BEDFORD PROPERTY INVESTORS INC/MD, S-2, 1996-02-14

BEDFORD PROPERTY INVESTORS INC/MD
S-2, 1996-02-14
REAL ESTATE INVESTMENT TRUSTS

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As filed with the Securities and Exchange Commission on February 14,
1996

Registration No. 33-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BEDFORD PROPERTY INVESTORS, INC.
(Exact name of the Registrant as specified in its charter)

Maryland
(State or other jurisdiction of incorporation or organization)

68-0306514
(I.R.S. Employer Identification No.)

270 Lafayette Circle
Lafayette, California 94549
(510) 283-8910

(Address, including zip code, and telephone number, including area
code,
of registrant's principal executive offices)

DONALD A. LORENZ
BEDFORD PROPERTY INVESTORS, INC.
270 Lafayette Circle
Lafayette, California 94549
(510) 283-8910

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

Copies to:

MICHAEL J. KENNEDY PAUL C. PRINGLE
Shearman & Sterling Brown & Wood
555 California Street 555 California Street
San Francisco, California 94104 San Francisco, California 94104
(415) 616-1100 (415) 772-1200

Approximate date of commencement of proposed sale to public: As
soon as practicable after the effective date of this Registration
Statement.

If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.

<PAGE>

If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legible facsimile thereof, pursuant
to Item 11(a)(1) of this form, check the following box.

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering.

If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.

If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.

CALCULATION OF REGISTRATION FEE

Title of Each Class
of Securities to be Registered Common Stock, $.01 par value per share

Amount to be Registered 7,705,000 (2)

Proposed Maximum Offering
Price Per Share (1) $7.5

Proposed Maximum Aggregate
Offering Price (1) $57,787,500

Amount of Registration Fee $19,927

(1) Estimated pursuant to Rule 457 under the Securities Act of 1933 solely
for the purpose of calculating the registration fee based on the
average of the high and low prices reported for shares on the New York
Stock Exchange Composite Tape on February 7, 1996.

(2) Includes 1,005,000 shares which may be issued pursuant to the
Underwriters' over-allotment option.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.

CROSS-REFERENCE SHEET

Pursuant to Item 501(b) of Regulation S-K Showing Location in
Prospectus of Information Required by Part I Items of Form S-2

Item Number and Heading
in Form S-2 Registration Statement Location in Prospectus

1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus. . . . . . . Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus. . . . . . . . . . . . . . . . . Table of Contents;
Inside Front and
Outside Back Cover
Pages; Available
Information;
Incorporation of
Certain Information
by Reference

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges. . . . . . . . Prospectus Summary;
Risk Factors;
Business and
Properties

4. Use of Proceeds . . . . . . . . . . . . . . Use of Proceeds

5. Determination of Offering Price . . . . . . Not Applicable

6. Dilution. . . . . . . . . . . . . . . . . . Not Applicable

7. Selling Security Holders. . . . . . . . . . Not Applicable

8. Plan of Distribution. . . . . . . . . . . . Outside Front Cover
Page; Underwriting

9. Description of Securities to be Registered. Description of
Capital Stock of the Company

10. Interests of Named Experts and Counsel. . . . Not Applicable

11. Information with Respect to Registrant. . . . Outside Front Cover
Page; Prospectus
Summary; Price Range
of Common Stock and
Distribution
History; Selected
Consolidated
Financial and
Operating Data;
Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operations; Business
and Properties;
Management;
Description of
Capital Stock of the
Company; Financial
Statements

12. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . Incorporation of
Certain Information
by Reference

13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. Not Applicable

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 14, 1996

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to by nor shall there be any sale securities
laws of any such State.

PROSPECTUS
6,700,000 Shares

[LOGO]

BEDFORD PROPERTY INVESTORS, INC.

Common Stock
______________

Bedford Property Investors, Inc. (the "Company") is a self-
administered and self-managed equity real estate investment
trust ("REIT") engaged in the business of owning, managing,
acquiring and, when appropriate, developing industrial and
suburban office properties proximate to metropolitan areas
primarily in the Western United States. As of December 31,
1995, the Company owned and operated 30 Properties, aggregating
approximately 2.6 million rentable square feet and comprised of
24 industrial properties, five suburban office properties and
one retail property. As of November 30, 1995, the Company's
properties were approximately 94% occupied by over 300 tenants.

All of the 6,700,000 shares of Common Stock, par value $.01
per share (the "Common Stock"), offered hereby are being sold by
the Company (the "Offering"). After completion of the Offering,
the senior officers and directors of the Company will
beneficially own approximately 18% of the shares of the
outstanding Common Stock, with Peter B. Bedford, the Company's
Chairman and Chief Executive Officer, beneficially owning
approximately 14% of such shares, assuming that the
Underwriters' over-allotment option is not exercised. The
Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Pacific Stock Exchange (the "PSE") under the
symbol "BED." On February 7, 1996, the last reported sale price
of the Common Stock on the NYSE was $7 1/2 per share.

See "Risk Factors" appearing on page 10 for a discussion of
certain factors relating to an investment in the Common Stock.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

Price to Underwriting Proceeds to
Public Discount(1) Company(2)

Per Share . . . . $ $ $

Total (3) . . . . $ $ $

(1) The Company has agreed to indemnify the several Underwriters
against certain liabilities under the Securities Act of 1933.
See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at
$485,000.
(3) The Company has granted the several Underwriters an option to
purchase up to 1,005,000 additional shares of Common Stock to
cover over-allotments. If all such shares of Common Stock are
purchased, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $______, $______ and $_______,
respectively. See "Underwriting."

The shares of Common Stock are offered by the several
Underwriters, subject to prior sale, when, as and if issued to and
accepted by them, subject to approval of certain legal matters by
counsel for the Underwriters. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the shares of Common Stock
offered hereby will be made in New York, New York, on or about
________, 1996.

Merrill Lynch & Co.

____________________________

The date of this Prospectus is , 1996.

<PAGE>

[FOLDOUT INSIDE FRONT COVER SHOWS MAP OF WESTERN UNITED STATES,
KANSAS AND MINNESOTA WITH THE LOCATION OF EACH OF THE COMPANY'S
PROPERTIES INDICATED THEREON.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, ON THE PACIFIC STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>

[PHOTOGRAPHIC IMAGES OF A NUMBER OF THE COMPANY'S PROPERTIES ARE
INCLUDED, ACCOMPANIED BY CAPTIONS IDENTIFYING THE NAME AND LOCATION OF
EACH SUCH PROPERTY.]

<PAGE>
TABLE OF CONTENTS

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Objectives and Growth Plans. . . . . . . . . . . . . 2
Corporate Strategies. . . . . . . . . . . . . . . . . . . . . 2
Market Overview . . . . . . . . . . . . . . . . . . . . . . . 3
Business and Properties . . . . . . . . . . . . . . . . . . . 3
The Offering. . . . . . . . . . . . . . . . . . . . . . . . . 6
Distribution Policy . . . . . . . . . . . . . . . . . . . . . 6
Tax Status of the Company . . . . . . . . . . . . . . . . . . 7
Summary Consolidated Financial and
Operating Data. . . . . . . . . . . . . . . . . . . . . . . . 7

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Geographic Concentration; Dependence on
California Economy. . . . . . . . . . . . . . . . . . . . . . 11
Historical Losses; Possibility of Future
Losses . . . . . . . . . . . . . . . . . . . . . . . . . 11
Risks Inherent in Real Estate Investments . . . . . . . . . . 11
Substantial Increase in Dividend
Requirements; Possible Inability to
Sustain Dividends. . . . . . . . . . . . . . . . . . . . 13
Tax Risks; Risks Associated with REIT Status. . . . . . . . . 14
Transfer and Ownership Limitations. . . . . . . . . . . . . . 16
Dependence on Key Personnel . . . . . . . . . . . . . . . . . 17
Competition . . . . . . . . . . . . . . . . . . . . . . . . . 17
Regulatory Compliance . . . . . . . . . . . . . . . . . . . . 18
Risks of Debt Financing . . . . . . . . . . . . . . . . . . . 19
Redemption of the Convertible Preferred Stock . . . . . . . . 20
Registration Rights . . . . . . . . . . . . . . . . . . . . . 20
Risk of Substantial Dilution. . . . . . . . . . . . . . . . . 20
Effect of Market Interest Rates on Price of Common Stock. . . 21
Concentration of Voting Power and Right to Consent of the Holders
of the Convertible Preferred Stock . . . . . . . . . . . 21
Exemption from the Maryland Business Combination Law. . . . . 22
Anti-takeover Effect of the Charter, the Bylaws, the Convertible
Preferred Stock and Certain Provisions of Maryland Law . 22
Shares Available for Future Sale. . . . . . . . . . . . . . . 24
Changes in Policies . . . . . . . . . . . . . . . . . . . . . 25

THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
History of the Company. . . . . . . . . . . . . . . . . . . . 26

BUSINESS OBJECTIVES AND GROWTH
PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Existing Properties . . . . . . . . . . . . . . . . . . . . . 28
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . 28
Development . . . . . . . . . . . . . . . . . . . . . . . . . 30
Dispositions. . . . . . . . . . . . . . . . . . . . . . . . . 30

CORPORATE STRATEGIES . . . . . . . . . . . . . . . . . . . . . . 31

MARKET OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 34

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . 38

PRICE RANGE OF COMMON STOCK AND
DISTRIBUTION HISTORY . . . . . . . . . . . . . . . . . . . . . . 39

DISTRIBUTION POLICY. . . . . . . . . . . . . . . . . . . . . . . 39

CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 41

SELECTED CONSOLIDATED FINANCIAL
AND OPERATING DATA . . . . . . . . . . . . . . . . . . . . . . . 43

MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . 44
Results of Operations . . . . . . . . . . . . . . . . . . . . 44
Funds From Operations . . . . . . . . . . . . . . . . . . . . 48
Liquidity and Capital Resources . . . . . . . . . . . . . . . 49
Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . 49

BUSINESS AND PROPERTIES. . . . . . . . . . . . . . . . . . . . . 50
Table of Properties . . . . . . . . . . . . . . . . . . . . . 51
Location and Type of the Company's Properties . . . . . . . . 54
Tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Lease Expirations for the Properties. . . . . . . . . . . . . 56
The Industrial Properties . . . . . . . . . . . . . . . . . . 56
The Suburban Office Properties. . . . . . . . . . . . . . . . 61
Development . . . . . . . . . . . . . . . . . . . . . . . . . 68
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 68
The Credit Facility . . . . . . . . . . . . . . . . . . . . . 68
Certain Property Tax Information. . . . . . . . . . . . . . . 70

POLICIES WITH RESPECT TO CERTAIN
ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Funding of Acquisition and Financing Costs. . . . . . . . . . 76
Recent Acquisitions . . . . . . . . . . . . . . . . . . . . . 77
Other Transactions. . . . . . . . . . . . . . . . . . . . . . 77
Employment Agreement. . . . . . . . . . . . . . . . . . . . . 77

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY. . . . . . . . . . . 78
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . 78
Convertible Preferred Stock . . . . . . . . . . . . . . . . . 79
Additional Series of Preferred Stock. . . . . . . . . . . . . 85
Restrictions on Transfer and Ownership of Capital Stock . . . 85
Transfer Agent and Registrar. . . . . . . . . . . . . . . . . 88

CERTAIN PROVISIONS OF MARYLAND
LAW AND OF THE COMPANY'S CHARTER AND BYLAWS. . . . . . . . . . . 89
Maryland Business Combination Law . . . . . . . . . . . . . . 89
Control Share Acquisitions. . . . . . . . . . . . . . . . . . 89
Interested Director Transactions. . . . . . . . . . . . . . . 90
Business Combinations . . . . . . . . . . . . . . . . . . . . 91
Amendments to the Charter and Bylaws. . . . . . . . . . . . . 91
The Board of Directors. . . . . . . . . . . . . . . . . . . . 92
Advance Notice of Director Nominations and New Business . . . 92

FEDERAL INCOME TAX
CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 93
Federal Income Taxation of the Company. . . . . . . . . . . . 93
Requirements for Qualification. . . . . . . . . . . . . . . . 94
Failure to Qualify. . . . . . . . . . . . . . . . . . . . . . 97
Taxation of U.S. Stockholders . . . . . . . . . . . . . . . . 98
Special Tax Considerations for Foreign Stockholders . . . . . 99
Information Reporting Requirements and Backup Withholding Tax 100
State and Local Tax . . . . . . . . . . . . . . . . . . . . 101

ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 101

SHARES AVAILABLE FOR FUTURE
SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102

UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . .102

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .105

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .105

AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . .105

INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE . . . . . . . . . . . . . . . . . . . .106

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .107

INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENTS
SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . .F-1

<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in,
or incorporated by reference into, this Prospectus. References herein
to the percentage of a Property or Properties leased or occupied are
calculated by dividing square feet leased or occupied, as the case may
be, by total rentable square feet, unless otherwise indicated. Unless
otherwise indicated, the information contained in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised.
References to the "Company" in this Prospectus shall be deemed to
include the Company, its predecessors, and those entities of which the
Company has control or owns a majority of the economic interests,
unless otherwise indicated or the context indicates otherwise. The
offering of shares of Common Stock pursuant to this Prospectus is
referred to herein as the "Offering." See "Glossary" for the
definitions of certain capitalized terms used in this Prospectus.

The Company

Bedford Property Investors, Inc. is a self-administered and self-
managed equity REIT engaged in the business of owning, managing,
acquiring and, when appropriate, developing industrial and suburban
office properties proximate to metropolitan areas primarily in the
Western United States. As of December 31, 1995 the Company owned and
operated, either directly or through one of its wholly-owned
subsidiaries, 30 properties, aggregating 2.6 million rentable square
feet and comprised of 24 industrial properties (the "Industrial
Properties"), five suburban office properties (the "Suburban Office
Properties") and one retail property (the "Retail Property"). The
Industrial Properties, the Suburban Office Properties and the Retail
Property are hereinafter referred to individually as a "Property" and
collectively as the "Properties." As of November 30, 1995, the
Properties were approximately 94% occupied by over 300 tenants.

The Company's strategy is to own, manage, acquire and, when
appropriate, develop industrial and suburban office properties in
markets proximate to metropolitan areas primarily in the Western
United States which are experiencing, or are expected by the Company
to experience, economic growth and, if possible, are subject to
limitations on the development of similar properties. The Company
believes that employment growth is a reliable indicator of future
demand for both industrial and suburban office space and that
increased industrial production and consumer spending are reliable
indicators of demand for industrial space. In addition, the Company
believes that certain supply-side constraints, such as limited
availability of undeveloped land in a market and of financing for
speculative real estate construction, increase a market's potential
for higher average rents over time. The Company is currently
targeting selected suburban markets in the Western United States that
are experiencing, or are expected by the Company to experience,
economic growth, increased spending or production and supply-side
constraints.

The Company believes that due to improvements in the regional
economy and reduced availability of financing for new construction, an
investment in industrial and suburban office properties in the Western
United States provides the potential for attractive returns. The
Company also believes that further improvement in economic conditions
in the Western United States could favorably affect occupancy levels,
rents and real estate values, although there can be no assurance that
this will in fact occur. The Company seeks to grow its asset base
through the acquisition of individual industrial and suburban office
properties and portfolios of such properties, as well as through the
development of new industrial and suburban office properties, when
appropriate.

The Company is led by an experienced management team that includes
Peter B. Bedford, Chairman of the Board of Directors and Chief
Executive Officer. Mr. Bedford has been engaged in the commercial
real estate business, primarily in the Western United States, for over
30 years and has been responsible for the ownership, management,
acquisition and development of an aggregate of approximately 18
million square feet of industrial, office and retail properties, as
well as land in 14 states, primarily as founder and President of
Bedford Property Holdings Limited ("BPHL"), a private diversified real
estate holding company. Since his election as the Company's Chairman
and Chief Executive Officer in 1992, Mr. Bedford has been instrumental
in assembling the Company's current Board of Directors, in the design
and implementation of the Company's current business plan, in the
Company's conversion to a self-administered REIT and in the selection
of a new, experienced management team, many of the members of which
had previously worked with Mr. Bedford at BPHL. The Company's three
senior officers and the Vice President of Bedford Acquisitions have on
average over 17 years of experience in the ownership, management,
acquisition and/or development of industrial and suburban office
properties in the Western United States.

Since the adoption of the Company's current business plan in
February 1993, the management team has strategically repositioned the
Company by (i) purchasing 20 of the Industrial Properties, all five of
the Suburban Office Properties and the Retail Property for
approximately $119 million, (ii) commencing development of a research
and development facility in Milpitas, California, (iii) selling five
real estate assets targeted for sale and selling the Edison Square
Partnerships, (iv) obtaining a $60 million credit facility (the
"Credit Facility"), (v) repaying $11.1 million in mortgage loans and
notes payable bearing interest at rates in excess of those in effect
under the Credit Facility and (vi) selling 8,333,334 shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per
share (the "Convertible Preferred Stock") for $50 million in gross
proceeds.

After completion of the Offering, the senior officers and directors
of the Company will beneficially own approximately 18% of the shares
of the outstanding Common Stock with Mr. Bedford beneficially owning
approximately 14% of such shares. As of December 31, 1995, Bed
Preferred No. 1 Limited Partnership ("AEW"), a Delaware limited
partnership and an affiliate of Aldrich Eastman Waltch, L.P., a
national real estate investment adviser whose clients primarily
include institutional investors, was the holder of all of the
outstanding shares of the Convertible Preferred Stock. Each of the
8,333,334 outstanding shares of Convertible Preferred Stock is
convertible at the option of the holders, after September 18, 1997,
into one share of the Company's Common Stock, subject to adjustment
upon the occurrence of certain events. Based on the initial
conversion ratio and following conversion, the outstanding shares of
Convertible Preferred Stock would represent approximately 39% of the
shares of Common Stock outstanding at the completion of the Offering.

The Company was formerly a Delaware corporation, incorporated in
November 1984 under the name of ICM Property Investors Incorporated.
On July 1, 1993, the Company was reincorporated in the state of
Maryland under a new name, Bedford Property Investors, Inc. The
Company's principal executive offices are located at 270 Lafayette
Circle, Lafayette, CA 94549. Its telephone number at that location is
(510) 283-8910.

Risk Factors

An investment in the Company's Common Stock is subject to
significant risks, including, but not limited to, the risk that the
Company will incur future losses, tax risks, the inability of the
Company to sustain or pay dividends and the risks inherent to
investment in real estate and real estate development. In addition to
the other information contained or incorporated by reference in this
Prospectus, prospective investors should carefully consider the
factors discussed in the section entitled "Risk Factors" before
purchasing the Common Stock offered hereby.

Business Objectives and Growth Plans

The Company's business objectives are (i) to increase funds
available for distribution to stockholders and (ii) to increase
stockholders' long-term total return through the appreciation in value
of the Common Stock. To achieve these objectives, the Company seeks
to (i) increase cash flow from the Properties, (ii) acquire quality
industrial and suburban office properties and/or portfolios of such
properties and (iii) when appropriate, develop new industrial and
suburban office properties.

Corporate Strategies

In pursuing its business objectives and growth plans, the Company
intends to:

Capitalize on its experienced management team, whose
senior officers have on average over 17 years of
experience in the ownership, management, acquisition
development of industrial and suburban office
properties in the Western United States;

Focus its efforts in the Western United States;

Pursue a market driven strategy which is based upon an
analysis of the regional factors which the Company
believes impact the supply of, and demand for,
industrial and suburban office properties;

Plan for future anticipated expenses associated with
tenant turnover by budgeting for tenant improvements,
lease commissions and lost income due to vacancy or
construction down-time;

Concentrate on acquiring general purpose, flexible
properties which are suitable for a diverse range of
tenants;

Utilize its in-house asset and property management
personnel in order to reduce its overhead costs and
increase its responsiveness to its tenants' needs;

Cooperate with local real estate brokers in order to
more effectively attract and retain tenants; and

Maintain a conservative capital structure by limiting
total consolidated indebtedness to no more than 50% of
its Total Market Capitalization.

Market Overview

The Company believes that certain metropolitan areas have multiple
suburban "cores" and that the potential for growth in these
metropolitan areas is generally greatest in and around these suburban
cores. The Company believes that such suburban cores emerge as jobs
move to the suburbs and typically offer a well-trained and well-
educated work force, high quality of life and, in many cases, a
diversified economic base. The Company focuses on owning, managing,
acquiring and, when appropriate, developing properties in these
suburban cores. In addition, the Company seeks real estate markets
that are subject to supply-side constraints such as limited
availability of undeveloped land and/or geographic, topographic,
regulatory and/or infrastructure restrictions. The Company believes
that such restrictions serve as barriers of entry to new construction,
thereby limiting the supply of new commercial space. The Company
believes that these supply-side constraints, when combined with a
growing employment and population base, enhance the long-term
investment potential of a real estate asset. As a result, the Company
searches for real estate acquisition and, when appropriate,
development opportunities in real estate markets that demonstrate some
or all of the foregoing characteristics.

Business and Properties

As of December 31, 1995, the Company owned and operated 30
Properties, aggregating approximately 2.6 million rentable square feet
and comprised of 24 Industrial Properties totalling approximately
2.1 million rentable square feet, five Suburban Office Properties
totalling approximately 424,000 rentable square feet and one Retail
Property totalling approximately 84,000 rentable square feet. As of
November 30, 1995, the Suburban Office Properties and Industrial
Properties were approximately 97% and 93% occupied, respectively, by a
total of 293 tenants, of which 72 were Suburban Office Property
tenants and 221 were Industrial Property tenants. As of November 30,
1995, the Retail Property was 98% occupied by 15 tenants.

<PAGE>

Table of Properties

The following table summarizes certain information as of
November 30, 1995 with respect to the Properties.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Total Percent Office/
Acquired/ Rentable Total Research and
Property Name and Year Square Percent Annualized Development Number of
Location Constructed Feet Occupied Base Rent (2) Finish Tenants

INDUSTRIAL PROPERTIES

Greater San Francisco Area, California

Building #3 at
Contra Costa Diablo
Industrial Park,
Concord 1990/1983 21,840 100% $108,108 50% 1

Building #8 at
Contra Costa Diablo
Industrial Park,
Concord(3) 1990/1981 31,800 0% $0 18% 0(3)

Building #18 at
Mason Industrial Park,
Concord 1990/1984 28,850 83% $158,832 17% 6

Milpitas Town Center,
Milpitas(4) 1994/1983 102,620 100% $753,936 60% 4

Auburn Court, Fremont 1995/1983 68,030 100% $444,660 50% 6

Westinghouse Drive,
Fremont 1995/1982 24,030 100% $132,648 25% 1

350 East Plumeria
Drive, San Jose 1995/1983 142,700 100% $1,113,060 52% 1

301 East Grand,
South San Francisco 1995/1974 57,846 70% $240,636 21% 2

342 Allerton,
South San Francisco 1995/1969 69,312 100% $476,832 15% 4

400 Grandview,
South San Francisco 1995/1976 107,004 100% $801,816 37% 5

410 Allerton,
South San Francisco 1995/1970 46,050 100% $237,612 12% 1

417 Eccles,
South San Francisco 1995/1964 24,624 100% $140,580 8% 2

Subtotal/
Weighted Average 724,706 93% $4,608,720 37% 33

Greater Los Angeles Area, California

Dupont Industrial
Center, Ontario 1994/1989 451,192 100% $1,429,920 5% 17

3002 Dow Business
Center, Tustin 1995/1987-89 192,125 83% $1,260,276 50% 55

Subtotal/
Weighted Average 643,317 95% $2,690,196 18% 72

Denver, Colorado

Bryant Street
Annex, Denver 1995/1968 55,000 100% $221,112 25% 2

Bryant Street
Quad, Denver 1995/1971-73 155,536 100% $480,516 20% 17

Subtotal/
Weighted Average 210,536 100% $701,628 21% 19

Minneapolis/St. Paul, Minnesota

St. Paul Business Center
East, Maplewood 1995/1984 77,000 90% $484,656 70% 12

St. Paul Business Center
West, Maplewood 1995/1981 108,750 81% $476,184 52% 26

Subtotal/
Weighted Average 185,750 85% $960,840 59% 38

Greater Portland Area, Oregon

Twin Oaks Technology
Center, Beaverton 1995/1984 94,174 81% $552,744 70% 16

Twin Oaks Business
Park, Beaverton 1995/1984 65,780 93% $474,528 100% 15

Subtotal/
Weighted Average 159,954 86% $1,027,272 82% 31

INDUSTRIAL PROPERTIES (CONTINUED)
Kansas City, Kansas

Ninety-Ninth Street #3,
Lenexa 1990/1990 50,000 100% $293,016 18% 2

Ninety-Ninth Street #1,
Lenexa 1995/1988 35,516 100% $282,708 70% 3

Ninety-Ninth Street #2,
Lenexa 1995/1988 12,974 100% $98,088 95% 1

Lackman Business
Center, Lenexa 1995/1985 45,956 98% $377,208 75% 22

Subtotal/
Weighted Average 144,446 99% $1,051,020 56% 28

Total/Weighted Average
All Industrial Properties 2,068,709 93% $11,039,676 36% 221

SUBURBAN OFFICE PROPERTIES

Greater Los Angeles Area, California

1000 Town Center
Drive, Oxnard 1993/1990 107,653 96% $1,832,040 100% 11

Mariner Court,
Torrance 1994/1989 105,436 100% $1,818,667 100% 35

Subtotal/
Weighted Average 213,089 98% $3,650,707 100% 46

Salt Lake City, Utah

Woodlands II,
Salt Lake City 1993/1990 114,352(5) 95% $1,542,984 100% 11

Kansas City, Kansas

6600 College Boulevard,
Overland Park 1995/1982-83 79,316 100% $952,884 95% 6

Greater San Francisco Bay Area,
California

Village Green,
Lafayette(6) 1994/1983 16,895 99% $304,536 100% 9

Total/Weighted Average
All Suburban Office Properties 423,652 97% $6,451,111 99% 72

RETAIL PROPERTY

Academy Place Shopping Center,
Colorado Springs 1995/1980-82 84,347 98% $836,748 N/A 15

Total/Weighted Average
All Properties 2,576,708 94% $18,327,535 47% 308

</TABLE>

____________________
(1) Rentable square feet occupied divided by total rentable square feet.

(2) Annualized Base Rent is computed upon the basis of the monthly base rent
in effect under each lease as of November 30, 1995, or, if such monthly base
rent has been reduced by a temporary rent concession, the monthly base rent
that would have been in effect at such date in the absence of such concession.
Annualized Base Rent does not reflect increases or decreases in monthly
rental rates or any lease expirations which are scheduled to occur or which
may occur after November 30, 1995 or the cost of any leasing commissions or
tenant improvements. See "Glossary."

(3) As of December 31, 1995, Building #8 at Contra Costa Diablo Industrial
Park was 100% occupied by one tenant.

(4) The Company owns 3.1 acres of adjoining land being developed on an
unleased ("speculative") basis. See "Business and Properties Development."

(5) Rentable square feet includes an 8,268 square foot single-story retail
building which was 100% occupied as of November 30, 1995. The Company owns
3.6 acres of adjoining, entitled land available for future development or sale.

(6) The Company's headquarters are located at Village Green.

<PAGE>

The Offering

All of the shares of Common Stock offered hereby are being sold
by the Company. None of the Company's stockholders are selling any
shares of Common Stock in the Offering.

Common Stock outstanding prior
to the Offering 6,090,650 shares

Common Stock offered
in the Offering 6,700,000 shares

Common Stock to be outstanding
after the Offering 12,790,650 shares

Common Stock outstanding after the Offering
assuming all shares of outstanding
Convertible Preferred Stock are converted
at the current conversion price 21,123,984 shares

Use of Proceeds To repay outstanding
indebtedness under the
Credit Facility and to
purchase additional
properties and for general
corporate purposes,
including working capital.
See "Use of Proceeds."

New York Stock Exchange and Pacific
Stock Exchange Symbol "BED"

Distribution Policy

The Company has made regular quarterly distributions to the
holders of the Common Stock in each quarter since the second quarter
of 1993 and has increased the dividend six times from $.05 per share
in the second quarter of 1993 to $.105 per share in each of the
second, third and fourth quarters of 1995. All dividend distributions
made for the years 1993, 1994 and 1995 were classified as a return of
capital for federal income tax purposes. It is likely, however, that
a substantial portion of the Company's dividend distributions in 1996
will be taxable as ordinary income. The Company currently intends to
continue paying regular quarterly dividends and to distribute amounts
sufficient to maintain its status as a REIT. Dividends are made at
the discretion of the Board of Directors and future distributions by
the Company will depend on the Board of Directors' evaluation of the
results of operations of the Company, its financial condition and
capital requirements, restrictions under the Convertible Preferred
Stock, debt instruments and the Maryland General Corporation Law (the
"MGCL"), the annual distribution requirements under the REIT
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), required repayments of borrowings and such other factors as
the Board of Directors deems relevant.

On September 18, 1995 the Company sold 8,333,334 shares of
Convertible Preferred Stock for $50 million in gross proceeds to AEW.
The Company paid dividends to AEW in an amount of approximately $.02
per share of Convertible Preferred Stock for the partial dividend
period commencing September 18, 1995 and ended September 30, 1995 and in
an amount of $.135 per share of Convertible Preferred Stock, for the fourth
quarter of 1995. Dividends may be authorized, declared and paid on
shares of Common Stock in any fiscal quarter only if full cumulative
dividends have been paid on, or authorized and set apart on, all
shares of Convertible Preferred Stock for all prior dividend periods
through and including the end of such quarter. Holders of shares of
Convertible Preferred Stock are entitled to receive in each calendar
quarter, when and as authorized and declared by the Board of
Directors, cumulative dividends in cash in an amount equal to the
greater of (i) an amount per share of $.135 or (ii) the dividends
payable with respect to such quarter on each share of Common Stock
into which each share of the Convertible Preferred Stock is
convertible, plus, in both cases, the accumulated but unpaid dividends
on the Convertible Preferred Stock.

Tax Status of the Company

The Company has elected to be taxed as a REIT under Sections
856-860 of the Code and (subject to certain exceptions) so long as it
qualifies as a REIT is not subject to federal income taxation at the
corporate level on its taxable income that is distributed to the
stockholders of the Company. A REIT is subject to a number of
organizational and operational requirements, including a requirement
that it currently distribute at least 95% of its annual taxable
income. Failure to qualify as a REIT would render the Company subject
to tax (including any applicable minimum tax) on its taxable income at
regular corporate rates, and distributions to the stockholders in any
such year would not be deductible by the Company. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to
certain state and local taxes on its income and property.

Summary Consolidated Financial and Operating Data

The following table sets forth summary consolidated financial
and operating data for the Company and its subsidiaries on a
historical basis as of and for the nine months ended September 30,
1994 and 1995 and the years ended December 31, 1990 through 1994. The
following table also sets forth summary consolidated financial and
operating data for the Company and its subsidiaries on a pro forma
basis as of and for the nine months ended September 30, 1995 and the
year ended December 31, 1994.

The financial and operating data as of and for the years ended
December 31, 1990 through 1994 have been derived from the Company's
audited financial statements. The financial and operating data as of
and for the nine months ended September 30, 1994 and 1995 have been
derived from the Company's unaudited financial statements. The
unaudited financial statements include all adjustments (consisting
only of normal recurring adjustments) that management considers
necessary for a fair presentation of the financial position and
results of operations for these periods. Operating results for the
nine months ended September 30, 1995 are not necessarily indicative of
the results to be expected for the entire year ending December 31,
1995. The following data should be read in conjunction with the
financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

<PAGE>

Summary Consolidated Financial and Operating Data

(in thousands of dollars, except per share, property and occupancy data)

AS OF AND
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
AS OF AND FOR THE YEAR ENDED DECEMBER 31,

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRO PRO
FORMA HISTORICAL FORMA HISTORICAL
1995 1995 1994 1994 1994 1993 1992 1991 1990

Operating Data:
Rental income $15,865 $8,052 $6,305 $20,435 $9,154 $7,207 $9,056 $8,675 $10,229
Income (loss) before
extraordinary item 4,735 1,249 2,703 7,182 3,609 3,147 (21,943) (5,454) (12,278)
Net income (loss) 4,735 1,249 2,703 7,182 3,609 3,147 (18,125) (5,454) (12,278)
Income (loss)
applicable to
common stockholders 1,360 1,089 2,703 2,682 3,609 3,147 (18,125) (5,454) (12,278)
Income (loss) before
extraordinary item per
common share $0.22 $0.18 $0.44 $0.44 $0.59 $0.53 $(3.67) $(0.91) $(2.23)
Net income (loss) per
common share $0.22 $0.18 $0.44 $0.44 $0.59 $0.53 $(3.03) $(0.91) $(2.23)

Cash flow information:
Net cash provided by
operating activities - 1,501 2,026 - 2,716 1,220 198 1,765 2,312
Net cash provided (used)
by investing activities - (13,255) (17,837) - (19,720) 10,085 (1,750) (1,190) 24,038
Net cash provided (used)
by financing activities - 22,583 11,464 - 16,807 (6,550) 1,400 (609) (27,235)

Other Data:
Funds from operations - 2,961 2,378 - 3,622 1,964 879 921 1,746
Dividends declared per share
of Common Stock - $0.305 $0.26 - $0.355 $0.18 - $0.12 $0.48
Number of Properties 30 15 12 30 12 9 12 14 14
Rentable square feet
(in thousands) 2,577 1,356 1,158 2,577 1,158 632 908 1,180 1,180
Percent occupied 94% 95% 95% 95% 95% 88% 90% 88% 93%

<PAGE>

AS OF
SEPTEMBER 30, 1995

PRO FORMA
AS
ADJUSTED
TO REFLECT
PRO THE
ACTUAL FORMA OFFERING (1)

Balance Sheet Data:
Real estate investments
before accumulated
depreciation 70,022 130,193 130,193
Total assets 85,953 132,506 136,305
Mortgage loans payable - - -
Bank loan payable - 42,700 -
Common stock and
other stockholders'
equity 32,432 32,432 78,931
Redeemable preferred
shares 50,000 50,000 50,000

1 Adjusted to reflect the sale of the 6,700,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of
$7 1/2 per share and the application of the net proceeds therefrom.

<PAGE>

RISK FACTORS

In addition to the other information contained or incorporated
by reference in this Prospectus, prospective investors should
carefully consider the following factors before purchasing the Common
Stock offered hereby.

Geographic Concentration; Dependence on California Economy

As of November 30, 1995, approximately 63% of the Company's
total Annualized Base Rent was generated by its Properties located in
the State of California. As a result of this geographic
concentration, the performance of the commercial real estate markets
and the local economies in various areas within California could
affect the value of such Properties and the rental income from such
Properties and, in turn, the Company's results of operations. In
addition, the geographic concentration of the Company's Properties in
California in close proximity to regions known for their seismic
activity exposes the Company to the risk that operating results could
be materially affected by a significant earthquake. See " Risks
Inherent in Real Estate Investments Effect of Uninsured Loss."

Historical Losses; Possibility of Future Losses

The Company had losses of $12.3 million, $5.5 million, $21.9
million and $439,000 for fiscal years 1990 through 1993, respectively,
before taking into account the gain on the extinguishment of debt in
1992 and gains on sales of investments and joint venture partnerships
in 1993. Although such losses were due in large part to investments
which the Company subsequently divested, there can be no assurance
that the Company will not incur significant losses in the future. As
of September 30, 1995, the Company's consolidated balance sheet
reflected accumulated losses and distributions in excess of net income
aggregating approximately $74.8 million, resulting from the losses
referred to above and the fact that aggregate dividends to
stockholders have exceeded net income. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations Results
of Operations."

Risks Inherent in Real Estate Investments

General

Real property investments are subject to numerous risks. The
yields available from an equity investment in real estate depend on
the amount of income generated and costs incurred by the related
properties. If properties in which the company invests do not
generate sufficient income to meet costs, including debt service,
tenant improvements, third-party leasing commissions and capital
expenditures, the Company's results of operations and ability to make
distributions to its stockholders will be adversely affected.
Revenues and values of the Company's properties may be adversely
affected by a number of factors, including the national economic
climate, the local economic climate, local real estate conditions
(such as an oversupply of space or a reduction in demand for real
estate in an area), the attractiveness of the properties to tenants,
competition from other available space, the ability of the Company to
provide adequate maintenance and insurance and to cover other
operating costs, government regulations and changes in real estate,
zoning or tax laws, interest rate levels, the availability of
financing and potential liabilities under environmental and other
laws. Historically, the Company has had tenants leasing space in the
Properties who occasionally have been delinquent in their payments.
Further, because the Company generally does not have extensive
historical or financial information on the tenants in its recently
acquired Properties, there may be tenants in the Company's recently
acquired Properties who, unknown to the Company, were delinquent in
the payment of their rent in the past. As substantially all of the
Company's income is derived from rental income from real property, the
Company's results of operations and ability to make distributions to
stockholders would be adversely affected if a number of the Company's
tenants or one or more of the Company's significant tenants were
unable to meet their obligations to the Company or failed to renew
their leases with the Company, or if the rental rates upon reletting
or renewal of leases were significantly lower than current or expected
rates or if the Company were unable to lease a significant amount of
space on economically favorable terms or at all. In addition, certain
significant expenditures associated with each equity investment (such
as debt service, real estate taxes and maintenance costs) are
generally not reduced when circumstances cause a reduction in rented
income from the investment. Should such events occur, the Company's
results of operations and ability to make distributions to
stockholders could be adversely affected.

Lease Expirations; Renewal of Leases and Reletting of Unleased
Space

As of November 30, 1995, leases representing 3%, 14%, 23%, 22%
and 13% of the Company's total Annualized Base Rent at that date were
scheduled to expire during the remainder of 1995 and in 1996, 1997,
1998 and 1999, respectively. The Company will be subject to the risk
that, upon expiration, certain of these leases will not be renewed,
the space may not be relet, or the terms of renewal or reletting
(including the cost of required renovations or concessions to tenants)
may be less favorable than current lease terms. See "Business and
Properties Lease Expirations for the Properties." In addition, the
Company expects to incur costs in making improvements or repairs to
its Properties required by new or renewing tenants and expenses
associated with brokerage commissions payable in connection with the
reletting of space. Similarly, rental income may be reduced due to
vacancies resulting from lease expirations or by construction of
tenant improvements required by renewing or new tenants. If the
Company is unable to promptly renew leases or relet space or to fund
expenses relating to tenant turnover, if the terms of any such renewal
or reletting are less favorable than current lease terms, or if the
expenses relating to tenant turnover are greater than expected, the
foregoing could have a material adverse effect on the Company and its
ability to make distributions to stockholders.

Dependence on Certain Tenants

At November 30, 1995, ten of the Company's tenants accounted for
approximately 31% of its total Annualized Base Rent. If the Company
were to lose any one or more of such tenants, or if any one or more of
such tenants were to declare bankruptcy or to fail to make rental
payments when due, there could be a material adverse effect on the
Company and its ability to make distributions to stockholders. See
" Bankruptcy of Tenants."

Bankruptcy of Tenants

At any time, a tenant could seek the protection of the
bankruptcy laws, which might result in the modification or termination
of such tenant's lease and cause a reduction in the cash flow of the
Company. In addition, a tenant from time to time may experience a
downturn in its business which may weaken its financial condition and
result in its failure to make rental payments when due. In the event
of default by or bankruptcy of a tenant, the Company may experience
delays in enforcing its rights as lessor and may incur substantial
costs in protecting its investment. The default, bankruptcy or
insolvency of a major tenant may have an adverse effect on the Company
and its ability to make distributions to stockholders. Moreover, a
substantial number of the Company's tenants are professionals or
small- or medium-sized businesses, which are generally more
susceptible to the foregoing risks than are large, well-capitalized
enterprises.

Risks Associated with Real Estate Acquisition and Development

The Company intends to actively seek to acquire industrial and
suburban office properties and portfolios of such properties, which
may include the acquisition of other companies and business entities
owning such properties. Although the Company will engage in due
diligence with respect to each new acquisition, there can be no
assurance that the Company will be aware of all potential liabilities
and problems associated with such properties, and the Company may have
limited contractual recourse, or no contractual recourse, against the
sellers of such properties. In that regard, of the 30 Properties
owned by the Company at December 31, 1995, 24 were acquired in 1994
and 1995, and there can be no assurance that the Company is aware of
all potential liabilities and problems associated with these recently
acquired Properties. Moreover, it is likely that in the future, the
majority of the Company's properties and portfolios of properties will
be acquired on an "as is" basis, with limited recourse against the
sellers. In addition, acquisitions of new properties entail risks
that the investments will fail to perform in accordance with
expectations, and estimates of the costs of improvements to bring an
acquired property up to the Company's standards, and standards
established for the market position intended for that property may
prove inaccurate. To the extent that the Company acquires properties
with substantial vacancies (as it has in the past), there is a risk
that the Company will be unable to lease vacant space in a timely
manner or at all, and that the costs of obtaining tenants (such as
tenant improvements, lease concessions and brokerage commissions)
could prove more costly than anticipated.

The Company is currently developing a 3.1-acre parcel located on
the Company's Milpitas Town Center property (the "Milpitas R&D
Property") in Milpitas, California on an unleased ("speculative")
basis. The Company anticipates incurring approximately $2.7 million
in construction costs in the development, which is scheduled to be
completed in April 1996. The Company will be subject to a number of
additional risks relating to the development of the Milpitas R&D
Property and any other industrial and suburban office property
projects it decides to develop, including the risks that financing for
such development may not be available on favorable terms, that a
project may not be completed or may not be completed on schedule or
for the amount planned (resulting in increased debt service expense
and construction costs) and that newly constructed properties may not
be leased on profitable terms or at all. Timely construction may be
adversely affected by the failure to obtain governmental permits,
environmental matters, by local or national strikes and by local or
national shortages in building materials or supplies or fuel for
equipment. Any of the foregoing could adversely affect the Company
and its ability to make distributions to stockholders.

Effect of Uninsured Loss

The Company currently carries general liability coverage with
primary limits of $1 million per occurrence and $2 million in the
aggregate, as well as a $10 million umbrella liability policy. The
Company carries property insurance on a replacement value basis
covering both the cost of direct physical damage and the loss of
rental income. Separate flood and earthquake insurance is provided
with an annual aggregate limit of $10 million, subject to varying
deductibles of 7.5% to 25% of total insurable value per building with
respect to earthquake coverage. Certain types of losses, however
(such as losses due to acts of war, nuclear accidents or pollution),
may be either uninsurable or not economically insurable. Likewise,
certain losses could exceed the limits of the Company's insurance
policies or could cause the Company to bear a substantial portion of
those losses due to deductibles under those policies. Should an
uninsured loss occur, the Company could lose both its invested capital
in and anticipated cash flow from the property and would continue to
be obligated to repay any outstanding indebtedness incurred to acquire
such property. In addition, a majority of the Properties are located
in areas that are subject to earthquake activity. Although the
Company has obtained earthquake insurance policies for all of its
Properties except 417 Eccles in South San Francisco, should one or
more Properties sustain damage as a result of an earthquake, the
Company may incur substantial losses up to the amount of the
deductible under its earthquake policy and, additionally, to the
extent that the damage exceeds the policy's maximum coverage.
Although the Company has obtained owner's title insurance policies for
each of the Properties, the title insurance may be in an amount less
than the current market value of certain of the Properties. If a
title defect results in a loss that exceeds insured limits, the
Company could lose all or part of its investment in, and anticipated
gains (if any) from, such Property. See "Business and
Properties Insurance."

Substantial Increase in Dividend Requirements; Possible Inability to
Sustain Dividends

The cumulative cash dividends payable on the Convertible
Preferred Stock, which was issued in September 1995, will
substantially increase the cash required to continue to pay cash
dividends on the Common Stock at current levels. The terms and
conditions of the Convertible Preferred Stock provide that dividends
may be paid on shares of Common Stock in any fiscal quarter only if
full cumulative cash dividends have been paid on all shares of
Convertible Preferred Stock in the amount equal to the greater of (i)
an amount per share of $.135 or (ii) the dividends payable with
respect to such quarter on each share of the Common Stock into which
the Convertible Preferred Stock is convertible plus, in both cases,
any accumulated but unpaid dividends on the Convertible Preferred
Stock. Furthermore, if the holders of the Convertible Preferred Stock
exercise their redemption rights and such redemption is not made, the
dividend payable on the Convertible Preferred Stock will increase.
See "Description of Capital Stock of the Company Convertible Preferred
Stock Dividends."

The Convertible Preferred Stock may be redeemed, under certain
circumstances, at the option of the Company or upon demand of the
holders of the Convertible Preferred Stock. Such a redemption would
decrease the amount of cash available to pay cash dividends on the
Common Stock. At any time after September 18, 1997, the Company may
redeem the Convertible Preferred Stock in whole (but not in part) at
its option at a price calculated by determining an internal rate of
return on the Convertible Preferred Stock of 25% per annum for the
period from September 18, 1995 until September 18, 1997 and an
internal rate of return on the Convertible Preferred Stock of 20% per
annum from and after September 18, 1997 until the date of redemption,
but not beyond September 18, 2000. At any time after September 18,
2000, or at any time prior thereto if there are less than 400,000
shares of Convertible Preferred Stock outstanding, the Convertible
Preferred Stock may be redeemed in whole or in part at the option of
the Company at a redemption price equal to $6.30 per share (declining
$.06 in each of the first five full years commencing on September 18,
2000) plus all accrued and unpaid dividends. In addition, after
September 18, 1996, the Company will be required, at the option of the
holders of the Convertible Preferred Stock, to redeem the Convertible
Preferred Stock on demand of the holders thereof on the occurrence of
any one or more of the following: (i) the failure to pay dividends on
the Convertible Preferred Stock for two consecutive quarters, (ii) a
default in the payment on certain institutional debt, (iii) the
failure of the Company to obtain any required consent of the holders
of the Convertible Preferred Stock or (iv) the failure to reach
certain financial performance levels. See "Description of Capital
Stock of the Company Convertible Preferred Stock Redemption."

In addition, the Common Stock issuable upon conversion of the
Convertible Preferred Stock and the Common Stock issued in connection
with the Offering will further substantially increase the cash
required to continue to pay cash dividends at current levels. Any
Common Stock or Preferred Stock that may in the future be issued to
finance acquisitions, upon exercise of stock options or otherwise
would have a similar effect. See "Risk Factors Shares Available for
Future Sale" and "Shares Available for Future Sale." The Company's
ability to pay dividends will depend in large part on the performance
of its Properties and other properties that it may acquire in the
future. In addition, the Credit Facility limits quarterly dividends
to stockholders to an amount equal to 90% of the average Funds From
Operations for the prior two quarters.

In addition, the Company's ability to pay dividends is based
upon a number of uncertainties. In particular, the Company acquired
24 of its 30 Properties in 1994 and 1995 and, therefore, has a limited
operating history with respect to those Properties. The Company's
ability to pay dividends depends in large part upon whether these
recently acquired Properties, as well as the Company's other
Properties and future acquisitions perform in accordance with
expectations. Likewise, the Company's ability to pay dividends will
depend upon, among other things, occupancy levels at its properties,
its ability to enter into new leases upon expiration of current leases
and costs associated with the renewal or reletting of space,
expenditures with respect to existing and newly acquired Properties,
the amount of its debt and the interest rate thereon, default or
bankruptcy by tenants, and other costs relating to its Properties, as
well as the continued absence of significant expenditures relating to
environmental or other regulatory matters. Most of these matters are
beyond the control of the Company and it is unlikely that the
Company's expectations with respect to these matters will prove
accurate in all respects. A significant difference between such
expectations and actual results could have a material adverse effect
on the Company and its ability to pay dividends.

The Company's ability to pay dividends on the Common Stock is
further limited by the MGCL. Under the MGCL, a Maryland corporation
may not make a distribution on its common stock if, after giving
effect to such distribution, either (i) the corporation would not be
able to pay indebtedness of the corporation as such indebtedness
becomes due in the usual course of business or (ii) the corporation's
total assets would be less than the sum of the corporation's total
liabilities plus any payments the corporation would be required to
make upon the corporation's dissolution to holders of stock having a
liquidation preference (such as the Convertible Preferred Stock) over
common stock in the event of dissolution. See "Description of Capital
Stock of the Company Convertible Preferred Stock Liquidation
Preference."

Tax Risks; Risks Associated with REIT Status

Adverse Consequences of the Failure to Maintain Qualification as
a REIT

The Company believes that it has operated so as to qualify as a
REIT under the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with the taxable year 1985. However, no assurance can be
given that the Company will be able to continue to operate in a manner
enabling it to remain so qualified or that it will not be found to
have failed to qualify as a REIT for a prior tax year. In that regard
(as discussed below), it is uncertain whether the Company properly
requested written statements from certain stockholders for tax years
1992 and 1993 as required by the regulations issued by the United
States Treasury Department (the "Treasury Regulations") under the
Code. Qualification as a REIT involves the application of highly
technical and complex Code provisions which have only a limited number
of judicial and administrative interpretations, and the determination
of various factual matters and circumstances not entirely within the
Company's control may have an impact on its ability to maintain its
qualification as a REIT. For example, in order to qualify as a REIT,
at least 95% of the Company's gross income in any year must be derived
from qualifying sources and the Company must make distributions to
stockholders aggregating annually at least 95% of its REIT taxable
income (excluding net capital gains). In addition, no assurance can
be given that new legislation, Treasury Regulations, administrative
interpretations or court decisions will not significantly change the
tax laws with respect to its qualification as a REIT or the federal
income tax consequences of such qualification. The Company, however,
is not aware of any proposal to amend the tax laws that would
significantly and adversely affect the Company's ability to continue
to operate as a REIT.

As a condition to maintaining its status as a REIT, the Code,
and the Treasury Regulations promulgated thereunder, contain a
requirement (the "Five or Fewer Requirement") that, during the last
half of each taxable year, not more than 50% in value of the REIT's
outstanding stock be owned, directly or indirectly, by five or fewer
individuals (defined in the Code to include certain entities). In
order to determine if a REIT satisfies the Five or Fewer Requirement,
the Treasury Regulations require a REIT to request written statements
concerning the ownership of its capital stock from certain
stockholders of record (the "Stockholder Polling Requirements"). See
"Certain Federal Income Tax Considerations Requirements for
Qualification." For tax years 1992 and 1993 (and possibly for certain
prior years which tax counsel referred to below believes are outside
the normal period for federal tax audit), it is uncertain whether the
Company properly requested the written statements required by the
Stockholder Polling Requirements from certain clearing organizations
holding Common Stock as nominees for the beneficial owners of such
shares. However, the Company did employ stockholder polling
procedures for tax years 1992 and 1993 which it believes went beyond
what is required by the Treasury Regulations under the Code in
providing stockholder ownership information for purposes of
determining whether the Company had satisfied the Five or Fewer
Requirement. In that regard, the Company has received an opinion of
Shearman & Sterling, counsel to the Company, to the effect that, based
on various assumptions and factual representations made by the
Company, the Company has not, by virtue of the Stockholder Polling
Requirements, failed to qualify as a REIT with respect to tax years
1992 and 1993. However, such opinion is not binding on the Internal
Revenue Service (the "IRS"). If the IRS were to successfully
challenge such compliance, the Company would lose its status as a REIT
as of the first taxable year in which it was considered not to have
complied with such requirements. See "Federal Income Tax
Considerations Failure to Qualify."

The Stock Purchase Agreement, in effect, permits a partner in
AEW to own up to 8.2% of the outstanding shares of Common Stock of
the Company on a fully diluted basis (that is, treating the
Convertible Preferred Stock as if all of such stock were converted to
Common Stock). This is the equivalent of owning approximately 14.2%
of the Convertible Preferred Stock, based on the number of shares of
Common Stock outstanding before the completion of the Offering or
20.8% based on the number of shares of Common Stock outstanding after
the Offering. If each share of the Convertible Preferred Stock and
each share of the Common Stock were relatively equal in value, the
ownership of the Convertible Preferred Stock or the Common Stock upon
conversion by AEW would not cause the Company to violate the Five or
Fewer Requirement since, when the maximum ownership of each of the
partners of AEW is combined with the ownership of Peter Bedford, five
or fewer individuals would not own more than 50% in value of the
outstanding shares of the Company. Notwithstanding the foregoing, if
(i) there were a substantial decline in the value of a share of the
Common Stock relative to a share of the Convertible Preferred Stock,
(ii) five or fewer individuals owned more than 50% of the Convertible
Preferred Stock, and (iii) such Convertible Preferred Stock
constituted more than 50% of the aggregate value of both the Common
Stock and the Convertible Preferred Stock, the Company would cease to
be eligible to be treated as a REIT. The Company believes that the
likelihood of all three circumstances occurring is remote. For
example, as noted, five or fewer "individuals" would need to own more
than a 50% interest in AEW. The Company believes that most of the
partners in AEW are entities which are widely held and not
individuals. Therefore, based upon the "look through" requirement
described above, the Company believes that it is unlikely that five or
fewer "individuals" would own more than 50% of the outstanding shares.
Nonetheless, if there were both such a substantial decline in value of
the shares of Common Stock and five or fewer individuals were treated
as owning more than 50% of AEW, the Company could fail to qualify as a
REIT.

If the Company fails to maintain its qualification as a REIT, or
is found not to have qualified as a REIT for any prior year, the
Company would not be entitled to deduct dividends paid to its
stockholders and would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular
corporate rates. In addition, unless entitled to relief under certain
statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year
during which qualification was lost. This treatment would reduce
amounts available for investment or distribution to stockholders
because of the additional tax liability to the Company for the year or
years involved. In addition, the Company would no longer be required
by the Code to make any distributions. As a result, disqualification
of the Company as a REIT could have a material adverse effect on the
Company and its ability to make distributions to stockholders. To the
extent that distributions to stockholders have been made in
anticipation of the Company's qualifying as a REIT, the Company might
be required to borrow funds or to liquidate certain of its investments
to pay the applicable tax. See "Federal Income Tax Considerations."

Effect of Distribution Requirements

To maintain its status as a REIT, the Company is required each
year to distribute to its stockholders at least 95% of its taxable
income (excluding net capital gains). In addition, the Company is
subject to a 4% nondeductible excise tax on the amount, if any, by
which certain distributions paid by it with respect to any calendar
year are less than the sum of 85% of its ordinary income and 95% of
its capital gain net income for the calendar year plus any amount of
such income not distributed in prior years. See "Federal Income Tax
Considerations." Although the Company anticipates that cash flow from
operations will be sufficient to enable it to pay its operating
expenses and meet the distribution requirements discussed above, there
can be no assurance that this will be the case and it may be necessary
for the Company to incur borrowings or otherwise obtain funds to
satisfy the distribution requirements associated with maintaining its
qualification as a REIT. In addition, differences in timing between
the receipt of income and the payment of expenses in arriving at
taxable income of the Company could require the Company to incur
borrowings or otherwise obtain funds to meet the distribution
requirements that are necessary to maintain its qualification as a
REIT. There can be no assurance that the Company will be able to
borrow funds or otherwise obtain funds if and when necessary to
satisfy such requirements.

Transfer and Ownership Limitations

For the purpose of preserving the Company's REIT qualification,
the Company's Charter provides that no holder is permitted to own,
either actually or constructively under the applicable attribution
rules of the Code, more than 5% (in value) of the aggregate
outstanding shares of all classes of stock of the Company or more than
5% (in number or value, whichever is more restrictive) of the
outstanding shares of Common Stock, with certain exceptions. In
addition, no holder is permitted to own, either actually or
constructively under the applicable attribution rules of the Code, any
shares of any class of the Company's stock if such ownership would
cause more than 50% in value of the Company's outstanding stock to be
owned by five or fewer individuals or would result in the Company's
stock being beneficially owned by less than 100 persons (determined
without reference to any rule of attribution). Acquisition or
ownership (actual or constructive) of the Company's stock in violation
of these restrictions results in automatic transfer of such stock to a
trust for the benefit of a charitable beneficiary or, under certain
specified circumstances, the violative transfer may be deemed void ab
initio or the Company may choose to redeem the violative shares. Mr.
Bedford and AEW are subject to higher ownership limitations than the
other stockholders. Specifically, Mr. Bedford is not permitted to own
more than 15% of the lesser of the number or value of the outstanding
shares of Common Stock, as adjusted to take into account the
conversion of the 8,333,334 shares of Convertible Preferred Stock.
AEW is permitted to own 100% of the outstanding shares of Convertible
Preferred Stock, but not more than 58% of the lesser of the number or
value of the outstanding shares of Common Stock, as adjusted to take
into account the conversion of the 8,333,334 shares of Convertible
Preferred Stock. See "Description of Capital Stock of the
Company Restrictions on Transfer and Ownership of Shares."

The constructive ownership rules are complex and may cause
Common Stock or Convertible Preferred Stock owned beneficially or
constructively by a group of related individuals and/or entities to be
constructively owned by one individual or entity. As a result, the
acquisition of less than 5% percent of the number or value of
outstanding Common Stock or of less than 5% percent of the value of
outstanding Convertible Preferred Stock (or the acquisition of an
interest in an entity which owns Common Stock or Convertible Preferred
Stock) by an individual or entity could cause that individual or
entity (or another individual or entity) to constructively own Common
Stock or Convertible Preferred Stock in excess of the limits described
above, and thus subject such stock to the ownership restrictions in
the Charter. See "Description of Capital Stock of the
Company Restrictions on Transfer and Ownership of Shares."

Dependence on Key Personnel

The Company is highly dependent on the efforts of its senior
officers, and in particular Peter B. Bedford, its Chairman and Chief
Executive Officer. While the Company believes that it could find
replacements for these key personnel, the loss of their services could
have a material adverse effect on the Company. In addition, the
Credit Facility provides that it is an event of default thereunder if
Mr. Bedford ceases for any reason to be the Chairman or Chief
Executive Officer of the Company and a replacement reasonably
satisfactory to the lenders thereunder has not been appointed by the
Board of Directors within six months thereafter. Additionally, if Mr.
Bedford were to cease serving substantially full-time as Chief
Executive Officer of the Company, the holders of the Convertible
Preferred Stock would be entitled to elect the smallest number of
directors constituting a majority of the Board of Directors of the
Company which could result in significant changes in the business
objectives, strategies and other policies of the Company. In
addition, the Convertible Preferred Stock must be redeemed 180 days
after such election. However, a majority of directors who are not
elected by the holders of the Convertible Preferred Stock may rescind
such automatic redemption prior to the end of the 180-day period at
their discretion. See "Description of Capital Stock of the
Company Convertible Preferred Stock Redemption." Mr. Bedford and the
Company have entered into an amended employment agreement pursuant to
which Mr. Bedford has agreed to serve as Chairman of the Board and
Chief Executive Officer on a substantially full-time basis until the
agreement s expiration on September 18, 2000. This agreement will be
automatically renewed for additional consecutive one-year terms unless
either party gives the other notice of non-renewal. See "Certain
Relationships and Related Transactions Employment Agreement."

Competition

Numerous industrial and suburban office properties compete with
the Company's Properties in attracting tenants. Some of these
competing properties are newer, better located or better capitalized
than the Company's Properties. Many of the Company's investments,
particularly the Suburban Office Properties, are located in markets
which have a significant supply of available space, resulting in
intense competition for tenants and lower rents. The number of
competitive properties in a particular area could have a material
adverse effect on the Company's ability to lease space in the
Properties or at newly acquired or developed properties. In addition,
numerous real estate companies (including other REITs) compete with
the Company in making bids to acquire new properties. Many of these
companies are larger and have substantially greater financial
resources than the Company. The activities of these competitors could
cause the Company to pay a higher purchase price for a new property
than it otherwise would have paid, or may prevent the Company from
purchasing a desired property at all.

Regulatory Compliance

Environmental Matters

Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate is liable for the
costs of removal or remediation of certain hazardous or toxic
substances released on, above, under or in such property. Such laws
often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of such removal or remediation could be
substantial. Additionally, the presence of such substances, or the
failure to properly remediate such substances, may adversely affect
the owner's ability to borrow using such real estate as collateral.
All of the Properties have had Phase I environmental site assessments
(which involve inspection without soil sampling or groundwater
analysis) by independent environmental consultants and have been
inspected for hazardous materials as part of the Company's acquisition
inspections. None of the Phase I assessments has revealed any
environmental conditions requiring material expenditures for
remediation. The Phase I assessment for Milpitas Town Center
indicates that the groundwater under that Property either has been, or
may in the future be, impacted by the migration of contaminants
originating off-site. According to information available to the
Company, the responsible party for this off-site source has been
identified and has begun remediation pursuant to a cleanup program
mandated by a California environmental authority and the cleanup
program is backed by an insurance policy from CIGNA up to $10 million.
The Company does not believe that this environmental matter will
impair the future value of Milpitas Town Center in any significant
respect, or that the Company will be required to fund any portion of
the cost of remediation, although there can be no assurance in this
regard. No assurance can be given that these Phase I assessments or
the Company's inspections have revealed all environmental liabilities
and problems relating to its Properties.

Certain environmental laws impose liability on a previous owner
of property to the extent that hazardous or toxic substances were
present during the prior ownership period. A transfer of the property
does not relieve an owner of such liability. Thus, the Company may be
liable in respect of properties and joint venture interests previously
sold or otherwise divested.

The Company believes that it is in compliance in all material
respects with all federal, state and local laws regarding hazardous or
toxic substances. To date, compliance with federal, state and local
environmental protection regulations has not had a material effect
upon the Company. However, there can be no assurance that costs of
investigating and remediating environmental matters with respect to
properties currently or previously owned by the Company or properties
which the Company may acquire in the future, or other expenditures or
liabilities (including claims by private parties) resulting from
hazardous substances present in, on, under or above such properties or
resulting from circumstances or other actions or claims relating to
environmental matters, will not have a material adverse effect on the
Company and its ability to make distributions to stockholders.

