PRUDENTIAL BACHE A G SPANOS REALTY PARTNERS L P I
PRER14A, 1998-02-02
OPERATORS OF APARTMENT BUILDINGS
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<PAGE>
 
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                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )
        
Filed by the Registrant [X]

Filed by a Party other than the Registrant [_] 

Check the appropriate box:

[X]  Preliminary Proxy Statement        [_]  Confidential, for Use of the 
           (revised)                         Commission Only (as permitted by
                                             Rule 14a-6(e)(2))
[_]  Definitive Proxy Statement 

[_]  Definitive Additional Materials 

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

             PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
- --------------------------------------------------------------------------------
               (Name of Registrant as Specified In Its Charter)

                         
- --------------------------------------------------------------------------------
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
Payment of Filing Fee (Check the appropriate box):

[_]  No fee required.

[X]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

   
     (1) Title of each class of securities to which transaction applies:
         Units of limited partnership interest in Prudential-Bache/A.G. Spanos
     -------------------------------------------------------------------------
         Realty Partners L.P., I
     -------------------------------------------------------------------------

     (2) Aggregate number of securities to which transaction applies:
         316,828 Units
     -------------------------------------------------------------------------


     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
         the filing fee is calculated and state how it was determined):
         $71.46(1)
     -------------------------------------------------------------------------
      

     (4) Proposed maximum aggregate value of transaction:
         $22,640,000(1)
     -------------------------------------------------------------------------


     (5) Total fee paid:
         $4,528
     -------------------------------------------------------------------------

[X]  Fee paid previously with preliminary materials.
     
[_]  Check box if any part of the fee is offset as provided by Exchange
     Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.
     
     (1) Amount Previously Paid:
 
     -------------------------------------------------------------------------


     (2) Form, Schedule or Registration Statement No.:

     -------------------------------------------------------------------------


     (3) Filing Party:
      
     -------------------------------------------------------------------------


     (4) Date Filed:

     -------------------------------------------------------------------------

Notes:
     (1) Estimated solely for purposes of calculating the fee. Based on
         estimated total distributions to unitholders, subordinated limited
         partners and general partners after application of anticipated proceeds
         less applicable expenses.



<PAGE>
 
              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                               ONE SEAPORT PLAZA
                            NEW YORK, NEW YORK 10292
                                                              
                                                          FEBRUARY __, 1998     


Dear Unitholders:

          As you know, the Partnership was formed in 1988 to acquire, operate
and then ultimately dispose of a portfolio of eight apartment properties located
in five states.  It was originally anticipated that the Partnership would
operate for seven to ten years and then sell the properties, although there is
no mandatory time frame in which the property sales must occur.

          The Partnership is now in its tenth year of operations, and for some
time now, A.G. Spanos Realty Partners, L.P. ("Spanos") and Prudential-Bache
Properties, Inc. ("P-B Properties"), the General Partners of the Partnership,
have been considering when and how to effect the disposition of the properties
in the best interests of the Partnership.  In addition, Spanos and certain of
its affiliates have been involved in discussions to resolve the claims against
them in certain class action litigation currently pending in federal district
court.  Although the Partnership is not named as a defendant in this litigation,
it is included among numerous limited partnerships which are at issue in the
litigation.  These discussions have culminated in a proposed settlement by
Spanos and its affiliates (the "Settlement") of the class action
<PAGE>
 
    
litigation, providing for an integrated plan of action (the "Plan") to sell the
eight properties and distribute the net sale proceeds in liquidation of the
Partnership.  The United States District Court for the Southern District of New
York (the "Court") has preliminarily approved the Settlement.  Accompanying this
letter is a copy of the Notice to Equitable Class of Pendency of Class Action,
Proposed Partial Settlement of Class Action by the Spanos Defendants,
Requirement for Majority Consent to the Auction of the Properties of Certain
Partnerships as Part of the Spanos Settlement, Settlement Fairness Hearing,
Right to Appeal at Hearing and Right to Object to the Settlement (the "Class
Notice").  Unitholders should review carefully the Class Notice, in conjunction
with this letter and the enclosed Notice of Consent Solicitation and Statement
Furnished in Connection with the Solicitation of Consents (the "Solicitation
Statement").  A copy of the agreement regarding the Settlement will be sent
without charge to any Unitholder who so requests.     

                            ------------------------

          IMPLEMENTATION OF CERTAIN ELEMENTS OF THE PLAN REQUIRES THE CONSENT OF
HOLDERS OF A MAJORITY OF THE UNITS, AND YOUR APPROVAL IS VERY IMPORTANT.  Please
return your Consent card as soon as possible, because a failure to return a
Consent card has the same effect as a "No" vote.

                            ------------------------

          Under the Plan, the properties will be sold at a public auction (the
"Auction") to be conducted by Ernst & Young LLP, an

                                       2
<PAGE>
 
    
independent national public accounting and consulting firm, through its E&Y
Kenneth Leventhal Real Estate Group ("Leventhal").  Pursuant to the demands of
the plaintiffs in the negotiations, under the proposed Settlement Spanos has
agreed that it or one of its affiliates will open the Auction by submitting an
initial bid so as to guarantee the Partnership a gross aggregate sales price for
all the properties of at least $22,440,000 in excess of the mortgage debt
outstanding.  Leventhal will then seek to obtain competing bids from other
qualified bidders.  After an initial bidding period, Leventhal will review the
bids received with P-B Properties and the lead lawyers representing the
plaintiffs in the class action ("Lead Class Counsel").  (Since an affiliate of
Spanos will be a bidder, Spanos will not take any part in reviewing the bids or
selecting the winner.)  Leventhal will thereafter re-solicit higher bids from
the bidders, other than Spanos or its affiliate.  Following the re-bid period,
Leventhal will report the final bid results to P-B Properties and Lead Class
Counsel, who will jointly determine the successful bid or bids.  Leventhal and
P-B Properties will then work toward consummating the sales with the successful
bidder or bidders.     

          If the Plan is approved, it is anticipated that the property sales
will be consummated by mid-1998.  As soon thereafter as practicable, the
Partnership will pay cash distributions to the Partners from the net sales
proceeds after payment of all expenses and liabilities of the Partnership and

                                       3
<PAGE>
     
certain attorneys' fees, and the establishment of a reserve account to cover
unexpected claims.  Any amount remaining in the reserve account will be
distributed to the Partners within twelve months from the date of the final
property closing, whereupon the Partnership will be dissolved.  Overall, the
Plan is anticipated to result in liquidating distributions of approximately
$13,520,000, or approximately $43.00 per Unit, and would produce higher
distributions if the Auction results in sale prices higher than the Spanos
initial bid.  For further information, see the discussion under "THE PLAN --
Anticipated Results of Auction, Use of Proceeds and Cash Distributions" in the
enclosed Solicitation Statement.     

          Spanos believes that the sale of the properties at this time would be
in the best interests of the Unitholders and recommends that you complete and
return the Consent card.  Spanos bases its recommendation on, among other
things, the following factors:

          .    The Plan permits the properties to be sold within the originally
anticipated seven-to ten-year holding period and under market conditions which,
considering current mortgage interest rates and the availability of investor
capital, Spanos believes are favorable for the sale of multi-family properties.

          .    The properties generally have shown a trend of improved
occupancies, revenues and net operating income over the past few years, which
Spanos believes enhances their salability.

                                       4
<PAGE>
 
          .  The court-approved Auction process provides a mechanism which
Spanos believes will enable the Partnership to sell the properties for the best
aggregate sale price obtainable at the date of sale under current market
conditions.  Spanos has guaranteed that the Auction will generate an aggregate
gross sales price of at least $22,440,000 in excess of the Partnership's
aggregate mortgage balance, which after payment of expenses and certain
attorneys' fees will be distributed to the Unitholders, Subordinated Limited
Partners and General Partners as provided in the Partnership Agreement.

          .    By selling the properties now, the Partnership will eliminate the
risks inherent in the ownership of real property, including, among other things,
the decline in value that can occur as a result of rising interest rates,
increasing real estate investor expectations and changing competition factors in
local rental markets.
    
          .    The sale of the properties will provide liquidity to the
Unitholders.  At present, there is no established public trading market for the
Partnership's Units, and liquidity has been limited to sporadic sales which
occur within an informal secondary market and two recent tender offers, each for
a limited number of Units, as described in the enclosed Solicitation 
Statement.     

          .    Spanos believes that older apartment buildings, even though well
maintained, can over time suffer a competitive disadvantage in attracting and
retaining tenants, as compared to

                                       5
<PAGE>
 
    
new apartments with more modern amenities in newer, attractive neighborhoods.
For example, the two-bedroom, one-bath configurations of many of the apartments
in the properties is not as attractive to prospective tenants as two-bedroom,
two-bath configurations often found in newer competing projects.  The
properties, therefore, may not be able to sustain current revenue levels.
Further, new apartment project construction has commenced recently in several of
the properties' market areas, as a result of recent price increases for
apartment projects and readily available financing for such construction.     

          .    In the opinion of Spanos, the properties are presently in good
repair, and it is advantageous to sell them before further aging and wear in the
ordinary course of business occurs, thereby requiring substantial cash
expenditures for costly repairs and refurbishments.

          .    The Partnership's liquidation will eliminate the annual Schedule
K-1 income tax reporting for the Partnership, which is often burdensome to
Unitholders.
          Among the disadvantages which would result to Unitholders from the
approval of the Plan are the following:

          .    The Partnership will not benefit from possible future
improvements in economic and market conditions, which possibly could produce
increased cash flow and enhance the sales price of the properties.

          .    It is not anticipated that, upon receipt of the final liquidating
distributions, the Unitholders will have

                                       6
<PAGE>
 
received aggregate distributions from the Partnership which will equal the
amounts originally invested in the Partnership.

          .    No current independent appraisals of the Partnership's properties
have been obtained.
          .    No independent opinion or evaluation of the fairness of the Plan
has been obtained from any third party.

          It should be noted that sale of the properties will eliminate any
future liability of the General Partners for Partnership liabilities and risks
to the Partnership which could arise from continued operation of the
Partnership.  Moreover, the Plan is part of a Settlement by Spanos and its
affiliates of certain class action litigation brought against the General
Partners and others.  P-B Properties previously settled the claims against it
and its affiliates.  The current Settlement has been preliminarily approved by
the Court, and the Plan will not be implemented unless the Court issues a final
order finding that the Settlement is fair, reasonable, adequate and in the best
interests of the Unitholders.  Neither of the General Partners will receive any
fees in connection with the sale of the properties or the termination and
liquidation of the Partnership.  However, as provided in the Partnership
Agreement, the General Partners will be entitled to receive distributions of
approximately $75,000 each, and the Subordinated Limited Partners, who are
affiliates of Spanos, will receive distributions of approximately $8,878,000.
The sale of the properties will result in elimination of the management fees and

                                       7
<PAGE>
 
special distributions which the General Partners presently receive.

          The Plan will result in the sale of all of the properties within a 12-
month period and the subsequent termination and liquidation of the Partnership,
which is an action that must be approved by the Unitholders.  Furthermore, since
it is possible that an affiliate of Spanos will be the successful bidder for one
or more of the properties in the Auction, the Plan requires an amendment to the
Partnership Agreement to permit such an affiliate to purchase the properties
from the Partnership.  Accordingly, Spanos is soliciting the written consent of
each Unitholder to these elements of the Plan, which are more fully described in
the enclosed Solicitation Statement.  Under the Partnership Agreement and
Delaware law, Unitholders do not have rights of appraisal or similar rights if
the Plan is approved.

          P-B Properties, having previously settled the claims against it, is
not a party to the Settlement of the litigation described above, but it has
acknowledged the Settlement and agreed to be bound by certain provisions of the
Settlement which require that P-B Properties take, or forebear from taking,
certain actions in connection with the Plan.  HOWEVER, P-B PROPERTIES IS MAKING
NO RECOMMENDATION TO UNITHOLDERS AS TO WHETHER THEY SHOULD APPROVE OR DISAPPROVE
THE PLAN.  THE ENCLOSED SOLICITATION STATEMENT IS BEING FURNISHED TO YOU SOLELY
BY SPANOS.

                                       8
<PAGE>
 
          YOU ARE URGED TO READ CAREFULLY THE SOLICITATION STATEMENT IN ITS
ENTIRETY FOR A COMPLETE DESCRIPTION OF THE PLAN.  If you have any questions,
please feel free to contact Robert Felton of Spanos at 1-800-985-6090.

                              Very truly yours,

                              A. G. SPANOS REALTY
                              PARTNERS, L.P.
                              General Partner

                              By AGS Financial Corporation,
                                 General Partner


                              By: _________________________
                                     Arthur J. Cole
                                     President

                              By A.G. Spanos Realty Capital,
                                 Inc., General Partner


                              By: _________________________
                                     Arthur J. Cole
                                     Vice President

                                       9
<PAGE>
 
              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                               ONE SEAPORT PLAZA
                            NEW YORK, NEW YORK 10292

                         NOTICE OF CONSENT SOLICITATION


To the Unitholders of Prudential-Bache/A.G. Spanos Realty Partners L.P., I:

          NOTICE IS HEREBY GIVEN to the holders (the "Unitholders") of the units
of limited partnership interest (the "Units") in Prudential-Bache/A.G. Spanos
Realty Partners L.P., I, a Delaware limited partnership (the "Partnership"),
that A.G. Spanos Realty Partners, L.P. ("Spanos") is soliciting written consents
(the "Consents") to approve a plan of action (the "Plan") which includes (i) the
sale of substantially all of the assets of the Partnership in a public auction,
(ii) the amendment of the Amended and Restated Agreement of Limited Partnership
of the Partnership to permit an affiliate of Spanos to bid for, and if
successful to purchase, one or more of the Partnership's real properties and
(iii) the complete termination and liquidation of the Partnership, resulting in
cash distributions to the Unitholders, Subordinated Limited Partners and General
Partners, all as more fully described in the accompanying Solicitation
Statement.  Although the Plan is a single proposal which must be approved by
Unitholders holding a majority of the Units, Unitholders may indicate approval,
disapproval or abstention with respect to each of the three elements of the
Plan.  However, the
<PAGE>
 
Plan will not be implemented unless Unitholders holding a majority of the Units
approve all three elements.
    
          Only Unitholders of record at the close of business on February 1,
1998 are entitled to notice of the solicitation of Consents and to give their
consent to the Plan.  In order to be valid, all Consents must be received before
the earlier of (a) the date upon which Spanos has received Consents from
Unitholders owning a majority in interest of the outstanding Units or (b) 10:00
a.m. California time on March 31, 1998 (unless such date or time is extended, in
the sole discretion of Spanos, by notice to all Unitholders).  The approval will
be obtained through the solicitation of written Consents, and no meeting of
Unitholders will be held.  Skinner & Co. has been retained as a soliciting
agent, to assist Spanos in soliciting Consents.  A Consent may be revoked by
written notice of revocation or by a later dated action containing different
instructions received by Skinner & Co. at any time on or before the expiration
of the time by which the Consent card must be received.     

                                       2
<PAGE>
 
          YOUR APPROVAL IS IMPORTANT.  PLEASE READ THE SOLICITATION STATEMENT
CAREFULLY AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT CARD AND RETURN
IT IN THE SELF-ADDRESSED PREPAID ENVELOPE.  Any Consent card which is signed and
does not specifically disapprove the Plan will be treated as approving the Plan.
Your prompt response will be appreciated.

    
Dated: February __, 1998      A.G. SPANOS REALTY PARTNERS,
                              L.P., General Partner

                              By AGS Financial Corporation,
                                 General Partner


                              By __________________________
                                    Arthur J. Cole
                                    President


                              By A.G. Spanos Realty Capital,
                                 Inc., General Partner


                              By __________________________
                                    Arthur J. Cole
                                    Vice President

                                       3
<PAGE>
 
              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                               ONE SEAPORT PLAZA
                            NEW YORK, NEW YORK 10292

                   STATEMENT FURNISHED IN CONNECTION WITH THE
                            SOLICITATION OF CONSENTS


INTRODUCTION
- ------------
              
          This Statement Furnished in Connection with the Solicitation of
Consents ("Solicitation Statement") is furnished to the holders ("Unitholders")
of units of limited partnership interest (the "Units") in Prudential-Bache/A.G.
Spanos Realty Partners L.P., I, a Delaware limited partnership (the
"Partnership"), in connection with the solicitation of written consents
("Consents") by A.G. Spanos Realty Partners, L.P. ("Spanos"), one of the general
partners of the Partnership, to approve (i) the auction and sale of
substantially all of the assets of the Partnership (the "Auction") pursuant to
paragraphs 15.4.19 and 19.1.4 of the Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), (ii) an amendment
to the Partnership Agreement to permit an affiliate of Spanos to bid for and, if
the successful bidder, to purchase one or more of the Partnership's real
properties (the "Amendment") and (iii) the subsequent termination and
liquidation of the Partnership pursuant to paragraph 19.2 of the Partnership
Agreement (the "Plan of Liquidation"), as more fully described under "THE PLAN."
Approval by Unitholders of each of the Auction, the Amendment and the Plan of
Liquidation (collectively, the "Plan") is required to implement the Plan.  
If     
<PAGE>
 
approved and consummated, the Plan will result in the sale of substantially all
of the Partnership's assets, the termination of the Partnership's business and
the distribution of the net sales proceeds and any other remaining Partnership
assets to the Unitholders, Subordinated Limited Partners and General Partners of
the Partnership, after payment of all liabilities and expenses and certain
attorneys' fees. Under the Partnership Agreement and Delaware law, Unitholders
do not have appraisal or similar rights if the Plan is approved. See "NO
APPRAISAL RIGHTS."
              
          The Plan is being proposed by Spanos in connection with, and pursuant
to the terms of, a proposed settlement by Spanos and its affiliates (the
"Settlement") of certain class action litigation (the "Litigation") now pending
in the United States District Court for the Southern District of New York (the
"Court"). The Settlement is set forth in a Stipulation of Settlement with Spanos
Defendants (the "Settlement Agreement"), executed by plaintiffs in the
Litigation and by Spanos and certain of its affiliates (the "Spanos
Defendants")./1/ The Court has preliminarily approved the Settlement. After
approval by the Unitholders of the Plan, but prior to implementation thereof,
the Court must enter an order finding that the Settlement is fair,     

- ----------------
/1/  The Spanos Defendants are: Alex G. Spanos, AGS Financial Corporation, A. G.
Spanos Realty Partners, L.P., A. G. Spanos Residential Partners-86, A. G. Spanos
Realty Capital, Inc., A. G. Spanos Realty, Inc., A. G. Spanos Construction, Inc.
and AGS Securities Corporation, together with their respective officers,
directors, employees, parent and subsidiary corporations, successors, heirs,
representatives and executors.

                                       2
<PAGE>
 
reasonable, adequate and in the best interests of the Unitholders, and such
order must have become final and nonappealable.  See "THE PLAN -- Background of
Proposed Sale of Properties" and "CERTAIN PENDING LITIGATION."

          Prudential-Bache Properties, Inc. ("P-B Properties"), the co-general
partner of the Partnership, has previously settled with the plaintiffs in the
Litigation and is not a party to the Settlement Agreement.  P-B Properties has
advised Spanos that, in view of the unique circumstances under which the Plan
arose, including the fact that P-B Properties and its affiliates have settled
with the plaintiff class in the litigation and did not take part in the
negotiations for the Settlement by Spanos and its affiliates with the Court-
approved counsel and representatives of the plaintiff class, it makes no
recommendation as to whether Unitholders should approve or disapprove the Plan.
However, because the Settlement Agreement contemplates certain action by P-B
Properties in connection with the Auction and the Liquidation, P-B Properties
has executed a separate agreement with the plaintiffs and the Spanos Defendants
whereunder it has acknowledged the Settlement and agreed, subject to final
approval of the Settlement by the Court, to be bound by all the provisions of
the Settlement Agreement which require that P-B Properties take, or forebear
from taking, certain actions in connection with the Plan (see "THE PLAN--
Description of the Auction").  This Solicitation Statement has been prepared and
is being furnished solely by Spanos.

                                       3
<PAGE>
 
              
          Neither Spanos nor P-B Properties (collectively, the "General
Partners") intends to call a meeting of the Unitholders in connection with this
solicitation of Consents.  Approval or disapproval by a Unitholder of the Plan
is to be indicated by marking and signing the enclosed form of Unitholder
consent (a "Consent") and returning it to Skinner & Co., which has been engaged
by Spanos on behalf of the Partnership to act as soliciting agent (the
"Soliciting Agent"), in the enclosed self-addressed envelope, which requires no
postage if mailed in the United States.  The enclosed form of Consent permits a
Unitholder to indicate approval, disapproval or abstention with respect to each
element of the Plan.  However, the Plan will not be implemented unless
Unitholders holding a majority of the outstanding Units approve all three
elements.  Moreover, implementation of the Plan is subject to the issuance by
the Court of a final, nonappealable order and judgment approving the 
Settlement.     
               
          Consents of the Unitholders to the Plan will be solicited until the
earlier of:  (a) receipt of Consents from Unitholders owning a majority in
interest of the outstanding Units or (b) March 31, 1998 (subject to extension to
a date not later than June 30, 1998, in Spanos' sole discretion, by notice to
all Unitholders).     
              
          The close of business on February 1, 1998 (the "Record Date") has been
fixed by Spanos for determining the Unitholders entitled to notice of the
solicitation of Consents and to consent     

                                       4
<PAGE>
 
    
to the Plan.  On the Record Date, there were 316,828 outstanding Units entitled
to vote on the Plan held by approximately 5,000 Unitholders.  This Solicitation
Statement and the enclosed form of Unitholder Consent are first being mailed to
Unitholders on or about February __, 1998.     

          Pursuant to the Court's preliminary approval order, Unitholders are
enjoined from selling or otherwise transferring their Units without Court
approval, unless both the Unitholder and his or her buyer or transferee agree in
writing to be bound by the Settlement Agreement if finally approved by the
Court.  Accordingly, no transfer of Units will be accepted by the General
Partners unless accompanied by such an agreement signed by both the transferring
Unitholder and the transferee and otherwise meeting the requirements of the
Partnership Agreement.  Unitholders will be notified as soon as possible as to
the results of this solicitation.
    
          Pursuant to the Partnership Agreement, the consent of Unitholders
holding a majority of the outstanding Units is required to approve the sale of
properties representing 66 2/3% or more of the aggregate net book value of the
Partnership's assets within a 12-month period and the termination of the
Partnership.  Under Delaware law and the Partnership Agreement, any matter upon
which the Unitholders are entitled to act may be submitted for a vote by written
consent without a meeting.  Any Consent given pursuant to this solicitation may
be revoked by the person giving it at any time before the earlier of (a) the
date     

                                       5
<PAGE>
 
    
upon which Spanos has received Consents from Unitholders owning a majority in
interest of the outstanding Units or (b) 10:00 a.m. California time on March 31,
1998 (unless such date or time is extended), by sending a written notice of
revocation or a later dated Consent containing different instructions to the
Soliciting Agent before such date.  Any written notice of revocation or
subsequent Consent should be sent to the Soliciting Agent, Skinner & Co., at 660
Market Street, Suite 204, San Francisco, CA 94104 (Telephone 415-981-0970).     

          In addition to solicitation by use of the mails, officers, directors
and employees of Spanos and its affiliates may solicit Consents in person or by
telephone, facsimile or other means of communication.  Such directors, officers
and employees will not receive additional compensation for such services but may
be reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation.  In addition, Skinner & Co. has been retained as Soliciting Agent
to assist Spanos in the solicitation of Consents for a base fee of $1,750, plus
additional fees for time spent by Skinner personnel in communication with
Unitholders and tabulations of Consents, as well as reimbursement of expenses
such as postage, copying, courier and messenger services and telephone and
facsimile costs.  The estimated aggregate of Skinner's fees is $6,750, and its
expenses are estimated at approximately $5,000.  Arrangements have been made
with custodians, nominees and fiduciaries for the forwarding of Consent
solicitation materials to beneficial owners

                                       6
<PAGE>
 
    
of Units held of record by such custodians, nominees and fiduciaries, and the
Partnership will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.  All costs and expenses of
this solicitation of Consents, including the costs of preparing and mailing this
Solicitation Statement, will be advanced by Spanos or its affiliates, subject to
reimbursement from the Partnership unless the consent of Unitholders holding a
majority of the outstanding Units is not obtained on or before 5:00 p.m.
California time on the third business day before the hearing at which the
parties to the Settlement Agreement will request the Court to enter its order
and judgment finally approving the Settlement.  That hearing is currently
expected to take place in April, 1998.  The aggregate expenses to be incurred
relating to this solicitation are estimated to be approximately $197,000.     

          Spanos recommends that Unitholders consent to the Plan.  See "THE PLAN
- -- Recommendation of Spanos."

                                       7
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
<TABLE>    
<CAPTION>
 
Section                                                       Page
- -------                                                       ----
<S>                                                           <C>
 
INTRODUCTION...............................................      1
                                                                  
SUMMARY....................................................     10
                                                                  
THE PLAN...................................................     17
     Background of Proposed Sale of Properties.............     19
     Description of the Auction............................     23
     Description of Properties.............................     32
     Anticipated Results of Auction, Use of Proceeds and 
          Cash Distributions...............................     35
     Recommendation of Spanos..............................     37
     Disadvantages of Plan.................................     39
     Advantages of Plan....................................     40
     Failure to Approve Plan...............................     42
     Amendment to Partnership Agreement....................     43
     Liquidation...........................................     43
     Distributions and Fees................................     45
                                                                  
PRO FORMA FINANCIAL INFORMATION............................     49
                                                                  
FINANCIAL INFORMATION REGARDING GENERAL PARTNERS...........     49
                                                                   
MARKET PRICES OF UNITS AND DISTRIBUTIONS TO UNITHOLDERS....     51
     Market Prices.........................................     51
     Distributions to Unitholders..........................     53
                                                                   
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN................     56
     General                                                    56
     Partnership Taxation..................................     57
     Sale of Properties....................................     57
     Tax Allocations and Distributions.....................     60
     Capital Gains Tax.....................................     64
     Passive Loss Limitation...............................     65
     Final Partnership Returns and Future Tax Issues.......     66
     Certain State Income Tax Considerations...............     67
                                                                
NO APPRAISAL RIGHTS........................................     68
                                                                
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............     68
                                                                
CERTAIN PENDING LITIGATION.................................     69
                                                                
AVAILABLE INFORMATION......................................     74
 
INDEX TO FINANCIAL STATEMENTS..............................    F-1
 
 
</TABLE>     

                                       8
<PAGE>
 
<TABLE>    
<CAPTION> 
Section                                                       Page
- -------                                                       ----
<S>                                                           <C>
EXHIBIT A:     Proposed Amendment to Amended and Restated
               Agreement of Limited Partnership of
               Prudential-Bache/A.G. Spanos Realty Partners
               L.P., I........................................  A-1
 
EXHIBIT B:     Annual Report of Partnership on SEC Form 10-K
               for the year ended December 31, 1996, as
               amended........................................  B-1
 
EXHIBIT C:     Quarterly Report of Partnership on SEC Form
               10-Q for the quarter ended September 30,
               1997...........................................  C-1
</TABLE>     

                                       9
<PAGE>
 
                                    SUMMARY


The following is a summary of certain information contained elsewhere in this
Solicitation Statement. This Summary does not purport to be complete and is
qualified in its entirety by the more detailed information contained in this
Solicitation Statement and the exhibits hereto. Unless otherwise specifically
provided, terms used in this Summary have the respective meanings ascribed to
them elsewhere in this Solicitation Statement or, if not defined herein, in the
Partnership Agreement. Unitholders are urged to read this Solicitation Statement
and the exhibits in their entirety.

THE PARTNERSHIP
- ---------------

Prudential-Bache/A.G.
Spanos Realty
Partners L.P., I..........    The Partnership is a Delaware limited partnership
                              which owns eight real properties (the
                              "Properties") consisting of eight garden apartment
                              complexes with a total of 2,017 apartment units in
                              five states. P-B Properties and Spanos are the
                              General Partners of the Partnership. The offices
                              of the Partnership are located at One Seaport
                              Plaza, New York, New York 10292 and its telephone
                              number is (212) 214-1016.

ACTION BY WRITTEN CONSENT
- -------------------------

Purpose of the Solicitation   Consents are being solicited by Spanos to approve
                              (i) the sale of the Properties, which comprise
                              substantially all of the assets of the
                              Partnership, and which will be sold at public
                              auction (the "Auction"); (ii) amendment of the
                              Partnership Agreement to permit an affiliate of
                              Spanos to bid for, and if the successful bidder to
                              purchase, one or more of the Properties from the
                              Partnership (the "Amendment"); and (iii) the
                              subsequent termination and liquidation of the
                              Partnership and the distribution to the
                              Unitholders, Subordinated Limited

                                       10
<PAGE>
 
                              Partners and the General Partners of the net sales
                              proceeds and other cash held by the Partnership at
                              the time of distribution, other than certain
                              amounts set aside to provide for the payment of
                              all expenses and other liabilities of the
                              Partnership and payment of certain attorneys' fees
                              in the Litigation (the "Plan of Liquidation").
    
