MERIDIAN POINT REALTY TRUST VIII CO/MO, 10-K405, 1997-03-31

MERIDIAN POINT REALTY TRUST VIII CO/MO
10-K405, 1997-03-31
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

COMMISSION FILE NUMBER: 1-10547

MERIDIAN POINT REALTY TRUST VIII CO.
(Exact name of registrant as specified in its charter)

MISSOURI 94-3058019
(State of incorporation) (I.R.S. Employer Identification No.)

655 MONTGOMERY STREET, SUITE 800
SAN FRANCISCO, CALIFORNIA 94111
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 956-3031

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

Name of each exchange on
Title of Each Class which registered
------------------- ------------------------
COMMON STOCK, PAR VALUE $0.001 PER SHARE AMERICAN STOCK EXCHANGE
PREFERRED STOCK, PAR VALUE $0.001 PER SHARE AMERICAN STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosures of delinquent filers pursuant to Item
405 of Regulation S-K is not contained here, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [_]

The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 21, 1997 was $33,378,000 computed by reference to the
respective closing sales prices of the common stock and preferred stock reported
on the American Stock Exchange and by excluding shares owned by trustees,
executive officers and principal shareholders (i.e., holders of 5% or more of
the registrant's outstanding shares).

The registrant had 1,609,937 shares of common stock and 5,273,927 shares of
preferred stock outstanding on March 21, 1997.
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.

ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996

TABLE OF CONTENTS
<TABLE>
<CAPTION>
FORM 10-K
ITEM NO NAME OF ITEM PAGE
<S> <C> <C> <C>
PART I
Item 1 Business 3
Item 2 Properties 5
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 6

PART II
Item 5 Market for Registrant's Common Equity and Related Shareholder 7
Matters
Item 6 Selected Financial Data 8
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 8 Financial Statements and Supplementary Data 13
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13

PART III
Item 10 Directors and Executive Officers of the Registrant 14
Item 11 Executive Compensation 16
Item 12 Security Ownership of Certain Beneficial Owners and Management 17
Item 13 Certain Relationships and Related Transactions 18

PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K 19

Signatures 26

Report of Independent Public Accountants 27
Consolidated Financial Statements and Financial Statement
Schedules 28-41
</TABLE>

-2-
<PAGE>

- -------------------------------------------------------------------------------
PART I
- -------------------------------------------------------------------------------

ITEM 1. BUSINESS.

The Company
- -----------

Meridian Point Realty Trust VIII Co. (the "Company") is a Missouri
corporation whose shares of common and preferred stock are traded on the
American Stock Exchange. The Company was organized in December 1987 under the
name Sierra Capital Realty Trust VIII Co. The Company changed its name to
Meridian Point Realty Trust VIII Co. in September 1993.

The Company was organized to qualify as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended
(the "Code"). Under the Code, a REIT must meet certain criteria, including
requirements (a) that certain percentages of its gross income be derived from
specific sources, (b) that it distribute annually to its shareholders at least
95% of its REIT taxable income (as defined in the Code), and (c) that it not
have five or fewer shareholders who own more than 50% of the total value of its
stock. The Company did not qualify as a REIT for the years ended December 31,
1992 and 1993 because of the failure to satisfy requirement (c) above. However,
the Revenue Reconciliation Act of 1993 added a provision which allows stock held
by a qualified trust to be treated as held directly by its beneficiaries in
proportion to their actuarial interest; this new "look-through" rule allows the
Company to satisfy requirement (c) above. The Internal Revenue Service permitted
the Company to re-elect its REIT status beginning in the 1994 tax year. (See
Item 7 below and Note 8 to the Company's financial statements.)

The Company was formed for the purpose of making equity investments in
income-producing industrial and commercial real estate in selected areas of
projected growth in the United States. At December 31, 1996, the Company had
nine real estate equity investments consisting of twenty-four properties (see
Item 2 below for a detailed description of the properties). The Company's
principal objectives are to preserve, protect and grow the shareholders'
capital, provide shareholders with cash dividends, and achieve capital
appreciation through potential appreciation in the values of the Company's
properties. There is no guarantee that the Company's objectives will be met.

The Company was formed as a self liquidating finite-life REIT. At the
annual meeting held on June 14, 1996, the shareholders approved an amendment to
the Company's Bylaws related to investment policy which allowed the Company to
reinvest proceeds from the sale of property into the purchase of new property,
thereby converting the Company to an infinite-life REIT. The general purpose of
the Company is to seek income that qualifies under the REIT provisions of the
Code. At such time as it is in the best interests of the Company's shareholders
to do so, the Board of Directors intends to make investments in such a manner as
to comply with the requirements of the REIT Provisions of the Code with respect
to the composition of the Company's investments and the derivation of its
income. The Directors' decision to acquire or sell properties would be based on
a number of factors such as: (i) the vitality of the real estate and money
markets, (ii) the economic climate, (iii) potential environmental liabilities,
and (iv) the income tax consequences to the Company and its shareholders.

Management and Employees
- ------------------------

The Company's affairs are overseen by a Board of Directors (referred to
herein as the "Directors"). There are seven Directors of the Company, six of
whom are independent (i.e. not an affiliate of a person or entity providing
services for the Company or performs services for the Company other than in his
capacity as a Director).

From its inception until March 31, 1991, the Company was externally
managed by companies operating on a for-profit basis. That external management
was discontinued effective April 1, 1991. From April 1, 1991 through November
30, 1995, the Company and other companies of common initial sponsorship were
effectively self-administered through an internalized management structure (the
Company and those other companies are collectively referred to herein as the
"Companies").

The Companies leased employees at cost from Meridian Point Properties,
Inc., a California corporation ("MPP"), a captive company controlled by the
Companies, to perform administrative, accounting, asset management, and property
management functions under the terms of an Amended and Restated Employee Leasing
Agreement and certain other agreements. Prior to December 1, 1995, the cost
reimbursements made to MPP were allocated among the Companies in accordance with
the Amended and Restated Employee Leasing Agreement and other agreements between
MPP and the

-3-
<PAGE>

Companies in the following manner. First, costs directly attributable to a
particular Company were allocated to that Company. Second, costs that were not
directly attributable to a particular Company but benefited a group or all of
the Companies were allocated among those Companies under formulas that varied
depending upon the type of cost involved.

Effective December 1, 1995, the Company terminated the Amended and
Restated Employee Leasing Agreement with MPP and entered into a management
agreement with TIS Financial Services, Inc. ("TIS") of San Francisco,
California. MPP has subsequently been dissolved as a result of the merger of
certain of the other Companies into Meridian Industrial Trust ("MIT"). Under the
new management agreement, the Company retained TIS to manage its assets,
properties and investments in addition to performing administrative services for
the Company. The initial term of the management agreement was for one year after
which the agreement operated on a month-to-month basis. The Company has recently
extended the TIS Management Agreement to December 31, 1997, with additional
three month options. The Company pays TIS, for services rendered under the
agreement, a base management fee calculated on an annual basis of 0.75% of the
Company's Average Invested Assets, as defined in the agreement. The agreement
requires that TIS pay the employment expenses of its personnel. As of December
31, 1996, the Company had no full time salaried employees.

Effective December 7, 1995, Lorraine O. Legg was elected President and
Chief Executive Officer of the Company, replacing Milton K. Reeder who resigned
on the same date. Ms. Legg is also President and Chief Executive Officer of TIS
and serves as a Director of the Company. Also on December 7, 1995, following the
resignation of the other senior officers of the Company affiliated with MPP,
various other TIS employees and other individuals were elected as officers of
the Company. Those officers of the Company affiliated with TIS receive no direct
compensation from the Company in exchange for their services.

Insurance
- ---------

In addition to other types of insurance maintained by the Company, the
Company carries comprehensive general liability and excess liability coverage on
properties it currently owns in the aggregate amount of $26,000,000 to insure
against liability claims and provide for the costs of defense. Similarly, the
Company is insured against the risk of direct physical damage in amounts
necessary to reimburse the Company on a replacement cost basis for costs
incurred to repair or rebuild each property, including loss of rental income
during the construction period in the aggregate amount of $25,000,000.

Tenants
- -------

The rental revenue generated by the Company's real estate portfolio is
affected by the terms of its 45 different tenant leases. Lease terms generally
range from three to five years, with some leases having renewal options beyond
their initial terms. The schedule below lists information regarding existing
leases which expire in each of the next five years and from 2001 forward.

<TABLE>
<CAPTION>
Number of % of Trust Annual Rent of
Leases Total Sq. Ft. of Total Potential Leases Expiring % of Trust Total
Year Expiring Leases Expiring Sq. Ft. (in dollars)(1) Annual Rent (1)
---- -------- --------------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 10 329,659 12% $619,629 8%
1998 10 259,187 10% 793,792 10%
1999 12 571,144 21% 1,386,182 17%
2000 3 229,710 8% 571,698 7%
2001 3 45,814 2% 161,842 2%
2002+ 7 996,639 37% 4,477,791 55%
</TABLE>

(1) Based on the projected 1997 base rent of existing leases.

The Company had an overall occupancy level of 91.2% as of December 31,
1996.

Three tenants represent 48% of the total rental revenue of the Company
based on the projected 1997 base rent of existing leases. Leases for these three
tenants are scheduled to expire in 2003 (15% of total annual rental revenue
based on 1996 existing leases), 2004 (13% of total annual rental revenue based
on 1996 existing leases), and 2010 (11% of total annual rental revenue based on
1996 existing leases).

-4-
<PAGE>

The Company's single-tenant industrial properties are generally leased
to tenants on a triple-net basis, with tenants responsible for most day-to-day
operating expenses such as real estate taxes, insurance, utilities, maintenance
of common areas and non-structural repairs. The Company's multiple-tenant
industrial properties are generally leased to tenants on a modified gross basis,
with tenants responsible for utilities, maintenance of common areas and
non-structural repairs. Under a modified gross lease, the Company is responsible
for base year real estate taxes and insurance, with the tenants responsible for
any increases over the base year for these expenses. Triple-net and modified
gross leases generally reduce the Company's exposure to increases in operating
expenses. Leases may include both fixed rent and escalating rent during their
terms. For occupancy rates of the Company's individual investments, see Item 2
below.

Real Estate Considerations
- --------------------------

The results of the Company's operations depend to a great extent on the
Company's ability to lease its properties. In attracting and retaining tenants,
the Company competes with similar properties for location, lease terms and
property condition. In addition, the success of the Company depends, among other
factors, upon trends in the economy, the financial condition of tenants and
prospective tenants, availability and cost of capital, interest rates, increases
or decreases in operating expenses, income tax laws, governmental regulations
and legislation, real estate market fluctuations, population trends and zoning
laws.

Regulation and Supervision
- --------------------------

Many jurisdictions have adopted laws and regulations relating to the
ownership of real estate. Compliance with these requirements may from time to
time require capital expenditures by the Company (for example, expenditures
necessary in order to comply with the Americans with Disabilities Act or changes
in local building or other codes). In addition, the Company may from time to
time have to expend capital for environmental control facilities. While the
ownership of real estate may entail environmental risks and liabilities to the
owner, Company management is sensitive to environmental issues and is not
currently aware of and does not expect any material effects on current or future
capital expenditures, earnings or competitive position resulting from compliance
with present federal, state or local environmental control provisions.

ITEM 2. PROPERTIES.

As of December 31, 1996, the Company's portfolio of nine real estate
equity investments consisted of twenty-four properties (either in the form of
direct ownership of the real property or in the form of an interest in a
partnership that directly owns the real property). The table below provides
information as to the location, the general character and the occupancy level of
those properties.

==================================================================================================================
NET NUMBER
NUMBER RENTABLE OF OCCUPANCY
EQUITY INVESTMENT OF PROPERTY SQ. FT. LEASES PERCENTAGE
NAME AND LOCATION PROPERTIES DESCRIPTION 12/31/96 12/31/96 12/31/96
==================================================================================================================
<C> <S> <C> <C> <C> <C> <C>

I AUBURN I (1)
Auburn Hills, MI 1 Office building 114,000 1 100%

II SOUTH SAYRE
Bedford Park, IL 1 Warehouse/distribution 242,690 2 100%
center building
III WALDENBOOKS FACILITY (3)
La Vergne, TN 1 Warehouse/distribution 376,800 1 100%
center building

IV MEMPHIS 8 (2)(3)
Memphis, TN 8 Warehouse/distribution 696,232 14 100%
center buildings

V JC PENNEY (3)
Memphis, TN 1 Warehouse/distribution 105,785 1 100%
center building
</TABLE>

-5-
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
VI INTERCHANGE D
Jackson, MS 1 Warehouse/distribution 67,275 7 93%
center building

VII ETHAN ALLEN
Chino, CA 1 Warehouse/distribution 300,300 1 100%
center building

VIII PHOENIX 5
Phoenix, AZ 5 Warehouse/distribution 333,609 13 86%
center buildings

IX BROOKHOLLOW
Dallas, TX 5 Warehouse/distribution 467,730 5 60%
center buildings

</TABLE>
(1) This property serves as collateral pursuant to a first deed of trust for
the repayment of a promissory note. (See Note 5 of the Company's
financial statements.)
(2) One of the Memphis 8 properties serves as collateral pursuant to a first
deed of trust for the repayment of a promissory note. (See Note 5 of the
Company's financial statements.)
(3) These properties are owned by Interchange Distribution Limited
Partnership, a California limited partnership. The partners of the
partnership are the Company (the limited partner) and NASH-IND
Corporation, a wholly owned subsidiary of the Company (the general
partner).

ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings to which the Company or
any partnership in which it has an interest is a party, or to which any of the
assets of the Company or any such partnership are subject.

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

No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1996.

-6-
<PAGE>

- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------

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

The principal market on which the Company's shares of common stock and
preferred stock are traded is the American Stock Exchange ("AMEX"). The listing
symbols of the common stock and preferred stock on the AMEX are "MPH" and
"MPHpr", respectively.