Americans with Disabilities Act Compliance; Government
Regulation; Risk of Increased Regulatory Compliance Costs

Under the Americans with Disabilities Act (the "ADA"), effective
in 1992, all public accommodations and commercial facilities are
required to meet certain federal requirements related to access and
use by disabled persons. Compliance with the ADA requires removal of
access barriers, and noncompliance may result in imposition of fines
by the U.S. government or an award of damages to private litigants.
Although the Company believes that the Properties are substantially in
compliance with these requirements, the Company may in the future
incur costs to comply with the ADA with respect to both existing
Properties and properties which may be acquired in the future, which
could have an adverse effect on the Company and its ability to make
distributions to stockholders.

The Properties are, and properties which the Company may acquire
in the future will be, subject to various other federal, state and
local regulatory requirements such as local building codes and other
similar regulations. Failure to comply with these requirements could
result in the imposition of fines by governmental authorities or
awards of damages to private litigants. The Company believes that the
Properties are currently in substantial compliance with all applicable
regulatory requirements, although expenditures at properties owned by
the Company may be required to comply with changes in these laws. No
material expenditures are contemplated at this time in order to comply
with any such laws or regulations; however, there can be no assurance
that these requirements will not be changed or that new requirements
will not be imposed that would require significant unanticipated
expenditures by the Company, which could have an adverse effect on the
Company and its ability to make distributions to stockholders.
Similarly, changes in laws increasing the potential liability for
environmental conditions existing on the Properties may result in
significant unanticipated expenditures, which could adversely affect
the Company and its ability to make distributions to stockholders.

Risks of Debt Financing

Dependence on Credit Facility

The Credit Facility currently permits the Company to borrow and
issue letters of credit thereunder in an aggregate principal amount of
up to $60 million at any time outstanding, subject to certain
limitations. Borrowings under the Credit Facility bear interest at a
floating rate and the Company may from time to time incur or assume
other indebtedness which bears interest at a floating rate. In the
event of interest rate increases, the Company's results of operations
may be adversely affected. In that regard, the Company's results of
operations for the last several years have benefitted from
historically low levels of interest rates. The Credit Facility is
secured by mortgages on 23 Properties (which Properties collectively
accounted for approximately 81% of the Company's Annualized Base Rent
as of November 30, 1995), along with the rental proceeds from such
Properties. As of December 31, 1995, these 23 Properties comprised
approximately 79% of the Company's total assets. In addition, the
Company anticipates that it will pledge properties acquired after the
completion of this Offering as collateral under the Credit Facility.
If the Company fails to meet its obligations under the Credit Facility
or any other debt instruments it may enter into from time to time,
including failure to comply with financial covenants, the holders of
such indebtedness generally would be entitled to demand immediate
repayment of the principal thereof and to foreclose upon any
collateral securing such indebtedness.

The Credit Facility expires on September 1, 1998, when the
principal amount of all outstanding borrowings must be paid. Since
the term of the Credit Facility is limited, the Company's ability to
continue to fund acquisitions and provide funds for working capital
and other cash needs following the expiration or utilization of the
Credit Facility will depend primarily on its ability to obtain
additional private or public equity or debt financing. There can be
no assurance that such financing will be available. See "Business and
Properties The Credit Facility."

The Company is subject to the risks normally associated with
debt financing, including the risk that the Company's cash flow from
operations will be insufficient to meet required payments of principal
and interest, the risk that the Company will not be able to refinance
existing indebtedness or that the terms of any such refinancing will
not be as favorable as the terms of such indebtedness, and the risk
that the Company may be unable to finance future acquisitions or
capital expenditures on favorable terms, or at all. In addition, the
Company is subject to the risk that its failure to maintain its REIT
status may constitute an event of default under the Credit Facility.
In addition, the Credit Facility provides that it is an event of
default thereunder if Mr. Bedford ceases for any reason to be Chairman
or Chief Executive Officer of the Company and a replacement reasonably
satisfactory to the lender under the Credit Facility has not been
appointed by the Board of Directors within six months thereafter. In
addition, default under or acceleration of any debt instrument could,
pursuant to cross-default clauses, cause or permit the acceleration of
other indebtedness and trigger the right of the holders of the
Convertible Preferred Stock, subject to applicable laws regarding
distributions, to cause the Company to redeem all of the then
outstanding shares of Convertible Preferred Stock at a price of $6.00
per share plus all accrued dividends payable thereon. Any such
default or acceleration could have a material adverse effect on the
Company and its ability to make distributions to stockholders and to
maintain its qualification as a REIT under the Code and could threaten
the continued viability of the Company. See " Dependence on Key
Personnel," "Description of Capital Stock of the Company Convertible
Preferred Stock Redemption" and "Business and Properties The Credit
Facility."

Policies on Indebtedness Subject to Change

The Company currently has a policy of limiting its total
consolidated indebtedness to 50% of its Total Market Capitalization
(see "Glossary"), but the organizational documents of the Company do
not contain any limitation on the amount or percentage of indebtedness
the Company may incur. Accordingly, the Board of Directors could
alter its policy of limiting the extent of its borrowing. If this
policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service that could adversely affect
the Company and its ability to make distributions to stockholders and
in increased risk of default on its obligations. Moreover, although
the Company will consider factors other than Total Market
Capitalization in making decisions regarding the incurrence of debt
(such as the purchase price of properties to be acquired with debt
financing, the estimated market value of properties upon refinancing,
and the ability of particular properties and the Company as a whole to
generate cash flow to cover expected debt service), there can be no
assurance that the ratio of total consolidated indebtedness to Total
Market Capitalization (or to any other measure of asset value) will be
such that the Company, after meeting debt service obligations thereon,
would be able to make stockholder distributions at the level currently
expected.

Redemption of the Convertible Preferred Stock

After September 18, 1996, the Company will be required, at the
option of the holders of the Convertible Preferred Stock, to redeem
the Convertible Preferred Stock on demand of the holders thereof on
the occurrence of any one or more of the following: (i) the failure
to pay dividends on the Convertible Preferred Stock for two
consecutive quarters, (ii) a default in the payment on certain
institutional debt, (iii) the failure of the Company to obtain any
required consent of the holders of the Convertible Preferred Stock or
(iv) the failure to reach certain financial performance levels. The
Company could experience substantial difficulty in financing any such
redemption and may be required to liquidate a substantial portion of
its properties. In addition, it is likely that the resultant
financial strain on the Company's capital resources would adversely
affect the market price of the Common Stock. See "Description of
Capital Stock of the Company Convertible Preferred Stock Redemption."

Registration Rights

After September 18, 1997, AEW and certain of its transferees
have the right to cause the Company to register the shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock for
sale to the public. In addition, pursuant to a registration rights
agreement, Mr. Bedford has the right to require the Company to
register up to 500,000 shares of Common Stock under the Securities Act
for offer and sale to the public (including by way of an underwritten
public offering) and to cause such shares to be included in any
registration statement filed by the Company. The right of AEW and
certain of its transferees and Mr. Bedford to register shares of
Common Stock issuable upon conversion of the Convertible Preferred
Stock and sell them in the public market could have a material adverse
effect on both the market price for the Common Stock and the Company's
ability to raise additional equity capital in the future. See
" Shares Available for Future Sale," "Description of Capital Stock of
the Company Convertible Preferred Stock Registration Rights" and
"Shares Available for Future Sale."

Risk of Substantial Dilution

At any time after September 18, 1997, the shares of Convertible
Preferred Stock will be convertible, at the option of the holders,
into such number of shares of Common Stock as is determined by
dividing $6.00 by the conversion price then in effect. The initial
conversion price is $6.00 per share and, therefore, each share of
Convertible Preferred Stock is initially convertible into one share of
Common Stock. See " Shares Available For Future Sale" and "Shares
Available For Future Sale." The conversion price is subject to
adjustment to provide certain antidilution protection to the
Convertible Preferred Stock. Holders of Common Stock could experience
substantial dilution in the event that the Company issues a
substantial number of additional shares of the Common Stock and/or
Preferred Stock, either upon conversion of the Convertible Preferred
Stock or otherwise, which issuance could adversely affect the market
price of Common Stock. See "Description of Capital Stock of the
Company Convertible Preferred Stock Conversion Rights."

Effect of Market Interest Rates on Price of Common Stock

One of the factors that will influence the market price of the
shares of Common Stock in public markets will be the annual yield on
the price paid for shares of Common Stock from distributions by the
Company. An increase in market interest rates may lead prospective
purchasers of the Common Stock to seek a higher annual yield from
their investments. Such circumstances may adversely affect the market
price of the Common Stock.

Concentration of Voting Power and Right to Consent of the Holders of
the Convertible Preferred Stock

The holders of the Convertible Preferred Stock have and will
continue to have significant direct and indirect influence over the
Company's affairs. Subject to certain limitations, the consent of AEW
or of any transferee holding 50% or more of the outstanding
Convertible Preferred Stock will be required for the Company to make
substantial investments, to issue substantial amounts of debt, modify
executive compensation or employment contracts, or change the
Company's business plan. See "Description of the Capital Stock of the
Company Convertible Preferred Stock Protective Provisions." In
addition, the budget applicable to the overhead component of the
Company's acquisitions and financing expenditures made through Bedford
Acquisitions, Inc., a corporation wholly-owned by Mr. Bedford, is
subject to the approval of AEW. See "Certain Relationships and
Related Transactions." As a result, although the Board of Directors
and the Company's management will continue to manage the ordinary
business affairs of the Company, AEW will have the ability to exercise
a controlling influence over most substantial transactions.

In addition, the holders of the Convertible Preferred Stock as a
class currently have the right to elect two directors. Under certain
circumstances, the holders of the Convertible Preferred Stock will be
entitled to elect a number of directors constituting a majority of the
Board of Directors. Such circumstances include the Company's failure
to pay quarterly dividends on the Convertible Preferred Stock in two
consecutive quarters or redeem the Convertible Preferred Stock
pursuant to a valid demand for redemption, and Mr. Bedford's cessation
to serve substantially full-time as Chief Executive Officer of the
Company. See "Description of Capital Stock of the Company Convertible
Preferred Stock Redemption." Moreover, the Company may not authorize
or create any class or series of stock that ranks equal or senior to
the Convertible Preferred Stock with respect to the payments of
dividends or amounts upon liquidation, dissolution or winding up
without the consent of the holders of a majority of the outstanding
shares of Convertible Preferred Stock, voting together as a single
class. Although the Board of Directors generally owes a fiduciary
duty to the Company, there can be no assurance that the interests of
AEW, and indirectly the directors elected by the holders of the
Convertible Preferred Stock, will not differ from or conflict with the
interests of the holders of Common Stock.

In addition, upon conversion of the Convertible Preferred Stock
into shares of Common Stock, the holders of the Convertible Preferred
Stock would have considerable influence with respect to the election
of directors and the approval or disapproval of significant corporate
actions, since they would hold approximately 40% of all outstanding
shares, assuming such conversion took place at the completion of the
Offering.

As of December 31, 1995, AEW, an affiliate of Aldrich Eastman
Waltch, L.P., was the sole holder of all outstanding shares of the
Convertible Preferred Stock. In view of the substantial influence of
the holders of the Convertible Preferred Stock over the Company's
affairs, it should be noted that AEW's interests do not necessarily
coincide with those of the holders of the Common Stock and therefore
its actions with respect to the Company will not necessarily be in the
best interests of the holders of Common Stock. In addition, AEW's
affiliation with Aldrich Eastman Waltch, L.P., a national real estate
investment adviser whose clients primarily include institutional
investors and other affiliates engaged in businesses competitive with
the Company, may give rise to a conflict of interest.

In addition, as of December 31, 1995, Mr. Bedford's beneficial
ownership of 1,819,325 shares of Common Stock of the Company
(including then-exercisable options to purchase 95,000 shares and
options exercisable within sixty days of such date to purchase 12,500
shares) represented approximately 30% of the outstanding shares of
Common Stock at that date. Mr. Bedford will be the beneficial owner
of the same number of shares at the completion of the Offering,
representing approximately 14% of the outstanding shares of Common
Stock at the completion of the Offering. While Mr. Bedford does not
and will not have majority control of the Company, he currently has,
and likely will continue to have, significant influence with respect
to the election of directors and approval or disapproval of
significant corporate actions.

Exemption from the Maryland Business Combination Law

Under the MGCL, certain "business combinations" (including
certain issuances of equity securities) between a Maryland corporation
and any Interested Stockholder or an affiliate thereof are prohibited
for five years after the date on which the Interested Stockholder
becomes an Interested Stockholder unless approved by two super
majority votes of the stockholders. Under the MGCL, an Interested
Stockholder includes any individual or entity which is the beneficial
owner of 10% or more of a corporation's outstanding stock which is
entitled to vote generally in the election of directors ("Voting
Stock"). However, as permitted by the statute, the Board of Directors
has elected to exempt the Company from the "business combination"
provision of the MGCL. Consequently, unless such exemption is amended
or repealed by the Board of Directors, the five-year prohibition and
the super majority vote requirements described above will not apply to
any business combination between any Interested Stockholder and the
Company. As a result, the Company may in the future enter into
business combinations with Mr. Bedford, AEW or other Interested
Stockholders, without compliance by the Company with the super
majority vote requirements and other provisions of the statute. See
"Certain Relationships and Related Transactions," "Certain Provisions
of Maryland Law and of the Company's Charter and Bylaws Maryland
Business Combination Law" and "Certain Provisions of Maryland Law and
of the Company's Charter and Bylaws Business Combinations."

Anti-takeover Effect of the Charter, the Bylaws, the Convertible
Preferred Stock and Certain Provisions of Maryland Law

The Company's Charter authorizes the Board of Directors to cause
the Company to issue additional shares of Common Stock or Preferred
Stock and to set the preferences, rights and other terms of such
Preferred Stock without the approval of the holders of the Common
Stock, provided that the Company must obtain the consent of AEW or the
transferee of AEW holding more than 50% of the outstanding shares of
Convertible Preferred Stock in order to issue certain equity
securities and may not authorize or create any class or series of
stock that ranks equal or senior to the Convertible Preferred Stock.
See "Description of Capital Stock of the Company Convertible Preferred
Stock Protective Provisions" and "Description of Capital Stock of the
Company Convertible Preferred Stock Ranking." Although the Board of
Directors has no intention to issue any shares of Preferred Stock at
the present time, it may establish one or more series of Preferred
Stock that could, depending on the terms of such series, delay, defer
or prevent a transaction or a change in control of the Company that
might involve a premium price for the Company's stock or otherwise be
in the best interests of the holders of Common Stock, or that could
have dividend, voting or other rights that could adversely affect the
interests of holders of Common Stock.

The Charter of the Company also contains other provisions that
may delay, defer or prevent a transaction or a change in control of
the Company that might involve a premium price for the stock or
otherwise be in the best interests of the stockholders or that could
otherwise adversely affect the interests of the stockholders, and the
Bylaws may be amended by the Board of Directors (subject to the
consent of AEW) to include provisions that would have a similar
effect, although the Board presently has no such intention. The
Charter provides that the Company must seek the consent of AEW or the
transferee of AEW holding more than 50% of the outstanding shares of
Convertible Preferred Stock before it may merge or consolidate or sell
assets with a purchase price of more than $10 million. Additionally,
the Charter contains provisions limiting the transferability and
ownership of shares of the capital stock of the Company, which may
have the effect of delaying, deferring or preventing a transaction or
a change in control of the Company. For example, these ownership
provisions preclude any potential acquiror from purchasing more than
5% percent in value of the Company's stock, discouraging any tender
offer which may be attractive to the holders of the Common Stock and
limiting the opportunity for stockholders to receive a premium for
their Common Stock that might otherwise exist if an investor were
attempting to assemble a block of shares in excess of 5% in number or
value of the Company's stock, or to otherwise effect a change in
control of the Company. See "Description of Capital Stock of the
Company Limitations on Transferability and Ownership."

Although, as described above in " Exemption from the Maryland
Business Combination Law," the Board of Directors has elected to
exempt the Company from the "business combination" provisions of the
MGCL, such exemption may be amended or repealed by the Board of
Directors at any time, except that the Charter provides that the
Company must seek the consent of specified holders of the Convertible
Preferred Stock before amending or repealing such resolution with
respect to AEW or with respect to the exercise of any redemption right
of the Convertible Preferred Stock which may constitute a business
combination. In addition, the Charter provides that, upon the
adoption of a resolution by the Board of Directors and approval
thereof by the affirmative vote of all stockholders entitled to vote
holding at least 80% of the outstanding voting stock of the Company,
voting together as a single class, the Charter may be amended to
include provisions restricting the ability of the Company to engage in
business combinations under the MGCL. Such action by the Board of
Directors would impose the "business combination" restrictions of the
MGCL on the Company, which could delay, defer or prevent a transaction
or change in control of the Company that might involve a premium price
for the Company's stock or otherwise be in the best interests of the
stockholders or that could otherwise adversely affect the interests of
the stockholders.

The Charter sets forth certain limitations on the Company's
ability to enter into a transaction with any Interested Stockholder.
As defined in the Charter, an "Interested Stockholder" includes any
individual, firm, corporation (other than the Company) or other entity
which is the beneficial owner of 10% or more of the outstanding shares
of voting stock of the Company. This definition is substantially
similar to the definition of "Interested Stockholder" under the MGCL.
Specifically, the Charter requires the affirmative vote of at least
80% of the Voting Stock of the Company in order for the Company to
enter into, among other transactions, a merger or consolidation, or
any sale, lease or exchange involving assets of the Company having an
aggregate fair market value of $5 million or more, with any Interested
Stockholder. This limitation does not apply to transactions which,
among other things, have been approved by a majority of the Directors
who, at the time such approval is given, are not affiliates of the
Interested Stockholder. In addition, such prohibition does not apply
if, among other things, the price to be received by the holders of
voting stock of the Company in such transaction is the higher of
(i) the highest per share price paid by the Interested Stockholder for
any such stock acquired by it within the two years preceding the
transaction or (ii) the highest per share price paid by the Interested
Stockholder in the transaction pursuant to which it became an
Interested Stockholder. This provision in the Charter could delay or
impede a transaction or a change in control of the Company that might
involve a premium price for the Company's capital stock or otherwise
be in the best interests of the stockholders unless such transaction
is approved by the Board of Directors or stockholders as aforesaid.
In addition, because this provision may be amended only pursuant to
the vote of 80% of the outstanding voting stock of the Company, it may
be difficult to amend this provision in response to a proposed
transaction that may be in the best interests of the stockholders.
The Board of Directors has adopted a resolution that exempts any
transaction between the Company and AEW or an AEW affiliate from the
limitations of this Charter provision. Such resolution may be amended
or repealed only if any such amendment or the repeal thereof does not
adversely affect the interests of AEW. See "Certain Provisions of
Maryland Law and of the Company's Charter and Bylaws Business
Combinations."

In addition, the MGCL restricts the voting rights of shares
deemed to be "control shares." Under the MGCL, "control shares" are
those which, when aggregated with any other shares held by the
acquiror, entitle the acquiror to exercise voting power within
specified ranges. Although the Bylaws provide that the control share
provisions of the MGCL shall not apply to the Company, such provision
of the Bylaws may be amended or eliminated by the Board of Directors
at any time in the future, provided that it obtains the required
consent from AEW and other specified holders of the Convertible
Preferred Stock. Moreover, any such amendment or elimination of such
provision of the Bylaws may result in the application of the control
share provisions of the MGCL not only to control shares which may be
acquired in the future, but also to control shares previously
acquired. The control share provisions of the MGCL could delay, defer
or prevent a transaction or change in control of the Company that
might involve a premium price for the Company's stock or otherwise be
in the best interests of the stockholders or that could otherwise
adversely affect the interests of the stockholders. See "Certain
Provisions of Maryland Law and of the Company's Charter and Bylaws."

Shares Available for Future Sale

Upon completion of the Offering, the Company will have
12,790,650 outstanding shares of Common Stock. All of such shares
will be freely tradable without restriction under the Securities Act
of 1933, as amended (the "Securities Act"), except for the 1,819,325
shares beneficially held by Mr. Bedford and the 440,800 shares
beneficially held by certain other senior officers and directors of
the Company, all of whom may be deemed "affiliates" of the Company as
defined in Rule 144 under the Securities Act ("Rule 144"). The shares
held by Mr. Bedford and such other senior officers and directors of
the Company are eligible for resale pursuant to Rule 144 under the
Securities Act, subject to compliance with certain volume and other
limitations imposed pursuant to Rule 144 and, in the case of Mr.
Bedford, subject to a standstill agreement between Mr. Bedford and the
Company.

In connection with the issuance of the Convertible Preferred
Stock in September 1995, Mr. Bedford has agreed not to sell, transfer
or otherwise dispose of any of the 1,198,278 shares of Common Stock
beneficially owned by him without the consent of the Board of
Directors. This agreement will remain in effect until the Company
notifies Mr. Bedford that such limitation no longer applies, or the
Company no longer qualifies as a REIT under the Code.

In connection with the Offering, the Company and its directors
and senior officers, holding in the aggregate 2,260,125 shares of
Common Stock have agreed that they will not, without the prior written
consent of the Underwriter, for a period of __ days after the date of
this Prospectus, sell, offer to sell, grant any option for the sale
of, or otherwise dispose of, or enter into any agreement to sell, any
shares of Common Stock or any securities convertible or exchangeable
or exercisable for Common Stock.

As of December 31, 1995, options to purchase 687,500 shares of
Common Stock were outstanding, of which 401,750 shares were subject to
then-exercisable options. Furthermore, an additional 1,404,750 shares
of Common Stock are reserved for issuance under the Company's option
plans. Upon exercise of these options, all of the shares will be
freely tradable (except those shares held by affiliates).

Shares of Convertible Preferred Stock are convertible at the
option of the holder at any time after September 18, 1997, into such
number of shares of Common Stock as is determined by dividing $6.00 by
the conversion price then in effect in respect of the Convertible
Preferred Stock (the "Conversion Price"). The Conversion Price is
currently $6.00 per share and, therefore, each share of Convertible
Preferred Stock is currently convertible into one share of Common
Stock. There were 8,333,334 shares of Convertible Preferred Stock
outstanding on December 31, 1995. The Conversion Price is subject to
adjustment as described below under the heading "Description of
Capital Stock of the Company Convertible Preferred Stock Conversion
Rights." The outstanding shares of Convertible Preferred Stock and
the Common Stock issuable upon conversion thereof will be "restricted
securities" within the meaning of Rule 144. In that regard, AEW and
certain of its transferees have the right to cause the Company to
register, in one or more registrations, the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock for sale
to the public. See "Description of Capital Stock of the
Company Convertible Preferred Stock Registration Rights."

No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sales, will
have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock, or the perception
that such sales could occur, may adversely affect the prevailing
market price for the Common Stock. See "Shares Available for Future
Sale."

Changes in Policies

The major policies of the Company, including its policies with
respect to maintaining its qualification as a REIT and with respect to
dividends, acquisitions, debt, and investments, are established by the
Board of Directors. Although it has no present intention to do so,
the Board of Directors may amend or revise these and other policies
from time to time without a vote of or notice to the stockholders of
the Company (subject to the rights of the holders of the Convertible
Preferred Stock). Accordingly, holders of the shares of Common Stock
will have no control over changes in policies of the Company,
including any policies relating to the payment of dividends or to
maintaining qualification as a REIT.

<PAGE>
THE COMPANY

General

Bedford Property Investors, Inc. is a self-administered equity
REIT with investments primarily in industrial and suburban office
properties concentrated in the Western United States. The Company
currently owns and operates, either directly or through one of its
wholly-owned subsidiaries, 30 properties, aggregating approximately
2.6 million rentable square feet and comprised of 24 Industrial
Properties, five Suburban Office Properties and one Retail Property.
Based on rentable square feet, as of November 30, 1995, the Properties
were 94% occupied by 308 tenants. The Company's Properties are
located in markets proximate to metropolitan areas in Northern and
Southern California, Colorado, Oregon, Utah, Kansas and Minnesota.

The Company's strategy is to own, manage, acquire and, when
appropriate, develop industrial and suburban office properties in
markets proximate to metropolitan areas primarily in the Western
United States which are experiencing or are expected by the Company to
experience economic growth and, if possible, are subject to
limitations on the development of similar properties. The Company
believes that employment growth is a reliable indicator of future
demand for both industrial and suburban office space and that
increased industrial production and consumer spending are reliable
indicators of demand for industrial space. In addition, the Company
believes that certain supply-side constraints, such as limited
availability of undeveloped land in a market and of financing for
speculative real estate construction, increase a market's potential
for higher average rents over time. The Company is presently
targeting selected markets proximate to metropolitan areas in Northern
and Southern California, Colorado, Oregon, Washington, and Kansas.

The Company is led by an experienced management team that
includes Peter B. Bedford, Chairman of the Board of Directors and
Chief Executive Officer. Mr. Bedford has been engaged in commercial
real estate business, primarily in the Western United States, for over
30 years and has been responsible for the ownership, management
acquisition and development of an aggregate of approximately 18
million square feet of industrial, office and retail properties, as
well as land in 14 states, primarily as founder and President of
Bedford Property Holdings Limited (BPHL), a privately-held diversified
real estate holding company. See "Management" and "Risk
Factors Dependence on Key Personnel." Since his election as the
Company's Chairman and Chief Executive Officer in 1992, Mr. Bedford
has been instrumental in assembling the Company's current Board of
Directors, in the design and implementation of the Company's current
business plan, in the Company's conversion to a self-administered REIT
and in the selection of a new, experienced management team, many of
the members of which had previously worked with Mr. Bedford at BPHL.
The Company's three senior officers and the Vice President of Bedford
Acquisitions (see "Certain Relationships and Related
Transactions Funding of Acquisition and Financing Costs") have on
average over 17 years of experience in the ownership, management,
acquisition and/or development of industrial and suburban office
properties in the Western United States.

History of the Company

1984-1990. Bedford Property Investors is the successor entity
to ICM, a Delaware corporation which was incorporated in November 1984
and headquartered in New York. ICM completed an initial public
offering in 1985 and subsequently was operated as an advised REIT with
no salaried employees. ICM's initial business objective was to invest
in office properties and mortgages on office properties throughout the
United States, both directly and through joint ventures. A large
number of ICM's investments were made between 1985 and 1987, when
property acquisition prices and property rents were at historic highs.
In 1989, Mr. Bedford began accumulating shares in ICM and by December
1990, Mr. Bedford owned approximately 29% of ICM's outstanding common
stock as well as 100% of the outstanding common stock of ICM's
advisor, Investors Central Management Corporation (later known as
Kingswood Realty Advisors, Inc.)

1991-1992. As a result of Mr. Bedford's ownership interest in
ICM, Mr. Bedford was placed on its Board of Directors in February
1991. Commencing with the first quarter of 1991, ICM suspended its
quarterly common stock dividend, and, in the spring of 1991,
Mr. Bedford moved ICM's headquarters to Lafayette, California and put
a new management team into place, a number of the members of which had
previously worked with Mr. Bedford at BPHL. In May 1992, Mr. Bedford
was appointed Chairman of the Board and the Company's stockholders
subsequently elected four of the current independent Company Board
members, namely Claude M. Ballard, a Limited Partner of the Goldman
Sachs Group, L.P., Anthony Downs, a Senior Fellow at the Brookings
Institution, Anthony M. Frank, former Postmaster General of the United
States and Martin I. Zankel, Senior Partner of the law firm of Bartko,
Zankel, Tarrant & Miller. In July 1992, the Company terminated its
advisory arrangement with Kingswood Realty, became a self-administered
REIT and began hiring salaried employees. In November 1992,
Mr. Bedford became the Company's Chief Executive Officer. During this
period, as a part of the process of strategically repositioning the
Company, certain joint ventures were divested. This process involved
properties being transferred to mortgage holders when mortgage
indebtedness was believed by the Company to exceed the property's then
current market value, and in one instance, the general partner of a
partnership in which the Company was a limited partner filing a
voluntary petition for federal bankruptcy protection.

1993-Present. In February 1993, the Board of Directors approved
the current business plan and announced that the Company would seek to
(i) regionalize its investments primarily in the Western United
States, (ii) grow the asset base of the Company by acquiring
industrial and suburban office properties on a wholly-owned basis, and
(iii) when appropriate, develop these property types on a
substantially pre-leased basis. On July 1, 1993, the Company
reincorporated in Maryland to reduce state franchise taxes and changed
its name to Bedford Property Investors, Inc. Since 1993, the
Company's new management team has strategically repositioned the
Company by (i) purchasing 20 of the Industrial Properties, all five of
the Suburban Office Properties and the Retail Property for
approximately $119 million, (ii) commencing development of a research
and development facility in Milpitas, California, (iii) selling five
real estate assets targeted for sale (generating approximately $38.9
million in gross proceeds) and selling the Edison Square Partnerships
(in exchange for a $300,000 note maturing in May 1998), (iv) obtaining
the $60 million Credit Facility, (v) repaying $11.1 million in
mortgage loans and notes payable bearing interest at rates in excess
of those in effect under the Credit Facility and (vi) selling
8,333,334 shares of the Company's Convertible Preferred Stock for $50
million in gross proceeds to AEW.

<PAGE>
BUSINESS OBJECTIVES AND GROWTH PLANS

Existing Properties

The Company seeks to increase cash flow from existing Properties
through (i) the lease-up of vacant space, (ii) the reduction of costs
associated with tenant turnover through the retention of existing
tenants, (iii) the negotiation of increases in rental rates and of
contractual periodic rent increases when market conditions allow it to
do so and (iv) the containment of operating expenses.

Acquisitions

General

The Company seeks to acquire quality industrial and suburban
office properties and/or portfolios of such properties. The Company
believes that (i) the experience of its management team, (ii) its
conservative capital structure and its $60 million Credit Facility,
(iii) its relationships with private and institutional real estate
owners, (iv) its strong relationships with real estate brokers and (v)
its integrated asset management program have enhanced, and will
continue to enhance, its ability to identify and capitalize on
acquisition opportunities. Each acquisition opportunity is reviewed
to evaluate whether it meets the following criteria: (i) potential
for higher occupancy levels and/or rents as well as for lower turnover
and/or operating expenses, (ii) ability to generate returns in excess
of the Company's weighted average cost of capital, taking into account
the estimated costs associated with tenant turnover (i.e., tenant
improvements, leasing commissions and the loss of income due to
vacancy) and (iii) availability for purchase at a price at or below
estimated replacement cost. The Company has, however, acquired and
may in the future acquire properties which do not meet one or more of
these criteria. This may be particularly true with the acquisition of
a portfolio of properties, which may include properties that do not
meet one or more of the foregoing criteria.

Following completion of an initial review, the Company may make
a purchase offer, subject to satisfactory completion of its due
diligence process. The due diligence process enables the Company to
refine its original estimate of a property's potential performance and
typically includes a complete review and analysis of the property's
physical structure, systems, environmental status and projected
financial performance, as well as an evaluation of the local market
and competitive properties and of relevant economic and demographic
information. Mr. Bedford and at least one other member of the Board
of Directors typically visit each proposed acquisition property before
the purchase is closed. The Company's activities relating to the
acquisition of new properties, including the due diligence process,
are conducted by Bedford Acquisitions, Inc., a California corporation
wholly- owned by Mr. Bedford. See "Certain Relationships and Related
Transactions Funding of Acquisition and Financing Costs."

The Company acquired a total of 24 Properties in 1994 and 1995.

Acquisitions in 1994

From January 1994 through August 1994, the Company acquired four
properties consisting of approximately 676,000 square feet and
comprised of two industrial properties and two suburban office
properties. The total cost of these Properties, including capital
expenditures and due diligence costs, was $25.5 million. At
acquisition it was estimated that these Properties would provide an
initial weighted average unleveraged return on cost (computed as
annualized property NOI divided by total acquisition cost) of 10.6%,
assuming no further lease-up. In 1995, the Company achieved a
weighted average unleveraged return on cost of 12.9% on these
Properties. The following is a brief description of the Properties
acquired in 1994.

In January 1994, the Company acquired Mariner Court, a three-
story suburban office building consisting of approximately 105,436
rentable square feet, in Torrance, California, which is located in the
South Bay market of Los Angeles approximately 25 miles southwest of
downtown Los Angeles. The Company paid $7.5 million, or approximately
$71 per rentable square foot, for Mariner Court.

In May 1994, the Company acquired Dupont Industrial Center, a
three-building bulk warehouse distribution facility consisting of
approximately 451,192 rentable square feet, in Ontario, California,
which is located in the Inland Empire West submarket of Los Angeles
approximately 80 miles southeast of downtown Los Angeles. The Company
paid $9.75 million, or approximately $22 per rentable square foot, for
Dupont Industrial Center.

In July 1994, the Company acquired Village Green, a
three-building suburban office property consisting of approximately
16,895 rentable square feet, in Lafayette, California, which is
located in the Lafayette/Orinda/Moraga submarket of Contra Costa
County market approximately 15 miles east of downtown San Francisco.
The Company paid $1.79 million, or approximately $106 per rentable
square foot, for Village Green. The Company's headquarters are
located at this property.

In August 1994, the Company acquired Milpitas Town Center, a
two-building industrial property consisting of approximately 102,620
rentable square feet, in Milpitas, California, which is located in
Silicon Valley submarket of San Francisco approximately 45 miles south
of downtown San Francisco. The Company paid $6.32 million, or
approximately $62 per rentable square foot, for Milpitas Town Center.
The Property includes a 3.1 acre parcel of land on which the Company
is developing a 44,543 square foot research and development facility.

Acquisitions in 1995

From September 1995 through December 1995, the Company acquired
20 properties consisting of approximately 1,546,000 square feet and
comprised of 18 industrial properties, one suburban office property
and one retail property. The total cost of these Properties,
including estimated capital expenditures and due diligence costs, was
$84.1 million. At acquisition, it was estimated that these Properties
will provide an initial weighted average unleveraged return on cost
(computed as annualized property NOI divided by total acquisition
cost) of 10.5%, assuming no further lease-up. With expected 1996
leasing activity, the Company anticipates achieving a weighted average
unleveraged return on cost of 11.4%. The cost of these Properties has
been financed with the proceeds of the $50 million sale of the
Convertible Preferred Stock and borrowings and letters of credit under
the Credit Facility. The following is a brief description of the
Properties acquired in 1995.

In September 1995, the Company acquired 350 East Plumeria Drive,
a research and development building consisting of approximately
142,700 rentable square feet, in San Jose, California, which is
located in the South Bay market of San Francisco approximately 37
miles south of downtown San Francisco. The Company paid $8.33
million, or approximately $58 per rentable square foot, for 350 East
Plumeria Drive.

In September 1995, the Company acquired Lackman Business Center,
a two-building industrial property consisting of approximately 45,956
rentable square feet, in Lenexa, Kansas, which is located
approximately eight miles southeast of Kansas City. The Company paid
$2.25 million, or approximately $49 per rentable square foot, for
Lackman Business Center.

In September 1995, the Company acquired Ninety-Ninth Street #1,
a single-story industrial building consisting of approximately 35,516
rentable square feet, in Lenexa, Kansas, which is located
approximately eight miles southeast of Kansas City. The Company paid
$1.95 million, or approximately $55 per rentable square foot, for
Ninety-Ninth Street #1.

In September 1995, the Company acquired Ninety-Ninth Street #2,
a single-story industrial building consisting of approximately 12,974
rentable square feet, in Lenexa, Kansas, which is located
approximately eight miles southeast of Kansas City. The Company paid
$735,000, or approximately $57 per rentable square foot, for Ninety-
Ninth Street #2.

In October 1995, the Company acquired 6600 College Boulevard, a
single-story office building consisting of approximately 79,316
rentable square feet, in Overland Park, Kansas, which is located
approximately ten miles southeast of Kansas City. The Company paid
$6.38 million, or approximately $80 per rentable square foot, for 6600
College Boulevard. See"Certain Relationships and Related
Transactions Acquisitions."

In December 1995, the Company acquired the Landsing Pacific
Portfolio, which comprised substantially all of the real estate assets
of the Landsing Pacific Fund, Inc., a publicly-traded REIT based in
San Mateo, California. The Landsing Pacific Portfolio consists of
thirteen industrial properties and one retail property aggregating
approximately 1.0 million rentable square feet located in Northern and
Southern California, Colorado, Minnesota and Oregon. The Company paid
$49.7 million, or approximately $50 per rentable square foot, for the
Landsing Pacific Portfolio. See "Certain Relationships and Related
Transactions Acquisitions."

In December 1995, the Company acquired 3002 Dow Business Center,
a five-building industrial property consisting of approximately
192,215 rentable square feet, in Tustin, California, which is located
in Orange County approximately 37 miles south of downtown Los Angeles.
The Company paid $11.5 million, or approximately $60 per rentable
square foot, for 3002 Dow Business Center.

Development

During 1995, the Company commenced the development of a 3.1-acre
parcel located on the Company's Milpitas Town Center property in
Milpitas, California on an unleased ("speculative") basis. The
development will consist of a single-story research and development
facility with approximately 44,543 rentable square feet. The Company
estimates that it will incur total development costs of approximately
$2.7 million with an expected completion date in April 1996. Upon
completion of the construction and leasing, the Company expects the
unleveraged annual return on total project costs (including land costs
of $672,000) to be 10.9%. The calculation of the unleveraged return
assumes that the facility is leased to a single tenant within nine
months of the completion of construction at current market rates. The
Company also owns 3.6 acres of entitled land adjacent to its Suburban
Office Property in Salt Lake City, Utah. The Company is currently
analyzing the feasibility of developing this parcel in the near
future. When appropriate and subject to the limitations in the Credit
Facility, the Company will consider the development of new industrial
and suburban office properties. See "Business and Properties The
Credit Facility." The Company's management team has experience in all
phases of the development process, including market analysis, site
selection, zoning, design, pre-development leasing, construction and
permanent financing and construction management.

Dispositions

In September 1995, the Company sold Cody Street Park, an
industrial property located in Overland Park, Kansas, consisting of
approximately 37,856 rentable square feet, to The Realty Associates
Fund III, L.P. for $1.5 million. The proceeds from the sale of Cody
Street Park were applied toward the purchase of Ninety-Ninth Street #1
and Ninety-Ninth Street #2, which were purchased from The Realty
Associates Fund III, L.P. and closed concurrently with the sale of
Cody Street Park. In October 1995, the Company sold the IBM Building,
a suburban office building located in Jackson, Mississippi, consisting
of approximately 89,625 rentable square feet, to The Parkway Company
for $6.5 million. The sale of the IBM Building completed the
Company's asset repositioning that was commenced in late 1992.

<PAGE>
CORPORATE STRATEGIES

In pursuing its business objectives and growth plans, the
Company intends to:

Capitalize on its Experienced Management Team.

The Company's management team has direct experience in all
aspects of managing a large real estate portfolio. The Company's
senior officers and the Vice President of Bedford Acquisitions have on
average over 17 years of experience in the ownership, management,
acquisition and/or development of industrial and suburban office
properties in the Western United States. The Company believes that
the experience of its management team makes it strategically well-
positioned for growth.

Focus its Efforts in the Western United States.

In February 1993, the Board of Directors of the Company approved
the current business plan which, among other things, regionalized the
Company's investment focus primarily in the Western United States. In
connection with this regional investment focus, the Company has
repositioned its portfolio of properties over the last several years.
The Company's target markets for future acquisitions and development
include selected suburban markets in Northern and Southern California,
Colorado, Oregon, Washington and Kansas. The Company believes that
this geographic focus, combined with management's market experience,
contributes to a more thorough understanding of these industrial and
suburban office property markets and allows the Company to anticipate
trends and therefore to better identify investment opportunities.

Pursue a Market Driven Strategy.

The Company's strategy is to own, manage and acquire and, when
appropriate, develop industrial and suburban office properties in
suburban markets primarily in the Western United States which are
experiencing, or are expected by the Company to experience, economic
growth, and which are, ideally, subject to supply-side constraints.
The Company believes that certain metropolitan areas (e.g., the San
Francisco Bay Area, the Los Angeles Basin, Denver, Portland, Seattle
and Kansas City) have multiple suburban "cores" and that the potential
for growth in these metropolitan areas is generally greatest in and
around these suburban cores. The Company believes that such suburban
cores emerge as jobs move to the suburbs and typically offer a well-
trained and well-educated work force, high quality of life and, in
many cases, a diversified economic base. The Company focuses on
owning, managing, acquiring and, when appropriate, developing
properties in these suburban cores. Additionally, the Company seeks
out real estate markets that are subject to supply-side constraints
such as limited availability of undeveloped land and/or geographic,
topographic, regulatory and/or infrastructure restrictions. The
Company believes that such restrictions serve as barriers of entry to
new construction, thereby limiting the supply of new commercial space.
The Company believes that these supply-side constraints, when combined
with a growing employment and population base, enhance the long-term
investment potential of a real estate asset. As a result, the Company
searches for real estate acquisition and, when appropriate,
development opportunities in real estate markets that demonstrate some
or all of the foregoing characteristics.

Plan for Future Anticipated Expenses Associated with Tenant
Turnover.

The cash flow of a real estate asset can vary significantly from
year to year depending on tenant turnover. When a lease expires and a
tenant renews or vacates its space, costs associated with tenant
improvements, lease commissions and lost income due to vacancy or
construction down-time can significantly reduce property cash flow.
Due to the capital intensive nature of suburban office properties and,
to a lesser degree, industrial properties, the Company believes that
planning and budgeting for future costs associated with tenant
turnover is a prudent component of managing the cash flow of the
Properties. The Company estimates the future costs for tenant
improvements, lease commissions and lost income due to vacancy and
construction down-time on a property by property basis. The Company
incorporates these estimates in its annual budgets and longer-term
forecasts and maintains cash and/or availability under the Credit
Facility adequate to cover these budgeted expenditures. The Company
believes that its ability to commit capital to fund tenant
improvements and pay lease commissions helps to retain and attract
tenants. To the extent that a vacancy in one of the Properties does
occur, the Company believes that its policy of budgeting ahead for
anticipated tenant improvement costs and leasing commissions enables
it to compete effectively for new tenants.

Concentrate on Acquiring General Purpose, Flexible Properties.

The Company concentrates on acquiring general purpose, flexible
industrial and suburban office properties that are suitable for a
diverse range of tenants ranging from small firms to large
corporations engaged in various businesses, rather than acquiring
highly-improved properties that cater to a limited number of tenants
based on use and size. The Properties are divisible into units
ranging from approximately 500 square feet to 180,000 square feet in
order to accommodate tenants of various sizes and needs. The Company
believes that the general purpose, flexible nature of its Properties
is an important factor in maintaining an overall high average
occupancy rate.

Utilize In-House Asset and Property Management.

The Company believes that the long-term value of its Properties
is enhanced through in-house asset management. The Company's asset
management team develops and monitors a comprehensive asset management
plan for each Property in an effort to ensure its efficient operation.
The Company's Vice President of Property/Asset Management works
directly with (i) each property manager to identify and implement
opportunities to improve cash flow from each Property and to maximize
each Property's long-term investment value, and (ii) the Company's
internal finance and accounting staff to develop and monitor detailed
budgets and financial reports for each Property.

In February 1993, as a part of the current business plan, the
Company made a strategic decision to internalize the property
management of its Properties. All of the Properties, other than those
located in St. Paul, Denver, Oregon and Kansas City, are currently
managed by the Company's in-house property management team. The
Company's objective is to expand its portfolio of properties in these
areas, as economically and strategically appropriate, to a level
sufficient to support a local in-house property manager. The Company
conducts its Southern California property management activities out of
its Orange County office. The Company's property management staff is
generally responsible for leasing activities, ordinary maintenance and
repairs, keeping financial records on income and expenses, rent
collection, payment of operating expenses and property operations.
The Company's property management philosophy is based on the belief
that the long-term value of the Properties is enhanced by attention to
detail and hands-on service provided by professional in-house property
managers. The Company believes that a successful leasing program
starts by servicing existing tenants first. Costs associated with
tenant turnover (i.e., tenant improvements, leasing commissions and
the loss of income due to vacancy) can be significant and, by
addressing and attending to existing tenants' needs, the Company
believes that it can increase its retention of existing tenants and
simultaneously make its properties more attractive to tenants. On
July 1, 1993, the Company installed a new computerized asset
management/accounting system at its corporate headquarters in
contemplation of its business objectives and growth strategy. The
Company believes this system is capable of accommodating the Company's
future growth plans.

Cooperate with Local Real Estate Brokers.

The Company seeks to develop strong relationships with local
real estate brokers, who can provide access to tenants as well as
general market intelligence and research. The Company believes that
these relationships have enhanced the Company's ability to attract and
retain tenants.

Maintain its Conservative Financial Leverage.

As of January 31, 1996, $13,425,000 was available to the Company
to be drawn under the Credit Facility and the Credit Facility had an
outstanding balance of $42,700,000 aggregate principal amount of
borrowings and $3,875,000 aggregate principal amount of letters of
credit (consisting of a letter of credit totalling $245,000 expiring
in March 1996, a letter of credit totalling $630,000 maturing in April
1996, and a letter of credit totalling $3,000,000 due and payable in
December 1996), which, as of that date, equaled approximately 34% of
its Total Market Capitalization. The Company currently intends to
limit its total consolidated indebtedness to no more than 50% of its
Total Market Capitalization. The Board of Directors intends, however,
to retain the ability to raise additional capital, including
additional debt and equity, in order to pursue acquisition and, when
appropriate, development opportunities that meet the Company's
investment criteria. See "Policies with Respect to Certain
Activities Financing Policies."

<PAGE>
MARKET OVERVIEW

The Company believes that certain metropolitan areas have
multiple suburban "cores" and that the potential for growth in these
metropolitan areas is generally greatest in and around these suburban
cores. The Company believes that such suburban cores emerge as jobs
move to the suburbs and typically offer a well-trained and well-
educated work force, high quality of life and, in many cases, a
diversified economic base. The Company focuses on owning, managing,
acquiring and, when appropriate, developing properties in these
suburban cores. In addition, the Company seeks real estate markets
that are subject to supply-side constraints such as limited
availability of undeveloped land and/or geographic, topographic,
regulatory and/or infrastructure restrictions. The Company believes
that such restrictions serve as barriers of entry to new construction,
thereby limiting the supply of new commercial space. The Company
believes that these supply-side constraints, when combined with a
growing employment and population base, enhance the long-term
investment potential of a real estate asset. As a result, the Company
searches for real estate acquisition and, when appropriate,
development opportunities in real estate markets that demonstrate some
or all of the foregoing characteristics. The Company believes that
the markets listed below exhibit one or more of these favorable
characteristics.

San Francisco Bay Area, California

Based on 1992 population of approximately 6.4 million, the San
Francisco Bay Area is the fourth largest metropolitan area of the
United States, and includes the cities of San Francisco, San Jose and
Oakland. From 1980 to mid-year 1992, the San Francisco Bay Area
population grew at an average rate of 1.6% per annum, compared with a
national average growth of approximately 1.1% per annum over a
comparable period. This area benefits from a highly educated work
force and wealthy population, as well as from strong links to the
growing economies of the Pacific Rim. In October 1995, the
unemployment rates in the San Francisco Bay Area averaged 5.3%, with
unemployment rates in San Francisco, San Jose and Oakland of 6.0%,
5.6% and 9.2%, respectively. The San Francisco Bay Area encompasses a
broad spectrum of industries, including the electronics and
biotechnology industries in the Silicon Valley and San Mateo and
Alameda Counties, and the financial services industries in San
Francisco, San Mateo, Marin and Contra Costa Counties.

The San Francisco Bay Area commercial real estate market is one
of the largest in the country. The area is often described in terms
of five principal area: San Francisco proper, where the Company owns
five Industrial Properties comprising approximately 304,000 square
feet; the Northern Bay area, principally the counties of Marin, Sonoma
and Napa, where the Company owns no properties; the County of San
Mateo, frequently described as the Peninsula, where the Company owns
no properties; the counties of Alameda, Contra Costa and Southern
Solano, frequently described as the East Bay, where the Company owns
five Industrial Properties and one Suburban Office Property comprising
approximately 174,000 and 17,000 square feet, respectively; and Santa
Clara County, commonly known as the Silicon Valley, where the Company
owns two Industrial Properties comprising approximately 245,000 square
feet.

Silicon Valley, located at the southern end of the San Francisco
Bay Area, is a leading center for technology-oriented industries.
Economic conditions in Silicon Valley have strengthened over the last
several years due to a recovery in the computer industry, growth in
the bioscience industry and trade with the Pacific Rim. The office
vacancy rate in the area declined from 13% at year end 1994 to 8.2% at
year-end 1995 on an inventory base of 40.7 million square feet. The
industrial research and development and warehouse vacancy rate in the
Silicon Valley fell from 9.2% at year-end 1994 to 5.1% at year-end
1995 on an inventory base of more than 206 million square feet.

The East Bay suburban office market is located on the eastern
side of the San Francisco Bay Area. The office vacancy rate in the
Contra Costa County submarket, which comprised 33 million square feet
of suburban office space at year-end 1995, declined from 9.2% at year-
end 1994 to 7.7% at year-end 1995. The industrial vacancy rate in the
East Bay, which comprised more than 169 million square feet at year-
end 1995, declined from 11.1% at year-end 1994 to 9.1% at year-end
1995.

Greater Los Angeles Area, California

The five-county Southern California region which comprises more
than 15 million people, includes the counties of Ventura, Los Angeles,
Riverside, San Bernardino and Orange. The Company owns one Suburban
Office Property in Ventura County comprising approximately 108,000
square feet; one Suburban Office Property in Los Angeles County
comprising approximately 105,000 square feet; one Industrial Property
in the Riverside-San Bernardino metropolitan area comprising
approximately 451,000 square feet; and one Industrial Property in
Orange County comprising approximately 192,000 square feet.

Ventura County is the northernmost county in the five-county
Southern California region and is located approximately 70 miles
northwest of downtown Los Angeles. From 1988 through 1992, the
Ventura County population grew at an average rate of approximately
1.8% per annum, compared to the national average rate of 1.0% per
annum over the same period. The office vacancy rate in Ventura
County, which consisted of approximately six million square feet at
year-end 1995, declined from approximately 28% at year-end 1990 to
approximately 14.4% at year-end 1995. The decrease in construction of
new office space in Ventura County in conjunction with positive net
absorption of office space over the same period contributed to this
decline.

The Riverside-San Bernardino metropolitan area is located
approximately 60 miles east of downtown Los Angeles and consists of
Riverside and San Bernardino Counties. From 1988 to 1992, the
metropolitan area population increased at an average rate of
approximately 5.0% per annum, compared to a population increase of
1.0% per annum for the nation as a whole for that period. Due to
convenient access to Ontario International Airport as well as several
major freeways, the metropolitan area is a strategic location for
ground transportation throughout the Southwestern United States.
Industrial sector vacancy in the Riverside - San Bernardino
metropolitan area fell from 12.1% at the end of the third quarter of
1994 to 9.1% at the end of the third quarter of 1995 on an inventory
of approximately 150 million square feet.

Orange County is the southwestern county in the five-county
Southern California region and is located approximately 35 miles south
of Los Angeles. From 1990 through 1994, the Orange County population
increased at an average rate of approximately 1.9% per annum, compared
to a population increase of 1.0% per annum for the nation as a whole
for that period. The vacancy rate in the Orange County industrial
market, which comprises approximately 186 million square feet,
declined from 14.7% at the end of the third quarter of 1994 to 12.9%
at the end of the third quarter of 1995.

In general, the five-county Southern California region has been
adversely impacted by defense spending cutbacks. The unemployment
rates in Orange County, Riverside County, San Bernardino County and
Ventura County were approximately 5.2%, 9.7%, 7.7% and 7.4%,
respectively, in October 1995, compared with a seasonally adjusted
rate of 5.5% for the nation as a whole on the same date.

Kansas City Metropolitan Area, Missouri

At year-end 1992, the population in the Kansas City metropolitan
area was approximately 1.6 million, having grown an average rate of
1.0% per annum from 1988 to 1992, the same as the average population
growth rate per annum for the nation as a whole during the same
period. Kansas City serves as the transportation, distribution and
financial services hub for the farm belt and also has a large fiber-
optic and telecommunications presence. The unemployment rate in the
Kansas City metropolitan area was 3.2% in October 1995, compared with
a seasonally adjusted rate of 5.5% for the nation as a whole on the
same date. The Company owns one Suburban Office Property and four
Industrial Properties in the Kansas City metropolitan area comprising
approximately 79,000 square feet and approximately 144,000 square
feet, respectively. The suburban office vacancy in the Kansas City
metropolitan area fell from 10.9% at year-end 1993 to 8.2% at the end
of the second quarter of 1995. The industrial property vacancy rate
in the Kansas City metropolitan area declined from 12.7% as of June
1994 to 12.4% as of June 1995 on an inventory base of approximately
123 million square feet.

Denver Metropolitan Area, Colorado

The Denver metropolitan area's population at mid-year 1994 was
estimated to be 1.7 million, having grown at an average rate of 1.4%
per annum from 1990 to mid-year 1994, compared with a national average
of approximately 0.24% per annum over a comparable period. The
unemployment rate in the Denver metropolitan area was 3.2% in October
1995, compared with a seasonally adjusted rate of 5.5% for the nation
as a whole on the same date. The Denver metropolitan area has
diversified away from its traditional oil and gas emphasis, with job
growth now generated by the technological, transportation and
telecommunication industries. Growth in the Denver economy has
created stronger demand for suburban office and industrial properties.
The Company owns two Industrial Properties in the Denver metropolitan
area comprising approximately 211,000 square feet. The vacancy rate
in the Denver industrial market, which consisted of over 182 million
square feet at the end of 1995, declined from 5.7% at year-end 1993 to
2.6% at year-end 1995. The office vacancy rate in Denver decreased
from 16.4% at year-end 1993 to 12.1% at year-end 1995 on a base of
approximately 57 million square feet.

Portland Metropolitan Area, Oregon

Based on 1994 population of approximately 1.7 million, Portland
is the largest city in Oregon and the second largest city in the
Pacific Northwest. From 1988 through 1992, the Portland metropolitan
area population grew at an average rate of approximately 2.7% per
annum, well above the national average of approximately 1.0% per annum
for the same period. Non-agricultural employment in the Portland
metropolitan area has grown an average of approximately 2.9% per annum
during the five-year period ended December 31, 1993, exceeding the
national average of approximately 1.4% per annum for the same period.
The unemployment rate in the Portland metropolitan area was 3.5% in
October 1995, compared with a seasonally adjusted rate of 5.5% for the
nation as a whole on the same date. Portland has a diverse economic
base, ranging from forest products to electronics, software and health
care companies, and a well-educated work force.

The Company owns two Industrial Properties in the Portland
metropolitan area comprising approximately 160,000 square feet. The
suburban office vacancy rate declined from 21.6% at year-end 1988 to
7.4% at year-end 1995. The current strength of the market, which at
year-end 1995 comprised approximately 10 million square feet, is
primarily the result of continued employment growth, positive net
absorption of suburban office space and limited new suburban
construction. The industrial vacancy rate in Portland declined from
approximately 18.7% at year-end 1988 to approximately 2.7% at year-end
1995. The current improvement in the industrial vacancy rate has been
driven primarily by positive net absorption of industrial space and
limited new industrial construction.

Salt Lake City Metropolitan Area, Utah

The Salt Lake City metropolitan area population, which exceeded
1.1 million in 1992, grew at an average rate of approximately 1.8% per
annum from 1988 through 1992 compared with an average rate of 1.0% per
annum for the nation as a whole over that period. Non-agricultural
employment in the Salt Lake City metropolitan area grew at an average
rate of approximately 3.7% per annum from 1989 through 1993, well
above the national average of 1.4% per annum for the same period. The
unemployment rate in the Salt Lake City metropolitan area was 2.9% in
October 1995, compared with a seasonally adjusted rate of 5.5% for the
nation as a whole on the same date. Salt Lake City's economy is
diversified with substantial employment in the service, construction,
and financial, insurance and real estate sectors. The Company owns
one Suburban Office Property in this area comprising approximately
114,000 square feet. The suburban office vacancy rate in the Salt
Lake City metropolitan area declined from 26.7% at year-end 1989 to
6.7% at year-end 1995 on an inventory of over 15 million square feet.
This decline reflects, among other things, a significant decrease in
the construction of new suburban office space, positive net
absorption, and strength in the service and financial, insurance and
real estate sectors of the local economy. The industrial vacancy rate
in Salt Lake City declined from 8.3% at year-end 1991 to 2.1% at year-
end 1995.

Greater Seattle Area, Washington

Based on 1994 population of approximately 2.2 million, Seattle
is the largest city in the Pacific Northwest. From 1989 through 1993,
non-agricultural employment growth in the Seattle metropolitan area
averaged 2.7% per annum, compared to the national average of
approximately 1.4% per annum for the same period. The unemployment
rate in the greater Seattle area was 5.4% in October 1995, compared
with a seasonally adjusted rate of 5.5% for the nation as a whole on
the same date. The greater Seattle Area has developed a diversified
job base in which the traditional manufacturing and natural resources
sectors have been joined by an increasing number of biotechnology,
software, and health care companies.

Although the Company does not currently own any properties in
the Seattle metropolitan area, it considers the area to be a target
market. The two primary suburban office submarkets in the Seattle
metropolitan area are the Eastside and South markets. The Eastside
suburban office submarket (which includes the cities of Bellevue,
Kirkland and Redmond) comprises approximately 15 million square feet,
and with no new suburban office construction and positive net
absorption of more than 297,000 square feet in 1995, the suburban
office vacancy rate in this submarket fell from 9.7% at year-end 1994
to 7.2% at year-end 1995, the lowest vacancy rate of all submarkets in
the Seattle office market. The smaller 5.8 million square foot South
suburban office submarket has been adversely affected by the recent
consolidation at Boeing, with negative net absorption driving up the
office vacancy rate from 9.4% at year-end 1989 to 10.6% at year-end
1995. The South suburban office submarket is expected to be
oversupplied for some time to come. From 1988 through 1994,
industrial vacancy rates in the industrial market fluctuated between
9.2% and 5.0%, and at year-end 1995, the industrial vacancy rate was
5.6%.

<PAGE>
USE OF PROCEEDS

The net cash proceeds to the Company from the Offering are
estimated to be approximately $46.5 million or approximately $53.5
million if the Underwriters' over-allotment option is exercised in
full. The Company will use the net cash proceeds of the Offering to
repay the outstanding principal balance under the Credit Facility
(which amounted to approximately $43.3 million as of December 31,
1995). Any remaining net proceeds will be used to purchase additional
properties and for general corporate purposes, including working
capital. The Company is continuously engaged, in the ordinary course
of its business, in the evaluation of properties for acquisition. No
agreements or understandings with respect to any material property
acquisitions are currently in effect. Pending application of any
remaining net proceeds, the Company will invest such portion of the
net proceeds in interest-bearing accounts and short-term, interest-
bearing securities, which are consistent with the Company's intention
to qualify for taxation as a REIT. Such investments may include, for
example, government and governmental agency securities, certificates
of deposit and interest-bearing bank deposits.

<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Common Stock of the Company trades on the New York Stock
Exchange and the Pacific Stock Exchange under the symbol "BED." The
following table sets forth, for the periods indicated, the quarterly
high and low sales prices per share reported on the New York Stock
Exchange and the dividends declared per share by the Company on the
Common Stock during each quarterly period since the first quarter of
1994.

Sale Price
Dividends
High Low Declared
1994
First Quarter. . . . . . . . . . . . . . . $7 1/4 $5 $.08
Second Quarter . . . . . . . . . . . . . . $7 $5 3/4 $.09
Third Quarter. . . . . . . . . . . . . . . $7 $5 3/4 $.09
Fourth Quarter . . . . . . . . . . . . . . $6 1/8 $4 7/8 $.095

1995
First Quarter. . . . . . . . . . . . . . . $6 3/8 $5 3/8 $.095
Second Quarter . . . . . . . . . . . . . . $5 7/8 $5 1/8 $.105
Third Quarter. . . . . . . . . . . . . . . $6 3/4 $5 5/8 $.105
Fourth Quarter . . . . . . . . . . . . . . $7 5/8 $6 3/8 $.105

1996
First Quarter
(through February 7, 1996) . . . . . . . . $7 5/8 $7 -

As of January 31, 1996 the Company had approximately 450 record
holders of Common Stock. On February 7, 1996, the last reported sale
price of the Common Stock on the NYSE was $7 1/2 per share.

The Company has an automatic dividend reinvestment plan which
allows stockholders to acquire additional shares of Common Stock
through the automatic reinvestment of cash dividends. The Company
pays all brokerage commissions incurred in connection with the
purchase of its stock under this plan, up to a maximum commission of
5%. See "Description of Capital Stock of the Company Common Stock."

DISTRIBUTION POLICY

The Company has made regular quarterly distributions to the
holders of the Common Stock in each quarter since the second quarter
of 1993, having increased the dividend six times since that time from
$.05 per share in the second quarter of 1993 to $.105 per share in
each of the second, third and fourth quarters of 1995. Distributions
on the Common Stock by the Company are at the discretion of the Board
of Directors and will depend on the Board of Directors' evaluation of
relevant factors including those enumerated below. See "Risk
Factors Substantial Increase in Dividend Requirements; Possible
Inability to Sustain Current Dividends."

On September 18, 1995, the Company sold 8,333,334 shares of
Convertible Preferred Stock for $50 million in gross proceeds to AEW.
The Company paid dividends to AEW in an amount of approximately $.02
per share of Convertible Preferred Stock for the partial dividend
period commencing September 18, 1995 and ended September 30, 1995 and in
an amount of $.135 per share of Convertible Preferred Stock for the fourth
quarter of 1995. Dividends may be authorized, declared and paid on
shares of Common Stock in any fiscal quarter only if full cumulative
dividends have been paid on, or authorized and set apart on, all
shares of Convertible Preferred Stock for all prior dividend periods
through and including the end of such quarter. Holders of shares of
Convertible Preferred Stock are entitled to receive in each calendar
quarter, when and as authorized and declared by the Board of
Directors, cumulative dividends in cash in an amount equal to the
greater of (i) an amount per share of $.135 or (ii) the dividends
payable with respect to such quarter on each share of the Common Stock
into which each share of the Convertible Preferred Stock is
convertible, plus, in both cases, the accumulated but unpaid dividends
on the Convertible Preferred Stock. See "Description of Capital Stock
of the Company Convertible Preferred Stock Dividends."