Record Date; Units Entitled
to Consent..................  Unitholders of record at the close of business on
                              February 1, 1998 are entitled to vote by written
                              Consent.  At such date, there were outstanding
                              316,828 Units, each of which will entitle the
                              record owner thereof to one vote.     

Vote Required...............  The Plan will not be implemented unless written
                              Consents approving each element of the Plan are
                              received from Unitholders of record holding a
                              majority of all outstanding Units.  See "VOTING
                              SECURITIES AND PRINCIPAL HOLDERS THEREOF" for
                              information regarding Unit ownership by Prudential
                              Securities Incorporated ("Prudential Securities"),
                              an affiliate of P-B Properties.
    
Termination of Consent
Solicitation................  Consents must be received by March 31, 1998 at
                              10:00 a.m. California time (unless earlier
                              terminated by Spanos or unless such date or time
                              is extended, in the sole discretion of Spanos, by
                              notice to all Unitholders, to permit further
                              solicitation of Consents if majority approval has
                              not been obtained).     

                                       11
<PAGE>
 
THE PLAN
- --------

General.....................  The Plan is a single proposal consisting of the
                              Auction, the Amendment and the Plan of
                              Liquidation.

Background of the Plan......  See "THE PLAN -- Background of Proposed Sale of
                              Properties."

Recommendation of Spanos....  Spanos recommends the approval of the Plan.
                              Spanos has been advised by P-B Properties that it
                              is making no recommendation regarding the Plan,
                              because the Plan was developed in the course of
                              negotiations (in which P-B Properties did not
                              participate) for the settlement of class action
                              litigation (to which P-B Properties is no longer a
                              party, having entered into a separate settlement
                              with the plaintiff class), which negotiations were
                              undertaken with Spanos and its affiliates by Lead
                              Class Counsel approved by the Court on behalf of
                              the plaintiff class, the representatives of which
                              were also approved by the Court.  See "THE PLAN --
                              Recommendation of Spanos."

Security Ownership and Voting
of the General Partners.....  As of the Record Date, neither of the General
                              Partners, nor any executive officer or director of
                              a General Partner, owned directly or beneficially
                              any Units.  Prudential Securities beneficially
                              owned approximately 1.5% of the outstanding Units
                              as of the Record Date.  Prudential Securities
                              intends to vote its Units to consent or withhold
                              consent to the Plan in the same proportions as do
                              the other Unitholders.

                                       12
<PAGE>
 
Consummation of the
Plan of Sale................  The Auction will be held as promptly as
                              practicable after obtaining the requisite approval
                              of the Unitholders to the Plan and after the Court
                              has entered a final nonappealable order and
                              judgment approving the Settlement.  It is
                              anticipated that property sales pursuant to the
                              Auction will be consummated by mid-1998.

No Appraisal Rights.........  Unitholders have no appraisal rights in connection
                              with the Plan.  See "NO APPRAISAL RIGHTS."

Federal Income
Tax Consequences............  The Partnership will have taxable gain or loss
                              upon its sale of each Property.  Such gain or loss
                              will be allocated to the Unitholders in accordance
                              with the Partnership Agreement, and generally will
                              constitute Section 1231 gain or Section 1231 loss.
                              Any Section 1231 gains would be eligible for a
                              reduced tax rate.  See "FEDERAL INCOME TAX
                              CONSEQUENCES OF THE PLAN -- Capital Gains Tax."
                              For most tax-exempt Unitholders, only a portion of
                              the gain from the sale of the Properties would be
                              treated as unrelated business income.  See
                              "FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN --
                              Sale of Properties."

                              Distributions to a Unitholder generally will not
                              be taxable to the extent the distributions do not
                              exceed the Unitholder's adjusted tax basis in the
                              Units.  The tax basis in the Units will be reduced
                              by the distributions, and those in excess of the
                              tax basis generally will be treated as capital
                              gain, which will be long-term if the applicable
                              Units have been held for more than one year.
                              Unitholders who have remaining tax basis in their
                              Units after termination of the Partnership
                              generally will have

                                       13
<PAGE>
 
                              a capital loss.  See "FEDERAL INCOME TAX
                                               ---                    
                              CONSEQUENCES OF THE PLAN -- Tax Allocations and
                              Distributions."
    
Final Distributions and
Liquidation.................  As promptly as practicable following the sale of
                              the last Property, after payment or reserving for
                              payment of all costs of the Auction and this
                              Consent solicitation, the General Partners will
                              determine the amount of funds which they believe
                              will be sufficient to provide for the
                              Partnership's remaining expenses and liabilities,
                              including the costs of liquidation of the
                              Partnership and any contingent liabilities. Such
                              liabilities would include potential liabilities
                              under contracts of sale of the Properties. The
                              Settlement Agreement provides that the amount of
                              the contingency reserve shall not exceed
                              $1,000,000, and that such reserve will be held for
                              a period of one year or less. The Settlement
                              Agreement further provides that Lead Class Counsel
                              representing the Unitholders may apply to the
                              Court for an award of attorneys' fees payable out
                              of the amount of property sales proceeds which
                              would otherwise be distributable to the
                              Unitholders. After establishment of the
                              contingency reserve and payment of the Court-
                              approved attorneys' fees, the balance of the
                              Partnership's funds will be distributed to the
                              Unitholders, Subordinated Limited Partners and
                              General Partners in accordance with the
                              Partnership Agreement. Once all known liabilities
                              have been satisfied, the Partnership will
                              distribute its remaining net assets and terminate.
                              Any remainder of the $1,000,000 reserve will be
                              distributed to the Unitholders in accordance with
                              the     

                                       14
<PAGE>
                                  
                              Partnership Agreement, and the General Partners
                              will remain obligated with respect to any
                              unsatisfied obligations of the Partnership.     

                                       15
<PAGE>
 
SELECTED HISTORICAL FINANCIAL DATA
- ----------------------------------
              
          The following table sets forth selected financial data of the
Partnership for each of the five years in the period ended December 31, 1996 and
for each of the nine-month periods ended September 30, 1997 and September 30,
1996, respectively.  This data should be read in conjunction with the financial
statements, related notes and other financial information included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996,
as amended, a copy of which is attached hereto as Exhibit B and in the
Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, a copy of which is attached hereto as Exhibit C.     

<TABLE>    
<CAPTION>
 
                                  For Nine Months Ended                  For Year Ended December 31,
                                  ---------------------             --------------------------------------------------------
                                      September 30,                 
                                      -------------                 
<S>                                   <C>        <C>                    <C>        <C>        <C>        <C>        <C>
(In thousands, except per             1997       1996                   1996       1995       1994       1993       1992
Unit and per Subordinated             ----       ----                   ----       ----       ----       ----       ----
    Interest amounts)              
- -------------------------          
                                   
OPERATING RESULTS                  
  Total Revenues                      $12,038    $11,921                $15,931    $15,362    $14,500    $13,424    $12,910
  Interest Expense                      3,820      3,893                  5,177      6,015      6,381      6,835      6,516
  Net Loss                               (136)      (323)                  (402)    (1,752)    (2,713)    (3,673)    (3,585)
  Net Loss to                              (3)        (6)                    (8)       (35)       (54)       (73)       (72)
    General Partners               
  Net Loss per                           - 0 -      - 0 -                 - 0 -      - 0 -      - 0 -      - 0 -      - 0 -
    Subordinated Interest          
  Net Loss per Unit                     (0.42)     (1.00)                 (1.24)     (5.42)     (8.39)    (11.36)    (11.09)
  Cash Distributions per                 - 0 -      - 0 -                 - 0 -      - 0 -      - 0 -      - 0 -      31.22
    Subordinated Interest          
  Cash Distributions per                 3.66       3.66                   4.88      - 0 -      - 0 -      - 0 -      38.00
    Unit
 
                                      At September 30,                                    At December 31,
                                      ----------------                                    ---------------
                                      <C>        <C>                    <C>        <C>        <C>        <C>        <C>
                                      1997       1996                   1996       1995       1994       1993       1992
                                      ----       ----                   ----       ----       ----       ----       ----
FINANCIAL POSITION                 
  Total Assets                        $80,220    $83,028                $82,001    $84,564    $87,946    $91,804    $95,451
  Mortgage Loans Payable               64,477     65,592                 65,322     66,362     67,215     68,581     69,232
  Unitholders' Equity                   5,637      7,394                  6,929      8,869     10,586     13,245     16,845
  Subordinated Limited                  8,878      8,878                  8,878      8,878      8,878      8,850      8,700
    Partners' Equity               
  General Partners' Deficit            (1,334)    (1,298)                (1,307)    (1,268)    (1,233)    (1,179)    (1,105)
   Total Partners' Equity              13,181     14,974                 14,500     16,479     18,231     20,916     24,440
</TABLE>     

                                       16
<PAGE>
 
                                    THE PLAN
              
          The Partnership was formed in June 1988 with the primary purpose of
acquiring from affiliates of Spanos, investing in, holding, managing, selling,
disposing of and otherwise acting with respect to multifamily residential rental
properties.  The Partnership's investment objectives at formation were to
preserve and protect Partnership capital by investing in properties in diverse
locations, to provide partially tax-sheltered cash distributions from operations
and to provide long-term capital appreciation.  Between November of 1988 and
December of 1989, the Partnership purchased from affiliates of Spanos eight
garden apartment complexes (the "Properties") with a total of 2,017 apartment
units in five states for an aggregate purchase price of $107,500,000.  See
"Description of Properties" below.     

          Although the Partnership Agreement provides that the term of the
Partnership will, unless previously terminated, continue until December 31,
2030, the prospectus of the Partnership for its original public offering of
Units stated that the Partnership anticipated that it would dispose of its
Properties within seven to 10 years after acquisition.

          The principal advantages of the Plan are:
       .  Sale of the Properties in a favorable market for multi-family
          properties.
       .  Enhanced salability due to recent improved operations of the
          Properties.

                                       17
<PAGE>
 
       .  Sale of the Properties in a public auction, with substantial
          information available to bidders.
       .  Providing liquidity to the Unitholders.
       .  Sale while the Properties are in good repair, avoiding substantial
          expenditures for repairs and refurbishments.
       .  Guaranteed minimum bids from an affiliate of Spanos.
       .  Sale of the Properties within the originally anticipated holding
          period.
       .  Elimination of Schedule K-1 tax reports.
See "Advantages of Plan" below.

     The principal disadvantages of the Plan are:

       .  Unitholders won't benefit from possible improvements in economic and
          market conditions affecting the Properties.
       .  Unitholders will not likely recover their original investments.
       .  No current independent appraisals of the Properties have been
          obtained.
       .  No independent opinion or evaluation of the fairness of the Plan to
          Unitholders has been obtained.
See "Disadvantages of Plan" below.

                                       18
<PAGE>
 
Background of Proposed Sale of Properties
- -----------------------------------------

          Spanos and P-B Properties have, in the ordinary course of
administration of the Partnership's affairs, been considering when and how to
effect the disposition of the Properties in the best interests of the
Partnership.  Affiliates of Spanos which have acted as general partners of real
estate limited partnerships have periodically evaluated the desirability of sale
of individual properties held by those partnerships, after the minimum
anticipated holding periods had ended.  Similarly, Spanos has from time to time
evaluated the Properties and those of Prudential-Bache/A.G. Spanos Genesis
Income Partners L.P., I (the "Genesis Partnership"), a public Delaware limited
partnership of which P-B Properties and A.G. Spanos Residential Partners-86, A
California Limited Partnership, an affiliate of Spanos ("Spanos Genesis") are
the general partners.  While the Partnership has sold no properties since its
inception, the Genesis Partnership has sold four properties since its inception
in 1987.  The ability to sell properties generally has been enhanced by
improvements in the national real estate investment market.  Pension funds, real
estate investment trusts ("REITs") and other institutional buyers are now
actively seeking new investment properties, as compared to the early 1990's,
when these same institutional buyers were fewer and less active.  The emergence
of securitized mortgage financing and lower mortgage interest rates have also
contributed to an improved market for real estate such as the Properties, as
entrepreneurial buyers who require

                                       19
<PAGE>
 
debt financing to purchase properties are able to borrow funds at attractive
rates.

          More specifically, with respect to the Partnership's Properties,
improvements in the real estate capital markets and in the operating performance
of the Properties have enhanced the prospects for selling these Properties at
attractive prices.  During the early 1990's, the Partnership's Properties
experienced devaluation due to a nationwide slump in real estate values.
Moreover, the Partnership suspended cash distributions to its Partners in 1992,
because cash flow after debt service would not support such distributions.  As a
result of improved net operating income and general improvement in the real
estate capital markets in these areas, Spanos believes that the Properties are
now readily salable.  The Partnership resumed payment of cash distributions to
Unitholders in 1996.  See "THE PLAN -- Description of Properties" for additional
information regarding these Properties.

          Although future economic conditions are difficult to predict, Spanos
believes that it is unlikely that continuing to hold the Properties would
significantly enhance the Partnership's ultimate realization on sale of the
Properties, or that the relative economic benefits of continued ownership would
justify the risks of such continued ownership.

          The sale of all or substantially all of the assets of the Partnership
in a single sale or in multiple sales in the same 12-month period requires the
approval of Unitholders holding a

                                       20
<PAGE>
 
majority of the Units.  The Partnership Agreement defines "Substantially All of
the Assets" to mean Properties representing 66-2/3% or more of the net book
value of all Partnership assets as of the end of the most recently completed
calendar quarter.  Neither the Partnership Agreement nor Delaware law requires
that Unitholders vote on the sale of each Property or on the actual terms of
specific sales.  Advance approval of the Plan will allow the General Partners to
consummate a sale or sales of the Properties upon completion of the Auction,
without risking loss of the buyer or buyers due to delays in obtaining the
necessary consents of Unitholders.
              
          The Litigation was commenced as a class action against P-B Properties
and its affiliates, and was expanded to include Spanos and its affiliates in
1993.  See "CERTAIN PENDING LITIGATION."  In early 1994, counsel for Spanos and
its affiliates met with the lead lawyers representing the plaintiffs in the
litigation ("Lead Class Counsel") to explore the prospects for settlement of the
Litigation as to Spanos and its affiliates.  From the beginning of the
settlement negotiations, Lead Class Counsel and the representatives of the class
of plaintiffs (the "Class Representatives") demanded the sale of the properties
of the Partnership and the Genesis Partnership and liquidation of such
partnerships, and that Spanos or its affiliates provide "floor bids," to ensure
a bargained-for specified minimum amount of proceeds to be distributed to
Unitholders.  Lead Class Counsel and the Class Representatives also stressed the
necessity of     

                                       21
<PAGE>
 
    
establishing the value of the properties, and requested information regarding
the operational histories of each of the properties, which was provided by
Spanos.  Lead Class Counsel, Spanos and Spanos Genesis agreed that the expense
of appraisals of each of the properties was not warranted, because they believed
that a public auction after dissemination of full information to prospective
bidders, together with a guaranteed minimum bid, would provide a superior
measure of the values of the various properties than would opinions of non-
bidding appraisers.  In the initial meeting, Lead Class Counsel, Spanos and its
affiliates began negotiations concerning the amount of a floor bid for the
properties of both the Partnership and the Genesis Partnership.  Spanos
initially offered a floor bid for all of the properties aggregating $31,900,000
over the existing mortgage debt on the properties.  Lead Class Counsel
thereafter engaged a financial and evaluation consultant who requested
additional information regarding the Properties, which was provided by 
Spanos.     
              
          Throughout 1994, negotiations continued with Lead Class Counsel and
its consultant, primarily relating to the floor bids.  In addition, Spanos'
counsel met twice with members of the executive committee formed by counsel to
plaintiffs in the Litigation, Lead Class Counsel and its consultant, and in late
1994 Spanos agreed to negotiate further its floor bids.  Ultimately, Spanos
agreed to increase its minimum bid for the properties of both partnerships to
$41,000,000 over existing     

                                       22
<PAGE>
 
    
mortgage debt.  However, no agreement regarding a settlement was reached, and
negotiations continued during 1995.  In June of 1995, Spanos agreed to increase
its aggregate floor bid price to $41,360,000, but still no definitive agreement
was reached.  Throughout the remainder of 1995 and 1996, settlement negotiations
were carried on, and various proposed forms of a settlement agreement were
exchanged between the parties.  In May, 1997, after further negotiations, Spanos
agreed to a further increase in the aggregate floor bid price to $43,000,000,
allocated $22,440,000 to the Partnership and $20,560,000 to the Genesis
Partnership, in each case over existing mortgage debt.  On May 12, 1997, the
Settlement Agreement was executed.     

          On May 20, 1997, the Court entered its preliminary order which, among
other things, approved the appointment of representatives of the plaintiff
class, approved the appointment of Lead Class Counsel, preliminarily approved
the Settlement and approved the form of Notice to the Unitholders which
accompanies this Solicitation Statement.
    
          If the Plan is approved by the Unitholders, and if the Court enters a
final nonappealable order and judgment approving the Settlement, the Auction
will take place as promptly as is practicable, consistent with meeting the terms
of the Plan, as described below under "Description of the Auction."     

Description of the Auction
- --------------------------

          Spanos recommends that the Unitholders approve the Plan, including
approval of the Auction, which will result in the

                                       23
<PAGE>
 
sale of all of the Partnership's Properties, followed by the termination and
liquidation of the Partnership.  If the Plan is approved, and the Court enters a
final nonappealable order and judgment approving the Settlement, the Properties
will be sold in the Auction on the terms set forth below and in accordance with
the terms of the Partnership Agreement as amended by the Amendment.

          Approval of the Plan will not automatically result in the sale of the
Properties.  Spanos and its affiliates have the right, but not the obligation,
to terminate the Settlement on the occurrence of certain conditions, including
the failure by the Court to enter a final order and judgment approving the
Settlement, or the entering by the Court of an order and judgment which varies
from that contemplated by the parties to the Settlement Agreement, or the
failure of a majority of the Unitholders to approve the Plan.  Termination of
the Settlement would have the effects described below under "Failure to Approve
Plan," and the Litigation would continue.

          The Court must enter an order and judgment approving the fairness of
the Settlement, and the order and judgment must become final and no longer
subject to appeal or review, before the Plan may be effected.

          The Auction will be conducted as follows:

          a.   Conduct of the Auction.  The Settlement Agreement covers both the
               ----------------------                                           
Partnership and the Genesis Partnership, and provides for a combined
simultaneous Auction of the properties of

                                       24
<PAGE>
 
both partnerships (the "Auction Properties").  Since one or more affiliates of
Spanos and Spanos Genesis (collectively, the "Spanos General Partners") will bid
in the Auction, the Settlement Agreement provides that the Spanos General
Partners shall have no involvement in conducting the Auction, except that they
may identify potential bidders to be invited to participate in the Auction, have
agreed to assist in accommodating due diligence information requests from
potential bidders, and have agreed to submit certain minimum bids, as hereafter
described.  The Partnership and the Genesis Partnership have engaged Ernst &
Young LLP, an independent national public accounting and consulting firm,
through its E&Y Kenneth Leventhal Real Estate Group (the "Agent") to conduct the
Auction.  P-B Properties will also cause the Partnership and the Genesis
Partnership:  (i) to retain independent real estate counsel to advise them
regarding the Auction; (ii) to engage Eckland Consultants Inc., a national
architectural, engineering and environmental consulting firm ("Eckland
Consultants"), to perform a physical inspection of the Auction Properties and
prepare an engineering report setting forth any material structural or
operational defects and to provide a Phase I report (and if necessary a Phase II
report) on the environmental condition of each of the Auction Properties; (iii)
to contract with First American Title Insurance Company to perform title
searches and issue preliminary title commitments; and (iv) to contract with  one
or more qualified termite inspection companies, selected by the Agent and
acceptable to P-B

                                       25
<PAGE>
 
Properties and Lead Class Counsel, to perform termite inspections at each
Auction Property.  The fees and expenses of the Agent, the independent real
estate counsel, Eckland Consultants, the title company and the termite
inspection companies will be borne by the Partnership and the Genesis
Partnership.  Where necessary, these fees and expenses will be allocated between
the Partnership and the Genesis Partnership in proportion to the gross sales
price, in excess of existing mortgages, realized by each as a result of the
Auction.

          The Agent will prepare packages of information (the "Bid Packages")
for distribution to potential bidders regarding the Auction, the Auction
Properties, the Partnership and the Genesis Partnership, including bidding
instructions, a bid form, a basic sales contract and various due diligence
materials for each of the Auction Properties, including the following:
          (i)  the reports of Eckland Consultants;
             
         (ii)  the preliminary title commitment;     
        (iii)  the termite inspection report;
         (iv)  detailed operating statements for the last three full calendar
               years;
          (v)  the rent roll;
         (vi)  copies of leases and schedules of current lease rates and
               expirations;
        (vii)  descriptions of all capital improvements of all assets reflected
               in the operating statement of the Auction Property;

                                       26
<PAGE>
 
       (viii)  schedules of required and planned capital improvements,
               renovations and repairs;
         (ix)  a summary of any mortgage debt on the Auction Property, including
               explanations of prepayment and assumption fee provisions; and
          (x)  a property-level budget, together with all property-level
               contracts not cancelable on 30 days' notice.

The Bid Packages will also include audited consolidated operating statements for
the Partnership and the Genesis Partnership for the last three full calendar
years, as well as any other information which the Agent may deem useful and
appropriate in soliciting bids.

          In the Settlement Agreement, the Spanos General Partners have agreed
to assist in accommodating all reasonable due diligence requests from potential
bidders, including providing (i) access to the books and records of the
Partnership, the Genesis Partnership and the individual Auction Properties
(including the rent rolls, operating statements and budgets included in the Bid
Packages, and such other information as is reasonably necessary to verify the
income and expenses of the Properties), (ii) opportunities for interviews with
management personnel of Spanos and Spanos Genesis, including property managers,
superintendents and leasing agents and (iii) on-site inspections of the Auction
Properties.

                                       27
<PAGE>
 
          To receive a Bid Package, a potential bidder must execute a
confidentiality agreement and demonstrate to the Agent's satisfaction that it
has the financial ability and legal capacity to prepare and submit a bona fide
bid and to undertake and perform all obligations arising upon acceptance of its
bid.
    
          After distribution of the Bid Packages, the Agent will solicit bids
from qualified bidders (i.e., persons or entities which the Agent believes to
have the financial ability and legal capacity to prepare and submit a bona fide
bid in the Auction and to undertake and perform all obligations arising upon
acceptance of any bid they may submit) and will conduct the Auction.     
         
     In the Auction, the Agent will neither favor nor disfavor the affiliate or
affiliates of the Spanos General Partners which submit the minimum required bids
described below.     

          The Agent will establish an "Initial Bid Period," within which bidders
may conduct further due diligence and submit preliminary written bids.  A bidder
may either bid for all of the Auction Properties of either the Partnership or
the Genesis Partnership (an "Overall Bid") or for any one or more of the Auction
Properties of either the Partnership or the Genesis Partnership (an "Individual
Bid").  A bid may be either an all cash bid or a combined bid of cash plus
assumption of related mortgage debt (if assumable), with the bidder being
responsible for any assumption fees or similar costs.  A bidder of all cash will
be responsible for any mortgage prepayment penalties and reconveyance costs, and
must provide evidence of financial

                                       28
<PAGE>
 
    
ability to support the bid.  At the close of the Initial Bid Period, the Agent
will review the bids received with P-B Properties and Lead Class Counsel, and
thereafter will encourage bids higher than the previous high bid from bidders
(other than  the Spanos affiliate) who have previously bid on a Property or
Properties, for a period of no more than 30 days from the close of the Initial
Bid Period.  The Agent will then determine the total of the highest of the
Individual Bids submitted for each of the Auction Properties, and the highest
Overall Bid for all of the Auction Properties, of each of the Partnership and
the Genesis Partnership.  The Agent will report the final bid results to P-B
Properties and to Lead Class Counsel.  P-B Properties and Lead Class Counsel
will then jointly determine the "Successful Bids"  (i.e., either the Overall Bid
or the aggregate Individual Bids which will, in the judgment of P-B Properties
and Lead Class Counsel, produce the highest gross cash price in excess of
existing mortgage debt to each of such partnerships).     

          Upon determination of the Successful Bids, the Agent will immediately
notify the makers of those bids (the "Successful Bidders") and seek to obtain
their signatures on the basic sales contract included in the Bid Package.

          b.   Execution of Sales Contracts.  The bid form will ask the
               ----------------------------                            
Successful Bidders to execute the basic sales contract immediately and promptly
to deposit the full purchase price into an escrow.  However, the Agent will be
authorized to negotiate with each of the Successful Bidders as to the definitive
form of

                                       29
<PAGE>
 
the sales contract, subject to approval by P-B Properties and Lead Class
Counsel.  If any Successful Bidder fails or refuses to execute a sales contract
at the price and on the terms included in the Successful Bid (with such
modifications as may be approved as aforesaid), the Agent may, with the
concurrence of P-B Properties and Lead Class Counsel, substitute as the
Successful Bid for the Auction Property or Auction Properties in question the
bid or bids producing the next highest gross cash price in excess of existing
mortgage debt to the Partnership or the Genesis Partnership, as the case may be.
              
          c.   Minimum Spanos Bid; No Other Bids or Purchases By Spanos.  Under
               --------------------------------------------------------        
the Settlement Agreement, Spanos has agreed that one or more of its affiliates
(the "Spanos Bidder") will, at the outset of the Initial Bid Period, submit a
preliminary written Overall Bid which will provide to the Partnership a gross
cash price in excess of then-existing mortgage debt of at least $22,440,000 (the
"Minimum Overall Bid").  In addition, Spanos has agreed that the Spanos Bidder
will submit preliminary written Individual Bids for each of the Properties in
amounts such that the aggregate gross cash price in excess of existing mortgage
debt for all of the Properties is at least $22,440,000.     

          The following table sets forth the amount of each preliminary
Individual Bid which Spanos currently intends that the Spanos Bidder will
submit:

                                       30
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                      Excess of Bid
                    Individual        Estimated        Price Over
   Property          Bid Price    Mortgage Debt (1)   Mortgage Debt
   --------         ----------    -----------------   -------------
<S>                 <C>           <C>                 <C>
Silver Springs      $ 7,103,000        $ 5,398,000      $ 1,705,000
Rancho del Sol       15,405,000         11,130,000        4,275,000
Sandpebble            9,643,000          5,528,000        4,115,000
Regency Square        9,922,000          8,047,000        1,875,000
Cameron Creek         8,417,000          6,427,000        1,990,000
Harbor Pointe        14,221,000         12,931,000        1,290,000
Pointe West           4,534,000          3,064,000        1,470,000
Bernardo Crest       17,235,000         11,515,000        5,720,000
                    -----------        -----------      -----------
     Total          $86,480,000        $64,040,000      $22,440,000
                    -----------        -----------      -----------
 
</TABLE>
- ----------------

(1)  Estimated principal amount of mortgage debt outstanding as of December 31,
1997.
              
          If the Spanos Bidder's guaranteed Minimum Overall Bid is the
Successful Bid for the Properties, Spanos estimates that the ultimate aggregate
distributions to Unitholders upon consummation of the Liquidation will be
approximately $43.00 per Unit.  See "Anticipated Results of Auction, Use of
Proceeds and Cash Distributions" below.     
              
          Under the Settlement Agreement, the Spanos Bidder may submit an
improved Individual Bid for one or more of the Properties during the re-bid
period, and, may also improve any Overall Bid previously submitted.  However,
certain Unitholders who were informed regarding the proposed conduct of the
Auction informally expressed concern that the ability of the Spanos Bidder to
submit improved Individual and Overall Bids could chill the interests of
potential third-party bidders in the Auction.  Accordingly, Spanos has
determined that, after submission of the required Minimum Overall bid and
required initial Individual     

                                       31
<PAGE>
 
    
Bids, neither the Spanos Bidder nor Spanos nor any affiliate of Spanos will
submit improved bids during the re-bid period.  Therefore, if any third-party
bidder submits an Overall Bid which exceeds the Minimum Overall Bid of the
Spanos Bidder, then the Spanos Bidder will not be the Successful Bidder.
Moreover, as to each Property, if any third-party bidder submits an Individual
Bid which exceeds the Spanos Bidder's initial Individual Bid, then the Spanos
Bidder will not be the Successful Bidder as to such Property.  Each of the bids
submitted by the Spanos Bidder will be considered a final bid and will remain
open through the end of the re-bid period.  If the Spanos Bidder is the
Successful Bidder with respect to one or more of the Properties, it will be
required to execute the basic sales contract without change.     

          d.   Consummation of Sales of Properties.  The bid form and the form
               -----------------------------------                            
of basic sales contract will provide that the sale of a Property will be
consummated as soon as practicable after execution of the contract.  At the
closing of the sale of each Property, the escrow agent for such property will be
directed to disburse the net sale proceeds to the Partnership.

          For a general discussion of the tax consequences from the sale of the
Properties, see "FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN."

Description of Properties
- -------------------------

          All of the Properties are garden apartment complexes, two of which are
located in Tempe, Arizona (a suburb of Phoenix), two in suburbs of Atlanta,
Georgia and one each in San Diego,

                                       32
<PAGE>
 
California, Las Vegas, Nevada, Sparks, Nevada (near Reno) and a suburb of
Denver, Colorado.
              