As of March 21, 1997, the Company had outstanding a total of 1,609,937
shares of common stock and 5,273,927 shares of preferred stock. As of the same
date, the common and preferred stock were held by approximately 1,000 and 1,600
holders of record, respectively (i.e. these figures do not reflect beneficial
ownership of shares held in nominee names).

The following table illustrates the published high and low closing
sales price information for the common stock and preferred stock during each
calendar quarter for 1995 and 1996 (amounts in dollars).

CALENDAR QUARTER CLASS HIGH LOW
---------------- ----- ---- ---
<S> <C> <C> <C>
1995
First Quarter Common 2-5/8 1-1/4
Preferred 4-3/4 4-3/8

Second Quarter Common 2-5/8 1-15/16
Preferred 4-3/4 4

Third Quarter Common 2-1/8 1-3/4
Preferred 4-3/4 4

Fourth Quarter Common 2 1-1/4
Preferred 5-1/2 4-1/8

1996
First Quarter Common 2-1/4 1-3/4
Preferred 6-1/4 4-3/4

Second Quarter Common 2-5/8 2
Preferred 6-1/8 4-3/8

Third Quarter Common 3-1/4 2-1/4
Preferred 5-1/8 4-1/2

Fourth Quarter Common 3 2-1/4
Preferred 5-3/8 4-3/4

</TABLE>

On March 21, 1997, high and low sales prices for shares of the
Company's common stock on the AMEX was $ 3-1/8. On March 21, 1997, the high and
low sales prices for shares of the Company's preferred stock on the AMEX was $
5-3/8.

As a REIT, the Company is required to make distributions to
shareholders that aggregate annually at least 95% of its taxable income. In
accordance with the Company's organizational documents, dividend distributions
to be made by the Company will always be at the discretion of the Directors and
will depend on, among other factors, the Company's operations, cash flow, and
financial condition, compliance with debt covenants, required principal
amortization payments, and applicable statutory and organizational restrictions
on the payment of dividends.

In the event of a dividend distribution, holders of preferred stock are
entitled to a dividend preference under certain circumstances as specified in
the Company's Articles of Incorporation. See Note 6 to the Company's financial
statements.

-7-
<PAGE>

In 1995, the Company declared and paid four quarterly distributions
whereby the holders of preferred stock and holders of common stock participated
equally, share for share as specified in the Company's Articles of
Incorporation, as follows:

DIVIDEND
PER SHARE AMOUNT
PAYABLE DATE PREFERRED COMMON
May 15, 1995 $0.07 $0.07
June 30, 1995 $0.07 $0.07
September 29, 1995 $0.07 $0.07
December 29, 1995 $0.07 $0.07

Each of the 1995 preferred distributions of $.07 includes a preference
amount of $0.06018 per share.

Similarly, in 1996, the Company declared and paid four quarterly
distributions whereby the holders of preferred stock and holders of common stock
participated equally, share for share as specified in the Company's Articles of
Incorporation, as follows:
DIVIDEND
PER SHARE AMOUNT
PAYABLE DATE PREFERRED COMMON
May 15, 1996 $0.07 $0.07
June 30, 1996 $0.07 $0.07
September 29, 1996 $0.07 $0.07
December 29, 1996 $0.07 $0.07

ITEM 6. SELECTED FINANCIAL DATA.

The following table summarizes certain selected financial data for the
Company for the five years ended December 31, 1996. This table should be read in
conjunction with the more detailed financial statements included elsewhere
herein.

<TABLE>
<CAPTION>
==================================================================================================================
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
==================================================================================================================
<S> <C> <C> <C> <C> <C>

Rentals from Real Estate
Investments $ 9,976,457 $ 10,868,405 $ 11,886,484 $ 11,353,018 $ 12,321,893
Income (Loss) Before
Extraordinary Item 1,352,171 (144,912) (1,874,789) (703,270) (4,475,572)
Extraordinary Item -- (129,433) -- -- 2,231,420
Net Income (Loss) 1,352,171 (274,345) (1,874,789) (703,270) (2,244,152)
Rental Properties, Net 81,834,510 81,765,163 83,469,941 88,129,068 92,073,618
Total Assets 71,593,955 76,494,325 91,757,548 95,842,193 98,313,849
Mortgage Notes Payable 7,570,281 7,782,168 7,976,495 1,843,696 1,856,204
Long-term Debt Facilities 20,042,420 24,259,396 36,754,964 43,622,525 44,529,845
Net Income (Loss) per
Common Share:
Loss Before
Extraordinary Item ($0.08) ($1.01) ($1.89) ($0.44) ($3.39)
Extraordinary Item -- (0.08) -- -- 1.39
Net Loss per
Common Share (0.08) (1.09) (1.89) (0.44) (2.00)
Distributions Declared
per Share:
Preferred 0.28 0.28 0.22 -- 0.186
Common 0.28 0.28 0.22 -- 0.186

- --------------------------------------------------------------------------------------------------------------------
</TABLE>

See "Material Changes in Results of Operations" under Item 7 for
information regarding material changes in results of operations during 1996,
1995 and 1994.

-8-
<PAGE>

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

INTRODUCTION
- ------------

The Company's principal asset is a portfolio of twenty-four industrial
and commercial properties, which are carried at the lower of depreciated cost or
net realizable value.

This section should be read in conjunction with the financial
statements and supplementary data listed in Item 8 below. Unless otherwise
defined in this report, or unless the context otherwise requires, the
capitalized words or phrases used in this section either: (a) describe
accounting terms that are used as line items in such financial statements, or
(b) have the meanings ascribed to them in such financial statements and the
notes thereto.

DISCUSSION OF KNOWN TRENDS, EVENTS AND UNCERTAINTIES
- ----------------------------------------------------

The economic climate for commercial real estate has stabilized and in
several markets has actually improved. Notwithstanding an improving real estate
market, tenants may or may not continue to renew leases as they expire or may
renew on less favorable terms. Conditions differ in each market in which the
Company's properties are located. Because of the continuing uncertainty of
future economic developments in each market, the impact these developments will
have on the Company's future cash flow and results of operations is uncertain.

Inflation, inflationary expectations and their effects on interest
rates may affect the Company in the future by changing the underlying value of
the Company's real estate or by impacting the costs of financing the Company's
operations. The Company's policy of negotiating leases on a triple-net basis or
modified gross basis, whenever possible, is designed to help protect the Company
against some of the increased costs that might otherwise result from inflation.

One of the requirements for REIT qualification is that five or fewer
shareholders cannot own more than 50% of the total value of a company's
outstanding stock at any time during the last half of the taxable year (the
"five or fewer rule".) For purposes of this rule under the law as it existed
before 1994, domestic pension trusts were treated as a single individual.

Due to fluctuations in the fair market value of its preferred stock
relative to its common stock, the Company failed to satisfy the five or fewer
rule and therefore did not qualify as a REIT for the years ended December 31,
1992 and 1993. As a result of the loss of REIT status, the Company was taxed as
a regular corporation for the years ended December 31, 1992 and 1993; however,
the loss of REIT status did not have a material tax impact on the Company
because the Company did not have any taxable income in 1992 or 1993. Beginning
with the 1994 tax year, the five or fewer rule was modified to allow REITs to
"look through" to the beneficiaries of a domestic pension trust and treat each
beneficiary as owning stock in the Company in proportion to the beneficiary's
actuarial interest in the domestic pension trust. This new "look-through" rule
allowed the Company to again satisfy the five or fewer rule and again elect REIT
status beginning in the 1994 tax year.

During 1995, the Company engaged C.S. First Boston as its financial
advisor to explore future strategic opportunities available to the Trust. In
that regard, the Company's Board of Directors considered all options which were
available, including liquidation of the Company's assets, conversion of the
Company to an infinite-life REIT with accompanying changes to the
self-liquidating policy, or other options. At the annual meeting of shareholders
held on June 14, 1996, the shareholders approved an amendment to the Company's
Bylaws related to investment policy which will allow the Company to reinvest
proceeds from the sale of property into the purchase of new property, making it
an infinite-life REIT.

The Company has previously determined that a soil settlement problem
exists at the 1033 East Maricopa property in Phoenix, Arizona. In that regard,
the Company instituted a lawsuit against the entity from which the property was
purchased and a related party in 1994. During the 3rd quarter of 1996, the
Company settled the lawsuit in return for monetary consideration. The amount of
the settlement will offset, to a material extent, any costs to rehabilitate the
property. Furthermore, the Company is now investigating the possibility of
insurance recoveries regarding this property.

-9-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

The Company's main sources of liquidity are: (i) cash flows from
operating activities, (ii) Funds From Operations, (iii) cash reserves, and (iv)
net proceeds from the sale of the Company's real properties. Secondary sources
of liquidity may include: (i) proceeds from the issuance of additional shares of
stock, and (ii) proceeds from secured and unsecured debt. A summary of the
Company's historical cash flows is as follows:

<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>

Cash flows provided by (used in):
Operating Activities $4,278,463 $3,842,343 $3,960,446
Investing Activities (146,663) 1,021,317 (772,049)
Financing Activities (6,356,346) (4,807,843) (2,373,487)
</TABLE>

In addition to cash flows and net income, management and industry
analysts generally consider Funds From Operations to be one additional measure
of the performance of an equity Real Estate Investment Trust (REIT) because,
together with net income and cash flows, Funds From Operations provides
investors with an additional basis to evaluate the ability of the Company to
incur and service debt and to fund acquisitions and other capital expenditures.
However, Funds From Operations does not measure whether cash flow is sufficient
to fund all of the Company's cash needs including principal amortization,
capital improvements, and distributions to shareholders. Funds From Operations
also does not represent cash generated from operating, investing or financing
activities as determined in accordance with generally accepted accounting
principles. Funds From Operations should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. Funds From Operations
represents net income (loss) before extraordinary items, adjusted for
depreciation on real property and amortization of tenant improvement costs and
lease commissions, gains from the sale of property, equity in earnings/(loss) of
unconsolidated joint ventures and net realizable value (NRV) provisions. A
reconciliation of the Company's net income (loss) to Funds From Operations is as
follows:

<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>

Net Income (Loss) $1,352,171 ($274,345) ($1,874,789)
Reconciling Items
Depreciation and Amortization 2,431,448 2,718,862 3,373,076
Gains from Disposition of Assets (47,452) (1,197) --
Extraordinary Item -- 129,433 --
---------- ---------- ----------
Funds From Operations, including
NRV Provisions 3,736,167 2,572,753 1,498,287
NRV Provisions -- 1,182,015 2,392,000
---------- ---------- ----------
Funds From Operations, excluding
NRV Provisions $3,736,167 $3,754,768 $3,890,287
========== ========== ==========
</TABLE>
Management considers Funds From Operations, excluding NRV provisions,
to represent one of the appropriate operating performance measures of an equity
REIT. Management considers NRV provisions to reflect adjustments of real estate
values based upon rising or falling market conditions which, although indicative
of impairment of the Company's investment, do not necessarily correlate to
ongoing operating results.

The Company's principal applications of its cash resources are (i)
operating expenses related to real estate operations, general and administrative
expenses, interest expense, and legal costs, (ii) capital improvements, (iii)
principal payments under one of its long-term debt facilities (see discussion
below) and mortgage notes payable, and (iv) payment of distributions to its
shareholders. During 1996, Funds From Operations were insufficient to fully fund
the Company's cash needs because of the maturity of $3,286,176 of one of the
advances under an insurance company debt facility. During 1995 and 1994, Funds
From Operations were sufficient to fully fund the Company's cash needs for the
items listed in the immediately preceding sentence.

As of December 31, 1996, the Company had approximately $2.8 million in
cash and cash equivalents.

-10-
<PAGE>

DEBT
- ----

The Company has a long-term debt facility with an insurance company.
This facility provided the Company with financing for property acquisitions,
capital improvements and general operating needs. At the present time, there is
no credit availability under the insurance company facility. Furthermore, the
insurance company facility is unsecured and the Company has agreed not to
encumber any additional Company property without the insurance company's prior
consent.

As of December 31, 1996, there were three outstanding advances totaling
$20,042,420 under the insurance company facility. These advances bear fixed
interest rates for periods ranging from twelve months to two years. Under the
existing insurance company facility agreements, the various advances and the
corresponding interest rate contracts mature on the dates specified below.

ADVANCE AND
NOTIONAL AMOUNT INTEREST MATURITY
AS OF 12/31/96 RATE DATE
-------------------- --------------------- ---------------------
$ 5,938,717 8.87% July 1997
11,303,016 8.87% July 1997
2,800,687 8.80% July 1998
-------------
$20,042,420

The insurance company loans amortize monthly under a 22 year schedule
subject to the maturities identified above. Furthermore, should the loan to
value ratio of the Company's portfolio exceed 55%, the Company is also required
to pay the insurance company any "Excess Cash." Excess Cash is defined as cash
reserves above $4 million at the end of each quarter. No Excess Cash payments
were required during 1996, 1995 or 1994.

Based on management's estimates of the values as of December 31, 1996,
the Company is in compliance with all covenants. The insurance company, however,
has complete discretion regarding valuations and is currently reviewing
management's estimates of value. If the insurance company were to calculate a
loan-to-value ratio greater than 55%, the Company would have to make an Excess
Cash payment, and the Company's dividends could be restricted.

As of December 31, 1996, approximately 86% or $17,241,733 of the
Company's advances under the insurance facility was subject to an interest rate
contract with a remaining terms of twelve months or less. The weighted average
remaining term of all the Company's interest rate contracts as of December 31,
1996 was approximately 7.7 months. As of December 31, 1996, the weighted average
interest rate of the facility was 8.86%.

On September 17, 1993, the shareholders of the Company elected four
individuals as new members of the board. The election of four new board members
(constituting a majority of the board) created a default under the Company's
loan agreements with the insurance company. The insurance company has recently
waived any claim of default in that regard.

