser of the Competitive  Real Estate  Commission
or an amount equal to  6% of the  contracted  for sales  price.  The Company may
enter into an agreement  (with any term approved by the  Directors)  pursuant to
which the  Advisor,  any  Director or any  Affiliate  thereof  will  provide the
services  referred  to in this  Section  with  respect  to all of the  Company's
properties, and will receive compensation therefor.

8.7 Limitation on Incentive Fees. An incentive fee based upon an interest in the
gain from the sale,  financing or  refinancing  of real property of the Company,
for which  full  consideration  is not paid in cash or  property  of  equivalent
value,  shall be allowed  provided the amount or  percentage of such interest is
reasonable.  Such an  interest  in gain  from the sale of real  property  of the
Company shall be considered  reasonable if it does not exceed 15% of the balance
of such gain  remaining after payment to Shareholders,  in the aggregate,  of an
amount equal to 100% of the adjusted price per Share (defined to be the original
issue price of the Common Shares reduced by prior distributions of gain from the
sale of the Company's assets), plus an amount equal to a 6% per annum cumulative
(noncompounded)  return on the adjusted price per Share. In the case of multiple
Advisors, Advisors and their Affiliates shall be allowed incentive fees provided
such  fees are  distributed  by a  proportional  method  reasonably  designed to
reflect the value added to such assets by each respective  Advisor or Affiliate.
Distribution of incentive fees to Advisors and their Affiliates in proportion to
the length of time served as Advisor while such property was held by the Company
or in ratio to the fair market  value of the asset at the time of the  Advisor's
termination,  and the fair market value of the asset upon its disposition by the
Company shall be considered  reasonable methods by which to apportion  incentive
fees.

8.8  Limitations on Leverage.  All borrowings by the Company must be approved by
the Directors.  The aggregate borrowings of the Company,  secured and unsecured,
shall be  reasonable  in  relation to the Net Assets of the Company and shall be
reviewed by the Directors at least quarterly.

                                       34


                                  ARTICLE IX
                  RESTRICTIONS ON INVESTMENTS AND ACTIVITIES

9.1  Restrictions.  Notwithstanding  any other  provision of these  Bylaws,  the
Company shall not:

(a) invest more than 10% of the total assets of the Company in  Unimproved  Real
Property or mortgage loans on Unimproved Real Property;

(b) invest in commodities or commodity future contracts or effect short sales of
commodities or securities, except when done solely for hedging purposes;

(c) invest in or make mortgage loans on property unless the Company shall obtain
a mortgagee's or owner's title insurance policy or commitment as to the priority
of the mortgage or the condition of the title;

(d) invest in contracts for the sale of real estate  unless they are  recordable
in the chain of title;

(e) make or invest in mortgage loans,  including  construction loans, on any one
property  if the  aggregate  amount of all  mortgage  loans  outstanding  on the
property  (at the time the  Company  makes or  invests  in its  mortgage  loan),
including the loans of the Company,  would exceed 85% of the appraised  value of
the property;

(f)  make or  invest  in  junior  mortgage  loans  (provided  that  this and the
preceding  limitation shall not apply to the Company taking back secured debt in
connection with the sale of any property);

(g)  issue  securities  that are  redeemable,  unless  the  Board  of  Directors
determines  that the  issuance  of  redeemable  securities,  such as  redeemable
preferred shares, is in furtherance of the financing plans and objectives of the
Company;

(h) issue debt securities  unless the historical  debt service  coverage (in the
most recently completed fiscal year) as adjusted for known changes is sufficient
to  properly  service  the  higher  level of debt or unless the cash flow of the
Company (for the last fiscal year) excluding extraordinary,  nonrecurring items,
is  sufficient  to  cover  the  debt  service  on  all  debt  securities  to  be
outstanding;

(i) invest in the equity securities of any  non-governmental  issuer,  including
other REITs or limited  partnerships  for a period in excess of 18 months unless
the  Board


                                       35




of  Directors  determines  such action to be in  furtherance  of the  investment
objectives and policies of the Company;


(j)  issue  equity  securities  on a  deferred  payment  basis or other  similar
arrangement;

(k) incur any  indebtedness,  secured or  unsecured,  which  would  result in an
aggregate  amount  of  indebtedness  in  excess  of 100% of Net  Assets  (before
subtracting any  liabilities),  unless any excess borrowing over such 100% level
shall be approved by a majority of the  Independent  Directors  and disclosed to
the  Shareholders  in the next  quarterly  report  of the  Company,  along  with
justification for such excess;