          The following table sets forth certain information regarding the
Properties as of January 1, 1998:     

                                       33
<PAGE>
 
<TABLE>   
<CAPTION>
                                                              1997
                                                            Average
                                        No.                  Annual
                                        of      Land       Occupancy    Date of       Purchase      Mortgage     Mortgage
Property             Location          Units   (Acres)        Rate      Purchase      Price/*/        Debt       Maturity
- --------             --------          -----   -------     ---------    --------      --------      --------     --------
<S>                 <C>                 <C>       <C>          <C>        <C>               <C>           <C>        <C>
Silver Springs        Tempe, AZ          198      9.3         93.8%      11/88   $     8,692,200   $ 5,398,000    12/2000
Rancho del Sol      Las Vegas, NV        376     16.0         93.7%      12/88        20,078,400    11,130,000    10/2019

Sandpebble            Sparks, NV         236     11.5         95.3%      12/88         9,828,000     5,528,000       6/98
Regency Square       Chamblee, GA        276      9.2         92.3%       1/89        14,955,000     8,047,000     2/2001
Cameron Creek          Tempe, AZ         211      8.7         94.5%       3/89         9,959,400     6,427,000    10/2019
Harbor Pointe        Dunwoody, GA        366     45.9         93.5%       6/89        20,203,000    12,931,000    10/2019

Pointe West           Aurora, CO         138      5.3         95.4%       9/89         5,100,000     3,064,000     3/2016

Bernardo Crest       San Diego, CA       216     16.6         96.4%      12/89        18,684,000    11,515,000     8/2019
                                       -----    -----                            ---------------   -----------
                                       2,017    122.5                            $107,500,000/*/   $64,040,000
<CAPTION> 

                         Mortgage   Monthly      Est.
                         Interest    Debt      Balloon
Property                   Rate     Service    Payment
- --------                 --------   -------    -------
<S>                        <C>     <C>        <C>
Silver Springs              6.5%   $ 38,006   $5,030,000
Rancho del Sol             8.11%     92,172           --

Sandpebble                 8.28%     48,828    5,474,000
Regency Square             8.00%     61,269    7,732,000
Cameron Creek              8.11%     52,480           --
Harbor Pointe              7.75%    102,635           --

Pointe West                7.61%     25,971           --

Bernardo Crest             8.12%     94,221           --
                                   --------   ----------
                                   $515,582   $18,236,00
</TABLE>      

________________________________
    
/*/  The purchase price per Property shown in the above table is the price
originally paid to an affiliate of Spanos for such Property, and does not
include acquisition fees aggregating $2,800,000 paid to an affiliate of Spanos
and acquisition expenses of approximately $200,000.  In addition, affiliates of
Spanos paid to the Partnership an aggregate of $5,037,000 in cash flow guaranty
payments with respect to such Properties, which payments were treated as
reductions to the purchase prices per Property set forth above.     

                                       34
<PAGE>
 
Anticipated Results of Auction, Use of Proceeds and Cash Distributions
- ----------------------------------------------------------------------
              
          The following table sets forth the anticipated application of the
proceeds from the Auction, as well as information regarding the estimated loss
to be realized per Unit upon sale of the Properties and termination of the
Partnership.  The amount available for distribution to Unitholders shown below
assumes that:  (i) the Spanos Bidder's guaranteed Minimum Overall Bid is the
Successful Bid for both the Partnership and the Genesis Partnership, and all of
the Auction Properties are purchased by the Spanos Bidder; and (ii) the costs of
the Auction and the solicitation of Consents are allocated between the
Partnership and the Genesis Partnership in proportion to the amounts of the
Spanos Bidder's respective guaranteed Minimum Overall Bids.  The amount
available for distribution to Unitholders would increase if the aggregate sales
price of the Properties exceeds the Spanos Bidder's guarantee by more than the
increased expenses of the Auction which will result from multiple purchasers of
the Properties.     

                                       35
<PAGE>
 
<TABLE>    
<CAPTION> 
Application of Proceeds:
<S>                                                 <C>
Auction Sale Price (Net of Mortgage Debt)               $22,440,000
Less:  Auction Expenses                                     695,000/1/  
       Consent Solicitation Expenses                        197,000/1/ 
                                                        -----------
Net Sale Price                                          $21,548,000
Plus:  Other Partnership Assets                           2,100,000/2/
                                                        -----------
         (Net of Liabilities)
                                                        $23,648,000
                                                        ===========
Less:  Liquidation Expenses (est.)                          100,000
       Attorneys' Fees                                    1,000,000/3/
                                                        -----------
Net Distributable Amount                                $22,548,000
                                                        ===========
Distributions to Unitholders                             13,520,000/4/
Distributions to Subordinated Limited Partners            8,878,000/5/
Distributions to General Partners                           150,000/6/
                                                        -----------
     Total Distributions                                $22,548,000
                                                        ===========
Distribution to Unitholders Per Unit
($250 of Original Capital Contribution):
     Prior Cash Distributions Per Unit                  $    154.71/7/
     Distributions Per Unit from Auction Proceeds             42.67/4/8/
Loss Per Unit                                                $52.62/6/8/
</TABLE>      

- ------------------
    
/1/ Auction expenses and Consent solicitation expenses are estimated amounts,
and are allocated between the Partnership and the Genesis Partnership as
indicated in (iii) above.  Expenses of the Auction will increase if there are
multiple purchasers of the Properties (i.e., if the Spanos Bidder is not the
sole Successful Bidder), but any such increase is not expected to be 
material.     
    
/2/ Estimated based upon assets and liabilities as of December 31, 1997.     

                                       36
<PAGE>
 
/3/      Pursuant to the Settlement Agreement and subject to the approval of the
Court, the Partnership will pay to Lead Class Counsel, on behalf of the
Unitholders, an amount not to exceed 8% of the amount otherwise distributable to
the Unitholders from the Auction Proceeds.

/4/      Of this amount, the General Partners initially will withhold $1,000,000
($3.16 per Unit) for a period of up to one year as a reserve against further
unforeseen contingent obligations of the Partnership, including any liabilities
which may arise under the sales contracts for the Properties.

/5/      The Subordinated Limited Partner Interests were issued to affiliates of
Spanos in consideration of a cash capital contribution of $5,544,000 and in
consideration of certain cash flow guaranty payments made by such affiliates to
the Partnership during the period from inception through June 30, 1992.
    
/6/      The Partnership Agreement provides that liquidating distributions are
to be paid to the Unitholders, Subordinated Limited Partners and General
Partners in accordance with their positive capital account balances, after
allocating the net income or loss from the terminating transaction. Based upon
the foregoing assumptions, it is estimated that approximately $950,000 of the
net income resulting from the Auction will be allocated to the General Partners,
which would bring their capital accounts (currently a deficit of approximately
$800,000) to a positive balance of approximately $150,000. (See "Distributions
and Fees") below.)     
    
/7/      Assumes Unitholder held Units since first closing of Partnership's
offering in 1988. Further assumes that cash distributions in respect of 1997
equalled those for 1996.     

/8/      Assumes contingency reserve is not utilized and is ultimately
distributed to Unitholders. In addition, Unitholders who are not tax-exempt
investors have received tax benefits from their investment in the Units, and
many Unitholders will receive additional amounts under both the Settlement
Agreement and the PSI Settlement Agreement described hereinafter under "CERTAIN
PENDING LITIGATION."


Recommendation of Spanos
- ------------------------

          Spanos believes that the advantages of selling the Properties at this
time exceed any disadvantages of such sales and, therefore, recommends that the
Unitholders approve the Plan.

                                       37
<PAGE>
 
In reaching its conclusions, Spanos considered the following factors, as more
fully described below and under "THE PLAN -Background of Sale of Properties" and
" Description of Properties":  (i) the fact that the Properties have now been
held for their originally anticipated holding periods; (ii) increased
availability of investor capital and the increased purchasing activity and
favorable interest rate environment; (iii) improved occupancies and revenues in
recent years; (iv) the potential for future operating performance increases and
a possible increase in the value of the Properties; (v) the satisfactory
physical condition of the Properties and the need for expenditures for repairs,
replacements and improvements to be incurred in the future; (vi) the presence of
competition; (vii) the relative illiquidity of the Units; (viii) the historic
levels of cash distributions to the Unitholders, the suspension of cash
distributions in 1992 and the resumption of distributions in 1996 at a
significantly lower level; and (ix) the potential for an increase in the amounts
of distributions.
              
          In addition, Spanos took into account the pendency of the Litigation,
including (i) the extensive negotiations with Lead Class Counsel leading to the
Settlement Agreement and the Court's approval of the Settlement; (ii) the fact
that included in the relief sought by the plaintiffs is rescission of the
original issuance of the Units; (iii) the costs expended to date and expected to
be expended by Spanos and its affiliates in continuing defense against such
Litigation; and (iv) the effects     

                                       38
<PAGE>
 
of participation in the defense of such Litigation upon certain of the key
personnel of Spanos.  See "THE PLAN  Background of Proposed Sale of Properties"
and "CERTAIN PENDING LITIGATION."
              
          Spanos, after reviewing all of the above, concluded that these factors
weighed in favor of agreeing to the floor bids and selling the Properties now,
rather than sometime in the future, because it believes that the risks of
continuing to own the Properties outweigh the benefits of continued 
ownership.     

Disadvantages of Plan
- ---------------------
              
          The primary disadvantage of disposing of the Properties at this time
is that the Partnership will not benefit from possible further improvements in
economic and market conditions which might produce increased cash flow and
possibly enhance the sales prices of the Properties.  Further, it is not
anticipated that the Unitholders will receive aggregate distributions from the
Partnership, including distributions from sales of the Properties and any
remaining contingency reserve, which will equal the amounts originally invested
in the Partnership.  In addition, no current independent appraisals of the
Properties were obtained, because Spanos believes that a public auction after
dissemination of full information to prospective bidders, together with its
affiliate's minimum bids, will provide the best measure of the value of the
Properties.  No independent opinion or evaluation of the fairness of the Plan to
Unitholders has been made.  However, the Plan will not be implemented unless the
Court     

                                       39
<PAGE>
 
issues an order finding that the Settlement is fair, reasonable, adequate and in
the best interests of the Unitholders.

Advantages of Plan
- ------------------

          In addition to the factors regarding the Settlement discussed under
"Background of Sale of Properties" above, Spanos based its recommendation on the
following factors:

          (i)   SPANOS' BELIEF THAT THE CURRENT LEVEL OF MORTGAGE INTEREST RATES
AND INCREASED AVAILABILITY OF INVESTOR CAPITAL ARE FAVORABLE FOR THE SALE OF THE
PROPERTIES.  In particular, Spanos has considered as favorable factors the
availability of potential purchasers with sufficient equity to purchase
properties; the availability of financing for the acquisition of real estate
from the capital markets and traditional lending sources; and continued
favorable interest rates which make it less expensive for potential purchasers
to borrow funds.
         (ii)  GENERAL IMPROVEMENT IN THE OCCUPANCIES, REVENUES AND NET
OPERATING INCOME OF THE PARTNERSHIP'S PROPERTIES, which Spanos believes enhances
their salability.
            
        (iii)  REALIZATION OF HIGHEST OBTAINABLE PRICES THROUGH THE AUCTION.
The Court-approved Auction process provides a mechanism which Spanos believes
will enable the Partnership to sell the Properties for the best aggregate sale
price obtainable at the time of sale, under current market conditions.
Moreover, the guaranteed minimum bids from an affiliate of Spanos provide
assurance that the Properties will be sold at prices exceeding     

                                       40
<PAGE>
 
existing mortgage debt and sufficient to assure at least $22,440,000 of gross
sale proceeds.

         (iv) RISKS OF CONTINUED OWNERSHIP.  Retaining the Properties will
continue to subject the Partnership to the risks inherent in the ownership of
rental property, such as fluctuations in occupancy rates, operating expenses and
rental rates (which in turn may be affected by general and local economic
conditions), the supply and demand for apartment properties of the type owned by
the Partnership, increased competition (particularly from newer apartment
projects with more desirable configurations and greater amenities) and federal
and local laws and regulations affecting the ownership and operation of real
estate.
              
          (v) LIQUIDITY.  The sales will provide liquidity to the Unitholders.
At present, there is no established public trading market for the Partnership's
Units, and liquidity has been limited to sporadic sales which occur within an
informal secondary market, and two recent tender offers, each for a limited
number of Units.  See "MARKET PRICES OF UNITS AND DISTRIBUTIONS TO UNITHOLDERS -
- - Market Prices."     

         (vi) INCREASED COMPETITION.  Spanos believes that older apartment
buildings such as those on the Properties, even though well maintained and in
good condition, can over time suffer a competitive disadvantage in attracting
and retaining tenants, as compared to new apartments with more modern amenities
in newer, attractive neighborhoods.  Further, the two-bedroom, one-bath

                                       41
<PAGE>
 
    
configurations of many of the apartments in the Properties are not as attractive
for prospective tenants as two-bedroom, two-bath configurations often found in
newer competing projects.  In addition, new apartment construction has commenced
recently in several of the Properties' market areas, as a result of recent price
increases for apartment projects and readily available financing for such
construction.  The Properties, therefore, may not be able to sustain current
levels of revenue.     

       (vii)   THE CONDITION OF THE PROPERTIES.  The Partnership has maintained
the Properties in good condition during the past few years.  Spanos believes
that it would be advantageous to sell the Properties now before further aging
and wear in the ordinary course occurs, thereby requiring substantially
increased expenditures for repairs and refurbishment.

       (viii)  THE PARTNERSHIP'S ORIGINAL OBJECTIVES AND POLICIES.  Sales of the
Properties at this time are compatible with the Partnership's originally
anticipated holding periods.
           
       (ix)    ELIMINATION OF SCHEDULE K-1 REPORTS.  The Partnership's
liquidation will eliminate the requirement for annual Schedule K-1 income tax
reporting for the Partnership, which Spanos believes is often burdensome for
Unitholders.     

Failure to Approve Plan
- -----------------------

          If the Unitholders fail to approve the Plan, the Partnership will
continue to own the Properties.  In such event, Spanos expects that the
Partnership will operate the Properties for an indefinite period, which over
time would likely entail

                                       42
<PAGE>
 
substantial expenditures for repairs and refurbishment.  Consistent with the
Partnership Agreement, the General Partners may receive or solicit offers for
the sale of one or more of the Properties as opportunities arise.  In any such
sale, the Partnership would benefit from any increase in value of the affected
property over the value at the time of the Auction, and would suffer a detriment
to the extent of decrease in such value.  Failure by the Unitholders to approve
the Plan will not affect their rights under the Partnership Agreement.

Amendment to Partnership Agreement
- ----------------------------------
              
          Pursuant to Section 15.4.20 of the Partnership Agreement, the General
Partners and their affiliates may not purchase real property from the
Partnership, other than in connection with joint ventures with the Partnership.
In order for an affiliate of Spanos to be able to bid for and, if successful, to
purchase any or all of the Properties, the Partnership Agreement must be
amended, which requires the approval of Unitholders holding a majority of the
outstanding Units.  The Amendment will permit such a purchase of the Properties,
as set forth in Exhibit A hereto.     

Liquidation
- -----------

          Pursuant to the Settlement Agreement, within ten business days
following the closing of the sale of the last Property, the General Partners
will cause the Partnership (i) to pay all costs associated with the Auction,
including the solicitation of Consents from Unitholders and the preparation and

                                       43
<PAGE>
 
    
mailing of the notices required by the Settlement Agreement and the Court to be
sent to Unitholders for which bills have been received; (ii) to estimate and
reserve for all such costs associated with the Auction for which bills have not
yet been received; and (iii) to provide a further contingency reserve for
potential unforeseen costs and liabilities in an amount not to exceed
$1,000,000, such reserve to be maintained for a period not to exceed one year
from the closing of the sale of the final Property.  The General Partners will
then cause the Partnership to distribute the balance of the cash from the sales
first, on behalf of the Unitholders, as attorneys' fees to Lead Class Counsel,
in such amount as has been awarded by the Court, which for the Unitholders will
not exceed eight percent (8%) of the amount otherwise distributable to the
Unitholders from the sales, and then to the Unitholders, Subordinated Limited
Partners and General Partners as provided in the Partnership Agreement.  The
remaining assets of the Partnership, and any remainder of the contingency
reserve, will be distributed to the Unitholders within one year after the
closing of the sale of the last Property.  If any costs associated with the
Auction are not individually charged or allocated to the Partnership or the
Genesis Partnership, the costs are to be allocated between the Partnership and
the Genesis Partnership based on the gross cash amount in excess of existing
mortgage debt paid to either of them as a result of the Auction, unless a more
equitable method of allocation is agreed upon by P-B Properties, Lead Class
Counsel     

                                       44
<PAGE>
     
and the Spanos General Partners.  Even if all liabilities of the Partnership
have not been satisfied after one year, the remainder of the contingency reserve
will be distributed to the Unitholders, and the General Partners will remain
obligated for such liabilities.     

          Section 19.1 of the Partnership Agreement provides that the
Partnership will terminate and be dissolved upon the disposition of all of the
assets of the Partnership and the receipt of the final cash payment of the
purchase price of all such assets.

Distributions and Fees
- ----------------------
              
          The sale of all of the Partnership's Properties in the Auction will
constitute a "Terminating Sale or Disposition," as defined below.  Pursuant to
Section 11.8 of the Partnership Agreement, a Terminating Sale or Disposition
invokes allocation and distribution requirements which differ in certain
respects from those that would ordinarily result from sale or refinancing of one
or more of the Partnership's Properties.  Section 11.8 and Section 11.4.4 of the
Partnership Agreement provide that any Net Income resulting from a Terminating
Sale or Disposition will be allocated first to Unitholders, Subordinated Limited
Partners and General Partners who have negative capital account balances.  As of
the date of this Solicitation Statement, only the General Partners had negative
capital account balances, which at December 31, 1997 aggregated approximately
$400,000 for each of the General Partners, and so an aggregate of approximately
$800,000     

                                       45
<PAGE>
 
    
of the Net Income resulting from the Auction will be allocated to the General
Partners' capital accounts, bringing those accounts to a zero balance.  The
remaining Net Income will next be allocated 2% to the General Partners and 98%
to the Unitholders and Subordinated Limited Partners until their capital account
balances equal their Adjusted Contributions (i.e., the original capital
contribution of $250 per Unit less any prior distributions of cash from sale or
refinancing of Properties or from working capital reserves).  Since the capital
account balances of the Subordinated Limited Partners currently equal their
Adjusted Contributions, the General Partners will be allocated approximately
$75,000 each and all of the remaining Net Income will be allocated to the
Unitholders.  Spanos does not anticipate that the Net Income of the Partnership
for the year 1998 (assuming all of the Properties are sold in 1998) will be
sufficient to restore the Unitholders' capital account balances to the level of
their Adjusted Contributions.     
              
          As set forth under "Anticipated Results of Auction, Use of Proceeds
and Cash Distributions" above, and based on the assumptions therein stated,
Spanos estimates that upon completion of the Liquidation, the General Partners
will have received cash distributions aggregating approximately $150,000, the
Subordinated Limited Partners (who are affiliates of Spanos) will have received
cash distributions of $8,878,000 and the Unitholders will have received
approximately $13,520,000 of cash     

                                       46
<PAGE>
 
distributions, in each case in addition to those previously received.

          A "Terminating Sale or Distribution" is defined in the Partnership
Agreement to be the earlier to occur of (i) the sale or disposition of the
Partnership's last three Properties commencing with the first such sale or (ii)
the sale or disposition of a Property which causes the aggregate acquisition
cost of all Properties which have been sold or disposed of to exceed 66 2/3% of
the aggregate original acquisition cost of all Properties.  Because all of the
Properties will be sold in the Auction as part of a single plan of disposition,
each sale will be treated as a Terminating Sale or Disposition, regardless of
the closing dates of sales of the individual Properties.

          Neither of the General Partners will receive any fees in connection
with the sale of the Properties or the liquidation and dissolution of the
Partnership.  However, as provided in the Partnership Agreement, the General
Partners will be entitled to receive cash distributions of approximately $75,000
each.  Upon sale of the Properties, the management fees and special
distributions which the General Partners presently receive will be eliminated.
Furthermore, Spanos has guaranteed that the Auction will generate gross proceeds
of at least $22,440,000 in excess of the aggregate outstanding principal balance
of all existing mortgage debt on the Properties, the net amount of which (after
payment of expenses of the Auction, certain plaintiffs' attorneys' fees and the
expenses of liquidation of the

                                       47
<PAGE>
 
Partnership and establishment of a contingency reserve) will be available for
distribution to the Unitholders, Subordinated Limited Partners and General
Partners as provided in the Partnership Agreement.  Sales of the Properties and
liquidation of the Partnership will also eliminate any liability of the General
Partners for future Partnership obligations and risk to the Partnership which
might arise from continued operation of the Partnership.

                                       48
<PAGE>
 
                        PRO FORMA FINANCIAL INFORMATION
              
          On a pro forma basis, if the Plan had been consummated on September
30, 1997 under the assumptions described above under "THE PLAN  Anticipated
Results of Auction, Use of Proceeds and Cash Distributions," the Partnership's
Balance Sheet as of September 30, 1997 would have reflected cash of
approximately $22,548,000, limited partners' equity of approximately
$13,520,000, subordinated limited partners' equity of approximately $8,878,000
and general partners' equity of approximately $150,000, and the Partnership's
income statement for the quarter ended September 30, 1997 would have reflected a
nonrecurring gain of approximately $9,367,000.     
                    
                FINANCIAL INFORMATION REGARDING GENERAL PARTNERS

          See the Index to Financial Statements for information regarding the
audited balance sheet of the Spanos General Partner as of its most recent fiscal
year-end, and the audited balance sheets of the general partners of the Spanos
General Partner as of their respective most recent fiscal year-ends.  The Spanos
General Partner has no reason to believe that P-B Properties does not have the
financial ability to meet its obligation to make an additional capital
contribution to the Partnership with respect to its capital account deficiency,
pursuant to the Partnership Agreement.  Moreover, as set forth under "THE PLAN 
- - - Distributions and Fees," allocation of the net income which will be produced
by sale of the Properties pursuant to the Minimum     

                                       49
<PAGE>
     
Overall Bid will result in elimination of the capital account deficiency of P-B
Properties and any obligation of P-B Properties to make an additional capital
contribution.     

                                       50
<PAGE>
 
            MARKET PRICES OF UNITS AND DISTRIBUTIONS TO UNITHOLDERS

Market Prices
- -------------
              
          The Units of the Partnership are not listed on any national securities
exchange or quoted on the NASDAQ System, and there is no established public
trading market for the Units.  Secondary market activity for the Units has been
limited and sporadic.  However, as a service to its clients, Prudential
Securities has facilitated sales to purchasers in a limited secondary market for
the Units.  Limited information available to Spanos from secondary market
sources indicates that bid prices in the limited secondary market have ranged
from a low of approximately $26.00 per Unit to a high of approximately $55.00
per Unit during the period from the first quarter of 1996 through November of
1997.  Such bid prices may not reflect actual transactions, and the proceeds to
a seller of Units would be reduced by sales commissions, which may be
substantial, and transfer fees payable to the Partnership.     

          Prudential Securities was the principal distributor of the Units in
the Partnership's public offering, and continues to provide certain investor
services on a contractual basis, including processing of all transfers of Units,
subject to the approval of the General Partners.  Prudential Securities has
advised Spanos that the transfer records for the Partnership reflect the
following aggregate numbers of Units transferred in the past five years:

                                       51
<PAGE>
 
<TABLE>    
<CAPTION>
 
                            No. of Units
               Year         Transferred
               ----         ------------
<S>                            <C>
 
               1993            38,843
               1994            37,409
               1995            36,516
               1996            51,174
               1997            40,690
</TABLE>     

Generally, no information regarding the prices at which Units were sold is
available from the Partnership's transfer records, and the transfers reflected
in the above table include non-sale transactions.

          Spanos believes that the limited amount of information available
regarding transfers of Units and bid prices does not reflect sufficient market
activity to be representative of the market value of the Units, and such
information should not be relied upon as being indicative of the ability of
Unitholders to sell their Units in secondary market transactions or as to the
prices at which such Units may be sold.  Therefore, the information presented
should not be relied upon by Unitholders in determining whether or not to
consent to the Plan.

          On November 5, 1996, Prescott Associates, L.L.C., an entity not
affiliated with either of the General Partners, commenced a limited tender offer
for up to 14,260 Units (4.5% of the outstanding Units) at a cash price of $35.00
per Unit, less the transfer fee of $75.00 payable to the Partnership and less
any cash distributions exceeding $1.22 per Unit made by the Partnership to any
tendering Unitholder after the date of the offer.  The tender offer was
scheduled to expire on December 6,

                                       52
<PAGE>
 
1996, and to the knowledge of the General Partners was not extended.  Based upon
the Partnership's records, it appears that a total of 13,002 Units were
purchased in this tender offer.
              
          In November, 1997, Hungry Bear Fund 96, LLC, an entity not affiliated
with either of the General Partners, commenced a limited tender offer for up to
500 units (.15% of the outstanding Units) at a cash price of $42.75 per Unit,
less the transfer fee of $75.00 payable to the Partnership and less any cash
distributions made by the Partnership after October 1, 1997 to any tendering
Unitholder.  The tender offer was scheduled to expire on December 15, 1997, and
to the knowledge of the General Partners was not extended.  Based upon the
Partnership's records, it appears to date that a total of 144 Units were
purchased in this tender offer.     

Distributions to Unitholders
- ----------------------------
              
          From the inception of the Partnership through the second quarter of
1992, the Partnership made quarterly cash distributions to the Unitholders.
Such distributions were made from operating cash flow, from proceeds of
refinancing of Properties and from funds received under a cash flow guaranty
made by affiliates of Spanos at the inception of the Partnership, which expired
in 1992.  Due to insufficient cash flow, the Partnership suspended cash
distributions in 1992, and did not resume such distributions until 1996. Spanos
believes that cash distributions in respect of 1997 will equal those for 1996.
The     

                                       53
<PAGE>
 
following table sets forth the amounts of such distributions per Unit.

<TABLE>    
<CAPTION>
                            Distribution
              Period        per $250 Unit*
              ------        -------------
<S>                              <C>
 
               1988**            $   1.95
               1989                 35.00
               1990                 35.00
               1991                 35.00
               1992                 38.00
               1993                   -0-
               1994                   -0-
               1995                   -0-
               1996                  4.88
               1997               4.88***
                                 --------
                                 $ 154.71
                                 --------
</TABLE>      
- ------------------------
*    Includes distribution of refinancing proceeds of $17.50 in 1989, $18.72 in
1990, $20.04 in 1991 and $31.22 in 1992, respectively.

**   Assumes Unitholder held Units since first closing of Partnership's offering
in 1988.

***  Estimated.
    
During the same period, the Partnership made cash distributions to the
Subordinated Limited Partners averaging $57.62 per $250 Unit, which
distributions were made from refinancing proceeds.  Pursuant to the Partnership
Agreement, the Partnership has made or accrued special distributions to P-B
Properties aggregating $1,861,586 for the period 1988-1997, which distributions
were made from operating cash flow and were treated for financial reporting and
tax purposes as operating expenses.

          In addition to distributions from the Partnership, most Unitholders
will be entitled to receive payments with respect to     

                                       54
<PAGE>
 
their Units pursuant to the PSI Settlement Agreement described below under
"CERTAIN PENDING LITIGATION."

                                       55
<PAGE>
 
                               FEDERAL INCOME TAX
                            CONSEQUENCES OF THE PLAN


General
- -------
          Approval of the Plan has certain tax implications to the Unitholders
that should be considered.  The following discussion summarizes the material
federal income tax consequences arising from the Partnership's proposed sale of
the Properties and provides a general overview of certain state income tax
considerations.  This summary is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations, court decisions and published
positions of the Internal Revenue Service (the "IRS"), as currently in effect.
There can be no assurance that the IRS will agree with the conclusions stated
herein or that future legislative or administrative changes or court decisions
will not significantly modify the federal or state income tax laws regarding the
matters described herein, potentially with retroactive effect.  This summary is
addressed only to Unitholders who are United States persons within the meaning
of Section 7701(a)(30) of the Code, deals only with Units that are held as
capital assets within the meaning of Section 1221 of the Code and is not
intended to be and should not be considered as an opinion respecting the federal
or state income tax consequences of the Plan.  In addition, this summary does
not address the tax consequences that may be relevant to Unitholders in special
tax situations (including, for example, life insurance companies, dealers in
securities or

                                       56
<PAGE>
 
currency, banks or other financial institutions, or Units held as a hedge or as
part of a hedging, straddle or conversion transaction).  ACCORDINGLY,
UNITHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF
UNITED STATES FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL
OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.

          Certain United States federal income tax consequences associated with
an investment in the Units were discussed in the Prospectus, dated October 18,
1988, covering the original public offering of the Units.  This summary does not
update that discussion; rather it discusses only the federal income tax aspects
directly relevant to the Plan.

Partnership Taxation
- --------------------

          This summary assumes, and Spanos believes, that the Partnership has
been and will continue to be properly classified as a partnership for federal
income tax purposes.  An entity that is classified as a partnership is not
subject to federal income tax.  Instead, each partner in the partnership is
required to take into account in computing his or her income tax liability the
partner's allocable share of the partnership's items of income, gain, loss,
deduction and credit.