The Company is currently negotiating with lenders to obtain permanent
mortgage loan financing (the Permanent Financing) to pay off the entire
remaining facility. The negotiations currently contemplate that the Permanent
Financing would be secured by deeds of trust on certain of the Company's real
estate investments. Management believes that it is more likely than not that the
Company will close on the Permanent Financing or other sources of financing to
retire the insurance facility; however, there can be no assurance as to the
ultimate outcome of the negotiations.

In addition to the debt facility, the Company has two mortgage notes
payable in the combined principal amount of $7,570,281 at December 31, 1996
bearing a weighted average fixed interest rate of approximately 8.7%. Principal
maturities under such mortgage notes amount to $259,846 during 1997 (See Note 5
to the Company's financial statements).

-11-
<PAGE>

REAL ESTATE ACTIVITY
- --------------------

The Company made no real estate acquisitions during 1996, 1995 or 1994.

In March 1997, the Company entered into an Amendment to Lease Agreement
in connection with a planned expansion of approximately 187,500 square feet
to its Waldenbooks industrial warehouse facility in La Vergne, TN. As amended,
the lease now provides for a 15 year term upon completion of the expansion which
is expected in the third quarter of 1997. Upon completion the
property will have a total of approximately 564,300 square feet. As amended, the
lease provides the Company with a specified return on its investment to expand
the property.

On May 25, 1995, the Company sold the Kroger property located in
Jackson, Mississippi. The selling price of $2,000,000 was paid entirely in cash.
The Company received net proceeds of $1,927,677, after deductions for closing
costs and prorated items totaling $72,323. In connection with the sale, the
Company recognized a Gain on Sale of Property of $157,257. The property had
previously been written down to its estimated net realizable value.

On July 24, 1995, the Company sold the Tropicana Marketplace located in
Las Vegas, Nevada for a selling price of $10,218,000. Net proceeds amounted to
$9,644,065 after (i) $398,935 of adjustments for closing costs, interest earned
and pro-rations, and (ii) adjustment for an escrow holdback amounting to
$175,000. The net proceeds from the sale and additional funds of $322,553
deposited by the Company into an escrow account totaling $9,966,618 were
remitted to the insurance company as additional principal reduction totaling
$9,809,535, prepayment penalties amounting to $129,433, and an interest payment
of $27,650. The Company used the net sale proceeds from the Tropicana
Marketplace to pay the entire balance of an interest rate contract which was
maturing in October 1995 and part of the balance of the interest rate contract
maturing in December 1996.

Capital expenditures for the years ended December 31, 1996, 1995 and
1994 totaled $153,827, $519,937 and $560,876, respectively. Lease commissions
for 1996, 1995, and 1994 were $66,439, $185,485, and $195,636, respectively.
Capital expenditures for 1996 were primarily for roof repairs at a number of the
Memphis 8 properties. Capital expenditures for 1995 were primarily for necessary
improvements at the Memphis properties and the Belden property. Capital
expenditures for 1994 were primarily for: (i) roof repairs and painting at one
of the Brookhollow properties in Dallas, (ii) structural repairs made to one of
the Phoenix 5 properties, and (iii) tenant improvements at the Memphis 8
properties. In formulating plans for capital improvements, the Company
considers, among other factors, the reasonable prospect of being able to recover
the costs of such improvements over a reasonable period of time either from
increased rental revenues or upon the sale of the property and the potential
effects of such improvements on funds available for distribution. The Company
has budgeted capital expenditures of $6,111,000 for 1997, of which $856,000
represents investment in exisiting leasable space and $5,255,000 represents a
major expansion planned for its Waldenbooks facility to be funded from cash flow
from operations and existing cash on hand.

DISTRIBUTIONS
- -------------

The Company paid distributions to shareholders aggregating $1,927,483
in each of the years ended December 31, 1996 and 1995, respectively.
Distributions paid to shareholders in 1994 aggregated $1,514,450. See Item 5
above and Note 6 to the Company's financial statements for a discussion of
distribution restrictions.

MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------

REVENUES
- --------

Rentals from Real Estate Investments totaled $9,976,457, $10,868,405
and $11,886,484 for the years ended December 31, 1996, 1995 and 1994,
respectively. The decrease of $891,948 during 1996 and $1,018,079 during 1995 as
compared to the same period in the prior year was primarily due to the loss of
rents from the Kroger and Tropicana properties, which where sold in 1995, and
adjustments to expense recaptures.

Interest and Other income totaled $244,300, $326,170 and $194,915 for
the years ended December 31, 1996, 1995 and 1994, respectively. The year-to-year
changes as compared to their respective prior years were primarily due to the
Company's average cash balances available for investment.

-12-
<PAGE>

EXPENSES
- --------

Interest and amortization of loan costs totaled $2,817,784, $3,393,743
and $3,901,912 for the years ended December 31, 1996, 1995 and 1994,
respectively. The decrease of $575,959 in 1996 from the 1995 level resulted from
principal paydown on the mortgage notes payable and long-term debt facility. The
average debt outstanding during the year ended December 31, 1996 was $30,818,853
as compared to $39,194,358 in the prior year. The decrease of $508,169 during
1995 was due primarily to lower debt service costs as a result of reduced
principal on the Company's insurance facility resulting from the sales of the
Kroger and Tropicana Marketplace properties.

Property taxes totaled $1,558,852, $1,536,584 and $1,739,159 for the
years ended December 31, 1996, 1995 and 1994, respectively. The increase of
$22,268 during 1996 occurred because of increases in assessed values of certain
of the Company's properties. However, to a large extent, such increases were
recaptured from tenants and are therefore included in revenues. Also in 1996,
there were no significant refunds of prior year taxes as there were in 1995. The
decrease of $202,575 during 1995 as compared to the same period in 1994 was
primarily due to (1) city and county tax refunds received in 1995, (2) a
decrease in the assessed values of the Company's properties and a consequent
reduction in property taxes, and (3) the sales of the Kroger and Tropicana
properties.

Property Operating Costs totaled $1,346,723, $1,757,154 and $1,765,123
for the years ended December 31, 1996, 1995 and 1994, respectively. The decrease
of $410,431 in 1996 is primarily the result of the 1995 property sales.

Legal Costs during the years ended December 31, 1996, 1995 and 1994
totaled $107,058, $63,290 and $135,155, respectively. 1996 included legal costs
relating to Bylaw amendments approved by the shareholders which terminated the
self-liquidating provisions of the Bylaws. The decrease of $71,865 in 1995
compared to 1994 was primarily due to nonrecurring fees incurred in 1994 in
connection with the restructuring of the Company's debt facility and fees
incurred in the determination of the Company's status as a real estate
investment trust.

General and Administrative expenses for the three years have remained
relatively constant at $654,173 in 1996, $689,036 in 1995 and $649,763 in 1994.
1995 expenses were somewhat higher than in the other years because of costs
related to the termination of the MPP Employee Leasing Agreement.

Included in Net Income are the non-cash expenses of Depreciation and
Amortization. For the years ended December 31, 1996, 1995 and 1994, these
expenses totaled $2,536,019, $2,827,396 and $3,540,584, respectively. The
decrease of $182,843 and $654,214 during 1996 and 1995 from the prior years was
primarily due to the sale of the Kroger and Tropicana properties.

OTHER MATTERS
- -------------

For the years ended December 31, 1995 and 1994, the Company recorded
Provisions for Decrease in Net Realizable Value amounting to $1,182,015 and
$2,392,000, respectively. The provisions are to provide for the unrealized
decrease in the net realizable value of the Company's rental properties. The
provisions represent a non-cash charge to operations. (See Note 1 to the
financial statements of the Company.)

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data listed in Item 14(a)(1)
and (a)(2) below are incorporated herein by reference and filed as part of this
report.

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

The Company has not changed its independent certified public
accountants and has not had any disagreement with its independent certified
public accountants on accounting or financial disclosures required to be made
under rules of the Securities and Exchange Commission.

-13-
<PAGE>

- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS
- ---------

The Directors are elected annually and serve until the next annual
meeting of shareholders and until their successors are elected and qualified.
The Company's Bylaws provide that the number of Directors shall be not less than
three nor more than seven. Presently the authorized number of Directors is
seven. In addition, the Company's Bylaws provide that a majority of the
Directors shall be "Independent Directors." An "Independent Director" generally
means a Director who is neither an affiliate of a person or entity providing
services to the Company nor is himself performing services for the Company other
than as a Director. The Board of Directors of the Company presently consists of
the seven individuals named below. Six of the seven individuals named below are
"Independent Directors." Set forth below are each Director's age, current
position with the Company, and business experience during the past five years or
more.

CHRISTOPHER J. DOHERTY
Director (2)
Age: 41
Mr. Doherty is a Partner at the Washington D.C. law firm of Fox, Bennett &
Turner. He has been with the firm for a total of six years from 1989 to 1991 and
from 1993 to present. Mr. Doherty served as General Counsel and Deputy Treasurer
to the Commonwealth of Massachusetts State Treasurer and as Massachusetts
Special Assistant Attorney from 1991 to 1993. From 1986 to 1989, he served as
Legislative Assistant and Counsel to the U.S. Senate Committee on Labor and
Human Resources. From 1979 to 1986 he served as a Special Assistant to Senator
Edward M. Kennedy. Mr. Doherty has a J.D. from the Georgetown University Law
Center and a B.A. from Harvard University. Mr. Doherty has been a Director of
the Company since September 1993.

PETER O. HANSON
Director (1) (3) (4)
Age: 63
Mr. Hanson has been the President of James E. Hanson, Inc., an industrial
real estate developer, property management and realty brokerage firm, since
1966. Since 1984, he has served as President of Property Investors Associates,
Inc. (a subsidiary of James E. Hanson, Inc.), which is the general partner of
five public real estate partnerships. He has been a Director of seven privately-
held corporations and general partner of eleven privately-held real estate
partnerships. Mr. Hanson is a member of the Society of Industrial and Office
Realtors, and served as its National President in 1985. He is also a member of
the New York Metropolitan Real Estate Brokers Association and in 1970 was its
President. Mr. Hanson has been a Director of the Company since 1988. He also is
a Trustee of Meridian Point Realty Trust `83 and Meridian Industrial Trust.

LORRAINE O. LEGG
President and Chief Executive Officer and Director (2) (4)
Age: 57
Ms. Legg has been President and Chief Executive Officer and a director of
TIS Financial Services, Inc. since 1984, TIS Mortgage Investment Company since
1988, and TIS Asset Management, Inc. since 1990. She is also President and Chief
Executive Officer and a director of Corporate Capital Investment Advisors. TIS
Financial Services, Inc., and its affiliates manage real estate and mortgage
investment portfolios for individuals and corporations. She is also President
and Chairman of TIS Mortgage Investment Company, a real estate investment trust
traded on the New York Stock Exchange. In addition, Ms. Legg is a director of
CFI Proservice, Inc. located in Portland, Oregon. Ms. Legg has over thirty-three
years of experience in corporate and real estate finance. Ms. Legg has served as
a Director of the Company since March 1993 and was elected as President and
Chief Executive Officer in December 1995. She also is a Trustee of Meridian
Point Realty Trust `83.

S. MICHAEL LUCASH
Chairman and Director (2) (4)
Age: 46
Mr. Lucash has been a Managing Director for Real Estate at Llama Company
since December 1995. Mr. Lucash was Chief Operating Officer of Boston Capital
Mortgage Company from March through December 1995. From 1993 to 1995 he was
Chief Operating Officer of ARBOR National Commercial Mortgage Corporation. Mr.
Lucash was President of Commercial Mortgage Corporation of America from 1987 to
1993. From 1985 to 1987 Mr. Lucash was Vice President of Mortgage Banking at
City Trust. Mr. Lucash has a B.S. from Southern Connecticut State University.
Mr. Lucash also attended Massachusetts School of Law. Mr. Lucash has been the
Chairman and a Director of the Company since September 1993.

-14-
<PAGE>

LAWRENCE P. MORRIS
Director (1)
Age: 41
Mr. Morris has been the Executive Vice President and Head of the Public
Finance Department for Mesirow Financial, Inc. since 1994. From 1985 to 1994,
Mr. Morris was a Vice President of First Chicago Capital Markets Inc. where he
managed the investment activities associated with bond financings and escrow
restructuring. From 1982 to 1985 Mr. Morris was an Assistant Vice President at
the First National Bank of Chicago. Mr. Morris received his B. A. from the
University of Notre Dame in 1978 and is a Certified Public Accountant. Mr.
Morris has served as a director of the Company since December 1995.

HOMER MCK. REES
Director (1) (3) (4)
Age: 66
From 1982 to 1992, Mr. Rees held various positions with The Prudential
Insurance Company of America, including Chairman in 1992 and President from 1988
to 1991 of Prudential Capital Corporation, a marketing unit responsible for
origination of private placements. Mr. Rees retired in 1992. Mr. Rees has an
M.B.A. from Harvard University and a B.A. from Yale University. Mr. Rees has
served as a Director of the Company since March 1993.

MICOLYN M. YALONIS
Director (2) (3)
Age: 37
Ms. Yalonis has been Vice President of Callan Associates, Inc. since 1993.
She was an independent real estate consultant from October 1992 to 1993,
providing independent real estate consulting services to advisors, plan
sponsors, and other institutional market participants. From 1988 to 1992, she
held various positions with Callan Associates Inc., including Vice President,
Manager from 1991 to 1992 and Assistant Vice President from June 1990 to
November 1991. Ms. Yalonis has a B.A. from the University of California, Los
Angeles. Ms. Yalonis has been a Director of the Company since September 1993.