Distributions on the Common Stock by the Company to the extent
of its current and accumulated earnings and profits for federal income
tax purposes generally will be taxable to stockholders as ordinary
income. Distributions in excess of such earnings and profits
generally will be treated as a non-taxable reduction in the
stockholder's basis in its stock to the extent of such basis, and
thereafter as gain from the sale of such stock. For purposes of
determining whether distributions are out of current or accumulated
earnings and profits, the earnings and profits of the Company will be
allocated first to the Convertible Preferred Stock, and then allocated
to the Common Stock. All dividend distributions made in the years
1993, 1994 and 1995 were classified as a return of capital stock for
federal income tax purposes. It is likely, however, that a
substantial portion of the Company's dividend distributions in 1996
will be taxable as ordinary income. For a discussion of the tax
treatment of distributions to holders of shares of the Company's
stock, see "Federal Income Tax Considerations."

The Company currently intends to continue paying regular
quarterly dividends and to distribute amounts sufficient to maintain
its status as a REIT (see "Federal Income Tax
Considerations Requirements for Qualification"). Dividends on the
Common Stock by the Company are made at the discretion of the Board of
Directors and depend on the Board of Directors' evaluation of the
Company's results of operations, financial condition and capital
requirements, restrictions under the Convertible Preferred Stock, the
Credit Facility, any other debt instruments and the MGCL, the annual
distribution requirements under the REIT provisions of the Code (see
"Federal Income Tax Considerations Requirements for Qualification"),
required repayments of borrowings and such other factors as the Board
of Directors deems relevant. See "Risk Factors Substantial Increase
in Dividend Requirements; Possible Inability to Sustain Current
Dividends." In particular, dividends may be authorized, paid and
declared on the shares of Common Stock only if full cumulative cash
dividends plus any accumulated but unpaid dividends have been paid on,
or authorized and set apart on, all shares of Convertible Preferred
Stock for all dividend periods through and including the end of such
quarter. See "Description of Capital Stock of the Company Convertible
Preferred Stock Dividends." In addition, in order to maintain its
qualification as a REIT under the Code, the Company is required to
distribute 95% of its taxable income currently. See "Federal Income
Tax Considerations Requirements for Qualification." In addition, the
Company will be required, upon maturity of the Credit Facility (which
will occur in 1998), to repay all outstanding borrowings thereunder.
The Board of Directors intends to evaluate the amount of the per share
dividend on the Common Stock from time to time and may adjust such
dividend in light of these and other factors.

CAPITALIZATION

The following table sets forth the capitalization of the Company
as of September 30, 1995. The pro forma information is presented as
if borrowings under the Credit Facility related to property
acquisitions occurring after September 30, 1995 had occurred on that
date. The pro forma, as adjusted information (i) is presented as if
borrowings under the Credit Facility related to property acquisitions
occurring after September 30, 1995 had occurred on that date and (ii)
gives pro forma effect to the issuance of the 6,700,000 shares of
Common Stock offered hereby, the receipt of the net proceeds therefrom
and the partial application thereof to repay the outstanding balance
under the Credit Facility as if such issuance, receipt and payment had
occurred on September 30, 1995. The information set forth below
should be read in conjunction with the consolidated historical
financial statements and notes thereto, the unaudited pro forma
financial information and notes thereto and the discussion set forth
in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," in each case included elsewhere in this
Prospectus.

<PAGE>

As of
September 30, 1995
Pro Forma
Actual Pro Forma As Adjusted
(unaudited, in thousands)
Debt:
Outstanding indebtedness under
the Credit Facility $ - $42,700 $ -
Redeemable Preferred Shares:
Series A Convertible
Preferred Stock: $.01 par value;
10,000,000 authorized; 8,333,334
issued and outstanding; 8,333,334
pro forma; 8,333,334 pro forma,
as adjusted 50,000 50,000 50,000

Common Stock and Other Stockholders
Equity:

Preferred Stock: $.01 par value;
10,000,000 authorized; none issued
and outstanding; none pro forma;
none pro forma, as adjusted - - -

Common Stock: $.01 par value;
30,000,000 authorized; 6,040,650
issued and outstanding; 6,040,650
pro forma; 12,740,650 pro forma,
as adjusted 60 60 127

Additional paid-in capital 107,209 107,209 153,641

Accumualted losses and distributions
in excess of net income (74,837) (74,837) (74,837)

Total Common Stock and Other
Stockholders Equity 32,432 32,432 78,931
Total Capitalization $82,432 $125,132 $128,931

<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated financial
and operating data for the Company and its subsidiaries on a
historical basis as of and for the nine months ended September 30,
1994 and 1995 and the years ended December 31, 1990 through 1994. The
following table also sets forth selected consolidated financial and
operating data for the Company and its subsidiaries on a pro forma
basis as of and for the nine months ended September 30, 1995 and the
year ended December 31, 1994.

The selected financial and operating data as of and for the
years ended December 31, 1990 through 1994 have been derived from the
Company's audited financial statements. The selected financial and
operating data as of and for the nine months ended September 30, 1994
and 1995 have been derived from the Company's unaudited financial
statements. The unaudited financial statements include all
adjustments (consisting only of normal recurring adjustments) that
management considers necessary for a fair presentation of the
financial position and results of operations for these periods.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results to be expected for the entire
year ending December 31, 1995. The following data should be read in
conjunction with the financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

The pro forma data are based upon certain assumptions in
addition to those specified above that are included in the notes to
the pro forma financial statements included elsewhere in this
Prospectus. The pro forma financial data are not necessarily
indicative of what the actual financial position and results of
operations of the Company would have been as of and for the periods
indicated, nor do they purport to represent the Company's future
financial position and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business Objectives and Growth Plans Acquisitions," and
the financial statements included elsewhere in this Prospectus.

<PAGE>

Selected Consolidated Financial and Operating Data
(in thousands of dollars, except per share, property and occupancy data)

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <c <C> <C> <C> <C> <C>
AS OF AND
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,

PRO PRO
FORMA HISTORICAL FORMA HISTORICAL
1995 1995 1994 1994 1994 1993 1992 1991 1990

Operating Data:
Rental income $15,865 $8,05 $6,305 $20,435 $9,154 $7,207 $9,056 $8,675 $10,229
Income (loss) before
extraordinary item 4,735 1,249 2,703 7,182 3,609 3,147 (21,943) (5,454) (12,278)
Net income (loss) 4,735 1,249 2,703 7,182 3,609 3,147 (18,125) (5,454) (12,278)
Income (loss)
applicable to
common stockholders 1,360 1,089 2,703 2,682 3,609 3,147 (18,125) (5,454) (12,278)
Income (loss) before
extraordinary item
per common share $0.22 $0.18 $0.44 $0.44 $0.59 $0.53 $(3.67) $(0.91) ($2.23)
Net income (loss) per
common share $0.22 $0.18 $0.44 $0.44 $0.59 $0.53 $(3.03) $(0.91) $(2.23)

Balance Sheet Data:
Real estate investments before
accumulated depreciation 130,193 70,022 57,820 129,605 58,203 41,225 53,874 85,301 86,927
Total assets 132,506 85,953 57,810 131,792 62,294 43,007 47,509 78,324 82,544
Mortgage loans payable - - - - - - 5,113 18,413 18,413
Bank loan payable 42,700 16,519 42,700 22,400 3,621 4,400 3,000 2,892
Common stock and other
stockholders' equity 32,432 32,432 36,594 32,085 36,932 35,441 33,370 51,495 57,666
Redeemable preferred shares 50,000 50,0 - 50,000 - - - - -

</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Selected
Consolidated Financial and Operating Data set forth above and the
Consolidated Financial Statements and Notes thereto contained
elsewhere in this Prospectus.

Results of Operations

Nine Months Ended September 30, 1995 Compared with Nine Months
Ended September 30, 1994

Income from Property Operations

Income from property operations (defined as rental income less
rental expenses) increased $558,000 or 19% for the nine months ended
September 30, 1995, as compared to the same period in 1994. This is
due primarily to an increase in rental income of $1,747,000 for the
first nine months in 1995 compared to the first nine months in 1994,
offset by an increase in rental expenses of $559,000 and provision for
possible loss on real estate investment of $630,000. The increase in
rental income and expenses is primarily attributable to the increase
in real estate investments.

350 East Plumeria Drive, Lackman Business Center, Ninety-Ninth
Street #1 and Ninety-Ninth Street #2 were acquired in September 1995.
Village Green and Milpitas Town Center were acquired in the middle of
the third quarter of 1994, and Dupont Industrial Center was acquired
on May 24, 1994. These acquisitions increased rental income in the
first nine months of 1995 by approximately $1,547,000. Additionally,
1000 Town Center Drive (acquired December 30, 1993) had an increase in
rental income of approximately $589,000, resulting from an increase in
occupancy from 43% to 95%. The increase in rental income was offset
by rental loss of $249,000 resulting from the vacancies at the Contra
Costa Diablo Buildings 3 and 8.

The increase in rental expenses is primarily attributable to
operating expenses incurred in connection with the newly acquired
properties and the increase in occupancy at 1000 Town Center Drive.

In September 1995, the Company recorded a provision for possible
loss of $630,000 in anticipation of the sale of the IBM Building which
was completed on October 2, 1995. There was no provision for possible
loss recorded during the nine months of 1994.

Expenses

Interest expense, which includes amortization of loan fees,
increased $776,000 or 146% for the first nine months of 1995 compared
with the same period in 1994. The increase is attributable to the
Company's higher level of borrowing on its credit facility to finance
the acquisition of properties in 1994, combined with the increase in
interest rates. The amortization expense of loan fees was $167,000
and $173,000 in the first nine months of 1995 and 1994, respectively.
General and administrative expenses remained relatively unchanged as
compared with the same period in 1994. In the first nine months of
1995, the increase of $70,000 in administrative and personnel costs
associated with a larger real estate portfolio was offset by decrease
of $42,000 in directors and officers ("D & O") insurance expense. D &
O insurance was renewed at a lower premium due to the Company's
improved operating performance in the recent years.

Gain (Loss) on Sale

On January 14, 1994, the Company sold its investment in the
Texas Bank North Building for $8,500,000 and recorded a gain of
$1,193,000. The gain on the sale of the Texas Bank North Building
primarily resulted from an improvement in the local real estate
economy subsequent to a 1992 write down of this asset by $3,631,000.
On September 20, 1995, the Company sold its investment in Cody Street
Park for $1,500,000, resulting in a loss of $12,000.

The Company's accounting policy was to depreciate properties
held for sale during the holding period, since rental revenues and
operating expenses continued to be recorded. The Company has adopted,
effective January 1, 1996, the provisions of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of. Under the
provisions of SFAS 121, depreciation will not be recorded on
properties being held for sale. The future impact from not
depreciating properties held for sale will be a reduction in the gain
on sale or an increase in the loss on sale.

Potential Factors Affecting Future Operating Results

For the nine months ended September 30, 1994, net income was
positively affected by the gain on sale of real estate investments.
For the nine months ended September 30, 1995, the Company recorded a
provision for possible loss of $630,000. The Company does not
anticipate any gain or loss on sales of real estate investments in the
fourth quarter of 1995.

Dividends

Dividends declared for the first, second and third quarters of
1995 were $.095, $.105 and $.105 per share, respectively. Consistent
with the Company's policy, the dividend declared for the last quarter
of 1994 was paid in 1995; as a result, the Company's statement of cash
flows for the period ended September 30, 1995 reflects dividends paid
for the fourth quarter of 1994, the first and second quarters of 1995.
Similarly, the Company's statement of cash flows for the period ended
September 30, 1994 reflects dividends paid for the fourth quarter of
1993, the first and second quarters of 1994. The dividends declared
for the fourth quarter of 1994 and 1993 were $0.095 and $0.07 per
share, respectively. Dividends of $160,000 were accrued on the
$50,000,000 Preferred Stock at September 30, 1995 and were paid on
November 13, 1995.

Year Ended December 31, 1994 Compared to Year Ended December 31,
1993

Income from Property Operations

Income from property operations (defined as rental income less
rental expenses) increased $3,027,000, or 190%, in 1994 compared with
1993. This was due to an increase of rental income of $1,947,000
combined with a decrease in rental expenses of $1,080,000. The
increase in rental income is primarily attributable to acquisitions of
real estate investments. The major acquisitions occurring in late
1993 and in 1994 were Woodlands II, 1000 Town Center Drive, Dupont
Industrial Center, Mariner Court, and Milpitas Town Center. These
acquisitions increased 1994 rental income by approximately $4,000,000.
This increase was partially offset by the sales of Point West Place
and University Tower in 1993, generating a reduction in 1994 rental
income of approximately $2,500,000.

The decrease in rental expenses (which include operating
expenses, real estate taxes, and depreciation and amortization) is
primarily attributable to the decrease in the amortization of leasing
commissions and tenant improvements. The newly acquired buildings
have not yet incurred significant leasing commissions and tenant
improvement costs.

Since leasing commissions and tenant improvement costs are
amortized over the life of the lease (generally three to five years),
the impact of having a portfolio consisting primarily of newly
acquired buildings created a significant reduction in amortization
expense.

Expenses

Interest expense, which includes amortization of loan fees,
increased $239,000, or 33%, in 1994 compared with 1993. The increase
is attributable to the Company's higher level of borrowing on its
credit facility combined with the increase in interest rates and
amortization expense of loan fees. The higher level of borrowing was
attributable to the acquisition of real estate in late 1993 and 1994.
General and administrative expenses remained relatively unchanged in
1994 compared with 1993.

Gains on Sales

In 1992, management and the board of directors decided to revise
the investment strategy and geographic focus of investments from a
continental-wide basis to a Western United States focus. This was
done because of the value growth advantage perceived in the Western
United States, new management's knowledge and experience in real
estate in the Western United States and, in part, because greater
management effectiveness and cost efficiencies can be achieved by
operating in a smaller geographic region.

Certain properties in the real estate portfolio were identified
for disposition. Those properties were individually evaluated and
written down to management's best estimate of net realizable value.
Such properties continued to be depreciated during the holding period
prior to disposition.

In writing down the properties, the Company relied on studies
performed by outside appraisers and consultants. The three methods
used, discounted cash flows, NOI capitalization and comparable sales,
indicated that current market values of these properties were below
their book value.

On May 1, 1993, the Company sold its interest in the Edison
Square partnerships, which were unconsolidated joint ventures, and
recorded a gain of $2,686,000; this gain was due primarily to the book
value of those partnerships having been reduced to negative $2,686,000
as the result of partnership losses. In August 1993, the Company sold
its investment in University Tower for $15,200,000 and recorded a gain
of $407,000. In October 1993, the Company sold its investment in
Point West Place for $7,180,000 and recorded a gain of $493,000. On
January 14, 1994, the Company sold its investment in the Texas Bank
North Building for $8,500,000 and recorded a gain of $1,193,000.

The gains on the sales of University Tower and Point West Place
related primarily to the depreciation of those properties during the
holding period. The gain from the sale of Texas Bank North was due to
improvements in 1993 in the local real estate market.

The significant number of property sales occurring in 1993 and
1994 were attributable to management's decision to refocus the real
estate portfolio on suburban office and industrial buildings located
in the Western United States. The Company does not expect this level
of property sales to occur in the future.

At December 31, 1994, the Company was offering for sale the IBM
Building located in Jackson, Mississippi. This property was first
offered for sale in 1991, at which time the Company's investment in
the property was written down by $2,113,000. The Company continued to
depreciate this property during the holding period prior to its
disposition in October 1995.

Dividends

Dividends declared for the four quarters of 1994 totaled $.355
per share. Consistent with the Company's policy, the dividend
declared for the last quarter of 1994 was paid in 1995; as a result,
the Company's statement of cash flows for the year ended December 31,
1994 reflects dividends declared for the fourth quarter of 1993 and
the first three quarters of 1994. The dividends declared for the
fourth quarter of 1994 and 1993 were $.095 and $.07 per share,
respectively.

Financial Condition

Total assets of the Company at December 31, 1994 increased by
$19,287,000 compared with December 31, 1993, primarily as a result of
an increase in real estate investments (net of depreciation) of
$16,978,000. During 1994, the Company sold its investment in the
Texas Bank North Building and acquired four properties (Mariner Court,
Dupont Industrial Center, Village Green and Milpitas Town Center).
Total liabilities at December 31, 1994 increased by $17,796,000
compared with December 31, 1993, primarily as a result of increased
borrowings under the credit facility in order to finance the purchase
of Mariner Court, Dupont Industrial Center, Village Green and Milpitas
Town Center.

Year Ended December 31, 1993 Compared to Year Ended December 31,
1992

Income from Property Operations

Income from property operations for the year ended December 31,
1993 increased $163,000, or 11%, over the year ended December 31,
1992. The increase occurred despite a decrease in rental income in
1993 of $1,849,000 from the prior year, which was primarily due to the
Company's ceasing to record the operations of Columbia Business Center
as of March 31, 1992, resulting in a $400,000 decrease in rental
income (see "Gains on Sales and Extraordinary Item" below); the sales
of University Tower and Point West Place in 1993, resulting in a
$1,500,000 decrease in rental income; and the fact that in 1992 the
Company recorded 15 months of rental income for the Texas Bank North
Building. The Texas North Bank Building was previously accounted for
by the Company as an unconsolidated joint venture with a September 30
fiscal year-end; as a result, the Company's 1991 financial statements
included results from this property for the 12 months ended September
30, 1991. The Company fully consolidated this property in its 1992
year-end financial statements and, accordingly, the 1992 financial
statements included results from this property for the last quarter of
1991 (which had not previously been reflected in the Company's
financial statements) and for the year ended December 31, 1992. This
resulted in an increase in 1992 rental income of approximately
$300,000.

The decreases in 1993 rental income were offset by a $500,000
increase in rental income from Woodlands Tower II, which was purchased
in August 1993. Correspondingly, rental expenses decreased by
$2,012,000 from the prior year. The decrease primarily resulted from
Columbia Business Center ($300,000), University Tower and Point West
Place ($1,200,000), and Texas Bank North ($600,000).

Interest income increased by $131,000, a result of investing the
remaining cash proceeds from the sales of University Tower and Point
West Place after acquiring Woodlands Tower II and repaying bank and
mortgage loans.

Equity in joint venture partnership operations produced a loss
of $153,000 for 1993, compared with a loss of $702,000 in 1992. The
$549,000 reduction in the loss was attributable primarily to the sale
of the Edison Square joint venture partnerships during 1993. Only
three months of joint venture partnership operations were recorded in
1993.

Expenses

Interest expense in 1993 decreased by $475,000 from the prior
year which was primarily attributable to the Company's ceasing to
record the operations of Columbia Business Center as of March 31, 1992
and the repayment of the $6,000,000 term loan from Bank of America on
August 18, 1993 and $5,113,000 in mortgage loans on November 1, 1993
with the proceeds from the sales of Point West Place and University
Tower. General and administrative expenses decreased by $1,265,000
(49%) from 1992 to 1993, primarily as a result of reduced expenses due
to the termination of most outside property managers and the advisory
agreement with Kingswood Realty Advisors, Inc., implemented cost
savings associated with a reduction in the number of personnel, and
the fact that results for 1992 included certain non-recurring expenses
related to state tax liabilities and employee severance payments.

In 1992, the Company wrote down its investment in Columbia
Business Center, University Tower, Point West Place and the Texas Bank
North Building by an aggregate amount of $18,921,000. The write-downs
in 1992 occurred as a result of management's decision to refocus the
real estate portfolio on suburban office and industrial buildings in
the Western United States. This decision was made in 1992, with
actual property sales occurring in 1993. No corresponding write-down
was taken in 1993.

Gains on Sales and Extraordinary Item

On May 31, 1993, the Company sold its interest in the Edison
Square partnerships, which were unconsolidated joint ventures, and
recorded a gain of $2,686,000; this gain was due primarily to the book
value of those partnerships having been reduced to negative $2,686,000
as the result of partnership losses. In August 1993, the Company sold
its investment in University Tower for $15,200,000 and recorded a gain
of $407,000. In October 1993, the Company sold its investment in
Point West Place for $7,180,000 and recorded a gain of $493,000. The
gains on the sales of University Tower and Point West Place related
primarily to the depreciation of those properties during the holding
period. There were no comparable sales in 1992.

In accordance with a settlement agreement between the Company
and the holder of the first mortgage on Columbia Business Center, the
Company transferred Columbia Business Center to the mortgage holder in
June 1992. As a result, in 1992 the Company recorded an extraordinary
gain of $3,818,000 attributable to the extinguishment of the first
mortgage debt on the property. The Company had previously written
down its investment in Columbia Business Center as part of the
$18,921,000 write-down taken in 1992 and referred to above.

Dividends

Dividends declared for the last three quarters of 1993 totaled
$.18 per share. Consistent with the Company's policy, the dividend
for the last quarter of 1993 was paid in 1994 and, accordingly, is not
reflected in the Company's statement of cash flows for the year ended
December 31, 1993. No dividends were declared during 1992 or for the
first quarter of 1993.

Financial Condition

Total assets of the Company at December 31, 1993 decreased by
$4,502,000 compared with December 31, 1992, primarily as a result of a
decrease in real estate investments of $9,591,000 and an increase in
cash of $4,755,000. The decrease in real estate investments was due
to the sale of two of the Company's properties, University Tower and
Point West Place (book value of $14,476,000 and $6,468,000,
respectively) offset in part by $13,052,000 invested in Woodlands II,
1000 Town Center Drive and tenant improvements to real estate
investments. The increase in cash consisted of the remaining proceeds
from the sales of University Tower and Point West Place after acquring
Woodlands II and 1000 Town Center Drive and paying off bank and
mortgage loans. Total liablities at December 31, 1993 decreased by
$6,573,000 compared with December 31, 1992, of which $9,513,000 was
attributable to the pay-off of the bank and mortgage loans, offset by
the Company's borrowing of $3,621,000 under the Credit Facility and
recording a liability of $1,500,000 for the purchase of 1000 Town
Center Drive.

Funds From Operations

Management considers Funds From Operations ("FFO") to be one
measure of the performance of an equity REIT. FFO during the nine
months ended September 30, 1995 amounted to $2,961,000, an increase of
25% over FFO of $2,378,000 during the same period in 1994. FFO for
1994 amounted to $3,622,000, an 84% increase over FFO of $1,964,000
for 1993. FFO for 1993 increased 123% over FFO of $879,000 in 1992.
These increases in FFO resulted primarily from the growth of the
Company's real estate portfolio. FFO was determined in accordance
with NAREIT's interpretation published in March 1995. FFO is defined
by NAREIT as net income, excluding gains or losses from debt
restructuring and sales of property, plus depreciation and
amortization of assets related to real estate, after adjustments for
unconsolidated ventures. FFO, therefore, does not represent cash
generated from operating activities in accordance with generally
accepted accounting principles and should not be considered an
alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity or its ability
to pay distributions.

Liquidity and Capital Resources

During the nine months ended September 30, 1995, the Company's
operating activities provided cash flow of $1,501,000. Investing
activities utilized cash of $13,255,000, primarily for acquisitions of
and improvements to real estate. Financing activities provided cash
flow of $22,583,000, primarily from the Convertible Preferred Stock
sale of $50,000,000 less issuance costs of $3,250,000, offset by net
repayments of bank loans of $22,400,000 and payments of dividends of
$1,765,000.

During the year ended December 31, 1994, the Company's operating
activities provided net cash flow of $2,716,000. Its investing
activities provided cash flow of $8,289,000 from the sale of the Texas
Bank North Building and utilized $28,009,000 of cash to acquire real
estate investments, for a net use of cash from investing activities of
$19,720,000. The financing activities provided bank loan proceeds of
$36,138,000 and utilized $17,359,000 to pay down the credit facility
and $1,972,000 for distributions to stockholders for a net cash
provided by financing activities of $16,807,000.

On September 18, 1995, the Company completed the sale of the
8,333,334 shares of Convertible Preferred Stock for $50 million in
gross proceeds to AEW. The net proceeds of the sale were used to
repay outstanding indebtedness and acquire properties.

As of December 31, 1995, the Company had $43,250,000 in
borrowings and $3,630,000 aggregate principal amount of letters of
credit outstanding under the Credit Facility. The Company does not
anticipate that cash flow from operations will be sufficient to enable
it to repay amounts outstanding under the Credit Facility when they
become due in 1998. The Company expects to make such payment by using
the proceeds from the Offering. See "Business and Properties The
Credit Facility."

The Company anticipates that the cash flow generated by its real
estate investments and funds available under the Credit Facility will
be sufficient to meet its short-term liquidity requirements. The
Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from
(i) cash flow from operations, (ii) borrowings under the Credit
Facility and, if available, other indebtedness (which may include
indebtedness assumed in acquisitions), (iii) the sale of real estate
investments and (iv) the sale of the Common Stock offered hereby and,
possibly, the issuance of additional equity securities in connection
with acquisitions.

Inflation

Most of the leases require the tenants to pay their share of
operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing the Company's exposure to
increases in costs and operating expenses resulting from inflation.
Inflation, however, could result in increases in the Company's
borrowing costs.

<PAGE>
BUSINESS AND PROPERTIES

As of December 31, 1995, the Company owned and operated 30
Properties, aggregating approximately 2.6 million rentable square feet
and comprised of 24 Industrial Properties totalling approximately
2.1 million rentable square feet, five Suburban Office Properties
totalling approximately 424,000 rentable square feet and one Retail
Property totalling approximately 84,000 rentable square feet. Based
on rentable square feet, as of November 30, 1995, the Suburban Office
Properties and the Industrial Properties were approximately 97% and
93% occupied, respectively, by a total of 293 tenants, of which 72
were Suburban Office Property tenants and 221 were Industrial Property
tenants. As of November 30, 1995, the Retail Property was 98%
occupied by 15 tenants. The Company holds a fee simple interest in
all of the Properties.

<PAGE>

Table of Properties

The following table summarizes certain information as of
November 30, 1995 with respect to the Properties.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Total Percent Office/
Acquired/ Rentable Percent Total Research and Number
Year Square Occupied Annualized Development of Largest
Property Name and Location Constructed Feet (1) Base Rent (2) Finish Tenants Tenant (3)

INDUSTRIAL PROPERTIES

Greater San Francisco Area, California

Building #3 at
Contra Costa Diablo
Industrial Park, Concord 1990/1983 21,840 100% $108,108 50% 1 Phase Metrics, Inc.

Building #8 at
Contra Costa Diablo
Industrial Park,
Concord (4) 1990/1981 31,800 0% $0 18% 0 (4) N/A

Building #18 at
Mason Industrial Park,
Concord 1990/1984 28,850 83% $158,832 17% 6 Rust Scaffold
Builders, Inc.

Milpitas Town Center,
Milpitas (5) 1994/1983 102,620 100% $753,936 60% 4 Solectron
Corporation

Auburn Court,
Fremont 1995/1983 68,030 100% $444,660 50% 6 Bond Technologies

Westinghouse Drive,
Fremont 1995/1982 24,030 100% $132,648 25% 1 SMT Unlimited,
L.P.

350 East Plumeria
Drive, San Jose 1995/1983 142,700 100% $1,113,060 52% 1 Compression Labs

301 East Grand,
South San Francisco 1995/1974 57,846 70% $240,636 21% 2 Radix Group Int'l

342 Allerton,
South San Francisco 1995/1969 69,312 100% $476,832 15% 4 Danzas Corporation

400 Grandview,
South San Francisco 1995/1976 107,004 100% $801,816 37% 5 Kuehne & Nagel,
Inc.

410 Allerton,
South San Francisco 1995/1970 46,050 100% $237,612 12% 1 See's Candies, Inc.

417 Eccles,
South San Francisco 1995/1964 24,624 100% $140,580 8% 2 Haitai America Inc.

Subtotal/
Weighted Average 724,706 93% $4,608,720 37% 33

Greater Los Angeles Area, California

Dupont Industrial
Center, Ontario 1994/1989 451,192 100% $1,429,920 5% 17 Ben Franklin
Retail Stores

3002 Dow Business
Center, Tustin 1995/1987-89 192,125 83% $1,260,276 50% 55 XCd, Inc.

Subtotal/
Weighted Average 643,317 95% $2,690,196 18% 72

Denver, Colorado

Bryant Street Annex,
Denver 1995/1968 55,000 100% $221,112 25% 2 Denver General Hospital

Bryant Street Quad,
Denver 1995/1971-73 155,536 100% $480,516 20% 17 King Soopers, Inc.

Subtotal/
Weighted Average 210,536 100% $701,628 21% 19

Minneapolis/St. Paul, Minnesota

St. Paul Business
Center East, Maplewood 1995/1984 77,000 90% $484,656 70% 12 Eye Technology, Inc.

St. Paul Business
Center West, Maplewood 1995/1981 108,750 81% $476,184 52% 26 Braun Intertec
Engineering

Subtotal/
Weighted Average 185,750 85% $960,840 59% 38

<PAGE>

INDUSTRIAL PROPERTIES (CONTINUED)

Greater Portland Area, Oregon

Twin Oaks Technology Center,
Beaverton 1995/1984 94,174 81% $552,744 70% 16 General
Telephone Co. of NW

Twin Oaks Business Park,
Beaverton 1995/1984 65,780 93% $474,528 100% 15 U. S. Postal Service

Subtotal/
Weighted Average 159,954 86% $1,027,272 82% 31

Kansas City, Kansas

Ninety-Ninth Street #3,
Lenexa 1990/1990 50,000 100% $293,016 18% 2 Yellow Technology
Services

Ninety-Ninth Street #1,
Lenexa 1995/1988 35,516 100% $282,708 70% 3 Snap-on-Tools

Ninety-Ninth Street #2,
Lenexa 1995/1988 12,974 100% $98,088 95% 1 Health Midwest

Lackman Business
Center, Lenexa 1995/1985 45,956 98% $377,208 75% 22 Entertel, Inc.

Subtotal/
Weighted Average 144,446 99% $1,051,020 56% 28

Total/Weighted Average
All Industrial Properties 2,068,709 93% $11,039,676 36% 221

SUBURBAN OFFICE PROPERTIES

Greater Los Angeles Area, California

1000 Town Center
Drive, Oxnard 1994/1989 107,653 96% $1,832,040 100% 11 Nordman,
Cormany,
Hair &
Compton

Mariner Court,
Torrance 1993/1990 105,436 100% $1,818,667 100% 35 Dodge, Warren & Peters

Subtotal/
Weighted Average 213,089 98% $3,650,707 100% 46

Salt Lake City, Utah

Woodlands II,
Salt Lake City 1993/1990 114,352(6) 95% $1,542,984 100% 11 Comphealth CHS, Inc.

Kansas City, Kansas

6600 College Boulevard,
Overland Park 1995/1982-83 79,316 100% $952,884 95% 6 Sprint

Greater San Francisco Bay Area,
California

Village Green,
Lafayette(7) 1994/1983 16,895 99% $304,536 100% 9 Vocational
Instruction
Software

Total/Weighted Average
All Suburban Office Properties 423,652 97% $6,451,111 99% 72

RETAIL PROPERTY

Academy Place
Shopping Center,
Colorado Springs 1995/1980-82 84,347 98% $836,748 N/A 15 Ross Stores #73

Total/Weighted Average
All Properties 2,576,708 94% $18,327,535 47% 308

</TABLE>

____________________

(1) Rentable square feet occupied divided by total rentable square feet.

(2) Annualized Base Rent is computed upon the basis of the monthly base
rent in effect under each lease as of November 30, 1995, or, if such monthly
base rent has been reduced by a temporary rent concession, the monthly base
rent that would have been in effect at such date in the absence of such
concession. Annualized Base Rent does not reflect increases or decreases
in monthly rental rates or any lease expirations which are scheduled to
occur or which may occur after November 30, 1995 or the cost of any
leasing commissions or tenant improvements. See "Glossary."

(3) Based upon Annualized Base Rent as of November 30, 1995.

(4) As of December 31, 1995, Building #8 at Contra Costa Diablo Industrial
Park was 100% occupied by one tenant.

(5) The Company owns 3.1 acres of adjoining land being developed on an
unleased ("speculative") basis.

(6) Rentable square feet includes an 8,268 square foot single-story retail
building which was 100% occupied as of November 30, 1995. The Company owns
3.6 acres of adjoining, entitled land available for future development or
sale.

(7) The Company's headquarters are located at Village Green.

<PAGE>

Location and Type of the Company's Properties

As of December 31, 1995, the location and type of Properties by
rentable square feet were as follows:

Rentable Square Footage of Properties by Location and Type of Property

<S> <C> <C> <C> <C> <C> <C>
Suburban Suburban Percent of Number of
Industrial Office Retail Total Total Properties

Metropolitan Area

Greater Los Angeles
Area, CA 643,317 213,089 - 856,406 33% 4

San Francisco Bay
Area, CA 724,706 16,895 - 741,601 29 13

Greater Kansas City
Area, KS 144,446 79,316 - 223,762 9 5

Denver, CO 210,536 - - 210,536 8 2

Greater Minneapolis/
St. Paul Area, MN 185,750 - - 185,750 7 2

Greater Portland
Area, OR 159,954 - - 159,954 6 2

Salt Lake City, UT - 114,352 - 114,352 5 1

Colorado Springs, CO - - 84,347 84,347 3 1

Total 2,068,709 423,652 84,347 2,576,708 100% 30

Percent of Total 80% 17% 3% 100%

Number of
Properties 24 5 1 30

</TABLE>

<PAGE>

Tenants

Based on rentable square feet, as of November 30, 1995, the
Suburban Office Properties and Industrial Properties were
approximately 97% and 93% occupied, respectively, by a total of 293
tenants of which 72 were Suburban Office Property tenants and 221 were
Industrial Property tenants. As of November 30, 1995, the Retail
Property was 98% occupied by 15 tenants. The Company's tenants
include local, regional, national and international companies engaged
in a wide variety of businesses. The following table sets forth, as
of November 30, 1995, information concerning the Company's ten largest
tenants (ranked by Annualized Base Rent as of that date). All of
these tenants occupy the space that they lease from the Company.

<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C>
Actual
Amount of
Scheduled Base
Annualized Base Rent (1) Rent Due From Rentable Area
December 1, Scheduled
Percent 1995 - November Square Percent of Lease
Tenant Amount of Total(2) 30, 1996 Feet Total (3) Expiration Date

1. Compression
Labs $1,113,060 6% $1,113,060 142,700 6% December 2001

2. Nordman,
Cormany,
Hair & Compton 707,495 4 721,632 29,837 1 May 2000

3. Sprint
Communications 736,800 4 736,800 62,441 2 December 1999

4. Kinko's Service
Corporation 697,092 4 702,911 45,119 2 September 1999 &
August 2001(4)

5. CompHealth 601,443 3 602,706 42,590 2 February 1997

6. Ben Franklin
Retail Stores 483,600 3 483,600 183,244 7 December 1996(5)

7. Principal Mutual
Life Ins. Co. 338,985 2 338,985 22,599 1 January 1998

8. Dodge, Warren &
Peters 321,859 2 334,929 13,615 1 December 2002

9. Ross Stores #73 309,624 2 309,624 38,703 2 January 2000

10. See's Candies,
Inc. 237,618 1 237,618 46,050 2 April 1998

Total $5,547,576 31% $5,581,865 626,898 26%

</TABLE>

____________________
(1) Annualized Base Rent is computed upon the basis of the monthly
base rent in effect under each lease as of November 30, 1995 or,
if such monthly base rent has been reduced by a temporary rent
concession, the monthly base rent that would have been in effect
at such date in the absence of such concession. Annualized Base
Rent does not reflect any increases or decreases in monthly
rental rates or any lease expirations which are scheduled to
occur or which may occur after November 30, 1995 or the cost of
any leasing commissions or tenant improvements. See "Glossary."

(2) Calculated based on a total Annualized Base Rent of $18,327,535
as of November 30, 1995.

(3) Calculated based on a total of 2,576,708 rentable square feet as
of November 30, 1995.

(4) Of Kinko's Service Corporation's 45,119 rentable square feet,
the lease with respect to 7,277 square feet expires in September
1999, while a separate lease with respect to 37,842 square feet
expires in August 2001.

(5) Ben Franklin Retail Stores' lease has been extended to March
1997. The Company currently is actively negotiating to renew
the lease as well as simultaneously marketing the space.

As of November 30, 1995, the Company's ten largest tenants
(based on Annualized Base Rent) in the aggregate accounted for
approximately 31% of the Company's total Annualized Base Rent at that
date. See "Risk Factors Risks Inherent in Real Estate
Investments Dependence on Certain Tenants."

<PAGE>

Lease Expirations for the Properties

The following table sets forth as of November 30, 1995 a
schedule of lease expirations at the Properties for each of the next
nine years beginning December 1, 1995, assuming that none of the
tenants exercise renewal options or termination rights.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases (1) Base Rent Under
Expiration Expiring Expiring Leases to Expiring Leases (in thousands) Expiring Leases (1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2) . . . . 18 71,023 3% 3% $ 458 3% 3%

1996 . . . . . 72 501,611 21 24 2,628 14 17

1997 . . . . . 88 544,550 22 46 4,270 23 40

1998 . . . . . 71 538,611 22 68 3,957 22 62

1999 . . . . . 32 322,655 13 81 2,301 13 75

2000 . . . . . 32 209,867 9 90 2,086 11 86

2001 . . . . . 6 201,782 8 98 1,970 11 97

2002 . . . . . 2 17,540 1 99 378 2 99

2003 . . . . . 2 10,279 1 100 158 1 100

2004 and
thereafter . 3 8,961 0 100% 122 0 100%

Total. . . . . . 326 2,426,879 100% $18,328 100%

</TABLE>
____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1, 1995
through December 31, 1995.

As set forth in the foregoing table, as of November 30, 1995
leases representing 3%, 14%, 23%, 22% and 13%, respectively, of the
Company's total Annualized Base Rent were scheduled to expire during
the remainder of 1995 and in 1996, 1997, 1998 and 1999, respectively.
The Company will be subject to the risk that, upon expiration, certain
of these or other leases will not be renewed, the space may not be
relet, or the terms of renewal or reletting (including the cost of
required renovations or concessions to tenants) may be less favorable
than current lease terms. See "Risk Factors-Risks Inherent in Real
Estate Investments-Lease Expirations; Renewal of Leases and Reletting
of Unleased Space."

<PAGE>

The Industrial Properties

As of December 31, 1995, the Company owned 24 Industrial
Properties aggregating approximately 2.1 million rentable square feet.
All of the Industrial Properties are located in industrial business
parks which have convenient access to major freeways and/or rail and
air transportation and have grade-level loading for lighter vehicles
and vans and/or dock-high facilities for larger trucks. Most of the
Industrial Properties consist of concrete tilt-up buildings. They are
typically designed to be divisible for leasing to multiple tenants,
although five of the Industrial Properties had a single tenant as of
November 30, 1995. As of November 30, 1995, the Industrial Properties
were approximately 93% occupied and the average Industrial Property
lease was for approximately 8,359 rentable square feet. All of the
Industrial Properties are well-maintained and professionally managed.

The Company's largest Industrial Property, Dupont Industrial
Center, is a 451,192 square foot, three building warehouse and
distribution complex located in Ontario, California, with
approximately 5% office space buildout and internal clearance heights
ranging from 20 to 26 feet. The Property is designed for the bulk
storage of materials and manufactured goods. The Company's remaining
23 Industrial Properties are light industrial properties used for
research and development, design, assembly, packaging and distribution
of goods and/or the provision of services. The light Industrial
Properties have office space and research and development build out
ranging from 8% to 100% and internal clearance heights between 14 and
24 feet. Light industrial properties are generally characterized by
less building depth and clearance height and a greater office buildout
than bulk warehouse properties. Dupont Industrial Center was
constructed in 1989, while the Company's other Industrial Properties
have an average age of approximately 13 years.

Leases for the Industrial Properties typically have terms
ranging from one to five years and do not contain purchase options.
Some leases also require periodic rental increases that are either
fixed or based on changes in the Consumer Price Index ("CPI"). Most
of the Company's Industrial Property leases contain tenant expense
contribution clauses whereby the tenant pays its pro rata share of
either all property operating expenses or any increase over
predetermined base amounts in operating expenses (e.g., real estate
taxes, insurance, utilities and maintenance). The Company may
occasionally enter into "gross" tenant leases whereby the tenant's
estimated expense contribution payments are calculated and scheduled
prior to lease commencement and subsequently paid in the form of
higher base rents.

Lease Expirations for the Industrial Properties

The following table sets forth as of November 30, 1995 the
scheduled lease expirations for all leases at the Industrial
Properties for each of the next nine years beginning December 1, 1995,
assuming that none of the tenants exercise renewal options or
termination rights.

Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases (1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases (1)

Cumulative Cumulative
Percentage Pecentage Percentage Percentage
1995(2). . . . 14 65,828 3% 3% $ 369 3% 3%

1996 . . . . . 54 469,386 24 27 2,085 19 22

1997 . . . . . 70 443,876 23 50 2,821 26 48

1998 . . . . . 50 452,754 23 73 2,707 25 73

1999 . . . . . 23 234,794 12 85 1,197 11 84

2000 . . . . . 17 116,305 6 91 673 6 90

2001 . . . . . 2 145,036 8 99 1,144 10 100

2002 . . . . . 0 0 0 99 0 0 100

2003 . . . . . 1 2,889 1 100 43 0 100

2004 and
thereafter . . 0 0 0 100% 0 0 100%

Total. . . . . . 231 1,930,868 100% $11,039 100%

</TABLE>
____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1, 1995
through December 31, 1995.

Non-Incremental Revenue-Generating Capital Expenditures, Tenant
Improvements and Leasing Commissions for the Industrial
Properties

The following table summarizes the Company's tenant improvement
and leasing commission expenditures incurred in the renewal or
releasing of space in its then-owned industrial properties for each of
the last three years and for the eleven months ended November 30,
1995.

Eleven Months Ended
November 30, Year Ended December 31,
1995 1994 1993 1992

Renewed or released
space in square feet(1) 92,665 18,282 36,828 13,028

Total expenditures $208,076 $37,403 $84,048 $86,297

Average cost per square
foot $2.25 $2.05 $2.28 $6.62

____________________

(1) Includes only square footage with respect to which leasing
commissions were paid or improvements were made in connection
with the renewal or the releasing of space.

The Company evaluated each Industrial Property and estimated the
amount of non-incremental revenue-generating capital expenditures to
be incurred during the year ended December 31, 1996 at approximately
$100,000. This amount represents approximately $0.05 per square foot,
based on the existing Industrial Property square footage of
approxiamtely 2.1 million square feet.

The Company plans to spend $1.6 million on capital expenditures
in 1996 in connection with improvements to the eighteen Industrial
Properties acquired in the period from September 1995 to December
1995. These expenditures will be capitalized as part of the purchase
price. The Company does not expect to incur any further substantial
capital expenditures in connection with the Industrial Peroperties.

Description of Major Industrial Properties

3002 Dow Business Center and Dupont Industrial Center, two of
the Company's major Industrial Properties, are described below.

3002 Dow Business Center (Tustin, California)

The Company acquired 3002 Dow Business Center in December 1995
for $11.5 million, or approximately $60 per rentable square foot.
3002 Dow Business Center is a five-building Industrial Property in
Tustin, California, which is located in Orange County approximately 37
miles south of downtown Los Angeles. The Property is part of a 315-
acre master-planned business park commonly known as the Irvine
Industrial Complex - Tustin, which is located in the southwestern
section of Tustin at the border of the City of Irvine and lies one-
half mile south of Interstate 5 and four miles north of Interstate
405, the two major north/south freeways in Southern California.
Additionally, the Eastern Transportation Corridor, a 24-mile toll road
that has secured its funding and is expected to be completed by late
1999, is planned to connect with Jamboree Boulevard at a location
approximately one quarter mile from the Property. The five buildings,
constructed in two phases in 1987 and 1989, are painted concrete tilt-
up structures containing approximately 192,215 rentable square feet.
Two of the buildings comprise 20,960 rentable square feet each and the
remaining buildings comprise 30,168, 33,361 and 86,676 rentable square
feet, respectively. Approximately 50% of the rentable area has been
built out as office space. There are 72 suites among the five
buildings ranging in sizes from 1,560 rentable square feet to
approximately 6,000 rentable square feet, accommodating small
industrial and research and development tenants. Except for the ten
suites that are fully- improved as office or research and development
suites, each of the suites at the Property has roll-up doors and a
main door servicing the industrial portion of each suite. The 12.48-
acre site provides parking for 640 vehicles, or approximately 3.3
spaces per 1,000 rentable square feet.

As of November 30, 1995, the Property was 83% occupied by 55
tenants with an average lease size of approximately 2,672 rentable
square feet. Leases range from 466 to 8,464 rentable square feet and
expire from 1995 to 2001. Annualized Base Rents as of November 30,
1995 range from $1,500 to $61,920. The average net effective rent per
square foot and the end of 1995 was $2.64. The majority of the leases
at this Property are triple net leases requiring the tenants to
reimburse the Company for all normal operating expenses, real estate
taxes and insurance costs. As of November 30, 1995, 63% of the leases
also provide for periodic rent increases based on either a fixed
percentage or dollar amount or an index such as the CPI.

As of November 30, 1995, the largest tenant of 3002 Dow Business
Center was XCd, Inc., which occupied approximately 8,464 rentable
square feet, or 4% of the rentable square feet of the Property. This
tenant's lease expires in March 1998.

The following table sets forth a schedule of lease expirations
at 3002 Dow Business Center as of November 30, 1995 for each of the
next nine years beginning December 1, 1995, assuming that none of the
tenants exercise renewal options or termination rights.

<PAGE>

<TABLE>
<CAPTION>
Lease Expirations
3002 Dow Business Center

<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases(1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2) . . . . 4 6,766 4% 4% $ 43 3% 3%

1996 . . . . . 17 47,509 30 34 375 30 33

1997 . . . . . 23 55,058 34 68 443 35 68

1998 . . . . . 7 23,542 15 83 183 15 83

1999 . . . . . 3 7,372 5 88 55 4 87

2000 . . . . . 5 17,712 11 99 130 10 97

2001 . . . . . 1 2,336 1 100 31 3 100

2002 . . . . . 0 0 0 100 0 0 100

2003 . . . . . 0 0 0 100 0 0 100

2004 and
thereafter . . 0 0 0 100% 0 0 100%

Total. . . . . 60 160,295 100% $1,260 100%

</TABLE>
____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1,
1995 through December 31, 1995.

The current annual realty tax rate for 3002 Dow Business Center
is approximately $1.48 per $100 of assessed value. The total annual
tax on the current assessed value of approximately $13.9 million at
this rate for 1995 is approximately $205,720. In addition, in 1995
there were direct assessments of approximately $9,000 and annual
Mello-Roos bond assessments of approximately $57,000.

Dupont Industrial Center (Ontario, California).

The Company acquired Dupont Industrial Center in May 1994 for
$9.75 million, or approximately $22 per rentable square foot. Dupont
Industrial Center is located in Ontario, California within the
California Commerce Center, an industrial development near the
Interstate 10 and Interstate 15 interchange in the Inland Empire West
submarket of Los Angeles approximately 80 miles southeast of downtown
Los Angeles. This location provides convenient access to nearby
Ontario International Airport and is a strategic location for ground
transportation throughout the Southwestern United States. The
Property, which was constructed in 1989, comprises 451,192 rentable
square feet and is the largest of the Company's Properties based upon
rentable square footage. The Property includes three industrial
buildings: Building A, which has 103,491 square feet divisible to
6,960 square feet with 20-foot vertical clearance; Building B, which
has 164,457 square feet divisible to 15,696 square feet with 24-foot
vertical clearance; and Building C, which has 183,244 square feet
divisible to 30,000 square feet with 26-foot vertical clearance.
Approximately 5% of the rentable area has been built out as office
space. The 19.9-acre site provides ample space for truck staging and
parking spaces for 735 cars, or 1.6 parking spaces per 1,000 rentable
square feet. Uses at the Property range from light manufacturing to
heavy bulk distribution/warehousing. There are 56 dock-high and 25
grade-level loading doors.

As of November 30, 1995, 100% of the rentable square footage of
Dupont Industrial Center was occupied by 17 tenants, with an average
lease size of approximately 26,541 rentable square feet and lease
terms ranging from one to seven years. The average occupancy rate for
the period from the Company's purchase of the Property through the end
of 1995 was 96%. The average net effective rents per square foot at
the end of 1994 and 1995 for this Property were $3.13 and $3.17,
respectively. Most of the leases at the Property require tenants to
reimburse the Company for all normal operating expenses, real estate
taxes and insurance costs or in some cases a portion of these costs
above fixed amounts. However, some of the leases are "gross" leases
in which predetermined expense reimbursements have been factored into
the base rents. The leases also provide for periodic rent increases
based on either a fixed percentage or dollar amount or an index, such
as the CPI.

As of November 30, 1995, the largest tenant of Dupont
Industrial Center was Ben Franklin Retail Stores, Inc., which occupied
approximately 183,244 square feet or 41% of the rentable square feet
of the Property. As of November 30, 1995, this tenant's lease expired
in December 1996 but the Company has subsequently extended the lease
to March 1997. The Company currently is actively negotiating to renew
the lease and marketing the space. No other tenant occupied 10% or
more of the rentable square footage of this Property as of November
30, 1995.

The following table sets forth a schedule of lease expirations
at Dupont Industrial Center as of November 30, 1995 for each of the
next nine years beginning December 1, 1995, assuming that none of the
tenants exercise renewal options or termination rights.

Lease Expirations
Dupont Industrial Center

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases(1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2). . . . . 1 24,433 5% 5% $ 98 7% 7%

1996 . . . . . . 6 259,948 58 63 755 53 60

1997 . . . . . . 3 49,672 11 74 187 13 73

1998 . . . . . . 4 49,171 11 85 184 13 86

1999 . . . . . . 2 47,088 10 95 143 10 96

2000 . . . . . . 1 20,880 5 100 63 4 100

2001 . . . . . . 0 0 0 100 0 0 100

2002 . . . . . . 0 0 0 100 0 0 100

2003 . . . . . . 0 0 0 100 0 0 100

2004 and
thereafter . . 0 0 0 100% 0 0 100%

Total. . . . . . 17 451,192 100% $1,430 100%

</TABLE>

____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1,
1995 through December 31, 1995.

The current annual realty tax rate for Dupont Industrial Center
is approximately $1.01 per $100 of assessed value. The total annual
tax on the current assessed value of approximately $9.9 million at
this rate for 1995 is approximately $99,990. In addition, in 1995
there were direct assessments of approximately $113,000.

The Suburban Office Properties

The Company's five Suburban Office Properties aggregate
approximately 424,000 rentable square feet. The Suburban Office
Properties are mid-rise buildings that have relatively narrow bay
depths for easy divisibility enabling the Company to serve a wide
array of tenants and to accommodate their expansion, contraction
and/or space re-engineering needs. As of November 30, 1995, the
Suburban Office Properties were approximately 97% occupied and the
average lease in the Suburban Office Properties was for approximately
5,162 rentable square feet. All of the Suburban Office Properties
have adequate on-site parking. Two of the five Suburban Office
Properties have been constructed during the last five years. The
Village Green office complex where the Company's headquarters are
located is twelve years old.

Leases for the Suburban Office Properties have lease terms
ranging from one to five years and do not contain purchase options.
Office tenants occupying 25% or more of a building typically have
leases with initial terms of five years or more. The office leases
generally require tenants to reimburse the Company for all normal
operating expenses, real estate taxes and insurance costs above fixed
or tenant base year amounts. Some of the office leases also provide
for periodic rent increases that are either a fixed percentage or
dollar amount or based on an index, such as the CPI. Renewal
provisions typically provide for renewal rents to be at or near market
rates; in some cases, the renewal rent may be less than the most
recent rent in effect under the lease.

Lease Expirations for the Suburban Office Properties

The following table sets forth, as of November 30, 1995, the
scheduled lease expirations of all leases at the Suburban Office
Properties for each of the next nine years beginning December 1, 1995,
assuming that none of the tenants exercise renewal options or
termination rights.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases (1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2). . . . 4 5,195 1% 1% $ 88 1% 1%

1996 . . . . . 17 30,465 8 9 523 8 9

1997 . . . . . 16 91,011 22 31 1,358 21 30

1998 . . . . . 16 73,361 18 49 1,104 17 47

1999 . . . . . 7 82,698 20 69 1,058 17 64

2000 . . . . . 11 50,429 12 81 1,048 16 80

2001 . . . . . 3 45,920 11 92 656 10 90

2002 . . . . . 2 17,540 4 96 378 6 96

2003 . . . . . 1 7,390 2 98 115 2 98

2004 and
thereafter . . 3 8,961 2 100% 122 2 100%

Total. . . . . 80 412,970 100% $ 6,450 100%

</TABLE>
____________________

(1) See "Glossary" for the definition of Annualized Base Rent. Annualized
Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1, 1995
through December 31, 1995.

Non-Incremental Revenue-Generating Capital Expenditures, Tenant
Improvements and Leasing Commissions for the Suburban Office Properties

The following table summarizes the Company's tenant improvement and
leasing commission expenditures incurred in the renewal or releasing of space
in its then-owned suburban office properties for each of the last three years
and for the eleven months ended November 30, 1995. None of the currently
owned Suburban Office Properties was owned prior to August 1993.

Eleven Months Ended
November 30, Year Ended December 31,
1995 1994 1993 1992

Renewed or released space in
square feet(1) . . . . . . 41,049 40,254 151,854 229,020

Total expenditures . . . . $205,248 $121,065 $907,410 $1,079,048

Average cost per
square foot . . . . . . . $5.00 $3.01 $5.98 $4.71

____________________

(1) Includes only square footage with respect to which leasing
commissions were paid or improvements were made in connection
with the renewal or the releasing of space.

The Company evaluated each Suburban Office Property and
estimated the amount of non-incremental revenue-generating capital
expenditures to be incurred during the year ended December 31, 1996 at
approximately $150,000. This amount represents approximately $0.32
per square foot, based on the existing Suburban Office Property square
footage of approximately 423,000 square feet.

The Company plans to spend $100,000 on capital expenditures in
1996 in connection with improvements to 6600 College Boulevard, the
Suburban Office Property acquired in October 1995. These expenditures
will be capitalized as part of the purchase price. The Company does
not expect to incur any further substantial capital expenditures in
connection with the Suburban Office Properties.

Description of Major Suburban Office Properties

Mariner Court, 1000 Town Center Drive and Woodlands II, three of
the Company's major Suburban Office Properties, are described below.

Mariner Court (Torrance, California)

Mariner Court is located in the Torrance Business Park at the
northwest corner of Del Amo Boulevard and Mariner Avenue in Torrance,
California, approximately 26 miles southwest of downtown Los Angeles.
The Property, which was constructed in 1989, consists of a three-
story, approximately 105,436 square foot office building situated on a
4.7-acre parcel and provides parking spaces for 368 cars, or
approximately 3.5 spaces per 1,000 rentable square feet. The Property
accommodates small office users who reside in nearby residential beach
and coastal communities, such as Palos Verdes, Rolling Hills and
Redondo Beach, and users requiring convenient freeway access to Los
Angeles International Airport as well as the Port of Long Beach.

As of November 30, 1995, 100% of the rentable square footage in
Mariner Court was occupied by 35 tenants, and the average lease size
at the Property was approximately 2,635 rentable square feet. Leases
at Mariner Court have terms ranging from one to six years and do not
contain purchase options. The leases generally require tenants to
reimburse the Company for all normal operating expenses, real estate
taxes and insurance costs above fixed or tenant base year amounts.
The leases also generally provide for periodic rent increases based on
either a fixed percentage or dollar amount or an index, such as the
CPI. The average net effective rents per square foot at the end of
1994 and 1995 for this Property were $19.32 and $18.83, respectively.

The largest tenant of Mariner Court as of November 30, 1995 was
Dodge, Warren & Peters, an insurance firm, which occupied
approximately 13,615 square feet or 13% of the rentable square feet of
the Property. The lease with respect to this tenant expires in
December 2002. No other tenant occupied 10% or more of the rentable
square footage of this Property as of November 30, 1995.

The following table sets forth as of November 30, 1995 a
schedule of lease expirations at Mariner Court for each of the next
nine years beginning December 1, 1995, assuming that none of the
tenants exercise renewal options or termination rights.

Lease Expirations
Mariner Court

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rentable Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Leases(1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2). . . . . 4 5,195 5% 5% $ 88 5% 5%

1996 . . . . . . 7 12,678 12 17 214 12 17

1997 . . . . . . 8 19,890 19 36 378 21 38

1998 . . . . . . 11 33,752 32 68 523 29 67

1999 . . . . . . 3 4,458 4 72 71 4 71

2000 . . . . . . 5 12,114 11 83 192 10 81

2001 . . . . . . 1 3,734 4 87 31 2 83

2002 . . . . . . 1 13,615 13 100 322 17 100

2003 . . . . . . 0 0 0 100 0 0 100

2004 and
thereafter . . 0 0 0 100% 0 0 100%

Total. . . . . . 40 105,436 100% $1,819 100%

</TABLE>
____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1,
1995 through December 31, 1995.

The current annual realty tax rate including direct assessments
for Mariner Court is approximately $1.00 per $100 of assessed value.
The total annual tax on the current assessed value of approximately
$7.7 million at this rate for 1995 is approximately $77,000. In
addition, in 1995 there were direct assessments of approximately
$11,000.

1000 Town Center Drive (Oxnard, California)

This Property is located adjacent to the intersection of the
Pacific Coast Highway (California Highway 1) and the Ventura Freeway
(California Highway 101) in Oxnard, California, approximately 70 miles
northwest of downtown Los Angeles. Constructed in 1990, the Property
consists of a six-story office building with approximately 107,698
rentable square feet. The Company believes that the building's modern
design and visibility from the highway are distinct marketing
advantages. The 5.5-acre site provides parking spaces for 432 cars,
or 4.5 spaces per 1,000 rentable square feet.

As of November 30, 1995, approximately 96% of the rentable
square footage of 1000 Town Center Drive was occupied by 11 tenants
and the average lease size at the Property was approximately 8,596
rentable square feet. The average occupancy rates for 1994 and 1995
were 98% and 97%, respectively. Leases at 1000 Town Center Drive have
terms ranging from one to ten years. The leases require tenants to
reimburse the Company for all normal operating expenses, real estate
taxes and insurance costs above fixed or tenant base year amounts.
The leases also generally provide for periodic rent increases based on
either a fixed percentage or dollar amount or an index, such as the
CPI. The average net effective rents per square foot at the end of
1994 and 1995 for this Property were $17.11 and $20.60, respectively.

The largest tenant of 1000 Town Center Drive as of November 30,
1995 was Kinko's Service Corporation, which occupied approximately
45,119 square feet or 42% of the rentable square feet of the Property.
Kinko's Service Corporation provides photocopying and printing
services. As of November 30, 1995, Nordman, Cormany, Hair & Compton,
a law firm, had occupied approximately 29,837 square feet or 28% of
the rentable square feet of the Property. No other tenant occupied
10% or more of the rentable square footage of this Property at
November 30, 1995.

The following table sets forth a schedule of lease expirations
at 1000 Town Center Drive as of November 30, 1995 for each of the next
nine years beginning December 1, 1995, assuming that none of the
tenants exercise renewal options or termination rights.

Lease Expirations
1000 Town Center Drive

Percentage and Percentage and
Cumulative Cumulative
Rentable Percentage of Annualized Percentage of
Number of Square Feet Total Leased Base Rent Under Annualized
Year of Lease Leases Subject to Square Feet Subject Expiring Leases(1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2). . . . . 0 0 0% 0% $ 0 0% 0%

1996 . . . . . . 1 2,981 3 3 64 3 3

1997 . . . . . . 1 2,637 2 5 45 2 5

1998 . . . . . . 0 0 0 5 0 0 5

1999 . . . . . . 2 10,174 10 15 158 9 14

2000 . . . . . . 4 35,012 34 49 798 44 58

2001 . . . . . . 2 42,186 41 90 625 34 92

2002 . . . . . . 0 0 0 90 0 0 92

2003 . . . . . . 1 7,390 7 97 115 6 98

2004 and
thereafter . . 1 2,770 3 100% 27 2 100%

Total 12 103,150 100% $ 1,832 100%

</TABLE>

____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1,
1995 through December 31, 1995.

The current annual realty tax rate for 1000 Town Center Drive is
approximately $1.04 per $100 of assessed value. The total annual tax
on the current assessed value of approximately $16 million at this
rate for 1995 is approximately $170,000.

Woodlands II (Salt Lake City, Utah)

This Property is situated at the intersection of 4000 South and
700 East, a major north-south thoroughfare, approximately seven miles
southwest of downtown Salt Lake City, Utah. The Property consists of
a six-story, approximately 106,084 rentable square foot office
building and an adjacent 8,268 square foot single-story retail
building, both of which were constructed in 1990. Woodlands II is the
second phase of the 15-acre Woodlands Business Park planned
office/retail development, which currently has a total of 267,000
square feet of office/retail space and 1,273 parking spaces, or
approximately 4.8 spaces per 1,000 rentable square feet in the
business park. The Property also includes a separate but adjoining
3.6-acre parcel of entitled land available for future development or
sale. The Company is currently analyzing the feasibility of
developing this parcel in the near future.

As of November 30, 1995, approximately 95% of the rentable
square footage in Woodlands II was occupied by 11 tenants, and the
average lease size at the Property was approximately 9,843 rentable
square feet. The average occupancy rates for 1994 and 1995 were 97%
and 98%, respectively. Leases at the Property have terms ranging from
three to seven years. The office leases generally require tenants to
reimburse the Company for all normal operating expenses, real estate
taxes and insurance costs above fixed or tenant base year amounts.
The retail leases generally require tenants to reimburse the Company
for all normal operating expenses, real estate taxes and insurance
costs. The leases also generally provide for periodic rent increases
based on either a fixed percentage or dollar amount or an index, such
as the CPI. The average net effective rents per square foot at the
end of 1994 and 1995 for this Property were $14.47 and $14.25,
respectively.