(l) allow aggregate  borrowings of the Company to exceed 50% of the Adjusted Net
Asset Value (before  subtracting  any  liabilities)  of the Company,  unless any
excess  borrowing  over such 50% level  shall be  approved  by a majority of the
Independent  Directors and disclosed to the  Shareholders  in the next quarterly
report of the Company, along with justification for such excess;

(m) invest in single-family  residential homes,  condominiums,  secondary homes,
resort or recreation properties,  nursing homes, gaming facilities,  mobile home
parks,  any other  commercial  or  industrial  properties  (other than  shopping
centers),  or undeveloped  land except in connection  with the acquisition of an
existing apartment complex or shopping center;

(n) engage in any short sale, underwrite or distribute,  as an agent, securities
issued by others, or engage in trading, as compared with investment  activities;
and

(o)  acquire  Securities  in any  company  holding  investments  or  engaging in
activities prohibited by the Internal Revenue Code of 1986, as amended, Virginia
law or this Section 9.1.

The  foregoing  limitations  shall not limit  the  manner in which any  required
investment  by the Advisor or its  Affiliates in the Company is made or preclude
the  Company  from  structuring  an  investment  in real  property  to  minimize
Shareholder  liability and  facilitate  the  investment  policies of the Company
under Article IX.


                                  ARTICLE X
          TRANSACTIONS WITH AFFILIATES; CERTAIN DUTIES AND LIABILITIES
              OF DIRECTORS, SHAREHOLDERS, ADVISOR AND AFFILIATES

10.1    Transactions with Affiliates.


                                       36



(a) Neither the Advisor nor any Affiliate of the Advisor shall sell, transfer or
lend any assets or  property  to the Company or  purchase,  borrow or  otherwise
acquire any assets or property from the Company, directly or indirectly,  unless
the transaction comes within one of the following exceptions:

(i) the  transaction  consists of the  acquisition  of property or assets at the
formation of the Company or shortly  thereafter,  and is fully  disclosed in the
Prospectus; or

(ii) the  transaction  is a borrowing  of money by the Company on terms not less
favorable than those then prevailing for comparable arms-length borrowings; or

(iii) the  transaction  consists of the  acquisition by the Company of federally
insured or guaranteed  mortgages at prices not  exceeding  the currently  quoted
prices  at  which  the  Federal  National  Mortgage  Association  is  purchasing
comparable mortgages; or

(iv) the  transaction  consists  of the  acquisition  of other  mortgages  if an
Appraisal is obtained  concerning the underlying  property and on terms not less
favorable  to the  Company  than  similar  transactions  involving  unaffiliated
parties; or

(v) the transaction consists of the acquisition by the Company of other property
at prices not exceeding  the fair value thereof as determined by an  independent
Appraisal.

All of the  above  transactions  and all  other  transactions  (other  than  the
entering into, and the initial term under, the Advisory Agreement,  the Property
Acquisition/Disposition  Agreement,  and the Property  Management  Agreement for
each property  acquired by the Company,  each of which agreement is specifically
disclosed in the Prospectus),  whether such transaction involves the transfer of
property,  the lending of money or the rendition of any  services,  in which any
such Persons have any direct or indirect interest shall be permitted only if:

(i) such  transaction has been approved by the affirmative  vote of the majority
of the Independent Directors; and

                                       37


(ii) if the  transaction  involves the purchase or acquisition of property,  the
purchase or  acquisition  from any such Person is on terms not less favorable to
the Company than those then prevailing for arms-length  transactions  concerning
comparable  property (based upon a determination of a majority of the Directors,
including a majority of the Independent Directors); and

(iii) each such  transaction is in all respects on such terms at the time of the
transaction and under the circumstances then prevailing,  fair and reasonable to
the Shareholders of the Company and, in the case of a purchase or acquisition of
property,  at a price to the  Company no  greater  than the cost of the asset to
such  Persons  (based  upon a  determination  of a  majority  of the  Directors,
including  a  majority  of the  Independent  Directors)  or, if the price to the
Company  is  in excess of such cost,  then  substantial  justification  for such
excess  must  exist  and  such  excess  is  not   unreasonable   (based  upon  a
determination  of a majority  of the  Directors,  including  a  majority  of the
Independent Directors).