- ---------------------------
(1) Member of the Audit Committee
(2) Member of the Nominating Committee
(3) Member of the Compensation Committee
(4) Member of the Strategic Alternatives Committee

EXECUTIVE OFFICERS
- ------------------

The following table sets forth as to each person who currently serves
as an executive officer, his or her name, age, and positions with the Company:

Name Age Position
---- --- --------

Lorraine O. Legg 57 President and Chief Executive Officer

John E. Castello 52 Senior Vice President and
Chief Financial Officer

Michael Gilbert 53 Vice President Real Estate

Denis F. Shanagher 40 Secretary

Michael Stone 60 Controller

Officers of the Company hold office at the discretion of the Directors.
Each executive officer's principal occupations during the past five years or
more are set forth below.

-15-
<PAGE>

LORRAINE O. LEGG
President and Chief Executive Officer and Director Ms. Legg has been
President and Chief Executive Officer and a director of TIS Financial Services,
Inc. since 1984, TIS Mortgage Investment Company since 1988, and TIS Asset
Management, Inc. since 1990. She is also President and Chief Executive Officer
and a director of Corporate Capital Investment Advisors. TIS Financial Services,
Inc., and its affiliates manage portfolios of real estate and mortgage
investments for individuals and corporations. Ms. Legg is also President and
Chairman of the Board of TIS Mortgage Investment Company, a real estate
investment trust traded on the New York Stock Exchange. In addition, Ms. Legg is
a director of CFI Proservice, Inc. located in Portland, Oregon. Ms. Legg has
over thirty-two years of experience in corporate and real estate finance. Ms.
Legg has served as a Director of the Company since March 1993 and was elected as
President and Chief Executive Officer in December 1995. She also is a Trustee of
Trust `83

JOHN E. CASTELLO
Senior Vice President and Chief Financial Officer
John E. Castello has been Senior Vice President of TIS Financial Services,
Inc. since 1985, Executive Vice President and Chief Financial Officer of TIS
Mortgage Investment Company since 1988, and Senior Vice President and Chief
Financial Officer of TIS Asset Management, Inc. since 1991 He is a Director of
TIS Mortgage Acceptance Corporation.

MICHAEL GILBERT
Vice President Real Estate
Mr. Gilbert has served as Vice President Real Estate for TIS Financial
Services since 1995. Prior to this time he was a real estate consultant, active
in major development projects in Southern California and many other areas of the
country. Previously Mr. Gilbert was vice president of S.H. Management, Inc. a
privately owned Los Angeles based investment concern. He was previously a vice
president and director of Gordon Capital Limited, a member
firm of the major Canadian Stock Exchanges.

DENIS F. SHANAGHER
Secretary
Mr. Shanagher has been a partner of the law firm of Preuss Walker &
Shanagher since August of 1993. Mr. Shanagher was a partner in the law firm of
Bronson, Bronson & McKinnon from 1987 to 1993, and an associate in the firm from
1981-1987. Mr. Shanagher has a J.D. from Hastings College of the Law and a B.A.
from Stanford University. Mr. Shanagher has served as outside General Counsel to
the Company since December of 1994.

MICHAEL STONE, CPA
Controller
Michael Stone has been Controller of TIS Financial Services, TIS Mortgage
Investment Company and TIS Asset Management since 1993. Prior to that Mr. Stone
served as Vice President - Finance at Dolby Laboratories, a position he held for
seven years. He served as Assistant Corporate Controller for twelve years at
McKesson Corporation and Accounting Manager at Crocker Estate Company. for five
years. After receiving his CPA, Mr. Stone was a Staff Accountant at the firm of
Arthur Young and Company for five years.

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION OF EXECUTIVE OFFICERS
- ----------------------------------

As of December 31, 1996, the Company had no full-time employees and is
currently managed under a Management Agreement with TIS Financial Services Inc.
This agreement requires that TIS pay the employment expenses of its personnel.

Prior to December 1995, the Company shared employee costs under an
internalized management structure using MPP. See Item 1. For the year ended
December 31, 1995, the Company's allocated share of each of its executive
officer's cash and non-cash compensation did not exceed $100,000.

-16-
<PAGE>

COMPENSATION OF DIRECTORS
- -------------------------

Director Fees. The Company pays each Director an annual fee of $8,000. In
-------------
1996, Ms. Yalonis, and Messrs. Doherty, Hanson, Lucash, Morris, and Rees each
received $8,000 as a Director fee.

Chairman's Fees. The Company pays the Chairman an annual fee of $25,000
---------------
which amount was paid in 1996.

Committee and Other Meeting Fees. The Directors are also entitled to be
--------------------------------
paid $500 for each Board meeting attended in person, $400 for each committee
meeting attended in person, and $300 for each Board or committee meeting
attended by means of conference telephone call; provided. Directors are also
paid $300 per half day for time spent attending to the Company's business.
During 1996 Mr. Doherty was paid $4,500, Mr. Hanson was paid $2,900, Mr. Lucash
was paid $3,700, Mr. Rees was paid $5,900, and Ms. Yalonis was paid $4,200.

Reimbursements. All Directors are reimbursed for reasonable travel and
--------------
other out-of-pocket expenses incurred in connection with attending Board and
committee meetings.

In December of 1995, TIS Financial Services Inc., of which Lorraine O.
Legg is President and Chief Executive Officer, became the Manager of the
Company. The management agreement provides that a management fee be paid to TIS
Financial Services in return for services. The management agreement requires
that TIS pay the employment expenses of its own personnel. Ms. Legg receives no
compensation from the Company for serving as President and Chief Executive
Officer. Ms. Legg is also a director of the Company and receives no compensation
for serving as a director.

The compensation and expense reimbursement arrangements for Directors
as set forth above may be changed by the Board of Directors pursuant to the
authority granted to it in the Company's Bylaws.

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

The following table sets forth the amount and nature of the beneficial
ownership of shares of common and preferred stock as of January 3, 1997, by (i)
each person known by the Company to own more than 5% of any class of the
Company's voting stock (based upon filings made with the Securities and Exchange
Commission), (ii) each Director, (iii) the executive officer named in the
Summary Compensation Table, and (iv) all Directors and executive officers of the
Company as a group.

Amount of Shares
Beneficially Owned Title Percent
Name (1) Directly or Indirectly of Class of Class
-------- ---------------------- -------- --------

Massachusetts State 1,560,754 Preferred 29.6%
Teachers' and Employees'
Retirement Systems Trust
c/o The Commonwealth of
Massachusetts Treasury
Department, One
Ashburton Place, #1200
Boston, MA 02108

Massachusetts Bay 1,183,556 Preferred 22.4%
Transportation Authority
Retirement Fund
99 Summer Street
17th Floor
Boston, MA 02110

Chicago Truck Driver, 521,164 Preferred 9.9%
Helpers & Warehouse
Workers Union
(Independent)
Pension Fund
809 W. Madison Street
Chicago, IL 60607

-17-
<PAGE>

Christopher J. Doherty -- -- --
Peter O. Hanson 1,600 Preferred (2)
Lorraine O. Legg 200 Preferred (2)
1,000 Common (2)
S. Michael Lucash -- -- --
Lawrence P. Morris -- -- --
Homer McK. Rees 1,000 Preferred (2)
5,000 Common (2)
Micolyn M. Yalonis -- -- --

All Directors and
executive officers
as a group (12 persons) 2,800 Preferred (2)
11,000 Common (2)

(1) Unless otherwise indicated in these footnotes, the persons listed above
have sole voting and investment power over the shares, subject to
community property laws were applicable.
(2) Less than 1%.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the period April 1, 1991 through December 1, 1995, the Company
and several other Companies were self-administered through an internalized
management structure (collectively, the "Participating Companies").
The structure of the self-administered management is described in Item 1.

Effective December 1, 1995, the Company terminated the Amended and
Restated Employee Leasing Agreement with MPP. On February 22, 1996, the Company
entered into a MPP Termination Agreement by which its interest in MPP was
terminated. Under the terms of the Agreement, the Company sold its outstanding
MPP stock to MPP and its proportionate interest in MPP's assets to Meridian
Industrial Trust ("MIT") at fair market value. In connection with transactions,
MPP was to be dissolved.

The MPP Termination agreement further required the termination of
certain other agreements between the Company and MPP, and the transfer of
certain third party agreements, right in actions, rights in certain insurance
policies and books and records from MPP to the Company. The Company and MPP
further agreed to the release of any claims, known or unknown, against the
other. The Company received par value of $3.84 per share for its stock in MPP
and $71,850 for its proportionate interest in the assets of MPP. The Company
subsequently received a final accounting relating to the dissolution of MPP and
received the return of its original advance of funds to MPP less certain MPP
expenses for December 1995.

Effective December 7, 1995, Lorraine O. Legg was elected President and
Chief Executive Officer of the Company. Legg is also President and Chief
Executive Officer of TIS Financial Services and serves as a Director of the
Company. Effective December 1, 1995, TIS manages the Company's assets,
properties and investments in addition to performing administrative services for
the Company in return for a base management fee in an amount equal to 0.75% of
the Company's Average Invested Assets, as defined in the Management Agreement.
The Agreement further requires that TIS pay all employment expenses of its
personnel performing services for the Company. Ms. Legg does not receive any
compensation from the Company for her services as an Officer of the Company. Ms.
Legg receives no compensation for her service as a Director of the Company.

In addition, on December 7, 1995, following the resignations of the
other senior officers of the Company affiliated with MPP, various other TIS
Officers and employees were elected as officers of the Company. Those officers
of the Company affiliated with TIS receive no direct compensation from the
Company in exchange for their services.

-18-
<PAGE>

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

(a) (1) FINANCIAL STATEMENTS. The following Company financial statements are
--------------------
filed as part of this report:
PAGE
Report of Independent Public Accountants...........................27
Consolidated Balance Sheets........................................28
Consolidated Statements of Operations..............................29
Consolidated Statements of Shareholders' Equity....................30
Consolidated Statements of Cash Flows..............................31
Supplemental Schedule of Non-Cash Transactions.....................32
Notes to Consolidated Financial Statements.........................33

(a) (2) FINANCIAL STATEMENT SCHEDULES. The following financial statement
----------------------------
schedules are filed as part of this report:

PAGE
Valuation and Qualifying Accounts................40
Real Estate and Accumulated Depreciation. .......41

Schedules for which provision is made in applicable accounting
regulations of the Securities and Exchange Commission which have not been
included have been omitted because of the absence of conditions for which they
are required or because the information is included elsewhere in this report.

(a) (3) EXHIBITS.
---------

NO. DESCRIPTION
- --- -----------

(in accordance with Item 601 of Regulation S-K)

3.1 Amended and Restated Bylaws of the Registrant dated March 5, 1992 filed
as Exhibit 3.4 to Registrant's Form 10-K for the fiscal year ended
December 3l, 1991 and incorporated herein by reference.

10.1 Loan Agreement between Sierra Capital Realty Trust VIII Co. and
Citicorp Real Estate, Inc. dated as of July 14, 1989, filed as Exhibit
10.1 to Registrant's Form 8-K dated July 14, 1989 and incorporated
herein by reference.

10.2 Letter Agreement dated as of June 13, 1990 between Sierra Capital
Realty Trust VIII Co. and Citicorp Real Estate, Inc. filed as Exhibit
10.8 to Registrant's Form 10-K for the fiscal year ended December 3l,
1991 and incorporated herein by reference.

10.3 Amendment to Loan Documents dated as of July 14, 1991 between Sierra
Capital Realty Trust VIII Co. and Citicorp Real Estate, Inc. filed as
Exhibit 10.9 to Registrant's Form 10-K for the fiscal year ended
December 3l, 1991 and incorporated herein by reference.

10.4 Amended and Restated Promissory Note executed by Sierra Capital Realty
Trust VIII Co. in favor of Citicorp Real Estate, Inc. dated July 14,
1991 filed as Exhibit 10.11 to Registrant's Form 10-K for the fiscal
year ended December 3l, 1991 and incorporated herein by reference.

10.5 Mortgage and Security Agreement with Assignment of Rents dated as of
July 14, 1989 made by Sierra Capital Realty Trust VIII Co. in favor of
Citicorp Real Estate, Inc. filed as Exhibit 10.12 to Registrant's Form
10-K for the fiscal year ended December 31, l991 and incorporated
herein by reference.

10.6 Omnibus Amendment to Security Agreements dated as of July 14, 1991
between Sierra Capital Realty Trust VIII Co. in favor of Citicorp Real
Estate, Inc. filed as Exhibit 10.15 to Registrant's Form 10-K for the
fiscal year ended December 31, l991 and incorporated herein by
reference.

-19-
<PAGE>

10.7 Environmental Agreement between Sierra Capital Realty Trust VIII Co.
and Citicorp Real Estate, Inc. dated July 14, 1989, filed as Exhibit
10.3 to Registrant's Form 8-K dated July 14, 1989 and incorporated
herein by reference.

10.8 Loan Agreement between Sierra Capital Realty Trust VIII Co. and The
Prudential Insurance Company of America dated as of May 25, 1990, filed
as Exhibit 10.1 to Registrant's Form 8-K dated June 14, 1990 and
incorporated herein by reference.

10.9 Promissory Note executed by Sierra Capital Realty Trust VIII Co. in
favor of The Prudential Insurance Company of America; Loan No.
7-503-316, filed as Exhibit 10.3 to Registrant's Form 8-K dated June
14, 1990 and incorporated herein by reference.

10.10 Employment Agreement dated July 2, 1991 by and among Sierra Real Estate
Equity Trust `82, Sierra Real Estate Equity Trust `83, Sierra Real
Estate Equity Trust `84 Co., Sierra Capital Realty Trust IV Co., Sierra
Capital Realty Trust VI Co., Sierra Capital Realty Trust VII Co.,
Sierra Capital Realty Trust VIII Co., Milton K. Reeder, and Meridian
Point Company, filed as Exhibit 10.2 to Registrant's Form 10-Q for the
quarter ended September 30, 1991 and incorporated herein by reference.