As of November 30, 1995, the two largest tenants at the Property
were Comphealth CHS, Inc., a health care consulting company, and
Principal Mutual Life Insurance, which occupied approximately 37% and
20%, respectively, of the Property's rentable square feet. The leases
with respect to these two tenants expire in February 1997 and January
1998, respectively. No other tenant occupied 10% or more of the
rentable square footage of this Property as of November 30, 1995.
<PAGE>
The following table sets forth a schedule of lease expirations
at Woodlands II as of November 30, 1995 for each of the next nine
years beginning December 1, 1995, assuming that none of the tenants
exercise renewal options or termination rights.

Lease Expirations
Woodlands II

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage and Percentage and
Cumulative Annualized Cumulative
Rental Percentage of Base Rent Under Percentage of
Number of Square Feet Total Leased Expiring Annualized
Year of Lease Leases Subject to Square Feet Subject Lease(1) Base Rent Under
Expiration Expiring Expiring Leases To Expiring Leases (in thousands) Expiring Leases(1)

Cumulative Cumulative
Percentage Percentage Percentage Percentage

1995(2). . . . . . 0 0 0% 0% $ 0 0% 0%

1996 . . . . . . . 1 3,641 3 3 51 3 3

1997 . . . . . . . 4 57,110 53 56 788 51 54

1998 . . . . . . . 3 35,311 33 89 511 33 87

1999 . . . . . . . 1 5,625 5 94 93 6 93

2000 . . . . . . . 1 2,661 2 96 44 3 96

2001 . . . . . . . 0 0 0 96 0 0 96

2002 . . . . . . . 1 3,925 4 100 56 4 100

2003 . . . . . . . 0 0 0 100 0 0 100

2004 and
thereafter . . . . 0 0 0 100% 0 0 100%

Total. . . . . . . 11 108,273 100% $1,543 100%

</TABLE>

____________________

(1) See "Glossary" for the definition of Annualized Base Rent.
Annualized Base Rent is determined as of November 30, 1995.

(2) Represents lease expirations for the period from December 1,
1995 through December 31, 1995.

The current annual realty tax rate including direct assessments
for the Property is approximately $1.43 per $100 of assessed value.
The total annual tax on the current assessed value of approximately $8
million at this rate for 1995 is approximately $112,000.

Development

The Company is currently developing a 3.1-acre parcel of land
located on the Company's Milpitas Town Center property in Milpitas,
California on an unleased ("speculative") basis. The development will
consist of a single-story research and development facility with
approximately 44,543 rentable square feet. The Company estimates that
it will incur total development costs of approximately $2.7 million,
with an expected completion date in April 1996. Upon completion of
the construction and leasing, the Company expects the unleveraged
annual return on total project costs (including land costs of
$672,000) to be 10.9%. The calculation of the unleveraged return
assumes that the facility is leased to a single tenant within nine
months of the completion of construction at current market rates. The
Company also owns 3.6 acres of entitled land adjacent to its Suburban
Office Property in Salt Lake City, Utah. The Company is currently
analyzing the feasibility of developing this parcel in the near
future. When appropriate and subject to the limitations in the Credit
Facility, the Company will consider the development of new industrial
and suburban office properties. The Company's management team has
experience in all phases of the development process, including market
analysis, site selection, zoning, design, pre-development leasing,
construction and permanent financing and construction management. See
"Risk Factors Risks Inherent in Real Estate Investments Risks
Associated with Real Estate Acquisition and Development," and
"Business Objectives and Growth Plans Development" and " The Credit
Facility."

Employees

At December 31, 1995, the Company had thirteen full-time
employees and one part-time employee. See "Certain Relationships and
Related Transactions Funding of Acquisition and Financing Costs." The
Company believes that relations with its employees are good.

Insurance

The Company currently carries general liability coverage with
primary limits of $1 million per occurrence and $2 million in the
aggregate, as well as a $10 million umbrella liability policy. The
Company carries property insurance on a replacement value basis
covering both the cost of direct physical damage and the loss of
rental income. Separate flood and earthquake insurance is provided
with an annual aggregate limit of $10 million, subject to varying
deductibles of 7.5% to 25% of total insurable value per building with
respect to earthquake coverage. Certain types of losses, however
(such as losses due to acts of war, nuclear accidents or pollution),
may be either uninsurable or not economically insurable. Likewise,
certain losses could exceed the limits of the Company's insurance
policies or could cause the Company to bear a substantial portion of
those losses due to deductibles under those policies. Should an
uninsured loss occur, the Company could lose both its invested capital
in, and anticipated cash flow from, the property and would continue to
be obligated to repay any outstanding indebtedness incurred to acquire
such property. In addition, a majority of the Properties are located
in areas that are subject to earthquake activity. Although the
Company has obtained earthquake insurance policies for all of its
Properties except for 417 Eccles in South San Francisco, should one or
more Properties sustain damage as a result of an earthquake, the
Company may incur substantial losses up to the amount of the
deductible under its earthquake policy and, additionally, to the
extent that the damage exceeds the policy's maximum coverage. See
"Risk Factors Risks Inherent in Real Estate Investments Effect of
Uninsured Loss." The Company also has obtained owner's title
insurance policies for each of the Properties; however, the title
insurance may be in an amount less than the current market value of
certain of the Properties. If a title defect results in a loss that
exceeds insured limits, the Company could lose all or part of its
investment in, and anticipated gains (if any) from, such Property.
Management believes that each of the Properties is adequately covered
by the Company's insurance policies. See "Risk Factors Risks Inherent
in Real Estate Investments Effect of Uninsured Loss."

The Credit Facility

The Credit Facility permits borrowings and letters of credit in
an aggregate principal amount of up to $60 million to be outstanding
at any one time, subject to limitations as described below.
Outstanding loans under the Credit Facility bear interest at a
floating rate equal to either the lender's published "reference rate"
plus .50% (50 basis points) or its "offshore rate" (similar to LIBOR)
plus 2.25% (225 basis points). As of January 31, 1996, $13,425,000
was available to the Company to be drawn under the Credit Facility and
the Credit Facility had an outstanding balance of $42,700,000
aggregate principal amount of borrowings and $3,875,000 aggregate
principal amount of letters of credit (consisting of a letter of
credit totalling $245,000 expiring in March 1996, a letter of credit
totalling $630,000 maturing in April 1996, and a letter of credit
totalling $3,000,000 due and payable in December 1996). See "Use of
Proceeds."

The Company's ability to borrow under the Credit Facility is
limited to an amount (the "Borrowing Base") equal to the lesser of (i)
a specified percentage of the appraised value of the properties which
have been pledged as collateral under the facility and (ii) an amount
calculated quarterly by reference to net operating income (as defined
in the Credit Facility) derived from properties pledged as collateral
under the Credit Facility. In addition, the Credit Facility provides
that the available credit limit thereunder (currently $60 million)
will decrease monthly, pursuant to a specified amortization formula,
commencing on September 1, 1997. To the extent that the Borrowing
Base falls to a level which is below the amount of debt and letters of
credit outstanding under the Credit Facility or borrowings and letters
of credit outstanding under the Credit Facility exceed the reduced
credit limit, the Company is required to reduce borrowings in the
amount of excess debt and deliver cash collateral in the amount of
excess letters of credit. See "Risk Factors Risks of Debt
Financing Default Under Debt Instruments."

The Company is required to apply the proceeds from the sale or
other disposition of properties pledged as collateral or from any
casualty or condemnation of properties pledged as collateral to repay
borrowings under the Credit Facility in amounts calculated pursuant to
formulas set forth in the Credit Facility. The Company also is
required to apply the net proceeds from the incurrence of any
indebtedness to repay borrowings outstanding under the Credit
Facility.

Borrowings under the Credit Facility may be used by the Company
(i) to finance acquisitions of real property, portfolios of real
properties and capital stock of real estate companies, (ii) subject to
certain limitations, to pay for tenant improvements, leasing
commissions and deferred maintenance expenses with respect to such
acquired properties and (iii) subject to certain limitations, to pay
expenses of the Company and to pay dividends to the Company's
stockholders. If the Company borrows under the Credit Facility to
purchase a property and wishes to borrow under the Credit Facility to
fund tenant improvements, leasing commissions and deferred maintenance
expenses in respect of such property, the Company must deliver a
budget of proposed tenant improvements, leasing commissions and
deferred maintenance expenses to be paid in connection with such
property. Until such improvements, commissions and expenses have been
paid, either through borrowings under the Credit Facility or
otherwise, the amount of borrowings available under the Credit
Facility is reduced by the amount budgeted.

The Credit Facility is secured by mortgages on 23 Properties
(which Properties collectively accounted for approximately 81% of the
Company's Annualized Base Rent as of November 30, 1995), together with
the rental proceeds from such Properties. As of December 31, 1995,
these Properties comprised approximately 79% of the Company's total
assets. Before a new property can be pledged as collateral under the
Credit Facility and added to the Company's Borrowing Base, potentially
increasing its effective credit availability, the Property must be
approved by the lender thereunder.

The Credit Facility contains various restrictive covenants which
include, among other things, a covenant limiting quarterly dividends
to 90% of average Funds From Operations for the immediately preceding
two fiscal quarters, a minimum ratio of cash flow to debt service, a
maximum ratio of debt to tangible net worth and limitations on liens,
mortgages, the purchase of undeveloped land, certain indebtedness,
partnership and joint venture activities and a restriction on making
loans and investments. The Credit Facility permits the Company and
its subsidiaries to engage in the business of real estate development,
but the Company may develop only "build to suit" projects involving at
any one-time aggregate construction costs of $10 million or less;
however, the lender under the Credit Facility has consented to the
Company's development, on an unleased ("speculative") basis, of a 3.1-
acre parcel adjacent to the Company's Milpitas Town Center property.

Amounts outstanding under the Credit Facility must be repaid in
full on September 1, 1998 and no letter of credit may have an
expiration date later than February 1, 1998. The Company does not
anticipate that cash flow from operations will be sufficient to enable
it to repay amounts outstanding under the Credit Facility when they
become due at maturity. As a result, the Company's ability to make
such payment will depend on its ability to refinance or extend the
Credit Facility or to raise funds through the sale of equity
securities or properties. There can be no assurance that the Company
will be able to do so and the failure by the Company to repay
borrowings outstanding under the Credit Facility when due would likely
have the consequences described above under "Risk Factors Risks of
Debt Financing Default under Debt Instruments."

Certain Property Tax Information

The aggregate real estate property tax obligations paid by the
Company (with or without tenant reimbursement) for the calendar year
1995 were approximately $1.0 million. Substantially all leases
contain provisions requiring tenants to pay as additional rent their
proportionate share of any real estate taxes or increases (in
conjunction with other normal operating expenses) over base amounts.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of certain investment, financing
and other policies of the Company. These policies have been determined
by the Company's Board of Directors and may be amended or revised from
time to time without a vote of the stockholders and in the discretion
of the Board of Directors, except that changes in certain policies
with respect to conflicts of interest must be consistent with legal
requirements.

Investment Policies

Investments in Real Estate or Interests in Real Estate.

The investment objectives of the Company are to increase cash
flow and asset value by actively managing the Properties and by
acquiring and developing additional properties that, either as
acquired or after improved management and leasing activities, will
produce additional cash flow. The Company's policy is to acquire and
develop properties primarily to generate current income and long-term
appreciation.

The Company expects to continue its acquisition and development
activities primarily in the Western United States. The Company may,
however, acquire or develop properties elsewhere at the discretion of
the Board of Directors. The Company expects to invest principally in
suburban office and industrial properties, although future investments
are not limited by property type and the Company has set no limit on
the amount or percentage of its assets invested in one property type.

The Company may develop, purchase or lease income-producing
properties, expand and improve the properties owned, or sell such
properties, in whole or in part, when circumstances warrant. The
Company expects that its development activities will typically be
undertaken on a build-to-suit basis for a particular tenant, or when a
significant portion of the building is pre-leased before construction
commences. The Company may also participate with other entities in
property ownership through joint ventures or other types of co-
ownership. Equity investments may be subject to existing or future
mortgage financing and other indebtedness that will have a priority
over the equity interests of the Company.

Securities of, or Interests in, Entities Primarily Engaged in
Real Estate Activities.

Subject to the percentage of ownership limitations and gross
income tests necessary for REIT qualification, the Company may also
invest in securities of other REITS, other entities engaged in real
estate activities or securities of other issuers. The Company may
also enter into joint ventures or partnerships for the purpose of
obtaining an equity interest in a particular property in accordance
with the Company's other investment policies. The Company does not
currently intend to invest in the securities of other issuers except
in connection with acquisitions of indirect interests in properties.
Investments in these securities are also subject to the Company's
policy not to be treated as an investment company under the Investment
Act of 1940, as amended.

Investments in Real Estate Mortgages.

While the Company will emphasize equity real estate investments,
the Company may, in its discretion, invest in mortgages and other real
estate interests consistent with its qualification as a REIT. The
Company does not presently intend to invest to any significant extent
in mortgages or deeds of trust, but may invest in participating or
convertible mortgages if the Company concludes that it may benefit
from the cash flow or any appreciation in the value of the property.

Financing Policies

As of January 31, 1996, the Company's debt to Total Market
Capitalization ratio (see Glossary), as adjusted to reflect the
Offering as if it had been consummated on that date, would have been
approximately 4.9%. The debt to Total Market Capitalization ratio,
which is based upon both the market value of the outstanding shares of
Common Stock on a fully diluted basis and the outstanding balance of
the Convertible Preferred Stock, will fluctuate with changes in the
price of the Common Stock (and the issuance of additional Common Stock
or shares of preferred stock, if any) and differs from the debt-to-
book capitalization ratio, which is based upon book values. A
company's debt-to-book capitalization ratio may not reflect the
current income potential of its assets and operations, and the Company
believes that a debt-to-Total Market Capitalization ratio is customary
in the REIT industry and provides a more appropriate indication of
leverage for a company whose assets are primarily income-producing
real estate.

The Company currently has a policy of limiting its total
consolidated indebtedness to no more than 50% of its Total Market
Capitalization. The Company's Articles of Incorporation and Bylaws do
not, however, limit the amount or percentage of indebtedness that the
Company may incur. In addition, the Company may from time to time
modify its debt policy in light of current economic conditions,
relative costs of debt and equity capital, market values of its
properties, general conditions in the market for debt and equity
securities, fluctuations in the market price of Common Stock, growth
opportunities, REIT qualification requirements and other factors.
Accordingly, the Company may increase or decrease its debt-to-Total
Market Capitalization ratio beyond the limits described above.

To the extent that the Board of Directors decides to obtain
additional capital, the Company may raise such capital through
additional equity offerings (including offerings of senior
securities), debt financings or retention of Funds From Operations
(subject to REIT distribution requirements), or a combination of these
methods. Borrowings may be unsecured or may be secured by any or all
of the assets of the Company and may have full or limited recourse to
all or any portion of the assets of the Company. Indebtedness incurred
by the Company or its affiliates may be in the form of bank
borrowings, purchase money obligations to sellers of properties,
publicly or privately placed debt instruments or financing from
institutional investors or other lenders. The proceeds from any
borrowings by the Company may be used for working capital, to
refinance existing indebtedness or to finance acquisitions, expansions
or the development of new properties, and for the payment of
distributions. Other than restrictions that may be imposed by lenders
from time to time in connection with outstanding indebtedness, the
Company has not established limits on the number or amount of
mortgages that may be placed on any single property or on its
portfolio as a whole.

Conflict of Interest Policies

The Company has adopted a policy that, without the approval of a
majority of the Company's disinterested directors, it will not (i)
acquire from or sell to any director, officer of employee of the
Company, or any entity in which a director, officer or employee of the
Company beneficially owns more than a 1% interest, or acquire from or
sell to any affiliate of any of the foregoing, any of the assets or
other property of the Company, (ii) make any loan to or borrow from
any of the foregoing persons or (iii) engage in any other transaction
with any of the foregoing persons.

Pursuant to Maryland law, each director will be subject to
restrictions on misappropriation of corporate opportunities to himself
or his affiliates. In addition, under Maryland law, a contract or
other transaction between the Company and a Director or between the
Company and any other corporation or other entity in which a Director
is a director or has a material financial interest is not void or
voidable solely on the grounds of such interest, the presence of such
Director at the meeting at which the contract or transaction is
approved or such Director's vote in favor thereof if (a) the
transaction or contract is approved or ratified, after disclosure of
the common directorship or interest, by the affirmative vote of a
majority of disinterested directors, even if the disinterested
directors constitute less than a quorum, or by a majority of the votes
cast by disinterested stockholders, or (b) the transaction or contract
is fair and reasonable to the Company.

Policies with Respect to Other Activities

The Company has authority to offer Common Stock, Preferred Stock
or options to purchase stock in exchange for property and to
repurchase or otherwise acquire its Common Stock or other securities
in the open market or otherwise and may engage in such activities in
the future. The Company may issue Preferred Stock from time to time,
in one or more series, as authorized by the Board of Directors without
the need for stockholder approval, except that it may not authorize,
create or increase the authorized amount of any class or series of
equity securities that ranks equal or senior to the Convertible
Preferred Stock with respect to the payments of dividends or amounts
upon liquidation, dissolution or winding up without the consent of the
holders of a majority of the outstanding shares of Convertible
Preferred Stock, voting together as a single class. At all times, the
Company intends to make investments in such a manner as to qualify as
a REIT, unless because of circumstances or changes in the Code (or the
Treasury Regulations), the Board of Directors determines that it is no
longer in the best interest of the Company to qualify as a REIT. The
Company's policies with respect to such activities may be reviewed and
modified or amended from time to time by the Company's Board of
Directors without a vote of the stockholders.

<PAGE>

MANAGEMENT

The following table sets forth certain information concerning
the Company's directors and senior officers. Officers of the Company
serve at the discretion of the Board of Directors, subject, in the
case of Mr. Bedford, to the terms of an employment agreement. See
"Certain Relationships and Related Transactions Employment Agreement."
In addition to the Company's senior officers, thirteen full-time
employees and one part-time staff employee assist with the management
of the Company's day-to-day operations. The following table also sets
forth information concerning Robert E. Pester, Vice President of
Acquisitions of Bedford Acquisitions. See "Certain Relationships and
Related Transactions Funding of Acquisitions and Financing Costs."

Name Age Position

Peter B. Bedford . . . 57 Chairman of the Board and
Chief Executive Officer

Donald A. Lorenz . . . 46 Executive Vice President and
Cheif Financial Officer

James R. Moore . . . . 55 Vice President of Property/
Asset Management

Robert E. Pester . . . 38 Vice President of Acquisitions
(Bedford Acquisitions)

Hanh Kihara. . . . . . 47 Controller

Claude M. Ballard. . . 65 Director

Anthony Downs. . . . . 64 Director

Thomas G. Eastman. . . 49 Director

Anthony M. Frank . . . 63 Director

Thomas H. Nolan, Jr. . 38 Director

Martin I. Zankel . . . 61 Director

Mr. Bedford has been Chairman of the Board of Directors since
May 1992 and Chief Executive Officer of the Company since November
1992. He served as a Director of the Company from February 1991 until
his election as Chairman and Chief Executive Officer. Mr. Bedford has
been engaged in the commercial real estate business, primarily in the
Western United States for over 30 years and has been responsible for
the acquisition, ownership, development and management of an aggregate
of approximately 18 million square feet of industrial, office and
retail properties, as well as land in 14 states, primarily as founder
and President of Bedford Property Holdings Limited ("BPHL"), a
privately-held diversified real estate holding company. Mr. Bedford
is the sole stockholder of BPHL. Mr. Bedford serves on the board of
directors of BankAmerica Corporation, Bixby Ranch Company, a real
estate investment company, and First American Title Guarantee Co., a
title insurance company. Mr. Bedford is the recipient of numerous
awards recognizing his contributions to the real estate industry and
serves as a trustee of the Urban Land Institute, a governor of the
Urban Land Foundation and an officer of the Hoover Institution. His
previous experience also includes serving as Vice Chairman of the
National Realty Committee and of the Hoover Institution and as
Chairman of the Real Estate Advisory Board of the Wharton School of
Business. Mr. Bedford received his B.A. in Economics from Stanford
University.

Mr. Lorenz became Executive Vice President of the Company in
September 1994 and Chief Financial Officer in July 1995. Previously,
Mr. Lorenz served as CEO of Tri-Ox, a manufacturing company, from 1993
to 1994. He served as Executive Vice President of BPHL from 1989 to
1994, the Managing Partner of Armstrong, Gilmour and Associates, a
certified public accounting firm, from 1979 to 1989 and Audit Manager
with KPMG Peat Marwick LLP from 1971 to 1978. Mr. Lorenz has been a
certified public accountant since 1973. Mr. Lorenz received a B.S. in
Business Administration from California State University - Hayward.

Mr. Moore joined the Company as Vice President of Property/Asset
Management in September 1995. From 1983 to 1994, he was Managing
Director of Cushman and Wakefield, an international commercial real
estate services firm. Mr. Moore was also a branch manager and
commercial real estate broker at Cushman and Wakefield. He has served
on the Board of Trustees of The Lindsay Museum since 1984. Mr. Moore
has studied at the Commercial Investment Real Estate Institute and has
lectured at the University of San Francisco and San Francisco State
University. He received a B.A. in History from the University of
California at Berkeley, an M.B.A. from the University of San Francisco
and is currently working toward a Ph.D. in Business Administration at
Golden Gate University.

Mr. Pester has been Vice President of Acquisitions of Bedford
Acquisitions, Inc. since February 1994. Prior to joining Bedford
Acquisitions, Inc., he was a real estate investment consultant from
1992 to 1993, President of the Development Division of BPHL from 1989
to 1992 and Vice President of Cushman & Wakefield in Northern
California from 1980 to 1989. Mr. Pester received a B.S. in Economics
and in Political Science from the University of California at Santa
Barbara.

Ms. Kihara has been the Controller of the Company since May
1993. Prior to joining the Company she was Controller and Assistant
Controller of BPHL from 1990 to 1993. From 1986 to 1990, Ms. Kihara
was a Manager of Armstrong, Gilmour and Associates, a certified public
accounting firm. Ms. Kihara has been a certified public accountant
since 1989. Ms. Kihara received a B.S. in Administration and
Accounting from California State University - Hayward.

Mr. Ballard has been a Director of the Company since May 1992.
Mr. Ballard is also a Trustee of The Urban Land Institute, and a
Limited Partner of the Goldman Sachs Group, L.P. Mr. Ballard also
serves on the Board of Directors of American Building Maintenance
Industries, Inc., a building maintenance company, CBL & Associates, a
REIT, and Taubman Centers, Inc., a REIT. He is also a Trustee of
Mutual Life Insurance Company of New York, the Chairman of Merit
Equity Partners, Inc., a property acquisition and management company,
and a Director of Horizon Hotels, Inc., a hotel ownership and
management company. Mr. Ballard attended Memphis State University and
University of Tennessee.

Mr. Downs has been a Director of the Company since May 1992.
Mr. Downs is also a Senior Fellow at the Brookings Institution, a non-
profit policy research organization, and is a consultant to Salomon
Brothers Inc, Aetna Realty Investors, the real estate investment
subsidiary of Aetna Life and Casualty Company, and the Federal
National Mortgage Association. Mr. Downs serves on the Board of
Directors of each of Pittway Corporation, a holding company with
equity interests in publishing and manufacturing entities, General
Growth Properties, Inc., a REIT, Massachusetts Mutual Life Insurance
Co., the Urban Institute, the NAACP Legal Educational Defense Fund,
Inc. and the National Housing Partnership Foundation, a developer of
low-income housing. Mr. Downs received a B.A. in International
Relations and Political Theory from Carlton College and an M.A. and
Ph.D. in Economics from Stanford University.

Mr. Eastman has been a Director of the Company since September
1995. Mr. Eastman is a founder and co-chairman of Aldrich Eastman
Waltch, a national real estate investment adviser. He is a board
member and former Chairman of the National Association of Real Estate
Investment Managers. He is a Member of the Urban Land Institute and
its Finance and Membership Committees. He is a Member of the
Executive Committee of the Institutional Real Estate Clearinghouse.
Mr. Eastman received a B.A. from Stanford University and an M.B.A.
from Harvard University.

Mr. Frank has been a Director of the Company since May 1992.
Mr. Frank served as Postmaster General of the United States from 1988
to 1992 and as Chairman and Chief Executive Officer of First
Nationwide Bank from 1971 to 1988. Prior to that time, he was
Chairman of the Federal Home Loan Bank of San Francisco, Chairman of
the California Housing Finance Agency, Chairman of the Independent
Bancorp of Arizona, and the first Chairman of the Federal Home Loan
Mortgage Corporation Advisory Board. Currently, he is Chairman of
Acrogen, Inc., a biotechnology company, consultant/director of
TransAmerica HomeFirst, a residential mortgage company, and serves on
the Board of Directors of each of Crescent Real Estate Equities, a
REIT, Capital Guaranty, a municipal bond insurer, Irvine Apartment
Communities, a REIT, Charles Schwab & Co., a brokerage firm, Temple-
Inland, Inc., a forest products company, General American Investors
Company, Inc., a publicly-traded closed-end investment fund, Living
Centers of America, Inc., a company engaged in the operation of long-
term health care centers, and Adia Services, Inc., a temporary
services company. Mr. Frank received a B.A. from Dartmouth College
and an M.B.A. from the Tuck School of Business at Dartmouth.

Mr. Nolan has been a Director of the Company since September
1995. Mr. Nolan directs the management of commingled investment fund
portfolios for Aldrich Eastman Waltch, a national real estate
investment adviser. Mr. Nolan joined Aldrich Eastman Waltch in 1984.
Mr. Nolan serves on the Board of Directors of Crocker Realty Trust,
Inc., a REIT, and the Partnership Committee of the Taubman Realty
Group L.P. Mr. Nolan earned a B.B.A. in Business Administration from
the University of Massachusetts.

Mr. Zankel has been a Director of the Company since May 1992.
Mr. Zankel is the Senior Partner of the law firm of Bartko, Zankel,
Tarrant & Miller, and a Principal of Independent Holdings, Inc., a
real estate investment company. Mr. Zankel was Chairman of the Board
of Directors, Chief Executive Officer and President of Landsing
Pacific Fund, Inc., a REIT. See "Certain Relationships and Related
Transactions Acquisitions." Mr. Zankel received a B.S. from the
University of Pennsylvania, The Wharton School of Commerce and Finance
and a J.D. from University of California, Hastings College of the Law.

All directors are elected annually and serve until the next
meeting of the stockholders or until the election and qualification of
their successors. There is no family relationship among any of the
members of the Board of Directors or senior officers.

<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Funding of Acquisition and Financing Costs

Due to the Company's limited financial resources, its activities
relating to the acquisition of new properties and debt and equity
financings are currently performed by Bedford Acquisitions pursuant to
a written contract dated January 1, 1995. The contract provides that
Bedford Acquisitions is obligated to provide services to the Company
with respect to the Company's acquisition and financing activities,
and that Bedford Acquisitions is responsible for the payment of its
expenses incurred in connection therewith. Such expenses include
certain costs incurred by the Company on behalf of Bedford
Acquisitions including the cost of officers and directors insurance
coverage under the Company's insurance policy. Bedford Acquisitions
must submit to the Company a direct cost estimate for the Company's
approval relating to each acquisition or financing, setting forth the
estimated timing and amount of all projected Bedford Acquisitions
costs relating to the acquisition or financing. Pursuant to the
contract, Mr. Bedford is obligated to make the payments of Bedford
Acquisitions' expenses described above if Bedford Acquisitions fails
to make any such payments in a timely fashion, provided that Mr.
Bedford is not obligated to pay any such amounts exceeding $1 million
or following a termination of Bedford Acquisitions' obligations based
on the expiration or termination of the term of the contract. The
contract provides that Bedford Acquisitions is to be paid a fee in an
amount equal to the lesser of (a) 1 1/2% of the gross amount raised in
financings or the aggregate purchase price of the property for
acquisitions, or (b) an amount equal to (i) the aggregate amount of
approved expenses funded by Bedford Acquisitions through the time of
such acquisition or financing minus (ii) the aggregate amount of fees
previously paid to Bedford Acquisitions pursuant to such arrangement.
In no event will the aggregate amount of fees paid to Bedford
Acquisitions exceed the aggregate amount of costs funded by Bedford
Acquisitions. The agreement with Bedford Acquisitions has a term of
one year, is renewable at the option of the Company for additional one
year terms, and will expire no later than January 1, 1998.

From February 1993 through December 1994, the Company's
activities relating to debt and equity financings and the acquisition
of new properties were handled under arrangements similar to the
current arrangement with Bedford Acquisitions through BPI
Acquisitions, a separate division within the Company. This division
operated under an arrangement with Mr. Bedford whereby he paid the
salaries of the divisions' personnel, one-half of the salary of the
Company's Chief Financial Officer (whose duties included acquisition
and financing activities), allocable overhead costs and the costs of
all due diligence conducted prior to an acquisition. Upon the
completion of a financing or the acquisition of a property,
Mr. Bedford was paid a fee by the Company substantially identical to
that described above. In no event could the aggregate amount of fees
paid to Mr. Bedford exceed the aggregate amount of costs funded by Mr.
Bedford.

As of December 31, 1995, the Company had paid Mr. Bedford and
Bedford Acquisitions an aggregate of $3,046,000 for acquisition and
financing activities performed since February 1993 pursuant to the
foregoing arrangements. The Company believes that since the fees
charged under the foregoing arrangements (i) have been and continue to
be comparable to those charged by other sponsors of real estate
investment entities or other third party service providers and (ii)
have been and continue to be charged only for services on acquired
properties or completed financings, such fees were and continue to be
properly includable in direct acquisition costs and capitalized as
part of the asset or financing activities. If the Company were to
discontinue this arrangement, its acquisition and financing activities
would have to be paid by the Company, as incurred, out of cash from
operations or borrowings and certain of such costs would be reflected
as operating expenses in its statement of operations rather than being
capitalized. For example, without the above-described arrangements
with Mr. Bedford and Bedford Acquisitions, the Company may have
incurred substantial operating expenses relating to acquisition and
financing activities; if the Company had employed the same personnel
and incurred the same expenses as Bedford Acquisitions, net income and
Funds from Operations for the year ended December 31, 1995 each would
have been reduced by approximately $600,000 (or $.07 per common and
common equivalent share) compared to the corresponding amounts
actually reported for that period. The Company intends to discontinue
this fee arrangement if and when its operating results permit it to
sustain acquisition and financing activities internally. However, the
termination of this arrangement prior to that time would likely
require the Company to decrease its acquisition and financing efforts,
which could have a material adverse effect on the Company's ability to
grow.

Recent Acquisitions

In December 1995, the Company acquired the Landsing Pacific
Portfolio, which comprised substantially all of the real estate assets
of the Landsing Pacific Fund, Inc., a publicly-traded REIT based in
San Mateo, California. The Company paid approximately $49.7 million
for the Landsing Pacific Portfolio. At all times relevant to the
transaction, Martin I. Zankel, a Director and stockholder of the
Company, was Chairman of the Board of Directors, Chief Executive
Officer and President of the Landsing Pacific Fund, Inc. Mr. Zankel
had no role on behalf of the Company in this acquisition and was
excused from all Board deliberations regarding this matter.

In October 1995, the Company completed the acquisition of 6600
College Boulevard, a single-story office building consisting of
approximately 79,316 rentable square feet in Overland Park, Kansas.
The building was acquired from AEW #25 Trust for $6.4 million. AEW
#25 Trust is an affiliate of AEW, which purchased 8,333,334 shares of
the Company's Convertible Preferred Stock for $50 million in September
1995. Thomas G. Eastman and Thomas E. Nolan, Jr., the Directors of
the Company who are affiliated with AEW, had no role on behalf of the
Company in this acquisition.

Other Transactions

Martin I. Zankel, a Director of the Company, and his associates
provide legal services to the Company for which his firm was paid, in
the aggregate, $52,000 in 1995.

Employment Agreement

On February 16, 1993, the Company entered into an employment
agreement with Mr. Bedford, Chairman of the Board and Chief Executive
Officer, and amended the agreement on September 18, 1995. Pursuant to
the amended employment agreement, Mr. Bedford has agreed to serve as
Chairman of the Board and Chief Executive Officer of the Company on a
substantially full-time basis until the agreement's expiration on
September 18, 2000. After September 18, 2000, the agreement will be
automatically renewed for additional one-year terms unless either
party gives the other notice of non-renewal. Under the employment
agreement, the Company agrees to pay Mr. Bedford a salary of not less
than $150,000 per annum, plus an automobile and parking allowance.
The amended employment agreement provides for a severance payment to
Mr. Bedford equal to one year's salary in the event that the Company
terminates his employment without cause or Mr. Bedford resigns under
specified circumstances, or due to a change in control of the Company.

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY

The following summary of certain terms of the capital stock of
the Company and Maryland law does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's
Charter and Bylaws and Maryland law.

General

The Company's Charter provides that the Company may issue up to
30,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), 10,000,000 shares of Series A Convertible Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"),
and 10,000,000 shares of Preferred Stock, $.01 par value per share.
As of December 31, 1995, there were 6,090,650 shares of Common Stock
issued and outstanding and at the completion of the Offering, there
will be 11,990,650 shares of Common Stock issued and outstanding. As
of the same date, there were 8,333,334 shares of Convertible Preferred
Stock issued and outstanding. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations.

Common Stock

Subject to the preferential rights of the Convertible Preferred
Stock and any other shares or series of stock, holders of shares of
Common Stock are entitled to receive dividends on such stock if, as
and when authorized and declared by the Board of Directors out of
assets legally available therefor and to share ratably in the assets
of the Company legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding up after
payment of or making adequate provision for all debts and liabilities
of the Company. See " Convertible Preferred Stock Dividends" and
" Convertible Preferred Stock Liquidation Preference."

Each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders except as
provided below regarding the right of the holders of the Convertible
Preferred Stock to vote as a single class with respect to the election
of a specified number of directors and certain amendments to the
Charter (see " Convertible Preferred Stock Voting Rights") and, except
as provided with respect to any other class or series of stock, the
holders of such shares possess the exclusive voting power. With
respect to the election of directors, the holders of the Convertible
Preferred Stock have the right to elect two members of the Board of
Directors and, upon the occurrence of certain events, a majority of
the members of the Board of Directors and the holders of shares of
Common Stock have the right to elect the remaining directors. See
" Convertible Preferred Stock Voting Rights Election of Directors."
There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding voting shares
of Common Stock can elect all of such remaining directors standing for
election and the holders of the remaining shares of Common Stock will
not be able to elect any directors.

Holders of shares of Common Stock have no preference,
conversion, exchange, sinking fund, redemption rights or preemptive
rights to subscribe for any securities of the Company.

Under the MGCL and the Charter, the Company cannot dissolve,
amend its charter, merge, consolidate, sell all or substantially all
of its assets, or engage in a share exchange unless such dissolution,
amendment, merger, consolidation, sale or share exchange is approved
by the holders of a majority of the outstanding shares entitled to
vote on the matter. As set forth below under "Certain Provisions of
Maryland Law and of the Company's Charter and Bylaws Business
Combinations," the Charter provides that certain extraordinary actions
must be approved by the affirmative vote of holders of 80% of the
outstanding shares of voting stock. In addition, as set forth below
under the caption " Convertible Preferred Stock Protective
Provisions," the Charter provides that the holders of the Convertible
Preferred Stock have the right to consent to specified transactions
including, but not limited to, the consolidation or merger of the
Company, the issuance of debt in a principal amount in excess of $10
million, the making of new investments, the issuance of specified
equity securities and the sale of assets in excess of specified
amounts.

Convertible Preferred Stock

As of December 31, 1995, AEW was the holder of all 8,333,334
outstanding shares of Convertible Preferred Stock. The following
summarizes certain rights of AEW, its affiliates and its transferees
under the Charter and the Stock Purchase Agreement between AEW and the
Company.

Ranking

The Convertible Preferred Stock ranks senior to the Common Stock
with respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up of the Company. The Company may not
authorize, create or increase the authorized amount of any class or
series of equity securities that ranks equal or senior to the
Convertible Preferred Stock with respect to the payments of dividends
or amounts upon liquidation, dissolution or winding up without the
consent of the holders of a majority of the outstanding shares of
Convertible Preferred Stock, voting together as a single class.

Dividends

Holders of shares of Convertible Preferred Stock are entitled to
receive in each calendar quarter, when and as authorized and declared
by the Board of Directors, out of assets of the Company legally
available for payment, cumulative dividends in cash in an amount equal
to the greater of (i) an amount per share of $.135 and (ii) the
dividends payable with respect to such quarter in respect of the
Common Stock into which each share of the Convertible Preferred Stock
is convertible plus, in both cases, the dividends accumulated but
unpaid on the Convertible Preferred Stock. If the holders of the
Convertible Preferred Stock have exercised the right to redeem such
stock and the redemption payment has not been made, then the rate at
which dividends accrue will increase to $.165 per share until either
the redemption price payable with respect to the Convertible Preferred
Stock is paid or the size of the Board is increased to eleven
directors and the holders of the Convertible Preferred Stock elect
four directors to fill the newly created vacancies on the Board of
Directors. See " Voting Rights." Dividends on the Convertible
Preferred Stock are payable quarterly in arrears, on such dates as the
Board of Directors may determine, which shall not be later than the
45th day after the end of the calendar quarter. Dividends began
accruing on September 18, 1995 (the date that the Convertible
Preferred Stock was issued), and are cumulative from such date,
whether or not in any dividend period or periods there are funds of
the Company legally available for the payment thereof.

Dividends may be authorized, declared and paid on shares of
Common Stock in any fiscal quarter only if full cumulative dividends
have been paid on or authorized and set apart on all shares of
Convertible Preferred Stock at such quarterly rates for all prior
dividend periods through and including the end of such quarter. In
the event that the Company authorizes a distribution payable other
than in cash, then the holders of the Convertible Preferred Stock are
entitled to a proportionate share of such distribution as though the
holders of Convertible Preferred Stock were holders of the number of
shares of Common Stock into which the Convertible Preferred Stock is
convertible.

In determining whether a distribution (other than upon voluntary
or involuntary liquidation) by dividend (but not by redemption or
other acquisition of shares or otherwise) is permitted under the MGCL,
amounts that would be needed if the Company were to be dissolved at
the time of the distribution to satisfy the preferential rights upon
dissolution of holders of the Company's Preferred Stock whose
preferential rights upon dissolution are superior to those receiving
the distribution are not to be included in the Company's total
liabilities.

Liquidation Preference

In the event of a Liquidation Event (as defined below) the
holders of shares of Convertible Preferred Stock are entitled to
receive $6.30 per share of Convertible Preferred Stock plus an amount
per share of Convertible Preferred Stock equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holders (the "Liquidation
Preference"), and no more.

Until the holders of the Convertible Preferred Stock have been
paid the Liquidation Preference in full, no payment will be made to
any holder of Common Stock upon the liquidation, dissolution or
winding up of the Company. If, upon the occurrence of a Liquidation
Event (as defined below), the assets of the Company, or proceeds
thereof, distributable among the holders of the shares of Convertible
Preferred Stock are insufficient to pay in full the Liquidation
Preference, then such assets, or the proceeds thereof, will be
distributed pro rata to the holders of shares of Convertible Preferred
Stock in accordance with their respective holdings thereof.

A "Liquidation Event" is (a) any transaction, including without
limitation, a consolidation or merger of the Company, or other
corporate reorganization if, immediately after such transaction, the
stockholders of the Company (determined prior to such event) hold
fifty percent or less in interest of the outstanding voting securities
of the surviving corporation, or (b) a sale of all or substantially
all of the assets of the Company to any person or the acquisition of a
majority of the outstanding shares of Common Stock of the Company by
any person, other than (i) AEW and its affiliates, (ii) Mr. Bedford,
members of his immediate family, or his affiliates, (iii) by any
person as a result of the conversion of shares of Convertible
Preferred Stock, or (iv) to any underwriter in either a public or
private offering.

Redemption

Redemption may be made at the option of the holders of the
Convertible Preferred Stock or at the option of the Company under the
conditions described below. All redemption payments are to be made in
cash, unless the holders of the Convertible Preferred Stock agree, at
their sole discretion, to accept some alternative payment. If
redemption is prohibited under the MGCL or similar statute, redemption
is pro rata to the extent of funds legally available therefor.

Redemption at Preferred Stockholders' Option

After September 18, 1996, the Company is required, at the option
of the holders of the Convertible Preferred Stock, to redeem the
Convertible Preferred Stock of any holder demanding redemption at a
price of $6.00 per share plus all accrued and unpaid dividends on the
occurrence of any one or more of the following: (a) failure to pay
required dividends on the Convertible Preferred Stock for two
consecutive quarters, including all dividends accumulated but unpaid
for all prior quarters; (b) a default in the payment of principal or
interest on any institutional debt (or debts) having an aggregate
outstanding balance greater than (i) $5 million for non-recourse debt,
and (ii) $2 million for recourse debt (which default, in either case,
shall not have been cured by the Company within 30 business days from
the time the Company receives written notification of the default);
(c) the failure of the Company to obtain any consent of AEW or other
holder of Convertible Preferred Stock prior to completing any major
transaction, as and if required pursuant to the terms of the Charter
(see " Protective Provisions"); (d) for the calendar year 1996, the
Company's Funds Available for Distribution, as defined in the Charter
("FAD"), fail to reach at least a break-even dividend coverage equal
to the full dividend payable on the Convertible Preferred Stock; (e)
for calendar year 1997, the Company's FAD fails to reach at least a
break-even dividend coverage equal to the full dividend payable on the
Convertible Preferred Stock and annual dividends on the Common Stock
equal to a seven percent (7%) yield on $5.72 (rounded to the nearest
whole cent); and (f) for calendar year 1998 and subsequent years, the
Company's FAD fails to reach at least a break-even dividend coverage
equal to the full dividend payable on the Preferred Stock and
dividends on the Common Stock equal to an eight percent (8%) yield on
$5.72 (rounded to the nearest whole cent). Because the Convertible
Preferred Stock is redeemable at the option of the holder, it is
reported separately from the stockholders' equity (i.e., classified as
temporary equity) in the Company's consolidated financial statements.

Redemption at the Option of the Company

Except as provided with respect to automatic redemption under
the heading "Automatic Redemption Cancellable at the Option of the
Non-Series A Directors," shares of Convertible Preferred Stock are not
redeemable by the Company prior to September 18, 1997. At any time
thereafter, the Convertible Preferred Stock may be redeemed in whole
(but not in part) at the option of the Company. The redemption price
is equal to a price calculated by determining an internal rate of
return on the Convertible Preferred Stock of 25% per annum (treating
the purchase price paid by AEW as investment "out-flows," and all
dividends and other distributions paid on the Convertible Preferred
Stock from the date of issuance as "in-flows") for the period from
September 18, 1995, until September 18, 1997 and an internal rate of
return on the Convertible Preferred Stock of 20% per annum from and
after September 18, 1997, until the date of redemption, but not beyond
September 18, 2000.

At any time after September 18, 2000, or at any time prior
thereto if there are less than 400,000 shares of Convertible Preferred
Stock outstanding, the Convertible Preferred Stock may be redeemed in
whole or in part at the option of the Company. The redemption price
at such time will be $6.30 per share (declining $.06 in each of the
first five full years commencing on September 18, 2000) plus all
accrued and unpaid dividends.

Prior to any redemption by the Company, the holders of
Convertible Preferred Stock have the right to convert the Convertible
Preferred Stock into Common Stock of the Company provided that the
holder of Convertible Preferred Stock shall have surrendered his
certificates for conversion and given written notice of the election
to convert not later than the close of business on the fifth business
day prior to the redemption date.

Automatic Redemption Cancellable at the Option of the Non-Series
A Directors

If the right of the holders of the Convertible Preferred Stock
to elect the smallest number of directors constituting a majority of
the Board of Directors has been triggered as discussed under " Voting
Rights," and the holders have elected directors pursuant to this
right, then the Company will be deemed to have approved a redemption
at the option of the Company to take place on the date 180 days after
such election. However, a majority of the directors who are not
elected by the holders of Convertible Preferred Stock may cancel such
a redemption before the end of such 180-day period in their absolute
discretion. This automatic redemption provision will have no effect
on the ability of a majority of the Board of Directors to effect a
redemption at any time following September 18, 1997.

Voting Rights

Except as indicated below with respect to the election of
directors, certain amendments to the Charter and the repeal of the
Charter's provisions regarding business combinations, the holders of
shares of Convertible Preferred Stock have no voting rights. On those
matters for which the holders of the Convertible Preferred Stock have
the right to vote, each share is entitled to one vote.

Election of Directors

The holders of the Convertible Preferred Stock as a class have
the right to elect two directors. In the event that the number of
outstanding shares of Convertible Preferred Stock represents less than
15% but at least 7% of the Company's outstanding shares of Common
Stock (calculated on an as-converted basis), then the holders of
Convertible Preferred Stock will be entitled to elect only one member
of the Board; should such number represent less than 7%, such right to
elect directors will terminate altogether.

In addition, if (i) the Company has failed in two consecutive
quarters to pay in full and in a timely manner the quarterly dividends
on the Convertible Preferred Stock (including all dividends
accumulated but unpaid for all prior quarters), (ii) Mr. Bedford
ceases to serve substantially full-time as Chief Executive Officer of
the Company, (iii) Mr. Bedford, his affiliates and members of his
immediate family beneficially own fewer than 1,198,278 shares of
Common Stock of the Company, as adjusted for any stock splits or
similar transactions, or (iv) the Company fails to pay the full
redemption price payable to the holders of a majority of the
Convertible Preferred Stock pursuant to a demand for redemption made
by the holders of a majority of the Convertible Preferred Stock under
circumstances in which the holders of the Convertible Preferred Stock
have the right to demand redemption, then immediately thereafter, and
regardless of any subsequent cure, the holders of the Convertible
Preferred Stock are entitled to elect the smallest number of directors
constituting a majority of the Board of Directors. The number of
members of the Board is currently seven. In order to facilitate the
effective control of the Board by the holders of the Convertible
Preferred Stock, upon the occurrence of any such event, the number of
directors then constituting the Board of Directors of the Company will
be increased to eleven, and the holders of the Convertible Preferred
Stock will have the exclusive right to elect four persons to fill
newly created vacancies on the Board of Directors.

Senior Securities; Amendments to the Charter

The approval of holders of a majority of the outstanding shares
of Convertible Preferred Stock, voting as a single class, is required
in order to amend the Charter in a way that would materially and
adversely affect the rights or preferences of the holders of
Convertible Preferred Stock or to authorize any class or series of
stock having rights equal or senior to the Convertible Preferred Stock
with respect to the payment of dividends or amounts upon liquidation,
dissolution or winding up of the Company. The right of the holders of
the Convertible Preferred Stock to vote on the foregoing matters
terminates if the holders of Convertible Preferred Stock hold less
than 15% of the Company's outstanding shares of Common Stock
(calculated on an as-converted basis).

Conversion Rights

Fractional shares of Common Stock will not be issued upon
conversion but, in lieu thereof, the Company will pay a cash amount
equal to the fair market value of such fractional interests as
determined in good faith by the Board.

The Conversion Price is subject to adjustments in the event that
the Company issues Additional Stock (as defined below) for
consideration which, on a per share basis, is less than the Conversion
Price as then in effect. Prior to September 18, 1997, if the Company
issues Additional Stock for a consideration per share less than the
Conversion Price, then the Conversion Price will be reduced,
concurrently with such issue, to a price equal to the consideration
per share received by the Company for such Additional Stock. On or
after September 18, 1997, if the Company issues Additional Stock for
consideration in an amount per share which is less than the Conversion
Price, then the Conversion Price will be reduced concurrently with
such issue to a price determined by multiplying the prior Conversion
Price by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately prior to such issuance, assuming
conversion of all outstanding shares of Convertible Preferred Stock at
the prior Conversion Price plus the number of shares of Common Stock
which the aggregate consideration received by the Company for the
total number of shares of Additional Stock so issued would purchase at
the prior Conversion Price; and the denominator of which is the number
of shares of Common Stock outstanding immediately prior to such issue,
assuming conversion of the outstanding shares of Convertible Preferred
Stock at the prior Conversion Price plus the number of shares of such
Additional Stock so issued. The effect of the foregoing formula is to
reduce the Conversion Price in an amount proportionate to the amount
by which the Conversion Price exceeds the per share consideration for
the Additional Stock, taking into account the amount of Additional
Stock issued relative to the total outstanding shares of Common Stock.

For purposes of the foregoing discussion, "Additional Stock"
means all Common Stock issued by the Company after September 18, 1995,
other than Common Stock issued or issuable at any time: (a) upon
conversion of the Convertible Preferred Stock; (b) upon exercise of
options outstanding on September 18, 1995; (c) upon issue of options
granted pursuant to the Company's stock option plans with respect to
employees, directors, and consultants of the Company in amounts not
exceeding the aggregate reserved for issuance under such plans on
September 18, 1995, as increased from time to time upon approval by a
majority of the Directors elected by the holders of the Convertible
Preferred Stock; (d) upon issue of warrants to underwriters in any
firm commitment public offering of securities by the Company; (e) as a
dividend or distribution on Convertible Preferred Stock or any
subdivision, combination, or consolidation of the Common Stock; or (f)
by way of dividend or other distribution on shares of Common Stock the
issuance of which was excluded from the definition of Additional Stock
by clauses (a) through (e) above, or on shares of Common Stock so
excluded.

The Conversion Price is also subject to adjustment upon certain
events, including subdivisions, combinations and consolidation of
Common Stock. In addition, in the event that the Company makes a
distribution of securities of the Company other than Common Stock,
then provision will be made such that holders of the Convertible
Preferred Stock will receive, upon conversion thereof, in addition to
Common Stock, that amount of securities which they would have received
had their shares of Convertible Preferred Stock been converted as of
the date of such distribution.

If the Common Stock issuable upon conversion of the Convertible
Preferred Stock is changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for above), the
Conversion Price then in effect will be proportionately adjusted,
concurrently with the effectiveness of such reorganization or
reclassification, such that the shares of Convertible Preferred Stock
are convertible into a number of shares of such other class or classes
of stock equivalent to the number of shares of Common Stock that would
have been subject to receipt by holders upon conversion of the
Convertible Preferred Stock immediately before that change.

Protective Provisions

The consent of AEW or any transferee of AEW holding more than
50% of the outstanding shares of Convertible Preferred Stock is
required in order for the Company to effect any of the following
transactions (the "Major Transactions"): (i) the consolidation or
merger of the Company; (ii) the issuance or modification of any debt
in a principal amount which exceeds $10 million; (iii) the making of
new investments, including a purchase of real estate operating
companies or real estate investment trusts, with a purchase price
equal to or greater than $10 million, or any series of purchases
within any 90-day period with aggregate purchase prices exceeding $25
million; (iv) the issuance of any equity securities, other than
pursuant to the Company's stock option plans with respect to
compensation of employees, directors and consultants, and the issuance
of equity securities the proceeds of which will be used to redeem the
Convertible Preferred Stock; (v) the sale of any asset or assets with
a sale price in excess of $10 million, or any series of sales within
any 90-day period with aggregate sales prices exceeding $25 million;
(vi) the modification of any executive employment agreement; (vii) the
modification of the contract with Bedford Acquisitions regarding the
provision of acquisition and financing activities or any other
agreement between the Company and Mr. Bedford or any of his affiliates
which would make any of the agreements less favorable to the Company;
(viii) the termination of the Company's status as a REIT; (ix) any
substantial change in the Company's business strategies or annual
operating plan (as approved by the Board of Directors); (x) permitting
Mr. Bedford to cease serving as the substantially full-time chief
executive officer of the Company or permitting Mr. Bedford to dispose
of his shares of Common Stock so that Mr. Bedford, his affiliates and
members of his immediate family beneficially own fewer than 1,198,278
shares of Common Stock (as adjusted for stock splits or similar
transactions); (xi) the issuance of awards of any shares or options
other than those permitted in paragraph (iv); and (xii) any amendment
to the resolution of the Board of Directors exempting AEW and any
affiliate of AEW from the provisions of the business combination
provisions set forth in Section 3-602 of the MGCL, and exempting
therefrom any transaction resulting from the exercise of a redemption
right of the Convertible Preferred Stock which may constitute a
business combination. See "Risk Factors Antitakeover Effect of the
Charter, the Bylaws, the Convertible Preferred Stock and Certain
Provisions of Maryland Law."

In order to protect the Company from violating one of the
foregoing provisions, Mr. Bedford has entered into an agreement with
the Company pursuant to which he has agreed not to sell certain of his
shares of Common Stock without prior approval from the Company.

The foregoing right to approve the Major Transactions remains
effective until such time as the total outstanding shares of
Convertible Preferred Stock represents less than 15% of the Company's
outstanding shares of Common Stock (calculated on an as-converted
basis).

In addition, for so long as the outstanding shares of
Convertible Preferred Stock represent at least 15% of the total of (i)
the shares of Common Stock outstanding, plus (ii) the shares of Common
Stock issuable upon the conversion of the outstanding Convertible
Preferred Stock, the Company must obtain the approval of holders of a
majority of the outstanding shares of Convertible Preferred Stock
prior to filing or assenting to or in any other way participating in
the filing of an involuntary petition in bankruptcy or seeking similar
protection from creditors under federal or state bankruptcy or
insolvency laws.

Right to Participate in Future Offerings

So long as AEW owns shares of Convertible Preferred Stock which
represent 15% or more of the total of (i) the shares of Common Stock
outstanding, plus (ii) the shares of Common Stock issuable upon the
conversion of the outstanding Convertible Preferred Stock, AEW has the
right to purchase for cash its pro rata share of each issuance by the
Company of New Securities (as defined below), on the same terms and
conditions as the New Securities are offered to third parties. "New
Securities" means any voting securities sold and issued for cash or
cash equivalents other than (i) securities issuable upon conversion of
any convertible voting securities; (ii) securities issuable upon
exercise of any options or warrants; (iii) securities issuable
pursuant to the Directors' Stock Option Plan and the Employee Stock
Option Plan of the Company; (iv) securities issuable in consideration
of the acquisition of assets or shares of another entity; (v)
securities issuable in a firm commitment underwritten public offering;
(vi) warrants (or the shares of Common Stock issuable upon exercise
thereof) issuable to an underwriter as partial compensation for a firm
commitment underwritten public offering; and (vii) securities issuable
in connection with any stock split, stock dividend, or
recapitalization of the Company. Other than AEW the holders of the
Convertible Preferred Stock will have no preemptive rights with
respect to any shares of stock of the Company or any other securities
of the Company convertible into or carrying rights or options to
purchase any such shares.

Registration Rights

The outstanding shares of Convertible Preferred Stock are not
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and accordingly may not be re-offered or re-sold in
the United States absent registration under the Securities Act or an
applicable exemption from the registration requirements under the
Securities Act. Under the Stock Purchase Agreement, certain holders
of the Convertible Preferred Stock have the right to request that the
Company register the shares of Common Stock issuable upon the
conversion of the Convertible Preferred Stock and any Common Stock
which may be issued or distributed in respect thereof by way of
recapitalization, reclassification, stock dividend, stock split or
other distribution ("Registrable Securities"). Any stockholder owning
40% or more of the Registrable Securities that have not been sold to
the public has the right, after September 18, 1997, to require the
Company to use its best efforts to register under the Securities Act
at least one million shares of Registrable Securities for resale in up
to five registrations upon demand, but not more than one demand
registration in any 12-month period. In addition, the Company has
agreed to include in up to four incidental ("piggyback") registrations
shares of Common Stock held by AEW, its affiliates or by any
transferee of the registration rights as permitted under the Stock
Purchase Agreement (any of which is a "Holder"), provided that the
number of shares of Common Stock that such Holder requests to be
included is not less than 500,000. If the Company qualifies for the
use of Form S-3 as promulgated by the Securities and Exchange
Commission (the "SEC"), then at any time after September 18, 1997 and
prior to September 18, 2002, any Holder has the right to cause the
Company to use its best efforts to effect a registration of at least
one million shares of the Registrable Securities on behalf of such
Holder and other Holders. The registration rights are assignable by
any Holder to any transferee acquiring at least 500,000 Registrable
Securities. The Company will pay all registration expenses in
connection with each registration of Registrable Securities pursuant
to the Stock Purchase Agreement. See "Risk Factors Registration
Rights," "Risk Factors Shares Available for Future Sale" and "Shares
Available for Future Sale."

Exemption From Antitakeover Statute

The Company has exempted from the provisions of Section 3-602 of
the Maryland General Corporation Law ("MGCL") any "business
combination" (as defined in Section 3-601 of the MGCL) between the
Company and AEW or any AEW Affiliate and any transaction resulting
from the exercise of any redemption right of the Convertible Preferred
Stock that may constitute a business combination. Such exemption may
not be repealed or amended without the consent of AEW or certain other
specified holders of the Convertible Preferred Stock.

Additional Series of Preferred Stock

Shares of Preferred Stock (including any unissued shares of any
series of Preferred Stock, to the extent permitted by the terms of
such series) may be issued from time to time, in one or more series as
authorized by the Board of Directors and subject to the right to
consent of certain holders of the Convertible Preferred Stock. See
" Convertible Preferred Stock Ranking" and " Convertible Preferred
Stock Protective Provisions." Prior to issuance of shares of each
series, the Board of Directors is required by the MGCL and the Charter
to specify the number of shares of Preferred Stock to be included in
such series and set the terms, preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of
redemption for each such series. Accordingly, the Board of Directors,
without approval of the holders of Common Stock, could cause the
issuance of one or more series of Preferred Stock that could,
depending on the terms of such series, delay, defer or prevent a
transaction or change in control of the Company that might involve a
premium price for the Common Stock or otherwise be in the best
interests of the holders of Common Stock, or that could have dividend,
voting or other rights that could adversely affect the interests of
holders of Common Stock. See "Risk Factors Anti-takeover Effect of
the Charter, the Bylaws, the Convertible Preferred Stock and Certain
Provisions of Maryland Law." As of the date hereof, the Company has
no present plans to issue any additional series of Preferred Stock.

Restrictions on Transfer and Ownership of Capital Stock

General

The Charter provides that the Board of Directors shall use its
reasonable best efforts to cause the Company and its stockholders to
qualify for federal income tax treatment in accordance with provisions
of the Code applicable to a REIT. In furtherance of the foregoing,
the Charter further provides that the Board of Directors shall use its
reasonable best efforts to take such actions as are necessary and may
take such actions, as in its sole judgment and discretion are
desirable, to preserve the status of the Company as a REIT; provided,
however, that if the Board of Directors determines that it is no
longer in the best interests of the Company for the Company to
continue to qualify as a REIT, the Board of Directors may revoke or
otherwise terminate the Company's election to be taxed as a REIT.

Limitation on Transfer of Capital Stock

For the Company to qualify as a REIT under the Code, the Company
must, among other things, satisfy the Five or Fewer Requirement and
100 Stockholder Requirement. See "Federal Income Tax Considerations."
To reduce the risk that the Company would fail to meet these
requirements, the Charter places limitations on the transferability of
the Company's stock.

Subject to certain exceptions, no holder is permitted to own,
either actually or constructively under the applicable attribution
rules of the Code, more than five percent (in value) of the aggregate
of the outstanding shares of stock of the Company (the "Aggregate
Stock Ownership Limit") or more than five percent (in number or value,
whichever is more restrictive) of the outstanding shares of Common
Stock (the "Common Ownership Limit"). In addition to either of the
foregoing ownership limits, no holder is permitted to own, either
actually or constructively under the applicable attribution rules of
the Code, any shares of any class of the Company's stock if such
ownership or acquisition (i) would cause more than 50% in value of the
Company's outstanding stock to be owned, either actually or
constructively under the applicable attribution rules of the Code, by
five or fewer individuals (as defined in the Code to include certain
entities) or (ii) would result in the Company's stock being
beneficially owned by less than 100 persons (determined without
reference to any rules of attribution). Acquisition or ownership
(actual or constructive) of the Company's stock in violation of these
restrictions results in automatic transfer of such stock to a trust
for the benefit of a charitable beneficiary or, under certain
specified circumstances, the violative transfer may be deemed void ab
initio or the Company may choose to redeem the violative shares.

As noted above, if any transfer of stock occurs which, if
effective, will result in any person (a "Prohibited Owner")
beneficially or constructively owning (under the applicable
attribution rules of the Code) shares of stock in excess of an
applicable ownership restriction, such shares will be automatically
transferred to a trust for the benefit of a charitable beneficiary,
effective as of the close of business on the business day prior to the
date of the purported transfer to the Prohibited Owner. While such
shares of stock are held in trust, the trustee will have all voting
rights with respect to such shares, and all dividends or distributions
paid on such shares will be paid to the trustee of the trust for the
benefit of the charitable beneficiary (any dividend or distribution
paid on such stock prior to the discovery by the Company that such
shares have been automatically transferred to the trust will, upon
demand, be paid over to the trustee for the benefit of the charitable
beneficiary). Within 20 days of receiving notice from the Company of
the transfer of shares to the trust, the trustee of the trust will be
required to sell the shares held in the trust to a person, designated
by the trustee, who may own such shares without violating the
ownership restrictions (a "Permitted Holder"). Upon such sale, the
price paid for the shares by the Permitted Holder will be distributed
to the Prohibited Owner to the extent of the lesser of (i) the price
paid by the Prohibited Owner for the share or, if the Prohibited Owner
did not give value for the above (e.g., in the case of a gift, devise
or other such transaction), the market price (as defined in the
Charter) on the date of the event which caused the shares to be held
in trust and (ii) the price received by the Trustee from the sale or
other disposition of shares. Any net sales proceeds in excess of this
amount will be paid immediately to the charitable beneficiary.

