Republic Plaza Properties Partnership, PFI Republic Limited, Inc., Tax Matters Partner - Page 12

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          entered in that agreement as well as any space that became vacant           
          when existing leases expired or tenants defaulted under their               
          leases.                                                                     
               The Marshall and Stevens appraisal report on which PFI                 
          relied in evaluating, inter alia, the reasonableness of the 11.5-           
          month period of zero rent provided by the lease agreement con-              
          tained discussions of various matters, including the condition of           
          the Denver office market at the time the lease agreement was                
          executed, the practice in that market of granting rent holidays             
          and other lease concessions in order to attract lessees, and                
          specific situations in that market in which the lessors of                  
          commercial office buildings had granted periods of free rent and            
          other lease concessions to lessees.  At the time Partnership and            
          BCE entered into the lease agreement, Partnership and its part-             
          ners PFI and BCE were aware of, inter alia, those matters.                  
               At the time the lease agreement was executed in June 1988,             
          the Denver office market was suffering the aftereffects of                  
          overbuilding that occurred during the late 1970's and early                 
          1980's.  Consequently, at that time, the Denver office market was           
          experiencing high vacancy rates of approximately 27 percent, and,           
          in order to attract lessees, lessors were offering prospective              
          lessees various types of concessions and low rental rates.  Prior           
          to the execution of the lease agreement in June 1988, the lessor            
          under the existing leases for space in Republic Plaza had typi-             





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