Sale of Properties
- ------------------

          The Partnership will have taxable gain or loss upon its sale of each
Property, measured by the difference between the amount realized on the sale
(generally, cash or other consideration received reduced by the expenses of
sale) and the

                                       57
<PAGE>
 
Partnership's adjusted basis in such Property.  The "adjusted basis" of a
Property generally is its cost plus the amount of any capital expenditures (such
as improvements) minus the amount of depreciation and amortization.
              
          Assuming (i) the Spanos guaranteed Minimum Overall Bid is the
Successful Bid for the Properties, (ii) the selling expenses (including Lead
Class Counsel's legal fees) are $1,695,000 and (iii) the sales are consummated
in 1998, Spanos estimates that the total gain resulting from the sale of the
Properties would be approximately $8 million.  The amount of gain realized on
the sale of the Properties will depend upon the actual sales prices and the
actual selling expenses and legal fees incurred in connection with the sale of
the Properties.     

          Any such gain or loss generally will constitute Section 1231 gain or
Section 1231 loss (i.e., gains or losses from disposition of real property or
                   ----                                                      
depreciable personal property used in a trade or business and held for more than
one year, other than property held for sale to customers in the ordinary course
of business).  A Unitholder's share of the gains or losses from the sales of the
Properties would be combined with any other Section 1231 gains or Section 1231
losses of the Unitholder for that year.  Net Section 1231 gains or net Section
1231 losses generally would be treated as long-term capital gain or ordinary
loss, as the case may be.  However, a Unitholder's net Section 1231 gains would
be treated as ordinary income rather than capital gain to the extent of his or
her net Section 1231 losses,

                                       58
<PAGE>
 
    
if any, incurred in the five preceding years.  Furthermore, in the event that a
Property is sold at a gain, the depreciation expense may be recaptured as
ordinary income under Section 1245 or Section 1250 of the Code to the extent of
the realized gain.   In general, under Section 1250, if real property is
depreciated on an accelerated basis rather than on a straight-line basis, then
the lesser of (i) any gain realized on disposition of the property or (ii) the
excess of accelerated depreciation over straight-line depreciation as of the
date of sale will be treated as ordinary income in the year the property is
sold.  The Partnership does not expect to have  any gain from the sale of the
Properties subject to recapture under Section 1250 of the Code.  Spanos
estimates that approximately $850,000 of the gain would be subject to recapture
as ordinary income under Section 1245 of the Code if the Properties are sold for
the Minimum Overall Bid.   Unitholders classified as corporations for federal
income tax purposes may be required, under Section 291(a) of the Code, to treat
20% of the gain from the sale of a Property attributable to depreciation expense
not subject to recapture under Section 1250 as ordinary income instead of
Section 1231 gain.  The total amount of gain subject to Section 291(a) ordinary
income treatment for a corporate Unitholder is estimated to be approximately
$1.7 million (approximately $5 per Unit).     

          Under Section 702(a)(3) of the Code, a partnership is required to
state separately, and the partners are required to account separately for, their
distributive share of all gains and

                                       59
<PAGE>
 
losses of their partnership.  Accordingly, each Unitholder's allocable share of
the gains or losses from the sale of the Properties (including each Unitholder's
allocable share of Section 291(a) gain, Section 1245 gain, Section 1231 gain or
Section 1231 loss) will be separately stated and reflected on the applicable
Schedule K-1 forms provided to the Unitholders by the Partnership.

          For most tax-exempt Unitholders, only a portion of the gain from the
sale of the Properties would be treated as unrelated business income.  Under
Section 514(a) of the Code, gain from the sale of "debt-financed property" is
treated as unrelated business income generally in an amount equal to a ratio
determined by comparing the property's debt to its basis.  If the Properties are
sold for the estimated total gain of approximately $8 million, Spanos estimates
that the portion of the gain that will be treated as unrelated business income
is $6.9 million (or $19 per Unit).  Additional unrelated business income may
result to a tax-exempt Unitholder which borrowed funds to purchase its Units.
Tax-exempt Unitholders should consult their own tax advisors regarding the
unrelated trade or business income that may result from the sale of the
Properties.

Tax Allocations and Distributions
- ---------------------------------

          Gain (or loss) from the sale of the Properties will be allocated to
the Partners in accordance with the Partnership Agreement.  Allocations of a
partnership's items of income, gain, loss, deduction and credit will be
respected for federal income

                                       60
<PAGE>
 
tax purposes if they have substantial economic effect or are otherwise made in
accordance with the partners' economic interests in the partnership.  This
summary assumes, and Spanos believes, that the allocations of Partnership items
of income, gain, loss, deduction and credit to the Unitholders have substantial
economic effect or are otherwise in accordance with the Unitholders' economic
interests in the Partnership.
              
          In general, under the Partnership Agreement, any Net Income in
connection with a Terminating Sale or Disposition will be allocated among the
Partners (prior to making distributions of sale proceeds) first to restore the
General Partners' negative capital account balances and then 98% to Unitholders
and 2% to the General Partners.  If the Net Income of the Partnership for the
year 1998 is not sufficient to restore the Unitholders' capital account balances
to the level of their Adjusted Contributions, then the Partnership Agreement
provides that the Units held by earlier-admitted Unitholders are to be allocated
more of the gain from the sale of the Properties in order to equalize their per-
Unit capital accounts with those of the later-admitted Unitholders.  See "THE
                                                                     ---     
PLAN -- Distributions and Fees."  If the Properties are sold for the Minimum
Overall Bid, Spanos estimates that a Unit acquired on the earliest closing date
will be allocated approximately $29 of the gain, and a Unit acquired on the last
closing date will be allocated approximately $10 of the gain.  Approximately $3
of such gain would be characterized as Section 1245 income with the balance
characterized as Section     

                                       61
<PAGE>
 
1231 gain.  To the extent that the actual gain on the Properties is more than
that estimated above, the per-Unit allocation of such gain would be
correspondingly higher.  Any allocation of gain (or loss) from the sale of
Properties will increase (or decrease) a Unitholder's basis in the Units.

          In general, under the Partnership Agreement, loss from the sale of a
Property must be allocated 2% to the General Partners and 98% to the
Unitholders.  However, in such circumstances a special allocation of gross
rental income (depending upon the ultimate sales proceeds) would be made to P-B
Properties to reduce its negative capital account by a comparable amount, and an
equal amount of loss will be allocated among the Unitholders.  Allocation of
loss will reduce a Unitholder's basis in the Units.  However, no loss can be
utilized currently to the extent the loss exceeds the Unitholder's basis in the
Units.

          Distributions to a Unitholder will generally not be taxable to the
extent the distributions do not exceed the Unitholder's adjusted tax basis in
the Units.  For purposes of determining tax basis in a Unitholder's Units, any
payment received by the Unitholder from the settlement fund established pursuant
to the PSI Settlement Agreement (see "CERTAIN PENDING LITIGATION"), or from any
other settlements related to the Units, should be applied to reduce such
Unitholder's adjusted tax basis.  The tax basis in the Units will also be
reduced by the distributions.  To the extent any settlement payment and the
distributions exceed the adjusted tax basis, such excess will

                                       62
<PAGE>
 
generally be treated as capital gain, which will be long-term if the applicable
Units have been held for more than one year.  Unitholders who have remaining tax
basis in their Units after termination of the Partnership will generally have a
capital loss.  Such capital loss can be used to offset any net Section 1231
gains that have not been otherwise characterized as ordinary income, but only if
such capital loss occurs in the same year as the net Section 1231 gain.  Net
capital losses of taxpayers other than corporations may not be carried back to
earlier years.

          It is not expected that the Partnership will terminate for federal
income tax purposes in the year in which the Properties are sold, because a
reserve for potential unforeseen costs and liabilities will be established and
maintained for a period not to exceed one year from the closing of the sale of
the final Property.  Accordingly, a Unitholder will likely be allocated gain
from the sale of the Properties in a different year than termination of the
Partnership, which may result in a capital loss to a Unitholder which cannot be
used to offset the gain from the sale of the Properties.
              
          Based on the estimated gain of $8 million, Spanos estimates that after
payment of the selling expenses incurred in connection with the sale of the
Properties and other expenses and liabilities of the Partnership and certain
attorneys' fees, the amount available for distribution to Unitholders would be
approximately $43.00 per Unit.     

                                       63
<PAGE>
 
Capital Gains Tax
- -----------------
              
          With respect to individuals, trusts, and estates, the Taxpayer Relief
Act of 1997 ("TRA") generally reduces the maximum tax rate on net capital gains
on capital assets held for more than 18 months to 20% and provides a maximum tax
rate on net capital gains derived from capital assets held for more than one
year and for not more than 18 months ("mid-term gains") of 28%.  TRA does not
affect the taxation of capital gains realized by corporations.  Substantially
all of the Partnership's assets have been held for longer than 18 months.
Accordingly, a substantial portion of any Section 1231 gains of the Partnership
realized on the sale of assets and allocable to Unitholders who are individuals,
trusts and estates may be taxed at a maximum federal income tax rate of 20% (if
such gains are not recharacterized as ordinary income as described above under
"Sale of Properties," or are not subject to the special tax rate described in
the next paragraph).     
              
          Under TRA, individuals, trusts and estates are taxed on unrecaptured
Section 1250 gain at a maximum federal income tax rate of 25%.  Unrecaptured
Section 1250 gain generally equals the excess of (i) the lesser of the gain
realized on disposition of depreciable real property or depreciation allowed or
allowable on the property through the date of disposition, over (ii) the amount
of depreciation recapture realized upon the disposition (as described above
under "Sale of Properties").  Spanos believes that substantially all of the gain
realized upon the sale of the     

                                       64
<PAGE>
 
Partnership's assets pursuant to the transactions described herein will be
unrecaptured Section 1250 gain.

          Net capital losses of such a Unitholder can be utilized to offset
ordinary income limited to the sum of net capital gains from other sources
recognized by the Unitholder during the tax year, plus $3,000 ($1,500 in the
case of a married individual filing a separate return).  The excess amount of
such net capital loss may be carried forward and utilized in subsequent years
subject to the same limitations but may not be carried back to a prior year.

          Unitholders classified as corporations are taxed on capital gains at
the same rates as ordinary income.  A corporate Unitholder can deduct capital
losses only to the extent of capital gains, with any unused capital losses
generally being carried back three years and forward five years.

Passive Loss Limitation
- -----------------------

          Unitholders that are individuals, trusts, estates, closely held
corporations or personal service corporations are subject to the passive
activity loss limitations rules.  A Unitholder's allocable share of Partnership
income or loss is treated as derived from a passive activity, except to the
extent of the Partnership's portfolio income, which includes interest, dividends
and gains from the sale of property held for investment purposes.  A
Unitholder's allocable share of any Partnership gain realized on the sale of its
Properties (other than gain from the sale of portfolio investments) will be
characterized as passive

                                       65
<PAGE>
 
activity income that may be offset by passive activity losses from other passive
activity investments.  If all of the Properties are sold, a Unitholder's
allocable share of any Partnership loss realized on such sale, or any loss
realized by the Unitholder upon liquidation of his or her Units, will not be
subject to the passive activity loss limitations.  In addition, upon the
complete disposition of a Unitholder's entire interest in the Partnership, any
suspended passive activity losses of the Unitholder with respect to his or her
investment in the Partnership could be used to reduce other income of the
Unitholder.

Final Partnership Returns and Future Tax Issues
- -----------------------------------------------

          Following the termination of the Partnership, the General Partners, on
behalf of the Partnership, will file a final tax return for the Partnership, and
on a timely basis will provide Schedule K-1 forms to all Unitholders setting
forth their allocable shares of the Partnership's items of income, gain, loss,
deduction and credit.  P-B Properties will also have full responsibility and
authority for any other tax-related matter arising after the termination of the
Partnership, including acting as the "tax matters partner" representing the
Partnership in any federal or other audit of returns of the Partnership for its
final year or any prior year.

          Unitholders should understand that while the Partnership will be
terminated, such termination will not eliminate the possibility that the IRS
could challenge the tax

                                       66
<PAGE>
 
treatment of the Partnership's activities for the year of termination or any
prior year for which the statute of limitations for making adjustments has not
elapsed.  If any adjustments are made to the Partnership's income tax returns,
P-B Properties will so notify the Unitholders.  Any tax audit or adjustments
could result in assessment of additional tax liabilities upon the Unitholders
which would be payable from their own funds and would not be reimbursable by the
General Partners or the Partnership.

Certain State Income Tax Considerations
- ---------------------------------------

          Because each state's tax law varies, it is impossible to predict the
tax consequences to the Unitholders in all the states in which they are already
subject to tax.  Accordingly, the following is a general summary of certain
common (but not necessarily uniform) principles of state income taxation.  State
tax consequences to each Unitholder will depend upon the provisions of the state
tax laws to which the Unitholder is subject.  The Partnership will generally be
treated as engaged in business in each of the states in which the Properties are
located, and the Unitholders will generally be treated as doing business in such
state and therefore subject to tax in such state.  Most states modify or adjust
the taxpayer's federal taxable income to arrive at the amount of income
potentially subject to state tax.  Resident individuals generally pay state tax
on 100 percent of such state-modified income, while corporations and other
taxpayers generally pay state tax only on

                                       67
<PAGE>
 
that portion of state-modified income assigned to the taxing state under the
state's own apportionment and allocation rules.

                              NO APPRAISAL RIGHTS

          If Unitholders owning a majority of the Units on the Record Date vote
in favor of the Plan, such approval will bind all Unitholders.  The Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act, under which
the Partnership is governed, do not give rights of appraisal or similar rights
to Unitholders who dissent from the vote of the majority in approving or
disapproving the Plan.  Accordingly, dissenting Unitholders do not have the
right to have their Units appraised or to have the value of their Units paid to
them if they disapprove of the action of a majority in interest of the
Unitholders.

                VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

          On the Record Date, there were 316,828 Units issued and outstanding
and entitled to vote on matters upon which Unitholders may vote or consent.
According to publicly available information, and to the best knowledge of
Spanos, as of the Record Date, no person or entity owned more than 5% of the
outstanding Units.  As of the Record Date, neither of the General Partners nor
any officer or director thereof owned any Units.  Prudential Securities
beneficially owned 4,663 Units as of the Record Date and has advised Spanos that
it intends to vote such Units to consent or withhold consent to the Plan in the
same proportions as do the other Unitholders.

                                       68
<PAGE>
 
                          CERTAIN PENDING LITIGATION

          There is currently pending in the United States District Court for the
Southern District of New York (the "Court") a class action entitled In re
Prudential Securities Incorporated Limited Partnerships Litigation, MDL Docket
No. 1005, M-21-67 (MP).  The consolidated action had its genesis in several
different class actions filed in various courts, all of which were transferred
to a single judge and consolidated for pretrial proceedings under the
aforementioned caption./*/  On June 8, 1994, plaintiffs in the consolidated
action filed a Consolidated Complaint that superseded the individual complaints
previously filed in various courts and that was purportedly brought on behalf of
a class of approximately 350,000 investors who had purchased units in
approximately 700 limited partnerships sponsored or co-sponsored by P-B
Properties or its affiliates (collectively the "Prudential Organization").  The
Consolidated Complaint named as defendants, among others, Prudential Securities,
P-B Properties, certain of the affiliates and present and former officers and
employees of the aforementioned, and the

- -----------------
    
/*/  The various consolidated cases are:  Bottner v. A.G. Spanos Residential
                                          -------    -----------------------
Partners - 86, et al., 93 Civ. 7708 (S.D.N.Y.); Kahn v. Prudential-Bache
- --------------------                            ----    ----------------
Properties, Inc., et al., 93 Civ. 5976 (S.D.N.Y.); Dumbroff, et al. v. Avron B.
- -----------------------                            ---------------     --------
Fogelman, et al., 93 Civ. 6261 (S.D.N.Y.); Gorman v. Almahurst, Inc., et al., 93
- ---------------                            ------    ----------------------     
Civ. 8805 (S.D.N.Y.); Kinnes, et al. v. Prudential Securities Group, Inc., et
                      -------------     -------------------------------------
al., 93 Civ. 654 (D. Ariz.); Massad, et al. v. Prudential Insurance Co., et al.,
- --                           -------------     -------------------------------  
93 Civ. 5095 (D.N.J.); Levine, et al. v. Prudential-Bache Properties Inc., et
                       -------------     ------------------------------------
al., 92 Civ. 52 (N.D. Ill.); Connelly, et al. v. Prudential-Bache Securities,
- --                           ---------------     ----------------------------
Inc., et al., CIV 93-713 TUC ACM (D. Ariz.).     
- -----------                                 

                                       69
<PAGE>
 
    
co-general partners of other partnerships sponsored or co-sponsored by the
Prudential Organization, including Spanos.  The Partnership is not named as a
defendant in the Consolidated Complaint, but the Partnership is listed as being
among the limited partnerships at issue in the case.     
              
          The Consolidated Complaint alleges violations of the federal and New
Jersey Racketeer Influenced and Corrupt Organizations Act ("RICO") statutes,
fraud, negligent misrepresentation, breach of fiduciary duties, breach of third-
party beneficiary contracts and breach of implied covenants in connection with
the marketing and sales of limited partnership interests.  Plaintiffs request
relief in the nature of rescission of the purchase of securities and recovery of
all consideration and expenses in connection therewith, as well as compensation
for lost use of money invested less cash distributions; compensatory damages;
consequential damages; treble damages for defendants' alleged RICO violations
(both federal and New Jersey); general damages for all injuries allegedly
resulting from negligence, fraud, breaches of contract, and breaches of duty in
an amount to be determined at trial; disgorgement and restitution of all
earnings, profits, benefits, and compensation received by defendants as a result
of their allegedly unlawful acts; and costs and disbursements of the action.  On
August 9, 1995, P-B Properties, Prudential Securities and other Prudential
Organization defendants (collectively the "PSI Settling Defendants") entered
into a Stipulation and Agreement of Partial     

                                       70
<PAGE>
 
    
Compromise and Settlement (the "PSI Settlement Agreement") with plaintiffs in
the consolidated action.  The Court preliminarily approved the PSI Settlement
Agreement by order dated August 29, 1995 and, following a hearing held November
17, 1995, found that the PSI Settlement Agreement was fair, reasonable, adequate
and in the best interests of the plaintiff class.  The court gave final approval
to the settlement, certified a class of purchasers of interests in specific
limited partnerships, including the Partnership, released all settled claims by
members of the class against the PSI Settling Defendants and permanently barred
and enjoined class members from instituting, commencing or prosecuting any
settled claim against the released parties.  Pursuant to the PSI Settlement
Agreement, PSI and its affiliates have paid a total of $110,000,000 into a
settlement fund for future distributions to members of the plaintiff class,
including Unitholders who purchased their Units prior to June 8, 1994.  The
consolidated action remained pending against Spanos and certain of its
affiliates, as well as other co-general partners of other partnerships,
including Spanos Genesis.  The Partnership is not named a defendant in the
Consolidated Complaint and the action is not expected to have a material effect
on the Partnership's financial condition; accordingly, no provision for any loss
that may result upon resolution of the Consolidated Complaint has been made in
the financial statements of the Partnership.     

          On May 12, 1997, Spanos and those of its affiliates named as
defendants in the consolidated action entered into the

                                       71
<PAGE>
 
Settlement Agreement with the plaintiffs therein.  P-B Properties is not a party
to the Settlement Agreement, but has acknowledged the Settlement and agreed to
be bound by certain provisions of the Settlement Agreement which require that P-
B Properties take, or forebear from taking, certain actions in connection with
the Plan.  The Settlement Agreement requires, among other things, that Spanos
use its best efforts to solicit the consent of the Unitholders of the
Partnership for the Auction and the subsequent termination and dissolution of
the Partnership.  In addition to the provisions for the Auction, the minimum
Spanos bids and the contingency reserve, the Settlement Agreement provides that
Spanos and its affiliates will pay (i) $1,175,000 into a settlement fund, to be
distributed to members of the plaintiff class, including Unitholders who
purchased their Units prior to June 8, 1994, (ii) $100,000 for the costs of
providing notice to the members of the plaintiff class and (iii) $500,000 to
Lead Class Counsel.  On May 20, 1997, the Court preliminarily certified two
settlement classes and preliminarily approved the Settlement.  For a more
detailed description of the Settlement and the rights of Unitholders in
connection therewith, refer to the NOTICE TO EQUITABLE CLASS OF PENDENCY OF
CLASS ACTION, PROPOSED PARTIAL SETTLEMENT OF CLASS ACTION BY THE SPANOS
DEFENDANTS, REQUIREMENT FOR MAJORITY CONSENT TO THE AUCTION OF THE PROPERTIES OF
CERTAIN PARTNERSHIPS AS PART OF THE SPANOS SETTLEMENT, SETTLEMENT FAIRNESS
HEARING, RIGHT TO APPEAR AT

                                       72
<PAGE>
 
HEARING AND RIGHT TO OBJECT TO THE SETTLEMENT, which accompanies this
Solicitation Statement.
              
          On or about April 15, 1994, a multiparty petition entitled Schreiber,
et al. v. Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed in
the 189th Judicial District Court of Harris County, Texas, purportedly on behalf
of investors in the Partnership against the Partnership, the General Partners,
Prudential Securities, The Prudential Insurance Company of America and a number
of other defendants.  The Petition alleges common law fraud, fraud in the
inducement and negligent misrepresentation in connection with the offering of
limited partnership interests and negligence, breach of fiduciary duty, civil
conspiracy, and violations of the federal Securities Act of 1933 (sections 11
and 12) and of the Texas Securities and Deceptive Trade Practices statutes.  The
suit seeks, among other things, compensatory and punitive damages, costs and
attorneys' fees.  Most of the plaintiffs have released their claims against the
defendants in exchange for monetary payments by Prudential Securities.  It is
expected that the remaining claims will be resolved by Prudential Securities at
no cost to the Partnership.  Accordingly, no provision for any loss that may
result upon resolution of this matter has been made in the financial statements
of the Partnership.     

                                       73
<PAGE>
 
                             AVAILABLE INFORMATION
              
          This Solicitation Statement does not purport to be a complete
description of all agreements and matters relating to the condition of the
Partnership, its Properties and the transactions described herein.  Attached to
this Solicitation Statement as Exhibits B and C, respectively, are the
Partnership's Annual Report on SEC Form 10-K for the year ended December 31,
1996, as amended, and its Quarterly Report on SEC Form 10-Q for the quarter
ended September 30, 1997, which provide additional information regarding the
Partnership.  With respect to statements contained in this Solicitation
Statement as to the content of any contract or other document filed as an
exhibit to either the Form 10-K or the Form 10-Q, each such statement is
qualified in all respects by reference to such report and the schedules thereto,
which may be obtained without charge upon written request to the Partnership.
To make such a request, a Unitholder must write to P-B Properties, One Seaport
Plaza, New York, New York 10292.     

          All documents filed by the Partnership with the Securities and
Exchange Commission after the date of this Solicitation Statement, but before
the Partnership takes action pursuant to this Consent, shall be deemed to be
incorporated by reference into this Solicitation Statement.  Copies of these
documents will be available without charge upon request to P-B Properties, One
Seaport Plaza, New York, New York 10292.  Any statement contained in a document
incorporated or deemed to be

                                       74
<PAGE>
 
incorporated by reference in this Solicitation Statement shall be deemed to be
modified or superseded for purposes of this Solicitation Statement to the extent
that a statement contained in this Solicitation Statement (or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference in this Solicitation Statement) modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Solicitation Statement.

                                       75
<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS
                         -----------------------------
<TABLE>    
<CAPTION>

<S>                                                                   <C>
A.G. Spanos Realty Partners, L.P.
- ---------------------------------

Independent Auditors' Report........................................  F-2
Balance Sheet as of September 30, 1997..............................  F-3
Notes to Balance Sheet..............................................  F-4

<CAPTION>

AGS Financial Corporation
- -------------------------

 Independent Auditors' Report.......................................  F-6
 Consolidated Balance Sheet as of August 31, 1997...................  F-7
 Notes to Consolidated Balance Sheet................................  F-9

<CAPTION>

A.G. Spanos Realty Capital, Inc.
- --------------------------------

 Independent Auditors' Report.......................................  F-13
 Balance Sheet as of September 30, 1997.............................  F-14
 Notes to Balance Sheet.............................................  F-15
</TABLE>     
                                      F-1
<PAGE>
     
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To the Partners
A.G. SPANOS REALTY PARTNERS, L.P.
Stockton, California

We have audited the accompanying balance sheet of A.G. SPANOS REALTY PARTNERS,
L.P., a California limited partnership, as of September 30, 1997.  This
financial statement is the responsibility of the Company's management.  Our
responsibility is to express an opinion on this financial statement based on our
audit.

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

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of A.G. SPANOS REALTY PARTNERS, L.P.
as of September 30, 1997, in conformity with generally accepted accounting
principles.



                              Bowman & Company, LLP


Stockton, California
January 8, 1998     

                                      F-2
<PAGE>

                       A.G. SPANOS REALTY PARTNERS, L.P.

                                 BALANCE SHEET
                               SEPTEMBER 30, 1997

<TABLE>    
 
<S>                                                              <C> 
          ASSETS
 
Accounts receivable                                              $  79,547
Advances to General Partner                                        498,029
                                                                 ---------
                                                                 $ 577,576
                                                                 =========
 
          LIABILITIES AND PARTNERS' DEFICIT
 
Accounts payable                                                           
Distributions and recognized losses in excess of investment      $  89,991 
  in Prudential-Bache/A.G. Spanos Realty Partners, L.P., I         666,934 
                                                                 --------- 
 
     Liabilities                                                   756,925
                                                                 ---------
 
General Partners' deficit                                           (3,594)
Limited Partners' deficit                                         (175,755)
                                                                 ---------
 
     Partners' deficit                                            (179,349)
                                                                 ---------
                                                                 $ 577,576
                                                                 =========
 
</TABLE>     

See Notes to Balance Sheet

                                      F-3
<PAGE>
     
                       A.G. SPANOS REALTY PARTNERS, L.P.

                             NOTES TO BALANCE SHEET



1.   NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     Nature of business
     ------------------

      A.G. Spanos Realty Partners, L.P. (A California Limited Partnership) (the
      "Partnership"), was organized under the laws of the State of California on
      June 1, 1988 and will continue until December 31, 2035, unless previously
      terminated in accordance with the provisions of the Limited Partnership
      Agreement.

      AGS Financial Corporation ("AGS") and A.G. Spanos Realty Capital, Inc.
      ("Realty Capital") are the general partners of the Partnership, and Mr.
      A.G. Spanos, Mr. Dean A. Spanos, Mr. Michael A. Spanos, Mr. Barry L. Ruhl,
      Mrs. Dea Spanos Berberian and the Spanos Grandchildren's Trust are the
      limited partners of the Partnership.  On June 1, 1988, the general
      partners contributed $10 each for their interest and the limited partners
      contributed $980 for their interests in the Partnership.

      The Partnership was organized for the purpose of sponsoring limited
      partnerships which in turn are to be organized to engage in the ownership,
      financing, management and operation of apartments and other real estate
      activities.

     Investment in Partnership
     -------------------------

      The Partnership reflects its investment in Prudential-Bache/A.G. Spanos
      Realty Partners, L.P., I using the equity method of accounting, whereby
      the Partnership's cash investment is reduced by partnership distributions
      to the Partnership and by the Partnership's proportionate share of the net
      loss of the partnership.  Since distributions and allocated losses exceed
      the Partnership's investment, the balance has been classified as a
      liability.

     Use of Estimates
     ----------------

      The preparation of the balance sheet in conformity with generally accepted
      accounting principles requires management to make estimates and
      assumptions that affect the reporting amounts of assets, liabilities and
      disclosures of contingent assets and liabilities at the date of the
      balance sheet.  Actual results could differ from those estimates.     

                                      F-4
<PAGE>
     
                            NOTES TO BALANCE SHEETS



2.   COMMITMENTS AND CONTINGENT LIABILITIES

     Lawsuits
     --------

      The Partnership has been named as a defendant in a "consolidated"
      complaint that supersedes separate class action complaints that were filed
      during the 1993 calendar year.  The plaintiffs seek unspecified damages
      for economic injury suffered by them for their investment in Prudential-
      Bache/A.G. Spanos Realty Partners L.P., I.  Among other things, the
      plaintiffs allege that the Company earned excess fees for the syndication
      of the entity.

      During the year ended September 30, 1994, the Partnership was named as a
      defendant in two separate lawsuits.  Both lawsuits contend that they were
      induced to purchase units in limited partnerships by of fraudulent
      misrepresentations.  One lawsuit settled with no liability to the
      Partnership during the year.

      During the year ended September 30, 1995, the Partnership was named as a
      defendant in a lawsuit.  The lawsuit contended that the plaintiff
      purchased units in limited partnership because of misrepresentations by
      the Partnership.  On May 12, 1997, a settlement was reached.

      The Partnership believes it has meritorious defenses in all pending cases
      and that adverse decisions in any or all of these cases would be covered
      by indemnification agreements from co-defendants, or by insurance, and
      would not have a material effect on the financial condition of the
      Partnership.  It is impossible at this point to evaluate the likely
      outcome and estimate any amount or range of potential losses.
      Accordingly, the Partnership has not accrued a contingent loss on the
      balance sheet.     