(b) Neither the Advisor nor any  Affiliate of the Advisor  shall invest in joint
ventures with the Company,  unless (i) such transaction has been approved by the
affirmative  vote  of  a  majority  of  the  Independent  Directors;   (ii)  the
transaction  is on terms not less  favorable  to the  Company  than  those  then
prevailing for comparable  arms-length  transactions (based upon a determination
of a  majority  of the  Directors,  including  a  majority  of  the  Independent
Directors);  and (iii) each such transaction is in all respects on such terms at
the time of the transaction and under the  circumstances  then prevailing,  fair
and reasonable to the Shareholders of the Company and on substantially  the same
terms and  conditions as those received by other joint  venturers  (based upon a
determination  of a majority  of the  Directors,  including  a  majority  of the
Independent Directors).

10.2  Restriction  of Duties and  Liabilities.  The duties  and  liabilities  of
Shareholders,  Directors  and  officers  shall in no event be  greater  than the
duties and  liabilities  of  shareholders,  directors and officers of a Virginia
corporation. The Shareholders, Directors and officers shall in no event have any
greater duties or  liabilities  than those imposed by applicable law as shall be
in  effect  from  time to  time.  However,  in no event  shall  the  duties  and
liabilities  of  Shareholders,  Directors and officers be inconsistent  with the
standards contained in the Articles of Incorporation.

                                       38


10.3 Persons  Dealing with  Directors or Officers.  Any act of the  Directors or
officers  purporting  to be done in  their  capacity  as such  shall,  as to any
Persons  dealing in good faith with the Directors or officers,  be  conclusively
deemed to be within the  purposes  of this  Company and within the powers of the
Directors and officers.

The  Directors may authorize any officer or officers or agent or agents to enter
into any  contract  or execute any  instrument  in the name and on behalf of the
Company and/or Directors.

No Person  dealing in good faith with the  Directors  or any of them or with the
authorized officers,  employees, agents or representatives of the Company, shall
be bound to see to the  application of any funds or property  passing into their
hands or control. The receipt of the Directors, or any of them, or of authorized
officers,  employees,  agents, or representatives of the Company,  for moneys or
other considerations, shall be binding upon the Company.

10.4  Reliance.  The  Directors  and  officers  may consult with counsel and the
advice or opinion of the counsel shall be full and complete personal  protection
to all of the  Directors and officers in respect of any action taken or suffered
by them in good faith and in reliance on and in  accordance  with such advice or
opinion.  In discharging  their duties,  Directors and officers,  when acting in
good faith,  may rely upon  financial  statements of the Company  represented to
them to be correct by  the Chairman or the officer of the Company  having charge
of its  books of  account,  or stated  in a  written  report  by an  independent
certified  public  accountant  fairly to present the  financial  position of the
Company.  The  Directors may rely,  and shall be personally  protected in acting
upon any instrument or other document believed by them to be genuine.

10.5 Income Tax Status.  Without  limitation of any rights of indemnification or
non-liability of the Directors, the Directors by these Bylaws make no commitment
or representation that the Company will qualify for the dividends paid deduction
permitted by the Internal  Revenue Code of 1986,  as amended,  and the Rules and
Regulations  pertaining  to real estate  investment  trusts  under the  Internal
Revenue  Code of 1986,  as amended,  and any such  failure to qualify  shall not
render the  Directors  liable to  the  Shareholders or to any other Person or in
any manner operate to annul the Company.

                                       39


                                  ARTICLE XI
                                MISCELLANEOUS

11.1 Competing Programs. Nothing in these Bylaws shall be deemed to prohibit any
Affiliate of the Company from dealing,  or otherwise  engaging in business with,
Persons  transacting  business  with  the  Company  or from  providing  services
relating to the purchase,  sale,  management,  development  or operation of real
property  and  receiving   compensation  therefor,  not  involving  any  rebate,
reciprocal  arrangement  or other  transaction  which  would  have the effect of
circumventing  any  restrictions   set forth  herein   relating to the  dealings
between the Company and its Affiliates. The Company shall not have any right, by
virtue of these  Bylaws,  in or to such other  ventures or  activities or to the
income or proceeds derived therefrom,  and the pursuit of such ventures, even if
competitive  with the business of the Company,  shall not be deemed  wrongful or
improper.  No  Affiliate  of the  Company  shall be  obligated  to  present  any
particular investment opportunity to the Company, even if such opportunity is of
a character  which, if presented to the Company,  could be taken by the Company;
provided, however, that until substantially all the net proceeds of the offering
of the Shares have been invested or committed to  investment,  the Sponsor shall
be obligated to present to the Company any investment opportunity which is of an
amount and  character  which,  if presented to the Company,  would be a suitable
investment for the Company.  To the extent necessary,  the Sponsor shall seek to
allocate investment  opportunities between  the Company and other entities based
upon  differences  in  investment  policies and  objectives,  the make-up of the
investment portfolio of each entity, the amount of cash available to each entity
for investment  financing,  the estimated  income tax effects of the purchase on
each  entity,  and the  policies of each  relating to  leverage.  Subject to the
limitations in this Section,  it will be within the discretion of the Sponsor to
allocate the investment  opportunities as it deems advisable.  The Sponsor shall
attempt to  resolve any other  conflicts  of  interests  between the Company and
others by exercising the good faith required of fiduciaries.