The Charter exempts Mr. Bedford and AEW from the Aggregate Stock
Ownership Limit and the Common Stock Ownership Limit and creates
separate ownership limitations for each of these two parties. Mr.
Bedford is limited to the ownership, either actual or constructive
under the applicable attribution rules of the Code, of no more than
15% of the lesser of the number or value of the outstanding shares of
Common Stock, as adjusted to take into account the conversion of the
8,333,334 shares of Convertible Preferred Stock. AEW is limited to
the ownership, either actual or constructive under the applicable
attribution rules of the Code, of 100% of the outstanding shares of
the Convertible Preferred Stock and 58% of the lesser of the number or
value of outstanding shares of Common Stock, as adjusted to take into
account the conversion of the 8,333,334 shares of Convertible
Preferred Stock. If shares of the Convertible Preferred Stock are
redeemed pursuant to the redemption rights of the Convertible
Preferred Stock, the percentage limit applicable to Mr. Bedford
increases automatically so as to permit his continued ownership after
the redemption of the number of shares of Common Stock that he was
permitted to own pursuant to his ownership limitation immediately
prior to the redemption, and AEW's ownership limitation percentage
with respect to shares of Common Stock decreases by the same amount of
Mr. Bedford's increase.

In addition, the Charter permits the Board of Directors to
waive, under certain conditions, the Aggregate Stock Ownership Limit
and the Common Stock Ownership Limit for other stockholders as to any
class or series of the outstanding stock of the Company and to
establish an ownership limitation relating to such stockholders' stock
ownership. The Company has agreed in the Stock Purchase Agreement
that it will not unreasonably withhold its consent to any transfer by
AEW, provided that the proposed transferee supplies such reasonable
representations and undertakings as appropriate to ensure that the
transfer will not cause the Company to lose its status as a REIT.

If the Board of Directors at any time determines in good faith
that a transfer or other event has taken place that results in a
violation of the above-described ownership limits or that a person
intends to acquire or has attempted to acquire constructive or
beneficial ownership of stock of the Company in violation of the above
described limits, the Board of Directors is required to take such
action as it deems advisable to refuse to give effect or to prevent
such transfer or other event, including but not limited to causing the
Company to repurchase stock, refuse to give effect to such ownership
or acquisition on the books of the Company or instituting proceedings
to enjoin such transfer or event.

The constructive ownership rules are complex and may cause
Common Stock or Convertible Preferred Stock owned beneficially or
constructively by a group of related individuals and/or entities to be
constructively owned by one individual or entity. As a result, the
acquisition of less than five percent of the number or value of
outstanding Common Stock or of less than five percent of the value of
outstanding Convertible Preferred Stock (or the acquisition of an
interest in an entity which owns Common Stock or Convertible Preferred
Stock) by an individual or entity could cause that individual or
entity (or another individual or entity) to constructively own Common
Stock or Convertible Preferred Stock in excess of the limits described
above, and thus subject such stock to the Common Ownership Limit or
the Aggregate Stock Ownership Limit set forth in the Charter.

The Charter also requires all persons who own five percent (or
such lower percentage as required by the Code or the Treasury
Regulations promulgated thereunder which, in the case of the Company,
is one percent) of the outstanding shares of the stock of the Company
to file each year a completed questionnaire with the Company
containing information regarding their ownership of such shares, as
set forth in the Treasury Regulations. In addition, upon demand, each
beneficial or constructive owner of stock of the Common is required to
disclose to the Company in writing such information as the Company in
good faith deems necessary to determine the Company's status as a REIT
or to comply with the requirements of any taxing authority or
governmental agency or to determine such compliance.

Limitations on Transfer of Convertible Preferred Stock

The terms of the Convertible Preferred Stock prohibit anyone
from owning Convertible Preferred Stock, and permit the Company to
invalidate any transfer of Convertible Preferred Stock, if the
Company's Board of Directors, in good faith, concludes that any such
ownership or transfer will or could result in the Company losing its
REIT status. In addition, the following are prohibited from
purchasing or holding shares of Convertible Preferred Stock or holding
shares of Common Stock issued on conversion of Convertible Preferred
Stock (but only so long as such Common Stock is a "restricted
security" as defined in Rule 144): (i) individuals, (ii) pension
plans in which five or fewer individuals own more than 50% of the
actuarial interests, (iii) trusts described in Code section 501(c)(17)
that are part of a plan providing for the payment of supplemental
unemployment benefits, (iv) charitable foundations that are private
foundations described in Code section 509(a), (v) portions of a trust
described in Code section 642(c) that are permanently set aside or to
be used exclusively to make charitable contributions, (vi) a
corporation with respect to which the stock ownership requirement of
Code section 542(a)(2) is met (generally five or fewer
individuals which includes the entities described above directly or
through attribution own more than 50% of the value of the
corporation's outstanding stock), and (vii) partnerships or trusts
that directly, or through other partnerships or trusts, are more than
50% owned by individuals, or the entities described above. Under
appropriate circumstances, the Board of Directors may waive one or
more of the foregoing restrictions.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock and the
Convertible Preferred Stock is Chemical Mellon Shareholder Services
LLC.

<PAGE>
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
COMPANY'S CHARTER AND BYLAWS

The following summary of certain provisions of Maryland law and
of the Charter and Bylaws of the Company does not purport to be
complete and is subject to and qualified in its entirety by reference
to Maryland law and the Charter and Bylaws of the Company. Copies of
the Charter and Bylaws may be obtained as described under "Available
Information."

Maryland Business Combination Law

Although the Board of Directors has voted to exempt any business
combination with an Interested Stockholder from the provisions of the
business combination provisions of the MGCL, such exemption may be
amended or repealed by the Board of Directors at any time, except that
the exemption may not be repealed or amended with respect to AEW, AEW
affiliates, and certain transactions involving the redemption of the
Convertible Preferred Stock. In addition, the Charter provides that,
upon the adoption of a resolution by the Board of Directors and the
approval thereof by the affirmative vote of stockholders entitled to
vote holding at least 80% of the outstanding voting stock of the
Company, voting together as a single class, the Charter may be amended
to include provisions restricting the ability of the Company to engage
in business combinations under the business combination provisions of
the MGCL. Such action by the Board of Directors would impose the
restrictions of the business combination provisions of the MGCL on the
Company, which could delay, defer or prevent a transaction or change
in control of the Company that might involve a premium price for the
Company's stock or otherwise be in the best interest of the
stockholders or that could otherwise adversely affect the interests of
the stockholders.

Control Share Acquisitions

The MGCL also provides that "control shares" (defined below) of
a Maryland corporation acquired in a "control share acquisition" have
no voting rights except to the extent approved by a vote of two-thirds
of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquiror, by officers or by directors who are
employees of the corporation. The control share provisions of the
MGCL do not apply (a) to shares acquired in a merger, consolidation or
share exchange if the corporation is a party to the transaction or (b)
to acquisitions approved or exempted by the corporation's charter or
bylaws. The Bylaws of the Company currently contain a provision
exempting from the control share provisions of the MGCL any and all
acquisitions by any person of the Company's shares of stock and, as a
result, the control share provisions currently do not apply to the
Company. There can be no assurance, however, that such provision will
not be amended or eliminated by the Board of Directors (subject to the
consent of the holders of the Convertible Preferred Stock required by
the Charter) at any time in the future.

"Control shares" are voting shares of stock which, if aggregated
with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or
direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise voting power
in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-third
or more but less than a majority, or (iii) a majority or more of all
voting power. Thus, if an acquisition of control shares within one
range is approved by stockholders and is followed by an acquisition of
additional control shares by the same person that results in the total
number of control shares owned by that person being in a higher range,
then voting rights for the additional shares in excess of the
previously approved range would also have to be approved by the
stockholders. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means
the acquisition of control shares, subject to certain exceptions.

A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the board of directors of the
corporation to call a special meeting of stockholders to be held
within 50 days of demand to consider the voting rights of the shares.
If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement as
required by the statute, then, subject to certain limitations, the
corporation may redeem any or all of the control shares (except those
for which voting rights have previously been approved) for fair value
determined, without regard to the absence of voting rights for the
control shares, as of the date of the last control share acquisition
by the acquiror or of the stockholders meeting at which the voting
rights of such shares were considered and not approved. If voting
rights for control shares are approved at the stockholders meeting and
the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share
paid by the acquiror in the control share acquisition.

As stated above, the control share provisions of the MGCL do not
currently apply to the Company because the Bylaws of the Company
contain a provision exempting from the control share provisions of the
MGCL any and all acquisitions by any person of the Company's shares of
stock. There can be no assurance, however, that such provision will
not be amended or eliminated by the Board of Directors (subject to the
consent of the holders of the Convertible Preferred Stock required by
the Charter) at any time in the future. Moreover, any amendment or
elimination of such provision of the Bylaws may result in the
application of the control share provisions of the MGCL not only to
shares which may be acquired in any future control share acquisitions,
but also to shares acquired in prior control share acquisitions. The
potential for such application of the control share provisions of the
MGCL could delay, defer or prevent a transaction or change in control
of the Company that might involve a premium price for the Company's
stock or otherwise be in the best interest of the stockholders.

Interested Director Transactions

The MGCL provides that a contract or other transaction between a
corporation and any of its directors or between a corporation and any
other entity in which any of its directors is a director or has a
material financial interest is not void or voidable by reason of such
common directorship or interest if: (i) the fact of the common
directorship or interest is disclosed or known to the board of
directors and the board of directors ratifies or approves the contract
or transaction by the affirmative vote of a majority of its
disinterested directors; (ii) the fact of the common directorship or
interest is disclosed or known to the stockholders entitled to vote,
and the contract or transaction is authorized, approved or ratified by
a majority of the votes cast by the stockholders entitled to vote,
other than the votes of shares owned of record or beneficially by the
interested director or corporation; or (iii) the contract or
transaction is fair and reasonable to the corporation. In addition,
the Company's Charter contains a provision for approval by the
disinterested directors that is substantially similar to the provision
of the MGCL referred to in clause (i) of the preceding sentence.

Business Combinations

The Company's Charter provides that a "business combination" (as
defined below) involving the Company and an Interested Stockholder (as
defined below) must be approved by the affirmative vote of the holders
of at least 80% of the outstanding shares of the Company's Voting
Stock, voting together as a single class, subject to certain
exceptions described below. The Board of Directors has adopted a
resolution that exempts any transaction between the Company and AEW or
an AEW affiliate from the limitations of this Charter provision. Such
resolution may be amended or repealed only if it does not adversely
affect the interests of AEW.

The Charter defines a "business combination" as: (i) any merger
or consolidation of the Company with or into any Interested
Stockholder or an Affiliate (as defined in Rule 12b-2 under the
Exchange Act) of an Interested Stockholder; or (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any Interested
Stockholder or an Affiliate of any Interested Stockholder of any of
the assets of the Company having an aggregate fair market value of
$5,000,000 or more; or (iii) any reclassification of securities
(including any reverse stock split) or recapitalization of the Company
or any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity securities of the Company convertible
into such class of equity securities which is directly or indirectly
owned by any Interested Stockholder of any Affiliate of any Interested
Stockholder; or (iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on behalf of
an Interested Stockholder or any Affiliate of any Interested
Stockholder. As defined in the Charter, an "Interested Stockholder"
is any individual, firm, corporation (other than the Company) or other
entity which is the beneficial owner of ten percent (10%) or more of
the outstanding Voting Stock of the Company. This definition is
substantially identical to the definition of "Interested Stockholder"
under the MGCL described above.

The Charter also provides, however, that the foregoing super-
majority vote is not required for a business combination if: (i) the
Company owns, at the time of the business combination, and for twelve
months prior thereto has owned at least a majority of each class of
the outstanding equity securities of the Interested Stockholder; or
(ii) such business combination has been approved by a majority of the
Board of Directors who, at the time such approval is given, were not
Affiliates or nominees of the Interested Stockholder and were members
of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder ("Disinterested
Directors"); or (iii) the following conditions have been met: (a) the
aggregate amount of the cash and the fair market value of non-cash
consideration to be received per share by holders of the Company's
voting stock in such business combination shall be at least equal to
the highest per share price paid by the Interested Stockholder for any
shares of voting stock acquired by it (1) within the two-year period
immediately prior to the first public announcement of the proposal of
the business combination or (2) in the transaction in which it became
an Interested Stockholder, whichever is higher; and (b) the
consideration to be received by holders of a particular class of
outstanding voting stock shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such voting
stock.

The foregoing provisions of the Charter could delay, defer or
prevent a transaction or a change in control of the Company that might
involve a premium price for the Company's stock or otherwise be in the
best interests of the stockholders.

Amendments to the Charter and Bylaws

The Charter provides generally that its provisions may be
amended only by the affirmative vote of a majority of all the votes
entitled to be cast on the matter. However, the approval of holders
of a majority of the outstanding shares of Convertible Preferred
Stock, voting as a single class, is required in order to amend the
Charter in a way that would materially and adversely affect the rights
or preferences of the holders of Convertible Preferred Stock or to
authorize any class or series of stock having rights equal or senior
to the Convertible Preferred Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up of
the Company. See " Convertible Preferred Stock Voting Rights." In
addition, 80% of the outstanding voting stock of the Company, voting
together as a single class, is required to amend or adopt any
provisions restricting the ability of the Company to engage in certain
"business combinations." See " Business Combinations" and " Maryland
Business Combination Law," above.

The Bylaws provide that the Board of Directors has the exclusive
power to adopt, alter or repeal any provision of the Bylaws and to
make new Bylaws, except as provided with respect to the provision
regarding the exemption from the control share provisions of the MGCL,
in which case consent of the holders of the Convertible Preferred
Stock is necessary to amend or repeal.

The Board of Directors

The Bylaws provide that the number of directors of the Company
may be established by a majority of the entire Board of Directors but
may not be fewer than three nor more than 15, and at least one-half of
the Board of Directors shall consist of Independent Directors. The
Bylaws define "Independent Director" as a director who is not,
directly or indirectly, an affiliate of the Company (as defined in
Rule 144 of the rules promulgated under the Securities Act). Any
vacancy on the Company's Board of Directors for any cause other than
an increase in the number of directors shall be filled by a majority
of the remaining directors (although such majority is less than a
quorum). However, any vacancy that arises because an Independent
Director ceases to be a director of the Company will be filled by the
selection of a successor director by a majority vote of the remaining
Independent Directors (although less than a quorum). Any vacancy on
the Board created by an increase in the number of directors may be
filled by a majority vote of the entire Board of Directors, except
that a vacancy which is required to be filled by an Independent
Director pursuant to the Company's Bylaws will be filled by a majority
vote of the Board of Directors' remaining Independent Directors
(although less than a quorum). The Bylaws provide that an individual
so elected as a director will hold office for the unexpired term of
the director he is replacing. The holders of the Convertible
Preferred Stock have certain rights with respect to the election of
directors. See " Convertible Preferred Stock Voting Rights."

Advance Notice of Director Nominations and New Business

The Bylaws of the Company provide that (a) with respect to an
annual meeting of stockholders, nominations of persons for election to
the Board of Directors and the proposal of business to be considered
by stockholders may be made only (i) pursuant to the Company's notice
of meeting, (ii) by or at the discretion of the Board of Directors or
(iii) by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice procedures set forth in the Bylaws
and (b) with respect to special meetings of stockholders, only the
business specified in the Company's notice of meeting may be brought
before the meeting of stockholders, and nominations of persons for
election to the Board of Directors may be made only (i) pursuant to
the Company's notice of meeting, (ii) by or at the discretion of the
Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a
stockholder who is entitled to vote at the meeting and has complied
with the advance notice provisions set forth in the Bylaws. The
foregoing provisions of the Company's Bylaws could delay, defer or
prevent a transaction or a change in control of the Company that might
involve a premium price for the Common Stock or the Convertible
Preferred Stock.

<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of the material federal
income tax considerations associated with an investment in the Common
Stock offered hereby. Shearman & Sterling, counsel to the Company, has
reviewed the following discussion and is of the opinion that it fairly
summarizes the federal income tax considerations that are likely to be
material to a holder of Common Stock. The following discussion is not
exhaustive of all possible tax considerations and is not tax advice.
Moreover, this summary does not deal with all tax aspects that might
be relevant to a particular prospective stockholder in light of his or
her personal circumstances; nor does it deal with particular types of
stockholders that are subject to special treatment under the Code,
such as insurance companies, financial institutions and
broker-dealers. The Code provisions governing the federal income tax
treatment of REITs are highly technical and complex, and this summary
is qualified in its entirety by the applicable Code provisions, rules
and Treasury Regulations promulgated thereunder, and administrative
and judicial interpretations thereof. The following discussion and
the opinions of Shearman & Sterling are based on current law.

EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO SUCH PURCHASER'S SPECIFIC FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PURCHASE, HOLDING AND
SALE OF COMMON STOCK OF THE COMPANY.

Federal Income Taxation of the Company

The Company believes that, commencing with its taxable year
ending December 31, 1985, it was organized and has operated in such a
manner as to qualify for taxation as a REIT under the Code, and the
Company intends to continue to operate in such a manner, but no
assurance can be given that it will operate in a manner so as to
qualify or remain qualified. The Company has not and does not intend
to request a ruling from the IRS as to its status as a REIT. Based on
various assumptions and factual representations made by the Company,
in the opinion of Shearman & Sterling, counsel to the Company, the
Company was organized in conformity with the requirements for
qualification as a REIT, the Company has operated so as to qualify as
a REIT since its taxable year ended December 31, 1992 (which such
counsel believes is the Company's earliest taxable year which is
within the normal period for federal tax audit), and the Company's
proposed method of operation will enable it to meet the requirements
for qualification and taxation as a REIT under the Code. Such
qualification depends upon the Company's ability to meet the various
requirements imposed under the Code through actual operations, as
discussed below, and no assurance can be given that actual operations
will meet these requirements. The opinion of Shearman & Sterling is
not binding on the IRS. The opinion of Shearman & Sterling also is
based upon existing law, the Treasury Regulations, currently published
administrative positions of the IRS and judicial decisions, which are
subject to change either prospectively or retroactively. In addition,
as discussed under "Risk Factors Tax Risks; Risks Associated with REIT
Status," for tax years 1992 and 1993 (and possibly for certain prior
years which such counsel believes are outside the normal period for
federal tax audit) it is uncertain whether the Company properly
requested the written statements required by the Treasury Regulations
concerning the ownership of its stock by certain Stockholders of
record (the "Stockholder Polling Requirements") from certain clearing
organizations holding Common Stock as nominees for the beneficial
owners of such shares. However, the Company did employ stockholder
polling procedures for tax years 1992 and 1993 which it believes went
beyond what is required by the Treasury Regulations in providing
stockholder ownership information for purposes of determining whether
the Company satisfied the Five or Fewer Requirement (defined below
under the caption" Requirements for Qualification"). In that regard,
the Company has received an opinion of Shearman & Sterling to the
effect that, based on various assumptions and factual representations
made by the Company, the Company has not, by virtue of the Stockholder
Polling Requirements, failed to qualify as a REIT with respect to tax
years 1992 and 1993.

If the Company qualifies for taxation as a REIT, it generally
will not be subject to federal corporate income taxes on that portion
of its ordinary income or capital gain that is currently distributed
to stockholders. The REIT provisions of the Code generally allow a
REIT to deduct dividends paid to its stockholders. This deduction for
dividends paid to stockholders substantially eliminates the federal
"double taxation" on earnings (once at the corporate level and once
again at the stockholder level) that usually results from investments
in a corporation.

The Company, however, will be subject to federal income tax, as
follows: first, the Company will be taxed at regular corporate rates
on its undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, the Company may
be subject to the "alternative minimum tax." Third, if the Company
has net income from the sale or other disposition of "foreclosure
property" that is held primarily for sale to customers in the ordinary
course of business or other non-qualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if the Company has net income from prohibited
transactions (which are, in general, certain sales or other
dispositions of property other than foreclosure property held
primarily for sale to customers in the ordinary course of business),
such income will be subject to a 100% tax. Fifth, if the Company
should fail to satisfy either the 75% or 95% gross income test
(discussed below) but has nonetheless maintained its qualification as
a REIT because certain other requirements have been met, it will be
subject to a 100% tax on the net income attributable to the greater of
the amount by which the Company fails the 75% or 95% test, multiplied
by a fraction intended to reflect the Company's profitability. Sixth,
if the Company fails to distribute during each year at least the sum
of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its
REIT capital gain net income for such year and (iii) any undistributed
taxable income from prior periods, the Company will be subject to a 4%
excise tax on the excess of such required distribution over the
amounts actually distributed. Seventh, if the Company should acquire
any asset from a C corporation (i.e., a corporation generally subject
to full corporate-level tax) in a carryover-basis transaction and the
Company subsequently recognizes gain on the disposition of such asset
during the ten-year period (the "Recognition Period") beginning on the
date on which the asset was acquired by the Company, then, to the
extent of the excess of (a) the fair market value of the asset as of
the beginning of the applicable Recognition Period over (b) the
Company's adjusted basis in such asset as of the beginning of such
Recognition Period (the "Built-In Gain"), such gain will be subject to
tax at the highest regular corporate rate, pursuant to guidelines
issued by the IRS (the "Built-In Gain Rules").

Requirements for Qualification

To qualify as a REIT, the Company must elect to be so treated
and must meet the requirements, discussed below, relating to the
Company's organization, sources of income, nature of assets and
distributions of income to stockholders.

Organizational Requirements

The Code defines a REIT as a corporation, trust or association:
(i) that is managed by one or more directors or trustees, (ii) the
beneficial ownership of which is evidenced by transferable shares or
by transferable certificates of beneficial interest, (iii) that would
be taxable as a domestic corporation but for the REIT requirements,
(iv) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code, (v) the beneficial
ownership of which is held by 100 or more persons (the "100
Stockholder Requirement"), and (vi) during the last half of each
taxable year not more than 50% in value of the outstanding stock of
which is owned, directly or indirectly, through the application of
certain attribution rules, by five or fewer individuals (as defined in
the Code to include certain entities) (the "Five or Fewer
Requirement"). In addition, certain other tests, described below,
regarding the nature of its income and assets also must be satisfied.
The Code provides that conditions (i) through (iv), inclusive, must be
met during the entire taxable year and that condition (v) must be met
during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. For
purposes of conditions (v) and (vi), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (vi).

In order to protect the Company from a concentration of
ownership of its stock that would cause the Company to fail the Five
or Fewer Requirement or the 100 Stockholder Requirement, the Charter
of the Company provides that no holder is permitted to own, either
actually or constructively under the applicable attribution rules of
the Code, more than 5% (in value) of the aggregate outstanding shares
of all classes of stock of the Company or more than 5% (in number or
value, whichever is more restrictive) of the outstanding shares of
Common Stock, with certain exceptions. In addition, no holder is
permitted to own, either actually or constructively under the
applicable attribution rules of the Code, any shares of any class of
the Company's stock if such ownership would cause more than 50% in
value of the Company's outstanding stock to be owned by five or fewer
individuals or would result in the Company's stock being beneficially
owned by less than 100 persons (determined without reference to any
rule of attribution). See "Description of Capital Stock of the
Company Restrictions on Transfer and Ownership of Capital Stock." In
addition, certain investors will be prohibited from purchasing or
holding shares of Convertible Preferred Stock or holding shares of
Common Stock issued on conversion of the Convertible Preferred Stock
(but only so long as such Common Stock is a "restricted security" as
defined in Rule 144). See "Description of Capital Stock of the
Company Restrictions on Transfer and Ownership of Capital Stock." In
rendering its opinion that the Company has operated so as to qualify,
and its proposed method of operation will enable it to qualify, as a
REIT, Shearman & Sterling is relying on the representation of the
Company that the ownership of its stock has satisfied and will satisfy
the Five or Fewer Requirement and the 100 Stockholder Requirement; and
Shearman & Sterling expresses no opinion as to whether, as a matter of
law, the provisions contained in the Charter or the additional
ownership restrictions imposed on the Convertible Preferred Stock will
preclude the Company from failing the Five or Fewer Requirement or the
100 Stockholder Requirement.

In addition, a corporation may not elect to become a REIT unless
its taxable year is the calendar year. The Company has a calendar
year taxable year.

The Company owns and operates a number of properties through
subsidiaries. Under the Code, a corporation which is a "qualified
REIT subsidiary" is not treated as a separate corporation; rather, all
assets, liabilities and items of income, deduction, and credit of a
"qualified REIT subsidiary" are treated as assets, liabilities and
such items (as the case may be) of the REIT. Thus, in applying the
requirements described herein, the Company's "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities and items
of income, deduction and credit of such subsidiaries will be treated
as assets, liabilities and items of the Company. While this summary
generally does not address state tax consequences, some states may not
recognize a "qualified REIT subsidiary", which could cause a
subsidiary to be taxed or could cause the Company to fail to qualify
as a REIT under such state law.

Income Tests

To maintain qualification as a REIT, three gross income
requirements must be satisfied annually. First, at least 75% of the
Company's gross income, excluding gross income from certain
dispositions of property held primarily for sale to customers in the
ordinary course of a trade or business ("prohibited transactions") for
each taxable year, must be derived directly or indirectly from
investments relating to real property or mortgages on real property
(including "rents from real property" and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at
least 95% of the Company's gross income (excluding gross income from
"prohibited transactions") for each taxable year must be derived from
such real property investments and from dividends, interest and gain
from the sale or disposition of stock or securities or from any
combination of the foregoing. Third, short-term gain from the sale or
other disposition of stock or securities, gain from "prohibited
transactions" and gain from the sale or other disposition of real
property held for less than four years (apart from involuntary
conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from
prohibited transactions) for each taxable year.

Rents received or deemed to be received by the Company will
qualify as "rents from real property" in satisfying the gross income
requirements for a REIT described above only if several conditions are
met. First, the amount of rent generally must not be based in whole
or in part on the income or profits of any person. An amount received
or accrued generally will not be excluded from the term "rents from
real property," however, solely by reason of being based on a fixed
percentage or percentages of receipts of sales. Second, the Code
provides that rents received from a tenant will not qualify as "rents
from real property" in satisfying the gross income tests if the REIT,
or a direct or constructive owner of 10% or more of the REIT, directly
or constructively owns 10% or more of such tenant. Third, if rent
attributable to personal property, leased in connection with a lease
of real property, is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to the personal
property will not qualify as "rents from real property." Fourth, for
rents to qualify as "rents from real property" the REIT must not
operate or manage the property or furnish or render services to
tenants, other than through an "independent contractor" who is
adequately compensated and from whom the REIT does not derive any
income; provided, however, that a REIT may provide services with
respect to its properties and the income will qualify as "rents from
real property" if the services are "usually or customarily rendered"
in connection with the rental of room or other space for occupancy
only and are not otherwise considered "rendered to the occupant."

The Company has not and does not anticipate that it will in the
future charge rent that is based in whole or in part on the income or
profits of any person (except by reason of being based on a fixed
percentage or percentages of receipts of sales consistent with the
rule described above). The Company has not and does not anticipate
that it will in the future derive rent attributable to personal
property leased in connection with real property that exceeds 15% of
the total rents.

The term "interest" generally does not include any amount
received or accrued (directly or indirectly) if the determination of
such amount depends in whole or in part on the income or profits of
any person. An amount received or accrued generally will not be
excluded from the term "interest," however, solely by reason of being
based on a fixed percentage or percentages of receipts or sales.

If the Company fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify
as a REIT for that year if it is eligible for relief under certain
provisions of the Code. These relief provisions will be generally
available if (i) the Company's failure to meet these tests was due to
reasonable cause and not due to willful neglect, (ii) the Company
attaches a schedule of the sources of its income to its federal income
tax return and (iii) any incorrect information on the schedule is not
due to fraud with intent to evade tax. It is not possible, however,
to state whether, in all circumstances, the Company would be entitled
to the benefit of these relief provisions. For example, if the
Company fails to satisfy the gross income tests because nonqualifying
income that the Company intentionally incurs exceeds the limits on
such income, the IRS could conclude that the Company's failure to
satisfy the tests was not due to reasonable cause. As discussed above
in " Federal Income Taxation of the Company," even if these relief
provisions apply, a tax would be imposed with respect to the excess
net income. No similar mitigation provision provides relief if the
Company fails the 30% income test; and in such case, the Company will
cease to qualify as a REIT. See "Risk Factors Tax Risks; Risks
Associated with REIT Status Adverse Consequences of the Failure to
Maintain Qualification as a REIT."

Asset Tests

At the close of each quarter of its taxable year, the Company
also must satisfy three tests relating to the nature and
diversification of its assets. First, at least 75% of the value of
the Company's total assets must be represented by real estate assets,
cash, cash items and government securities. Second, no more than 25%
of the Company's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included
in the 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total
assets, and the Company may not own more than 10% of any one issuer's
outstanding voting securities.

After initially meeting the asset tests at the close of any
quarter, the Company will not lose its status as a REIT for failure to
satisfy the asset tests at the end of a later quarter solely by reason
of changes in asset values. If the failure to satisfy the asset tests
results from an acquisition of securities or other property during a
quarter, the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter.
The Company has maintained and intends in the future to maintain
adequate records of the value of its assets to ensure compliance with
the asset tests and to take such other actions within 30 days after
the close of any quarter as may be required to cure any noncompliance.

Annual Distribution Requirements

In order to be taxed as a REIT, the Company is required to
distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (a) the sum of (i) 95% of
the Company's "REIT taxable income" (computed without regard to the
dividends-paid deduction and the Company's net capital gain) and (ii)
95% of the net income, if any, from foreclosure property in excess of
the special tax on income from foreclosure property, minus (b) the sum
of certain items of non-cash income. Such distributions must be paid
in the taxable year to which they relate, or in the following taxable
year if declared before the Company timely files its federal income
tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Even if the Company
satisfies the foregoing distribution requirements, to the extent that
the Company does not distribute all of its net capital gain or "REIT
taxable income," as adjusted, it will be subject to tax thereon at
regular capital gains or ordinary corporate tax rates. Furthermore,
if the Company should fail to distribute during each calendar year at
least the sum of (a) 85% of its ordinary income for that year, (b) 95%
of its capital gain net income for that year and (c) any undistributed
taxable income from prior periods, the Company would be subject to a
4% excise tax on the excess of such required distribution over the
amounts actually distributed. In addition, during its Recognition
Period, if the Company disposes of any asset subject to the Built-In
Gain Rules, the Company will be required, pursuant to guidance issued
by the IRS, to distribute at least 95% of the Built-In Gain (after
tax), if any, recognized on the disposition of the asset.

It is expected that the Company's REIT taxable income will
continue to be less than its cash flow due to the allowance of
depreciation and other non-cash charges in computing REIT taxable
income. Accordingly, the Company anticipates that it will generally
have sufficient cash or liquid assets to enable it to satisfy the 95%
distribution requirement. It is possible, however, that the Company,
from time to time, may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement or to distribute such greater
amount as may be necessary to avoid income and excise taxation, as a
result of timing differences between (i) the actual receipt of income
and actual payment of deductible expenses and (ii) the inclusion of
such income and deduction of such expenses in arriving at taxable
income of the Company, or as a result of nondeductible expenses such
as principal amortization or repayments, or capital expenditures in
excess of non-cash deductions. In the event that such timing
differences occur, the Company may find it necessary to seek funds
through borrowings or the issuance of equity securities (there being
no assurance that it will be able to do so) or, if possible to pay
taxable stock dividends in order to meet the dividend requirement.

Under certain circumstances, the Company may be able to rectify
a failure to meet the distribution requirement for a year by paying
"deficiency dividends" to stockholders in a later year, which may be
included in the Company's deduction for dividends paid for the earlier
year. Thus, the Company may be able to avoid being taxed on amounts
distributed as deficiency dividends. The Company will, however, be
required to pay interest based upon the amount of any deduction taken
for deficiency dividends.

Failure to Qualify

If the Company fails to qualify for taxation as a REIT in any
taxable year and the relief provisions do not apply, the Company will
be subject to tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which the Company fails to qualify will
not be deductible by the Company nor will they be required to be made.
In such event, to the extent of current or accumulated earnings and
profits, all distributions to stockholders will be dividends, taxable
as ordinary income; and subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends-received
deduction. Unless the Company is entitled to relief under specific
statutory provisions, the Company also will be disqualified from
taxation as a REIT for the four taxable years following the year
during which qualification was lost. It is not possible to state
whether in all circumstances the Company would be entitled to such
statutory relief. For example, if the Company fails to satisfy the
gross income tests because nonqualifying income that the Company
intentionally incurs exceeds the limit on such income, the IRS could
conclude that the Company's failure to satisfy the tests was not due
to reasonable cause. See "Risk Factors Tax Risks; Risks Associated
with REIT Status Adverse Consequences of the Failure to Maintain
Qualification as a REIT."

Taxation of U.S. Stockholders

As used herein, the term "U.S. Stockholder" means a holder of
Common Stock that for United States federal income tax purposes (a) is
a citizen or resident of the United States, (b) is a corporation,
partnership or other entity created or organized in or under the laws
of the United States or of any political subdivision thereof or (c) is
an estate or trust, the income of which is subject to United States
federal income taxation regardless of its source. For any taxable
year for which the Company qualifies for taxation as a REIT, amounts
distributed to taxable U.S. Stockholders will be taxed as follows.

Distributions Generally

Distributions to U.S. Stockholders, other than capital gain
dividends discussed below, will constitute dividends up to the amount
of the Company's current or accumulated earnings and profits and will
be taxable to the stockholders as ordinary income. For purposes of
determining whether distributions are out of current or accumulated
earnings and profits, the earnings and profits of the Company will be
allocated first to the Company's Preferred Stock, and then allocated
to the Common Stock. These distributions are not eligible for the
dividends-received deduction for corporations. To the extent that the
Company makes a distribution in excess of its current or accumulated
earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in the U.S.
Stockholder's Common Stock, and the distribution in excess of a U.S.
Stockholder's tax basis in its Common Stock will be taxable as gain
realized from the sale of its Common Stock. Dividends declared by the
Company in October, November or December of any year payable to a
stockholder of record on a specified date in any such month shall be
treated as both paid by the Company and received by the stockholder on
December 31 of the year, provided that the dividend is actually paid
by the Company during January of the following calendar year.
Stockholders may not include on their own federal income tax returns
any losses of the Company.

The Company will be treated as having sufficient earnings and
profits to treat as a dividend any distribution by the Company up to
the amount required to be distributed in order to avoid imposition of
the 4% excise tax discussed in " Federal Income Taxation of the
Company" above. Moreover, any "deficiency dividend" will be treated
as an ordinary or capital gain dividend, as the case may be,
regardless of the Company's earnings and profits. As a result,
stockholders may be required to treat certain distributions that would
otherwise result in a tax-free return of capital as taxable dividends.

Capital Gain Dividends

Dividends to U.S. Stockholders that are properly designated by
the Company as capital gain dividends will be treated as long-term
capital gains (to the extent they do not exceed the Company's actual
net capital gain) for the taxable year without regard to the period
for which the stockholder has held his stock. However, corporate
stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations.

Passive Activity Loss and Investment Interest Limitations

Distributions from the Company and gain from the disposition of
Common Stock will not be treated as passive activity income, and
therefore stockholders may not be able to apply any "passive activity
losses" against such income. Dividends from the Company (to the
extent they do not constitute a return of capital) will generally be
treated as investment income for purposes of the investment income
limitation on the deduction of investment interest. Under recently
enacted legislation, net capital gain from the disposition of Common
Stock and capital gain dividends generally will be excluded from
investment income.

Certain Dispositions of Shares

In general, a U.S. Stockholder will realize capital gain or loss
on the disposition of shares of Common Stock equal to the difference
between the sales price for such shares and the adjusted tax basis for
such shares. Gain or loss realized upon a sale or exchange of Common
Stock by a U.S. Stockholder who has held such Common Stock for more
than one year will be treated as long-term capital gain or loss,
respectively, and otherwise will be treated as short-term capital gain
or loss. However, losses incurred on the sale or exchange of Common
Stock held for less than six months (after applying certain holding
period rules) will be deemed long-term capital loss to the extent of
any capital gain dividends received by the selling stockholder from
those shares.

Treatment of Tax-Exempt Stockholders

Generally, a tax-exempt investor that is exempt from tax on its
investment income, such as an individual retirement account ("IRA") or
a 401(k) plan, that holds the Common Stock as an investment will not
be subject to tax on dividends paid by the Company. However, if such
tax-exempt investor is treated as having purchased its Common Stock
with borrowed funds, some or all of its dividends will be subject to
tax. In addition, a portion of the dividends paid to certain pension
plans (including 401(k) plans but not including IRAs and government
pension plans) that own more than 10% (by value) of the Company's
outstanding Common Stock and Convertible Preferred Stock will be taxed
as unrelated business taxable income if the Company is treated as
predominantly owned within the meaning of the Code by such pension
plans.

Special Tax Considerations for Foreign Stockholders

The rules governing United States federal income taxation of
non-resident alien individuals, foreign corporations, foreign
partnerships and foreign trusts and estates (collectively, "Non-U.S.
Stockholders") are complex, and the following discussion is intended
only as a summary of these rules. Prospective Non-U.S. Stockholders
should consult with their own tax advisors to determine the impact of
federal, state and local income tax laws on an investment in the
Company, including any reporting requirements.

In general, Non-U.S Stockholders will be subject to regular
United States federal income tax with respect to their investment in
the Company if the investment is "effectively connected" with the
Non-U.S. Stockholder's conduct of a trade or business in the United
States. A corporate Non-U.S. Stockholder that receives income that is
(or is treated as) effectively connected with a U.S. trade or business
also may be subject to the branch profits tax under Section 884 of the
Code, which is imposed in addition to regular United States federal
corporate income tax generally at the rate of 30%, subject to
reduction under a tax treaty, if applicable. The following discussion
will apply to Non-U.S. Stockholders whose investment in the Company is
not so effectively connected.

A distribution by the Company that is not attributable to gain
from the sale or exchange by the Company of a United States real
property interest and that is not designated by the Company as a
capital gain dividend will be treated as an ordinary income dividend
to the extent that it is made out of current or accumulated earnings
and profits. Generally, any ordinary income dividend will be subject
to a United States federal income tax equal to 30% of the gross amount
of the dividend unless this tax is reduced by an applicable tax
treaty. To the extent that the Company makes a distribution in excess
of its current or accumulated earnings and profits, the distribution
will be treated first as a tax-free return of capital, reducing a
Non-U.S. Stockholder's basis in its Common Stock (but not below zero),
and the distribution in excess of a Non-U.S. Stockholder's tax basis
in its Common Stock will be treated as gain realized from the sale of
its Common Stock.

Distributions by the Company that are attributable to gain from
the sale or exchange of a United States real property interest will be
taxed to a Non-U.S. Stockholder under the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, such distributions
are taxed to a Non-U.S. Stockholder as if the distributions were gains
"effectively connected" with a United States trade or business.
Accordingly, a Non-U.S. Stockholder will be taxed at the normal
capital gain rates applicable to a U.S. Stockholder (subject to any
applicable alternative minimum tax and a special alternative minimum
tax in the case of non-resident alien individuals). Distributions
subject to FIRPTA also may be subject to the branch profits tax
generally at the rate of 30%, subject to reduction under a tax treaty,
if applicable.

Although tax treaties may reduce the Company's withholding
obligations, the Company generally will be required to withhold from
distributions to Non-U.S. Stockholders, and remit to the IRS, (i) 35%
of designated capital gain dividends (or, if greater, 35% of the
amount of any distributions that could be designated as capital gain
dividends) and (ii) 30% of all other distributions, unless reduced by
an applicable tax treaty. In addition, if the Company designates
prior distributions as capital gain dividends, subsequent
distributions, up to the amount of such prior distributions, will be
treated as capital gain dividends for purposes of withholding.
Because the Company will withhold 30% of all other distributions, a
Non-U.S. Stockholder will be entitled to a refund from the IRS to the
extent the distribution is not a distribution out of earnings and
profits.

Unless the Common Stock constitutes a "United States real
property interest" within the meaning of FIRPTA, a sale of Common
Stock by a Non-U.S. Stockholder generally will not be subject to
United States federal income taxation. The Common Stock will not
constitute a United States real property interest if the Company is a
"domestically controlled REIT." A domestically controlled REIT is a
REIT in which at all times during a specified testing period less than
50% in value of its shares is held directly or indirectly by Non-U.S.
Stockholders. It is currently anticipated that the Company will be a
domestically controlled REIT and therefore that the sale of Common
Stock will not be subject to taxation under FIRPTA. However, because
the Common Stock is publicly traded, no assurance can be given that
the Company will continue to be a domestically controlled REIT.
Notwithstanding the foregoing, capital gains not subject to FIRPTA
will be taxable to a Non-U.S. Stockholder if the Non-U.S. Stockholder
is a non-resident alien individual who is present in the United States
for 183 days or more during the taxable year and certain other
conditions apply, in which case the non-resident alien individual will
be subject to a 30% tax on his or her U.S. source capital gains. If
the Company were not a domestically controlled REIT, gain on the sale
of Common Stock would be subject to taxation under FIRPTA, and a
Non-U.S. Stockholder would be subject to the same treatment as a U.S.
Stockholder with respect to the gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). In such case, under FIRPTA
the purchaser of Common Stock may be required to withhold 10% of the
purchase price and remit this amount to the IRS.

Information Reporting Requirements and Backup Withholding Tax

Under certain circumstances, U.S. Stockholders may be subject to
backup withholding at a rate of 31% on payments made with respect to,
or cash proceeds of a sale or exchange of, Common Stock. Backup
withholding will apply only if the holder (i) fails to furnish his or
her taxpayer identification number ("TIN") (which, for an individual,
would be his or her Social Security number), (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that he or she has failed
properly to report payments of interest and dividends or is otherwise
subject to backup withholding or (iv) under certain circumstances,
fails to certify, under penalties of perjury, that he or she has
furnished a correct TIN and (a) that he or she has not been notified
by the IRS that he or she is subject to backup withholding for failure
to report interest and dividend payments or (b) that he or she has
been notified by the IRS that he or she is no longer subject to backup
withholding. Backup withholding will not apply with respect to
payments made to certain exempt recipients, such as corporations and
tax-exempt organizations.

U.S. Stockholders should consult their own tax advisors
regarding their qualifications for exemption from backup withholding
and the procedure for obtaining such an exemption. Backup withholding
is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a U.S. Stockholder will be
allowed as a credit against the U.S. Stockholder's United States
federal income tax liability and may entitle the U.S. Stockholder to a
refund, provided that the required information is furnished to the
IRS.

Additional issues may arise pertaining to information reporting
and backup withholding for Non-U.S. Stockholders. Non-U.S.
Stockholders should consult their tax advisors with regard to U.S.
information reporting and backup withholding.

State and Local Tax

The Company and its stockholders may be subject to state and
local tax in states and localities in which it does business or owns
property. The tax treatment of the Company and the stockholders in
such jurisdictions may differ from the federal income tax treatment
described above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the Company.

ERISA CONSIDERATIONS

The following is intended to be a summary only and is not a
substitute for careful planning with a professional. Employee benefit
plans subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and various sections of the Code considering
purchasing the shares of Common Stock should consult with their own
tax and other appropriate counsel regarding the application of ERISA
and the Code to their purchase of the Common Stock. Benefit Plans (as
defined below) should also consider the entire discussion under the
heading "Federal Income Tax Considerations" as material contained
therein is relevant to any decision by a Plan to purchase the Common
Stock.

Fiduciary Considerations

Certain employee benefit plans and individual retirement
accounts and individual retirement annuities ("IRAs") (collectively
"Benefit Plans") are subject to various provisions of ERISA and the
Code. Before investing in the Common Stock of the Company, a Benefit
Plan fiduciary should ensure that such investment is in accordance
with ERISA's general fiduciary standards. In making such a
determination, a Benefit Plan fiduciary should ensure that the
investment is in accordance with the governing instruments and the
overall policies of the Benefit Plan, and that the investment will
comply with the diversification and composition requirements of ERISA.
In addition, provisions of ERISA and the Code prohibit transactions
involving the assets of a Benefit Plan by persons who have specified
relationships with such Benefit Plan ("Parties in Interest" under
ERISA and "Disqualified Persons" under the Code, collectively referred
to herein as "Parties in Interest"), unless an exemption is available
for such transaction. The consequences of such prohibited
transactions include the imposition of excise taxes, possible
disqualification of IRAs and other liabilities. A Benefit Plan
fiduciary should ensure that any investment in shares of the Common
Stock will not constitute or give rise to a direct or indirect non-
exempt prohibited transaction. A Benefit Plan fiduciary should also
consider prohibitions in ERISA relating to improper delegation of
control over or responsibility for "plan assets."

Plan Assets Issue

In certain circumstances where a Benefit Plan holds an interest
in an entity, the assets of the entity are deemed to be "plan assets"
(the "Look-Through Rule") of such Benefit Plan for purposes of the
prohibited transactions provisions of the ERISA Code. In addition,
under such circumstances, any person that exercises authority or
control with respect to the management or disposition of such assets
is a Benefit Plan fiduciary. "Plan assets" are not defined in ERISA
or the Code, but the United States Department of Labor has issued a
regulation, effective March 13, 1987 (the "Regulation"), that outlines
the circumstances under which a Plan's interest in an entity will be
subject to the Look-Through Rule.

The Regulation applies to the purchase by a Benefit Plan of an
"equity interest" in an entity, such as common stock of a REIT.
However, the Regulation provides an exception to the Look-Through Rule
for equity interests that are "publicly-offered securities."

Under the Regulation, a "publicly-offered security" is a
security that is (1) freely transferable, (ii) part of a class of
securities that is widely-held and (iii) either (a) part of a class of
securities that is registered under section 12(b) or 12(g) of the
Exchange Act, or (b) sold to a Benefit Plan as part of an offering of
securities and the class of securities of which such security is a
part is registered under the Exchange Act within 120 days (or such
longer period allowed by the Commission) after the end of the fiscal
year of the issuer during which the offering of such securities to the
public occurred. Whether a security is considered "freely
transferable" depends on the facts and circumstances of each case.
Generally, if the security is part of an offering in which the minimum
investment is $10,000 or less, any restriction on or prohibition
against transfer or assignment of such security for the purposes of
preventing a termination or reclassification of the entity for federal
or state tax purposes will not itself prevent the security from being
considered freely transferable. A class of securities is considered
"widely-held" if immediately after the initial offering it is owned by
100 or more investors independent of the issuer and of one another.

It is anticipated by the Company that the Common Stock will meet
the criteria of the publicly-offered securities exceptions to the
Look-Through Rule. Accordingly, the Company believes that if a
Benefit Plan purchases shares of the Common Stock, the Company's
assets should not be deemed to be "plan assets."

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have
12,790,650 shares of Common Stock outstanding. All of such shares are
freely tradeable without restriction under the Securities Act of 1933
(the "Securities Act") except for the 1,819,325 shares beneficially
held by Mr. Bedford and 440,800 shares beneficially held by certain
other senior officers and directors of the Company, all of whom may be
deemed "affiliates" of the Company as defined in Rule 144 under the
Securities Act ("Rule 144"). The shares held by Mr. Bedford and such
other senior officers and directors of the Company are eligible for
resale pursuant to Rule 144 under the Securities Act, subject to
compliance with certain volume and other limitations imposed pursuant
to Rule 144 and, in the case of Mr. Bedford, subject to a standstill
agreement between Mr. Bedford and the Company, discussed below.

In general, under Rule 144 as currently in effect, if two years
have elapsed since the date of acquisition of restricted shares from
the Company or any "affiliate" of the Company, as that term is defined
under the Securities Act, the acquiror or subsequent holder thereof is
entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the number of shares of Common
Stock then outstanding or the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange
Commission. Sales under Rule 144 also are subject to certain
provisions relating to the manner of sale, notice requirements and the
availability of current public information about the Company. If
three years have elapsed since the date of acquisition of restricted
shares from the Company or from any "affiliate" of the Company, and
the acquiror or subsequent holder thereof is deemed not to have been
an "affiliate" of the Company at any time during the 90 days preceding
a sale, such person would be entitled to sell such shares in the
public market under Rule 144(k) without regard to volume limitations,
manner of sale provisions, public information requirements or notice
requirements.

"Restricted securities" (as defined in Rule 144) also may be
sold pursuant to a registration statement filed by the Company under
the Securities Act or another exemption from registration that might
be available without compliance with the requirements of Rule 144. In
that regard, pursuant to a registration rights agreement, Mr. Bedford
has the right to require the Company to register up to 500,000 shares
of Common Stock under the Securities Act for offer and sale to the
public (including by way of an underwritten public offering) and to
cause such shares to be included in any registration statement filed
by the Company.

In connection with the issuance of the Convertible Preferred
Stock in September 1995, Mr. Bedford has agreed not to sell, transfer
or otherwise dispose of any of 1,198,278 shares of Common Stock
beneficially owned by him without the consent of the Board of
Directors. This agreement will remain in effect until the Company
notifies Mr. Bedford that such limitation no longer applies or the
Company no longer qualifies as a REIT under the Code.

In connection with the Offering, the Company and its directors
and senior officers, holding in the aggregate 2,260,125 shares of
Common Stock, have agreed that they will not, without the prior
written consent of the Underwriter, for a period of __ days after the
date of this Prospectus, sell, offer to sell, grant any option for the
sale of, or otherwise dispose of, or enter into any agreement to sell,
any shares of Common Stock or any securities convertible or
exchangeable or exercisable for Common Stock.

Shares of Convertible Preferred Stock will be convertible at the
option of the holder at any time after September 18, 1997, into such
number of shares of Common Stock as is determined by dividing $6.00 by
the then conversion price in respect of the Convertible Preferred
Stock (the "Conversion Price"). The current Conversion Price is $6.00
per share and, therefore, each share of Convertible Preferred Stock
currently is convertible into one share of Common Stock. There were
8,333,334 shares of Convertible Preferred Stock outstanding on
December 31, 1995. The Conversion Price is subject to adjustment as
described above, under the heading "Description of Capital Stock of
the Company Convertible Preferred Stock Conversion Rights." The
outstanding shares of Convertible Preferred Stock and the Common Stock
issuable upon conversion thereof are "restricted securities" within
the meaning of Rule 144. In that regard, AEW and certain of its
transferees have the right, in one or more registrations, to cause the
Company to register the shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock for sale to the public.
See "Description of Capital Stock of the Company Convertible Preferred
Stock Registration Rights."

<PAGE>
UNDERWRITING

The Underwriters named below, acting through their
Representative, Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Representative"), have severally agreed, subject to the terms
and conditions of the Purchase Agreement, to purchase from the Company
the number of shares of Common Stock set forth below opposite their
respective names. The Underwriters are committed to purchase all of
such shares if any are purchased.

Number of
Underwriter Shares

Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . .

Total. . . . . . . . . . . . 6,700,000

The Representative of the Underwriters has advised the Company
that the Underwriters propose to offer the shares of Common Stock to
the public at the public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a
concession not in excess of $______ per share of Common Stock. The
Underwriters may allow, and such dealers may reallow, a discount not
in excess of $_____ per share of Common Stock on sales to certain
other dealers. After the Offering, the public offering price,
concession and discount may be changed.

The Company has granted the Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an
additional 1,005,000 shares of Common Stock to cover over-allotments,
if any, at the public offering price less the underwriting discount
set forth on the cover page of this Prospectus. If the Underwriters
exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately
the same percentage thereof that the number of shares of Common Stock
to be purchased by it shown in the foregoing table bears to the number
of shares of Common Stock initially offered hereby.

The Company and the directors and senior officers of the Company
have agreed that they will not, without the prior written consent of
the Representative, directly or indirectly, for a period of ______
days after the date of this Prospectus, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, or enter into any
agreement to sell, any shares of Common Stock or any securities
convertible or exchangeable or exercisable for Common Stock.

The Company has agreed to indemnify the Underwriters against
civil liabilities, including certain liabilities under the Securities
Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.

<PAGE>
EXPERTS

The consolidated financial statements and financial statement
schedule of Bedford Property Investors, Inc. as of December 31, 1994
and 1993 and for each of the years in the three-year period ended
December 31, 1994; the Historical Summaries of Gross Income and Direct
Operating Expenses of the Landsing Pacific Portfolio, 3002 Dow
Business Center and 350 East Plumeria Drive for the year ended
December 31, 1994; and the Historical Summary of Gross Income and
Direct Operating Expenses of 6600 College Boulevard for the years
ended December 31, 1994, 1993 and 1992, have been included herein and
in the registration statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed
upon for the Company by Ballard Spahr Andrews & Ingersoll, Baltimore,
Maryland. Certain legal matters related to the Offering will be
passed upon for the Company by Shearman & Sterling, San Francisco,
California. In addition, the description of federal income tax
consequences contained in the section of the Prospectus entitled
"Federal Income Tax Considerations" is based upon the opinion of
Shearman & Sterling. Certain legal matters related to the Offering
will be passed upon for the Underwriters by Brown & Wood, San
Francisco, California.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement (of which this
Prospectus is a part) on Form S-2 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules
and regulations of the Commission, and in the exhibits thereto.
Statements contained in this Prospectus as to the content of any
contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the
Company and the Common Stock offered hereby, reference is hereby made
to the Registration Statement and such exhibits and schedules, which
may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Commission and its regional offices listed
below.

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act ), and
in accordance therewith files reports, proxy statements, and other
information with the Commission. The Registration Statement, as well
as such reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained
from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates. Such reports, proxy statements and other
information can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 and the
offices of the Pacific Stock Exchange at 301 Pine Street, San
Francisco, California 94104.

<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents are incorporated by reference in this
Prospectus:

1. The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended by Form 10-K/A filed on May
1, 1995, and Form 10-K/A-2 filed on August 8, 1995.

2. The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1995 (as amended by Form 10-Q/A filed on
August 7, 1995), June 30, 1995 and September 30, 1995.

3. The Company's Current Reports on Form 8-K filed on May 19,
1995, July 28, 1995, August 18, 1995, October 2, 1995 (as amended by
Form 8-K/A filed on November 30, 1995), October 16, 1995, October 17,
1995 (as amended by Form 8-K/A filed on December 15, 1995), November
10, 1995, December 19, 1995 and December 27, 1995 and the Company's
Current Reports on Form 8-K/A-2 filed on November 10, 1995 and dated
December 30, 1993, May 24, 1994 and August 11, 1994.

All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.

This Prospectus incorporates by reference documents which are
not presented herein or delivered herewith. These documents (without
exhibits, unless such exhibits are specifically incorporated by
reference) are available without charge upon request. Requests for
documents should be directed to Bedford Property Investors, Inc., 270
Lafayette Circle, Lafayette, California 94549, Attention: Investor
Relations (telephone: (510) 283-8910).

<PAGE>
GLOSSARY

"301 East Grand" refers to one of the Company's five industrial
properties located in the Pacific International Business Center in
South San Francisco, California.

"342 Allerton" refers to one of the Company's five industrial
properties located in the Pacific International Business Center in
South San Francisco, California.

"350 East Plumeria Drive" refers to the Company's industrial
property located in San Jose, California.

"400 Grandview" refers to one of the Company's five industrial
properties located in the Pacific International Business Center in
South San Francisco, California.

"410 Allerton" refers to one of the Company's five industrial
properties located in the Pacific International Business Center in
South San Francisco, California.

"417 Eccles" refers to one of the Company's five industrial
properties located in the Pacific International Business Center in
South San Francisco, California.

"1000 Town Center Drive" refers to the Company's suburban office
property located in Oxnard, California.

"1992 Stock Option Plan" refers to the Bedford Property
Investors, Inc. 1992 Directors' Stock Option Plan, effective May 20,
1992, as adopted by the Company on September 27, 1993 and amended and
restated as of February 7, 1994.

"3002 Dow Business Center" refers to the Company's industrial
property located in Tustin, California.

"6600 College Boulevard" refers to the Company's suburban office
property in Overland Park, Kansas.

"Academy Place Shopping Center" refers to the Company's retail
property in Colorado Springs, Colorado.

"AEW" refers to Bed Preferred No. 1 Limited Partnership, a
Delaware limited partnership and the purchaser of 8,333,334 shares of
the Company's Convertible Preferred Stock issued and sold on September
18, 1995. AEW is an affiliate of Aldrich Eastman Waltch, L.P., a
national real estate investment adviser whose clients primarily
include institutional investors.

"Annualized Base Rent" means, for any property and at any date,
the product of (i) the monthly base rent in effect with respect to
such Property at such date or, if such monthly base rent has been
reduced by a temporary rent concession, the monthly base rent that
would have been in effect at such date in the absence of such
concession, multiplied by (ii) 12. Annualized Base Rent does not
reflect any increases or decreases in monthly rental rates or lease
expirations which are scheduled to occur or which may occur after the
date of calculation or the cost of any leasing commissions or tenant
improvements.

"Auburn Court" refers to one of the Company's two industrial
properties located in Fremont, California.

"Bedford Acquisitions" refers to Bedford Acquisitions, Inc., a
California corporation wholly owned by Mr. Bedford.

"Board of Directors" refers to the board of directors of the
Company.

"Bryant Street Annex" refers to one of the Company's two
industrial properties located in Denver, Colorado.

"Bryant Street Quad" refers to one of the Company's two
industrial properties located in Denver, Colorado.

"Bylaws" refers to the Bylaws of the Company and all amendments
thereto.

"Building #3 at Contra Costa Diablo Industrial Park" refers to
one of the Company's three industrial properties located in Concord,
California.

"Building #8 at Contra Costa Diablo Industrial Park" refers to
one of the Company's three industrial properties located in Concord,
California.

"CPI" refers to the Consumer Price Index.

"Charter" refers to the charter of the Company and all
amendments thereto and restatements thereof.

"Code" refers to the Internal Revenue Code of 1986, as amended.

"Cody Street Park" refers to the industrial property located in
Overland Park, Kansas that the Company sold in September 1995.

"Convertible Preferred Stock" refers to the Company's Series A
Convertible Preferred Stock, par value $.01 per share.

"Credit Facility" refers to the Company's $60 million revolving
credit facility with Bank of America NT & SA.

"Dupont Industrial Center" refers to the Company's industrial
property in Ontario, California.

"Edison Square Partnerships" refers to the Company's partnership
interests in three Edison, New Jersey properties, that the Company
sold in May 1993.

"Employee Stock Option Plan" refers to the Bedford Property
Investors, Inc. Employee Stock Option Plan, effective September 16,
1985, and amended on June 9, 1993, February 7, 1994 and September 12,
1994.

"Funds From Operations" is defined by the National Association
of Real Estate Investment Trusts as net income, excluding gains or
losses from debt restructuring and sales of property, plus
depreciation and amortization of assets related to real estate, after
adjustments for unconsolidated ventures.

"IBM Building" refers to the suburban office property located in
Jackson, Mississippi that the Company sold in October 1995.

"ICM" refers to ICM Property Investors Incorporated, the
predecessor corporation of the Company.

"Industrial Properties" refers to 301 East Grand, 342 Allerton,
400 Grandview, 410 Allerton, 417 Eccles, 3002 Dow Business Center,
Auburn Court, Bryant Street Annex, Bryant Street Quad, Building #3 at
Contra Costa Industrial Park, Building #8 at Contra Costa Industrial
Park, Building # 18 at Mason Industrial Park, 350 East Plumeria Drive,
Dupont Industrial Center, Lackman Business Center, Milpitas Town
Center, Ninety-Ninth Street #1, Ninety-Ninth Street #2, Ninety-Ninth
Street #3, St. Paul Business Center East, St. Paul Business Center
West, Twin Oaks Business Park, Twin Oaks Technology Center and
Westinghouse Drive.

"Lackman Business Center" refers to one of the Company's four
industrial properties located in Lenexa, Kansas.

"Landsing Pacific Portfolio" refers to the portfolio of the
following Properties that the Company acquired from the Landsing
Pacific Fund, Inc., a publicly-traded REIT based in San Mateo,
California: 301 East Grand, 342 Allerton, 400 Grandview, 410
Allerton, 417 Eccles, Academy Place Shopping Center, Auburn Court,
Bryant Street Annex, Bryant Street Quad, St. Paul Business Center
East, St. Paul Business Center West, Twin Oaks Business Park, Twin
Oaks Technology Center and Westinghouse Drive.

"Mariner Court" refers to the Company's suburban office property
located in Torrance, California.

"Mason Industrial Park" refers to one of the Company's three
industrial properties located in Concord, California.

"MGCL" refers to the Maryland General Corporation Law, as
amended from time to time.

"Milpitas R&D Property" refers to a 3.1-acre parcel located on
the Company s Milpitas Town Center property in Milpitas, California,
on which the Company is developing a single-story research and
development facility with approximately 44,543 rentable square feet on
an unleased ("speculative") basis.

"Milpitas Town Center" refers to the Company's industrial
property located in Milpitas, California.

"NAREIT" refers to the National Association of Real Estate
Investment Trusts, Inc.

"negative net absorption" means that, for a given period and
area in question, there is a net decrease in the number of square feet
of property under lease.

"Ninety-Ninth Street #1" refers to one of the Company's four
industrial properties located in Lenexa, Kansas, which was acquired in
September 1995.

"Ninety-Ninth Street #2" refers to one of the Company's four
industrial properties located in Lenexa, Kansas, which was acquired in
September 1995.

"Ninety-Ninth Street #3" refers to one of the Company's four
industrial properties located in Lenexa, Kansas, which was acquired in
December 1990.

"NOI" means net operating income, which is rental income less
rental expenses before depreciation and amortization.

"positive net absorption" means that, for a given period and
area in question, there is a net increase in the number of square feet
of property under lease.

"Properties" refers collectively to the Company's 30 Properties,
which include 24 Industrial Properties, five Suburban Office
Properties and one Retail Property.

"REIT" refers to a real estate investment trust, as defined by
Sections 856 through 860 of the Code and applicable Treasury
Regulations.

"Retail Property" refers to Academy Place Shopping Center, the
Company's retail property located in Colorado Springs, Colorado.