                                      F-5
<PAGE>
     
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To the Board of Directors
AGS FINANCIAL CORPORATION
Stockton, California

We have audited the accompanying balance sheet of AGS FINANCIAL CORPORATION AND
SUBSIDIARIES, as of August 31, 1997.  This financial statement is the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this financial statement based on our audit.

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

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of AGS FINANCIAL CORPORATION AND
SUBSIDIARIES as of August 31, 1997, in conformity with generally accepted
accounting principles.



                              Bowman & Company, LLP


Stockton, California
October 21, 1997     

                                      F-6
<PAGE>
 
                           AGS FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                AUGUST 31, 1997

<TABLE>    
 
<S>                                                    <C> 
                    ASSETS

CASH                                                    $1,309,581
                                                        ----------
 
RECEIVABLES
   Fees receivable                                      $  950,229
   Accrued interest receivable                             622,597
   Advances to sponsored partnerships                      241,272
   Other receivables                                        91,539
   Notes receivable from sponsored partnerships          1,057,878
   Receivable from affiliated partnership                3,518,395
                                                        ----------
                                                        $6,481,910
                                                        ----------
 
INVESTMENT IN PARTNERSHIPS                              $   30,814
                                                        ----------
FURNITURE AND EQUIPMENT
   Office furniture and equipment                       $  247,092
   Less accumulated depreciation and amortization          246,340
                                                        ----------
                                                        $      752
                                                        ----------
                                                        $7,823,057
                                                        ==========
</TABLE>     

See Notes to Consolidated Balance Sheet.

                                      F-7
<PAGE>
 
       LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>    
<S>                                                        <C> 
LIABILITIES

   Accounts payable and accrued expenses                    $  404,381
   Deferred income taxes                                     1,250,661
   Advances from affiliated company                             46,611
   Recognized losses in excess of investment                  
      in partnerships                                          270,982 
   Payable to affiliated company                             3,678,141
                                                            ----------
                                                            $5,650,776
                                                            ----------
  
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY
   Common stock, stated value $1 per share                             
      authorized 100,000 shares, issued 10,000 shares       $   10,000
   Retained earnings                                         2,162,281
                                                            ----------
                                                            $2,172,281
                                                            ----------
                                                            $7,823,057
                                                            ==========
</TABLE>     

                                      F-8
<PAGE>
     
                           AGS FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                      NOTES TO CONSOLIDATED BALANCE SHEET


NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

       Nature of business
       ------------------

          AGS Financial Corporation syndicates and functions as general partner
          in real estate limited partnerships.  One of the Company's wholly-
          owned subsidiaries, AGS Securities Corporation, is inactive.  The two
          other wholly-owned subsidiaries, Residential Portfolio Depository
          Corp. and AGS Depository Corp., are assignor limited partners in
          public syndications.

          The Company earns fees for services that it renders to the
          partnerships, which are generally located in the Western and Sunbelt
          states.  In addition, the Company may advance funds to the
          partnerships.  The Company's receivables consist primarily of these
          fees and advances.  Such receivables are not secured. However, the
          Company generally has priority on the proceeds from the sale of the
          real estate when such sales occur.  This priority is subordinated only
          to the mortgage debt secured by such property

     A summary of the Company's significant accounting policies follows:

       Principles of consolidation
       ---------------------------

          The consolidated financial statements include the accounts of the
          Company and its subsidiaries.  All material intercompany accounts and
          transactions are eliminated in consolidation.

       Use of Estimates
       ----------------

          The preparation of the balance sheet in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reporting amounts of assets,
          liabilities and disclosures of contingent assets and liabilities at
          the date of the balance sheet.  Actual results could differ from those
          estimates.

       Investments in partnerships
       ---------------------------

          The Company's general partner investment in these entities is
          reflected using the equity method of accounting, whereby the Company's
          cash investment is reduced by partnership distributions to the Company
          and by the Company's proportionate share of net losses of the
          partnerships.  In the partnerships where allocated losses exceed the
          Company's investment, the balance has been classified as a liability.

       Furniture and equipment
       -----------------------

          Furniture and equipment are stated at cost and are depreciated using
          either the straight-line method or double declining balance method
          over five years.     
                                      F-9
<PAGE>
     
                      NOTES TO CONSOLIDATED BALANCE SHEET

NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     Income Taxes
     ------------

       The Company and its subsidiaries file consolidated federal and state
       income tax returns. To the extent that undistributed earnings of the
       subsidiaries are expected to be indefinitely invested in the
       subsidiaries' business, no provisions is made for income taxes which
       would be payable if these earnings were paid as dividends to the parent
       company.

       Deferred taxes are provided on temporary differences between the
       recognition of revenues and expenses for tax and accounting purposes
       using the tax rates at which the differences are expected to reverse in
       accordance with the Statement of Financial Accounting Standards No. 109,
       "Accounting for Income Taxes."

       The major sources of deferred income taxes are the use of accelerated
       depreciation in the partnerships, cash basis reporting by the Company for
       tax purposes, and the treatment of partnership fees as guaranteed
       payments for tax purposes.

     Cash
     ----

       For purposes of reporting the statements of cash flows, the Company
       includes all cash accounts which are not subject to withdrawal
       restrictions or penalties, and all highly liquid debt instruments
       purchased with a maturity of three months or less as cash on the
       accompanying balance sheet.

       Frequently, the Company had cash amounts deposited in a financial
       institution in excess of federally insured limits. As of August 31, 1997
       there was $1,094,053 deposited in excess of federally insured limits.

NOTE 2.   RELATED PARTY TRANSACTIONS

       Company-sponsored limited partnerships
       --------------------------------------

          As managing general partner or pursuant to agreements with each of the
          limited partnerships, the Company performs certain services for which
          it receives compensation.  Fees receivable from partnerships for
          services performed were $950,229 at August 31,1997.  The Company also
          makes short-term advances to the partnerships which are reimbursed as
          cash flow permits.  Advances were $43,762 at August 31, 1997.

       Purchase and management of real estate projects
       -----------------------------------------------

          All but one of the company-sponsored limited partnerships have
          purchased real estate projects from entities owned by several of the
          shareholders of the Company.  A corporation owned by several
          shareholders provides property management services to all of the real
          estate partnerships organized by the Company.     

                                     F-10
<PAGE>
     
                      NOTES TO CONSOLIDATED BALANCE SHEET

NOTE 2.  RELATED PARTY TRANSACTIONS (CONT.)

     Notes receivable from affiliated partnerships
     ---------------------------------------------

       The Company has made loans to company-sponsored limited partnerships in
       order to allow the partnerships to meet their cash needs. In addition,
       the Company has taken back notes for unreimbursed offering and
       organization costs incurred during the formation of several partnerships.
       Notes receivable from partnerships were $1,057,878 at August 31, 1997.
       Interest of $622,384 has accrued on these notes at August 31, 1997.

     Advances from affiliated company
     --------------------------------

       The Company owes affiliates $46,611 at August 31, 1997, for working
       capital advances by the affiliates.  The advances are payable on demand.
       Accrued interest owed to affiliates of $12,346 at August 31, 1997, has
       been included in accounts payable and accrued expenses.

NOTE 3.  COMMITMENTS AND CONTINGENT LIABILITIES

       Company-sponsored limited partnerships
       --------------------------------------

          As general partner for various limited partnerships, the Company may
          be subject to liabilities of the partnerships if the partnerships'
          assets should become insufficient to meet their obligations. In the
          opinion of management, the future revenues and the value of the
          underlying assets of each of these partnerships will be sufficient to
          meet partnership obligations.

          As general partner, the Company has a fiduciary responsibility to
          oversee the management of company-sponsored limited partnerships.  The
          assets and liabilities of such partnerships are included in the
          individual partnership financial statements and not on the accounts of
          the Company.

       Lawsuits
       --------

          AGS Financial Corporation has been named as a defendant in a
          "consolidated" complaint that supersedes separate class action
          complaints that were filed during the 1993 calendar year.  The
          plaintiffs seek unspecified damages for economic injury suffered by
          them for their investment in Prudential/Bache/A.G. Spanos Realty
          Partners L.P., I.  Among other things, the plaintiffs allege that the
          Company earned excess fees for the syndication of the entity.

          During the year ended August 31,1994, the Company was named as a
          defendant in two separate lawsuits.  Both lawsuits contend that they
          were induced to purchase units in limited partnerships by fraudulent
          misrepresentations.  One lawsuit settled with no liability to the
          Company during the year.

          During the year ended August 31, 1995, the Company was named as a
          defendant in a lawsuit. The lawsuit contended that the plaintiff
          purchased units in limited partnerships because of misrepresentations
          by the Company.  On May 12, 1997, a settlement was reached.     

                                     F-11
<PAGE>
     
                      NOTES TO CONSOLIDATED BALANCE SHEET

NOTE 3.   COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)

       The Company believes it has meritorious defenses in all pending cases and
       that adverse decisions in any or all of these cases would be covered by
       indemnification agreements from co-defendants, or by insurance, and would
       not have a material effect on the financial condition of the Company. It
       is impossible at this point to evaluate the likely outcome and estimate
       any amount or range of potential losses. Accordingly, the Company has not
       accrued a contingent loss on the financial statements.

NOTE 4.   SUBSEQUENT EVENTS

       During the months of September, October and November, 1997, the real
       property of the several partnership investments were sold.  These sales
       generated gains for the Company. Payments of the receivables due from
       these partnerships are expected to be made to the Company.

NOTE 5.   EXCHANGE OBLIGATION

       On October 31, 1996, a partnership affiliated with the Company deeded
       property in anticipation of a deferred tax free exchange.  The Company
       sold the property on October 31, 1996.  The Company entered into an
       agreement to build a replacement property for the affiliated partnership
       and deeded the property to the affiliated partnership on April 29, 1997,
       subject to a construction loan which had a balance at August 31, 1997 of
       $8,173,053.

       At August 31, 1997, the Company had cash in the amount of $159,746 and
       accounts receivable of $3,518,395 from the October 31, 1996 sale and
       exchange and had an account payable to an affiliated corporation in the
       amount of $3,678,141. These amounts are reflected on the accompanying
       balance sheet.     

                                     F-12
<PAGE>
     
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
A.G. SPANOS REALTY CAPITAL, INC.
Stockton, California

We have audited the accompanying balance sheet of A.G. SPANOS REALTY CAPITAL,
INC., a California corporation, as of September 30, 1997.  This financial
statement is the responsibility of the Company's management.  Our responsibility
is to express an opinion on this financial statement based on our audit.

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

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of A.G. SPANOS REALTY CAPITAL, INC. as
of September 30, 1997, in conformity with generally accepted accounting
principles.

A.G. SPANOS REALTY CAPITAL, INC. is a wholly-owned subsidiary of A.G. Spanos
Construction, Inc., and this balance sheet is included in the consolidated
financial statements of A.G. Spanos Construction, Inc., the primary reporting
entity.

                              BOWMAN & COMPANY, LLP


Stockton, California
January 8, 1998     

                                     F-13
<PAGE>
 
                        A.G. SPANOS REALTY CAPITAL, INC.


                                 BALANCE SHEET
                               SEPTEMBER 30, 1997
<TABLE>    
<S>                                                                           <C> 
                  ASSETS
Cash                                                                          $    59,798
Certificate of Deposit                                                            100,000
                                                                              -----------
                                                                              $   159,798
                                                                              ===========
                  LIABILITIES AND STOCKHOLDER'S EQUITY
 
Distributions and recognized losses in excess of investment in                $     1,912
 Prudential-Bache/A.G. Spanos Realty Partners, L.P., I                        -----------
 
Common stock, stated value $10 per share                                          100,000
  10,000 shares authorized and issued                                           3,068,280
Additional paid-in capital                                                     (3,068,280)
Note receivable - shareholder                                                      57,886
                                                                              -----------
Retained earnings                                                                 157,886
                                                                              -----------
                                                                              $   159,798
                                                                              ===========
</TABLE>     
See Notes to Balance Sheet.
                                     F-14
<PAGE>
     
                        A.G. SPANOS REALTY CAPITAL, INC.

                             NOTES TO BALANCE SHEET

NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

         Nature of Business
         ------------------

         A.G. Spanos Realty Capital, Inc. (the "Company") is a California
         corporation formed in 1988. It serves as co-general partner with AGS
         Financial Corporation in A.G. Spanos Realty Partners, L.P.  A.G. Spanos
         Realty Capital, Inc. expects to organize additional partnerships that
         will invest in properties in various locations.  The sole shareholder,
         A.G. Spanos Construction, Inc., has contributed $3,068,280 to the
         capital of A.G. Spanos Realty Capital, Inc. by an unsecured, negotiable
         demand promissory note.

         Investment in Partnership
         -------------------------

         The Company reflects its investment in A.G. Spanos Realty Partners,
         L.P. using the equity method of accounting, whereby the Company's cash
         investment is reduced by partnership distributions to the Company and
         by the Company's proportionate share of the net loss of the
         partnership.  Since distributions and allocated losses exceed the
         Company's investment, the balance has been classified as a liability.

         Use of Estimates
         ----------------

         The preparation of the balance sheet in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reporting amounts of assets,
         liabilities and disclosures of contingent assets and liabilities at the
         date of the balance sheet.  Actual results could differ from those
         estimates.

NOTE 2.  NOTE RECEIVABLE FROM SHAREHOLDER

         The note receivable from A.G. Spanos Construction, Inc. (shareholder)
         satisfies the shareholder's obligation under the capitalization
         agreement between A.G. Spanos Realty Partners, L.P., A California
         Limited Partnership, and A.G. Spanos Realty Capital, Inc.  The
         capitalization agreement provides that the initial capitalization shall
         be provided by the shareholder in the amount of $100,000 in cash plus
         an unsecured demand promissory note in the amount of $1,400,000.
         Because the note is given as evidence of the obligation to provide
         additional capital when required under terms of the capitalization
         agreement and does not constitute current paid-in capital, it is not
         reflected as paid-in capital or common stock subscribed.

         The capitalization agreement further provides that the note receivable
         shall be increased from time to time so that the total value of the
         note and the $100,000 cash paid in for stock issued shall be the larger
         of $1,500,000 or four percent of the gross amount of proceeds of the
         offering for limited partnership interests in Prudential-Bache/A.G.
         Spanos Realty Partners, L.P., I, a Delaware limited partnership.  The
         maximum required capital will be $3,168,280.     

                                     F-15
<PAGE>
     
                            NOTES TO BALANCE SHEETS

NOTE 3.  COMMITMENTS AND CONTINGENT LIABILITIES

         A.G. Spanos Realty Capital, Inc. has been named as a defendant in a
         "consolidated" complaint that supersedes separate class action
         complaints that were filed during the 1993 calendar year.  The
         plaintiffs seek unspecified damages for economic injury suffered by
         them for their investment in Prudential-Bache/A.G. Spanos Realty
         Partners L.P., I.  Among other things, the plaintiffs allege that the
         Company earned excess fees for the syndication of the entity.

         During the year ended September 30, 1994, the Company was named as a
         defendant in two separate lawsuits.  Both lawsuits contend that
         investors were induced to purchase units in limited partnerships by
         fraudulent misrepresentations.  One lawsuit settled with no liability
         to the Company during the year.

         During the year ended September 30, 1995, the Company was named as a
         defendant in a lawsuit. The lawsuit contended that the plaintiff
         purchased units in limited partnerships because of misrepresentations
         by the Company. On May 12, 1997, a settlement was reached.

         The Company believes it has meritorious defenses in all pending cases
         and that adverse decisions in any or all of these cases would be
         covered by indemnification agreements from co-defendants, or by
         insurance, and would not have a material effect on the financial
         condition of the Company. It is not possible, at this point, to
         evaluate the likely outcome and estimate any amount or range of
         potential losses. Accordingly, the Company has not accrued a contingent
         loss on the balance sheet.     

                                     F-16
<PAGE>
 
                                    EXHIBITS

EXHIBIT A:     Proposed Amendment to Amended and Restated Agreement of Limited
               ---------------------------------------------------------------
               Partnership of Prudential-Bache/A.G. Spanos Realty Partners L.P.,
               -----------------------------------------------------------------
               I
               -

          Section 15.4.20 of the Amended and Restated Agreement of Limited
          Partnership of Prudential-Bache/A.G. Spanos Realty Partners L.P., I is
          amended to read in full as follows (language in boldface to be added):


15.4      Limitations.  Neither the General Partners nor any Affiliate shall
          -----------                                                       
          have the authority to:

                                     . . .

15.4.20   except as provided in Paragraph 15.4.4, purchase or lease real
          property from the Partnership or except with respect to the Properties
          and as set forth in Paragraphs 15.4.4 and 15.4.25, sell or lease real
          property to the Partnership; provided, however, that an Affiliate of
                                       ---------------------------------------
          the Spanos General Partner may bid for, and if such bid is successful
          ---------------------------------------------------------------------
          purchase, any or all of the Properties in a public auction held
          ---------------------------------------------------------------
          pursuant to the order of a court with jurisdiction over the
          -----------------------------------------------------------
          Partnership, the General Partners, the Subordinated Limited Partners,
          ---------------------------------------------------------------------
          the Limited Partners and the Unitholders.
          ---------------------------------------- 

                                      A-1
<PAGE>
     
EXHIBIT B:     ANNUAL REPORT OF PARTNERSHIP ON SEC FORM 10-K FOR THE YEAR ENDED
               DECEMBER 31, 1996, AS AMENDED.     


                                      B-1
<PAGE>
 
         
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                            
                                   FORM 10-K/A      
                                    
                                AMENDMENT NO. 1      

(Mark One) 

/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

For the transition period from _________ to _________

Commission File Number: 0-17683

              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
- ---------------------------------------------------------------------------- 
               (Exact name of registrant as specified in charter)

Delaware                                                        94-3069380
- ----------------------------------------------------------------------------
(State or other jurisdiction of        I.R.S. Employer Identification No.)
incorporation or organization)

1341 West Robinhood, Suite B-9, Stockton, CA                         95207
- ----------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip code)

Registrant's telephone number, including area code (209) 478-0140    

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

                                            Name of each exchange
             Title of each class              on which registered
                                     
                   None                              None        
          -------------------             ----------------------


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

             Depository Units of Limited Partnership Interests
             -------------------------------------------------
                             (Title of class)

Indicate by check CK 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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.   Yes _CK_  No__

Indicate by check CK if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, 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.  [ CK ]


                               Page B-1 of B-46
                          Exhibit Index at page B-39
<PAGE>
 
                             TABLE OF CONTENTS

                                  Part I

Item  1. Business                                                           3
Item  2. Properties                                                         5
Item  3. Legal Proceedings                                                  7
Item  4. Submission of Matters to a Vote of Security Holders                7


                                  Part II

Item  5. Market for the Partnership's Depository Units of Limited 
          Partnership Interest and Related Security Holder Matters          8
Item  6. Selected Financial Data                                           10
Item  7. Management's Discussion and Analysis of Financial
          Condition and Results of Operations                              11
Item  8. Financial Statements and Supplementary Data                       14
Item  9. Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                              32


                                Part III

Item 10. Directors and Executive Officers of the Registrant                33
Item 11. Executive Compensation                                            36
Item 12. Security Ownership of Certain Beneficial Owners and
          Management                                                       36
Item 13. Certain Relationships and Related Transactions                    37


                                  Part IV

Item 14. Exhibits, Financial Statement Schedules, and 
          Reports on Form 8-K                                              39

                                      2 
<PAGE>
 
                                  PART I

Item 1.  Business

The Registrant, Prudential-Bache/A.G. Spanos Realty Partners L.P., I (the
"Partnership"), is a limited partnership formed on June 3, 1988 under
Delaware law.  The business of the Partnership is managed and controlled
by its general partners (the "General Partners"), A.G. Spanos Realty
Partners, L.P. (the "Spanos General Partner") and Prudential-Bache
Properties, Inc. (the "Bache General Partner").  The primary purpose of
the Partnership is to acquire from affiliates of the Spanos General
Partner, invest in, hold, manage, sell, dispose of, and otherwise act with
respect to eight properties on which multi-family residential developments
have been constructed (the "Properties").  The Partnership will continue
until December 31, 2030, unless terminated earlier under the provisions of
its Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement").  The prospectus ("Prospectus") included with the
Partnership's Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration Statement No. 33-22613) contains a description of
the business of the Partnership in the sections entitled "Property
Acquisitions," pages 59-69, and "Partnership Objectives and Policies,"
pages 86-89, all of which pages are incorporated herein by reference.

The Properties are subject to competition from similar apartment
properties located in close proximity, including properties owned by
affiliates of the Spanos General Partner. The Properties compete for a
variety of tenant groups, including young professionals,  retail, service
and trade employees, students and retirees.  Competition for tenants is
principally on the basis of location, physical condition, amenities, and
rental rates.  The location and condition of the Properties is considered
to be good to above-average.  The Properties feature fairly typical
amenity packages, including swimming pools, tennis courts, fitness
facilities, microwave ovens and guarded entrances, and are generally able
to compete adequately with other projects in their respective markets.  
Many areas, including Phoenix, Denver, Las Vegas, Sparks and Atlanta have
seen construction of new apartment properties increase since 1992.  This
has led to the emergence of market segmentation between 1980's vintage
properties (such as the Partnership's) and the newer generation of
apartment properties completed recently.  The newer properties have a
competitive advantage not only because they are new, but because many are
designed with larger unit sizes,  have floor plans and finishes similar to
those found in single family homes, and feature more extensive amenities
than do the properties built in the 1980's.  To date, these newer
properties generally command higher rents and have competed with each
other for tenants able to pay premium rents, leaving the 1980's vintage 

                                      3 
<PAGE>
 
properties to compete with each other for the next tier of apartment
renters.  There is a risk, however, that if overbuilding in the upper
segment of the market results in lower rents, the new properties with more
extensive amenities could be highly competitive with the 1980's vintage
apartment product.

Within the greater housing market, the apartment sector competes with
single-family homes.  Thus, apartment demand can be affected by the
affordability of owner-occupied housing, which can increase and decrease
with changes in mortgage interest rates.

The Partnership does not segregate revenues or assets by geographic
regions.  The Properties that accounted for more than 15% of revenue
during any of the past three years are Rancho del Sol (17%), Harbor Pointe
(18% to 19%) and Regency Square (15% in 1995 and 1996).  No single tenant
accounted for 10% or more of the revenue for any of the three years ended
December 31, 1996.  The Partnership is engaged solely in the business of
real estate investment; therefore, presentation of industry segment
information is not applicable.  The General Partners believe the
Properties are adequately insured.  For more information regarding the
Properties, see Item 2, Properties.  For more information regarding the
Partnership's operations, see Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations.

The Partnership has no employees.  The officers and employees of the
Spanos General Partner and the Bache General Partner, and their
affiliates, perform services for the Partnership pursuant to the
Partnership Agreement.

The Partnership resumed paying Distributions in 1996.  Distributions had
been suspended beginning with the third quarter of 1992.  See Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, for a discussion of the factors affecting Distributions.

The General Partners are presently conducting negotiations regarding a
potential auction sale of the Properties in connection with the potential
settlement of certain of the litigation described below in Note E to the
financial statements.  There is no assurance that these negotiations will
result in an agreement to sell the Properties.

                                      4 
<PAGE>
 
Item 2.  Properties
<TABLE>
<CAPTION>
The Partnership owned the eight Properties described below at March 1, 1997:

<S>                                         <C>                        <C>           <C>
                                                                         Purchase
                                            Location                       Date           Mortgage Holder

Silver Springs Apartments:                  Tempe, Arizona             11/18/88      MDS Loan Services (2)
a 198-unit midrise apartment complex        (suburb of Phoenix)
located on approximately 9.28 acres.

Rancho del Sol Apartments:                  Las Vegas, Nevada          12/30/88      Great Western Bank (3)
a 376-unit garden apartment complex          
located on approximately 16 acres.           

Sandpebble Village Apartments:              Sparks, Nevada             12/30/88      Wells Fargo Realty (4)
a 236-unit garden apartment complex          
located on approximately 11.5 acres.

Regency Square Apartments:                  Chamblee, Georgia          01/31/89      Mellon Mortgage (5)
a 276-unit garden apartment complex         (suburb of Atlanta)                      (successor to American
located on approximately 9.2 acres.                                                  Savings Bank)

Cameron Creek Apartments:                   Tempe, Arizona             03/31/89      Great Western Bank (3)
a 211-unit garden apartment complex         (suburb of Phoenix)
located on approximately 8.7 acres.

Harbor Pointe Apartments:                   Dunwoody, Georgia          06/30/89      Great Western Bank (3)
a 366-unit garden apartment complex         (suburb of Atlanta)
located on approximately 45.9 acres.         

Bernardo Crest Apartments:                  San Diego, California      12/01/89      Great Western Bank (3)
a 216-unit garden apartment complex          
located on approximately 16.6 acres. 

Pointe West Apartments:                     Aurora, Colorado           09/30/89      Great Western Bank (6)
a 138-unit garden apartment complex         (suburb of Denver)
located on approximately 5.27 acres.

</TABLE>
                                      5 
<PAGE>
 
Item 2.  Properties (continued)
<TABLE>
<CAPTION>

                          Average Annual Occupancy        Average Annual Revenue Per Apt. Unit (7)   1996 Realty Tax Data
                       1996   1995   1994   1993   1992      1996    1995    1994    1993    1992      Amount     Rate
<S>                  <C>    <C>    <C>    <C>    <C>      <C>     <C>     <C>     <C>     <C>        <C>       <C>
Silver Springs         94.1%  95.1%  95.2%  95.0%  92.5%   $7,029  $6,832  $6,183  $5,844  $5,310      $64,725    1.2959%
Rancho del Sol         94.9%  93.6%  95.7%  94.7%  93.5%   $7,099  $6,921  $6,850  $6,177  $5,989     $141,647    0.9146%
Sandpebble Village     97.4%  95.8%  96.0%  94.7%  93.2%   $7,519  $7,142  $6,875  $6,369  $6,159     $109,552    1.1272%
Regency Square         94.4%  96.2%  94.8%  94.5%  94.5%   $8,582  $8,219  $7,452  $6,991  $6,827     $222,827    1.6604%
Cameron Creek          92.8%  93.0%  94.4%  92.9%  90.4%   $7,544  $7,187  $6,816  $6,058  $5,596      $94,279    1.1815%
Harbor Pointe          92.1%  94.5%  97.2%  96.1%  95.2%   $7,951  $7,828  $7,433  $6,822  $6,465     $209,456    1.6112%
Bernardo Crest         95.2%  94.4%  91.5%  92.4%  91.0%  $10,215  $9,736  $9,167  $9,201  $9,163     $138,733    1.0234%
Pointe West            93.9%  95.7%  94.7%  95.2%  95.4%   $6,514  $6,348  $5,903  $5,463  $4,910      $53,063    1.0119%

<CAPTION>
(1) The Partnership has a 100% fee simple ownership interest in each Property subject to a first mortgage lien in favor
    of the indicated holder.  Each mortgage is secured only by the Property to which it relates and is without recourse
    to either of the General Partners or the Partnership.  (See  Note C and Schedule III to the Financial Statements.)

(2) Loan may be prepaid without charge.

(3) Loan may be prepaid upon payment of a 2% prepayment charge.  The lender may waive the prepayment charge for
    principal prepayments during the calendar year which do not exceed 20% of the original loan balance and for
    prepayments made within 90 days of a notice of installment adjustment.  The lender will also waive the prepayment
    charge so long as A.G. Spanos Construction, Inc. or any entity owned and controlled (with "control" defined as a
    50% beneficial interest) by A.G. Spanos Construction or by Alex G. Spanos remains liable on the loan.

(4) Loan may be prepaid upon payment of a 4.14% prepayment charge.

(5) Loan may be prepaid upon payment of prepayment charge of 1% for prepayment occuring prior to February 1, 1998. 
    Thereafter, loan may be prepaid without charge.

(6) Loan may be prepaid upon payment of a 2% prepayment charge.  The lender may waive the prepayment charge for
    principal prepayments during the calendar year which do not exceed 20% of the original loan balance and for
    prepayments made within 90 days of a notice of installment adjustment.  The lender will also waive the prepayment
    charge so long as A.G. Spanos Construction, Inc. or any entity owned and controlled  by A.G. Spanos Construction or
    by Alex G. Spanos remains liable on the loan.

(7) Average annual revenue per apartment unit is determined by dividing total operating revenues for the Property by
    the number of apartment units.

</TABLE>
                                       6
<PAGE>
 
Item 3.  Legal Proceedings

This information is incorporated by reference to Note E to the financial
statements in Item 8, Financial Statements and Supplementary Data.


Item 4.  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Unitholders during the fourth
quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.