11.2  Corporate  Seal.  The Company shall have a corporate seal in the form of a
circle  containing  the name of the  Company  and such  other  details as may be
required by the Board of Directors.

11.3  Inspection of Bylaws.  The Company  shall keep at its principal  office in
this  Commonwealth  for the  transaction  of  business,  a list of the names and
addresses  of the  Company's  Shareholders  and  the  original  or a copy of the
Bylaws,  as  amended,  certified  by the  Secretary,  which  shall  be  open  to
inspection by Shareholders at any reasonable time during office hours.

                                       40


11.4  Inspection  of Corporate  Records.  Shareholders  of the  Company,  or any
holders of a voting  trust  certificate,  shall  have the right to  inspect  the
accounting  books and records of the Company,  and the minutes of proceedings of
the  Shareholders  and the Board and  committees of the Board as provided by the
Virginia Stock Corporation Act.

11.5  Checks,  Drafts,  Etc.  All checks,  drafts or other orders for payment of
money,  notes or  other  evidences  of  indebtedness,  issued  in the name of or
payable to the Company, shall be signed or endorsed by the Person or Persons and
in the  manner as from time to time shall be  determined  by  resolution  of the
Board of Directors.

11.6 Contracts,  Etc., How Executed. The Board of Directors,  except as provided
elsewhere in these  Bylaws,  may  authorize  any officer or officers or agent or
agents to enter into any contract or execute any  instrument  in the name of and
on behalf of the Company.  That authority may be general or confined to specific
instances.  Unless so  authorized  by the  Board of  Directors  or as  otherwise
provided in these Bylaws, no officer,  agent or employee shall have any power or
authority  to bind the Company by any  contract or  engagement  or to pledge its
credit to render it liable for any purpose or to any amount.

11.7  Representation  of  Shares  of Other  Corporations.  The  Chairman  or the
President  or, in the event of their  absence or  inability  to serve,  any Vice
President  and  the  Secretary  or  Assistant  Secretary  of this  Company,  are
authorized to vote, represent and exercise, on behalf of the Company, all rights
incidental  to any and all shares of any other  company  standing in the name of
the  Company.  The  authority  granted to such  officers to vote or represent on
behalf of the  Company  any and all  shares  held by  the  Company  in any other
company may be exercised by any authorized Person in person or by proxy or power
of attorney duly executed by the officers.

11.8 Annual Report. The Board of Directors of the company shall cause to be sent
to the  Shareholders,  not later  than 120 days after the close of the fiscal or
calendar year, and not less than 30 days before the date of the Company's annual
meeting of  Shareholders  as provided in Section 4.2 of these Bylaws,  an Annual
Report  in the form  deemed  appropriate  by the Board of  Directors,  including
without limitation,  any explanation of excess expenses as set forth in Sections
5.14 and 8.5. The  reports  shall also disclose the ratio of the cost of raising
capital to the capital  raised during the year and the  aggregate  amount of the
advisory  fees and  other  fees  paid  during  the year to the  Advisor  and its
Affiliates,  including  fees or charges paid to the Advisor and  Affiliates by a
third party on behalf of the Company.  The Annual  Report also shall  include as
required by Section 5.14 full disclosure of all material terms, factors and

                                       41


circumstances surrounding any and all transactions involving the Company and the
Directors,  Advisor and/or Affiliates thereof occurring during the year, and the
Independent Directors shall examine and comment in the report as to the fairness
of any such transactions.  The Annual Report shall include a statement of assets
and liabilities and a statement of income and expense of the Company prepared in
accordance  with  generally  accepted  accounting   principles.   The  financial
statements shall be accompanied by the report of an independent certified public
accountant.  A manually  signed copy of the  accountant's  report shall be filed
with the Directors.