"St. Paul Business Center East" refers to one of the Company's
two industrial properties located in Maplewood, Minnesota.

"St. Paul Business Center West" refers to one of the Company's
two industrial properties located in Maplewood, Minnesota.

"Stock Purchase Agreement" refers to the agreement between AEW
and the Company whereby AEW agrees to purchase and the Company agrees
to sell 8,333,334 shares of Convertible Preferred Stock.

"Suburban Office Properties" refers to Mariner Court, 1000 Town
Center Drive, Village Green, 6600 College Boulevard and Woodlands II.

"Texas Bank North" refers to the Texas Bank North office
building located in San Antonio, Texas that the Company sold in
January 1994.

"Total Market Capitalization" means the aggregate market value
of the outstanding shares of Common Stock on a fully-diluted basis
plus the outstanding balance of the Convertible Preferred Stock plus
the total consolidated indebtedness of the Company.

"Twin Oaks Business Park" refers to one of the Company's two
industrial properties in Beaverton, Oregon.

"Twin Oaks Technology Center" refers to one of the Company's two
industrial properties in Beaverton, Oregon.

"Village Green" refers to the Company's suburban office property
located in Lafayette, California. The Company's headquarters are
located at this property.

"Westinghouse Drive" refers to one of the Company's two
industrial buildings located in Fremont, California.

"Woodlands II" refers to the Company's suburban office property
located in Salt Lake City, Utah.

<PAGE>

INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENTS SCHEDULES

FINANCIAL STATEMENTS

BEDFORD PROPERTY INVESTORS PRO FORMA
Statement. . . . . . . . . . . . . . . . . . . . . . . . .
Pro Forma Consolidated Balance Sheet as of September 30, 1995
(unaudited). . . . . . . . . . . . . . . . . . . . . . . .
Pro Forma Consolidated Statement of Operations for the nine
months ended
September 30, 1995 (unaudited). . . . . . . . . . . .
Pro Forma Consolidated Balance Sheet as of December 31, 1994
(unaudited). . . . . . . . . . . . . . . . . . . . . . . .
Pro Forma Consolidated Statement of Operations for the year
ended
December 31, 1994 (unaudited) . . . . . . . . . . . .
Notes to Pro Forma Financial Statements. . . . . . . . . .
BEDFORD PROPERTY INVESTORS HISTORICAL
Consolidated Balance Sheets as of September 30, 1995 and
December 31, 1994 (unaudited). . . . . . . . . . . . . . .
Consolidated Statements of Income for the three months ended
September 30, 1995 and 1994 (unaudited) and the nine months
ended
September 30, 1995 and 1994 (unaudited) . . . . . . .
Consolidated Statements of Common and Other Stockholders' Equity
for the nine months ended
September 30, 1995 and the year ended December 31, 1994
(unaudited) . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 and 1994 (unaudited).. . . . . . .
Notes to Consolidated Financial Statements . . . . . . . .
Report of Independent Public Accountants . . . . . . . . .
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . .
Consolidated Statements of Changes in Stockholders' Equity for
the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . .
Financial Statement Schedule . . . . . . . . . . . . . . .
<PAGE>
LANDSING PACIFIC PORTFOLIO HISTORICAL
Independent Auditors' Report . . . . . . . . . . . . . . .
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended
December 31, 1994 . . . . . . . . . . . . . . . . . .
Notes to Historical Summary of Gross Income and Direct Operating
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .

3002 DOW BUSINESS CENTER HISTORICAL
Independent Auditors' Report . . . . . . . . . . . . . . .
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended
December 31, 1994 . . . . . . . . . . . . . . . . . .
Notes to Historical Summary of Gross Income and Direct Operating
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .

6600 COLLEGE BOULEVARD HISTORICAL
Independent Auditors' Report . . . . . . . . . . . . . . .
Historical Summary of Gross Income and Direct Operating Expenses
for the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . .
Notes to Historical Summary of Gross Income and Direct Operating
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .

350 EAST PLUMERIA DRIVE HISTORICAL
Independent Auditors' Report . . . . . . . . . . . . . . .
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended
December 31, 1994 . . . . . . . . . . . . . . . . . .
Notes to Historical Summary of Gross Income and Direct Operating
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .

<PAGE>
STATEMENT

The unaudited pro forma balance sheet data as of September
30, 1995 are presented as if property acquisitions occurring after
September 30, 1995 had occurred on that date. The unaudited pro forma
operating data for the nine months ended September 30, 1995 are
presented as if (i) property acquisitions and property sales occurring
after December 31, 1994 and (ii) the sale of 8,333,334 shares of
Convertible Preferred Stock had occurred on January 1, 1995. The
unaudited pro forma balance sheet data as of December 31, 1994 are
presented as if (i) property acquisitions and property sales occurring
after December 31, 1994 and (ii) the sale of 8,333,334 shares of
Convertible Preferred Stock had occurred on December 31, 1994. The
unaudited pro forma operating data for the year ended December 31,
1994 are presented as if (i) property acquisitions and property sales
occurring after December 31, 1993 and (ii) the sale of 8,333,334
shares of Convertible Preferred Stock had occurred on January 1, 1994.
In management's opinion, all material adjustments necessary to reflect
the effects of these transactions have been made. The pro forma
financial data are not necessarily indicative of what the actual
financial position and results of operations of the Company would have
been as of and for the periods indicated, nor do they purport to
represent the Company's future financial position and results of
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business Objectives and Growth
Plans Acquisitions" and "Business and Properties The Acquisition
Properties" included elsewhere in this Prospectus.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
PRO FORM A CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(Unaudited)
(in thousands, except share, per share, property and occupancy amounts)

Historical Acquired Properties Pro Forma Pro Forma
Consolidated Properties(1) Sold(2) Adjustments(3) Consolidated

ASSETS:

Real estate investments:
Office buildings-held for sale $8,321 $ - $(8,321) - $ -
Office buildings-held for
investment 23,397 6,367 - - 29,764
Industrial buildings 38,304 55,863 - - 94,167
Retail buildings - 6,262 - - 6,262
$70,022 $68,492 $(8,321) - $130,193

Less accumulated depreciation 3,876 (2,024) - 1,852
66,146 68,492 (6,297) - 128,341

Cash 15,562 (20,890) 6,337 $(141) 868
Other 4,245 (900) (189) 141 3,297

Total assets $85,953 $46,702 $(149) - $132,506

LIABILITIES AND STOCKHOLDERS' EQUITY:

Bank loan payable - $42,700 - - $42,700
Accounts payable and
accrued expenses $1,620 510 $(149) - 1,981
Dividend payable 800 - - - 800
Acquisition payable - 3,000 - - 3,000
Other liabilities 1,101 492 - - 1,593

Total liabilities $3,521 $46,702 $(149) - $50,074

Redeemable preferred shares:
Series A convertible preferred
stock, par value $0.01 per
share, authorized, issued and
outstanding 8,333,334 shares;
aggregate redemption amount
$50,000, aggregate liquidation
preference $52,500 $50,000 - - - $50,000

Common stock and other
stockholders' equity:
Common stock, par value $0.01
per share; authorized 30,000,000
shares, issued and outstanding
6,040,650 shares 60 - - - 60

Additional paid-in capital 107,209 - - - 107,209
Accumulated losses and
distributions in excess of
net income (74,837) - - - (74,837)

Total common and other
stockholders' equity $32,432 - - - $32,432

Total liabilities and
stockholders' equity $85,953 $46,702 $(149) - $132,506

Number of properties 15 16 (1) 30
Total rentable square feet 1,356 1,308 (87) 2,577
Percent occupied 95% 94%

</TABLE>

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
(in thousands, except per share amounts)

<S> <C> <C> <C> <C> <C>
Historical Acquired Properties Pro Forma Pro Forma
Consolidated Properties(4) Sold (5) Adjustments Consolidated

Property operations
Rental income $8,052 $9,035 $(1,048) $(174)(6) $15,865
Rental expenses:
Operating expenses 2,077 1,071 (317) (2)(6) 2,829
Real estate taxes 743 1,069 (141) (10)(6) 1,661
Depreciation and
amortization 1,070 829 (223) (6)(6) 1,670
Provision for loss
on real estate
investment 630 - - - 630

Income from property
operations 3,532 6,066 (367) (156) 9,075

General and administrative
expense (1,018) - - - (1,018)

Interest income 56 - - - 56

Interest expense (1,309) - - (1,852)(7) (3,161)

Income before loss
on sales 1,261 6,066 (367) (2,008) 4,952

Loss on sales of real
estate investments (12) - (205) - (217)

Net Income $1,249 $6,066 $(572) $(2,008) $4,735

Income applicable to
common stockholders $1,089 $6,066 ($572) ($5,223)(8) $1,360

Income per common and
common equivalent share $0.18 $0.98 $(0.09) $(0.85) $0.22

</TABLE>

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1994
(Unaudited)
(in thousands, except share, per share, property and occupancy amounts)

Historical Acquired Properties Pro Forma Pro Forma
Consolidated Properties(9) Sold (10) Adjustment(11) Consolidated

ASSETS:
Real estate investments:
Office building held
for sale $ 8,928 $ - ($8,928) $ - $ -
Office buildings held
for investment 23,022 6,367 - - 29,389
Industrial buildings 26,253 69,340 (1,639) - 93,954
Retail building - 6,262 - - 6,262
58,203 81,969 (10,567) - 129,605

Less accumulated
depreciation 3,150 - (2,037) - 1,113

55,053 81,969 (8,530) - 128,492

Cash 4,733 (34,414) 7,684 21,997 -
Other assets 2,508 - (211) 1,003 3,300

Total assets $62,294 $47,555 ($1,057) $23,000 $131,792

LIABILITIES AND STOCKHOLDERS EQUITY:

Bank loan payable 22,400 42,700 - (22,400) 42,700

Accounts payable and
accrued expenses 850 510 (188) - 1,172

Dividend payable 568 - - - 568

Acquisition Payable 600 3,000 - (600) 3,000

Other liabilities 944 1,345 (22) - 2,267

Total liabilities 25,362 47,555 (210) (23,000) 49,707

Redeemable preferred shares:

Series A convertible preferred
stock, par value $0.01 per
share; authorized, issued
and outstanding 8,333,334
shares; aggregate redemption
amount $50,000; aggregate
liquidation preference $52,500. - - - 50,000 50,000

Common stock and other
stockholders' equity:

Common stock, par value $0.01
per share; authorized
30,000,000 shares, issued
and outstanding,
5,990,650 shares 60 - - - 60

Additional paid-in-capital 107,151 - - - 107,151

Accumulated losses and
distributions in excess
of net income (70,279) - (847) (4,000) (75,126)

Total common stock and other
stockholders' equity 36,932 - (847) (4,000) 32,085

Total liabilities and
stockholders' equity $62,294 $47,555 ($1,057) $23,000 $131,792

Number of properties 12 20 (2) 30

Total rentable square feet 1,158 1,545 (126) 2,577

Percent of occupancy 95% 95%

</TABLE>

<PAGE>
BEDFORD PROPERTY INVESTORS
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(in thousands, except per share amounts)

<S> <C> <C> <C> <C> <C>
Consolidated Acquired Properties Pro Forma Pro Forma
Historical Properties(2) Sold(3) Adjustments Consolidated

Property operations:
Rental income $9,154 $14,114 ($1,441) ($1,392)(12) $20,435
Rental expenses:
Operating expenses 2,408 1,961 (445) (253)(12) 3,671
Real estate taxes 916 1,803 (194) (169)(12) 2,356
Depreciation and
amortization 1,206 1,376 (323) (157)(12) 2,102

Income from property
operations 4,624 8,974 (479) (813) 12,306

General and administrative
expense (1,309) - - - (1,309)

Interest income 56 - - - 56

Interest expense (955) - - (2,974)(14) (3,929)

Income before gains (loss)
on sales 2,416 8,974 (479) (3,787) 7,124

Gains (loss) on sales of real
estate investments 1,193 8,974 (1,135) - 58

Net income $3,609 $8,974 ($1,614) ($3,787) $7,182

Income applicable to
common stockholders $3,609 $8,974 ($1,614) ($8,287)(15) $2,682

Income per common and
common equivalent share $0.59 $1.46 ($0.26) ($1.35) $0.44

</TABLE>

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS

(1) The unaudited pro forma consolidated balance sheet reflects the
acquisitions of 6600 College Boulevard, 3002 Dow Business Center
and the Landsing Pacific Portfolio as of September 30, 1995. The
Company acquired 6600 College Boulevard on October 6, 1995, 3002
Dow Business Center on December 5, 1995 and the Landsing Pacific
Portfolio on December 14, 1995.

The combining balance sheet for these acquisitions as of
September 30, 1995 is as follows:

6600 3002 Dow Landsing
College Business Pacific
Boulevard Center Portfolio Total

Assets:
Real estate investments:
Office buildings held
for investment $6,367 - - $6,367
Industrial buildings - $11,752 $44,111 55,863
Retail buildings - - 6,262 6,262

Cash (6,148) (11,057) (3,685) (20,890)
Other assets (100) (550) (250) (900)

Total assets $119 $145 $46,438 $46,702

Liabilities:

Bank loan payable - - 42,700 42,700

Accounts payable and
accrued expenses 103 - 407 510

Acquisitions payable - - 3,000 3,000

Other liabilities 16 145 331 492

Total liabilities $119 $145 $46,438 $46,702

Consolidated pro forma real estate investments as of September 30, 1995
include capitalized fees of $95, $173 and $594 paid by the Company to Bedford
Acquisitions, Inc., a corporation wholly owned by Mr. Bedford ("Bedford
Acquisitions"), in connection with the Company's acquisitions of 6600 College
Boulevard, 3002 Dow Business Center, and the Landsing Pacific Portfolio,
respectively.

(2) Reflects the sale of the IBM Building as if it had occurred on
September 30, 1995. The Company sold the IBM Building on October
2, 1995.

(3) Reflects appraisal and legal costs incurred in connection with
the Company's $60 million credit facility (the "Credit
Facility").

(4) The unaudited pro forma consolidated statement of operations
reflects the acquisitions of 350 East Plumeria Drive, Lackman
Business Center, Ninety-Ninth Street #1, Ninety-Ninth Street #2,
6600 College Boulevard, 3002 Dow Business Center, and the
Landsing Pacific Portfolio as if such transactions had occurred
on January 1, 1995. The Company acquired 350 East Plumeria Drive
and Lackman Business Center on September 19, 1995, Ninety-Ninth
Street #1 and Ninety-Ninth Street #2 on September 20, 1995, 6600
College Boulevard on October 6, 1995, 3002 Dow Business Center on
December 5, 1995 and the Landsing Pacific Portfolio on December
14, 1995.

<PAGE>
The combining historical statement of operations for the nine months
ended September 30, 1995 for the acquired properties is as follows:

<S> <C> <C> <C> <C> <C> <C> <C>
Ninety-
350 East Lackman Ninth 6000 3002 Dow Landsing
Plumeria Business Street College Business Pacific
Drive Center #1 and #2 Boulevard Center Portfolio Total

Rental income $807 $261 $321 $713 $1,478 $5,455 $9,035

Rental expenses:
Operating expenses 18 53 34 76 200 690 1,071
Real estate taxes 116 71 24 101 151 606 1,069
Depreciation and
amortization 89 27 36 66 124 487 829

Income from property
operations $584 $110 $227 $470 $1,003 $3,672 $6,066

</TABLE>

(5) The unaudited pro forma consolidated statement of operations
reflects the elimination of the actual results of operations of
Cody Street Park and the IBM Building from January 1, 1995
through September 30, 1995 and the loss on the sale of these
properties as if the sales had occurred on January 1, 1995. The
Company sold Cody Street Park on September 20, 1995 and the IBM
Building on October 2, 1995.

Cody
Street IBM
Park Building Total

Rental income $147 $901 $1,048
Rental expenses:
Operating expenses 14 303 317
Real estate taxes 24 117 141
Depreciation and
amortization 45 178 223

Income from property
operations $64 $303 $367

(6) Adjusted to deduct the actual results of operations of 350
East Plumeria Drive, Lackman Business Center and Ninety-
Ninth Street #1 and Ninety-Ninth Street #2 from their
respective dates of acquisition to September 30, 1995,
which results of operations are included in the Company's
historical consolidated statement of operations. 350 East
Plumeria Drive and Lackman Business Center were acquired on
September 19, 1995, and Ninety-Ninth Street #1 and Ninety-
Ninth Street #2 were acquired on September 20, 1995.

(7) The pro forma consolidated interest expense consists of the
amortization of loan fees incurred for the restatement and
expansion of the Credit Facility and interest on $42,700 of
borrowings from the Credit Facility. The acquisitions of
350 East Plumeria Drive, Lackman Business Center, Ninety-
Ninth Street #1, Ninety-Ninth Street #2, 6600 College
Boulevard and 3002 Dow Business Center are financed by the
cash proceeds from (i) the sale of the Convertible
Preferred Stock and (ii) the sale of Cody Street Park and
the IBM Building. The acquisition of the Landsing Pacific
Portfolio is financed with the remaining cash proceeds from
the Convertible Preferred Stock, borrowings of $42,700 from
the Credit Facility and issuance of a letter of credit of
$3,000.

(8) Reflects 9% dividends ($3,375) accrued to holders of the
Convertible Preferred Stock less accrued dividends
reflected in the historical column of $160. The unaudited
pro forma consolidated statement of operations reflects the
$50 million sale of the Convertible Preferred Stock as if
such transaction had occurred on January 1, 1995. The sale
of the Convertible Preferred Stock was completed on
September 18, 1995.

(9) The unaudited pro forma consolidated balance sheet reflects
the acquistions of 350 East Plumeria Drive, Lackman
Business Center, Ninety-Ninth Street #1, Ninety-Ninth
Street #2, 6600 College Boulevard, 3002 Dow Business Center
and the Landsing Pacific Portfolio as of December 31, 1994.
The Company acquired 350 East Plumeria Drive and Lackman
Business Center on September 19, 1995, Ninety-Ninth Street
#1 and Ninety-Ninth Street #2 on September 20, 1995, 6600
College Boulevard on October 6, 1995, 3002 Dow Business
Center on December 5, 1995 and the Landsing Pacific
Portfolio on December 14, 1995.

The combining balance sheet for these acquisitions as of December 31,
1994, is as follows:

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ninety-
350 East Lackman Ninth 6600 3002 Dow Landsing
Plumeria Business Street College Business Pacific
Drive Center #1 and #2 Boulevard Center Portfolio Total
Acquired properties

Assets:
Real estate investments:
Office buildings
held for investment - - - $6,367 - - $6,367
Industrial buildings $8,466 $2,285 $2,726 - $11,752 $44,111 69,340
Retail buildings - - - - - 6,262 6,262
Cash (8,386) (2,260) (2,695) (6,248) (11,607) (3,218) (34,414)

Total assets $80 $25 $31 $119 $145 $47,155 $47,555

Liabilities:
Accounts payable and
accrued expenses - - - 103 - 407 510
Bank Loan Payable - - - - - 42,700 42,700
Acquisition Payable - - - - - 3,000 3,000
Other liabilities 80 25 31 16 145 1,048 1,345

Total liabilities $80 $25 $31 $119 $145 $47,155 $47,555

</TABLE>

Consolidated pro forma real estate investments as of December 31, 1994
include capitalized fees of $125, $34, $40, $95, $173 and $594 paid by the
Company to Bedford Acquisitions in connection with the Company's acquisitions
of 350 East Plumeria Drive, Lackman Business Center, Ninety-Ninth Street #1
and Ninety-Ninth Street #2, 6600 College Boulevard, 3002 Dow Business Center
and the Landsing Pacific Portfolio.

(10) Reflects the sale of Cody Street Park and the IBM Building on
December 31, 1994. The Company sold Cody Street Park and the IBM
Building on September 20, 1995 and October 2, 1995, respectively.

(11) Reflects the sale of the Convertible Preferred Stock, the pay-
down of the existing credit facility and the letter of credit as
if all these transactions occurred on December 31, 1994. The
unaudited pro forma consolidated balance sheet at December 31,
1994 includes fees of $750 and $555 paid to Bedford Acquisitions
in connection with the sale of the Convertible Preferred Stock
and the acquisition of the Credit Facility. The unaudited pro
forma consolidated balance sheet at December 31, 1994 also
includes loan fees of $448 incurred to secure the Credit
Facility.

(12) The unaudited pro forma consolidated statement of operations
reflects the acquisitions of Milpitas Town Center, Village Green,
Dupont Industrial Center, Mariner Court, 350 East Plumeria Drive,
Lackman Business Center, Ninety-Ninth Street #1, Ninety-Ninth
Street #2, 6600 College Boulevard, 3002 Dow Business Center and
the Landsing Pacific Portfolio as if such transactions had
occurred on January 1, 1994. The Company acquired Milpitas Town
Center on August 11, 1994, Village Green on July 7, 1994, Dupont
Industrial Center on May 24, 1994 and Mariner Court on January 5,
1994, 350 East Plumeria Drive and Lackman Business Center on
September 19, 1995, Ninety-Ninth Street #1 and Ninety-Ninth
Street #2 on September 20, 1995, 6600 College Boulevard on
October 6, 1995, 3002 Dow Business Center on December 5, 1995 and
the Landsing Pacific Portfolio on December 14, 1995. The actual
results of operations of Milpitas Town Center, Village Green and
Dupont Industrial Center for the periods subsequent to
acquisition, which are included in the Company's historical
consolidated statement of operations, are eliminated by pro forma
adjustments to the Company's historical results of operations.
No pro forma adjustments are included for Mariner Court, which
was acquired on January 5, 1995. The actual results of
operations of this property from January 5, 1994 to December 31,
1994, reasonably approximate the pro forma results of operations
for the year ended December 31, 1994.

The combining historical statement of operations for the year ended
December 31, 1994 for these properties is as follows:

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ninety-
Dupont Milpitas 350 East Lackman Ninth 6600 3002 Dow Landsing
Industrial Village Town Plumeria Business Street College Business Pacific
Center Green Center Drive Center #1 and #2 Boulevard Center Portfolio Total

Rental Income $814 $330 $922 $1,076 $348 $428 $951 $1,971 $7,274 $14,114

Rental Expenses:
Operating Expenses 211 88 234 24 71 45 101 267 920 1,961
Real Estate Taxes 279 24 73 155 94 33 135 202 808 1,803
Depreciation
and Amortization 141 28 100 118 37 48 88 166 650 1,376

Income from Property
Operations $183 $190 $515 $779 $146 $302 $627 $1,336 $4,896 $8,974

</TABLE>

(13) The unaudited pro forma consolidated statement of operations
reflects the elimination of the actual results of operations of
Texas Bank North from January 1, 1994 through the date of sale.
The statement also reflects the gain on sale of this property as
if the sale had occurred on January 1, 1994. The Company sold
Texas Bank North on January 14, 1994. The unaudited pro forma
consolidated statement of operations reflects the elimination of
actual results of operation of Cody Street Park and the IBM
Building from January 1, 1994 to December 31, 1994. The
statement also reflects the losses on the sales of these
properties as of January 1, 1994; the actual dates of sale of
Cody Street Park and the IBM Building were September 20, 1995 and
October 2, 1995, respectively.

<PAGE>
Texas Cody
Bank Street IBM
North Park Building TOTAL

Rental income $11 $206 $1,224 $1,441
Rental expenses:
Operating expenses 50 21 374 445
Real estate taxes 6 33 155 194
Depreciation and
amortization 13 60 250 323

Income from Property
Operations $(58) $92 $445 $479

(14) The pro forma consolidated interest expense consists of the interest
on $42,700 of borrowings from the Credit Facility and the amortization of
loan fees incurred to secure the Credit Facility. The acquisitions of
3002 Dow Business Center, 350 East Plumeria Drive, Lackman Business
Center, Ninety-Ninth Street #1, Ninety-Ninth Street #2, 6600 College
Boulevard, Milpitas Town Center, Village Green, Dupont Industrial
Center and Mariner Court were financed by the cash proceeds from (i)
the sale of Convertible Preferred Stock (after paying off the line of
credit of $3,621 and a letter of credit of $1,500) and (ii) the sale of
Cody Street Park, the IBM Building, and Texas Bank North. The
acquisition of the Landsing Pacific Portfolio is financed with the
remaining cash proceeds from the Convertible Preferred Stock,
borrowings of $42,700 from the Credit Facility and issuance of a letter
of credit of $3,000.

(15) Reflects 9% dividends ($4,500) accrued to the holders of the
Convertible Preferred Stock. The unaudited pro forma
consolidated statement of operations reflects the $50 million
Convertible Preferred Stock sale as if such transaction had
occurred on January 1, 1994. The sale of the Convertible
Preferred Stock was completed on September 18, 1995.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
(in thousands, except share and per share amounts)

September 30, December 31,
1995 1994
ASSETS:
Real estate investments:
Office building-held
for sale $ 8,321 $ 8,928
Office buildings-held
for investment 23,397 23,022
Industrial buildings 38,304 26,253
70,022 58,203
Less accumulated depreciation 3,876 3,150
66,146 55,053

Cash 15,562 4,733
Other assets 4,245 2,508

Total assets $ 85,953 $ 62,294

LIABILITIES AND STOCKHOLDERS' EQUITY:
Bank loan payable - 22,400
Accounts payable and
accrued expenses 1,620 850
Dividend payable 800 568
Acquisition payable - 600
Other liabilities 1,101 944

Total liabilities 3,521 25,362

Redeemable preferred shares:
Series A convertible preferred
stock, par value $0.01
per share; authorized,
issued and outstanding
8,333,334 shares in 1995;
aggregate redemption amount
$50,000; aggregate liquidation
preference $52,500 50,000 -

Common stock and other stockholders'
equity:
Common stock, par value $0.01
per share;
authorized 30,000,000 shares,
issued and outstanding,
6,040,650 shares in 1995;
5,976,900 shares in 1994 60 60
Additional paid-in capital 107,209 107,151
Accumulated losses and distributions
in excess of net income (74,837) (70,279)

Total common stock and other
stockholders' equity 32,432 36,932

Total liabilities and
stockholders' equity $ 85,953 $ 62,294

See accompanying notes to consolidated financial statements.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(in thousands, except share and per share amounts)

Three Months Nine Months
1995 1994 1995 1994

Property operations
Rental income $2,774 $2,473 $8,052 $6,305
Rental expenses:
Operating expenses 772 686 2,077 1,753
Real estate taxes 261 287 743 710
Depreciation and
amortization 372 263 1,070 868
Provision for loss on
real estate investment 630 - 630 -

Income from property
operations 739 1,237 3,532 2,974

General and administrative
expense (336) (361) (1,018) (976)

Interest income 37 9 56 45

Interest expense (401) (336) (1,309) (533)

Income before gain (loss)
on sale 39 549 1,261 1,510

Gain (loss) on sale of real
estate investment (12) - (12) 1,193

Net income $27 $549 $1,249 $2,703

Income (loss) applicable to
common stockholders(1) $(133) $549 $1,089 $2,703

Earnings (loss) per common and
common equivalent share(1) $(0.02) $0.09 $0.18 $0.44

Weighted average number of
common and common
equivalent shares 6,163,719 6,141,928 6,142,760 6,141,197

(1) Reflects dividend of $160 accrued during the third quarter of 1995 on
$50,000 of preferred stock issued on September 18, 1995.

See accompanying notes to consolidated financial statements.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF COMMON AND OTHER STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(in thousands, except per share amounts)

Accumulated Total
losses and common stock
Additional distributions and other
Common paid-in in excess of stockholder's
stock capital net income equity

Balance
December 31, 1993 $60 $107,147 $(71,766) $35,441

Issuance of common
stock - 4 - 4

Net income - - 3,609 3,609

Dividends
($0.355 per share) - - (2,122) (2,122)

Balance,
December 31, 1994 60 107,151 (70,279) 36,932

Issuance of common
stock - 58 - 58

Costs of issuance of
preferred stock - - (3,750) (3,750)

Redemption of rights - - (60) (60)

Net income - - 1,249 1,249

Dividends to common
stockholders
($0.305 per share) - - (1,837) (1,837)

Dividends to preferred
stockholder (9%) - - (160) (160)

Balance,
September 30, 1995 $60 $107,209 ($74,837) $32,432

See accompanying notes to consolidated financial statements.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(in thousands)

1995 1994

Operating Activities:
Net income $1,249 $2,703
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 1,273 1,058
Loss on sale of real estate
investment 12 -
Gain on sale of real estate
investment - (1,193)
Provision for loss on real estate
investment 630 -
Change in other assets (2,090) (574)
Change in accounts payable and
accrued expenses 270 (364)
Change in other liabilities 157 396

Net cash provided by
operating activities 1,501 2,026

Investing Activities:
Investments in real estate (14,688) (26,126)
Proceeds from sale of real
estate investment 1,433 8,289

Net cash used by investing
activities (13,255) (17,837)

Financing Activities:
Proceeds from bank loan 3,850 30,257
Repayments of bank loan (26,250) (17,359)
Issuance of common stock 58 -
Net proceeds from sale of
preferred stock 46,750 -
Redemption of rights (60) -
Payment of dividends (1,765) (1,434)

Net cash provided by financing
activities 22,583 11,464

Net increase (decrease) in cash 10,829 (4,347)
Cash at beginning of period 4,733 4,930

Cash at end of period $15,562 $583

Supplemental disclosure of cash
flow information:
Cash paid during the period
for interest $1,283 $254

See accompanying notes to consolidated financial statements.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Basis of Presentation

The Company

On July 1, 1993, the Company (formerly known as ICM Property Investors
Incorporated) reincorporated from the State of Delaware to the State of
Maryland under a new name, Bedford Property Investors, Inc. Since July 1,
1993, the Company's Common Stock has traded under the symbol "BED" on both
the New York and Pacific Stock Exchanges.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes necessary for a fair presentation of financial
condition, results of operations, and cash flows in conformity with generally
accepted accounting principles. When necessary, reclassification have been
made to prior period balances to conform to current period presentation.

Per Share Data

Per share data is based on the weighted average number of common and common
equivalent shares outstanding during the period. Stock options issued under
the Company's stock option plans are considered common stock equivalents and
are included in the calculation of per share data if, upon exercise, they
would have a dilutive effect. Dividends accrued on the $50,000,000
Convertible Preferred Stock are deducted from net income for purposes of
determining income applicable to common stockholders.

<PAGE>

Note 2. Real Estate Investments

As of September 30, 1995, the Company's real estate investments (net of
depreciation) were diversified by property type as follows (in thousands):

Number of Investment % of
Properties Amount Total

Office Buildings 5 $28,838 44
Industrial Buildings 10 37,308 56

Total 15 $66,146 100

As of September 30, 1995, the Company's real estate investments (net of
depreciation) were diversified by geographic region as follows (in
thousands):

Number of Investment % of
Properties Amount Total

San Francisco Bay Area,
California 6 $22,592 34

Greater Los Angeles Area,
California 3 23,226 35

Salt Lake City, Utah 1 6,720 10

Greater Kansas City Area,
Kansas 4 7,311 11

Jackson, Mississippi
(sold October 2, 1995) 1 6,297 10

Total 15 $66,146 100

<PAGE>

The following table sets forth the Company's real estate investments
as of September 30, 1995 (in thousands):

Less
Accumulated
Land Building Depreciation Total

Office Buildings:

IBM Building(1) $2,590 $5,731 $2,024 $6,297

Woodlands Tower II 945 6,095 320 6,720

1000 Town Center Drive 1,785 4,691 307 6,169

Mariner Court 3,221 4,506 187 7,540

Village Green 743 1,411 42 2,112

Total Office 9,284 22,434 2,880 28,838

Industrial Buildings:

Building 3
Contra Costa Diablo
Industrial Park 495 1,172 125 1,542

Building 8
Contra Costa Diablo
Industrial Park 877 1,551 166 2,262

Building 18,
Mason Industrial Park 610 1,305 146 1,769

Ninety-Ninth Street
Park #1 396 1,584 1 1,979

Ninety-Ninth Street
Park #2 172 575 - 747

Ninety-Ninth Street
Park #3 360 2,172 232 2,300

Lackman Business Center 626 1,660 1 2,285

Dupont Industrial Center 3,588 6,136 207 9,517

Milpitas Town Center 1,935 4,624 114 6,445

350 East Plumeria Drive 3,166 5,300 4 8,462

Total Industrial 12,225 26,079 996 37,308

Total $21,509 $48,513 $3,876 $66,146

(1) Sold October 2, 1995.

<PAGE>

Texas Bank North Building

During the fourth quarter of 1992, the Company decided to offer the
Texas Bank North Building for sale. In anticipation of such sale, the
property was evaluated and written down to management's best estimate
of net realizable value. The Company wrote down its investment in this
property by $3,631,000. This write down resulted from the general
economic conditions that existed in the national and local real estate
markets. In December 1993, the Company entered into a contract to sell
the Texas Bank North Building for a cash sale price of $8,500,000. The
sale was completed on January 14, 1994, and resulted in a gain of
$1,193,000. This gain was primarily attributable to an improvement in
1993 in the local real estate economy.

Mariner Court

The property, a suburban three-story office building located in
Torrance, California, was purchased for $7,500,000 or $71 per square
foot on January 5, 1994.

Dupont Industrial Center

The property, a three-building industrial complex located in Ontario,
California, was purchased for $9,750,000 or $22 per square foot on May
24, 1994.

Village Green

The property, a suburban three-building office complex located in
Lafayette, California, was purchased for $1,792,000 or $106 per square
foot on July 7, 1994.

Milpitas Town Center

The property, consisting of two suburban research and development
buildings and 3.1 acres of entitled land, is located in Milpitas,
California. It was purchased for $6,320,000 or $62 per square foot
(excluding the undeveloped land) on August 11, 1994. The property has
a Phase I environmental site assessment which indicates that the
groundwater under the property either has been or may in the future be
impacted by the migration of contaminants originating from an off-site
source. The responsible party has begun remediation pursuant to a
cleanup program which is backed by an insurance policy from CIGNA up
to $10 million. The Company does not believe that this environmental
matter will impair the future value of the property.

350 East Plumeria Drive

The property, a suburban research and development facility located in
San Jose, California, was purchased for $8,325,000 or $58 per square
foot on September 19, 1995. The Company also recorded acquisition
costs of $125,000 paid to Bedford Acquisitions, Inc. ("Bedford
Acquisitions"), a company wholly-owned by Peter B. Bedford, Chairman
of the Board and Chief Executive Officer of the Company (see Note 3).

Lackman Business Center

The property, a single-story service center industrial project located
in Lenexa, Kansas, was purchased for $2,250,000 or $49 per square foot
on September 19, 1995. The Company also recorded acquisition costs of
$34,000 paid to Bedford Acquisitions (see Note 3).

Ninety-Ninth Street #1 and Ninety-Ninth Street #2

The properties, two service industrial buildings located in Lenexa,
Kansas, were purchased for $2,685,000 or $55 per square foot on
September 20, 1995. The Company also recorded acquisition costs of
$40,000 paid to Bedford Acquisitions (see Note 3).

Cody Street Park

In the third quarter 1995, the Company decided to sell the Cody Street
Park. The sale was completed on September 20, 1995, and resulted in a
loss of $12,000.

6600 College Boulevard

The property, a suburban service center industrial complex located in
Overland Park, Kansas, was purchased for $6,360,000 or $81 per square
foot, on October 6, 1995. The property was acquired from AEW #25
Trust, an affiliate of BED Preferred No.l Limited Partnership which
recently purchased $50 million of the Company's Series A Convertible
Preferred Stock. The directors of the Company who are affiliated with
BED Preferred No. 1 Limited Partnership, however, played no role in
this acquisition. The Company also recorded acquisition costs of
$95,000 paid to Bedford Acquisitions (see Note 3).

IBM Building

During 1995, the Company continued to offer for sale the IBM Building
located in Jackson, Mississippi. This property was first offered for
sale in 1991, at which time the Company's investment in the property
was written down by $2,113,000. On October 2, 1995, the Company
completed the sale of the IBM Building for a cash sale price of
$6,500,000, resulting in a loss of $630,000. In the anticipation of
this sale, the investment in this property was written down by
$630,000 at September 30, 1995.

There has been no significant development in environmental matters or
proceedings since the filing of the Company's 1994 Annual Report on
Form 10-K.

The Company internally manages the majority of its properties and
maintains centralized financial record keeping. For the IBM Building
and Woodlands Tower II, the Company has subcontracted on-site
maintenance to local maintenance firms

Note 3. Related Party Transactions

Since February 1993, all of the Company's activities relating to debt
and equity financings and the acquisition of new properties have been
handled through an arrangement with Mr. Bedford, whereby he provides
acquisition and financing personnel, allocable overhead costs, and the
costs of all due diligence conducted prior to an acquisition. Since
January 1995, this arrangement has been with Bedford Acquisitions,
Inc. ("Bedford Acquisitions"), a company wholly-owned by Mr. Bedford.
Upon the completion of a financing or the acquisition of a property,
Bedford Acquisitions is paid a fee by the Company equal to 1-1/2% of
the gross amount raised or 1-1/2% of the purchase price of the
property, as the case may be. However, because Mr. Bedford is a
related party and in order to insure that such fees are reasonable,
the Board of Directors has limited the maximum amount of fees that can
be paid to Bedford Acquisitions. The agreement specifies that
aggregate fees paid to Bedford Acquisitions for such services cannot
exceed the total costs incurred by Bedford Acquisitions in maintaining
a staff of personnel skilled in such activities. As of September 30,
1995, the Company had paid Mr. Bedford or Bedford Acquisitions an
aggregate of $2,407,000 pursuant to this arrangement, which was
$158,000 less than the amount of total acquisition and financing costs
funded.

The Company believes that since the fees charged are (i) comparable to
those charged by other sponsors or real estate investment entities or
other third party service providers, and (ii) are charged only for
services on acquired properties or completed financings, such fees are
properly includable in direct acquisition costs and are capitalized as
part of the asset or financing activities.

The Company is leasing 2,400 square feet of industrial space on a
month-to-month basis at a market rental rate of $1,288 per month to a
company wholly-owned by Mr. Bedford.

Note 4. Stock Options

In September 1995, the Company established a Management Stock
Acquisition program. Under the program, options exercised by key
members of management within thirty days of the grant date may be
exercised either in cash or with a note payable to the Company. Such
note bears interest at 7.5% or the Applicable Federal Rate as defined
by the Internal Revenue Service, whichever is higher. The note is due
in five years or within ninety days from termination of employment,
with interest payable quarterly.

On September 13, 1995, one member of the management team exercised
options for 50,000 shares of common stock in exchange for a note
payable to the Company The $287,500 note bears interest at 7.5%. The
unpaid balance of the note is included in the accompanying
consolidated balance sheet as a reduction of additional paid-in
capital.

Note 5. Bank Loan Payable

In December 1993, the Company concluded an agreement with Bank of
America for a $20 million revolving line of credit for real estate
acquisitions. In August 1994, the maximum commitment amount of the
facility was increased from $20 million to $23 million. On September
18, 1995, outstanding borrowings under the facility were repaid and
the facility was amended and restated to $60 million. The amended
facility, which matures on September 1, 1998, carries an interest rate
option of either prime plus 0.50% or IBOR plus 2.25%. It is secured by
mortgages on Woodlands Tower II, Mariner Court, Village Green,
Milpitas Town Center, IBM Building, 1000 Town Center Drive and Dupont
Industrial Center.

The daily weighted average amount owing under the Credit Facility was
$18,112,000 and $6,285,000 in the first nine months of 1995 and 1994,
respectively. The weighted average interest rate in these periods was
8.73% and 7.70%, respectively.

<PAGE>

Report of Independent Public Accountants

To the Stockholders and the Board of Directors of
Bedford Property Investors, Inc.:

We have audited the accompanying consolidated balance sheets of
Bedford Property Investors, Inc. and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1994. In connection with
our audits of the consolidated financial statements, we also have
audited the financial statement schedule of real estate and
accumulated depreciation as of December 31, 1994. These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Bedford Property Investors, Inc. and subsidiaries as of December
31, 1994 and 1993, and the results of their operations and their cash
flows for each of the years in the three-year period ended December
31, 1994, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.

San Francisco, California
February 14, 1995

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(in thousands, except share and per share amounts)

1994 1993

Assets:

Real estate investments:
Office buildings - held for sale $8,928 $19,019
Office buildings - held for investment 23,022 12,074
Industrial buildings 26,253 10,132
58,203 41,225
Less accumulated depreciation 3,150 5,263
55,053 35,962
Cash 4,733 4,930
Other assets 2,508 2,115

Total assets $62,294 $43,007

Liabilities and Stockholders' Equity:

Bank loan payable 22,400 3,621
Accounts payable and accrued expenses 850 1,465
Dividend payable 568 418
Acquisition payable 600 1,500
Other liabilities 944 562

Total liabilities 25,362 7,566

Stockholders' equity:
Preferred stock, par value 0.01 per share;
authorized 10,000,000 shares, issued none - -
Common stock, par value $0.01 per share;
authorized 30,000,000 shares, issued and
outstanding, 5,976,900 shares in 1994;
5,975,900 shares in 1993 60 60
Additional paid-in capital 107,151 107,147
Accumulated losses and distributions
in excess of net income (70,279) (71,766)

Total stockholders' equity 36,932 35,441

Total liabilities and stockholders'
equity $62,294 $43,007

See accompanying notes to consolidated financial statements.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands, except share and per share amounts)

1994 1993 1992

Property operations:
Rental income $9,154 $7,207 $9,056
Rental expenses:
Operating expenses 2,408 2,520 3,227
Real estate taxes 916 840 1,196
Depreciation and amortization 1,206 2,250 3,199

Income from property operations 4,624 1,597 1,434

General and administrative expenses (1,309) (1,303) (2,568)
Interest income 56 136 5
Interest expense (955) (716) (1,191)

Provision for possible loss on
real estate investments - - (18,921)
Income (loss) from joint ventures - 2,533 (702)

Income (loss) before gains on sales
and extraordinary item 2,416 2,247 (21,943)

Gains on sales of real estate
investment 1,193 900 -

Income (loss) before extraordinary
item 3,609 3,147 (21,943)

Extraordinary item:
Gain on extinguishment of debt - - 3,818

Net income (loss) $3,609 $3,147 $(18,125)

Per common and common equivalent share:
Before extraordinary item $0.59 $0.53 $(3.67)
Extraordinary item 0.00 0.00 0.64

Net income (loss) per common and common
equivalent share: $0.59 $0.53 $(3.03)

Weighted average number of common
and common equivalent shares
outstanding 6,147,664 5,975,900 5,975,900

See accompanying notes to consolidated financial statements.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands, except per share amounts)

Accumulated
losses and
Additional distributions Total
Common paid-in in excess of stockholders'
stock capital net income equity

Balance,
December 31, 1991 $60 $107,147 $(55,712) $51,495

Net loss - - (18,125) (18,125)

Balance,
December 31, 1992 60 107,147 (73,837) 33,370

Net income - - 3,147 3,147

Dividends ($0.18 per share) - - (1,076) (1,076)

Balance,
December 31, 1993 60 107,147 (71,766) 35,441

Issuance of common stock - 4 - 4

Net income - - 3,609 3,609

Dividends ($0.355 per share) - - (2,122) (2,122)

Balance,
December 31, 1994 $60 $107,151 $(70,279) $36,932

See accompanying notes to consolidated financial statements.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)

1994 1993 1992

Operating Activities:
Income (loss) before
extraordinary item $3,609 $3,147 $(21,943)
Extraordinary item - - 3,818
Net income (loss) 3,609 3,147 (18,125)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 1,463 2,349 3,350
Gain on sale of real estate
investments (1,193) (900) -
Gain on sale of joint venture
partnership operations - (2,686) -
Equity in joint venture
partnership operations
(including depreciation of
$191 in 1993 and $697
in 1992) - 153 702
Provision for possible loss on
real estate investments - - 15,103
Change in other assets (930) (777) (277)
Change in accounts payable and
accrued expenses (615) (252) (152)
Change in other liabilities 382 186 (403)
Net cash provided by operating
activities 2,716 1,220 198

Investing Activities:
Investments in real estate (28,009) (11,552) (1,350)
Jefferson Plaza settlement - - (400)
Proceeds from sales of
real estate investments 8,289 21,637 -
Net cash provided (used)
by investing activities (19,720) 10,085 (1,750)

Financing Activities:
Proceeds from bank loan 36,138 5,221 1,900
Repayment of bank loan (17,359) (6,000) (500)
Repayment of mortgage loan - (5,113) -
Payment of dividends (1,972) (658) -
Net cash provided (used)
by financing activities 16,807 (6,550) 1,400

Net increase (decrease) in cash (197) 4,755 (152)
Cash at beginning of year 4,930 175 327

Cash at end of year $4,733 $4,930 $175

Supplemental disclosure of cash flow information

a) Non-cash investing and
financing activities:
Debt incurred in connection
with real estate acquired $600 $1,500 -
b) Cash paid during the year
for interest $1,166 $1,148 $857

See accompanying notes to consolidated financial statements.

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

The Company

On July 1, 1993, the Company (formerly known as ICM Property
Investors Incorporated) reincorporated from the state of Delaware to
the state of Maryland under a new name, Bedford Property Investors,
Inc. As of July 1, 1993 the Company's Common Stock traded under the
symbol "BED" on both the New York and Pacific Stock Exchanges.
Concurrent with the reincorporation, the number of authorized shares
of Preferred Stock was increased from 1,000,000 shares to 10,000,000
shares and the number of authorized shares of Common Stock was
increased from 10,000,000 to 30,000,000 shares. Also, the par value
of both the Preferred and Common Stock was reduced from $1.00 to $0.01
per share and Treasury Stock was eliminated. For comparative
purposes, stockholders' equity for the year ended December 31, 1992
has been reclassified to reflect the above changes.

Principles of Consolidation

The consolidated financial statements include the accounts of
Bedford Property Investors, Inc., its wholly-owned subsidiaries and
its consolidated joint venture partnerships. As of June 30, 1992, the
Company no longer had investments in joint venture partnerships which
were consolidated. As of May 31, 1993, the Company no longer had
investments in unconsolidated joint venture partnerships.

All significant inter-entity balances have been eliminated in
consolidation.

Federal Income Taxes

The Company has qualified as a real estate investment trust
under Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended (the "Code"). A real estate investment trust is generally not
subject to Federal income tax on that portion of its real estate
investment trust taxable income ("Taxable Income") which is
distributed to its stockholders, provided that at least 95% of Taxable
Income is distributed. No provision for Federal income taxes has been
made in the consolidated financial statements, as the Company believes
it is in compliance with the Code.

Taxable income differs from net income for financial reporting
purposes primarily because of the different methods of accounting for
joint venture partnerships and the difference in timing of the
recognition of losses. As of December 31, 1994, for Federal income
tax purposes, the Company had an ordinary loss carryforward of
approximately $39,532,000 and a capital loss carryforward of
approximately $15,195,000.

Real Estate Investments

Buildings and improvements are carried at cost less accumulated
depreciation. Buildings are depreciated on a straight-line basis over
45 years. Upon the acquisition of an investment by the Company,
acquisition related costs are added to the carrying cost of that
investment. These costs are being depreciated over the useful lives
of the buildings. Leasing commissions and improvements to tenants'
space incurred subsequent to the acquisition are amortized over the
terms of the respective leases. Expenditures for repairs and
maintenance, which do not add to the value or prolong the useful life
of a property, are expenses as incurred. When the Company concludes
that the recovery of the carrying value of a real estate investment is
permanently impaired, it reduces such carrying value to the amount
deemed recoverable. Investments which have been classified as offered
for sale are written down to estimated net realizable value if net
realizable value is less than the carrying amount of the investment.

Income Recognition

Rental income from operating leases is recognized in income on a
straight-line basis over the period of the related lease agreement.

Per Share Data

Per share data are based on the weighted average number of
common and common equivalent shares outstanding during the year.
Weighted average shares for computing per share data were 6,147,664
for 1994 and 5,975,900 for 1993 and 1992. Stock options issued under
the Company's stock option plans are considered common stock
equivalents and are included in the calculation of per share data if,
upon exercise, they would have a dilutive effect.

Reclassification

Certain Reclassifications have been made to the 1993 and 1992
financial statements to conform to the 1994 presentation.

Note 2 - Real Estate Investments

The following table sets forth the Company's real estate
investments as of December 31, 1994 (in thousands):

Less
Accumulated
Land Building Depreciation Total

Office Buildings:

IBM Building,
Jackson, MS (2) $2,590 $6,338 $1,875 $7,053
Woodlands Tower II,
Salt Lake City, UT 945 6,059 194 6,810
1000 Town Center
Drive, Oxnard, CA 1,785 4,669 115 6,339
Mariner Court,
Torrance, CA 3,221 4,455 101 7,575
Village Green,
Lafayette, CA 556 1,332 14 1,874

Total Office $9,097 $22,853 $2,299 $29,651

Industrial Buildings:

Building 3
Contra Costa
Diablo Industrial
Park, Concord, CA 495 1,167 106 1,556
Building 8
Contra Costa
Diablo Industrial
Park, Concord, CA 877 1,551 140 2,288
Building 18
Mason Industrial
Park, Concord, CA 610 1,275 118 1,767
Building 6
Cody Street Park,
Overland Park, KS 380 1,259 162 1,477
Building 3
Ninety-Ninth Street,
Lenexa, KS 360 2,172 196 2,336
Dupont Industrial
Center, Ontario, CA 3,588 6,079 90 9,577
Milpitas Town Center,
Milpitas, CA 1,935 4,505 39 6,401

Total Industrial 8,245 18,008 851 25,402

Total $17,342 $40,861 $3,150 $55,053

(2) Offered for Sale

University Tower

On July 31, 1992, the Company entered into a contract to sell
its investment in University Tower for $15,350,000 in cash. In
anticipation of the proposed sale, the Company provided for a possible
loss of $3,200,000 related to this investment. The contract of sale,
which was scheduled to expire on November 13, 1992, was extended and
expired on December 31, 1992. Subsequent to the expiration of the
contract, the Company signed a tenant lease with the potential buyer
for approximately 20% of the building's space and, as part of the
lease, the lessee obtained a short-term option to purchase the
building. On May 25, 1993, the option was exercised and the sale of
University Tower was completed on August 18, 1993. The cash sale
price, including the reimbursement of tenant relocation costs of
$300,000, was $15,200,000 and produced a gain of $407,000.

Point West Place

During the fourth quarter of 1992, the Company decided to offer
Point West Place for sale. In anticipation of such sale, the Company
wrote down its investment in this property by $9,290,000 in 1992. On
October 1, 1993, the property was sold for a cash price of $7,180,000,
resulting in a gain of $493,000.

IBM Building

The Company continues to offer the IBM Building for sale.

Columbia Business Center

In accordance with a Settlement Agreement dated June 3, 1992,
between the Company and the first mortgagee, ownership of Columbia
Business Center was transferred to the first mortgagee. As of June
30, 1992, the Company wrote off its investment in this property,
resulting in the recognition of a net gain of $1,018,000 (comprised of
an extraordinary gain of $3,818,000 attributable to the extinguishment
of the first mortgage on the property and a $2,800,000 loss related to
the write-off of the property's buildings and improvements).

Texas Bank North Building

As of May 1, 1992, the Company's partner in the partnership that
owned the Texas Bank North Building assigned its interest in the
partnership to the Company. As a result, this investment became
wholly owned. In 1991, the investment was recorded as an
unconsolidated joint venture.

During the fourth quarter of 1992, the Company decided to offer
the Texas Bank North Building for sale. In anticipation of such sale,
the Company wrote down its investment in this property by $3,631,000.
In December, 1993, the Company entered into a contract to sell the
Texas Bank North Building for a cash sale price of $8,500,000. The
sale was completed on January 14, 1994 and resulted in a gain of
$1,193,000.

1000 Town Center Drive

The property, a suburban six-story office building located in
Oxnard, California, was purchased for $5,100,000 or $47 per square
foot on December 30, 1993. The purchase price consisted of $3,600,000
in cash and a deferred payment of $1,500,000 which was paid in
December 1994. The Company also recorded acquisition costs of $77,000
paid to Peter B. Bedford, Chairman of the Board and Chief Executive
Officer of the Company ("Mr. Bedford"), see Note 5.

Mariner Court

The property, a suburban three-story office building located in
Torrance, California, was purchased for $7,500,000 or $71 per square
foot on January 5, 1994. The Company recorded acquisition costs of
$113,000 paid to Mr. Bedford.

Dupont Industrial Center

The property, a three-building industrial complex located in
Ontario, California, was purchased for $9,750,000 or $22 per square
foot on May 24, 1994. The Company recorded acquisition costs of
$146,000 paid to Mr. Bedford. Because the property was only 68%
leased at the time of purchase, the purchase contract established a
rental income guarantee fund of $400,000 which was disbursed to the
Company until at least 90% of the space was leased. As of December
31, 1994, the rental income guarantee fund was terminated since the
property was 91% leased. The Company had received $264,000 of the
rental income guarantee fund. This amount has been accounted for as a
reduction in the cost of the property.

Village Green

The property, a suburban three-building office complex located
in Lafayette, California, was purchased for $1,792,000 or $106 per
square foot on July 7, 1994. The Company recorded acquisition costs
of $27,000 paid to Mr. Bedford.

Milpitas Town Center

The property consists of two suburban research and development
buildings and a 3.1 acre parcel of entitled land. The property,
located in Milpitas, California, was purchased for $6,320,000 or $62
per square foot (excluding the undeveloped land), on August 11, 1994.
The purchase price consisted of $5,720,000 in cash and a deferred
payment of $600,000 due in August, 1995, for which the Company has
issued a letter of credit under its credit facility. The Company
recorded acquisition costs of $95,000 paid to Mr. Bedford. The
property has a Phase I environmental site assessment which indicates
that the groundwater under the property either has been or may in the
future be impacted by the migration of contaminants originating from
an off-site source. The responsible party has begun remediation
pursuant to a clean-up program which is backed by an insurance policy
from CIGNA for up to $10 million. The Company does not believe that
this environmental matter will impair the future value of the
property.

The Company internally manages the majority of its properties
and maintains centralized financial record-keeping. For the IBM
Building and Woodlands Tower II, the Company has subcontracted on-site
maintenance to local maintenance firms.

Note 3 - Unconsolidated Joint Venture Partnerships

Edison Square

Distributions to the Company exceeded its combined mortgage loan
and equity investments in these joint venture partnerships and such
amounts had been recorded as liabilities in the Company's financial
statements. On May 31, 1993, the Company sold its partnership
interests in the three Edison Square properties in exchange for a note
receivable of $300,000 with an interest rate of 8% payable quarterly
in July, October, January, and April until May 31, 1998, at which time
the note matures. The sale of the Company's interest in the three
unconsolidated joint venture partnerships resulted in a gain of
$2,686,000.

Jefferson Plaza

In May 1992, the Company paid $400,000 to settle a dispute with
the partners in the partnership that owns Jefferson Plaza and
transferred its interest in the property for a nominal sum, in
exchange for general releases by the Company's partners.

The components of equity in joint ventures as shown on the
consolidated statements of operations are as follows:

1994 1993 1992
Equity in operating
losses of joint ventures $ - $(153) $(302)
Gains (losses) on sales:
Edison Square - 2,686 -
Jefferson Plaza - (400)
Total $ - $2,533 $(702)

<PAGE>

Note 4 - Leases

Minimum future rental receipts outstanding at December 31, 1994
are as follows (in thousands):

1995 $8,850
1996 7,878
1997 5,487
1998 3,369
1999 2,444
Thereafter 3,973

The total minimum future rental payments shown above do not
include tenants' obligations for reimbursement of operating expenses
or taxes as provided by the terms of certain leases.

Note 5 - Related Party Transactions

Since February 1993, all of the Company's activities relating to
debt and equity financings and the acquisition of new properties have
been handled under an arrangement with Mr. Bedford whereby he provides
acquisition and financing personnel, allocable overhead costs, and the
costs of all due diligence conducted prior to an acquisition. Upon
the completion of a financing or the acquisition of a property, Mr.
Bedford is paid a fee by the Company equal to the lesser of (a) 1-1/2%
of the gross amount raised or the purchase price of the property, as
the case may be, or (b) an amount equal to (i) the aggregate amount of
costs funded by Mr. Bedford through the time of such acquisition or
financing minus (ii) the aggregate amount of fees previously paid to
Mr. Bedford pursuant to such arrangement. In no event does the
aggregate amount of fees paid to Mr. Bedford exceed the aggregate
amount of costs funded by Mr. Bedford. Such fees are capitalized by
the Company as part of the direct costs of acquisition and financing
activities. As of December 31, 1994, the Company had paid Mr. Bedford
an aggregate of $903,000 pursuant to this arrangement, which was
$712,000 less than the amount of total acquisition and financing costs
funded by Mr. Bedford.

The Company is leasing 2,400 square feet of industrial space on
a month-to-month basis at a market rental rate of $1,288 per month to
a company wholly-owned by Mr. Bedford.

During 1994, furniture and equipment was purchased from a
company wholly-owned by Mr. Bedford. The purchase prices of $69,000
was based on independent valuations.

Note 6 - Stock Option Plans

A total of 1,800,000 shares of the Company's common stock have
been reserved for issuance under the Employee Stock Option Plan (the
"Employee Plan"). The Employee Plan expires by its own terms in 2003.
The Employee Plan provides for non-qualified stock options, incentive
stock options and stock appreciation rights. Stock appreciation
rights may only be granted in conjunction with stock options and
entitled the holder to receive the difference between the fair market
value and the exercise price of the common stock which would be
receivable upon exercise of the underlying option. The exercise of a
stock appreciation right results in the termination of the related
option on a share-for-share basis.

The Employee Plan is administered by the Compensation Committee
of the Board of Directors, which determines the terms of options
granted, including the exercise price, the number of shares subject to
the option, and the option's exercisability. Options granted to
employees are immediately exercisable upon vesting, but typically vest
over a four-year period.

The Employee Plan requires that the exercise price of incentive
stock options be at least equal to the fair market value of such
shares on the date of grant and that the exercise price non-qualified
stock options be equal to at least 85% of the fair market value of
such shares on the date of the grant. The maximum term of options
granted is ten years.

At December 31, 1994, options to purchase 215,000 shares were
outstanding at a weighted average exercise price of $6.52 per share,
options to purchase 1,000 shares and stock appreciation right relating
to 93,000 shares had been exercised and 1,491,000 shares were
available for issuance under the Employee Plan. Stock appreciation
rights were outstanding in connection with options to purchase an
aggregate of 50,000 shares.

A total of 500,000 shares of the Company's common stock have
been reserved for issuance under the Directors' Stock Option Plan (the
"Directors' Plan"). The Directors' Plan expires by its own terms in
2002. The Directors' Plan provides for the grant of non-qualified
stock options to directors of the Company. The Directors' Plan
contains an automatic grant feature whereby a director receives a one-
time "initial option" to purchase 50,000 shares upon a director's
appointment to the Board of Directors and thereafter receives
automatic annual grants of options to purchase 10,000 shares upon re-
election to the Board of Directors. Options granted are generally
exercisable six months from the date of grant.

The Directors' Plan requires that the exercise price of options
be equal to the fair market value of the underlying shares on the date
of grant. The maximum term of options granted is five years.

At December 31, 1994, options to purchase 350,000 shares were
outstanding at a weighted average exercise price of $3.38 per share,
no options had been exercised and 150,000 shares were available for
issuance under the Directors' Plan.

Note 7 - Stockholder Rights Plan

On July 18, 1989, the Company's Board of Directors adopted a
Stockholder Rights Plan and declared a dividend distribution of one
right for each share of the Company's Common Stock outstanding on July
31, 1989. The Rights entitle the holders to purchase, under certain
conditions, one-hundredth of a newly-issued share of Series A voting
Preferred Stock at an exercise price of $30.00. The Rights may also,
under certain conditions, entitle the holders to receive Common Stock
or other consideration having a value equal to two times the exercise
price of each Right. The Rights are redeemable by the Company at a
price of $0.01 per Right. If not so redeemed, the Rights expire on
July 18, 1999.

Note 8 - Bank Loan Payable

In December 1993, the Company concluded an agreement with Bank
of America for a $20,000,000 revolving line of credit for real estate
acquisitions. In August 1994, the maximum commitment amount of the
facility was increased from $20 million to $23 million. The facility,
which matures on January 1, 1997, carries an interest rate option of
either prime plus 0.75% or IBOR plus 3.00%.

The facility is secured by mortgages on Woodlands Tower II,
Mariner Court, Village Green, Milpitas Town Center, IBM Building, 1000
Town Center Drive, and Dupont Industrial Center. At December 31,
1994, the Company had outstanding borrowings of $22,400,000 under the
credit facility and a letter of credit issued under the facility in
the amount of $600,000.

The daily weighted average amount owing to the bank was
$8,984,000 and $3,253,000 in 1994 and 1993, respectively. The
weighted average interest rate in these periods was 8.1% and 6.7%
respectively. The effective interest rate at December 31, 1994, was
9.1%.