10.11 Change of Control Agreement dated December 12, 1991 among Al E.
Andrews, Jr. and Meridian Point Realty Trust `82, Meridian Point Realty
Trust `83, Sierra Real Estate Equity Trust `84 Co., Meridian Point
Realty Trust IV Co., Meridian Point Realty Trust VI Co., Meridian Point
Realty Trust VII Co. and Sierra Capital Realty Trust VIII Co. filed as
Exhibit 10.5l to Registrant's Form 10-K for the fiscal year ended
December 3l, 1991 and incorporated herein by reference.

10.12 Change of Control Agreement dated December 12, 1991 among Robert A.
Dobbin and Meridian Point Realty Trust `82, Meridian Point Realty Trust
`83, Sierra Real Estate Equity Trust `84 Co., Meridian Point Realty
Trust IV Co., Meridian Point Realty Trust VI Co., Meridian Point Realty
Trust VII Co. and Sierra Capital Realty Trust VIII Co. filed as Exhibit
10.52 to Registrant's Form 10-K for the fiscal year ended December 3l,
1991 and incorporated herein by reference.

10.13 Change of Control Agreement dated December 12, 1991 among Dennis D.
Higgs and Meridian Point Realty Trust `82, Meridian Point Realty Trust
`83, Sierra Real Estate Equity Trust `84 Co., Meridian Point Realty
Trust IV Co., Meridian Point Realty Trust VI Co., Meridian Point Realty
Trust VII Co. and Sierra Capital Realty Trust VIII Co. filed as Exhibit
10.53 to Registrant's Form 10-K for the fiscal year ended December 3l,
1991 and incorporated herein by reference.

10.14 Change of Control Agreement dated December 12, 1991 among Barbara J.
Schuessler and Meridian Point Realty Trust `82, Meridian Point Realty
Trust `83, Sierra Real Estate Equity Trust `84 Co., Meridian Point
Realty Trust IV Co., Meridian Point Realty Trust VI Co., Meridian Point
Realty Trust VII Co. and Sierra Capital Realty Trust VIII Co. filed as
Exhibit 10.55 to Registrant's Form 10-K for the fiscal year ended
December 3l, 1991 and incorporated herein by reference.

10.15 Stock Option Agreement, effective April 1, 1991, among Milton K.
Reeder, Meridian Point Properties, Inc., Meridian Point Company,
Meridian Point Realty Trust `82, Meridian Point Realty Trust `83,
Sierra Real Estate Equity Trust `84 Co., Meridian Point Realty Trust IV
Co., Meridian Point Realty Trust VI Co., Meridian Point Realty Trust
VII Co. and Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.60
to Registrant's Form 10-K for the fiscal year ended December 3l, 1991
and incorporated herein by reference.

10.16 Amended and Restated Articles of Incorporation of Meridian Point
Properties, filed March 24, 1992 filed as Exhibit 10.6l to Registrant's
Form 10-K for the fiscal year ended December 3l, 1991 and incorporated
herein by reference.

10.17 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Thomas B. Swartz filed as Exhibit 10.62 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.18 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Thomas B. Swartz filed as Exhibit 10.63 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

-20-
<PAGE>

10.19 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Robert A. Dobbin filed as Exhibit 10.64 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.20 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Milton K. Reeder filed as Exhibit 10.65 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.21 Indemnity Agreement, dated June 26, 1989, between Sierra Capital Realty
Trust VIII Co. and Steven B. Sinnett filed as Exhibit 10.71 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.22 Indemnity Agreement, dated March 5, 1992, between Sierra Capital Realty
Trust VIII Co. and Dennis H. Higgs filed as Exhibit 10.78 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.23 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Peter O. Hanson filed as Exhibit 10.66 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.24 Indemnity Agreement, undated, between Sierra Capital Realty Trust VIII
Co. and Richard H. Hughes filed as Exhibit 10.67 to Registrant's Form
10-K for the fiscal year ended December 3l, 1991 and incorporated
herein by reference.

10.25 Indemnity Agreement, dated July 29, 1988, between Sierra Capital Realty
Trust VIII Co. and Charles L. Smythe, Jr. filed as Exhibit 10.68 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.26 Indemnity Agreement, dated August 17, 1988, between Sierra Capital
Realty Trust VIII Co. and Richard S. Stanson filed as Exhibit 10.69 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.27 Indemnity Agreement, dated June 26, 1989, between Sierra Capital Realty
Trust VIII Co. and William B. Stevenson filed as Exhibit 10.70 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.28 Indemnity Agreement, effective June 6, 1991, between Sierra Capital
Realty Trust VIII Co. and Kermit Mowbray filed as Exhibit 10.72 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.29 Indemnity Agreement, effective June 6, 1991, between Sierra Capital
Realty Trust VIII Co. and James B. Davis filed as Exhibit 10.73 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.30 Indemnity Agreement, effective June 6, 1991, between Sierra Capital
Realty Trust VIII Co. and Lee W. Wilson filed as Exhibit 10.74 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.31 Indemnity Agreement, dated September 13, 1991, between Sierra Capital
Realty Trust VIII Co. and Al E. Andrews, Jr. filed as Exhibit 10.75 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.32 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust VIII Co. and Milton K. Reeder filed as Exhibit 10.76 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.33 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust VIII Co. and Robert A. Dobbin filed as Exhibit 10.77 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

-21-
<PAGE>

10.34 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust VIII Co. and James S. McCaffrey filed as Exhibit 10.79 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.35 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust VIII Co. and Steven B. Sinnett filed as Exhibit 10.80 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.36 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust VIII Co. and Barbara J. Finnegan filed as Exhibit 10.8l to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.37 Indemnity Agreement, dated March 5, 1992, between Sierra Capital Realty
Trust VIII Co. and Meridian Point Properties, Inc. filed as Exhibit
10.82 to Registrant's Form 10-K for the fiscal year ended December 3l,
1991 and incorporated herein by reference.

10.38 Indemnity Agreement, dated March 5, 1992, between Sierra Capital Realty
Trust VIII Co. and Meridian Point Company filed as Exhibit 10.83 to
Registrant's Form 10-K for the fiscal year ended December 3l, 1991 and
incorporated herein by reference.

10.39 First Amendment to Loan Agreement dated as of April 10, l992 between
the Prudential Company of America and Sierra Capital Realty Trust VIII
Co. filed as Exhibit 10.l to Registrant's Form 10-Q for the quarter
ended March 3l, l992 and incorporated herein by reference.

10.40 Amended and Restated Employee Leasing Agreement, effective March 24,
l992, among Meridian Point Realty Trust `82, Meridian Point Realty
Trust `83, Sierra Real Estate Equity Trust `84 Co., Meridian Point
Realty Trust IV Co., Meridian Point Realty Trust VI Co., Meridian Point
Realty Trust VII Co., and Sierra Capital Realty Trust VIII Co. filed as
Exhibit 10.l to Registrant's Form 10-Q for the quarter ended June 30,
l992 and incorporated herein by reference.

10.41 Amended and Restated Registrar, Transfer Agent, Dividend Disbursement
and Service Agreement, effective March 24, l992, among Meridian Point
Properties, Inc. and Meridian Point Realty Trust `82, Meridian Point
Realty Trust `83, Sierra Real Estate Equity Trust `84 Co., Meridian
Point Realty Trust IV Co., Meridian Point Realty Trust VI Co., Meridian
Point Realty Trust VII Co., and Sierra Capital Realty Trust VIII Co.
filed as Exhibit 10.2 to Registrant's Form 10-Q for the quarter ended
June 30, l992 and incorporated herein by reference.

10.42 Amendment No. l to Stock Option Agreement, effective March 24, l992,
among Milton K. Reeder, Meridian Point Properties, Inc., Meridian Point
Realty Trust `82, Meridian Point Realty Trust `83, Sierra Real Estate
Equity Trust `84 Co., Meridian Point Realty Trust IV Co., Meridian
Point Realty Trust VI Co., Meridian Point Realty Trust VII Co., and
Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.3 to
Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

10.43 Amendment to Promissory Note dated April 10, l992 to Promissory Note
dated June l4, l990 from Sierra Capital Realty Trust VIII Co. in favor
of The Prudential Insurance Company of America in the amount of
$8,l20,000 representing Loan No. 7-503-3l6 filed as Exhibit 10.5 to
Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

10.44 Promissory Note dated June 29, l990 from Sierra Capital Realty Trust
VIII Co. in favor of The Prudential Insurance Company of America in the
amount of $3,000,000 representing Loan No. 7-503-3l7 filed as Exhibit
10.6 to Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

10.45 Amendment to Promissory Note dated April 10, l992 to Promissory Note
dated June 29, l990 from Sierra Capital Realty Trust VIII Co. in favor
of The Prudential Insurance Company of America in the amount of
$3,000,000 representing Loan No. 7-503-3l7 filed as Exhibit 10.7 to
Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

10.46 Promissory Note dated October 29, l990 from Sierra Capital Realty Trust
VIII Co. in favor of The Prudential Insurance Company of America in the
amount of $8,725,000 representing Loan No. 7-503-3l9 filed as Exhibit
10.10 to Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

-22-
<PAGE>

10.47 Amendment to Promissory Note dated April 10, l992 to Promissory Note
dated October 29, l990 from Sierra Capital Realty Trust VIII Co. in
favor of The Prudential Insurance Company of America in the amount of
$8,725,000 representing Loan No. 7-503-3l9 filed as Exhibit 10.11 to
Registrant's Form 10-Q for the quarter ended June 30, l992 and
incorporated herein by reference.

10.48 Amended and Restated Promissory Note dated June l4, l992 from Sierra
Capital Realty Trust VIII Co. in favor of The Prudential Insurance
Company of America in the amount of $12,160,619.35 representing Loan
No. 7-503-3l5 filed as Exhibit 10.l2 to Registrant's Form 10-Q for the
quarter ended June 30, l992 and incorporated herein by reference.

10.49 Amended and Restated Promissory Note dated June 29, l992 from Sierra
Capital Realty Trust VIII Co. in favor of The Prudential Insurance
Company of America in the amount of $6,389,289.l3 representing Loan No.
7-503-3l8 filed as Exhibit 10.l3 to Registrant's Form 10-Q for the
quarter ended June 30, l992 and incorporated herein by reference.

10.50 Sublease dated September 11, 1992 between Chicago Title Insurance
Company and Meridian Point Properties, Inc. filed as Exhibit 10.95 to
Registrant's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference.

10.51 Indemnity Agreement effective February l, l992 between Sierra Capital
Realty Trust VIII Co. and Debra H. Paul filed as Exhibit 10.96 to
Registrant's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference.

10.52 Indemnity Agreement dated September 10, l992 between Sierra Capital
Realty Trust VIII Co. and Dennis D. Higgs filed as Exhibit 10.97 to
Registrant's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference.

10.53 Change of Control Agreement dated December 2, 1992 among Debra H. Paul
and Meridian Point Realty Trust `82, Meridian Point Realty Trust `83,
Sierra Real Estate Equity Trust `84 Co., Meridian Point Realty Trust IV
Co., Meridian Point Realty Trust VI Co., Meridian Point Realty Trust
VII Co. and Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.98
to Registrant's Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference.

10.54 Indemnity Agreement dated March 4, 1993 between Sierra Capital Realty
Trust VIII Co. and Lorraine O. Legg filed as Exhibit 10.1 to
Registrant's Form 10-Q for the quarter ended March 31, 1993 and
incorporated herein by reference.

10.55 Indemnity Agreement dated March 4, 1993 between Sierra Capital Realty
Trust VIII Co. and Robert E. Morgan filed as Exhibit 10.2 to
Registrant's Form 10-Q for the quarter ended March 31, 1993 and
incorporated herein by reference.

10.56 Indemnity Agreement between Sierra Capital Realty Trust VIII Co. and
Homer McK Rees filed as Exhibit 10.3 to Registrant's Form 10-Q for the
quarter ended March 31, 1993 and incorporated herein by reference.

10.57 Second Amendment to Loan Agreement dated as of June 24, 1993 between
The Prudential Insurance Company of America and Sierra Capital Realty
Trust VIII Co. filed as Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended June 30, 1993 and incorporated herein by reference.

10.58 Amendment No. 1 to the Employment Agreement of Milton K. Reeder dated
September 14, 1993 filed as Exhibit 10.1 to Registrant's Form 10-Q for
the quarter ended September 30, 1993 and incorporated herein by
reference.

10.59 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Al E. Andrews, Jr. filed as Exhibit 10.2 to Registrant's
Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.

10.60 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Robert A. Dobbin filed as Exhibit 10.3 to Registrant's
Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.

10.61 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Barbara S. Finnegan filed as Exhibit 10.4 to Registrant's
Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.

-23-
<PAGE>

10.62 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Dennis D. Higgs filed as Exhibit 10. 5 to Registrant's
Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.

10.63 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Debra H. Paul filed as Exhibit 10.6 to Registrant's Form
10-Q for the quarter ended September 30, 1993 and incorporated herein
by reference.

10.64 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Steven B. Sinnett filed as Exhibit 10.7 to Registrant's
Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.

10.65 Amendment to Promissory Note dated June 24, 1993 (Prudential Loan No.
7-503-315) filed as Exhibit 10.8 to Registrant's Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.

10.66 Amendment to Promissory Note dated June 24, 1993 (Prudential Loan No.
7-503-317) filed as Exhibit 10.9 to Registrant's Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.

10.67 Amendment to Promissory Note dated June 24, 1993 (Prudential Loan No.
7-503-318) filed as Exhibit 10.10 to Registrant's Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.

10.68 Amendment to Promissory Note dated June 24, 1993 (Prudential Loan No.
7-503-319) filed as Exhibit 10.11 to Registrant's Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.

10.69 Promissory Note executed by Meridian Point Realty Trust VIII Co. in
favor of the Prudential Insurance Company of America, Loan No. 7-503-
316 filed as Exhibit 10.12 to Registrant's Form 10-Q for the quarter
ended September 30, 1993 and incorporated herein by reference.