11.9 Quarterly  Reports.  At least  quarterly,  the Directors shall send interim
reports to the  Shareholders  having the form and content as the Directors  deem
proper.  The  quarterly  reports  shall  disclose  (i) the ratio of the costs of
raising capital during the quarter to the capital raised, and (ii) the aggregate
amount of the advisory  fees and the fees paid during the quarter to the Advisor
and its  Affiliates,  including  fees or  charges  paid to the  Advisor  and its
Affiliates by third parties on behalf of the Company. The quarterly report shall
also disclose any excess in borrowings  over the level specified in Section 8.8,
along with a justification for such excess.

11.10 Other  Reports.  The  Directors  shall furnish the  Shareholders  at least
annually  with a statement in writing  advising as to the source of dividends or
distributions  so  distributed.  If the  source  has not  been  determined,  the
communication shall so state and the statement as to the source shall be sent to
the  Shareholders  not later than 60 days after the close of the fiscal  year in
which the distribution was made.

11.11 Provisions of the Company in Conflict with Law or Regulation.

(a) The  provisions of these Bylaws are  severable,  and if the Directors  shall
determine,  with the advice of counsel, that any one or more of these provisions
(the  "Conflicting  Provisions") are in conflict with the REIT Provisions of the
Internal  Revenue  Code,  or with other  applicable  laws and  regulations,  the
Conflicting Provisions shall be deemed never to have constituted a part of these
Bylaws,  and the  Directors  shall be able to amend or revise  the Bylaws to the
extent  necessary to bring the provisions of these Bylaws into  conformity  with
the REIT Provisions of the Internal Revenue Code, or any other applicable law or
regulation;  however,  this  determination  by the Directors shall not affect or
impair any of the  remaining  provisions  of these  Bylaws or render  invalid or
improper any action taken or omitted  (including but not limited to the election
of Directors)  prior to the  determination.  A certification  in recordable form
signed by a majority of the Directors  setting forth any such  determination and
reciting that

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it was  duly  adopted  by the  Directors,  or a copy of these  Bylaws,  with the
Conflicting  Provisions  removed  pursuant to the  determination,  in recordable
form,  signed by a majority of the  Directors,  shall be conclusive  evidence of
such  determination  when  logged in the  records of the  Company.  The Board of
Directors may also amend or revise the Bylaws to the extent other  provisions of
these Bylaws  expressly  permit such amendment or revision.  The Directors shall
not be liable for failure to make any determination under this Section 11.11.

(b) If any  provisions  of these Bylaws shall be held invalid or  unenforceable,
the invalidity or unenforceability shall attach only to that provision and shall
not in any manner affect or render invalid or unenforceable any other provision,
and  these  Bylaws  shall be  carried  out as if the  invalid  or  unenforceable
provision were not present.

11.12  Voluntary  Dissolution.  The Company may elect to wind up and dissolve by
the vote of Shareholders  entitled to exercise a majority of the voting power of
the Company.


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11.13  Distributions.  The payment of  distributions  on Shares  shall be at the
discretion of the Directors,  including a majority of the Independent Directors,
and shall depend upon the earnings, cash flow and general financial condition of
the Company, and such other facts as the Directors deem appropriate.

11.14  Shareholder  Liability.  The holders of the Company's Shares shall not be
personally liable on account of any obligation of the Company.

11.15 Return of Offering Proceeds. The Directors shall have the right and power,
at any time, to return to Shareholders  offering proceeds to the extent required
by applicable law,  including to the extent necessary to avoid  characterization
of the Company as an "investment company."

11.16 Certain New York Stock Exchange  Requirements.  Nothing contained in these
Articles  shall impair the settlement of  transactions  entered into through the
facilities of the New York Stock Exchange, Inc.


                                  ARTICLE XII
                             AMENDMENTS TO BYLAWS

12.1  Amendments.  These  Bylaws  may be  amended  or  repealed  by the  vote of
Shareholders entitled to exercise a majority of the voting power of the Company;
provided,  however,  that any amendment to these Bylaws or any provision  hereof
which would affect any rights with respect to any  outstanding  Common Shares or
other Securities, or diminish or eliminate any voting rights pertaining thereto,
may not be effected  unless approved by the vote of the holders of two-thirds of
the  outstanding  securities of the class of Securities  affected.  The Board of
Directors may propose any such amendment to the  Shareholders,  but the Board of
Directors  may not  amend  the  Bylaws  or any  portion,  except  to the  extent
expressly provided in Section 11.11.


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