Note 9 - Quarterly Financial Data - Unaudited

The following is a summary of quarterly results of operations
for 1994 and 1993 (in thousands of dollars, except per share data):

1994 Quarters Ended 3/31 6/30 9/30 12/31

Rental revenue $1,856 $1,976 $2,473 $2,849

Income before
gain on sale 396 565 549 906

Net income $1,589 $565 $549 $ 906

Per common and common equivalent
share:

Net income $0.26 $0.09 $0.09 $0.15

1993 Quarters Ended 3/31 6/30 9/30 12/31

Rental revenues $2,138 $2,040 $1,721 $1,308

Income (loss)
before gain on sale (82) 90 (451) 4

Net income (loss) $(82) $2,776 $(44) $ 497

Per common Share:

Net income (loss) $(0.01) $0.46 - $0.08

<PAGE>

BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994
(in thousands of dollars)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Cost to Company
Cost Capitalized Gross Amount Accum- Date Date Depriciable
Buildings & Subsequent to Carried at Close of Period ulated Construc Acquired Life
Description Land Improvements Acquisition Land Building Total Deprici- ted ired (Years)
ation

OFFICE BUILDING:

IBM Building,
Jackson, MS $2,590 $9,142 $699 $2,590 $6,338 $8,928 $1,875 1985 12/85 45

Woodlands Tower II,
Salt Lake City, UT 945 5,805 254 945 6,059 7,004 194 1990 8/93 45

1000 Town Center
Drive, Oxnard, CA 1,785 3,315 1,354 1,785 4,669 6,454 115 1990 12/93 45

Mariner Court,
Torrance, CA 3,221 4,279 176 3,221 4,455 7,676 101 1989 1/94 45

Village Green,
Lafayette, CA 547 1,245 96 556 1,332 1,888 14 1983 7/94 45

INDUSTRIAL BUILDINGS:

Contra Costa Diablo
Industrial Park
Building 3,
Concord, CA 495 1,159 8 495 1,167 1,662 106 1982 12/90 45

Contra Costa Diablo
Industrial Park
Building 8,
Concord, CA 877 1,548 3 877 1,551 2,428 140 1983 12/90 45

Mason Industrial Park
Building 18,
Concord, CA 610 1,265 10 610 1,275 1,885 118 1979 12/90 45

Ninety-Ninth Street
Business Park
Building 3,
Lenexa, KS 360 2,167 5 360 2,172 2,532 196 1990 12/90 45

Cody Street Park
Building 6,
Overland Park, KS 380 1,103 156 380 1,259 1,639 162 1981 12/90 45

Dupont Industrial Center,
Ontario, CA 3,588 6,162 83(G) 3,588 6,079 9,667 90 1989 5/94 45

Milpitas Town Center,
Milpitas, CA 1,899 4,421 120 1,935 4,505 6,440 39 1983 8/94 45

17,297 41,611 2,798 17,342 40,861 58,203(A)(C) 3,150(A)

<PAGE>

NOTES TO SCHEDULE III
(in thousands of dollars)

A) An analysis of the activity in real estate for the years ended
December 31, 1994, 1993 and 1992 is presented below:

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Investment Accumulated Depreciation
1994 1993 1992 1994 1993 1992

BALANCE AT BEGINNING OF PERIOD $41,225 $53,874 $85,301 $5,263 $8,321 $8,991
Add (deduct):
Sale of University Tower (D) - (15,946) - - (1,470) -
Acquisition of Woodlands Tower II - 6,884 - - - -
Sale of Point West Place (F) - (9,505) - - (3,037) -
Acquisition of 1000 Town Center Drive - 5,190 - - - -
Write-down of Point West Place (F) - - (9,290) - - -
Write-down of Texas Bank North (E) - - (3,631) - - -
Provision for possible loss on
University Tower (D) - - (3,200) - - -
Write-off of Columbia Business Center (B) - - (15,681) - - (2,979)
Write-off of fully amortized tenant
improvements - - (484) - - (484)
Sale of Texas Bank North (E) (10,131) - - (3,035) - -
Acquisition of Mariner Court 7,500 - - - - -
Acquisition of Dupont Industrial Center 9,750 - - - - -
Acquisition of Village Green 1,792 - - - - -
Acquisition of Milpitas Town Center 6,320 - - - - -
Capitalized costs 1,747 728 859 - - -
Depreciation - - - 922 1,449 2,793

BALANCE AT END OF PERIOD $58,203 $41,225 $53,874 $3,150 $5,263 $8,321

</TABLE>

(B) In accordance with a Settlement Agreement Dated June 3, 1992, between
the Company and the first mortgagee, ownership of Columbia Business Center
was transferred to the first mortgagee and the investment was written off
as of June 30, 1992.

(D) On October 2, 1991, the Company acquired its partner's interest in
the University Tower property. As a result of this transaction, the
University Tower investment became wholly owned. In anticipation of
proposed sale, the Company provided a $3,200,000 provision for possible
loss related to this investment in 1992. The property was sold on August
18, 1993.

(E) During 1992, it was decided to offer the Texas Bank North Building for
sale. In anticipation of such sale, the Company wrote down its
investment in this property by $3,631,000 in 1992. The property was sold
on January 14, 1994.

(F) During 1992, it was decided to offer Point West Place for sale.
In anticipation of such sale, the Company wrote down its investment in this
property by $9,290,000 in 1992. The property was sold on October 1, 1993.

(G) Rental income guarantee in the amount of $264,000 was received from
the seller and accounted for as a reduction of the cost of the property.

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bedford Property Investors, Inc:

We have audited the accompanying Historical Summary of Gross Income
and Direct Operating Expenses (the Summary) of the Landsing Pacific
Portfolio (the Property) for the year ended December 31, 1994. The
Summary is the responsibility of management. Our responsibility is to
express an opinion on the Summary 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 Summary is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Summary. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall Summary presentation. We believe that our audit provides a
reasonable basis for our opinion.

The accompanying Summary was prepared to comply with the rules and
regulations of the Securities and Exchange Commission and excludes
certain expenses, described in note A, that would not be comparable to
those resulting from the proposed future operations of the property.

In our opinion, the Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses,
exclusive of expenses described in note A, of the Landsing Portfolio
for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.

San Francisco, California KPMG Peat Marwick LLP
November 10, 1995

<PAGE>
THE LANDSING PACIFIC PORTFOLIO

HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 1994

Revenues:

Rental income $5,803,230
Common area reimbursement 1,434,574
Other 36,584

7,274,388
Operating expenses:

Real property tax 807,850
Repairs and maintenance 480,572
Utilities 207,768
Insurance 142,616
Administrative 76,101
Bad debts and other 13,734

1,728,641

Operating Income $5,545,747

<PAGE>
THE LANDSING PACIFIC PORTFOLIO

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

A. Property and Basis of Accounting

The Historical Summary of Gross Income and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and
relates to the operations of the Landsing Pacific Portfolio,
comprising fourteen properties totalling 1,037,000 rentable square
feet located in Maplewood, Minnesota; Denver and Colorado Springs,
Colorado; South San Francisco and Fremont, California; and
Beaverton, Oregon.

In accordance with Rule 3-14, direct operating expenses are
presented exclusive of depreciation, interest, management fees and
income taxes as these expenses would not be comparable to the
proposed future operations of the property.

The acquisition of the property may result in new valuation for
purposes of determining future property tax assessments.

Rental income is recognized on a straight line basis over the term
of the related lease. For 1994, the aggregate rental income
exceeded contractual rentals by $11,441.

B. Leases

Minimum future rental receipts as of December 31, 1994 are as
follows (in thousands):

1995 $ 5,470
1996 4,848
1997 3,754
1998 2,231
1999 1,026
Thereafter 238
$17,567

The minimum future rental payments shown above do not include the
tenant's obligations of the Landsing Pacific Portfolio for
reimbursement of operating expenses, insurance and real estate
taxes.

<PAGE>
THE LANDSING PACIFIC PORTFOLIO

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES - (Continued)

C. Estimated Taxable Operating Results and Cash to be Made Available
by Operations (unaudited)

Pro forma cash available from operations and pro forma taxable
income for 1994 are shown below. Pro forma taxable operating
results are derived by deducting depreciation; however, as a Real
Estate Investment Trust (REIT), Bedford Property Investors, Inc.
is not subject to federal income tax if it qualifies under the
Internal Revenue Code ("Code") REIT provisions. That is, Bedford
Property Investors, Inc. is not subject to federal income tax if
it distributes 95% of its taxable income and otherwise complies
with the provisions of the Code. Bedford Property Investors, Inc.
intends to pay dividends in order to maintain its REIT status.
Dividends paid to the REIT shareholders are classified as return
of capital, dividend income, or capital gains.

Revenues (1) $7,262,947
Operating expenses 1,728,641
Cash available from operations 5,534,306
Depreciation expense 750,136

Taxable income $4,784,170

(1) Excludes $11,441 which represents the excess of aggregate rental
income on a straight-line basis over contractual rents.

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bedford Property Investors, Inc:

We have audited the accompanying Historical Summary of Gross Income
and Direct Operating Expenses (the Summary) of 3002 Dow Business
Center (the Property) for the year ended December 31, 1994. The
Summary is the responsibility of management. Our responsibility is to
express an opinion on the Summary based on our audit.

In our opinion, the Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses,
exclusive of expenses described in note A, of 3002 Dow Business Center
for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.

San Francisco, California KPMG Peat Marwick LLP
January 26, 1996

<PAGE>
3002 DOW BUSINESS CENTER

HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 1994

Revenues:

Rental income $1,649,496
Common area reimbursement 312,421
Other 8,703

1,970,620
Operating expenses:

Real property tax 202,000
Repairs and maintenance 60,248
Utilities 21,921
Insurance 23,814
Administrative 87,429
Bad debts and other 73,438

468,850

Operating Income $1,501,770

<PAGE>
3002 DOW BUSINESS CENTER

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

A. Property and Basis of Accounting

The Historical Summary of Gross Income and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and
relates to the operations of 3002 Dow Business Center, a five-
building industrial property located in Tustin, California, with
approximately 192,125 rentable square feet.

The acquisition of the property may result in new valuation for
purposes of determining future property tax assessments.

Rental income is recognized on a straight line basis over the term
of the related lease. For 1994, the aggregate rental income
exceeded contractual rentals by $21,097.

B. Leases

Minimum future rental receipts as of December 31, 1994 are as
follows (in thousands):

1995 $1,032
1996 643
1997 300
1998 132
1999 77
Thereafter 3
$2,187

The minimum future rental payments shown above do not include the
tenants' obligations of 3002 Dow Business Center for reimbursement
of operating expenses, insurance and real estate taxes.

<PAGE>
3002 DOW BUSINESS CENTER

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES - (Continued)

C. Estimated Taxable Operating Results and Cash to be Made Available
by Operations (unaudited)

Revenues (1) $1,949,523
Operating expenses 468,850
Cash available from operations 1,480,673
Depreciation expense 191,046

Taxable income $1,289,627

(1) Excludes $21,097 which represents the excess of aggregate rental
income on a straight-line basis over contractual rents.

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bedford Property Investors, Inc:

We have audited the accompanying Historical Summary of Gross Income
and Direct Operating Expenses (the Summary) of 6600 College Boulevard
(the Property) for the years ended December 31, 1992, 1993 and 1994.
The Summary is the responsibility of management. Our responsibility
is to express an opinion on the Summary based on our audit.

In our opinion, the Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses,
exclusive of expenses described in note A, of 6600 College Boulevard
for the years ended December 31, 1992, 1993 and 1994, in conformity
with generally accepted accounting principles.

San Francisco, California KPMG Peat Marwick LLP
December 8, 1995

<PAGE>
6600 COLLEGE BOULEVARD

HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

YEARS ENDED DECEMBER 31, 1992, 1993 and 1994

Revenues:
1992 1993 1994

Rental income $1,044,684 $768,204 $810,472
Common area reimbursement 169,498 148,349 137,015
Other 2,977 1,187 3,649

1,217,159 917,740 951,136
Operating expenses:

Real property tax 170,757 127,328 135,211
Repairs and maintenance 66,571 71,876 79,580
Utilities 4,549 9,891 10,243
Insurance 5,960 5,610 5,924
Legal and accounting 4,555 5,070 1,070
Bad debts and other 1,734 53,130 4,297

254,126 272,905 236,325

Operating Income $963,033 $644,835 $714,811

<PAGE>
6600 COLLEGE BOULEVARD

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

A. Property and Basis of Accounting

The Historical Summary of Gross Income and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and
relates to the operations of 6600 College Boulevard, an office
complex located in Overland Park, Kansas, with approximately
79,316 rentable square feet.

The acquisition of the property may result in new valuation for
purposes of determining future property tax assessments.

Rental income is recognized on a straight line basis over the term
of the related lease. For 1992 and 1994, the aggregate rental
income exceeded contractual rentals by $64,946 and $4,517,
respectively. For 1993, the aggregate contractual rental receipts
exceeded rental income by $37,081.

B. Leases

Minimum future rental receipts as of December 31, 1994 are as
follows (in thousands):

1995 $ 952
1996 938
1997 842
1998 749
1999 737
$4,218

The minimum future rental payments shown above do not include
tenants obligations for reimbursement of operating expenses,
insurance and real estate taxes.

<PAGE>

6600 COLLEGE BOULEVARD

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSE - (Continued)

C. Estimated Taxable Operating Results and Cash to be Made Available
by Operations (unaudited)

Pro forma cash available from operations and pro forma taxable
income for 1992, 1993 and 1994 are shown below. Pro forma taxable
operating results are derived by deducting depreciation; however,
as a Real Estate Investment Trust (REIT), Bedford Property
Investors, Inc. is not subject to federal income tax if it
qualifies under the Internal Revenue Code ("Code") REIT
provisions. That is, Bedford Property Investors, Inc. is not
subject to federal income tax if it distributes 95% of its taxable
income and otherwise complies with the provisions of the Code.
Bedford Property Investors, Inc. intends to pay dividends in order
to maintain its REIT status. Dividends paid to the REIT
shareholders are classified as return of capital, dividend income,
or capital gains.

1992 1993 1994

Revenues (1) $1,152,213 $954,821 946,619
Operating expenses 254,126 272,905 236,325
Cash available from
operations 898,087 681,916 710,294
Depreciation expense 101,101 101,101 101,101

Taxable income $ 796,986 $580,815 $609,193

(1) 1992 and 1994 revenues exclude the excess of aggregate rental
income on a straight-line basis over contractual rents of $64,946 and
$4,517, respectively. 1993 revenues include $37,081 which represents
the excess of the contractual rents over the aggregate rental income
on a straight-line basis.

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bedford Property Investors, Inc:

We have audited the accompanying Historical Summary of Gross Income
and Direct Operating Expenses (the Summary) of 350 East Plumeria Drive
(the Property) for the year ended December 31, 1994. The Summary is
the responsibility of management. Our responsibility is to express an
opinion on the Summary based on our audit.

In our opinion, the Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses,
exclusive of expenses described in note A, of 350 East Plumeria Drive
for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.

San Francisco, California KPMG Peat Marwick LLP
October 11, 1995

<PAGE>

350 EAST PLUMERIA DRIVE

HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 1994

Revenues:

Rental income $904,298
Common area reimbursement 170,864
Other 467

1,075,629
Operating expenses:

Real property tax 155,093
Repairs and maintenance 3,700
Insurance 15,771
Administrative 4,368

178,932

Operating Income $896,697

<PAGE>
350 EAST PLUMERIA DRIVE

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES

A. Property and Basis of Accounting

The Historical Summary of Gross Income and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and
relates to the operations of 350 East Plumerian Drive, a suburban
industrial complex located in San Jose, California, with
approximately 142,620 rentable square feet.

The acquisition of the property may result in new valuation for
purposes of determining future property tax assessments.

Rental income is recognized on a straight line basis over the term
of the related lease. For 1994, the aggregate rental income
exceeded contractual rentals by $83,773.

B. Leases

Minimum future rental receipts as of December 31, 1994 are as
follows (in thousands):

1995 $ 927
1996 1,113
1997 1,199
1998 1,284
1999 1,370
Thereafter 2,740
$ 8,633

The minimum future rental payments shown above do not include
obligations of 350 East Plumeria Drive's sole tenant under the
term of its lease for reimbursement of operating expenses,
insurance and real estate taxes.

<PAGE>
350 EAST PLUMERIA DRIVE

NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES - (Continued)

C. Estimated Taxable Operating Results and Cash to be Made Available
by Operations (unaudited)

Revenues (1) $991,856
Operating expenses 178,932
Cash available from operations 812,924
Depreciation expense 135,894

Taxable income $677,030

(1) Excludes $83,773 which represents the excess of aggregate rental
income on a straight-line basis over contractual rents.

<PAGE>

6,700,000 Shares

BEDFORD PROPERTY INVESTORS, INC.

Common Stock

PROSPECTUS

Merrill Lynch & Co.

_____, 1996

No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this
Prospectus in connection with the Offering covered by this Prospectus.
If given or made, such information or representations must not be
relied upon as having been authorized by the Company or the
Underwriters. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, the Common Stock in any
jurisdiction where, or to any person to whom, it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has not been any change in the facts set forth
in this Prospectus or in the affairs of the Company since the date
hereof.

<PAGE>

TABLE OF CONTENTS Page

Prospectus Summary 1
Risk Factors 11
The Company 26
Business Objectives and Growth Plans 28
Corporate Strategies 31
Market Overview 33
Use of Proceeds 38
Price Range of Common Stock and
Distribution History 39
Distribution Policy 39
Capitalization 41
Selected Consolidated Financial
and Operating Data 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 44
Business and Properties 50
Policies With Respect to Certain Activities 70
Management 73
Certain Relationships and Related
Transactions 76
Description of Capital Stock
of the Company 78
Certain Provisions of Maryland Law and of
the Company's Charter and Bylaws 91
Federal Income Tax Considerations 93
ERISA Considerations 101
Shares Available for Future Sale 102
Underwriting 104
Experts 105
Legal Matters 105
Available Information 105
Incorporation of Certain Information
By Reference 106
Glossary 107
Index to Financial Statements and
Financial Statements Schedules F-1

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by Bedford
Property Investors, Inc. (the "Registrant") in connection with the
sale of Common Stock being registered. All amounts are estimates
except the registration fee, the NASD filing fee and the listing fees
for the New York Stock Exchange and the Pacific Stock Exchange.

Registration Fee. . . . . . . . . . . . . . . $ 19,993
NASD Filing Fee . . . . . . . . . . . . . . . 6,298
Legal Fees and Expenses . . . . . . . . . . . 225,000
Printing and Engraving Costs. . . . . . . . . 125,000
Accounting Fees and Expenses. . . . . . . . . 60,000
Blue Sky Fees and Expenses. . . . . . . . . . 15,000
New York Stock Exchange Listing Fee 23,333
Pacific Stock Exchange Listing Fee. . . . . . 7,500
Miscellaneous . 2,876
Total. $485,000

Item 15. Indemnification of Directors and Officers.

The MGCL permits a Maryland corporation to include in its
charter a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages
except for liability resulting from (a) actual receipt of an improper
personal benefit or profit in money, property or services or
(b) active and deliberate dishonesty established by a final judgment
as being material to the cause of action. The Charter of the
Registrant contains such a provision which eliminates such liability
to the maximum extent permitted by the MGCL.

The Charter of the Registrant authorizes it, to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and
to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or
officer or (b) any individual who, while a director of the Registrant
and at the request of the Registrant, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan
or any other enterprise as a director, officer, partner or trustee of
such corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The Bylaws of the Registrant obligate it,
to the maximum extent permitted by Maryland law, without requiring a
preliminary determination of the ultimate entitlement to
indemnification, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any
individual who is a present or former director or officer of the
Registrant or (b) any individual who, while a director of the
Registrant and at the request of the Registrant, serves or has served
another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise. The Registrant's Charter and
Bylaws also permit the Registrant to indemnify and advance expenses to
any person who served a predecessor of the Registrant in any of the
capacities described above and to any employee or agent of the
Registrant or a predecessor of the Registrant.

The MGCL requires a corporation (unless its charter provides
otherwise, which the Registrant's Charter does not) to indemnify a
director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he is made a
party by reason of his service in that capacity. The MGCL permits a
corporation to indemnify its present and former directors and
officers, and certain other parties, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by
reason of their service in those or other capacities unless it is
established that (a) the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the indemnified party actually received an improper
personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the indemnified party had reasonable cause to
believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. In addition, the MGCL requires the
Registrant, as a condition to advancing expenses, to obtain (a) a
written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for
indemnification by the Registrant as authorized by the Bylaws and
(b) a written statement by or on his behalf to repay the amount paid
or reimbursed by the Registrant if it shall ultimately be determined
that the standard of conduct was not met.

Peter B. Bedford's employment agreement provides that the
Registrant shall indemnify Mr. Bedford to the fullest extent permitted
by law, provided that the indemnification applies to Mr. Bedford only
so long as he acts in good faith and is not found to be guilty of
recklessness or willful or wanton misconduct.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
<PAGE>
Item 16. Exhibits.

(a) Exhibits

The following exhibits are filed herewith or incorporated herein
by reference.

Exhibit
Number Description

1.1+ Form of Purchase Agreement between Merrill Lynch & Co. and the
Registrant

4.1* Specimen Stock Certificate

4.2* Charter of the Registrant, as amended

4.3 Amended and Restated Bylaws of the Registrant are incorporated
herein by reference to Exhibit 3.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995

5.1+ Opinion of Ballard Spahr Andrews & Ingersoll as to the legality
of the Registrant's Common Stock

7.1+ Opinion of Ballard Spahr Andrews & Ingersoll as to restrictions
upon surplus by reason of the liquidation preference of the
Series A Convertible Preferred Stock

8.1+ Opinion of Shearman & Sterling as to certain tax matters

10.1 The Registrant's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Registrant, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property Investors
Incorporated dated January 25, 1985

10.2* The Registrant's Employee Stock Option Plan, as amended and
restated

10.3* The Registrant's 1992 Directors' Stock Option Plan, as
amended and restated

10.4 Amended and Restated Credit Agreement for $60 million revolving
line of credit dated as of September 14, 1995, by and between
the Registrant, as Borrower, and Bank of America National Trust
and Savings Association is incorporated herein by reference to
Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995

10.5 Sale and Option Agreement dated as of August 26, 1995, by and
between Kemper Investors Life Insurance Company, on behalf of
itself and Participants (as defined therein), as Lender, the
Registrant, as Purchaser, and Tustin Properties, as Owner, for
3002 Dow Business Center is incorporated herein by reference to
Exhibit 10.19 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995

10.6 BPIA Agreement dated as of January 1, 1995, by and between
Westminster Holdings, Inc., a California corporation and the
Registrant is incorporated herein by reference to Exhibit 10.14
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995

10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B. Bedford
is incorporated by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended by Form 10-K/A filed on May
1, 1995, and Form 10-K/A-2 filed on August 8, 1995

10.8 Amendment No. 1 to Employment Agreement dated as of September
18, 1995, by and between Peter B. Bedford and the Registrant is
incorporated herein by reference to Exhibit 10.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995

10.9 Series A Convertible Preferred Stock Purchase Agreement, among
the Registrant, AEW Partners, L.P. and Peter B. Bedford dated as
of May 18, 1995, is incorporated herein by reference to
Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995

10.10 Amendment No. 1 to the Series A Convertible Preferred Stock
Purchase Agreement dated September 11, 1995, among the
Registrant, AEW Partners, L.P. and Peter B. Bedford, is
incorporated herein by reference to Exhibit 10.12 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995

10.11 Standstill Agreement dated as of September 18, 1995, by and
between the Registrant and Peter B. Bedford is incorporated
herein by reference to Exhibit 10.13 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995

10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland corporation
as Seller, and the Registrant, the Buyer, as amended, is
incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed on December
27, 1995

23.1+ Consent of Ballard Spahr Andrews & Ingersoll (included in
the opinion filed as Exhibit 5.1)

23.2+ Consent of Shearman & Sterling (included in the opinion
filed as Exhibit 8.1)

23.3* Consent of KPMG Peat Marwick LLP, independent auditors

23.4* Consent of KPMG Peat Marwick LLP, independent auditors

* Filed herewith.
+ To be filed by amendment.
<PAGE>

Item 17. Undertakings.

(a) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.

(b) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that such a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.

(2) For purposes of determining any liability under the
Securities of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lafayette,
State of California, on the 14th day of February, 1996.

BEDFORD PROPERTY INVESTORS, INC.

By /s/ Peter B. Bedford
Peter B. Bedford
Chairman and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Peter B. Bedford and
Donald A. Lorenz jointly and severally, his or her attorneys-in-fact,
each with the power of substitution, for him or her in any and all
capacities to sign any amendments to the Registration Statement, and
to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

/s/ Peter B. Bedford
Peter B. Bedford Chairman, Chief Executive
Officer and Director
(Principal Executive Officer) February 14, 1996

/s/ Donald A. Lorenz
Donald A. Lorenz Executive Vice President
and Chief Financial Officer
(Principal Financial Officer) February 14, 1996

/s/ Hanh Kihara
Hanh Kihara Controller
(Principal Accounting Officer) February 14, 1996

/s/ Claude M Ballard
Claude M. Ballard Director February 14, 1996

/s/ Anthony Downs
Anthony Downs Director February 14, 1996

/s/ Thomas G. Eastman
Thomas G. Eastman Director February 14, 1996

/s/ Anthony M. Frank
Anthony M. Frank Director February 14, 1996

/s/ Thomas H. Nolan, Jr.
Thomas H. Nolan, Jr. Director February 14, 1996

/s/ Martin I. Zankel
Martin I. Zankel Director February 14, 1996

INDEX TO EXHIBITS

Exhibit
Number Description

1.1+ Form of Purchase Agreement between Merrill Lynch & Co. and the
Registrant

4.1* Specimen Stock Certificate

4.2* Charter of the Registrant, as amended

4.3 Amended and Restated Bylaws of the Registrant are incorporated
herein by reference to Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995

5.1+ Opinion of Ballard Spahr Andrews & Ingersoll as to the
legality of the Registrant's Common Stock

7.1+ Opinion of Ballard Spahr Andrews & Ingersoll as to
restrictions upon surplus by reason of the liquidation
preference of the Series A Convertible Preferred Stock

8.1+ Opinion of Shearman & Sterling as to certain tax matters

10.2* The Registrant's Employee Stock Option Plan, as amended and
restated

10.3* The Registrant's 1992 Directors' Stock Option Plan, as amended
and restated

10.4 Amended and Restated Credit Agreement for $60 million
revolving line of credit dated as of September 14, 1995, by
and between the Registrant, as Borrower, and Bank of America
National Trust and Savings Association is incorporated herein
by reference to Exhibit 10.15 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995

10.5 Sale and Option Agreement dated as of August 26, 1995, by and
between Kemper Investors Life Insurance Company, on behalf of
itself and Participants (as defined therein), as Lender, the
Registrant, as Purchaser, and Tustin Properties, as Owner, for
3002 Dow Business Center is incorporated herein by reference
to Exhibit 10.19 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995

10.6 BPIA Agreement dated as of January 1, 1995, by and between
Westminster Holdings, Inc., a California corporation and the
Registrant is incorporated herein by reference to
Exhibit 10.14 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995

10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B.
Bedford is incorporated by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended by Form 10-K/A filed on
May 1, 1995, and Form 10-K/A-2 filed on August 8, 1995

10.8 Amendment No. 1 to Employment Agreement dated as of September
18, 1995, by and between Peter B. Bedford and the Registrant
is incorporated herein by reference to Exhibit 10.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995

10.9 Series A Convertible Preferred Stock Purchase Agreement, among
the Registrant, AEW Partners, L.P. and Peter B. Bedford dated
as of May 18, 1995, is incorporated herein by reference to
Exhibit 10.15 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995

10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland corporation as
Seller, and the Registrant, the Buyer, as amended, is
incorporated herein by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed on December 27,
1995

23.1+ Consent of Ballard Spahr Andrews & Ingersoll (included in the
opinion filed as Exhibit 5.1)

23.2+ Consent of Shearman & Sterling (included in the opinion filed
as Exhibit 8.1)

23.3* Consent of KPMG Peat Marwick LLP, independent auditors

23.4* Consent of KPMG Peat Marwick LLP, independent auditors

* Filed herewith.
+ To be filed by amendment.

EXHIBIT 4.1

[FORM OF FACE OF CERTIFICATE]

COMMON STOCK

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

IMPORTANT NOTICE
THE CORPORATION'S CHARTER IMPOSES ACTUAL AND/OR POTENTIAL RESTRICTIONS
ON THE TRANSFER, ACQUISITION, AND OWNERSHIP OF THE SHARE(S) OF COMMON
STOCK REPRESENTED HEREBY. THE CORPORATION WILL FURNISH INFORMATION
ABOUT THE RESTRICTIONS TO THE STOCKHOLDER ON REQUEST AND WITHOUT
CHARGE. REQUESTS SHOULD BE MADE TO THE SECRETARY OF THE CORPORATION
AT ITS PRINCIPAL OFFICES OR THE TRANSFER AGENT.

SHARES
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 076446 20 2

BEDFORD PROPERTY INVESTORS, INC.

THIS CERTIFIES THAT

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE
OF $.01 PER SHARE
of Bedford Property Investors, Inc. (the "Corporation") transferable
on the books of the Corporation by the holder hereof by its duly
authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the charter and
Bylaws of the Corporation, as amended or supplemented, copies of which
are on file with the Corporation and the Transfer Agent, to all of which
the holder, by his acceptance hereof, assents. This Certificate is not
valid unless countersigned by the Transfer Agent and registered by the
Registrar.

Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated

COUNTERSIGNED AND REGISTERED:
MELLON SECURITIES TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT AND REGISTRAR

/s/ Jennifer I. Mori /s/ Peter B. Bedford
AUTHORIZED SIGNATURE SECRETARY CHIEF EXECUTIVE OFFICER

[FORM OF BACK OF CERTIFICATE]

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common

UNIF GIFT MIN ACT - _____(Cust)_____ Custodian _____(Minor)_______
under Uniform Gifts to Minors Act ___(State)___

Additional abbreviations may also be used though not in the above list.

The Corporation will furnish to any stockholder, on request and without charge,
a full statement of the information required by Section 2-211(b) of the
Corporations and Associations Article of the Annotated Code of Maryland with
respect to the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
(i) the differences in the relative rights and preferences between the shares
of each series to the extent set, and (ii) the authority of the Board of
Directors to set such reights and preferences of subsequent series. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation
(the "Charter"), a copy of which will be sent without charge to each
stockholder who so requests. Such request must be made to the Secretary
of the Corporation at its principal office or to the Transfer Agent.

For the value received, ___________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
___________________________________________________________________________

__________________________________________________________________________

shares of the Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint ___________________ Attorney to
transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated _______

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMNET OR ANY CHANGE WHATEVER.

Exhibit 4.2

ARTICLES OF AMENDMENT DEFINING THE
TERMS OF THE SERIES A CONVERTIBLE PREFERRED STOCK AND
AMENDING THE LIMITATIONS ON THE TRANSFERABILITY OF
THE COMPANY'S STOCK

THIS IS TO CERTIFY THAT:

FIRST: The charter of Bedford Property Investors, Inc., a Maryland
corporation (the "Corporation"), is hereby amended by (a) deleting
existing Section 1 of Article V and adding a new Section 1 as follows
and (b) adding new Section 5 to Article V as follows:

Section 1. Authorized Shares. The total number of shares of stock
which the Corporation has authority to issue is 50,000,000 shares, of
which 30,000,000 shares are shares of Common Stock, $0.01 par value
share ("Common Stock"), 10,000,000 shares are shares of Preferred
Stock, $0.01 par value per share ("Preferred Stock"), and 10,000,000
shares are shares of Series A Convertible Preferred Stock, $.01 par
value per share ("Series A Preferred"). The aggregate par value of all
authorized shares of stock having a par value is $500,000.

Section 5. Series A Preferred Stock. The preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends
and other distributions, qualifications and terms and conditions of
redemption of the Series A Preferred are set forth below. The Board of
Directors may reclassify any unissued shares of Series A Preferred
from time to time in one or more classes or series of stock of the
Corporation.

1. Cumulative Dividends.

(a) (i) The holders of outstanding shares of the Series A Preferred
shall be entitled to receive in each fiscal quarter, when and as
authorized and declared by the Board of Directors, out of any assets
at the time legally available therefor, dividends in cash at the
greater of (X) the rate of $0.135 (the "Dividend Rate") per share or
(Y) the dividends payable with respect to such quarter in respect of
the Common Stock into which each share of the Preferred Stock is
Convertible, plus, in both cases, dividends accumulated on the Series
A Preferred but unpaid for all prior quarters, before any cash
dividend is paid on the Common Stock for such quarter. If any shares
of Series A Preferred have been called for redemption by the holders
of the Series A Preferred but the redemption payment has not been made
thereon on the redemption date for any reason whatsoever, then the
rate at which dividends shall accrue on such shares shall increase to
$0.165 per share until the earlier of (A) the payment of the
redemption price, or (B) such time as the size of the board has been
increased to eleven pursuant to Paragraph 3(a) hereof and the holders
of Series A Preferred have elected four directors to fill the newly
created vacancies. The right to dividends on shares of Series A
Preferred shall be cumulative.

(ii) Such dividends or distributions shall be payable quarterly
(commencing with the calendar quarter ending September 30, 1995) in
arrears on such dates as the Board of Directors may from time to time
determine, which shall not be later than the 45th day after the end of
the calendar quarter. Any dividends payable on Series A Preferred for
any partial dividend period (including the period commencing on the
date the shares are initially issued and ending on September 30, 1995)
will be computed on the basis of a 360-day year consisting of twelve
30-day months. Dividends or distributions (other than dividends
payable solely in shares of Common Stock) may be authorized and
declared and paid upon shares of Common Stock in any fiscal quarter of
the Corporation only if dividends shall have been paid on or declared
and set apart upon all shares of Series A Preferred at such quarterly
rates for all prior periods through and including the end of such
quarter.

(b) In the event the Corporation shall declare a distribution payable
in securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, assets (excluding cash
distributions) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the
Series A Preferred shall be entitled to a proportionate share of any
such distribution as though the holders of the Series A Preferred were
the holders of the number of shares of Common Stock of the Corporation
into which their shares of Series A Preferred are convertible as of
the record date fixed for the determination of the holders of Common
Stock of the Corporation entitled to receive such distribution.

(c) In determining whether a distribution (other than upon voluntary
or involuntary liquidation), by dividend (but not by redemption or
other acquisition of shares or otherwise), is permitted under the
Maryland General Corporation Law, amounts that would be needed, if the
Corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of
Preferred Stock whose preferential rights upon dissolution are
superior to those receiving the distribution shall not be added to the
Corporation's total liabilities.

2. Liquidation Preference.

(a) In the event of any Liquidation Event (as defined at (b) below)
either voluntary or involuntary, the holders of the Series A Preferred
shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation
to the holders of the Common Stock by reason of their ownership
thereof, the amount of $6.30 per share plus any accrued and unpaid
dividends, for each share of Series A Preferred then held by them (the
"Series A Liquidation Preference"). If, upon the occurrence of such
event, the assets and funds thus distributed among the holders of the
Series A Preferred shall be insufficient to permit the payment to such
holders of the full Series A Liquidation Preference, then the entire
assets and funds of the Corporation legally available for distribution
shall be distributed ratably in satisfaction of the Series A
Liquidation Preference in proportion to the aggregate preferential
amounts owed to each holder of the Series A Preferred. After payment
has been made to the holders of the Series A Preferred of their full
Series A Liquidation Preference, any remaining assets shall be
distributed ratably to the holders of the Common Stock.

(b) For purposes of this Paragraph 2, any transaction, including
without limitation a consolidation or merger of the Corporation (other
than for purposes of reincorporation), or other corporate
reorganization of the Corporation with or into any other corporation
or corporations, immediately after which transaction the stockholders
of the Corporation (determined prior to such event) hold fifty percent
or less in interest of the outstanding voting securities of the
surviving corporation, or a sale of all or substantially all of the
assets of the Corporation or the acquisition of a majority of the
outstanding shares of Common Stock of the Corporation by a person
other than (i) AEW Partners, L.P. and its Affiliates, (ii) as a result
of the conversion of the Series A Preferred Stock, (iii) Peter Bedford
or his Affiliates or members of his immediate family (his spouse,
issue, brothers, sisters and their respective issue and trusts for the
benefit of such persons) or (iv) underwriters in a public or private
placement, shall be treated as a Liquidation Event. "Affiliate" shall
mean with respect to any person, any other person controlling,
controlled by or under direct or indirect common control with such
person (for the purposes of this definition "control", when used with
respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing).

(c) The value of securities and property paid or distributed pursuant
to this Paragraph 2 shall be computed at fair market value at the time
of payment by the Corporation or at the time made available to
stockholders, all as determined by the Board of Directors in the good
faith exercise of its reasonable business judgment, provided that (i)
if such securities are listed on any established stock exchange or a
national market system, their fair market value shall be the closing
sales price for such securities as quoted on such system or exchange
(or the largest such exchange) for the date the value is to be
determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the
Wall Street Journal or similar publication, and (ii) if such
securities are regularly quoted by a recognized securities dealer but
selling prices are not reported, their fair market value shall be the
mean between the high bid and low asked prices for such securities on
the date the value is to be determined (or if there are no quoted
prices for such date, then for the last preceding business day on
which there were quoted prices).

(d) Nothing hereinabove set forth shall affect in any way the right of
each holder of Series A Preferred to convert such shares at any time
and from time to time into Common Stock in accordance with Paragraph 4
hereof.

3. Voting Rights and Voting Switch. Except as expressly provided in
this Charter, the holders of Series A Preferred shall have no voting
rights.

(a) Directors. The holder of shares of Series A Preferred as a class
shall have the right to elect two members of the Board of Directors
(which right to elect such two directors shall be construed for the
purposes of this Charter as the right to vote generally in the
election of directors) and the holders of shares of Common Stock shall
have the right to elect the remaining directors; provided, however,
that if at any time (i) the Corporation has failed in two consecutive
quarters to pay in full and in a timely manner the quarterly dividends
on the Series A Preferred as required by Paragraph 1 (including all
dividends accumulated but unpaid for all prior quarters), (ii) Peter
Bedford shall cease to serve as the substantially full-time chief
executive officer of the corporation, (iii) Peter Bedford and his
Affiliates and members of his immediate family (his spouse, issue,
brothers, sisters and their respective spouses and issue and trusts
for the benefit of such persons) own beneficially fewer than 1,198,278
shares of Common Stock of this Corporation (adjusted for any stock
splits or similar transactions), or (iv) the Company fails to pay the
full redemption price on the shares of Series A Preferred subject to
redemption pursuant to Paragraph 5(c) on any redemption date (provided
that such redemption was made at the request of holders of a majority
of the then outstanding shares of Series A Preferred), then the
holders of Series A Preferred shall immediately (and regardless of any
subsequent cure) and thereafter be entitled to elect the smallest
number of directors constituting a majority of the Board of Directors,
and the holders of Common Stock, as a class, shall retain the right to
elect the remaining directors. The number of authorized directors is
seven and such number cannot be increased without the consent of the
holders of Series A Preferred. In order to facilitate the effective
control of the Board of Directors by the holders of Series A Preferred
upon the occurrence of any event identified in (i), (ii), (iii) or
(iv) above, the size of the Board shall automatically be increased to
eleven, and the holders of the Series A Preferred, voting together as
single class, shall have the exclusive right to elect four persons to
fill such newly created vacancies on the Board of Directors. All
directors elected by the vote of the Series A Preferred shall be
referred to as "Series A Directors". The holders of Series A Preferred
may elect the Series A Directors by unanimous written consent, by a
special meeting of the holders of Series A Preferred, or at an annual
meeting of stockholders of the Corporation. Any special meeting of the
holders of Series A Preferred may be called by holders who hold at
least 10% of the outstanding shares of Series A Preferred or by a
Series A Director and shall be held at the time and place specified by
the holder or director calling the meeting. A majority of the holders
of the Series A Preferred shall constitute a quorum for the purposes
of any such special meeting. In the case of any vacancy occurring
among the Series A Directors, a majority of the remaining Series A
Directors, if any, may elect a successor to hold office for the
unexpired term of such Series A Director. If all Series A Directors
shall cease to serve as directors before their terms expire, the
holders of Series A Preferred then outstanding may, by unanimous
written consent or at a special meeting of the holders of Series A
Preferred, elect successors to hold office for the unexpired terms of
the Series A Directors.

(b) Senior Securities. Authorization of any series or class of equity
securities ranking senior or equal to the Series A Preferred with
respect to the payment of dividends or amounts upon liquidation,
dissolution or winding up of the Corporation, must be approved by the
affirmative vote of holders of at least a majority of the outstanding
shares of Series A Preferred, voting together as a single class.

(c) Amendment. Any amendment to the Charter of the Corporation which
would materially adversely affect the preferences or rights of the
Series A Preferred must be approved by affirmative vote of the holders
of at least a majority of the outstanding shares of Series A
Preferred, voting together as a single class.

(d) Termination. The voting rights set forth at (b) and (c) above
shall terminate if the Common Shares issuable upon conversion of the
outstanding shares of Series A Preferred shall represent less than 15%
of the total of (i) outstanding shares of Common Stock and (ii) the
number of shares of Common Stock that would be outstanding upon
conversion of the outstanding Series A Preferred. If the Common Shares
issuable upon conversion of the outstanding Series A Preferred
represent less than 15% but 7% or more of such total, the voting
rights set forth at (a) above shall provide that the holders of shares
of Series A Preferred Stock as a class shall only have the right to
elect one member of the Board of Directors rather than two; and
provided further that the voting rights set forth at (a) above shall
terminate if the Common Shares issuable upon conversion of the
outstanding shares of Series A Preferred Stock represent less than 7%
of such total.

(e) Mechanics. Solely for purposes of this Paragraph 3, each holder of
shares of Series A Preferred shall be entitled to one vote for each
such share of Series A Preferred held on the record date for the vote
or consent of stockholders.

(f) Notice of Meetings. The holder of each share of the Series A
Preferred shall be entitled to notice of any stockholders' meeting in
the manner provided in the Bylaws of the Corporation.

4. Conversion. The holders of the Series A Preferred shall have
conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. Subject to Subsection (c), each share of Series
A Preferred shall be convertible, at the option of the holder thereof,
at any time after September 18, 1997 at the office of the Corporation
or any transfer agent for the Series A Preferred, into such number of
fully paid and nonassessable shares of Common Stock as is determined
by dividing $6.00 for each share of Series A Preferred by the
Conversion Price at the time in effect for such share. The initial
Conversion Price for shares of Series A Preferred shall be $6.00 per
share; provided, however, that such Conversion Price shall be subject
to adjustment as set forth in Subsection (c) below.

(b) Mechanics of Conversion. Before any holder of Series A Preferred
shall be entitled to convert the same into shares of Common Stock, the
certificate or certificates therefor shall be surrendered, duly
endorsed, at the office of the Corporation or of any transfer agent
for the Series A Preferred, and the holder shall give written notice
by mail, postage prepaid, to the Corporation at its principal office,
of the election to convert the same and shall state therein the name
or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series
A Preferred, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A
Preferred to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. No fractional shares of Common
Stock shall be issued upon conversion of shares of Series A Preferred
Stock. Instead of any fractional shares of Common Stock that would
otherwise be issuable upon conversion, the Corporation shall pay in
cash an amount equal to the fair market value of such fractional
interest as determined in good faith by the Corporation's Board of
Directors. In determining the amount of fractional share payments, all
of the shares of a single holder of Series A Preferred shall be
aggregated so that no holder shall receive a fractional share payment
equal to or exceeding the value of one share.

(c) Conversion Price Adjustments. The Conversion Price of Series A
Preferred shall be subject to adjustment from time to time as follows:

(i) Special Definitions. For purposes of this
Paragraph 4(c), the following definitions shall apply:

(l)"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible
Securities.

(2)"Original Issue Date" with respect to the Series A Preferred shall
mean the date on which the first share of such Series A Preferred was
issued.

(3)"Convertible Securities" shall mean any evidence of indebtedness,
shares (other than the Common Stock or Series A Preferred Stock) or
other securities convertible into or exchangeable for Common Stock.

(4)"Additional Stock" shall mean all Common Stock issued (or, pursuant
to Paragraph 4(c)(iii), deemed to be issued) by the Corporation after
the Original Issue Date, other than Common Stock issued or issuable at
any time:

(A) upon conversion of the Series A Preferred;

(B) upon exercise of Options outstanding on the Original Issue Date;

(C) upon issue of options to officers, directors, and employees of,
and consultants to the Corporation pursuant to the Amended Employee
Stock Option Plan and Directors Stock Option Plan of this Corporation
in amounts not exceeding the aggregate reserved for issuance under
such plans on the Original Issue Date, as increased from time to time
provided that any such increase is approved by a majority of the
Series A Directors;

(D) upon issue of warrants to underwriters in any firm commitment
public offering of securities by this Corporation;

(E) as a dividend or distribution on Series A Preferred or any event
for which adjustment is made pursuant to subparagraph (c) (vi) hereof;

(F) by way of dividend or other distribution on Common Stock excluded
from the definition of Additional Stock by the foregoing clauses (A),
(B), (C), (D), (E) or this clause (F) or on Common Stock so excluded.

(ii) No Adjustment of Conversion Price. No adjustment in the
Conversion Price of a particular share of Series A Preferred shall be
made as a result of the issuance of Additional Stock unless the
consideration per share for such Additional Stock issued or deemed to
be issued by the Corporation is less than the Conversion Price in
effect on the date of, and immediately prior to such issue, for such
share of Series A Preferred.

(iii) Deemed Issue of Additional Shares of Common Stock.

(1) Options and Convertible Securities. Except as otherwise provided
in Paragraph 4 (c) (ii), in the event the Corporation at any time or
from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be shares of Additional Stock issued as of the time
of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional
Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Paragraph 4(c) (v) hereof) of such
Additional Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record date,
as the case may be, and provided further that in any such case in
which Additional Stock is deemed to be issued.

(A) no further adjustment in the Conversion Price for such series
shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion
or exchange of such Convertible Securities;

(B) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or in the number of
shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options
or the rights of conversion or exchange under such Convertible
Securities;

(C) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:

(I) in the case of Convertible Securities or Options for Common Stock,
the only Additional Stock issued was Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation for the
issue of all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such exercise,
or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or
exchange, and

(II) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the shares of Additional
Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;

(D) no readjustment pursuant to clause (B) or (C) above shall have the
effect of increasing the Conversion Price to an amount which exceeds
the lower of (i) the Conversion Price on the date immediately prior to
the original adjustment date, or (ii) the Conversion Price that would
have resulted from any issuance of Additional Stock between such date
and such readjustment date; and

(E) in the case of any Options which expire by their terms not more
than 90 days after the date of issue thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise of all
such Options.

(2) Stock Dividends. In the event the Corporation at any time or from
time to time after the Original Issue Date shall pay any dividend on
the Common Stock payable in Common Stock, then and in any such event,
Additional Stock shall be deemed to have been issued immediately after
the close of business on the record date for the determination of
holders of any class of securities entitled to receive such dividend;
provided, however, that if such record date is fixed and such dividend
is not fully paid the only Additional Stock deemed to have been issued
will be the number of shares of Common Stock actually issued in such
dividend, and such shares will be deemed to have been issued as of the
close of business on such record date, and the Conversion Price shall
be recomputed accordingly.

(iv) Adjustment of Conversion Price Upon Issuance of
Additional Stock

(1) Prior to September 18, 1997. If prior to September 18, 1997, the
Corporation shall issue Additional Stock (including Additional Stock
deemed to be issued pursuant to Paragraph 4 (c) (iii)) for a
consideration per share less than the Conversion Price for the Series
A Preferred in effect on the date of and immediately prior to such
issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price equal to the consideration
per share received by the Corporation for such Additional Stock.

(2) On or after September 18, 1997. If on or after September 18,
1997, the Corporation shall issue Additional Stock (including
Additional Stock deemed to be issued pursuant to Paragraph 4(c) (iii))
for a consideration per share less than the Conversion Price for the
Series A Preferred in effect on the date of and immediately prior to
such issue, then and in such event, such Conversion Price shall be
reduced concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue (including
all shares of Common Stock issuable upon conversion of the outstanding
Series A Preferred) plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total
number of shares of Additional Stock so issued would purchase at such
Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue
(including all shares of Common Stock issuable upon conversion of the
outstanding Series A Preferred) plus the number of shares of such
Additional Stock so issued.

(v) Determination of Consideration. For purposes of this Paragraph 4
(c), the consideration received by the Corporation for the issue of
any shares of Additional Stock shall be computed as follows:

(1) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;

(B) insofar as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as determined in
good faith by the Board: and

(C) in the event Additional Stock is issued together with other shares
or securities or other assets of the Corporation for consideration
which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.

(2) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Stock deemed to have been
issued pursuant to Paragraph 4(c) (iii) (1), relating to Options and
Convertible Securities, shall be determined by dividing:

(X) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities; by

(Y) the maximum number of shares of Common Stock (as set forth in
the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

(vi) Adjustments for Subdivisions, Combinations or Consolidation of
Common Stock. In the event the outstanding shares of Common Stock
shall be subdivided (by stock split, or otherwise), into a greater
number of shares of Common Stock, the Conversion Price for each series
then in effect shall, concurrently with the effectiveness of such
subdivision, be proportionately decreased. In the event the
outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of
Common Stock, the Conversion Price then in effect shall, concurrently
with the effectiveness of such combination or consolidation, be
proportionately increased.

(vii) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to
receive any distribution payable in securities of the Corporation
other than shares of Common Stock and other than as otherwise adjusted
in this Paragraph 4 or as otherwise provided in Paragraph l(b), then
and in each such event provision shall be made so that the holders of
Series A Preferred shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received
had their shares of Series A Preferred been converted into shares of
Common Stock on the date of such event and had they thereafter, during
the period from the date of such event to and including the date of
conversion, retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called for during
such period under this Paragraph 4 with respect to the rights of the
holders of the Series A Preferred.

(viii) Adjustments for Reclassification, Exchange and Substitution. If
the Common Stock issuable upon conversion of the Series A Preferred
shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination
of shares, consolidation or merger provided for above), the Conversion
Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted
such that the shares of Series A Preferred shall be convertible into,
in lieu of the number of shares of Common Stock which the holders
would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the
holders upon conversion of the Series A Preferred immediately before
that change.

(d) No Impairment. The Corporation will not, by amendment of its
Charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Paragraph 4 and in the
taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Series A Preferred
against impairment.

(e) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price for the Series A
Preferred pursuant to this Paragraph 4, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of such Series A
Preferred a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request
at any time of any holder of Series A Preferred, furnish or cause to
be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price in effect at
the time for such series, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such Series A Preferred

(f) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, any right to subscribe
for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right,
this Corporation shall mail to each holder of Series A Preferred, at
least 20 days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of
such dividend, distribution, or right.

(g) Reservation of Stock Issuance Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred such number of its
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred
and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series A Preferred, in addition to such
other remedies as shall be available to the holder of such Series A
Preferred, the Corporation will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.

(h) Notices. Any notice required by the provisions of this Paragraph
(4) to be given to the holders of shares of Series A Preferred shall
be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address
appearing on the books of this Corporation.

5. Redemption. The Series A Preferred shall be redeemable as follows:

(a) Redemption at the option of the Corporation after 1997 but Prior
to 2000. At any time after September 18, 1997, but prior to September
18, 2000, the Series A Preferred may be redeemed in whole (but not in
part) at the option of the Corporation. The Corporation will give
notice to the holders of Series A Preferred of its intent to redeem
the Series A Preferred not less than 30 nor more than 60 days prior to
the date set for redemption. The redemption price shall be that amount
necessary to cause the holders of the Series A Preferred to have
received an internal rate of return (defined below) of 25% per annum
over the period of the first two years commencing with the Original
Issue Date and an internal rate of return of 20% per annum over the
period from and after two years after the Original Issue Date until
the date of redemption (but not beyond September 18, 2000). For the
purposes of this paragraph (a), "internal rate of return" or "IRR"
shall be calculated using the acquisition purchase price paid by the
holders of the Series A Preferred under the stock purchase agreement
under which such shares were originally issued as the investment
"out-flows", with payments of dividends or other distributions
received by the Series A Preferred holders hereunder taken into
account as "in-flows" provided that (i) the original purchasers of the
Series A Preferred shall be deemed to be the holders of the Series A
Preferred for the purposes of calculating investment amounts and
receipts, (ii) the fact that such holders may from time to time
finance or leverage funds invested in the purchase of the Series A
Preferred shall not affect either the characterization or calculation
of such investment amounts (i.e. neither receipt of the proceeds of
any such financing nor the payment of any debt service or costs
related to such financing shall be taken into account), (iii) neither
the fact of any transfer of Series A Preferred from the original
holders nor the amount of any consideration received by the original
holders or paid by the successor holders in connection with any
transfer shall affect the calculation of internal rate of return and
(iv) all items of investment/expense and receipt shall be deemed to
have been invested/expended or received on the last day of the
calendar month in which they occur. An example of the calculation of
IRR is attached as Schedule 1.

(b) Redemption at the Option Of the Corporation after Five Years of
Upon Less than 400,000 Shares Outstanding. Notwithstanding the
provisions of Paragraph 5(a), (i) at any time after September 18,
2000, or (ii) at any time prior thereto if there shall be less than
400,000 shares of Series A Preferred outstanding (adjusted for any
stock splits or similar transactions), the Series A Preferred may be
redeemed in whole or in part at the option of the Corporation. The
Corporation will give notice to the holders of the Series A Preferred
of its intent to redeem the Series A Preferred not less than 30 nor
more than 60 days prior to the redemption date. The redemption price
shall be $6.30 per share (declining $0.06 for each of the first 5 full
years after September 18, 2000), plus in each case, all accrued and
unpaid dividends.

(c) Redemption as Preferred Stockholders Option. After
September 18, 1996, the Corporation will be required, at the option of
the holders of the Series A Preferred, to redeem the Series A
Preferred of any holder demanding redemption at a price of $6.00 per
share plus all accrued and unpaid dividends on the occurrence of any
one or more of the following:

(i) failure in two consecutive quarters to pay in full the quarterly
dividends on the Series A Preferred required by paragraph 1 of this
Section 5 (including all dividends accumulated but unpaid for all
prior quarters);

(ii) a default in the payment of principal or interest on any
institutional debt (or debts) having an outstanding balance (or
balances aggregating) greater than (a) $5 million for non-recourse
debt, and (b) $2 million for recourse debt (which default, in either
case, shall not have been cured by the Corporation within 30 business
days from the time the Corporation receives written notification of
the default);

(iii) failure to comply with paragraph 6 hereof;

(iv) for calendar year 1996, the Corporation's FAD (defined below)
fails to reach at least a break-even dividend coverage equal to the
full dividend payable on the Series A Preferred;

(v) for calendar year 1997, the Corporation~s FAD fails to reach at
least a break-even dividend coverage equal to the full dividend
payable on the Series A Preferred and annual dividends on the Common
Stock equal to at least a seven percent (7%) yield on $5.72; and

(vi) for calendar year 1998 and subsequent years, the Corporation's
FAD fails to reach at least a break-even dividend coverage equal to
the full dividend payable on the Preferred Stock and dividends on the
Common Stock equal to at least an eight percent (8%) yield on $5.72
(rounded to the nearest whole cent).

For purposes of this Charter, Funds Available for Distribution ("FAD")
shall mean "Funds From Operations" minus "Non-Revenue Enhancing
Capital Expenditures". The calculation of FAD shall be made by the
Corporation and the Corporation's independent public accounting firm
shall prepare a special use report on such calculation.

"Funds From Operations" or "FFO" shall be defined in accordance with
the FFO White Paper prepared in March 1995 by the National Association
of Real Estate Investment Trusts and shall mean the Corporation's net
income (computed in accordance with generally accepted accounting
principles in effect on December 31, 1994, applied in a manner
consistent with the Corporation's accounting policies and practices as
of that date), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis. As the
White Paper provides, only depreciation and amortization of assets
uniquely significant to the real estate industry will be added back.
Amounts added back would include real property depreciation,
amortization of capitalized leasing expenses, tenant allowances or
improvements, and the like. Specifically excluded are the add back of
items such as the amortization of deferred financing costs,
depreciation of computer software, company office improvements, and
other items commonly found in other industries and required to be
recognized as expenses in the calculation of net income. Items
classified by generally accepted accounting principles as
extraordinary or unusual, along with significant non-recurring events
that materially distort the comparative measurement of company
performance over time, are not meant to be reductions or increases in
FFO, and should be disregarded in its calculation. The use of a
corporate form versus a partnership form for unconsolidated
partnerships and joint ventures should not affect the determination of
whether an entity is to be treated as a joint venture for purposes of
the definition. Gains or losses on sales of securities or
undepreciated land shall be included in FFO, unless they are unusual
and nonrecurring.

"Non-Revenue Enhancing Capital Expenditures" shall mean those capital
expenditures (computed in accordance with generally accepted
accounting principles consistently applied) made with respect to
existing real property that the Corporation has owned and leased to
others in order to continue (but not those expenditures designed to
enhance) the revenue-generating capacity of the property; the
following categories of capital expenditures shall not be included for
this purpose (and accordingly, the listed capital expenditures will
not be deducted from FFO in computing FAD): capital expenditures
relating to (i) acquisitions, (ii) deferred maintenance on
acquisitions, (iii) tenant improvements and leasing commissions on
square footage that was not leased at the time of acquisition, (iv)
development of new properties or material new elements of existing
properties, and (v) improvements to bring a property into compliance
with governmental regulations.

(d) Waiver. The Corporation shall promptly notify each holder of
Series A Preferred of the occurrence of any event set forth at (c)
above, and unless such holder has submitted a notice of redemption to
the Corporation on or before 90 days after receipt of the
Corporation's notice, the holder shall be deemed to have waived the
right to have shares of Series A Preferred redeemed as a result of
such occurrence. No such waiver shall constitute a waiver of rights
with respect to any subsequent occurrence.

(e) Redemption Date: Notice of Redemption. The notice of redemption
submitted by the Corporation or a Series A Preferred Stockholder shall
set forth: (i) the redemption date which shall be not less than 30 nor
more than 60 days after the date of the notice in the case of notice
submitted by the Corporation and not less than 30 nor more than 180
days after the date of the notice in the case of notice submitted by a
Series A Preferred stockholder; (ii) the redemption price; and (iii)
the place at which the shareholders may obtain payment of the
redemption price upon surrender of their share certificates. In case
of a partial redemption of Series A Preferred, such redemption shall
be pro rata among the various holders thereof or as determined by lot
in the discretion of the Board of Directors. On or before the
redemption date, each holder of shares called for redemption shall
surrender the certificate representing such shares to the Corporation
at the place designated in the redemption notice and shall thereupon
be entitled to receive payment of the redemption price on the
redemption date. If less than all of the shares represented by a
surrendered certificate are redeemed, the Corporation shall issue a
new certificate representing the unredeemed shares.

If, on or before the redemption date, the Corporation has cash funds
available or has deposited for such purpose in trust with a bank or
trust company sufficient funds to pay the redemption price in full to
the holders of all shares called for redemption, the shares so called
shall be deemed to be redeemed as of the date of deposit, dividends on
those shares shall cease to accrue and no interest shall accrue on
redemption price from and after the redemption date.

All Conversion Rights shall remain valid and effective following the
Corporation's notice of redemption, provided that the right to convert
shares shall terminate at the close of business on the fifth day prior
to the redemption date if the holder thereof has not exercised its
Conversion Right in accordance with Paragraph 4(b) on or prior to such
date. Any amounts so deposited on account of the redemption price of
shares converted subsequent to the date of deposit shall be repaid to
the Corporation forthwith upon the conversion of such shares.

(f) Automatic Redemption and Authority for Non-Series A Directors to
Cancel. In the event that the size of the Board of Directors has been
increased to eleven pursuant to Clauses (i), (ii) or (iii) of
Paragraph 3(a) hereof and the holders of Series A Preferred have
elected four Series A Directors to fill the newly created vacancies
(the date on which the last of such four directors is elected being
referred to as the "Board Switch Date"), then all of the shares of
Series A Preferred shall be redeemed on the 180th day following the
Board Switch Date pursuant to paragraph 5(a) or 5(b) (other than the
notice requirements and with any automatic redemption occurring prior
to September 18, 1997 being deemed a redemption pursuant to paragraph
5(a)), as applicable, from holders of record of such Shares as of the
close of business on the 150th day following the Board Switch Date,
unless a majority of the directors who are not Series A Directors
rescind such automatic redemption prior to the 180th day following the
Board Switch Date. Nothing in this paragraph (f) is intended to limit
the rights of the Series A Preferred to effect a redemption pursuant
to paragraph 5(c) or to limit the authority of a majority of the full
board to effect a redemption pursuant to paragraphs 5(a) or 5(b),
including the ability to call the Series A Preferred for redemption
during the 180 day period following a Board Switch Date
notwithstanding the rescission of an automatic redemption by the
directors who are not Series A Directors pursuant to this clause (f)
during that period.

(g) Payment in Cash. All redemption payments shall be made in cash;
provided, however, that if shares of Series A Preferred are called for
redemption pursuant to paragraph 5(c) and the Corporation does not
reasonably believe that it can obtain the cash necessary to make the
redemption payment by the redemption date, the Corporation within 30
days after the date of the redemption notice may provide the holders
of Series A Preferred a proposal to pay the redemption price in other
than cash, including real property, fully-collateralized senior
promissory notes or other assets. Such proposal shall contain a
valuation of any assets proposed to be transferred or to be used as
collateral to secure the Corporation's obligations. The holders of a
majority of the outstanding shares of Series A Preferred called for
redemption shall have the right in their absolute discretion, for any
reason or no reason, for a period of 30 days to accept or reject such
proposed alternative redemption payment following submittal by the
Corporation. If holders of a majority of the outstanding shares of
Series A Preferred fail to respond within such 30 day period, they
shall be deemed to have rejected such proposal.

(h) Payment Prohibited By Law. If the Corporation fails to make a
redemption payment because such payment is prohibited by Section 2-311
of the Maryland General Corporation Law or similar statute, then on
the redemption date the Corporation shall provide to the holders of
Series A Preferred, whose shares are subject to redemption, payment of
the maximum amount that may then be legally paid, on a pro rata basis,
together with a certificate of the chief executive or chief financial
officer of the Corporation setting forth the computation made under
the applicable statutory provision to determine what amount could be
legally paid. Thereafter, until the shares subject to redemption have
been fully redeemed, within fifteen days after the end of each month,
the Corporation shall provide the holders of Series A Preferred whose
shares are subject to redemption, a similar certificate showing the
computation of the maximum legally permitted redemption payment that
may be made as of the end of such month, together with the maximum
permitted payment, if any, on a pro rata basis. All shares of Series A
Preferred for which the redemption payment has not been made on the
redemption date shall be considered to be outstanding for all
purposes. Nothing in this paragraph (h) is intended to limit the other
rights of the Series A Preferred relating to the failure of the
Company to make a redemption payment.