                                       7
<PAGE>
 
                                  PART II

Item 5.  Market for Partnership's Depository Units of Limited Partnership
         Interest and Related Security Holder Matters

The Partnership had three limited partners as of March 3, 1997: AGS
Depository Corp. (the "Assignor Limited Partner"), a wholly owned
subsidiary of AGS Financial Corporation, and two affiliates of the Spanos
General Partner which are holders of Subordinated Limited Partnership
Interests ("Subordinated Interests").  The Assignor Limited Partner has
transferred and assigned to the Unitholders all of the Assignor Limited
Partner's rights and interest in and to the assigned Limited Partnership
Interests, except for record ownership and the right to vote directly on
matters submitted to the Limited Partners and Unitholders for a vote. 
There were 5,102 Unitholders as of March 3, 1997.

A significant secondary market for the Units has not developed, and it is
not expected that one will develop in the future.  There are also certain
restrictions set forth in the Partnership Agreement limiting the ability
of a Unitholder to transfer Units.  Consequently, Unitholders may not be
able to liquidate their investments in the event of an emergency or any
other reason.

The Partnership resumed paying Distributions to the Unitholders in 1996. 
Distributions had been suspended beginning with the third quarter of 1992. 
Distributions were paid approximately 45 days after the end of the
specified quarter as follows:

                 Quarter Ended              Distribution

             March 31, 1996                            $1.22
             June 30, 1996                             $1.22
             September 30, 1996                        $1.22
             December 31, 1996                         $1.22

All $1,546,000 of the distributions paid to Unitholders for 1996
represents a return of capital on a generally accepted accounting
principle ("GAAP") basis.  The return of capital on a GAAP basis is
calculated as Unitholder distributions less net income, if any, allocated
to Unitholders.

                                      8 
<PAGE>
 
There are no material legal restrictions on the Partnership's present or
future ability to make distributions in accordance with the provisions of
the Partnership Agreement. Future distributions will be dependent upon the
performance of the Partnership.  See Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, for a
discussion of the factors affecting future Distributions.

                                      9 
<PAGE>
 
Item 6.  Selected Financial Data (a)
<TABLE>
<CAPTION>

                                            For the year ended December 31,
                                        1996         1995         1994         1993         1992
<S>                                 <C>          <C>          <C>          <C>          <C>
Total revenues                       $15,930,615  $15,362,108  $14,499,788  $13,424,097  $12,909,954

Interest expense                      $5,176,971   $6,014,655   $6,381,294   $6,835,318   $6,516,313

Net loss                               ($402,122) ($1,752,058) ($2,713,210) ($3,672,977) ($3,585,433)

Net loss per Unit                         ($1.24)      ($5.42)      ($8.39)     ($11.36)     ($11.09)
 
Net loss per Subordinated
  Interest                                    --           --           --           --           --
 
Cash distributions per Unit (b)            $4.88           --           --           --       $38.00

Cash distributions per 
  Subordinated Interest                       --           --           --           --       $31.22

Total assets                         $82,001,149  $84,563,942  $87,946,202  $91,804,442  $95,451,032

Mortgage loans payable               $65,322,170  $66,361,897  $67,215,017  $68,580,958  $69,231,923

<CAPTION>

(a) The above selected financial data should be read in conjunction with the financial statements
    and the related notes (see Item 8).

(b) Cash distributions were paid from operating cash flow, payments received under a cash flow
    guaranty and from refinancing  proceeds .   The cash distributions did not result in taxable
    income to the Unitholders.  Each Unitholder's taxable income or loss from the Partnership is
    equal to his allocable share of the taxable income or loss of the Partnership, without regard
    to the cash generated or distributed by the Partnership.

</TABLE>

                                      10
<PAGE>
 
Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations 

Capital Resources and Liquidity

The Partnership had cash of $3,947,000 at December 31, 1996  There are no
proposed programs for renovation, improvement or development of the
Properties other than maintenance and repairs (including major repairs) in
the ordinary course which will be paid from operations, and the
Partnership's liquidity position is considered satisfactory.  

The Partnership's operating activities provided cash of $2,907,000 in
1996, of which $85,000 reflects timing differences related to current
assets and liabilities.  Of the balance, $1,040,000 was applied to
scheduled principal amortization on the Partnership's mortgage debt,
$1,578,000 was paid in cash distributions, and $204,000 was retained. 
Cash provided by operating activities in 1995 reflects the payment of
$795,000 of fees incurred in prior years and is not directly comparable
with cash provided by operating activities in 1996.  As adjusted for the
effect of the fee deferral and the other timing differences related to
prepaid and accrued expense items, cash provided by operating activities
improved from $2,097,000 in 1995 to $2,822,000 in 1996, reflecting the
Properties' improved operating performance as described below.  Cash flows
from financing activities reflects the resumption of distributions paid to
the partners.  (Fourth quarter 1996 distributions of $394,000 were paid
subsequent to the balance sheet date.)  Scheduled principal amortization
increased in 1996, reflecting the fact that the principal portion of the
monthly mortgage payments increases over time.

The Partnership's long term debt, which consists of eight real estate
mortgages with respect to the Properties, was $65,322,000 at December 31,
1996.  This debt requires monthly installments of principal and interest
of $516,000.  The Properties are currently generating aggregate revenue to
cover operating expenses and debt service.  Five of the mortgages are
fully self-amortizing.  The other three require balloon payments as
follows:  $5,474,000 in 1998, $5,030,000 in 2000, and $7,732,000 in 2001. 
The General Partners anticipate that the Properties securing the balloon
payment mortgages will be sold or refinanced before the balloon payment
due dates.  If the Properties are not sold or refinanced beforehand, the
Partnership would be required to refinance them when the balloon payments
become due subject to then existing conditions in the real estate and
mortgage financing markets or to sell the properties under terms which may
not be the most favorable to the Partnership.  If the Partnership were
unable to complete sales or refinancings, then the lenders could institute
foreclosure proceedings against the Properties.

                                      11 
<PAGE>
 
The interest rates on five of the mortgage loans (Rancho del Sol, Cameron
Creek, Harbor Pointe, Pointe West and Bernardo Crest) adjusted downward
during 1995, resulting in monthly debt service savings of $62,000.  The
new interest rates are fixed for five years.  The debt service savings
coupled with the Properties' improved operating performance during the
past two years enabled the Partnership to resume paying cash distributions
to the Unitholders in 1996.  The Partnership had suspended distributions
to the Unitholders beginning with the third quarter of 1992.

The Partnership deferred payment of $795,000 of certain fees payable to
the General Partners for the period July 1, 1992 through December 31, 1993
because property income after debt service was insufficient to pay them. 
Operating results improved in 1994, and payment of these items resumed on
a current basis.  The deferrals were paid in 1995 without interest.

The General Partners are presently conducting negotiations regarding a
potential auction sale of the Properties in connection with the potential
settlement of certain of the litigation described below in Note E to the
financial statements.  There is no assurance that these negotiations will
result in an agreement to sell the Properties.

Results of Operations

1996 Compared to 1995.  Rental revenue was $15,811,000 in 1996, an
increase of 3.6% from 1995.  Revenue increased at all eight properties,
with the increases ranging from 5.3% at Sandpebble Village to 1.6% at
Harbor Pointe.  Revenue increases resulted primarily from increased
effective rental rates.  Overall, the weighted average occupancy of the
Apartment Projects was 94.3% in 1996 compared to 94.7% in 1995.

Property operating expenses were $5,716,000 in 1996 compared to $5,222,000
for 1995.  Major repairs (i.e., exterior painting, asphalt work and other
expensive repairs that do not recur on an annual basis) increased to
$541,000 in 1996 compared to $371,000 for 1995.  Furnished unit expense
was up $22,000 over 1995, reflecting the increased furnished unit rentals,
but this expense was offset by the higher rents received for those
apartments.  Operating expenses excluding major repairs and furnished unit
expense increased $303,000 or approximately 6.4% over 1995.  Expense
categories showing the greatest increases were maintenance, up $177,000 or
12% reflecting the generally higher costs of operating an aging property
portfolio; utilities, up $50,000 or 4.5%; and advertising, up $47,000 or
16%.  Property taxes declined $51,000 because of lower assessed valuations
at Harbor Pointe and Bernardo Crest.  Property management fees, which are
3% of property revenue, increased with the increase in revenue.  Interest
expense declined $838,000, reflecting the lower interest rates now

                                      12 
<PAGE>
 
applicable on five of the Partnership mortgage loans.  In addition,
interest expense in 1995 included $201,000 of loan fee amortization not
charged in 1996 because the fees became fully amortized in 1995. 
Depreciation expense declined $424,000 because certain personal property
assets became fully depreciated in 1995.

1995 Compared to 1994.  Rental revenue was $15,269,000 in 1995, an
increase of 5.8% from 1994.  Revenue increased at all eight properties,
with the increases ranging from 10% at Silver Springs and Regency Square
to only 1% at Rancho del Sol, which was impacted by the number of new
apartment completions in the Las Vegas market last year.  Revenue
increases resulted primarily from increased effective rental rates. 
Revenue at Bernardo Crest, which had been flat for the prior three years
reflecting the weak economic conditions in San Diego, posted a 6% increase
over 1994.   Overall, the weighted average occupancy of the Apartment
Projects was 94.7% in 1995 compared to 95.2% in 1994.

Property operating expenses were $5,222,000 in 1995 compared to $5,044,000
for 1994.  Major repairs declined to $371,000 in 1995 compared to $671,000
for 1994.  Furnished unit expense was up $42,000 over 1994, reflecting the
increased furnished unit rentals, but this expense was offset by the
higher rents received for those apartments.  Operating expenses excluding
major repairs and furnished unit expense increased $436,000 or
approximately 10% over 1994.  Expense categories showing the greatest
increases were maintenance, up $247,000 or 20% reflecting the generally
higher costs of operating an aging property portfolio; payroll, up $89,000
or 8% reflecting higher compensation and fringe benefit costs; and
insurance, up $35,000 or 25% reflecting a trend toward higher property
insurance costs.  Property management fees, which are 3% of property
revenue, increased with the increase in revenue.  Interest expense
declined to $6,015,000 from $6,381,000 in 1994 as a result of the
restructuring of the Regency Square mortgage loan and the scheduled
adjustment to the interest rates on five of the mortgage loans.

                                      13
<PAGE>
 
Item 8.   Financial Statements and Supplementary Data              Page

Independent Auditors' Report                                        15

Balance sheets at December 31, 1996 and 1995                        16

Statements of operations for the years ended 
  December 31, 1996, 1995 and 1994                                  17

Statements of changes in partners' equity (deficit)
  for the years ended December 31, 1996, 1995 and 1994              18

Statements of cash flows for the years ended 
  December 31, 1996, 1995 and 1994                                  19

Notes to financial statements                                    20-31

Schedule to financial statements                                    45

                                      14 
<PAGE>
 
INDEPENDENT AUDITORS' REPORT


General and Limited Partners
Prudential-Bache/A.G. Spanos 
Realty Partners, L.P., I:

We have audited the accompanying balance sheets of Prudential-Bache/A.G.
Spanos Realty Partners L.P., I (a limited partnership) (the "Partnership")
as of December 3 1, 1996 and 1995, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1996.  Our audits also
included the financial statement schedule of the Partnership listed at
Item 14(a)(2).  These financial statements and financial statement
schedule are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit 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, such financial statements present fairly, in all material
respects, the financial position of Prudential-Bache/A.G. Spanos Realty
Partners L.P., I as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.  Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.


/s/ Deloitte & Touche LLP
    
San Francisco, California      
February 21, 1997

                                      15 
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                               BALANCE SHEETS

<TABLE>
<CAPTION>
                                                      1996         1995
                                                   ----------   ----------
<S>                                               <C>          <C>
                     ASSETS
Property, net                                     $77,633,657  $80,837,637
Cash and cash equivalents                           3,946,802    3,262,675
Other assets (net of accumulated amortization
 of $1,276,744 and $1,256,116, respectively)          420,690      463,630
                                                   ----------   ----------
                                                  $82,001,149  $84,563,942
                                                   ----------   ----------
                                                   ----------   ----------


   LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
Mortgage loans payable                            $65,322,170  $66,361,897
Accounts payable                                      603,086      571,286
Accounts payable, affiliate                           200,389      197,612
Distributions payable                                 394,418          -0-
Accrued interest                                      428,040      434,618
Unearned rent and tenant deposits                     553,085      518,766
                                                   ----------   ----------
                                                   67,501,188   68,084,179
                                                   ----------   ----------
Partners' equity (deficit):
Limited partners' equity (316,828 units
  authorized and outstanding)                       6,929,279    8,869,479
Subordinated limited partners' equity (46,364 units 
  authorized and outstanding)                       8,878,175    8,878,175
General partners' deficit                          (1,307,493)  (1,267,891)
                                                   ----------   ----------
                                                   14,499,961   16,479,763
                                                   ----------   ----------
                                                  $82,001,149  $84,563,942
                                                   ----------   ----------
                                                   ----------   ----------

</TABLE>
See notes to financial statements.

                                      16
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                          STATEMENTS OF OPERATIONS
           For the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                      1996         1995         1994
                                                   ----------   ----------   ----------
<S>                                               <C>          <C>          <C>
Revenues:
 Rental                                           $15,811,247  $15,269,148  $14,432,479
 Interest                                             119,368       92,960       67,309
                                                   ----------   ----------   ----------
                                                   15,930,615   15,362,108   14,499,788
                                                   ----------   ----------   ----------
Expenses:
 Property operating expenses                        5,716,463    5,221,536    5,044,387
 Property taxes                                     1,033,812    1,084,608    1,024,012
 Property management fees to affiliates               474,158      458,074      432,974
 General and administrative expense                    94,903       96,939      102,511
 Interest expense                                   5,176,971    6,014,655    6,381,294
 Management fees to General Partners                  632,450      610,766      577,300
 Depreciation                                       3,203,980    3,627,588    3,650,520
                                                   ----------   ----------   ----------
                                                   16,332,737   17,114,166   17,212,998
                                                   ----------   ----------   ----------
Net loss                                          $  (402,122) $(1,752,058) $(2,713,210)
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------

Net loss allocated to General Partners            $    (8,042) $   (35,041) $   (54,264)
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------
Net loss allocated to Limited Partners            $  (394,080) $(1,717,017) $(2,658,946)
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------
Net loss allocated to Subordinated Limited
 Partners                                         $       -0-  $       -0-  $       -0-
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------
Net loss per unit of limited partnership
 interest                                         $     (1.24) $     (5.42) $     (8.39)
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------

</TABLE>
See notes to financial statements.

                                      17
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

             STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
           For the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                   Subordinated
                                        Limited      Limited      General
                            Total      Partners     Partners     Partners
                         ----------   ----------   ----------   ----------
<S>                     <C>          <C>          <C>          <C>
Partners' equity
  (deficit)-
  December 31, 1993     $20,916,832  $13,245,442  $ 8,849,976  $(1,178,586)

Capital contributions
 for subordinated
 interests under
 cash flow guaranty          28,199          -0-       28,199          -0-

Net loss                 (2,713,210)  (2,658,946)         -0-      (54,264)
                         ----------   ----------   ----------   ----------
Partners' equity
  (deficit)-
  December 31, 1994      18,231,821   10,586,496    8,878,175   (1,232,850)

Net loss                 (1,752,058)  (1,717,017)         -0-      (35,041)
                         ----------   ----------   ----------   ----------
Partners' equity
  (deficit)-
  December 31, 1995      16,479,763    8,869,479    8,878,175   (1,267,891)

Net loss                   (402,122)    (394,080)         -0-       (8,042)

Distributions            (1,577,680)  (1,546,120)         -0-      (31,560)
                         ----------   ----------   ----------   ----------
Partners' equity
  (deficit)-
  December 31, 1996     $14,499,961  $ 6,929,279  $ 8,878,175  $(1,307,493)
                         ----------   ----------   ----------   ----------
                         ----------   ----------   ----------   ----------

</TABLE>
See notes to financial statements.

                                      18
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                          STATEMENTS OF CASH FLOWS
           For the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                      1996         1995         1995
                                                   ----------   ----------   ----------
<S>                                               <C>          <C>          <C>
Cash flows from operating activities:
Net loss                                          $  (402,122) $(1,752,058) $(2,713,210)
                                                   ----------   ----------   ----------
 Adjustments to reconcile net loss to net
 cash provided by operating activities:
   Depreciation                                     3,203,980    3,627,588    3,650,520
   Amortization of loan fees included in
    interest expense                                   20,628      221,744      220,524
   Decrease (increase) in other assets                 22,312       18,390      (20,375)
   Increase in accounts payable                        31,800       37,400       51,856
   Increase (decrease) in accounts payable, 
     affiliate                                          2,777     (783,498)     150,728
    Decrease in accrued interest                       (6,578)     (57,123)     (50,189)
   Increase in unearned rent and tenant deposits       34,319       26,139       40,317
                                                   ----------   ----------   ----------
    Total adjustments                               3,309,238    3,090,640    4,043,381
                                                   ----------   ----------   ----------
Net cash provided by operating activities           2,907,116    1,338,582    1,330,171
                                                   ----------   ----------   ----------

Cash flows from financing activities:
 Payments under cash flow guaranty contribution           -0-          -0-       28,199
 Mortgage loan principal amortization              (1,039,727)    (853,120)    (732,751)
 Other mortgage loan repayments                           -0-          -0-     (633,190)
 Distributions to partners                         (1,183,262)         -0-          -0-
                                                   ----------   ----------   ----------
                                                   (2,222,989)    (853,120)  (1,337,742)
                                                   ----------   ----------   ----------
Net increase in cash and cash equivalents             684,127      485,462       (7,571)
Cash and cash equivalents, beginning of period      3,262,675    2,777,213    2,784,784
                                                   ----------   ----------   ----------
Cash and cash equivalents, end of period          $ 3,946,802  $ 3,262,675  $ 2,777,213
                                                   ----------   ----------   ----------
                                                   ----------   ----------   ----------

</TABLE>
See notes to financial statements.

                                      19 
<PAGE>
 
                       PRUDENTIAL-BACHE/A. G. SPANOS
                          REALTY PARTNERS L.P., I
                          (A Limited Partnership)
                                     
                       NOTES TO FINANCIAL STATEMENTS
               Years Ended December 31, 1996, 1995 and 1994


NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Prudential-Bache/A.G. Spanos Realty Partners L.P., I (the "Partnership")
is a Delaware limited partnership organized for the purpose of acquiring
and operating eight specified apartment properties (the "Properties"). 
The General Partners of the Partnership are Prudential-Bache Properties,
Inc. (the "Bache General Partner") and A.G. Spanos Realty Partners, L.P.,
(the "Spanos General Partner").  The Partnership will continue until
December 31, 2030, unless previously terminated in accordance with the
provisions of its Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement").

The Partnership sold 316,828 depository units of limited partnership
interest ("Units") between October 1988 and December 1989 for aggregate
capital contributions (net of certain volume selling commission discounts)
of $79,194,827.  The Partnership has also issued non-voting Subordinated
Limited Partnership Interests ("Subordinated Interests") to affiliates of
the Spanos General Partner in consideration for capital contributions and 
payments under a cash flow guaranty.

Financial Statement Preparation

The Partnership has a fiscal year ending December 31.  The books and
records of the Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles. 
Certain reclassifications have been made to prior year amounts in order to
be in conformity with the current year presentation.

Accounting Estimates

In preparing the financial statements, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities (see Note E) at the date
of the financial statements and the reported amounts of revenues and
expenses from the reporting period.  Actual results could differ from
those estimates.


                                      20 
<PAGE>
 
Cash Equivalents

Cash equivalents consist of money market funds containing money market
instruments with an original maturity date of 90 days or less whose cost
approximates market value.

Property

Property, which includes land, buildings and equipment, is carried at the
lower of depreciated cost or the amount estimated to be recoverable
through future cash flows from property operations and dispositions on an
undiscounted basis.  Depreciated cost is reduced by certain payments
received under the cash flow guaranty (see Note D).  Depreciation on
buildings and equipment is recorded on a straight-line basis over their
estimated useful lives, which range from 7 to 27.5 years. 

Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," was  adopted by the Partnership as of January 1, 1996 for
its financial statements for the year ended December 31, 1996.  Under SFAS
No.121, impairment for properties to be held and used is determined to
exist when estimated amounts recoverable through future operations on an
undiscounted basis are below the properties' carrying value.  If a
property is determined to be impaired, it should be recorded at the lower
of its carrying value or its estimated fair value.  For properties that
are held for sale, SFAS No. 121 states that they should be reported at the
lower of carrying amount or estimated fair value less cost to sell.  The
implementation of SFAS No. 121 did not affect the Partnership's results of
operations or financial position for the year ended December 31, 1996.

Prior to 1996, property investments were carried at the lower of
depreciated cost or estimated amounts recoverable through future
operations and ultimate disposition of the property. A provision for loss
on impairment of assets would be recorded when the property carrying
amounts exceeded the amounts estimated to be recoverable through
future cash flows from property operations (before debt service) and
disposition proceeds on an undiscounted basis.

Other Assets

Other assets include loan fees with a net book value of $287,144 and
$307,772 at December 31, 1996 and 1995, respectively.  Such loan fees are
generally amortized to interest expense over the life of the related
loans.

                                      21 
<PAGE>
 
Income Taxes

No provision has been made for federal or state income taxes (or benefits)
since such items are the responsibility of the partners.  A reconciliation
of the net loss in the financial statements to the net taxable loss is set
forth below:

                                            1996         1995         1994   

Net loss per financial statements        $ (402,122) $(1,752,058) $(2,713,210)
Financial statement depreciation
 in excess of tax depreciation              175,997      269,972      263,261
Cancellation of debt recognized as
 income for tax purposes, net of 
 interest expense adjustment                    -0-          -0-      264,176
Loan fee amortization and interest
 expense adjustment                             -0-      (10,051)         -0-
Unearned rent and non refundable
 deposits recognized as income for
 tax purposes when received                     148          618       28,479
                                         ----------   ----------   ----------
Net taxable loss                        $   (25,977) $(1,491,519) $(2,157,294)
                                         ----------   ----------   ----------
                                         ----------   ----------   ----------

The book and tax bases of partners' equity differ by the cumulative effect
of the book to tax income adjustments. 

Allocations and Distributions

Pursuant to the Partnership Agreement, operating income, losses and cash
distributions are generally allocated 98% to the Unitholders and 2% to the
General Partners.  Taxable income and losses are allocated in the same
manner.  Cash distributions resulting from sales or refinancings of the
Properties are generally allocable as follows:  First, 98% to the limited
partners and 2% to the General Partners until (i) the aggregate of all
such distributions equals the limited partners' aggregate capital
contributions and (ii) the aggregate of all other cash distributions
(including operating cash distributions, but excluding distributions in
repayment of capital contributions) equals the limited partners' 10% per
annum cumulative noncompounded return on their adjusted capital
contributions (the "First Level Sale or Refinance Distributions"). 
Thereafter, cash distributions resulting from a sale or refinancing are
generally allocable 85% to the Unitholders and 15% to the General Partners 

                                      22 
<PAGE>
 
(the "Second Level Sale or Refinance Distributions").  Income from sales
of the Properties is generally allocable in the same manner as cash
distributions resulting from such sales, after taking into account the
depreciation expense with respect to the Properties sold.

The Subordinated Interests entitle the holders to receive First Level Sale
or Refinance Distributions (and corresponding allocations of income on
sales), but no allocations of operating income, losses or cash
distributions and no allocations of Second Level Sale or Refinance
Distributions.

Cash distributions to the partners are recorded in the periods to which
they relate for financial reporting purposes.  In February 1997, the
Partnership paid fourth quarter 1996 distributions of $394,418 which were
accrued at December 31, 1996.  No distributions were paid in 1995 or 1994.

Revenue Recognition

Rental income is accrued as rents are due.

Fair Value of Financial Instruments

SFAS 107, "Disclosures about Fair Value of Financial instruments,"
requires the determination of fair value for certain of the Partnership's
assets and liabilities.  The following methods and assumptions were used
to estimate the fair value of those financial instruments included in the
following categories:

Cash and Cash Equivalents - The carrying amount approximates fair value
based on the liquidity of the assets.

Mortgage Loans Payable (see Note C) - The carrying value approximates fair
value based on interest rates available to the Partnership on debt
instruments with similar terms.

                                      23 
<PAGE>
 
NOTE B - PROPERTY

Property is comprised of the following at December 31, 1996 and 1995:

                                           1996            1995    

Apartment buildings                    $  83,030,825  $  83,030,825
Equipment                                  4,369,974      4,369,974
Land                                      18,053,226     18,053,226
                                         -----------    -----------
                                         105,454,025    105,454,025
Less: Accumulated depreciation           (27,820,368)   (24,616,388)
                                         -----------    -----------
                                       $  77,633,657  $  80,837,637
                                         -----------    -----------
                                         -----------    -----------

The Partnership leases apartments under lease agreements with terms
ranging from one to twelve months.


NOTE C - MORTGAGE LOANS PAYABLE

The mortgage loans payable are collateralized by first deeds of trust on
the respective Properties and security interests in the equipment
contained therein.  Detailed information regarding the mortgage loans is
set forth below.

                                      24 
<PAGE>
 
<TABLE>
<CAPTION>
                                                                      Final         Monthly     Principal     Estimated
Property Pledged              Obligation    Obligation    Interest    Maturity      Payment     Due During    Balloon
as Collateral                 at 12/31/96   at 12/31/95   Rate        Date          Terms       1997          Payment
                              ----------    ----------    --------    ----------    --------    ----------    ----------
<S>                          <C>           <C>           <C>         <C>           <C>         <C>           <C>
Silver Springs Village
 Tempe, Arizona                 5,500,487     5,592,637        6.50%  12/01/00         38,006       102,052     5,030,000

Rancho del Sol
 Las Vegas, Nevada             11,325,219    11,505,293        8.11%  10/01/19         92,172       195,235           N/A

Sandpebble Village
 Sparks, Nevada                 5,650,644     5,763,581        8.28%  06/01/98         48,828       122,651     5,474,000

Regency Square
 Chamblee, Georgia              8,321,802     8,447,528        8.00%  02/01/01         61,269        88,016     7,732,000

Cameron Creek
 Tempe, Arizona                 6,530,719     6,626,568        8.11%  10/01/19         52,480       103,919           N/A

Harbor Pointe
 Dunwoody, Georgia             13,150,748    13,354,526        7.75%  10/01/19        102,635       220,144           N/A

Pointe West
 Aurora, Colorado               3,138,599     3,208,553        7.61%  03/01/16         25,971        75,394           N/A

Bernardo Crest
 San Diego, California         11,703,952    11,863,211        8.12%  08/01/19         94,221       188,899           N/A
                              -----------   -----------                              --------   -----------
                               65,322,170    66,361,897                               515,582     1,096,310
                              -----------   -----------                              --------   -----------
                              -----------   -----------                              --------   -----------
</TABLE>

Interest paid in 1996, 1995 and 1994 was $5,150,209, $5,850,034 and 
$6,199,864, respectively.

                                      25 
<PAGE>
 
In February 1994, the Partnership completed a restructuring of the Regency
Square mortgage loan pursuant to which the lender wrote down $296,398 of
the outstanding principal in exchange for a $633,190 principal payment by
the Partnership.  No gain or loss was recognized on the debt
restructuring; the discount is accounted for as a reduction of interest
expense over the new loan term.

Aggregate maturities of mortgage loans payable for each of the five years
ending December 31, 2001 and thereafter are as follows:

             1997                                 $  1,096,310
             1998                                    6,584,646
             1999                                    1,146,784
             2000                                    6,266,309
             2001                                    8,999,824
             Thereafter                             41,228,297
                                                    ----------
                                                   $65,322,170
                                                    ----------
                                                    ----------

NOTE D - RELATED PARTY TRANSACTIONS

The Partnership acquired the Properties from affiliates of the Spanos
General Partner (the "Sellers").  Under the terms of the acquisitions, the
Sellers guaranteed that if the Properties as a group did not meet certain
annual net cash flow levels between their acquisition dates and June 30,
1992, then the Sellers would make up any deficiency by periodic cash
payments ("Support Payments") to the Partnership.  The first $4,500,000 of
Support Payments were non-refundable, and the Partnership accounted for
them as a reduction of the purchase price of the Properties.  The
Partnership issued Subordinated Interests in exchange for Support Payments
in excess of that amount; however, the Subordinated Interests were
cancelable by the Partnership to the extent that the aggregate net cash
flow from any of the Properties (treated individually and not
collectively) was negative during the guaranty period.  The cancellations
were also accounted for as a reduction of the purchase price of the
Properties.

Support Payments of $11,083,798 accrued to the Partnership based upon the
operating results of the Properties from inception of the Partnership
through the conclusion of the guaranty.  The Partnership issued 26,335
Subordinated Interests (at $250 each) to a Seller in exchange for
$6,583,798 of Support Payments in excess of the $4,500,000 non-refundable
amount.  The Silver Springs property had aggregate negative net cash flow
of $537,220; accordingly, the Partnership canceled 2,149 Subordinated
Interests.

                                      26 
<PAGE>
 
An affiliate of the Spanos General Partner manages the Apartment Projects. 
Property management fees totalled $474,158, $458,074 and $432,974 in 1996,
1995 and 1994, respectively.  Under the management agreements, the
affiliate employs property managers and other on-site personnel, and the
Partnership bears the expense for their compensation (including employment
taxes and fringe benefits).  That expense was approximately $1,301,000,
$1,262,000 and $1,193,000 in 1996, 1995 and 1994, respectively.  Accruals
of $41,315 and $42,142 for property management fees and $104,347 and
$107,861 for salary expense reimbursements were outstanding at
December 31, 1996 and 1995, respectively.