10.70 Indemnity Agreement dated September 17, 1993 between Micolyn Magee
Yalonis and Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.13
to Registrant's Form 10-Q for the quarter ended September 30, 1993 and
incorporated herein by reference.

10.71 Indemnity Agreement dated September 17, 1993 between Philip R. O'Connor
and Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.14 to
Registrant's Form 10-Q for the quarter ended September 30, 1993 and
incorporated herein by reference.

10.72 Promissory Note and Deed of Trust dated October 1993 in the principal
amount of $1,850,000 (for refinancing of Memphis 20 property) filed as
Exhibit 10.15 to Registrant's Form 10-Q for the quarter ended September
30, 1993 and incorporated herein by reference.

10.73 Promissory Note dated December 10, 1993 executed by Meridian Point
Realty Trust VIII Co. in favor of the Prudential Insurance Company of
America, Loan No. 7-503-319 filed as Exhibit 10.69 to Registrant's Form
10-K for the fiscal year ended December 31, 1993 and incorporated
herein by reference.

10.74 Indemnity Agreement dated September 17, 1993, between Sierra Capital
Realty Trust VIII Co. and S. Michael Lucash filed as Exhibit 10.70 to
Registrant's Form 10-K for the fiscal year ended December 31, 1993 and
incorporated herein by reference.

10.75 Modification to Promissory Note dated June 29, 1994 (Prudential Loan
No. 7-503-317) filed as Exhibit 10.1 to Registrant's 10-Q for the
quarter ended June 30, 1994 and incorporated herein by reference.

10.76 Mortgage and Security Agreement dated August 8, 1994 between Meridian
Point Realty Trust VIII Co. and PFL Life Insurance Company filed as
Exhibit 10.2 to Registrant's Form 10-Q for the quarter ended June 30,
1994 and incorporated herein by reference.

10.77 Mortgage Note dated August 8, 1994 executed by Meridian Point Realty
Trust VIII Co. in favor of PFL Life Insurance Company filed as Exhibit
10.3 Registrant's Form 10-Q for the quarter ended June 30, 1994 and
incorporated herein by reference.

-24-
<PAGE>

10.78 Amendment No. 1 to Amended and Restated Employee Leasing Agreement,
effective as of February 1, 1994 filed as Exhibit 10.1 to Registrant's
Form 10-Q for the quarter ended September 30, 1994 and incorporated
herein by reference.

10.79 Indemnity Agreement effective January 31, 1995, between Meridian Point
Realty Trust VIII Co. and Brian F. Zywiciel filed as Exhibit 10.1 to
Registrant's Form 8-K dated January 31, 1995, and incorporated herein
by reference.

10.80 Indemnity Agreement effective January 31, 1995, between Meridian Point
Realty Trust VIII Co. and Barbara S. Finnegan filed as Exhibit 10.2 to
Registrant's Form 8-K dated January 31, 1995, and incorporated herein
by reference.

10.80 Indemnity Agreement effective January 31, 1995, between Meridian Point
Realty Trust VIII Co. and Brian F. Zywiciel filed as Exhibit 10.3 to
Registrant's Form 8-K dated January 31, 1995, and incorporated herein
by reference.

10.81 Management Agreement dated October 18, 1995 and effective December 1,
1995 by and between Meridian Point Realty Trust VIII Co. and TIS
Financial Services, Inc. filed as Exhibit 10.81 to Registrant's Form
10K dated April 1, 1996, and incorporated herein by reference.

10.82 MPP Termination Agreement among Meridian Point Properties, Inc.
Meridian Point Industrial Trust, Inc. Meridian Point Realty Trust VIII
Co. Dated as of February 22, 1996 filed as Exhibit 10.82 to
Registrant's Form 10K dated April 1, 1996, and incorporated herein by
reference.

(b) REPORTS ON FORM 8-K.
--------------------

None.

(d) The financial statement schedules listed in Item 14(a)(2) above are
submitted as part of this report.

-25-
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 28, 1997 MERIDIAN POINT REALTY TRUST VIII CO.

By: /s/ Lorraine O. Legg
--------------------
Lorraine O. Legg
President and Chief Executive Officer

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

/s/Lorraine O. Legg Dated: March 28, 1997
- ----------------------------------------
Lorraine O. Legg
President and Chief Executive Officer
(Principal Executive Officer)

/s/John E. Castello Dated: March 28, 1997
- ----------------------------------------
John E. Castello
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ S. Michael Lucash Dated: March 28, 1997
- ----------------------------------------
S. Michael Lucash
Chairman and Director

/s/ Christopher J. Doherty Dated: March 28, 1997
- ----------------------------------------
Christopher J. Doherty
Director

/s/ Peter O. Hanson Dated: March 28, 1997
- ----------------------------------------
Peter O. Hanson
Director

/s/ Lorraine O. Legg Dated: March 28, 1997
- ----------------------------------------
Lorraine O. Legg
Director

/s/ Lawrence P. Morris Dated: March 28, 1997
- ----------------------------------------
Lawrence P. Morris
Director

/s/ Homer McK. Rees Dated: March 28, 1997
- ----------------------------------------
Homer McK. Rees
Director

/s/ Micolyn Magee Yalonis Dated: March 28, 1997
- ----------------------------------------
Micolyn Magee Yalonis
Director

-26-
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

- --------------------------------------------------------------------------------
To The Shareholders and Board of Directors of Meridian Point Realty Trust VIII
Co.:

We have audited the accompanying Consolidated Balance Sheets of
Meridian Point Realty Trust VIII Co. (a Missouri corporation) and subsidiary as
of December 31, 1996 and 1995, and the related Consolidated Statements of
Operations, Shareholders' Equity, and Cash Flows for each of the three years in
the period ended December 31, 1996. These financial statements and the schedules
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Meridian
Point Realty Trust VIII Co. and subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Financial Statement Schedules listed
in Item 14 (a)(2) are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

San Francisco, California
March 14, 1997

-27-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
INVESTMENT IN REAL ESTATE:
Rental Properties, Net $81,834,510 $81,765,163
Less: Accumulated Depreciation (15,152,397) (12,987,770)

66,682,113 68,777,393
OTHER ASSETS:
Cash and Cash Equivalents 2,791,670 5,016,216
Receivables, Net of Reserves of $25,961 and $134,971
as of December 31, 1996 and 1995, respectively 493,942 585,771
Notes Receivable From Affiliates -- 228,000
Personal Property, Net of Accumulated Depreciation of
$726,568 at December 31, 1995 -- 30,521
Capitalized Loan Costs, Net of Accumulated Amortization of
$709,158 and $765,089 as of December 31, 1996
and 1995, respectively 108,918 213,489
Capitalized Lease Commissions, Net of Accumulated Amortization
of $331,172 and $308,514 as of December 31, 1996
and 1995, respectively 308,835 363,504
Other Assets, Net of Accumulated Amortization of
$365,084 and $305,295 as of December 31, 1996
and 1995, respectively 1,208,477 1,279,431
----------- -----------
TOTAL ASSETS $71,593,955 $76,494,325
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage Notes Payable $ 7,570,281 $ 7,782,168
Long-term Debt Facility 20,042,420 24,259,396
Due to Affiliates 163,000 116,209
Accounts Payable 1,184,057 1,073,280
Prepaid Rent, Tenant Deposits and Other Liabilities 168,219 221,982
----------- -----------
TOTAL LIABILITIES 29,127,977 33,453,035
----------- -----------
SHAREHOLDERS' EQUITY:
Shares of Common and Preferred Stock with par value of $0.001 an aggregate of
50,000,000 Common and Preferred Shares authorized; 1,609,937 Common Shares
and 5,273,927 Preferred Shares issued and outstanding as of December 31,
1996 and 1995, respectively 6,884 6,884
Paid-in Capital 65,389,820 65,389,820
Distributions in Excess of Income (22,930,726) (22,355,414)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 42,465,978 43,041,290
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $71,593,955 $76,494,325
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

-28-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>

1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments $9,976,457 $10,868,405 $11,886,484
Interest and Other 244,300 326,170 194,915
---------- ----------- -----------
TOTAL REVENUES 10,220,757 11,194,575 12,081,399
---------- ----------- -----------
EXPENSES:
Interest and Amortization of Loan Costs 2,817,784 3,393,743 3,901,912
Property Taxes 1,558,852 1,536,584 1,739,159
Property Operating Costs, Including Amounts Paid
to Related Parties of $668,309, $624,015, and
$773,701, respectively 1,346,723 1,757,154 1,765,123
Legal Costs 107,058 63,290 135,155
General and Administrative, Including Amounts
Paid to Related Parties of $131,318, $168,205,
and $140,304, respectively 654,173 689,036 649,763
Provision for Decrease in Net Realizable Value -- 1,182,015 2,392,000
Depreciation and Amortization 2,431,448 2,718,862 3,373,076
---------- ----------- -----------
TOTAL EXPENSES 8,916,038 11,340,684 13,956,188
---------- ----------- -----------
INCOME (LOSS) BEFORE GAIN ON
DISPOSITION OF ASSETS 1,304,719 (146,109) (1,874,789)
Gain on Disposition of Assets 47,452 1,197 --
---------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 1,352,171 (144,912) (1,874,789)
Extraordinary Item -
Prepayment Penalty on Paydown of Debt -- (129,433) --
---------- ----------- -----------

NET INCOME (LOSS) $1,352,171 ($274,345) ($1,874,789)
========== =========== ===========

NET INCOME (LOSS) $1,352,171 ($274,345) ($1,874,789)
Preferred Distributions Declared (1,476,700) (1,476,700) (1,160,264)
---------- ----------- -----------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS ($124,529) ($1,751,045) ($3,035,053)
========== =========== ===========

NET LOSS PER COMMON SHARE:
Loss Before Extraordinary Item ($0.08) ($1.01) ($1.89)
Extraordinary Item - Prepayment Penalty -- (0.08) --
---------- ----------- -----------
NET LOSS PER COMMON SHARE ($0.08) ($1.09) ($1.89)
========== =========== ===========

PREFERRED DISTRIBUTIONS PAID PER SHARE $0.28 $0.28 $0.22
COMMON DISTRIBUTIONS PAID PER SHARE $0.28 $0.28 $0.22
========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

-29-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

COMMON STOCK PREFERRED STOCK DISTRIBUTIONS
------------ --------------- PAID-IN IN EXCESS
SHARES AMOUNT SHARES AMOUNT CAPITAL OF INCOME
------ ------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
JANUARY 1, 1994 1,609,937 $1,610 5,273,927 $5,274 $65,389,820 ($16,764,347)
Net Loss -- -- -- -- -- (1,874,789)
Distributions Declared:
Common -- -- -- -- -- (354,186)
Preferred -- -- -- -- -- (1,160,264)
--------- ------ --------- ------ ----------- -----------
BALANCE
DECEMBER 31, 1994 1,609,937 1,610 5,273,927 5,274 65,389,820 (20,153,586)
Net Loss -- -- -- -- -- (274,345)
Distributions Declared:
Common -- -- -- -- -- (450,783)
Preferred -- -- -- -- -- (1,476,700)
--------- ------ --------- ------ ----------- -----------
BALANCE
DECEMBER 31, 1995 1,609,937 1,610 5,273,927 5,274 65,389,820 (22,355,414)
Net Income -- -- -- -- -- 1,352,171
Distributions Declared:
Common -- -- -- -- -- (450,783)
Preferred -- -- -- -- -- (1,476,700)
--------- ------ --------- ------ ----------- -----------
BALANCE
DECEMBER 31, 1996 1,609,937 $1,610 5,273,927 $5,274 $65,389,820 ($22,930,726)
========= ====== ========= ====== =========== ============

The accompany notes are an integral part of these consolidated statements.
</TABLE>

-30-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $1,352,171 ($274,345) ($1,874,789)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities:
Depreciation 2,253,477 2,519,491 3,096,100
Amortization - Other 282,542 307,905 444,484
Provision for Decrease in Net Realizable Value -- 1,182,015 2,392,000
Rent Adjustment -- (16,698) (12,615)
Prepayment Penalty on Paydown of Debt -- 129,433 --
Gain on Disposition of Assets (47,452) (1,197) --
Decrease (Increase) in Accounts Receivable 91,829 143,011 (49,647)
Decrease (Increase) in Other Assets 14,091 56,781 (136,518)
Increase (Decrease) in Accounts Payable 110,777 (242,078) 119,149
Increase (Decrease) in Due from/to Affiliates, net 274,791 (15,697) 76,361
Increase (Decrease) in Other Liabilities (53,763) 53,722 (94,079)
---------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,278,463 3,842,343 3,960,446
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to Existing Real Estate (153,827) (519,937) (560,876)
Additions to Capitalized Lease Commissions (66,439) (185,485) (195,636)
Net Cash Received on Sale of Properties -- 1,730,124 --
Sales (Purchases) of Personal Property 73,603 (3,385) (15,537)
---------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (146,663) 1,021,317 (772,049)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Debt Facility (4,216,976) (2,686,033) (913,508)
Cash Received Due to Debt Refinancing -- -- 141,672
Principal Payments on Mortgage Notes (211,887) (194,327) (87,201)
Distributions Paid to Shareholders (1,927,483) (1,927,483) (1,514,450)
---------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES (6,356,346) (4,807,843) (2,373,487)
---------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,224,546) 55,817 814,910
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 5,016,216 4,960,399 4,145,489
---------- --------- ---------
END OF YEAR $2,791,670 $5,016,216 $4,960,399
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

-31-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

Disposition of Properties Due to Sale:
Net Book Value of Disposed Assets $26,151 $11,563,062 $ --
Other Assets Written-Off, Net of Other Liabilities -- 104,833 --
Paydown of Long-Term Debt Facility -- 9,809,535 --
Prepayment Penalties -- 129,433 --
Interest Paid in Escrow -- 27,650 --
Cash Held in Escrow -- 175,000 --

Refinancing of Auburn Hills:
Extinguishment of Bank Facility -- -- 5,928,958
Assumption of Mortgage Note Payable -- -- 6,220,000
Loan Costs Incurred -- -- 62,200
Closing Costs -- -- 87,170
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

-32-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

(a) ORGANIZATION. Meridian Point Realty Trust VIII Co. ("the Company")
is a corporation organized for the purpose of acquiring, operating and holding
for investment income-producing commercial and industrial real estate. The
Company was formed as a self liquidating finite-life REIT. However, at the
annual meeting of shareholders held on June 14, 1996, the shareholders approved
an amendment to the Company's Bylaws related to investment policy which will
allow the Company to reinvest proceeds from the sale of property into the
purchase of new property, making the Company an infinite-life REIT. The general
purpose of the Company is to seek income that qualifies under the REIT
provisions of the Internal Revenue Code. At such time as it is in the best
interests of the Company's shareholders to do so, the Board of Directors intends
to make investments in such a manner as to comply with the requirements of the
REIT Provisions of the Internal Revenue Code with respect to the composition of
the Company's investments and the derivation of its income. The Company
commenced operations on October 17, 1988.

