PROMISSORY NOTE

PROMISSORY NOTE

           FOR VALUE RECEIVED , the undersigned, NTS REALTY HOLDINGS LIMITED PARTNERSHIP , a Delaware limited partnership, 10172 Linn Station Road, Louisville, Kentucky (the “Borrower”), hereby unconditionally promises to pay to the order of NATIONAL CITY BANK , a national banking association (the “Bank”), as payee, having an office at One East Fourth Street, Cincinnati, Ohio 45202, Attention: Commercial Real Estate Division, or at such other place as the holder hereof may from time to time designate in writing, the principal sum of Thirty-Five Million Four Hundred Seventy-Seven Thousand Eight Hundred Ninety-Seven and 16/100 Dollars ($35,477,897.16) or so much as is actually drawn by Borrower hereunder in lawful money of the United States of America with interest thereon at the LIBOR Loan Rate in accordance with the terms of this Note.

          1.         Definitions . The following terms shall have the following meanings as used in this Note:

          “Covenant Agreement” means that certain Covenant Agreement granted by Borrower to the Bank regarding certain real properties located in Jefferson County, Kentucky and more particularly described therein, together with any and all amendments, modifications or supplements thereto.

          “Default Rate” means an annual interest rate equal to the lesser of: (a) five and 00/100 percent (5.00%) plus the LIBOR Loan Rate existing at the time of calculation of the Default Rate, or (b) the maximum interest rate which Bank may by law charge Borrower.

          “Eurodollar Banking Day” means any Banking Day on which banks in the London Interbank Market deal in United States dollar deposits and on which banking institutions are generally open for domestic and international business at Cincinnati, Ohio and in New York, New York.

          “Late Charge” means an amount equal to the greater of: (i) Twenty and No/100ths Dollars ($20.00), or (ii) five percent (5%) of the amount of such required but unpaid payment to Bank. Such Late Charge is imposed to help defray the expenses incurred by Bank in handling and processing the delinquent payment and to compensate Bank for the loss of the use of the delinquent payment and the amount shall be secured by the Mortgage and the other Loan Documents.

          “LIBOR Loan Rate” means a fluctuating rate which is equal to the sum of: (i) one and 75/100 percent (1.75%) per annum plus (ii) One Month Libor, adjusted daily by Bank to equal One Month LIBOR on each such date. Bank shall not be required to notify Borrower if there is any adjustment in the LIBOR Loan Rate. Borrower may, however, request a quote of the prevailing One Month LIBOR on any Banking Day.

          “Loan Documents” means this Note, the Covenant Agreement, the Mortgage and any other agreement, instrument, certificate or document now or hereafter executed to evidence or to secure the indebtedness evidenced by this Note, together with any and all modifications, amendments and supplements thereof.

          “Maturity Date” means November 15, 2007 (or such earlier date as the Bank may accelerate the indebtedness evidenced hereby by reason of Borrower’s default hereunder or under any other Loan Document).

          “Mortgage” means that certain Mortgage, Security Agreement and Fixture Financing Statement granted by Borrower to the Bank and encumbering certain real properties located in Jefferson County, Kentucky and more particularly described therein, together with any and all amendments, modifications or supplements thereto.

          “One Month Libor” means the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%) determined by Bank and equal to the average rate per annum at which deposits (denominated in United States dollars) in an amount similar to the principal amount of that loan and with a maturity one month after the date of reference are offered to Bank at 11:00 a.m. London time (or as soon thereafter as practicable) on the date of reference by banking institutions in the London, United Kingdom market, as such interest rate is referenced and reported by the British Bankers Association in the Bridge Financial Telerate system “Page 3750” report, or, if the same is unavailable, any other generally accepted authoritative source of such interest rate as Bank may reference from time to time.

          2.         Applicable Interest Rate. Interest shall be computed at the Libor Loan Rate on a 360-day year basis and on the actual number of days elapsed. All sums payable hereunder shall be payable in lawful money of the United States at the address set forth above or at such other address as the Bank may specify by written notice to Borrower.

          3.         Interest Payments. Beginning on November 15, 2006 and continuing through November 15, 2007, Borrower shall make monthly interest payments at the LIBOR Loan Rate on the outstanding principal balance of the indebtedness evidenced hereby. The first such payment shall be due and payable on November 15, 2006 and subsequently such interest payments shall be due and payable on the 15 ^th day of each successive calendar month thereafter and at maturity hereunder. Borrower shall pay, in a single payment, the entire unpaid principal balance of the indebtedness evidenced hereby, together with all accrued interest thereon and any and all other sums then payable hereunder on November 15, 2007.

          4.         Principal Repayment . Prior to payment in full of this Note on the Maturity Date, Borrower shall make principal repayments at the time of the sale of any of the following properties in the amount set forth below:

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          5.         Late Charges; Default Rate. If the Borrower fails to pay, in full, any interest payment or other sum required hereunder, including all sums due hereunder at Maturity, and such failure to pay continues for ten (10) days after the due date of such required payment, then, in addition to any interest which may accrue at the Default Rate, Borrower shall pay to Bank, upon demand, a Late Charge. Payment of such Late Charge shall not be construed as an agreement or privilege to extend the date of the payment of any interest payment or other sum required hereunder, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. The payment of a Late Charge will not cure or constitute a waiver of any Event of Default under this Note. In addition, Borrower agrees that upon the occurrence of an Event of Default, Bank shall be entitled to receive and Borrower shall pay interest on the entire unpaid principal sum then outstanding hereunder at a per annum rate equal to the Default Rate. The Default Rate shall be computed from the occurrence of the Event of Default until the earlier of the date upon which the Event of Default is cured or the date upon which all sums due hereunder are paid in full. Interest calculated at the Default Ra