Under the Partnership Agreement, the Spanos General Partner is entitled to
a supervisory management fee and the Bache General Partner is entitled to
a special distribution.  The fee and distribution are each equal to two
percent of the revenues from the Properties.  The special distribution is
reduced to the extent of reimbursements to the Bache General Partner for
certain expenses incurred in the administration of the Partnership. 
Amounts accrued during the past three years were as follows.

                                              1996       1995     1994  

Supervisory management fee                  $316,225  $305,383  $288,650
Special distribution                         260,697   249,855   233,122
Administrative expense reimbursements         55,528    55,528    55,528
                                             -------   -------   -------
                                            $632,450  $610,766  $577,300
                                             -------   -------   -------
                                             -------   -------   -------
Accruals of $159,074 and $155,470 for management fees payable to the
General Partners were outstanding at December 31, 1996 and 1995,
respectively.

The General Partners deferred payment of a total of $795,432 of
supervisory management fees, special distributions and administrative
expense reimbursements accrued for the period July 1, 1992 through
December 31, 1993.  The deferrals were paid in 1995 without interest.

The General Partners' capital account deficit for financial accounting
purposes exceeds the amount the General Partners would be obligated to
restore if the Partnership were to dissolve.

Prudential Securities Incorporated ("PSI"), an affiliate of the Bache
General Partner, owned 4,663 Units at December 31, 1996.

                                      27 

<PAGE>
 
NOTE E - CONTINGENCIES

On or about October 18, 1993 a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in
the United States District Court for the District of Arizona, purportedly
on behalf of investors in the Partnership against the Partnership, the
Bache General Partner, PSI and a number of other defendants.  On or about
November 16, 1993, a putative class action captioned Connelly et al. v.
Prudential-Bache Securities Inc. et al. (93 Civ. 713) was filed in the 
United States District Court for the District of Arizona, purportedly on
behalf of investors in the Partnership against the Partnership, the Bache
General Partner, PSI and a number of other defendants.  On or about July
23, 1993 a putative class action, captioned Kahn v. Prudential-Bache
Properties, Inc. et al. (Index No. 11867/93) was filed in the Supreme
Court of the State of New York, County of New York, purportedly on behalf
of investors in the Partnership against the General Partners, PSI, The
Prudential Insurance Company of America and certain of their affiliates
and officers.  The case was subsequently removed to the United States
District Court for the Southern District of New York (93 Civ. 5976).

On or about May 11, 1994 a policyholder derivative action and putative
class action, captioned Romano et al. v. The Prudential Insurance Company
of America et at. (94 Civ.3527), was filed in the United States District
Court for the Southern District of New York, purportedly on behalf of
policyholders of The Prudential Insurance Company of America ("The
Prudential") against The Prudential and PSI as nominal defendants and
against certain officers of The Prudential and its affiliates, including
the present and former chief executive officers of PSI, and present and
former members of The Prudential's board of directors, the Spanos General
Partner and certain of its affiliates as defendants.  In substance the
suit alleged that the wrongful acts of the defendants (essentially the
same conspiracy regarding the sales of limited partnership interests
alleged in the consolidated complaint discussed below) have resulted in
substantial losses to PSI as a consequence of fines and litigation
settlements. Because PSI is a wholly owned subsidiary of The Prudential,
its losses allegedly diminished the value of plaintiffs' interests in The
Prudential as policyholders. The complaint contains counts based upon
RICO, intentional and negligent misrepresentation, and unjust enrichment.
Plaintiffs sought unspecified compensatory, general, consequential,
incidental and punitive damages as well as interest, costs and attorneys'
fees.  A motion to dismiss the case was filed January 20, 1995 on behalf
of The Prudential and the outside directors.  On October 2, 1996, The
Prudential and PSI entered into a stipulation of settlement with legal
counsel representing plaintiffs.  By order dated October 16, 1996 the
court certified a settlement class, preliminarily approved the class and

                                      28 
<PAGE>
 
derivative action settlement agreement and notice, scheduled a hearing on
the fairness and adequacy of the settlement and on the application for
awards of attorneys' fees and disbursements.  Following a hearing on
December 4, 1996 the court approved the settlement as being fair,
reasonable and adequate and by order dated December 18, 1996, dismissed
the case with prejudice as to all the settling defendants.

On or about February 13, 1995 an individual action, captioned Estate of
Jean Adams v. Prudential Securities, Inc. et al. (Case No. 1995 CV 00265)
was filed in the Court of Common Pleas in Stark County, Ohio against PSI,
The Prudential, the General Partners, the Partnership and affiliates of
the Spanos General Partner.  The action was removed to the United States
District Court for the Northern District of Ohio (Eastern Division) on
March 15, 1995.  Plaintiff alleged misrepresentations, breach of fiduciary
duties and civil conspiracy by defendants in connection with the sale of
units of the Partnership. Plaintiff sought unspecified damages, including
punitive damages.

By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes and Kahn cases, by order dated June 8, 1994, the Connelly
case, by order dated June 27, 1994, the Romano case, and by order dated
April 7, 1995, the Adams case, were transferred to a single judge of the
United States District Court for the Southern District of New York and,
except for Romano, consolidated for pretrial proceedings under the caption
In re Prudential Securities Incorporated Limited Partnerships Litigation
(MDL Docket 1005). The Romano case was coordinated for pretrial discovery
purposes.  On June 8, 1994, plaintiffs in the transferred cases filed a
complaint that consolidated the previously filed complaints and named as
defendants, among others, PSI, certain of its present and former employees
and the General Partners.  The Partnership is not named a defendant in the
consolidated complaint, but the name of the Partnership is listed as being
among the limited partnerships at issue in the case.  The consolidated
complaint alleges violations of the federal and New Jersey Racketeer
Influenced and Corrupt Organizations Act ("RICO") statutes, fraud,
negligent misrepresentation, breach of fiduciary duties, breach of third-
party beneficiary contracts and breach of implied covenants in connection
with the marketing and sales of limited partnership interests.  Plaintiffs
request relief in the nature of rescission of the purchase of securities
and recovery of all consideration and expenses in connection therewith, as
well as compensation for lost use of money invested less cash
distributions; compensatory damages; consequential damages; treble damages
for defendants' RICO violations (both federal and New Jersey); general
damages for all injuries resulting from negligence, fraud, breaches of
contract, and breaches of duty in an amount to be determined at trial;

                                      29 
<PAGE>
 
     
disgorgement and restitution of all earnings, profits, benefits, and
compensation received by defendants as a result of their unlawful acts;
and costs and disbursements of the action.  On November 28, 1994 the
transferee court deemed each of the complaints in the constituent actions
(including Kinnes and Kahn) amended to conform to the allegations of the
consolidated complaint.  On August 9, 1995 the Bache General Partner, PSI
and other Prudential defendants entered into a Stipulation and Agreement
of Partial  Compromise and Settlement with legal counsel representing
plaintiffs in the consolidated actions. The court preliminarily approved
the settlement agreement by order dated August 29, 1995 and, following a
hearing held November 17, 1995, found that the agreement was fair,
reasonable, adequate and in the best interests of the plaintiff class. 
The court gave final approval to the settlement, certified a class of
purchasers of specific limited partnerships, including the Partnership,
released all settled claims by members of the class against the PSI
settling defendants and permanently barred and enjoined class members from
instituting, commencing or prosecuting any settled claim against the
released parties.  The full amount due under the settlement agreement has
been paid. The consolidated action remains pending against the Spanos
General Partner and certain of its affiliates.  Although the order
approving the partial settlement agreement dismissed the consolidated
complaint on the merits and with prejudice as against the PSI settling
defendants, it expressly continued the action against all nonsettling
defendants, including the Spanos General Partner, and preserved all claims
against them.  The Partnership is not named a defendant in the
consolidated complaint and the action is not expected to have a material
effect on the Partnership's financial statements; accordingly, no provision
for any loss that may result upon resolution of this matter has been made
in the accompanying financial statements.     

On or about April 15, 1994 a multiparty petition entitled Schreiber, et
al. v. Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed
in the 189th Judicial District Court of Harris County, Texas, purportedly
on behalf of investors in the Partnership against the Partnership, the
General Partners, PSI, The Prudential Insurance Company of America and a
number of other defendants.  The Petition alleges common law fraud, fraud
in the inducement and negligent misrepresentation in connection with the
offering of limited partnership interests and negligence, breach of
fiduciary duty, civil conspiracy, and violations of the federal Securities
Act of 1933 (sections 11 and 12) and of the Texas Securities and Deceptive
Trade Practices statutes.  The suit seeks, among other things,
compensatory and punitive damages, costs and attorneys' fees.  The
ultimate outcome of this action as well as the impact on the Partnership

                                      30 
<PAGE>
 
cannot presently be determined.  Accordingly, no provision for any loss
that may result upon resolution of this matter has been made in the
accompanying financial statements.  The General Partners, PSI and the
Partnership, where applicable, believe they have meritorious defenses to
this complaint and intend to vigorously defend themselves in this action.

The General Partners are presently conducting negotiations regarding a
potential auction sale of the Properties in connection with the potential
settlement of certain of the litigation described above.  There is no
assurance that these negotiations will result in an agreement to sell the
Properties.

                                      31 
<PAGE>
 
Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure

Not applicable.

                                      32
<PAGE>
 
                                 PART III

Item 10.  Directors and Executive Officers of the Registrant

The Partnership does not have directors or executive officers.  The
Partnership is managed by the General Partners, which have formed, and may
continue to form, other real estate investment entities with investment
policies similar to those of the Partnership and which may compete with
the Partnership for management services.  The Spanos General Partner is a
California limited partnership whose general partners are AGS Financial
Corporation and A.G. Spanos Realty Capital, Inc.  AGS Financial
Corporation is the managing general partner of the Spanos General Partner. 
The directors and executive officers of AGS Financial Corporation and the
Bache General Partner who perform services for the Partnership are listed
below, together with a brief description of their experience.  All have
indefinite terms.

AGS Financial Corporation is owned by Dean A. Spanos, Barry L. Ruhl,
Michael A. Spanos, Dea Spanos and a Spanos family trust.  Dean A. Spanos,
Michael A. Spanos and Dea Spanos are children of Alex G. Spanos, Chairman
of the Board of AGS Financial Corporation.  Barry L. Ruhl is a son-in-law
of Alex G. Spanos.  There are no other family relationships among the
directors and executive officers of AGS Financial Corporation or the Bache
General Partner.

The General Partners and their directors and executive officers, and any
persons holding more than ten percent of the Partnership's Units are
required to report their initial ownership of such units and any
subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5.  Such executive officers, directors and
greater than ten percent Unitholders are required by Securities and
Exchange Commission regulations to furnish the Partnership with copies of
all Forms 3, 4 and 5 they file.  All of these filing requirements were
satisfied on a timely basis.  In making the disclosures, the Partnership
has relied solely on written representations of the General Partners'
directors and executive officers and greater than ten percent Unitholders
or copies of the reports that they have filed with the Securities and
Exchange Commission during and with respect to its most recent fiscal
year.

                                      33
<PAGE>
 
                         AGS FINANCIAL CORPORATION
             Name                                       Position

        Alex G. Spanos                          Chairman of the Board

        Dean A. Spanos                     Vice Chairman and Director

        Barry L. Ruhl                                        Director

        Michael A. Spanos                                    Director

        Arthur J. Cole                         President and Director

        Jeremiah T. Murphy               Executive Vice President and
                                              Chief Financial Officer

ALEX G. SPANOS, age 73 has been Chairman of the Board of AGS Financial
Corporation since its founding in 1981.  In addition, he serves as
Chairman of the Board or President of each of the other Spanos companies
and owns a controlling interest in the San Diego Chargers, a professional
football team.  Mr. Spanos founded the combined Spanos organizations in
the early 1960's and has been the driving force behind the development of
approximately 50,000 apartments and over 3 million square feet of office
space.  Mr. Spanos maintains close contact with the key executives of each
of his companies and lends his judgment and experience to all major land
acquisitions, development and property financing decisions, and the
investment activities of AGS Financial Corporation.  Mr. Spanos attended
the University of the Pacific.

DEAN A. SPANOS, age 46, has been Vice Chairman and a Director of AGS
Financial Corporation since its founding in 1981.  He is the chief
operating officer of the property development and management companies
within the Spanos organization, responsible for land acquisitions,
financing construction and property sales.  Mr. Spanos holds a bachelor's
degree in business administration from the University of the Pacific.

MICHAEL A. SPANOS, age 37, has served as a Director of AGS Financial
Corporation since its founding in 1981.  He is Executive Vice President of
A.G. Spanos Construction, Inc.  He holds a bachelor's degree from the
University of the Pacific.

BARRY L. RUHL, age 45, has been a Director of AGS Financial Corporation
since its founding in 1981.  He is Executive Vice President of A.G. Spanos
Construction, Inc. He holds a D.D.S. from the University of the Pacific
Dental School.

                                      34 
<PAGE>
 
ARTHUR J. COLE, age 42, has served as President of AGS Financial
Corporation since August 1990 and as a director since 1986.  He joined AGS
Financial Corporation in 1983.  He holds a bachelor's degree from Golden
Gate University.

JEREMIAH T. MURPHY, age 52, has served as an Executive Vice President of
AGS Financial Corporation and is the Chief Financial Officer for all the
A.G. Spanos Companies.  He has been employed by the Spanos companies since
1983.  Prior to joining the Spanos companies he was a partner with the
accounting firm, Bowman & Company, which he joined in 1970.  Mr. Murphy is
a Certified Public Accountant and a graduate of Bernard Baruch College.

                     PRUDENTIAL-BACHE PROPERTIES, INC.

        Name                                                 Position

        Thomas F. Lynch, III               President, Chief Executive
                                       Officer, Director and Chairman
                                            of the Board of Directors

        Barbara J. Brooks                Vice President - Finance and
                                              Chief Financial Officer

        Eugene D. Burak                                Vice President

        Chester A. Piskorowski                  Senior Vice President

        Frank W. Giordano                                    Director

        Nathalie P. Maio                                     Director

THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of the Bache General
Partner. He is a Senior Vice President of Prudential Securities
Incorporated ("PSI"), an affiliate of the Bache General Partner. Mr. Lynch
also serves in various capacities for other affiliated companies. Mr.
Lynch joined PSI in November 1989.

BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief
Financial Officer of the Bache General Partner.  She is a Senior Vice
President of PSI. Ms. Brooks also serves in various capacities for other
affiliated companies.  She has held several positions within PSI since
1983.  Ms. Brooks is a certified public accountant.

                                      35 
<PAGE>
 
EUGENE D. BURAK, age 51, is a Vice President of the Bache General Partner. 
He is a First Vice President of PSI. Prior to joining PSI in September
1995, he was a management consultant for three years and was with
Equitable Capital Management Corporation from March 1990 to May 1992. Mr.
Burak is a certified public accountant.
   
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of the Bache
General Partner. He is a Senior Vice President of PSI and is the Senior
Manager of the Specialty Finance Asset Management area. Mr. Piskorowski
has held several positions within PSI since April 1972. Mr. Piskorowski is
a member of the New York and Federal Bars.

FRANK W. GIORDANO, age 54, is a Director of the Bache General Partner.  He
is a Senior Vice President of PSI and Executive Vice President and General
Counsel of Prudential Mutual Fund Management, LLC, an affiliate of PSI. 
Mr. Giordano also serves in various capacities for other affiliated
companies. He has been with PSI since July 1967.

NATHALIE P. MAIO, age 46, is a Director of the Bache General Partner. She
is a Senior Vice President and Deputy General Counsel of PSI and
supervises non-litigation legal work for PSI.  She joined PSI's Law
Department in 1983; presently, she also serves in various capacities for
other affiliated companies.


Item 11.  Executive Compensation

The Partnership is not required to and did not pay remuneration to the
officers and directors of the General Partners.  Certain officers and
directors of the General Partners receive compensation from the General
Partners and/or their affiliates (but not from the Partnership) for
services performed for various affiliated entities, which may include
services performed for the Partnership; however, the General Partners
believe that any compensation attributable to services performed for the
Partnership is immaterial.  See Item 13, "Certain Relationships and
Related Transactions," for a discussion of compensation and fees to which
the General Partners and their affiliates are entitled.  


Item 12.  Security Ownership of Certain Beneficial Owners and Management

No Unitholder is known by the Partnership to own beneficially more than 5%
of the outstanding Units.  The percentage of outstanding Units held by all
directors and officers of the General Partners is less than 1%.

                                      36 
<PAGE>
 
The Partnership has issued 48,513 Subordinated Interests (of which 46,364
remain outstanding at March 3, 1997) to affiliates of the Spanos General
Partner, all of which Subordinated Interests are beneficially owned by
members of the Spanos family, certain of whom are directors and officers
of the general partners of the Spanos General Partner.

As of March 3, 1997, the individual directors and the directors and
officers, as a group, of AGS Financial Corporation and A.G. Spanos Realty
Capital, Inc., the general partners of the Spanos General Partner,
beneficially owned shares of the common stock of AGS Financial Corporation
and A.G. Spanos Realty Capital, Inc. as follows:

                                  AGS Financial         A.G. Spanos
                                   Corporation          Realty, Inc.
Name                          Shares  % of Class  Shares % of Class

Alex G. Spanos                       -0-        -0-        20       100%
Dean A. Spanos                      1,000       10%
Barry L. Ruhl                       1,000       10%
Michael A. Spanos                   1,000       10%
All directors and officers
as a group (8 persons)              9,000(1)    90%        20       100%

(1)  These amounts include shares beneficially owned by virtue of certain
beneficial interests in a Spanos family trust which owns 6,000 shares
(60%) of the shares of AGS Financial Corporation.


Item 13.  Certain Relationships and Related Transactions

The General Partners and their affiliates are permitted to engage in
transactions with the Partnership as described in the Partnership
Agreement. 

The General Partners and certain affiliates thereof have, during the
Partnership's year ended December 31, 1996, earned or received
compensation or payments for services from the Partnership as follows.

                                      37 
<PAGE>
 
                     Capacity in            Form of          Cash
    Recipient        Which Served         Compensation     Compensation

Spanos General    General Partner      Supervisory                 $316,225
  Partner                               Management Fee(1)

Bache General     General Partner      Special                      260,697
  Partner                                Distribution(2)

A.G. Spanos       Property Manager      Property                    474,158
  Management Inc.                       Management Fees(3)

General Partners  General Partners   Cash from Operations(4)         31,560

Bache General     General Partner           Expense                  55,528
  Partner                                Reimbursements

(1)  Supervisory Property Management Fee for supervising the management of the
Properties equal to 2% of gross receipts from the Properties.

(2)  Special Distribution for services in managing and administering the
Partnership equal to 2% of gross receipts from the Properties, reduced to the
extent of reimbursements, if any, for certain expenses incurred in the
administration of the Partnership.

(3)  Property Management Fees for property management services equal to 3% of
gross receipts from the Properties.

(4)  Cash from Operations equal to 2% of Adjusted Cash from Operations remaining
after payment of the Special Distribution.

                                      38 
<PAGE>
 
                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

   (a)(1) Financial Statements:  

          See Index to Financial Statements and Schedule on page 14. 

       (2)Financial Statement Schedule:

          III.Real Estate and Accumulated Depreciation, page __.

          All other schedules have been omitted because they are
          inapplicable or not required, or the information is included in
          the financial statements or notes thereto.


           Exhibits

            4(a) Certificate of Limited Partnership of Registrant as
                 filed with the Secretary of State of Delaware, 
                 incorporated by reference to Exhibit 4(a) to
                 Registration Statement on Form S-11, File No. 33-22613,
                 filed with the Securities and Exchange Commission on
                 October 14, 1988.

            4(b) Amendment to Certificate of Limited Partnership of
                 Registrant as filed with the Secretary of State of
                 Delaware, incorporated by reference to Exhibit 4(b) to
                 Amendment No. 1 to Registration Statement on Form S-11,
                 File No. 33-22613, filed with the Securities and
                 Exchange Commission on October 14, 1988.

            4(c) Amended and Restated Agreement of Limited Partnership of
                 Registrant, incorporated by reference to Exhibit 4(c) to
                 Amendment No. 1 to Registration Statement on Form S-11,
                 File No. 33-22613, filed with the Securities and
                 Exchange Commission on October 14, 1988.

            4(d) Amendments No. 1 through 7 dated November 21, and
                 December 30, 1988 and January 31, February 28, March 31,
                 April 28, and May 31, 1989  to the Amended and Restated
                 Agreement of Limited Partnership of Registrant,
                 incorporated by reference to Exhibit 4(d) to
                 Post-Effective Amendment No. 1 to Registration Statement
                 on Form S-11, File No. 33-22613, filed with the
                 Securities and Exchange Commission on June 30, 1989.

                                      39 
<PAGE>
 
         4(e) Amendments No. 8 through 14 dated June 30, August 11
                and 31, September 29, October 31, and December 1 and 22,
                1989 to the Amended and Restated Agreement of Limited
                Partnership of Registrant, incorporated by reference to
                Exhibit 4(e) to Annual Report on Form 10-K, File No.
                0-17683, filed with the Securities and Exchange
                Commission on March 28, 1991.

           27   Financial Data Schedule (filed herewith)

   (b)   Reports on Form 8-K:
       
       There were no reports on Form 8-K filed during the last quarter
       of the period covered by this Report.

                                      40
<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 amendment to report to be
signed on its behalf by the undersigned, thereunto duly authorized.     

PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I (Registrant)

By: Prudential-Bache Properties, Inc.
    A Delaware corporation, General Partner
    
    By: /s/Brian J. Martin                          Date: January 30, 1998
        ---------------------------------------
        Brian J. Martin
        Chairman of the Board of Directors and Director     

    
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to Report has been signed below by the following person on behalf of
the Registrant in the capacities (with respect to the General Partners) and on
the dates indicated.     

By: Prudential-Bache Properties, Inc.
    A Delaware corporation, General Partner
    
    By: /s/Brian J. Martin                          Date: January 30, 1998
        ---------------------------------------
        Brian J. Martin
        Chairman of the Board of Directors and Director
        (Principal Executive Officer)     
    
    By: /s/Barbara J. Brooks                        Date: January 30, 1998     
        ---------------------------------------
       Barbara J. Brooks
       Vice President-Finance and Chief Financial Officer
       (Principal Financial Officer)
    
    By: /s/Nathalie P. Maio                         Date: January 30, 1998     
        ---------------------------------------
       Nathalie P. Maio
       Director

                                      41
<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 amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.    

PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I (Registrant)

By:     A.G. Spanos Realty Partners, L.P.
        General Partner

        By: AGS Financial Corporation, a general partner
                
            By: /s/Arthur J. Cole                   Date: January 30, 1998     
                -------------------------------
                Arthur J. Cole
                President
                (Principal Accounting Officer)

        By: A.G. Spanos Realty Capital, Inc., a general partner
                
            By: /s/Arthur J. Cole                   Date: January 30, 1998     
                -------------------------------
                Arthur J. Cole
                Vice President

AGS DEPOSITORY CORP. (Registrant as to the issuance of Depository Receipts
with respect to the Assigned Limited Partnership Interests)

            
        By: /s/Arthur J. Cole                       Date: January 30, 1998     
            -------------------------------
            Arthur J. Cole
            Vice President

                                      42
<PAGE>
 
                                SIGNATURES

    
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to Report has been signed below by the following person on behalf of
the Registrant in the capacities (with respect to the General Partners) and on
the dates indicated.      

By: A.G. Spanos Realty Partners, L.P.
    General Partner

    By:  AGS Financial Corporation, a general partner

    
    By:  /s/Alex G. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Alex G. Spanos
         Chairman of the Board of Directors      

    
    By:  /s/Dean A. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Dean A. Spanos
         Vice Chairman and Director      

    
    By:  /s/Michael A. Spanos                       Date:  January 30, 1998
          ----------------------------------
         Michael A. Spanos
         Director      

    
    By:  /s/Barry L. Ruhl                           Date:  January 30, 1998
          ----------------------------------
         Barry L. Ruhl
         Director      

    
    By:  /s/Arthur J. Cole                          Date:  January 30, 1998
          ----------------------------------
         Arthur J. Cole
         President and Director
         (Principal Executive Officer)      

    
    By:  /s/Jeremiah T. Murphy                      Date:  January 30, 1998
          ----------------------------------
         Jeremiah T. Murphy
         Executive Vice President and Chief Financial Officer
         (Principal Financial and Accounting Officer)      

                                      43 
<PAGE>
 
                                SIGNATURES

By:  A.G. Spanos Realty Capital, Inc., a general partner

    
    By:  /s/Alex G. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Alex G. Spanos
         President and Director (Principal Executive Officer)      

    
    By:  /s/Dean A. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Dean A. Spanos
         Executive Vice President and Director      

    
    By:  /s/Michael A. Spanos                       Date:  January 30, 1998
          ----------------------------------
         Michael A. Spanos
         Executive Vice President and Director      

    
    By:  /s/Barry L. Ruhl                           Date:  January 30, 1998
          ----------------------------------
         Barry L. Ruhl
         Executive Vice President and Director      

    
    By:  /s/Jeremiah T. Murphy                      Date:  January 30, 1998
          ----------------------------------
         Jeremiah T. Murphy
         Vice President (Principal Financial and Accounting Officer)      

AGS Depository Corp.

    
    By:  /s/Alex G. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Alex G. Spanos
         Director, President and Chief Financial Officer
         (Principal Executive, Financial and Accounting Officer)      

    
    By:  /s/Dean A. Spanos                          Date:  January 30, 1998
          ----------------------------------
         Dean A. Spanos
         Director      

    
    By:  /s/Jeremiah T. Murphy                      Date:  January 30, 1998
          ----------------------------------
         Jeremiah T. Murphy
         Director      

                                      44 
<PAGE>
 
              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                            (A LIMITED PARTNERSHIP)

                                 SCHEDULE III
                   REAL ESTATE AND ACCUMULATED DEPRECIATION
                              December 31, 1996
<TABLE>
<CAPTION>

Column A                       Column B             Column C                  Column D              Column E   Column F   Column G

                                               Costs Capitalized  Gross Amount at which Carried at
                             Initial Cost to     Subsequent to            Close of Period
                              Partnership        Acquisition             Notes 2, 3 and 5
                                                                                                  Accumulated
                                     Bldgs &           Carrying            Buildings &    Total      Depr.     Date of      Date
Description (Note 1)        Land     Equip       Imps   Cost       Land     Equipment     Note 2   (Note 4)  Construction Acquired
- ---------------------       ----     ------      -----  ----       ----     ---------     ------     ------  ------------ --------

<S>                     <C>        <C>         <C>     <C>      <C>        <C>        <C>         <C>        <C>         <C>
Silver Springs Village   1,842,000  6,977,200      -0-     -0-   1,417,226  6,380,215   7,797,441  2,194,957     1985     11/18/88
Tempe, Arizona           

Rancho del Sol           3,019,000 17,919,645      -0-     -0-   2,358,000 18,007,683  20,365,683  5,899,767     1988     12/30/88
Las Vegas, Nevada        

Sandpebble Village       1,409,000  8,615,000      -0-     -0-   1,055,000  8,418,056   9,473,056  2,766,059     1983     12/30/88
Sparks, Nevada           

Regency Square           2,623,000 12,776,000      -0-     -0-   2,115,000 12,730,384  14,845,384  4,138,185     1988     01/31/89
Chamblee, Georgia                                                                      
                                                                                       
Cameron Creek            1,950,000  8,270,400      -0-     -0-   1,601,000  8,195,184   9,796,184  2,617,815     1988     03/31/89
Tempe, Arizona                                                                         
                                                                                       
Harbor Pointe            3,845,000 16,896,000      -0-     -0-   3,147,000 16,777,942  19,924,942  5,212,537     1988     06/30/89
Dunwoody, Georgia                                                                      
                                                                                       
Bernardo Crest           6,337,000 12,901,000      -0-     -0-   5,670,000 12,808,626  18,478,626  3,756,593     1988     12/04/89
San Diego, California                                                                  
                                                                                       
Pointe West                885,000  4,226,000      -0-     -0-     690,000  4,082,709   4,772,709  1,234,455     1985     09/29/89
Aurora, Colorado
                        ---------- ----------      ---     ---  ---------- ----------  ---------- ----------
                        21,910,000 88,581,245      -0-     -0-  18,053,226 87,400,799 105,454,025 27,820,368
                        ---------- ----------      ---     ---  ---------- ----------  ---------- ----------
                        ---------- ----------      ---     ---  ---------- ----------  ---------- ----------
</TABLE>
See notes.
                                      45 
<PAGE>
 
              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                        ( A Limited Partnership)

                          NOTES TO SCHEDULE III
              REAL ESTATE AND ACCUMULATED DEPRECIATION


Note 1 - See description of mortgage notes payable in note C of the Notes
to Financial Statements.  Depreciable property is depreciated over 
useful lives of 7 to 27.5 years.