From April 1, 1991 through November 30, 1995, the Company operated
under a self-administered management structure in conjunction with other
commonly-sponsored real estate investment trusts (the Company and such other
real estate investment trusts are collectively referred to herein as the
"Companies"). Under this management structure, Meridian Point Properties, Inc.
("MPP"), leased employees to the Company at cost to perform the administrative,
accounting, asset management, and property management functions. In addition,
through December 31, 1994, MPP, at cost, acted as the transfer agent for the
Companies and provided shareholder account maintenance and dividend
reimbursement and reinvestment services. The reimbursements made to MPP were
allocated among the Companies in accordance with agreements between MPP and the
Companies.

Effective December 1, 1995, the Company terminated its employee leasing
agreement with MPP and entered into a management agreement with TIS Financial
Services, Inc. ("TIS"). Under the agreement, the Company has retained TIS to
manage its assets, properties and investments in addition to performing
administrative services for the Company. The Company will pay TIS, for services
rendered under the agreement, a base management fee in an amount equal to 0.75%
of the Company's Average Invested Assets, as defined in the agreement, during
each calendar year. (See Note 2.)

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

The Company is currently negotiating with lenders to obtain permanent
mortgage loan financing (the Permanent Financing) to pay off the entire
remaining insurance facility (see Note 4). The negotiations currently
contemplate that the Permanent Financing would be secured by deeds of trust on
certain of the Company's real estate investments. Management believes that it is
more likely than not that the Company will close on the Permanent Financing or
other sources of financing to retire the insurance facility; however, there can
be no assurance as to the ultimate outcome of the negotiations. The accompanying
consolidated financial statements do not reflect any adjustments for this
uncertainty.

(c) CONSOLIDATION. The consolidated financial statements include
the Company and NASH-IND Corporation, a wholly-owned corporate subsidiary of the
Company. All significant intercompany transactions and balances have been
eliminated.

(d) STATEMENTS OF CASH FLOWS. For purposes of the statements of
cash flows, the Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.

Cash paid for interest was $2,740,085, $3,366,056 and $3,785,136 for the
years ended December 31, 1996, 1995, and 1994, respectively.

(e) INVESTMENT IN REAL ESTATE AND DEPRECIATION METHODS. In accordance
with Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed
Of", investments in Real Estate are stated at the lower of depreciated cost or
net realizable value. Net realizable value for financial reporting purposes: (i)
is evaluated and identified quarterly by the Company on a property by property
basis

-33-
<PAGE>

using undiscounted cash flows; (ii) is measured by comparing the Company's
estimate of fair value based upon either sales comparables or the net cash
expected to be generated by the property (comprised of the forecasted operations
for the property based upon historical results, together with management's
estimates of the property's future occupancy, lease rates and capital
improvement requirements), less estimated carrying costs (including interest)
throughout the anticipated holding period, plus the estimated cash proceeds from
the ultimate disposition of the property; and (iii) is not necessarily an
indication of a property's current value or the amount that will be realized
upon the ultimate disposition of the property. To the extent net realizable
value is less than the carrying value of the property, a Provision for Decrease
in Net Realizable Value is recorded in the amount by which the carrying value
exceeds estimated fair value. As of December 31, 1996 and 1995, the Company's
Investment in Real Estate is stated net of a cumulative Provision for Decrease
in Net Realizable Value of $5,167,000; As of December 31, 1994 the Provision was
$6,772,000. Investors should consider any net realizable value provisions in
evaluating realization of their investments. (See Note 3.)

Depreciation and amortization have been calculated under the
straight-line method, based upon the estimated useful lives of the assets.
Property and property additions are depreciated over 35 years. Expenditures for
maintenance, repairs, and improvements which do not materially prolong the
normal useful life of an asset are charged to operations as incurred. Leasing
commissions and tenant improvements are amortized under the straight-line method
over the term of the related lease.

(f) RENTALS FROM REAL ESTATE INVESTMENTS. Certain of the Company's
leases relating to its properties require lessees to pay all or a portion of
real estate taxes, insurance, and operating costs ("Expense Recaptures").
Expense Recaptures of $1,203,380, $1,393,576 and $1,693,123 are included in
Rentals from Real Estate Investments for the years ended December 31, 1996,
1995, and 1994, respectively.

All leases are classified as operating leases. The Company recognizes
rental income on the straight-line basis over the terms of the leases. Deferred
rent receivable, included in other assets, represents the excess of rental
revenue recognized on a straight-line basis over cash received under the
applicable lease provisions.

(g) CAPITALIZED LOAN COSTS. Costs incurred in obtaining long-term debt
are capitalized and amortized in relation to the corresponding debt.

(h) RECLASSIFICATIONS. Certain prior year amounts have been
reclassified in the consolidated financial statements and related notes to
conform to the 1996 presentation.

2. RELATED PARTIES.

For the three years ended December 31, 1996, the Company incurred fees
and expenses for services rendered by the directors of the Company totaling
$131,318, $168,205 and 140,304, respectively. Such amounts were paid directly
to the directors. Prior to December 1, 1995, the Company operated under a
self-administered management structure. (See Note 1)

For the year ended December 31, 1996, the Company incurred management
fees to TIS totaling $668,309, of which $163,000 was due at year end. These
management fees are all included in Property Operating Costs. For the years
ended December 31, 1995 and 1994, reimbursements to MPP were $624,015 and
$773,701, respectively, all of which are included in Property Operating Costs.

In accordance with agreements then existing between the Company and
MPP, these reimbursements were allocated among the Companies based on (i) gross
rental receipts of the Companies' properties and the Companies' relative real
estate assets for property and asset management costs; and (ii) proportionate
time incurred, the number of shareholders and relative real estate assets for
costs incurred in conducting the Companies' daily operations.

On October 18, 1995, the Company entered into a management agreement
with TIS and terminated its employee leasing agreement with MPP effective
December 1, 1995. Pursuant to the termination provisions in the agreements
between the Company and MPP, the Company is obligated for its pro-rata share of
any contractual obligations that MPP entered into on behalf and for the benefit
of the Company. The financial impact from such contractual obligations did not
have a material impact on the Company's financial position or results of
operation in 1996 and management believes that any future impact will also be
immaterial.

-34-
<PAGE>

Under the agreement with TIS, the Company has retained TIS to manage
its assets, properties and investments in addition to performing administrative
services for the Company. The Company will pay TIS, for services rendered under
the agreement, a base management fee in an amount equal to 0.75% of the
Company's Average Invested Assets, as defined in the agreement, during each
calendar year. For the years ended December 31, 1996 and 1995, the Company has
incurred $668,309 and $56,000, respectively, under this agreement with TIS. The
Company's President and Chief Executive Officer is also an officer of TIS and
serves on the board of directors of the Company.

Notes Receivable From Affiliates
- --------------------------------

In connection with the internalization of management, the Company made
advances to MPP for the estimated amount of expenditures that would be incurred
in conducting the daily operations of the Company. The advances were repaid in
1996.

3. RENTAL PROPERTIES, NET.

Rental properties, net at December 31, 1996 and 1995 consist of the
following:

1996 1995
---- ----

Land $14,833,973 $14,833,973
Buildings 63,957,172 63,957,172
Capital Improvements 3,040,065 2,850,979
Construction in Progress 3,300 123,039
----------- -----------
TOTAL $81,834,510 $81,765,163
=========== ===========

There was no Provision for Decrease in Net Realizable Value for the
year ended December 31, 1996 The cumulative Provision for Decrease in Net
Realizable Value and net book as of December 31, 1996 are as follows:

CUMULATIVE PROVISION
FOR DECREASE IN NET
PROPERTY REALIZABLE VALUE NET BOOK VALUE
-------- ---------------- --------------

South Sayre $ 550,000 $ 4,410,873
Memphis #1 31,000 1,620,116
Memphis #8 233,000 328,792
Memphis #20 781,000 2,285,321
3821 Getwell 94,000 500,596
1033 East Maricopa 420,000 611,572
616 South 55th Avenue 406,000 3,183,329
2455 South 7th Street 910,000 1,127,572
9219 Viscount 203,000 1,922,204
9100 Carpenter 322,000 682,366
7601 Ambassador 1,137,000 2,353,986
7811/7901 Ambassador 80,000 1,912,705
---------- -----------
Subtotal 5,167,000 20,939,432
Total for all properties with no
Cumulative Provision for
Decrease in Net Realizable Value -- 45,742,681
---------- -----------
Total $5,167,000 $66,682,113
========== ===========

-35-
<PAGE>

All the Company's leases relating to its rental properties are
operating leases. The minimum future rental revenues from these leases as of
December 31, 1996, are as follows:

1997 $ 8,073,849
1998 7,326,213
1999 5,897,001
2000 5,007,119
2001 4,933,781
Thereafter 18,701,542

There are currently three major tenants comprising 48% of the total
rental revenue of the Company based on the projected 1997 base rent of existing
leases. As of December 31, 1996, the Company's properties were 91.2% occupied.
During 1997, leases covering approximately 12% of the Company's leasable space
are scheduled to expire.

4. LONG-TERM DEBT FACILITY.

FACILITY

As of December 31, 1996 and 1995, there was outstanding $20,042,420 and
$24,259,396, respectively, under a facility with an insurance company. This
facility have provided the Company with financing for property acquisitions,
capital improvements and general operating needs. At the present time, there is
no credit availability under the insurance company facility.

INTEREST AND PRINCIPAL MATURITIES

Under the insurance company facility, there are three outstanding
advances totaling $20,042,420. These advances bear fixed interest rates for
periods ranging from six months to two years. Under the existing insurance
company facility agreements, the various advances and the corresponding interest
rate contracts mature on the dates specified below.

As detailed above, the Company's debt facility has total principal
maturities of approximately $17.2 million in July 1997. The Company is currently
negotiating with lenders to obtain permanent mortgage loan financing (the
Permanent Financing) to pay off the entire remaining facility. The negotiations
currently contemplate that the Permanent Financing would be secured by deeds of
trust on certain of the Company's real estate investments. Management believes
that it is more likely than not that the Company will close on the Permanent
Financing or other sources of financing to retire the insurance facility;
however, there can be no assurance as to the ultimate outcome of the
negotiations.

On December 10, 1996, the Company retired a fourth advance under the
insurance company facility with a principal payment of $3,286,176 from the
Company's cash reserve.

On May 25, 1995, the Company sold the Kroger property located in
Jackson, Mississippi (see Note 9). The net sale proceeds received from that
transaction were used to make a principal payment on the insurance company
facility. On July 24, 1995, the Company sold the Tropicana Marketplace located
in Las Vegas, Nevada. The Company used the net sale proceeds from the Tropicana
Marketplace to pay the entire balance of an interest rate contract which was
maturing in October 1995 and part of the balance of the interest rate contract
maturing in December 1996. (See Note 9.)

-36-
<PAGE>

LOAN COVENANTS AND COLLATERAL

On June 24, 1993, the Company and the lender executed a second
amendment to the loan agreement. The amendment stipulates that if the loan
to-value-ratio is more than 55% and equal to or less than 65%, the Company must
pay the lender any excess cash which will be utilized to pay down the
outstanding principal balance. Excess cash has been defined as cash and cash
equivalents at the end of any calendar quarter in excess of $4.0 million.
If the loan-to-value ratio exceeds 65%, the loan will be in default.

Additional terms and conditions of the second amendment include: (i)
repayment of the loan in monthly principal and interest payments using a
twenty-two year amortization schedule (subject to the interest rate contract
maturities detailed above); (ii) reduction of the minimum net worth covenant to
$25.0 million; (iii) a requirement to apply 90% of the net proceeds to the
facility upon the sale of more than 2% of appraised value of the Company's
assets during any 12 month period if the loan-to-value ratio is equal to or
greater than 50%; and (iv) a requirement to apply 70% of the net proceeds to the
facility upon the sale of more than 2% of the appraised value of the Company's
assets during any 12 month period if the loan-to-value ratio is less than 50%.
Under the terms of the second amendment, unless payment of distributions is
necessary to preserve REIT status, the Company can only pay distributions if the
insurance company has determined that the Company's loan-to-value ratio is 55%
or less. (See Note 6.)

As approved by the insurance company, the property valuations as of
December 31, 1996 indicate that the Company is in compliance with all covenants
regarding the loan-to-value ratio which is 40%.