Note 2 - Reconciliation of real
 estate:                              1996         1995         1994

Balance at beginning of period    $105,454,025 $105,454,025 $105,454,025

Deductions during period:
 Payments received under cash
 flow guaranty adjustment                  -0-          -0-          -0-
                                  ------------ ------------ ------------
Balance at close of period         105,454,025  105,454,025  105,454,025
                                  ------------ ------------ ------------
                                  ------------ ------------ ------------

The sellers guaranteed that if the Properties do not meet certain
targeted net cash flow levels between their acquisition dates and June
30, 1992, then the sellers would make payments necessary to meet those
targets. Nonrefundable payments of $4,500,000 received under the
guaranty are accounted for as an adjustment to the purchase prices of
the Properties.   Payments totalling $537,220 received under the cash
flow guaranty contribution are also accounted for as an adjustment to
the purchase price of the Properties. Amounts shown as initial cost to
Partnership on the accompanying schedule do not reflect such cash flow
guaranty adjustments.


Note 3 - The aggregate cost of real estate for federal income tax
purposes is $105,454,025.

Note 4 - The Partnership acquired the Properties from affiliates of the
Spanos General Partner. The |amount of affiliate profit included in the
amounts in column E is approximately $14,004,000.

Note 5 - Reconciliation of            1996         1995         1994
 accumulated depreciation:
                                    24,616,388   20,988,800   17,338,280
Balance at beginning of period 
Additions during period:             3,203,980    3,627,588    3,650,520
 Depreciation                     ------------ ------------ ------------
                                    27,820,368   24,616,388   20,988,800
                                  ------------ ------------ ------------
                                  ------------ ------------ ------------

                                      46
<PAGE>
     
EXHIBIT C:     QUARTERLY REPORT OF PARTNERSHIP ON SEC FORM 10-Q FOR THE QUARTER
               ENDED SEPTEMBER 30, 1997.     


                                      C-1
<PAGE>
 
                                                                       EXHIBIT C

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                        
                                   FORM 10-Q

(Mark One) 

/X/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

                                       OR

/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-17683

              PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
- ---------------------------------------------------------------------------
               (Exact name of registrant as specified in charter)

Delaware                                                         94-3069380
- ---------------------------------------------------------------------------
(State or other jurisdiction of         I.R.S. Employer Identification No.)
incorporation or organization)

1341 West Robinhood, B-9, Stockton, CA                                95207
- ---------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip code)

Registrant's telephone number, including area code (209) 478-0140    

                                      N/A
- ---------------------------------------------------------------------------
   Former name, former address and former fiscal year, if changed since  
                                 last report

Indicate by check CK 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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.   Yes _CK_  No__
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
                                                                PAGE
                                                               ------
<S>      <C>                                                  <C>
Part I.  Financial Information

Item 1:  Balance Sheets - September 30, 1997 and
         December 31, 1996 . . . . . . . . . . . . . . . . .      3

         Statements of operations for the nine months ended
         September 30, 1997 and 1996   . . . . . . . . . . .      4

         Statements of operations for the three months ended
         September 30, 1997 and 1996   . . . . . . . . . . .      5

         Statement of changes in partners' equity (deficit) 
         for the nine months ended September 30, 1997  . . .      6

         Statements of cash flows for the nine months
         ended September 30, 1997 and 1996 . . . . . . . . .      7

         Notes to Financial Statements . . . . . . . . . . .      8

Item 2:  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations   . . . . . . .     13


Part II.  Other Information . . . . . . . . . . . . . . . . .    14
</TABLE>

                                     2
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                               BALANCE SHEETS
                                (Unaudited)
<TABLE>
<CAPTION>
                                                 September 30, December 31,
                                                      1997         1996
                                                   ----------   ----------
<S>                                               <C>          <C>
                     ASSETS
Property, net                                     $75,365,027  $77,633,657
Cash and cash equivalents                           4,491,418    3,946,802
Other assets (net of accumulated amortization
 of $1,292,215 and $1,276,744, respectively)          363,353      420,690
                                                   ----------   ----------
                                                  $80,219,798  $82,001,149
                                                   ----------   ----------
                                                   ----------   ----------


   LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
Mortgage loans payable                            $64,477,241  $65,322,170
Accounts payable                                      482,061      470,521
Accounts payable, affiliate                           199,007      200,389
Accrued distributions                                 394,418      394,418
Accrued interest                                      422,863      428,040
Accrued property taxes                                497,206      132,565
Unearned rent and tenant deposits                     565,838      553,085
                                                   ----------   ----------
                                                   67,038,634   67,501,188
                                                   ----------   ----------
Partners' equity (deficit):
Limited partners' equity (316,828 units
  authorized and outstanding)                       5,636,857    6,929,279
Subordinated limited partners' equity (46,364 
  units authorized and outstanding)                 8,878,175    8,878,175
General partners' deficit                          (1,333,868)  (1,307,493)
                                                   ----------   ----------
                                                   13,181,164   14,499,961
                                                   ----------   ----------
                                                  $80,219,798  $82,001,149
                                                   ----------   ----------
                                                   ----------   ----------

</TABLE>
See notes to financial statements.

                                     3
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                          STATEMENTS OF OPERATIONS
             For the nine months ended September 30, 1997 and 1996
                                (Unaudited)

<TABLE>
<CAPTION>
                                                      1997         1996
                                                   ----------   ----------
<S>                                               <C>          <C>
Revenues:
 Rental                                           $11,945,380  $11,834,381
 Interest                                              92,866       87,021
                                                   ----------   ----------
                                                   12,038,246   11,921,402
                                                   ----------   ----------
Expenses:
 Property operating expenses                        4,319,090    4,270,851
 Property taxes                                       835,359      760,904
 Property management fees to affiliates               358,011      353,122
 General and administrative expense                    94,929       90,032
 Interest expense                                   3,819,954    3,892,697
 Management fees to General Partners                  477,816      473,376
 Depreciation                                       2,268,630    2,402,985
                                                   ----------   ----------
                                                   12,173,789   12,243,967
                                                   ----------   ----------
Net loss                                          $  (135,543) $  (322,565)
                                                   ----------   ----------
                                                   ----------   ----------

Net loss allocated to General Partners            $    (2,711) $    (6,451)
                                                   ----------   ----------
                                                   ----------   ----------
Net loss allocated to Limited Partners            $  (132,832) $  (316,114)
                                                   ----------   ----------
                                                   ----------   ----------
Net loss allocated to Subordinated 
 Limited Partners                                 $       -0-  $       -0-
                                                   ----------   ----------
                                                   ----------   ----------
Net loss per unit of limited partnership
 interest                                         $     (0.42) $     (1.00)
                                                   ----------   ----------
                                                   ----------   ----------

</TABLE>
See notes to financial statements.

                                     4
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                          STATEMENTS OF OPERATIONS
          For the three months ended September 30, 1997 and 1996
                                (Unaudited)

<TABLE>
<CAPTION>
                                                      1997         1996
                                                   ----------   ----------
<S>                                               <C>          <C>
Revenues:
 Rental                                           $ 3,977,323  $ 3,992,182
 Interest                                              28,458       35,675
                                                   ----------   ----------
                                                    4,005,781    4,027,857
                                                   ----------   ----------
Expenses:
 Property operating expenses                        1,525,331    1,468,384
 Property taxes                                       258,477      225,775
 Property management fees to affiliates               118,902      119,166
 General and administrative expense                    18,687       11,285
 Interest expense                                   1,267,832    1,304,026
 Management fees to General Partners                  159,094      159,688
 Depreciation                                         756,210      800,995
                                                   ----------   ----------
                                                    4,104,533    4,089,319
                                                   ----------   ----------
Net loss                                          $   (98,752) $   (61,462)
                                                   ----------   ----------
                                                   ----------   ----------

Net loss allocated to General Partners            $    (1,975) $    (1,229)
                                                   ----------   ----------
                                                   ----------   ----------
Net loss allocated to Limited Partners            $   (96,777) $   (60,233)
                                                   ----------   ----------
                                                   ----------   ----------
Net loss allocated to Subordinated 
 Limited Partners                                 $       -0-  $       -0-
                                                   ----------   ----------
                                                   ----------   ----------
Net loss per unit of limited partnership
 interest                                         $     (0.31) $     (0.19)
                                                   ----------   ----------
                                                   ----------   ----------

</TABLE>
See notes to financial statements.

                                     5
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

             STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
                For the nine months ended September 30, 1997
                                (Unaudited)

<TABLE>
<CAPTION>
                                                   Subordinated
                                        Limited      Limited      General
                            Total      Partners     Partners     Partners
                         ----------   ----------   ----------   ----------
<S>                     <C>          <C>          <C>          <C>
Partners' equity
  (deficit)-
  December 31, 1996     $14,499,961  $ 6,929,279  $ 8,878,175  $(1,307,493)

Net loss                   (135,543)    (132,832)         -0-       (2,711)

Distributions            (1,183,254)  (1,159,590)         -0-      (23,664)
                         ----------   ----------   ----------   ----------
Partners' equity
  (deficit)-
  September 30, 1997    $13,181,164  $ 5,636,857  $ 8,878,175  $(1,333,868)
                         ----------   ----------   ----------   ----------
                         ----------   ----------   ----------   ----------

</TABLE>
See notes to financial statements.

                                     6
<PAGE>
 
           PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
                          (A Limited Partnership)

                          STATEMENTS OF CASH FLOWS
             For the nine months ended September 30, 1997 and 1996
                                (Unaudited)

<TABLE>
<CAPTION>
                                                      1997         1996
                                                   ----------   ----------
<S>                                               <C>          <C>
Cash flows from operating activities:
Net loss                                          $  (135,543) $  (322,565)
                                                   ----------   ----------
 Adjustments to reconcile net loss to 
 net cash provided by operating activities:
   Depreciation                                     2,268,630    2,402,985
   Amortization of loan fees included in
    interest expense                                   15,471       15,471
   Change in other assets                              41,866      132,600
   Change in accrued liabilities                      371,004      319,615
   Change in accounts payable, affiliate               (1,382)       2,202
   Change in unearned rent and tenant deposits         12,753       22,809
                                                   ----------   ----------
    Total adjustments                               2,708,342    2,895,682
                                                   ----------   ----------
Net cash provided by operating activities           2,572,799    2,573,117
                                                   ----------   ----------

Cash flows from financing activities:
 Mortgage loan principal amortization                (844,929)    (769,501)
 Distributions to partners                         (1,183,254)    (788,844)
                                                   ----------   ----------
Net cash used in financing activities              (2,028,183)  (1,558,345)
                                                   ----------   ----------
Net increase in cash and cash equivalents             544,616    1,014,772
Cash and cash equivalents, beginning of period      3,946,802    3,262,675
                                                   ----------   ----------
Cash and cash equivalents, end of period          $ 4,491,418  $ 4,277,447
                                                   ----------   ----------
                                                   ----------   ----------

                SUPPLEMENTAL SCHEDULE OF FINANCING ACTIVITIES

Accrued distributions to partners                 $ 1,183,254  $ 1,183,262
Increase in distributions payable                         -0-     (394,418)
                                                   ----------   ----------
Cash used in distributions to partners            $ 1,183,254  $   788,844
                                                   ----------   ----------
                                                   ----------   ----------


</TABLE>
See notes to financial statements.

                                     7
<PAGE>
 
             PRUDENTIAL-BACHE/A. G. SPANOS REALTY PARTNERS L.P., I
                            (A Limited Partnership)
                    NOTES TO FINANCIAL STATEMENTS(Unaudited)

NOTE A - FINANCIAL STATEMENT PREPARATION

The September 30, 1997 financial statements have been prepared without
audit.  In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Partnership's financial position, results of operations and cash
flows.  The operating results for the nine months ended September 30, 1997
may not necessarily be indicative of the results expected for the full
year.

Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted.  These financial statements must
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report for the year ended December 31,
1996.  Certain reclassifications have been made to prior year amounts in
order to be in conformity with the current year presentation.

NOTE B - PROPERTY

Property is comprised of the following:
<TABLE>
<CAPTION>
                                  September 30,1997     December 31, 1996
                                  ---------------------------------------
<S>                                  <C>                 <C>
Apartment buildings                  $ 83,030,825        $ 83,030,825
Equipment                               4,369,974           4,369,974
Land                                   18,053,226          18,053,226
                                      -----------         -----------
                                      105,454,025         105,454,025
Less: Accumulated depreciation        (30,088,998)        (27,820,368)
                                       -----------         -----------      
                                     $ 75,365,027        $ 77,633,657
                                      -----------         -----------
                                      -----------         -----------
</TABLE>

                                     8
<PAGE>
 
NOTE C - RELATED PARTY TRANSACTIONS

Set forth below are the fees and other amounts relating to transactions
between the Partnership and the General Partners and their affiliates for
the nine months ended September 30, 1997 and 1996.

<TABLE>
<CAPTION>
                                                 1997           1996
                                               -----------------------
<S>                                           <C>            <C>
Expensed to the General Partners:
 Supervisory management fee                   $238,908       $236,688
 Special distribution                          184,765        182,545
 Administrative expense reimbursements          54,143         54,143
                                               -------        -------
                                              $477,816       $473,376
                                               -------        -------
                                               -------        -------

Expensed to A.G. Spanos Management, Inc.:
  Property management fees                    $358,011       $353,122 
                                               -------        -------
                                               -------        -------
</TABLE>
Accruals of $39,913 and $41,315 for property management fees and $159,094
and $159,074 for General Partner fees were outstanding at September 30,
1997 and December 31, 1996, respectively.  The General Partners' capital
account deficit for financial accounting purposes exceeds the amount the
General Partners would be obligated to restore if the Partnership were to
dissolve.

Prudential Securities Incorporated ("PSI"), an affiliate of the Bache
General Partner, owned 4,663 Units at September 30, 1997.

                                    9
<PAGE>
 
NOTE D - CONTINGENCIES

On or about October 18, 1993 a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in
the United States District Court for the District of Arizona, purportedly
on behalf of investors in the Partnership against the Partnership, the
Bache General Partner, PSI and a number of other defendants.  On or about
November 16, 1993, a putative class action captioned Connelly et al. v.
Prudential-Bache Securities Inc. et al. (93 Civ. 713) was filed in the 
United States District Court for the District of Arizona, purportedly on
behalf of investors in the Partnership against the Partnership, the Bache
General Partner, PSI and a number of other defendants.  On or about July
23, 1993 a putative class action, captioned Kahn v. Prudential-Bache
Properties, Inc. et al. (Index No. 11867/93) was filed in the Supreme Court
of the State of New York, County of New York, purportedly on behalf of
investors in the Partnership against the General Partners, PSI, The
Prudential Insurance Company of America and certain of their affiliates and
officers.  The case was subsequently removed to the United States District
Court for the Southern District of New York (93 Civ. 5976).

On or about February 13, 1995 an individual action, captioned Estate of
Jean Adams v. Prudential Securities, Inc. et al. (Case No. 1995 CV 00265)
was filed in the Court of Common Pleas in Stark County, Ohio against PSI,
The Prudential, the General Partners, the Partnership and affiliates of the
Spanos General Partner.  The action was removed to the United States
District Court for the Northern District of Ohio (Eastern Division) on
March 15, 1995.  Plaintiff alleged misrepresentations, breach of fiduciary
duties and civil conspiracy by defendants in connection with the sale of
units of the Partnership. Plaintiff sought unspecified damages, including
punitive damages.

By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes and Kahn cases, by order dated June 8, 1994, the Connelly
case, and by order dated April 7, 1995, the Adams case, were transferred to
a single judge of the United States District Court for the Southern
District of New York and consolidated for pretrial proceedings under the
caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 1005).  On June 8, 1994, plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its
present and former employees and the General Partners.  The Partnership is
not named a defendant in the consolidated complaint, but the name of the
Partnership is listed as being among the limited partnerships at issue in
the case.  The consolidated complaint alleges violations of the federal and
New Jersey Racketeer Influenced and Corrupt Organizations Act ("RICO")
statutes, fraud, negligent misrepresentation, breach of fiduciary duties,
breach of third- party beneficiary contracts and breach of implied
covenants in connection with the marketing and sales of limited partnership
interests.  Plaintiffs request relief in the nature of rescission of the
purchase of securities and recovery of all consideration and expenses in
connection therewith, as well as compensation for lost use of money

                                     10 
<PAGE>
 
invested less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and
New Jersey); general damages for all injuries resulting from negligence,
fraud, breaches of contract, and breaches of duty in an amount to be
determined at trial; disgorgement and restitution of all earnings, profits,
benefits, and compensation received by defendants as a result of their
unlawful acts; and costs and disbursements of the action.  On November 28,
1994 the transferee court deemed each of the complaints in the constituent
actions (including Kinnes and Kahn) amended to conform to the allegations
of the consolidated complaint.  On August 9, 1995 the Bache General
Partner, PSI and other Prudential defendants entered into a Stipulation and
Agreement of Partial  Compromise and Settlement with legal counsel
representing plaintiffs in the consolidated actions. On November 20, 1995,
the court gave final approval to the settlement, dismissed the Kinnes and
Kahn actions, certified a class of purchasers of specific limited
partnerships, including the Partnership, released all settled claims by
members of the class against the PSI settling defendants and permanently
barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties.  By orders
entered August 12, 1996 and October 25, 1996, respectively, the Adams and
Connelly cases were dismissed as to the Bache General Partner, PSI and the
other Prudential defendants.  The full amount due under the settlement
agreement has been paid. The consolidated action as well as the Adams and
Connelly cases remain pending against nonsettling defendants, including the
Spanos General Partner and certain of its affiliates.  The Partnership is
not named a defendant in the consolidated complaint and the action is not
expected to have a material effect on the Partnership's financial
statements; accordingly, no provision for any loss that may result upon
resolution of this matter has been made in the accompanying financial
statements.

On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions.  The settlement
contemplated, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and dissolution
of the Partnership. The settlement agreement was preliminarily approved by
the Court on August 28, 1997.  Pursuant to the settlement, detailed
information about the proposed auction sale and other terms of the
settlement will be sent to the Limited Partners with proxy solicitation
materials seeking the Limited Partners' consent to the auction sale.  The
Spanos General Partner filed a preliminary proxy statement with the
Securities and Exchange Commission on July 28, 1997, and has received a
second series of comments to which it is in the process of responding.  The
settlement agreement contains numerous conditions and must be finally
approved by the Court at a fairness hearing at which Limited Partners and
other interested parties will have an opportunity to be heard.  There can
be no assurance that the conditions to implementation of the settlement
will be satisfied.

                                     11
<PAGE>
 
On or about April 15, 1994 a multiparty petition entitled Schreiber, et al.
v. Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed in
the 189th Judicial District Court of Harris County, Texas, purportedly on
behalf of investors in the Partnership against the Partnership, the General
Partners, PSI, The Prudential Insurance Company of America and a number of
other defendants.  The Petition alleges common law fraud, fraud in the
inducement and negligent misrepresentation in connection with the offering
of limited partnership interests and negligence, breach of fiduciary duty,
civil conspiracy, and violations of the federal Securities Act of 1933
(sections 11 and 12) and of the Texas Securities and Deceptive Trade
Practices statutes.  The suit seeks, among other things, compensatory and
punitive damages, costs and attorneys' fees.  Most of the plaintiffs have
released their claims against the defendants in exchange for monetary
payments by PSI.  It is expected that the remaining claims will be resolved
by PSI at no cost to the Partnership.  Accordingly, no provision for any
loss that may result upon resolution of this matter has been made in the
accompanying financial statements.

NOTE E - SUBSEQUENT EVENT

The Partnership paid third quarter cash distributions of $386,530 to the
Unitholders and $7,888 to the General Partners in November 1997.


                                      12
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Capital Resources and Liquidity

The Partnership had cash of $4,491,000 at September 30, 1997.  There are no
proposed programs for renovation, improvement or development of the
Properties other than maintenance and repairs (including major repairs) in
the ordinary course which will be paid from operations, and the
Partnership's liquidity position is considered satisfactory.  

The Partnership's operating activities provided cash of $2,573,000 in the
first nine months of which $424,000 reflects timing differences related to
current assets and liabilities.  Of the balance, $845,000 was applied to
scheduled principal amortization on the Partnership's mortgage debt,
$1,183,000 was paid in cash distributions, and $121,000 was retained.

The Partnership resumed paying distributions in May 1996.  Distributions
had been suspended following the second quarter of 1992.  Future
distributions will be dependent on the operations of the Partnership.

On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions.  The settlement
contemplates, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and dissolution
of the Partnership. If the settlement agreement is preliminarily approved
by the Court, detailed information about the proposed auction sale and
other terms of the settlement will be sent to the Limited Partners with
proxy solicitation materials seeking the Limited Partners' consent to the
auction sale.  The Spanos General Partner filed a preliminary proxy
statement with the Securities and Exchange Commission on July 28, 1997, and
has received a second series of comments to which it is in the process of
responding.  The settlement agreement contains numerous conditions and must
be finally approved by the Court at a fairness hearing at which Limited
Partners and other interested parties will have an opportunity to be heard. 
There can be no assurance that the conditions to implementation of the
settlement will be satisfied.

Results of Operations

Rental revenue was $11,945,000 for the first nine months of 1997, an
increase of 0.9% over the same period last year, primarily due to increased
effective rental rates.  Average occupancy was 94.2% for the first nine
months of 1997 compared to 94.4% for the same period last year.

Property operating expenses were $4,319,000 for the first nine months of
1997, up 1.1% from the comparable period last year.  Property taxes
increased $74,000 or 9.8%, principally because of a higher assessment at
the Harbor Pointe property.  Depreciation expense declined $134,000 because
certain personal property assets became fully depreciated in 1996. 
Comparative third quarter 1997 and 1996 operating results generally reflect
the same trends.

                                     13
<PAGE>
 
                          PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

This information is incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Partnership's
Quarterly Report.

Item 2.  Changes in Securities

(None)

Item 3.  Defaults Upon Senior Securities

(None)

Item 4.  Submission of Matters to a Vote of Security Holders

(None)

Item 5.  Other Information

(None)

Item 6.     Exhibits and Reports on Form 8-K

            Exhibits

            4(a) Certificate of Limited Partnership of Registrant as
                 filed with the Secretary of State of Delaware, 
                 incorporated by reference to Exhibit 4(a) to
                 Registration Statement on Form S-11, File No. 33-22613,
                 filed with the Securities and Exchange Commission on
                 October 14, 1988.

            4(b) Amendment to Certificate of Limited Partnership of
                 Registrant as filed with the Secretary of State of
                 Delaware, incorporated by reference to Exhibit 4(b) to
                 Amendment No. 1 to Registration Statement on Form S-11,
                 File No. 33-22613, filed with the Securities and
                 Exchange Commission on October 14, 1988.

            4(c) Amended and Restated Agreement of Limited Partnership of
                 Registrant, incorporated by reference to Exhibit 4(c) to
                 Amendment No. 1 to Registration Statement on Form S-11,
                 File No. 33-22613, filed with the Securities and
                 Exchange Commission on October 14, 1988.

                                     14
<PAGE>
 
            4(d) Amendments No. 1 through 7 dated November 21, and
                 December 30, 1988 and January 31, February 28, June 30,
                 April 28, and May 31, 1989  to the Amended and Restated
                 Agreement of Limited Partnership of Registrant,
                 incorporated by reference to Exhibit 4(d) to
                 Post-Effective Amendment No. 1 to Registration Statement
                 on Form S-11, File No. 33-22613, filed with the
                 Securities and Exchange Commission on June 30, 1989.

            4(e) Amendments No. 8 through 14 dated June 30, August 11
                 and 31, September 29, October 31, and December 1 and 22,
                 1989 to the Amended and Restated Agreement of Limited
                 Partnership of Registrant, incorporated by reference to
                 Exhibit 4(e) to Annual Report on Form 10-K, File No.
                 0-17683, filed with the Securities and Exchange
                 Commission on March 28, 1991.

           27    Financial Data Schedule (filed herewith)

            Reports on Form 8-K

                 (None)

                                     15
<PAGE>
 
                             SIGNATURES

Pursuant to the requirements 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.


PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS, L.P., I (Registrant)

By: A.G. Spanos Realty Partners, L.P., General Partner

    By:  AGS Financial Corporation, a general partner
         By: /s/Arthur J. Cole               Date: November 14, 1997
         ---------------------------------
         Arthur J. Cole
         President and Chief Accounting Officer

    By:  A.G. Spanos Realty Capital, Inc., a general partner
         By: /s/Arthur J. Cole               Date: November 14, 1997
         ---------------------------------
         Arthur J. Cole
         Vice President and Chief Accounting Officer

                                     16

<PAGE>
 
[ARTICLE] 5
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I, AND IS 
QUALIFIED ENTIRELY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[CIK]  0000844159
[NAME] PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
<TABLE>
<S>                             <C>
[PERIOD-TYPE]                   9-MOS
[FISCAL-YEAR-END]                          DEC-31-1997
[PERIOD-START]                              JAN-1-1997
[PERIOD-END]                               SEP-30-1997
[CASH]                                       4,491,418
[SECURITIES]                                         0
[RECEIVABLES]                                  363,353
[ALLOWANCES]                                         0
[INVENTORY]                                          0
[CURRENT-ASSETS]                             4,854,771
[PP&E]                                     105,454,025
[DEPRECIATION]                              30,088,998
[TOTAL-ASSETS]                              80,219,798
[CURRENT-LIABILITIES]                        2,561,393
[BONDS]                                     64,477,241
[PREFERRED-MANDATORY]                                0
[PREFERRED]                                          0
[COMMON]                                             0
[OTHER-SE]                                  13,181,164
[TOTAL-LIABILITY-AND-EQUITY]                80,219,798
[SALES]                                     11,945,380
[TOTAL-REVENUES]                            12,038,246
[CGS]                                                0
[TOTAL-COSTS]                                        0
[OTHER-EXPENSES]                             8,353,835
[LOSS-PROVISION]                                     0
[INTEREST-EXPENSE]                           3,819,954
[INCOME-PRETAX]                                      0
[INCOME-TAX]                                         0
[INCOME-CONTINUING]                                  0
[DISCONTINUED]                                       0
[EXTRAORDINARY]                                      0
[CHANGES]                                            0
[NET-INCOME]                                 (135,543)
[EPS-PRIMARY]                                   (0.42)
[EPS-DILUTED]                                        0
</TABLE>
<PAGE>

             PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS, L.P., I

                       CONSENT REGARDING SALE OF ASSETS,
             AMENDMENT TO THE PARTNERSHIP AGREEMENT AND LIQUIDATION


          The undersigned holder ("Holder") of units ("Units") of limited
partnership interest in Prudential-Bache/A.G. Spanos Realty Partners L.P., I
(the "Partnership"), hereby votes as follows:

          (1) The proposed sale of substantially all of the assets of the
Partnership in a public auction:
 
      [ ] CONSENTS            [ ] DOES NOT CONSENT           [ ] ABSTAINS

          (2) The proposed amendment of the Amended and Restated Agreement of
Limited Partnership of the Partnership:
 
      [ ] CONSENTS            [ ] DOES NOT CONSENT           [ ] ABSTAINS

          (3) The proposed termination and liquidation of the Partnership:

      [ ] CONSENTS            [ ] DOES NOT CONSENT           [ ] ABSTAINS

    
in each case as more fully described in the Partnership's Statement Furnished in
Connection with the Solicitation of Consents dated February __, 1998 (the
"Solicitation Statement").     

          The Units represented by this Consent will be voted in accordance with
the elections specified by the Holder named below.  IF NO ELECTIONS ARE
SPECIFIED, ANY OTHERWISE PROPERLY COMPLETED AND SIGNED CONSENT FORM WILL BE
DEEMED TO BE A CONSENT TO EACH OF THE FOREGOING PROPOSALS AS DESCRIBED IN THE
SOLICITATION STATEMENT.  By execution hereof, the undersigned Holder
acknowledges receipt of the Solicitation Statement.
              
          The Partnership reserves the right to waive any conditions to, or
modify the terms of, the Solicitation (as defined in the Solicitation
Statement).  In order to count, this Consent must be received by the Partnership
prior to 10:00 a.m., Pacific Time, on the earlier of (a) the date on which the
Spanos General Partner receives Consents from Unitholders owning a majority of
the Outstanding Units, or (b) March 31, 1998, or on such later date as may be
determined by the Spanos General Partner.  This fully completed and executed
Consent should be sent by mail in the self-addressed, postage-paid envelope
enclosed for that purpose, or by overnight courier, or by fax, to the
Partnership, as follows:     
<PAGE>

If delivered by mail or                 If delivered by fax, to:
by courier, to:

Skinner & Co.                           Skinner & Co.
660 Market Street, Suite 204            Facsimile Number: (415) 981-0970
San Francisco, CA 94104                 Telephone Number: (415) 788-0794

          Please sign your name below exactly in the same manner as the name(s)
in which ownership of the Units is registered.  When Units are held by two or
more joint Holders, all such Holders should sign.  When signing as attorney-in-
fact, executor, administrator, trustee or guardian, please give full title as
such.  If a corporation, please sign in full corporate name by the President or
other authorized officer.  If a partnership, please sign in partnership name by
an authorized person.
    
          Dated: _____________, 1998     

          Signature


          ______________________________

          Name (Please Print)


          ______________________________

          Signature if held jointly


          ______________________________

          Name (Please Print)


          ______________________________



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