5. MORTGAGE NOTES PAYABLE.

The following table presents information regarding the Company's
Mortgage Notes Payable at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
STATED ANNUAL MATURITY BALANCE AS OF DECEMBER 31,
NAME AND LOCATION OF PROPERTY INTEREST RATE PAYMENTS DATES 1996 1995
- ----------------------------- ------------- -------- ----- ---- ----
<S> <C> <C> <C> <C> <C>

Memphis #20, Memphis, TN 8.000% $185,700 11/1/98 $1,714,643 $1,761,132
Auburn I, Auburn Hill, MI 8.875% 693,144 08/01/09 5,855,638 6,021,036

Total $7,570,281 $7,782,168
</TABLE>

Principal payments are due as follows:

1997 $ 259,846
1998 1,953,392
1999 315,824
2000 345,022
2001 436,702
Thereafter 4,259,495
----------
$7,570,281
==========
On August 11, 1994, the Company refinanced the Auburn Hills property.
The loan was for $6,220,000 has a fifteen-year term with a maturity date of
August 1, 2009, and bears an interest rate of 8.875% per annum. The monthly
principal and interest payments are currently $57,762 and are based on a
schedule specified in the loan agreement.

-37-
<PAGE>

6. DISTRIBUTIONS.

The analysis below presents the amount of distributions paid to
shareholders and the percentage of the distribution which the Company estimates
is nontaxable for the years ended December 31, 1996, 1995 and 1994.
Nontaxable distributions are considered return of capital to shareholders.
<TABLE>
<CAPTION>
1996 1995 1994
Common Preferred Common Preferred Common Preferred
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

Distributions Paid Per Share $0.280 $0.280 $0.280 $0.280 $0.220 $0.220
------ ------ ------ ------ ------ ------
Nontaxable Distributions 25.00% 22.88% 100% 100% 61% 2%
Taxable Distributions 75.00% 77.12% --% --% 39% 98%
------ ------ ------ ------ ------ ------
100.00% 100.00% 100% 100% 100% 100%
------ ------ ------ ------ ------ ------
</TABLE>

Under the Company's articles of incorporation, the Board cannot declare
any dividends on common shares until it has first declared dividends on the
preferred shares' annual preference amount as computed under those articles.

The preferred shares generally have a non-cumulative preferential right
to such current distributions as are declared each year by the Board of
Directors up to an amount equal to the lesser of (a) 6% on the aggregate
adjusted stated value of preferred shares, (b) earnings and profits for the
prior year, or (c) the amount legally available for distribution by the Company.

The preferred shares are generally entitled to the first declared sale
or refinance distributions attributable to a property up to an amount equal to
their proportionate share of the equity initially invested in that property.

The preferred shares will receive all declared liquidating
distributions until these shares have recovered their entire investment via sale
or refinance distributions and liquidating distributions.

During each of the years ended December 31, 1996 and 1995,
distributions totaling $1,927,483 were made to shareholders. Information with
regard to the declaration and payment of these distributions follows:

Per Preferred Per Common
Date Declared Record Date Payable Date Share Share
------------- ----------- ------------ ----- -----
<S> <C> <C> <C> <C>
1996
March 12, 1996 March 19, 1996 March 29, 1996 $0.07 $0.07
June 14, 1996 June 21, 1996 June 28, 1996 0.07 0.07
September 13, 1996 September 23, 1996 September 30, 1996 0.07 0.07
December 13, 1996 December 23, 1996 December 27, 1996 0.07 0.07

1995
April 28, 1995 May 4, 1995 May 15, 1995 0.07 0.07
June 7, 1995 June 20, 1995 June 30, 1995 0.07 0.07
September 8, 1995 September 19, 1995 September 29, 1995 0.07 0.07
December 8, 1995 December 19, 1995 December 29, 1995 0.07 0.07

</TABLE>

7. NET LOSS PER COMMON SHARE.

Net loss per share of common stock has been determined by dividing net
loss, after deduction of preferred distributions declared, by the weighted
average number of shares of common stock outstanding during the year. Weighted
average common shares outstanding totaled 1,609,937 for 1996, 1995 and 1994.

-38-
<PAGE>

8. INCOME TAXES.

The Company previously made an election to be taxed as a real estate
investment trust ("REIT") beginning with the calendar tax year 1989. The Company
continued to satisfy all of the requirements to maintain its status as a REIT
for the tax years ended December 31, 1990 and 1991.

One of the requirements for REIT qualification is that five or fewer
shareholders cannot own more than 50% of the total value of the Company's
outstanding stock at any time during the last half of the taxable year (the
"five or fewer rule"). For purposes of this rule under 1992 and 1993 tax law,
domestic pension trusts were treated as a single individual. During the last
half of the year ended December 31, 1992, the Company failed to satisfy the five
or fewer rule. The failure was caused, for the most part, by the decline and
fluctuations in the fair market value of its preferred stock relative to its
common stock and was not the result of increases in the shares held by any
shareholders. The decline and fluctuations in the fair market value of its
preferred and common stock were due in part to recent declines in real estate
values coupled with the preferred shareholders' liquidation preference.

As a result of its loss of REIT status, the Company was taxed as a
regular corporation beginning with the tax year ended December 31, 1992.
Accordingly, any of the Company's taxable income remaining after utilizing any
available net operating loss carryovers, would have been subject to federal and
state corporate income tax. However, the Company had no material federal or
state tax liability for 1992 or 1993.

Under applicable tax rules, the Company would have been prohibited from
re-electing REIT status for a five year period (i.e. until calendar year 1997)
unless: (1) the Company satisfied all of the REIT requirements including, but
not limited to, the five or fewer rule; and (2) the Company had received
permission from the Internal Revenue Service ("IRS") under a special procedure.
With respect to item (1), the Company should be able to satisfy all of the REIT
requirements, but most importantly, satisfy the five or fewer rule beginning
with the calendar year 1994 because of an amendment to the five or fewer rule.
The amendment, which became effective on January 1, 1994, allowed the Company to
"look-through" to the beneficiaries of a domestic pension trust and treat each
beneficiary as owning stock in the Company in proportion to the beneficiary's
actuarial interest in the domestic pension trust for purposes of the five or
fewer rule. With respect to item (2), the Company's formal request for
re-election of REIT status was granted by the IRS effective January 1, 1994.

The Company made an election to be taxed as a REIT beginning with the
calendar year 1994. Under certain circumstances, loss of REIT status may result
in the imposition of federal and state corporate level tax on certain
"built-in-gains" (if any) with respect to Company properties that exist on the
date of its re-election of REIT status. The Company intends to qualify and elect
to be treated as a real estate investment trust ("REIT") for the year ending
December 31, 1996. As such, the Company should be allowed a deduction for
dividends paid to shareholders if the Company satisfies certain income, asset
and distribution requirements (see Note 6). Accordingly, no provision for
federal income taxes has been made in the accompanying Consolidated Statements
of Operations for the years ended December 31, 1996, 1995 and 1994.

9. DISPOSITION OF PROPERTIES.

On July 24, 1995, the Company sold the Tropicana Marketplace located in
Las Vegas, Nevada for a selling price of $10,218,000. Net proceeds amounted to
$9,644,065 after (i) $398,935 of adjustments for closing costs, interest earned
and pro-rations, and (ii) adjustment for an escrow holdback amounting to
$175,000. The net proceeds from the sale and additional funds of $322,553
deposited by the Company into an escrow account totaling $9,966,618 were
remitted to the insurance company as additional principal reduction totaling
$9,809,535, prepayment penalties amounting to $129,433, and an interest payment
of $27,650. As a result of this payment, an interest rate contract maturing in
October 1995 with a notional amount of $5,541,419 was paid off completely, and
the amount due in December 1996 was reduced. (See Note 4)

In connection with the sale, the Company recognized a Loss on Sale of
Property of $156,060. The property had previously been written down to its
estimated net realizable value. Subsequent to July 24, 1995, the Company
received a partial refund of the $175,000 escrow holdback in the amount of
$126,393, reflecting deductions totaling $50,000 that were incurred in
connection with the settlement of tenant disputes outstanding on the date the
Tropicana Marketplace property was sold. The refund includes interest earned on
the escrow holdback in the amount of $1,393. The $50,000 deduction is included
in the Loss on Sale of Property.

In 1996, the Company sold all of its personal property for $73,603
resulting in a gain of $47,452.

-39-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

BALANCE BALANCE
BEGINNING OF CHARGED TO END OF
DESCRIPTION YEAR EXPENSE DEDUCTIONS YEAR
----------- ---- ------- ---------- ----

1994
Reserve for Bad Debts 155,758 (38,480) -- 117,278

1995
Reserve for Bad Debts 117,278 201,281 (183,588) 134,971

1996
Reserve for Bad Debts 134,971 (38,121) (70,889) 25,961

-40-
<PAGE>

MERIDIAN POINT REALTY TRUST VIII CO.

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996

<TABLE>
<CAPTION>
COSTS CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION
----------------------- -------------------------
NET REALIZABLE
RENTAL VALUE
DESCRIPTION ENCUMBRANCES LAND BUILDING IMPROVEMENTS GUARANTEES WRITEDOWNS (3)
- ------------------------- ---------------- ------------- -------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Office Building
Auburn Hills, MI $5,855,638 $ 1,990,705 $11,665,913 $ $ $
-- -- --

Warehouse/Distribution
Lavergne, TN 1,693,892 11,866,236 -- --
Bedford Park, IL 851,483 5,157,273 95,670 (550,000)
Memphis, TN 1,714,643 3,215,594 12,872,967 1,549,293 (1,139,000)

Richland, MS 203,949 2,345,404 151,175 (132,127) --
Chino, CA 3,416,095 7,259,203 -- -- --
Phoenix, AZ 2,488,197 9,952,790 266,425 (227,129) (1,736,000)
Dallas, TX 2,085,889 7,251,811 980,802 -- (1,742,000)
----------- ----------- ----------- ----------- --------- ----------
Total $7,570,281 $15,945,804 $68,371,597 $3,043,365 ($359,256) ($5,167,000)
=========== =========== =========== ========== ========= ===========
</TABLE>

<TABLE>
<CAPTION>
GROSS AMOUNT
CARRIED AT END OF PERIOD
------------------------
BUILDINGS & ACCUMULATED DATE OF DATE OF DEPRECIABLE
DESCRIPTION LAND IMPROVEMENTS TOTAL (2) DEPRECIATION CONSTRUCTION ACQUISITION LIFE
- ----------- ---- ------------ --------- ------------ ------------ ----------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Office Building
Auburn Hills, MI $1,990,705 $11,665,913 $13,656,618 $2,670,635 1986-87 12/27/88 35 yrs.

Warehouse/Distribution
Lavergne, TN 1,693,892 11,866,236 13,560,128 2,544,329 1988-89 06/28/89 35 yrs.
Bedford Park, IL 773,544 4,780,882 5,554,426 1,143,564 1975 08/04/89 35 yrs.
Memphis, TN 2,962,554 13,536,300 16,498,854 3,263,419 1968-82 12/21/89 & 35 yrs.
04/27/90
Richland, MS 193,379 2,375,022 2,568,401 574,390 1984-89 12/21/89 35 yrs.
Chino, CA 3,416,095 7,259,203 10,675,298 1,435,031 1982 01/31/90 35 yrs.
Phoenix, AZ 2,095,571 8,648,712 10,744,283 1,818,601 1987-89 06/29/90 35 yrs.
Dallas, TX 1,708,233 6,868,269 8,576,502 1,702,428 1958-68 10/29/90 35 yrs.
----------- ----------- ----------- ----------- ------- --------- ------
Total $14,833,973 $67,000,537 $81,834,510 $15,152,397
=========== =========== =========== ===========

</TABLE>

A Reconciliation of Cost and Accumulated Depreciation for the Years ended
December 31, 1996, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
1996 1995
ACCUMULATED Accumulated
COST DEPRECIATION Cost Depreciation
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Balance at Beginning of Year $81,765,163 $12,987,770 96,820,813 $13,350,872

Additions during period
Capital Improvements 153,827 -- 519,937 --
Depreciation -- 2,249,107 -- 2,467,408
Provision for Decrease in Net Realizable Value -- -- (1,182,015) --
Deletions (84,480) (84,480) (358,256) (358,256)
Cost of Real Estate Disposed (1) -- -- (14,035,316) (2,472,254)
------------------------ --------------------------
Balance at End of Year $81,834,510 $15,152,397 $81,765,163 $12,987,770
======================== ==========================

</TABLE>
<TABLE>
<CAPTION>

1994
ACCUMULATED
COST DEPRECIATION
---- ------------
<S> <C> <C>

Balance at Beginning of Year $98,968,496 $10,839,42

Additions during period
Capital Improvements 560,876 --
Depreciation -- 2,828,003
Provision for Decrease in Net Realizable Value (2,392,000) --
Deletions (316,559) (316,559)
Cost of Real Estate Disposed (1) -- --
--------------------------
Balance at End of Year $96,820,813 $13,350,872
==========================

</TABLE>

(1) Represents the property basis of Kroger and Tropicana Marketplace, net
of Decrease in Net Realizable Value, which were disposed on May 25,
1995 and July 24, 1995, respectively.
(2) The aggregate cost for Federal Income Tax purposes was approximately
$87,000,000.
(3) Represents the cumulative Provision for Decrease in Net Realizable
Value at December 31, 1996 and 1995, which is measured as the amount by
which the carrying value of the properties exceeds their respective
current estimated fair values.

-41-

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,791,670
<SECURITIES> 0
<RECEIVABLES> 519,903
<ALLOWANCES> 25,961
<INVENTORY> 0
<CURRENT-ASSETS> 3,285,612
<PP&E> 81,834,510
<DEPRECIATION> 15,152,397
<TOTAL-ASSETS> 71,593,955
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
5,274
<COMMON> 1,610
<OTHER-SE> 42,459,094
<TOTAL-LIABILITY-AND-EQUITY> 71,593,955
<SALES> 0
<TOTAL-REVENUES> 10,268,209
<CGS> 0
<TOTAL-COSTS> 6,098,254
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,817,784
<INCOME-PRETAX> 1,352,171
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,352,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,352,171
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)

</TABLE>