6. Protective Provisions.

(a) For so long as the shares of Common Stock issuable upon conversion
of the outstanding shares of Series A Preferred represent at least 15%
of the total of (a) the shares of Common Stock outstanding, plus (b)
the shares of Common Stock issuable upon conversion of the outstanding
Series A Preferred, then the Corporation shall not voluntarily file or
assent to or in any other way participate in the filing of an
involuntary petition in bankruptcy or seek similar protection from
creditors under federal or state bankruptcy or insolvency laws without
first obtaining the approval of holders of a majority of the
outstanding shares of Series A Preferred.

(b) For so long as (I) either the original purchaser of the Series A
Preferred still holds shares of Series A Preferred or at least one
holder holds more than 50% of the outstanding shares of Series A
Preferred and (II) the shares of Common Stock issuable upon conversion
of all outstanding shares of Series A Preferred represent at least 15%
of the total of (A) the shares of Common Stock outstanding, plus (B)
the shares of Common Stock issuable upon conversion of the outstanding
Series A Preferred, then the Corporation shall not take any of the
following actions without first obtaining the approval of the original
purchaser or, if a holder other than the original purchaser owns more
than 50% of the outstanding shares of Series A Preferred, such holder
("the Approving Person"):

(i) The issuance of or modification of any debt in principal amount
which exceeds $10 million;

(ii) New investments, including a purchase of real estate operating
companies or real estate investment trusts, as defined in Section 856
of the Internal Revenue Code of 1986 ("REIT"), with a purchase price
equal to or greater than $10 million, or any series of purchases
within any 90 day period with aggregate purchase prices exceeding $25
million;

(iii) Issuance of any equity securities other than options granted
pursuant to the Director Option Plan or the Employee Option Plan or
Common Stock issued upon exercise of such options (except approval
will not be required upon issuance of any equity securities the
proceeds of which will be used to redeem the Series A Preferred);

(iv) Sale of any asset or assets with a sales price in excess of $10
million, or any series of sales within any 90 day period with
aggregate sales prices exceeding $25 million;

(v) Consolidation or merger of the Corporation;

(vi) Modification in any material respect of any employment agreement
with an executive officer of the Corporation, including compensation;

(vii) Modification of the agreement between the Corporation and
Westminster Holdings, Inc., a California corporation, or any other
agreement between the Corporation and Peter Bedford or any Affiliate
of Peter Bedford which would make such agreement less favorable to the
Corporation, or entering into any new agreement, arrangement or
transaction with Peter Bedford or any Affiliate of Peter Bedford;
provided, however, that this clause (vii) shall not apply to the
Standstill Agreement to be entered into between Peter Bedford and the
Corporation;

(viii) Issuance of awards of any shares or options other than those
permitted in paragraph (iii) above;

(ix) The termination of the Corporation's status as a REIT for tax
purposes;

(x) Any substantial change in the Corporation's business strategies;

(xi) Permit Peter Bedford's ceasing to serve as substantially
full-time chief executive officer of the Corporation or disposing of
his shares of Common Stock 80 that Peter Bedford and his Affiliates
and members of his immediate family, his spouse, issue, brothers,
sisters, and their respective spouses and issue, and trusts for the
benefit of such persons) own beneficially less than 1,198,278 shares
of Common Stock (as adjusted for stock splits or similar
transactions); and

(xii) any amendment to the resolution of the Board of Directors
exempting from the terms of Section 3-602 of the Maryland General
Corporation Law and the Charter any transaction between AEW Partners,
L.P. (or any Affiliate of AEW Partners, L.P.) and the Corporation and
any transaction contemplated by or resulting from the exercise of any
redemption right of the Series A Preferred which may constitute a
business combination.

With respect to each of the above transactions, the Approving Person
shall be provided with the information regarding the proposed
transaction ten business days (any day, Monday through Friday, in
which the New York Stock Exchange is open for regular trading) prior
to the scheduled approval date. If the Approving Person shall not
deliver a written notice objecting to the particular transaction
before the end of such ten business day period, the Approving Person
shall be deemed to have consented to such transaction.

(c) In the event that any holder of Series A Preferred takes any legal
action to enforce any of its rights under this Section 5 of Article V
of the Corporation's Charter, the non-prevailing party shall be
required to pay the costs and expenses of the prevailing party
incurred in connection with such action, including attorney and
witness fees

SECOND: The charter of the Corporation is further amended by replacing
Article VII in its entirety with the following:

ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1. Definitions. For the purpose of this Article VII, the
following terms shall have the following meanings:

Aggregate Stock Ownership Limit. The term "Aggregate Stock Ownership
Limit" shall mean not more than five percent in value of the aggregate
of the outstanding shares of Capital Stock. The value of the
outstanding shares of Capital Stock shall be determined by the Board
of Directors of the Corporation in good faith, which determination
shall be conclusive for all purposes hereof.

Beneficial Ownership. The term "Beneficial Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the
shares of Capital Stock is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned
through the application of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner",
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meaninqs.

Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by
law, regulation or executive order to close.

Capital Stock. The term "Capital Stock" shall mean all classes or
series of stock of the Corporation, including, without limitation,
Common Stock, Preferred Stock and Series A Preferred Stock

Charitable Beneficiary. The term "Charitable Beneficiary" shall mean
one or more beneficiaries of the Trust as determined pursuant to
Section 7.3.6, provided that each such organization must be described
in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections
170(b)(1)(A), 2055 and 2522 of the Code.

Charter. The term "Charter" shall mean the charter of the Corporation,
as that term is defined in the MGCL.

Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

Common Stock Ownership Limit. The term "Common Stock Ownership Limit"
shall mean not more than five percent (in value or in number of
shares, whichever is more restrictive) of the aggregate of the
outstanding shares of Common Stock of the Corporation. The number and
value of outstanding shares of Common Stock of the Corporation shall
be determined by the Board of Directors of the Corporation in good
faith, which determination shall be conclusive for all purposes
hereof.

Constructive Ownership. The term "Constructive Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the
shares of Capital Stock is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned
through the application of Section 318 (a) of the Code, as modified by
Section 856 (d) (5) of the Code. The terms "Constructive Owner",
"Constructively Owns" and "Constructively Owned" shall have the
correlative meanings.

Excepted Holder. The term "Excepted Holder" shall mean a stockholder
of the Corporation for whom an Excepted Holder Limit is created by
these Articles or by the Board of Directors pursuant to Section 7.2.7.

Excepted Holder Limit. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Directors pursuant to Section
7.2.7, and subject to adjustment pursuant to Section 7.2.8: (a) for
Peter B. Bedford, fifteen percent of the lesser of the number or value
of the outstanding shares of Common Stock, (b) for AEW Partners, L.P.,
a Delaware limited partnership ("AEW") together with a partnership or
limited liability company that is 100% owned directly or indirectly by
AEW, (i) fifty-eight percent of the lesser of the number or value of
the outstanding shares of Common Stock and (ii) one hundred percent of
the outstanding shares of Series A Preferred Stock and (c) for other,
subsequently designated Excepted Holders, as to any class or series of
the outstanding Capital Stock, the percentage limit established by the
Board of Directors pursuant to Section 7.2.7. For these purposes, the
outstanding Common Stock shall include the shares of Common Stock into
which outstanding shares of Series A Preferred Stock are convertible,
and if shares of the Series A Preferred Stock are redeemed by the
Corporation, (a) the percentage limit applicable to Peter Bedford
shall be automatically increased so as to permit his continued
ownership after the redemption of that number of shares Common Stock
that he was permitted to own under the applicable Excepted Holder
Limit immediately before the redemption, and (b) notwithstanding
Section 7.2.7(d), the percentage limit with respect to shares of
Common Stock applicable to AEW shall be automatically decreased by the
same amount as the increase in (a).

Initial Date. The term "Initial Date" shall mean the date upon which
the Articles of Amendment containing this Article VII are filed with
the State Department of Assessments and Taxation of Maryland.

Market Price. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding shares of Capital Stock,
the Closing Price for such Capital Stock on such date. The "Closing
Price" on any date shall mean the last sale price for such Capital
Stock, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, for such
Capital Stock, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NYSE or, if such Capital Stock is
not listed or admitted to trading on the NYSE, as reported on the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which such Capital Stock is listed or admitted to trading or, if such
Capital Stock is not listed or admitted to trading on any national
securities exchange, the last quoted price, or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such system is no longer in
use, the principal other automated quotation system that may then be
in use or, if such Capital Stock is not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such
Capital Stock selected by the Board of Directors of the Corporation
or, in the event that no trading price is available for such Capital
Stock, the fair market value of the Capital Stock, as determined in
good faith by the Board of Directors of the Corporation.

MGCL. The term "MGCL" shall mean the Maryland General Corporation
Law, as amended from time to time.

NYSE. The term "NYSE" shall mean the New York Stock Exchange.

Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections
401(a) or 501(c) (17) of the Code), a portion of a trust permanently
set aside for or to be used exclusively for the purposes described in
Section 642 (c) of the Code, association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or
other entity and also includes a group as that term is used for
purposes of Section 13 (d) (3) of the Securities Exchange Act of 1934,
as amended, and a group to which an Excepted Holder Limit applies.

Prohibited Owner. The term "Prohibited Owner" shall mean, with respect
to any purported Transfer, any Person who, but for the provisions of
Section 7.2.1, would Beneficially Own or Constructively Own shares of
Capital Stock, and if appropriate in the context, shall also mean any
Person who would have been the record owner of the shares that the
Prohibited Owner would have so owned.

REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.

Restriction Termination Date. The term "Restriction Termination
Date" shall mean the first day after the Initial Date on which the
Corporation determines pursuant to Article VI, Section 9 of the
Charter that it is no longer in the best interests of the Corporation
to attempt to, or continue to, qualify as a REIT or that compliance
with the restrictions and limitations on Beneficial Ownership,
Constructive Ownership and Transfers of shares of Capital Stock set
forth herein is no longer required in order for the Corporation to
qualify as a REIT.

Transfer. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other
event that causes any Person to acquire Beneficial Ownership or
Constructive Ownership, or any agreement to take any such actions or
cause any such events, of Capital Stock or the right to vote or
receive dividends on Capital Stock, including (a) the granting or
exercise of any option (or any disposition of any option), (b) any
disposition of any securities or rights convertible into or
exchangeable for Capital Stock or any interest in Capital Stock or any
exercise of any such conversion or exchange right and (c) Transfers of
interests in other entities that result in changes in Beneficial or
Constructive Ownership of Capital Stock; in each case, whether
voluntary or involuntary, whether owned of record, Constructively
Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms "Transferring" and "Transferred" shall have the
correlative meanings.

Trust. The term "Trust" shall mean any trust provided for in Section
7.3.1.

Trustee. The term "Trustee" shall mean the Person unaffiliated with
the Corporation and a Prohibited Owner, that is appointed by the
Corporation to serve as trustee of the Trust.

Section 7.2 Capital Stock.

Section 7.2.1 Ownership Limitations. During the period commencing on
the Initial Date and prior to the Restriction Termination Date:

(a) Basic Restrictions.

(i) (1) No Person, other than an Excepted Holder, shall Beneficially
Own or Constructively Own shares of Capital Stock in excess of the
Aggregate Stock Ownership Limit, (2) no Person, other than an Excepted
Holder, shall Beneficially Own or Constructively Own shares of Common
Stock in excess of the Common Stock Ownership Limit and (3) no
Excepted Holder shall Beneficially Own or Constructively Own shares of
Capital Stock in excess of the Excepted Holder Limit for such Excepted
Holder.

(ii) No Person shall Beneficially or Constructively Own shares of
Capital Stock to the extent that such Beneficial or Constructive
Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code
(without regard to whether the ownership interest is held during the
last half of a taxable year), or otherwise failing to qualify as a
REIT (including, but not limited to, Beneficial or Constructive
Ownership that would result in the Corporation owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from
such tenant would cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code).

(iii) Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such Transfer is
the result of a transaction entered into through the facilities of the
NYSE or any other national securities exchange or automated inter-

dealer quotation system) that, if effective, would result in the
Capital Stock being beneficially owned by less than 100 Persons
(determined under the principles of Section 856(a)(5) of the Code)
shall be void ab initio, and the intended transferee shall acquire no
rights in such shares of Capital Stock.

(b) Transfer in Trust. If any Transfer of shares of Capital Stock
(whether or not such Transfer is the result of a transaction entered
into through the facilities of the NYSE or any other national
securities exchange or automated inter-dealer quotation system) occurs
which, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Capital Stock in violation of Section
7.2.1(a)(i) or (ii),

(i) then that number of shares of the Capital Stock, the Beneficial or
Constructive Ownership of which otherwise would cause such Person to
violate Section 7.2.1(a)(i) or (ii)(rounded to the nearest whole
shares), shall be automatically transferred to a Trust for the benefit
of a Charitable Beneficiary, as described in Section 7.3, effective as
of the close of business on the Business Day prior to the date of such
Transfer, and such Person shall acquire no rights in such shares; or

(ii) if the transfer to the Trust described in clause (i) of this
sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that
number of shares of Capital Stock that otherwise would cause any
Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio,
and the intended transferee shall acquire no rights in such shares of
Capital Stock.

Section 7.2.2 Remedies for Breach. If the Board of Directors of the
Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place
that results in a violation of Section 7.2.1 or that a Person intends
to acquire or has attempted to acquire Beneficial or Constructive
Ownership of any shares of Capital Stock in violation of Section 7.2.1
(whether or not such violation is intended), the Board of Directors or
a committee thereof shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer or other event,
including, without limitation, causing the Corporation to redeem
shares, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or
other event; provided, however, that any Transfers or attempted
Transfers or other events in violation of Section 7.2.1 shall
automatically result in the transfer to the Trust described above,
and, where applicable, such Transfer (or other event) shall be void ab
initio as provided above irrespective of any action (or non-action) by
the Board of Directors or a committee thereof.

Section 7.2.3 Notice of Restricted Transfer. Any Person who acquires
or attempts or intends to acquire Beneficial Ownership or Constructive
Ownership of shares of Capital Stock that will or may violate Section
7.2.1(a), or any Person who would have owned shares of Capital Stock
that resulted in a transfer to the Trust pursuant to the provisions of
Section 7.2.1(b) shall immediately give written notice to the
Corporation of such event, or in the case of such a proposed or
attempted transaction, give at least 15 days prior written notice, and
shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of
such Transfer on the Corporation's status as a REIT.

Section 7.2.4 Owners Required To Provide Information. From the Initial
Date and prior to the Restriction Termination Date:

(a) every owner of more than five percent (or such lower percentage as
required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Capital Stock, within 30 days
after the end of each taxable year, shall give written notice to the
Corporation stating the name and address of such owner, the number of
shares of Capital Stock and other shares of the Capital Stock
Beneficially Owned and a description of the manner in which such
shares are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to
determine the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the
Capital Stock Ownership Limit.

(b) each Person who is a Beneficial or Constructive Owner of Capital
Stock and each Person (including the stockholder of record) who is
holding Capital Stock for a Beneficial or Constructive Owner shall
provide to the Corporation such information as the Corporation may
request, in good faith, in order to determine the Corporation's status
as a REIT and to comply with requirements of any taxing authority or
governmental authority or to determine such compliance.

Section 7.2.5 Remedies Not Limited. Subject to Article VI, Section 9
of the Charter, nothing contained in this Section 7.2 shall limit the
authority of the Board of Directors of the Corporation to take such
other action as it deems necessary or advisable to protect the
Corporation and the interests of its stockholders in preserving the
Corporation's status as a REIT.

Section 7.2.6 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3,
or any definition contained in Section 7.1, the Board of Directors of
the Corporation shall have the power to determine the application of
the provisions of this Section 7.2 or Section 7.3 with respect to any
situation based on the facts known to it. In the event Section 7.2 or
7.3 requires an action by the Board of Directors and the Charter fails
to provide specific guidance with respect to such action, the Board of
Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Sections 7.1,
7.2 or 7.3.

Section 7.2.7 Exceptions.

(a) Subject to Section 7.2.1(a)(ii), the Board of Directors of the
Corporation, in its sole discretion, may exempt a Person from the
Aggregate Stock Ownership Limit and the Common Stock Ownership Limit,
as the case may be, and may establish or increase an Excepted Holder
Limit for such Person if:

(i) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
(to the extent practicable and prudent) that no individual's
Beneficial or Constructive Ownership of such shares of Capital Stock
will violate Section 7.2.1(a)(ii);

(ii) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
(to the extent practicable and prudent) that such Person does not and
represents that it will not own, actually or Constructively, an
interest in a tenant of the Corporation (or a tenant of any entity
owned or controlled by the Corporation) that would cause the
Corporation to own, actually or Constructively, more than a 9.9%
interest (as set forth in Section 856(d)(2)(B) of the Code) in such
tenant and the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
this fact (for this purpose, a tenant from whom the Corporation (or an
entity owned or controlled by the Corporation) derives (and is
expected to continue to derive) a sufficiently small amount of revenue
such that, in the opinion of the Board of Directors of the
Corporation, rent from such tenant would not adversely affect the
Corporation's ability to qualify as a REIT, shall not be treated as a
tenant of the Corporation); and

(iii) such Person agrees that any violation or attempted violation of
such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 7.2.1 through
7.2.6) will result in such shares of Capital Stock being automatically
transferred to a Trust in accordance with Sections 7.2.1(b) and 7.3.

(b) Prior to granting any exception pursuant to Section 7.2.7(a), the
Board of Directors of the Corporation may require a ruling from the
Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole
discretion, as it may deem necessary or advisable in order to
determine or ensure the Corporation's status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the Board of
Directors may impose such conditions or restrictions as it deems
appropriate in connection with granting such exception.

(c) Subject to Section 7.2.1(a) (ii), an underwriter which
participates in a public offering or a private placement of Capital
Stock (or securities convertible into or exchangeable for Capital
Stock) may Beneficially Own or Constructively Own shares of Capital
Stock (or securities convertible into or exchangeable for Capital
Stock) in excess of the Aggregate Stock Ownership Limit, the Common
Stock Ownership Limit, or both such limits, but only to the extent
necessary to facilitate such public offering or private placement.

(d) The Board of Directors may only reduce the Excepted Holder Limit
for an Excepted Holder: (1) with the written consent of such Excepted
Holder at any time, or (2) pursuant to the terms and conditions of the
agreements and undertakings entered into with such Excepted Holder in
connection with the establishment of the Excepted Holder Limit for
that Excepted Holder. No Excepted Holder Limit shall be reduced to a
percentage that is less than the Common Stock Ownership Limit.

Section 7.2.8. Increase in Aggregate Stock Ownership and Common Stock
Owner Limits. The Board of Directors may from time to time increase
the Common Stock Ownership Limit and the Aggregate Stock Ownership
Limit.

Section 7.2.9 Legend. Each certificate for shares of Capital Stock
shall bear the following legend:

The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Corporation's maintenance of its status as a Real Estate
Investment Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Corporation's Charter, (i) no Person may
Beneficially or Constructively Own shares of the Corporation's Common
Stock in excess of five percent (in value or number of shares) of the
outstanding shares of Common Stock of the Corporation unless such
Person is an Excepted Holder (in which case the Excepted Holder Limit
shall be applicable); (ii) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Corporation in
excess of five percent of the value of the total outstanding shares of
Capital Stock of the Corporation, unless such Person is an Excepted
Holder (in which case the Excepted Holder Limit shall be applicable);
(iii) no Person may Beneficially or Constructively Own Capital Stock
that would result in the Corporation being "closely held" under
Section 856 (h) of the Code or otherwise cause the Corporation to fail
to qualify as a REIT; and (iv) no Person may Transfer shares of
Capital Stock if such Transfer would result in the Capital Stock of
the Corporation being owned by fewer than 100 Persons. Any Person who
Beneficially or Constructively owns or attempts to Beneficially or
Constructively Own shares of Capital Stock which causes or will cause
a Person to Beneficially or Constructively Own shares of Capital Stock
in excess or in violation of the above limitations must immediately
notify the Corporation. If any of the restrictions on transfer or
ownership are violated, the shares of Capital Stock represented hereby
will be automatically transferred to a Trustee of a Trust for the
benefit of one or more Charitable Beneficiaries. In addition, upon the
occurrence of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All capitalized
terms in this legend have the meanings defined in the charter of the
Corporation, as the same may be amended from time to time, a copy of
which, including the restrictions on transfer and ownership, will be
furnished to each holder of Capital Stock of the Corporation on
request and without charge.

Section 7.3 Transfer of Capital Stock in Trust

Section 7.3.1 Ownership in Trust. Upon any purported Transfer or other
event described in Section 7.2.1(b) that would result in a transfer of
shares of Capital Stock to a Trust, such shares of Capital Stock shall
be deemed to have been transferred to the Trustee as trustee of a
Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the
purported Transfer or other event that results in the transfer to the
Trust pursuant to Section 7.2.1 (b). The Trustee shall be appointed by
the Corporation and shall be a Person unaffiliated with the
Corporation and any Prohibited Owner. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 7.3.6.

Section 7.3.2 Status of Shares Held by the Trustee. Shares of Capital
Stock held by the Trustee shall be issued and outstanding shares of
Capital Stock of the Company. The Prohibited Owner shall have no
rights in the shares held by the Trustee. The Prohibited Owner shall
not benefit economically from ownership of any shares held in trust by
the Trustee, shall have no rights to dividends and shall not possess
any rights to vote or other rights attributable to the shares held in
the Trust.

Section 7.3.3 Dividend and Voting Rights. The Trustee shall have all
voting rights and rights to dividends or other distributions with
respect to shares of Capital Stock held in the Trust, which rights
shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or other distribution paid prior to the
discovery by the Corporation that the shares of Capital Stock have
been transferred to the Trustee shall be paid with respect to such
shares of Capital Stock to the Trustee upon demand and any dividend or
other distribution authorized but unpaid shall be paid when due to the
Trustee. Any dividends or distributions so paid over to the Trustee
shall be held in trust for the Charitable Beneficiary. The Prohibited
Owner shall have no voting rights with respect to shares held in the
Trust and, subject to Maryland law, effective as of the date that the
shares of Capital Stock have been transferred to the Trustee, the
Trustee shall have the authority (at the Trustee's sole discretion)
(i) to rescind as void any vote cast by a Prohibited Owner prior to
the discovery by the Corporation that the shares of Capital Stock have
been transferred to the Trustee and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of
the Charitable Beneficiary. Notwithstanding the provisions of this
Article VII, until the Corporation has received notification that
shares of Capital Stock have been transferred into a Trust, the
Corporation shall be entitled to rely on its share transfer and other
stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority
of proxies, and otherwise conducting votes of stockholders.

Section 7.3.4 Sale of Shares by Trustee. Within 20 days of receiving
notice from the Corporation that shares of Capital Stock have been
transferred to the Trust, the Trustee of the Trust shall sell the
shares held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the ownership limitations set
forth in Section 7.2.1(a). Upon such sale, the interest of the
Charitable Beneficiary in the shares sold shall terminate and the
Trustee shall distribute the net proceeds of the sale to the
Prohibited Owner and to the Charitable Beneficiary as provided in this
Section 7.3.4. The Prohibited Owner shall receive the lesser of (1)
the price paid by the Prohibited Owner for the shares or, if the
Prohibited Owner did not give value for the shares in connection with
the event causing the shares to be held in the Trust (e.g., in the
case of a gift, devise or other such transaction), the Market Price of
the shares on the day of the event causing the shares to be held in
the Trust and (2) the price per share received by the Trustee from the
sale or other disposition of the shares held in the Trust. Any net
sales proceeds in excess of the amount payable to the Prohibited Owner
shall be immediately paid to the Charitable Beneficiary. If, prior to
the discovery by the Corporation that shares of Capital Stock have
been transferred to the Trustee, such shares are sold by a Prohibited
Owner, then (i) such shares shall be deemed to have been sold on
behalf of the Trust and (ii)' to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such
Prohibited Owner was entitled to receive pursuant to this Section
7.3.4, such excess shall be paid to the Trustee upon demand.

Section 7.3.5 Purchase Right in Stock Transferred to the Trustee.
Shares of Capital Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the Trust (or, in the
case of a devise or gift, the Market Price at the time of such devise
or gift) or (ii) the Market Price on the date the Corporation, or its
designee, accepts such offer. The Corporation shall have the right to
accept such offer until the Trustee has sold the shares held in the
Trust pursuant to Section 7.3.4. Upon such a sale to the Corporation,
the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the
sale to the Prohibited Owner.

Section 7.3.6 Designation of Charitable Beneficiaries. By written
notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the
interest in the Trust such that (i) the shares of Capital Stock held
in the Trust would not violate the restrictions set forth in Section
7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each
such organization must be described in Section 501(c)(3) of the Code
and contributions to each such organization must be eligible for
deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.

THIRD: The charter of the Corporation is further amended by replacing
Article VIII, Section 3, Paragraph (c) in its entirety with the
following:

(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or

(ii) which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or understanding;
or

(iii) which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.

FOURTH: The charter of the Corporation is further amended by replacing
Article VIII, Section 3, Paragraph (e) in its entirety with the
following:

(e) "Affiliate" or "Associates" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
April 5, 1993.

FIFTH: The amendments to the charter of the Corporation as hereinabove
set forth have been duly advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law and
by the Charter of the Corporation.

SIXTH: The total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment was 40,000,000,
of which 30,000,000 were shares of Common Stock, $0.01 par value per
share, and 10,000,000 were Preferred Stock, $0.01 par value per share.
The aggregate par value of all authorized shares of stock having a par
value was $400,000.00.

SEVENTH: The total number of shares of stock which the Corporation has
authority to issue, pursuant to the charter of the Corporation as
hereby amended, is 50,000,000, of which 30,000,000 are shares of
Common Stock, $0.01 par value per share, 10,000,000 are shares of
Preferred Stock, $0.01 par value per share, and 10,000,000 are shares
of Series A Convertible Preferred Stock. The aggregate par value of
all authorized shares of stock having a par value is $500,000.00

EIGHTH: The undersigned Chairman of the Board acknowledges these
Articles of Amendment to be the corporate act of the Corporation and
as to all matters or facts required to be verified under oath, the
undersigned President acknowledges that to the best of his knowledge,
information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties
for perjury.

IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman of the Board and
attested to by its Secretary on this 13th day of September, 1995.

ATTEST:

BEDFORD PROPERTY INVESTORS, INC.

By: /s/ Peter B. Bedford
Chairman of the Board
and Chief Executive Officer
Peter B. Bedford

By: /s/ Jennifer I. Mori
Secretary
Jennifer I. Mori

(Seal)

<PAGE>
SCHEDULE 1

REDEMPTION PRICE CALCULATION

Year 1 Year 2 Year 3 Year 4

Preferred Stock $50,000,000 50,000,000 50,000,000 50,000,000
Accrued Redemption
Premium 0 8,000,000 18,000,000 27,100,000
Total Investment
Basis(1) 50,000,000 58,000,000 68,000,000 77,100,000
Internal Rate of
Return 25.00% 25.00% 20.00% 20.00%
Total Return 12,500,000 14,500,000 13,600,000 15,420,000
Minimum Dividends
Paid (4,500,000) (4,500,000) (4,500,000) (4,500,000)
Accrued Redemption
Premium $ 8,000,000 $10,000,000 $ 9,100,000 $10,920,000

Redemption Price(2) $58,000,000 $68,000,000 $77,100,000 $88,020,000

Footnotes:

(1) Beginning of 12 month period.

(2) End of 12 month period.

Note: The above analysis calculates the redemption price at the end
of four consecutive twelve month periods. The actual redemption price
would be calculated based upon the exact number of days between the
date of initial investment and the date of redemption utilizing the
required internal rates of return applicable to each period and the
actual dividends paid, as such dividends paid may exceed the minimum
dividends indicated above.

<PAGE>
BEDFORD PROPERTY INVESTORS, INC.

ARTICLES OF INCORPORATION

ARTICLE I

INCORPORATOR

The undersigned, James J. Hanks, Jr., whose address is 300 East
Lombard Street, Baltimore, Maryland 21202, being at least 18 years of
age, does hereby form a corporation under the general laws of the
State of Maryland.

ARTICLE II

NAME

The name of the corporation (the "Corporation") is:

Bedford Property Investors, Inc.

ARTICLE III

PURPOSE

The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation,
engaging in business as a real estate investment trust under the
Internal Revenue Code of 1986, as amended, or any successor statute
(the "Code")), for which corporations may be organized under the
general laws of the State of Maryland as now or hereafter in force.
For purposes of these Articles, "REIT" means a real estate investment
trust as defined under Sections 856 through 860 of the Code.

ARTICLE IV

PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

The post office address of the principal office of the Corporation in
the State of Maryland is James J. Hanks, Jr., c/o Ballard Spahr
Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland
21202. The name and address of the resident agent of the Corporation
in the State of Maryland is James J. Hanks, Jr., c/o Ballard Spahr
Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland
21202. The resident agent is an individual residing in the State of
Maryland.

<PAGE>
ARTICLE V

STOCK

Section 1. Authorized Shares. The total number of shares of stock which the
Corporation has authority to issue is 40,000,000 shares, of which 30,000,000
are shares of Common Stock, $.01 par value per share ("Common Stock"), and
10,000,000 are shares of Preferred Stock, $.01 par value per share
("Preferred Stock"). The aggregate par value of all authorized shares of
stock having a par value is $400,000.00.

Section 2. Common Stock. Each share of Common Stock shall entitle the holder
thereof to one vote.

Section 3. Preferred Stock. The Preferred Stock may be issued, from time to
time, in one or more series as is authorized by the Board of Directors.
Prior to issuance of shares of each series, the Board of Directors by
resolution shall designate that series to distinguish it from all other
series and classes of stock of the Corporation, shall specify the number
of shares to be included in the series and shall set the terms, preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends or other distributions, qualifications and terms or conditions
of redemption. Subject to the express terms of any other series of
Preferred Stock outstanding at the time and notwithstanding any other
provisions of the charter of the Corporation, the Board of Directors may
increase or decrease the number of shares of, or alter the designation or
classify or reclassify, any unissued shares of any series of Preferred
Stock by setting or changing, in any one or more respects, from time to
time before issuing the shares, the terms, preferences, conversion of other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of
redemption of the shares of any series of Preferred Stock.

Section 4. Charter and Bylaws. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the
charter and the Bylaws of the Corporation.

ARTICLE VI

PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

Section 1. Number and Classification. The number of directors of the
Corporation initially shall be five, which number may be increased or
decreased pursuant to the Bylaws of the Corporation;

<PAGE>

provided, however, that (a) if there is stock outstanding and so long as
there are three or more stockholders, the number of directors shall never be
less than three and (b) if there is stock outstanding and so long as there
are less than three stockholders, the number of directors may not be less
than the number of stockholders. The names of the directors who shall
serve effective immediately and until the first annual meeting of
stockholders and until their successors are duly elected and qualify are:

Claude M. Ballard
Peter B. Bedford
Anthony Downs
Anthony M. Frank
Martin I. Zankel

Section 2. Extraordinary Actions. Except as otherwise herein specifically
provided, notwithstanding any provision of law permitting or requiring any
action to be taken or authorized by the affirmative vote of the holders of
a greater number of votes, any such action shall be effective and valid if
taken or authorized by the affirmative vote of holders or shares entitle
to cast a majority of all the votes entitled to be cast on the matter.

Section 3. Authorization by Board of Stock Issuance. The Board of Directors
of the Corporation may authorize the issuance from time to time of shares
of its stock of any class. Whether now or hereafter authorized, or
securities convertible into shares of its stock of any class, whether now
or hereafter authorized, for such consideration as the Board of Directors
may deem advisable, subject to such restrictions or limitations, if any,
as may be set forth in the charter or the Bylaws of the Corporation or in
the general laws of the State of Maryland.

Section 4. Preemptive Rights. Except as may be provided by the Board of
Directors in authorizing the issuance of shares of Preferred Stock pursuant
to Article V, Section 3, no holder of shares of stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe
for any additional shares of the stock of the Corporation or any other
security of the Corporation which it may issue or sell.

Section 5. Indemnification. The Corporation shall have the power, to the maximum
extent permitted by Maryland law in effect from time to time, to obligate
itself to indemnify, and to pay or reimburse reasonable expenses in advance
of final disposition of a preceding to, (a) any individual who is a present
or former director, officer or employee of the Corporation or (b) any
individual who, while a director of the Corporation and at the request of
the Corporation, serves or has served another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The
Corporation shall have the power, with the approval of its Board of
Directors, to provide such indemnification and advancement of expenses to a
person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation
or a predecessor of the Corporation.

Section 6. Related Party Transactions. Without limiting any other procedures
available by law or otherwise to the Corporation, the Board of Directors may
authorize any agreement or other transaction with any person, corporation,
association, company, trust, partnership (limited or general) or other
organization, although one or more of the directors or officers of the
Corporation may be a party to any such agreement or an officer, director,
stockholder or member of such other party, and no such agreement or
transaction shall be invalidated or rendered void or voidable solely by
reason of the existence of any such relationship if the existence is
disclosed or known to the Board of Directors, and the contract or transaction
is approved by the affirmative vote of a majority of the disinterested
directors, even if they constitute less than a quorum of the Board. Any
director of the Corporation who is also a director, officer, stockholder or
member of such other entity may be counted in determining the existence of a
quorum at any meeting of the Board of Directors considering such matter.

Section 7. Determinations by Board. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of
Directors consistent with the charter of the Corporation and in the absence
of (a) actual receipt of an improper benefit in money, property or services
or (b) an adverse judgment or other final adjudication based on a finding
that an act or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action being adjudicated, shall
be final and conclusive and shall be binding upon the Corporation and every
holder of shares of its stock: the amount of the net income of the
Corporation for any period and the amount of assets at any time legally
available for the payment of dividends, redemption of its stock or the
payment of other distribution on its stock; the amount of paid-in surplus,
net assets, other surplus, annual or other net profit, net assets in excess
of capital, undivided profits or excess of profits over losses on sales of
assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety
thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or
discharged); the fair value, or any sale, bid or asked price to be applied
in determining the fair value, of any asset owned or held by the
Corporation; and any matters relating to the acquisition, holding and
disposition of any assets by the Corporation.

<PAGE>
Section 8. Reserved Powers of Board. The enumeration and definition of
particular powers of the Board of Directors included in this Article VI
shall in no way be limited or restricted by reference to or inference from
the terms of any other clause of this or any other provision of the
Certificate of Incorporation of the Corporation, or construed or deemed
by inference or otherwise in an any manner to exclude or limit the powers
conferred upon the Board of Directors under the general laws of the
State of Maryland as now or hereafter in force.

Section 9. REIT Qualification. The Board of Directors shall use its
reasonable best efforts to cause the Corporation and its stockholders
to qualify for federal income tax treatment in accordance with the
provisions of the Code applicable to a REIT. In furtherance of the
foregoing, the Board of Directors shall use its reasonable best
efforts to take such actions as are necessary, and may take such
actions as in its sole judgment and discretion are desirable,
to preserve the status of the Corporation as a REIT; provided, however,
that if the Board of Directors determines that it is no longer in the
best interests of the Corporation for it to continue to qualify as a
REIT, the Board of Directors may revoke or otherwise terminate the
Corporation's REIT election pursuant to Section 856(g) of the Code.

ARTICLE VII

RESTRICTION ON TRANSFER OF
SHARES AND CERTAIN STOCK REPURCHASES

Section 1. Refusal to Transfer. The Corporation is authorized to refuse to
accept for transfer or to issue a new certificate for any shares of capital
stock delivered for transfer if the Board of Directors in good faith
concludes that any such sale, transfer or issuance will or could result
in the loss of status of the Corporation as a "real estate investment trust"
within the meaning set forth in the Internal Revenue Code of 1986, as
amended, the regulations thereunder, or any interpretation thereof
by a court or other governmental agency of competent jurisdiction.

Section 2. Repurchases. The Corporation shall not purchase, directly or
indirectly, at a price above the market price prevailing at the time of
purchase, any stock from any person or any Affiliate or Associate (as
hereinafter defined) of such person, who beneficially owns more than three
percent (3%) of the outstanding stock of the class of stock to be purchased,
unless (a) such purchase has been approved by an affirmative vote of the
holders of a majority of the aggregate outstanding voting
stock of the Corporation held by stockholders other than such person or
any Affiliate or Associate of such person, or (b) the Corporation offers to
purchase from all stockholders of the Corporation, other than such person
or any Affiliate or Associate of such person, all shares of such class
and all shares convertible into such class for a price at least equal to
the price being offered to such person or any Affiliate or Associate of
such person; provided, however, that notwithstanding the foregoing, the
Board of Directors may authorize the Corporation to purchase, directly or
indirectly, on terms approved by the Board of Directors, any stock from any
person or any Affiliate or Associate of such person without the vote or
consent of the stockholders to the extent such purchase is deemed by the
Board in good faith to be necessary to meet the requirements for a real
estate investment trust" within the meaning set forth in the Internal
Revenue Code of 1986, as amended, the regulations thereunder, or any
interpretation thereof by a court or other governmental agency of
competent jurisdiction.

Section 3. Beneficial Owner. A person shall be a "beneficial owner" or shall
"beneficially own" stock of the Corporation:

(a) which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly: or

(b) which such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to
any agreement, arrangement or understanding; or

(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.

Section 4. Affiliates. "Affiliate" or Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
regulations under the Securities Exchange Act of 1934, as in effect on
April 5, 1993.

ARTICLE VIII

BUSINESS COMBINATIONS

Section 1. Necessary Vote. In addition to any vote otherwise required by law
or these Articles of Incorporation, a Business Combination, as hereinunder
defined, shall require the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of the then outstanding shares
of capital stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), voting together as a single class.

<PAGE>

Section 2. Exceptions. The provisions of Section 1 of this Article VIII
shall not apply to any Business Combination if:

(a) The Corporation is at the time of the consummation of the Business
Combination, and at all times throughout the preceding twelve months has
been, directly or indirectly, the beneficial owner of a majority of each
class of the outstanding "equity securities" (as defined in Rule 3all-1 of
the General Rules and Regulations under the Securities Exchange Act of 1934,
as in effect on November 9, 1984) of the Interested Stockholder
(as hereinafter defined) which is a party to such transaction; or

(b) Such Business Combination has been approved by a majority of the Board of
Directors who, at the time such approval is given, were not Affiliates (as
hereinafter defined) or nominees of the Interested Stockholder and were members
of the Board of Directors prior to the time that the Interested Stockholder
became an Interested Stockholder ("Disinterested Directors"), and any
successor of a Disinterested Director who is not an Affiliate or nominee of the
Interested Stockholder and who is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors; or

(i) The aggregate amount of the cash and the Fair Market Value (as hereinafter
defined) as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of Voting
Stock in such Business Combination shall be at least equal to the highest
per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) aid by the Interested Stockholder for any shares of
Voting Stock acquired by it (1) within the two-year period immediately prior
to the first public announcement of the proposal of the Business Combination
or (2) in the transaction in which it became an Interested Stockholder,
whichever is higher; and

(ii) The consideration to be received by holders of a particular class of
outstanding Voting Stock shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such Voting Stock.
If the Interested Stockholder paid for shares of any class of Voting Stock
with varying forms of consideration, the form of consideration to be paid by
the Interested Stockholder for such class of Voting Stock shall be either
cash or the form used to acquire the largest number of shares of such class
of Voting Stock previously acquired by the Interested Stockholder.

Section 3. Definitions. For the purposes of this Article VIII:

(a) A "Business Combination" shall mean:

<PAGE>
(i) any merger or consolidation of the Corporation with or into (1) any
Interested Stockholder (as hereinafter defined) or (2) any other corporation
(whether or not itself an Interested Stockholder) which is, or after such
merger or consolidation would be, an Affiliate (as hereinafter defined) of
an Interested Stockholder; or

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) to or with any Interested
Stockholder or an Affiliate of any Interested Stockholder of any of the
assets of the Corporation having an aggregate fair market value of Five
Million Dollars ($5,000,000.00) or more; or

(iii) any reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation or any other transaction (whether or not
with or into or otherwise involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity securities of the Corporation
convertible into such class of equity securities which is directly or
indirectly owned by any Interested Stockholder of any
Affiliate of any Interested Stockholder; or

(iv) the adoption of any plan or proposal for the liquidation or dissolution of
the Corporation proposed by or on behalf of an Interested Stockholder or any
Affiliate of any Interested Stockholder.

(b) "Interested Stockholder" shall mean any individual, firm, corporation
(other than the Corporation) or other entity which, as of the record date
for the determination of stockholders entitled to notice of and to vote on
any of the transactions described in clauses (i) through (iv) of subsection
(a) of this Section 3, or immediately prior to the consummation of any such
transaction, is the beneficial owner of ten percent (10%) or more of the
outstanding Voting Stock;

(c) "Beneficial owner" or "beneficially own" shall have the meaning set forth in
Section 3 of Article VII of these Articles of Incorporation.

(d) For the purpose of determining whether a person is an Interested Stockholder
pursuant to subsection (b) of this Section 3, the number of shares of Voting
Stock deemed to be outstanding shall include shares deemed owned through the
application of Section 3 of Article VII of these Articles of Incorporation
but shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or
options or otherwise.

<PAGE>
(e) "Affiliate" or "Associate" shall have the meaning set forth in Section 4 of
Article VII of these Articles of Incorporation.

(f) "Fair Market Value" means: (i) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date of the
consummation of the Business Combination of a share of such stock on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock
is not quoted on the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc., Automated Quotation System or any
system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock was determined by the
Board of Directors in good faith; and (ii) in the case of property other than
cash or stock, the fair market value of such property on the date in question
as determined by the Board of Directors in good faith.

<PAGE>
ARTICLE IX

AMENDMENTS

The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in this charter,
of any shares of outstanding stock. Any amendment to the charter of the
Corporation shall be valid only if such amendment shall have been approved
by the affirmative vote of a majority of all the votes entitled to be cast
on the matter, except that eighty percent (80%) of the outstanding voting
stock of the Corporation, voting together as a single class shall be required
to amend or adopt any provisions inconsistent with Article VIII of these
Articles of Incorporation or with the reference to Article VIII in this
sentence. All rights and powers conferred by the charter of the Corporation
on stockholders, directors and officers are granted subject to this reservation.

ARTICLE X

LIMITATION OF LIABILITY

To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors, officers and employees, no director,
officer or employee of the Corporation shall be liable to the Corporation or
its stockholders for money damages. Neither the amendment nor repeal of this
Article X, nor the adoption or amendment of any other provision of the charter
or the Bylaws of the Corporation inconsistent with this Article X, shall
apply to or affect in any respect the applicability of the preceding sentence
with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.

IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this 29th day of June, 1993.

/s/ James J. Hanks, Jr.
James J. Hanks, Jr.

Exhibit 10.2

BEDFORD PROPERTY INVESTORS, INC.
EMPLOYEE STOCK OPTION PLAN
Effective September 16, 1985
(as amended April 15, 1986)
(as amended and restated June 9, 1993)

Bedford Property Investors, Inc. (formerly ICM Property Investors
Incorporated [the "Company"]), in order to attract and retain
personnel for positions of responsibility with the Company and its
subsidiaries and to provide additional incentive to such personnel by
offering them an opportunity to obtain a proprietary interest in the
Company, hereby authorizes nonqualified stock options and incentive
stock options to be granted to the officers, key employees and
consultants of the Company and its subsidiaries to purchase shares of
the common stock of the Company (the "Common Stock") upon the
following terms and conditions. The Company hereby further authorizes
the grant of stock appreciation rights also subject to the following
terms. The 1985 Stock Option Plan (the "Plan") permits the grants of
Nonqualified Stock Options, as well as the grant of Incentive Stock
Options intended to qualify under Section 422A of the Internal Revenue
Code of 1954, as amended (the "Code"). Options granted under the Plan
will be designated as "Nonqualified Stock Options" or "Incentive Stock
Options".

1. Administration of the Plan. The Plan shall be administered, and the
options and stock appreciation rights hereunder shall be granted, by a
committee called the "Committee on Stock Options and Management"
(hereinafter referred to as the "Committee"). The Committee shall
consist of not less than three, nor more than five, members of the
Board of Directors of the Company who are not officers or employees of
the Company. No member of the Committee shall be eligible for
selection as a person to whom options may be granted nor shall such
member have been eligible, at any time within one year prior to
becoming a member, to be allocated or granted stock, stock options or
stock appreciation rights pursuant to any plan of the Company or any
of its affiliates, entitling the participants therein to acquire
stock, stock options or stock appreciation rights of the Company or
any of its affiliates except for a plan meeting the requirements of
paragraph (c)(2)(ii) of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended. Such members shall serve, without
compensation other than attendance fees, at the pleasure of the Board.
Any decision of the Committee shall be final and conclusive in all
matters relating to the Plan. The Committee may act only by a majority
of its members in office, except that the members thereof may
authorize any one or more of their number to execute and deliver
documents on behalf of the Committee. No member of the Committee shall
be liable for anything done or omitted to be done by him or her or by
any other member of the Committee in connection with the Plan, except
for his or her own willful misconduct or as expressly provided by
statute.

2. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is 1,800,000 shares of Common
Stock. Such shares may be either authorized but unissued or reacquired
shares. If the Company shall effect one or more stock splits, stock
dividends, combinations, exchanges of shares or similar capital
adjustments, the Committee shall proportionately adjust the aggregate
number and kind of shares with respect to which options may be granted
under the Plan. If any option granted hereunder, or any portion
thereof, shall expire or terminate for any reason without having been
exercised in full, the shares with respect to which it has not been
exercised shall be available for further options.

3. Eligible Recipients. Options may only be granted to officers, key
employees and consultants of the Company and such other corporations
as are subsidiary corporations of the Company at the time of grant
(any such employer being hereinafter referred to as a "Participating
Employer"). The Committee is hereby given the authority to select the
particular employees and consultants within the class to whom options
and stock appreciation rights are to be granted and to determine the
number of shares to be optioned or made subject to a stock
appreciation right with respect to each such employee. Options and
stock appreciation rights may not be granted to the members of the
Committee, but may be granted to any other members of the Board of
Directors of the Company who are officers, employees or consultants.

4. Terms of Options.

(a) Options may be granted to any participant in the Plan to purchase
such number of shares as the Committee shall determine, in exchange
for payment of the option price in cash and/or, with the consent of
the Committee, in shares of Common Stock already owned by the grantee.
Each option granted under the Plan shall comply with the following
terms and conditions:

(i) The option price shall not be less than 85% of the fair market
value of the Common Stock subject to such option at the time the
option is granted, as determined in good faith by the Committee (with
the exception of Incentive Stock Options, whose option price may not
be less than 100% of such fair market value);

(ii) The option shall not be exercisable after the expiration of ten
years from the date it is granted;

(iii) The option shall not be exercisable unless either the Common
Stock subject to the option has been registered under the Securities
Act of 1933, as amended, or the optionee has furnished the Company
with an investment representation satisfactory to the Company;

(iv) The options shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his or her lifetime only by the optionee.

(b) The aggregate fair market value (determined at the time of grant
of the option) of Common Stock issuable upon the exercise of incentive
stock options which are exercisable for the first time by any optionee
shall not exceed $100,000 during any calendar year under all plans of
the Company (or its parent or subsidiary corporations).

(c) No Incentive Stock Option shall be granted under the Plan to any
person who at the time owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of
the Company or its parent or subsidiary corporations.

5. Qualification. It is intended that options issued under this Plan
which are designated as "Incentive Stock Options" shall qualify as
Incentive Stock Options within the meaning of Section 422A of the
Code. The words "employee", "outstanding" and "disposition", the term
"subsidiary corporation" and any other words or terms used herein and
in Section 421, 422A or 425 of the Code shall, unless the context
clearly requires otherwise, have the meanings assigned to them in such
Sections of the Code.

6. Stock Option Agreement. The terms and conditions of the grant of
each option granted hereunder shall be embodied in a written agreement
in a form prescribed by the Committee which shall contain terms and
conditions not inconsistent with this plan and which shall incorporate
this plan by reference. Such agreement shall have been:

(i) completed with the date, name of optionee, number of shares to
which it relates, option price per share, name of optionee's employing
company and (with respect to Incentive Stock Options) the conditions
set forth in Sections 4(a)(i), 4(a)(ii), 4(a)(iv) and 4(b) hereof,

(ii) signed by a member of the Committee or an officer of the Company
designated by the Committee, and

(iii) delivered to the optionee.

7. Death of Optionee. If an optionee entitled to exercise an option
dies while employed or engaged as a consultant by a Participant
Employer (as defined in Section 3 hereof) or dies after the
termination of such optionee's employment or consulting agreement with
a Participating Employer during the period within which he or she was
entitled to exercise such option pursuant to Section 8, then such
option, to the extent of the number of shares of Common Stock which
could have been purchased by the optionee on the date of death, may be
exercised by the optionee's estate, and/or by a person who acquires
the right to exercise such option by bequest or inheritance or by
reason of the death of the optionee, provided that such exercise
occurs prior to the expiration of the option and:

(i) in the case of the optionee's death while employed or engaged as a
consultant by a Participating Employer, within one year after death;

(ii) in the case of an optionee who is an employee, the optionee's
death within three months after the termination of such optionee's
employment (as described in Section 8 hereof), within the applicable
Post-Termination Period (as defined in Section 8 hereof) or within one
year after death, if later; or

(iii) in either case, within such other period of time as the
Committee shall have specified in the written stock option agreement.

8. Termination of Employment of Optionee. Except as provided in
Section 7 and as further provided below, all options of an optionee
who is an employee of a Participating Employer shall be cancelled upon
termination of the optionee's employment. Upon termination of the
optionee's employment with a Participating Employer by reason of (1)
permanent disability (as defined in section 105(d)(4) of the Code), as
determined by the Committee, retirement at or after age sixty-five
(65), or (ii) a termination of such optionee's employment for any
other reason (except a termination for cause as defined below), then
the optionee may exercise any option during the Post-Termination
Period (as defined below) to the extent such option would have been
exercisable had the employee been continuously employed by a
Participant Employer up to the date of exercise of the option. The
"Post-Termination Period" shall be one year from the date of a
termination of employment by reason of permanent disability, three
months from the date of any other termination of employment described
in this paragraph or within such other period of time prior to the
expiration of the option as the Committee shall have specified in the
written stock option agreement, provided that the Post-Termination
Period for an Incentive Stock Option shall be no longer than the
applicable one-year or three-month period described earlier in this
sentence. For purposes of this Section 8, termination for "cause"
shall mean termination due to a willful act or acts by the optionee in
contravention of the interests of the Company as determined in the
sole discretion of the Committee.

9. Termination of Consulting Agreement. All options of an optionee who
is a consultant to a Participating Employer shall be cancelled upon
termination of such optionee's consulting agreement for cause as
defined in Section 8. Except as provided in Section 7, if an
optionee's consulting agreement is terminated for any other reason,
such optionee's options shall be cancelled or terminated within such
period of time as the Committee shall have specified in the written
stock option agreement to which such options are subject.

10. Grant of Stock Appreciation Rights.

(a) The Committee may grant stock appreciation rights to participants
who have been granted Options under the Plan. Each such stock
appreciation right shall relate to a specific option granted under the
Plan and in the case of Incentive Stock Options may be granted only
concurrently with the option to which it or they relate or in the case
of nonqualified stock options stock appreciation rights may be granted
at any time prior to the exercise, termination or expiration of such
option, or in connection with the substitution, cancellation or
surrender of the option.

(b) The term "stock appreciation rights" shall mean the right to
receive from the Company, upon exercise of the right, an amount equal
to the fair market value on the exercise date of the total number of
shares of Common Stock for which the stock appreciation right is
exercised, less the exercise price that the optionee would have
otherwise been required to pay upon purchase of such shares had the
option been exercised.

(i) Stock appreciation rights shall be exercisable by the optionee
only at such times as the option to which it relates could be
exercised and may expire no later than the expiration of the
underlying option. The exercise of an option shall cause a correlative
reduction in any related stock appreciation rights theretofore held by
an employee. The exercise of a stock appreciation right shall cause a
correlative cancellation of the related options.

(ii) The exercise of a stock appreciation right shall automatically
result in the cancellation of the related stock option right by the
optionee on a share-for-share basis to the extent shares under such
related stock option are used to calculate the amount to be received
by such optionee upon the exercise of such stock appreciation right.
Shares covered by such cancelled options shall not thereafter be
available for issuance pursuant to the exercise of options under this
Plan.

(iii) Stock appreciation rights shall be transferable only when the
underlying option is transferable, and under the same conditions.

(iv) Stock appreciation rights may only be exercised when the market
price of the stock subject to the related option exceeds the exercise
price of the option.

(v) No stock appreciation right granted in tandem with an Incentive
Stock Option to any individual under the Plan shall be exercisable
while there is outstanding any Incentive Stock Option or related stock
appreciation right which was granted before the granting of such stock
appreciation right.

(vi) The stock appreciation right may be paid in cash or in shares of
Common Stock, or a combination thereof, as determined in the sole
discretion of the Committee.

(vii) The Committee may impose any other conditions it prescribes upon
the exercise of any stock appreciation right which conditions may
include a total prohibition on the exercise of such rights for such
periods or period as it, in its sole discretion, deems to be in the
best interest of the Company. Except as so provided, any stock
appreciation right may be exercised in whole or in part from time to
time during its term.

(d) The terms and conditions of the grant of each stock appreciation
right shall be embodied in a written agreement in a form prescribed by
the Committee which shall contain terms and conditions not
inconsistent with this Plan and which shall incorporate this Plan by
reference.

11. Amendment. This Plan may be amended at any time and from time to
time by the Board of Directors of the Company, but no amendment
affecting the aggregate number of shares which may be issued under the
options or related stock appreciation rights granted pursuant to this
Plan, the class of employees or consultants eligible to receive such
options, the material terms of the options and stock appreciation
rights required by this Plan or this sentence shall be effective
unless the same be approved by the stockholders of the Company, within
12 months before or after the Board of Directors adopts such
amendment, in accordance with the same procedure that is required by
Section 12 hereof with respect to stockholder approval. No amendment
shall alter or impair any of the rights or obligations of any person,
without his or her consent, under any option theretofore granted under
this Plan.

12. Termination. This Plan shall terminate upon the first of the
following dates or events to occur:

(a) upon the adoption of a resolution of the Board of Directors of the
Company terminating the Plan; or

(b) on April 30, 2003.
No termination of this Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any
option theretofore granted under the Plan.

13. Stockholder Approval. The Plan, as amended and restated, shall be
submitted to the stockholders of Bedford Property Investors, Inc. for
their approval on or before June 9, 1993. The stockholders shall be
deemed to have approved this Plan only if it is approved at a meeting
of the stockholders duly held on or before such date by such vote
taken in such manner as would be required by the Company's certificate
of incorporation, its bylaws and the laws of the State of Delaware, at
the time such vote is taken.

14. Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation and the Company is the
surviving corporation and there shall be any change in the shares of
Common Stock by reason of such merger or consolidation, (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, (iii) the Company is reorganized, dissolved or liquidated
(each such event in (i), (ii) and (iii) being hereinafter referred to
as a "Reorganization Event") or (iv) the Board of Directors shall
propose that the Company enter into a Reorganization Event, then the
Committee may, in its sole discretion, (i) by written notice to each
optionee and grantee, as applicable, provide that his or her grant of
options shall be terminated, unless exercised within thirty (30) days
(or such longer period as the Committee shall determine) after the
date of such notice; or (ii) advance the dates upon which any or all
outstanding options shall be exercisable, as applicable under the
circumstances. Any action taken by the Committee may be made
conditional upon the consummation of the applicable Reorganization
Event.

In the event of a change in the Common Stock which is limited to a
change in the designation thereof to "Capital Stock" or other similar
designation, or to a change in the par value thereof, or from par
value to no par value, without increase in the number of issued
shares, the shares resulting from any such change shall be deemed to
be Common Stock within the meaning of the Plan.

15. Options in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time
in substitution for stock options held by employees of or consultants
to corporations who become or are about to become key employees of or
consultants to a Participating Employer as the result of a merger or
consolidation of the employing corporation with a Participating
Employer, or the acquisition by a Participating Employer of the assets
of the employing corporation, or the acquisition by a Participating
Employer of stock of the employing corporation as the result of which
it becomes a subsidiary of a Participating Employer. The terms and
conditions of the substitute options so granted may vary from the
terms and conditions set forth in Section 4 of the Plan to such extent
as the Board of Directors at the time of grant may deem appropriate to
conform, in whole or part, to the provisions of the options in
substitution for which they are granted.

16. Withholding Taxes. Whenever the Company proposes to deliver shares
of Common Stock under the Plan, or to make payments pursuant to the
exercise of a stock appreciation right under the Plan, the Company
shall have the right to require the individual who is to receive the
shares or the payment to remit to the Company, prior to the delivery
of any certificate or certificates for such shares or the payment of
any money or other property, an amount sufficient to satisfy any
federal, state and/or local tax withholding requirements.

Exhibit 10.3

BEDFORD PROPERTY INVESTORS, INC.
1992 DIRECTORS' STOCK OPTION PLAN
Effective May 20, 1992

Bedford Property Investors, Inc. (formerly ICM Property
Investors Incorporated [the "Company"]), in order to attract and
retain qualified members of its Board of Directors and to provide
additional incentive by offering them an opportunity to obtain a
proprietary interest in the Company, hereby authorizes non-qualified
stock options to be granted to members of the Board of Directors to
purchase shares of the common stock of the Company having a par value
of $ 1 per share (the "Common Stock") upon the following terms and
conditions, pursuant to this 1992 Directors' Stock Option Plan (the
"Plan").

1. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is 500,000 shares of Common Stock.
Such shares may be either authorized but unissued, reacquired, or
treasury shares. If the Company shall effect one or more stock splits,
stock dividends, combinations, exchanges of shares or similar capital
adjustments, the Committee on Stock Options and Management of the
Board of Directors of the Company shall proportionately adjust the
aggregate number and kind of shares with respect to which options may
be granted under the Plan. If any option granted hereunder, or any
portion thereof, shall expire or terminate for any reason without
having been exercised in full, the shares with respect to which it has
not been exercised shall be available for further options.

2. Eligibility. Options may only be granted to members of the Board of
Directors.

3. Grant and Terms of Options. (i) On the date of the annual meeting
coincident with or first succeeding a director's election to the Board
of Directors (other than a re-election for a successive term), each
director in office at the time of such meeting (but not leaving office
as of such meeting) will receive a grant of 50,000 options, each
representing the right to purchase one share of Common Stock. Payment
of the option exercise price must be made in cash. As of each
subsequent annual meeting held while such director holds his or her
position until the shares reserved hereunder are fully granted, each
director re-elected for an additional term shall be granted an
additional 10,000 options. If, in any year, an insufficient number of
shares are available for grant under this Plan, each director shall
receive a pro-rata allocation of options.

(ii) Each option shall become exercisable six months from the later of
(a) date of grant or (b) the date shareholders approve this Plan.

(iv) The option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by the optionee.

(v) The option shall be exercisable for five years from the date
specified in (ii) above, provided that in the event that an optionee
resigns by reason of permanent disability (as defined in Section
105(d)(4) of the Internal Revenue Code of 1986), then the optionee may
exercise any option for one year from the date of a resignation by
reason of permanent disability, and if the optionee resigns for any
other reason, the optionee may exercise any option for three months
from the date of resignation.

(vi) Each option shall have an exercise price equal to the fair market
value of the Common Stock on the date of grant.

4. Stock Option Agreement. The terms and conditions of the grant of
each option granted hereunder shall be embodied in a written agreement
which shall contain terms and conditions not inconsistent with this
Plan and which shall incorporate this Plan by reference. Such
agreement shall also include the date, name of optionee, number of
shares to which it relates, and option exercise price per share.

5. Death of Optionee. If an optionee entitled to exercise an option
dies, then such option may be exercised by the optionee's estate,
and/or by a person who acquires the right to exercise such option by
bequest or inheritance or by reason of the death of the optionee,
provided that such exercise occurs prior to the expiration of the
option and within one year after death.

6. Amendment. This Plan may be amended at any time and from time to
time by the Board of Directors of the Company, provided that no
provision affecting the aggregate number of shares which may be issued
under the options granted pursuant to this Plan, the class of persons
eligible to receive such options, or the timing or exercise price of
the option grants may be amended more frequently than once every six
months, other than to comply with changes in the Internal Revenue Code
of 1986, as amended, or the Employee Retirement Income Security Act of
1975, as amended. Any amendment (1) which under the requirements of
applicable law must be approved by the stockholders of the Company, or
(ii) which must be approved by the stockholders of the Company in
order to maintain the continued qualification of the Plan under Rule
16b-3 of the Securities Exchange Act of 1934, as amended, will not be
effective unless and until such stockholder approval has been
obtained. No amendment shall alter or impair any of the rights or
obligations or any person, without his consent, under any option
theretofore granted under this Plan.

7. Termination. This Plan shall terminate upon the first of the
following dates or events to occur: (a) upon the adoption of a
resolution of the Board of Directors of the Company terminating the
Plan; or (b) on May 19, 2002. No termination of this Plan shall alter
or impair any of the rights or obligations of any person, without his
consent, under any option theretofore granted under the Plan.

8. Stockholder Approval. The Plan shall be submitted to the
stockholders of Bedford Property Investors, Inc. for their approval on
or before May 19, 1993. The stockholders shall be deemed to have
approved this Plan only if it is approved at a meeting of the
stockholders duly held on or before such date by such vote taken in
such manner as would be required by the Company's certificate of
incorporation, its By-laws and the laws of the State of Delaware, at
the time such vote is taken.

9. Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation and the Company is not
the surviving corporation and there shall be any change in the shares
of Common Stock by reason of such merger or consolidation, (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, or (iii) the Company is reorganized, dissolved or
liquidated (each such event in (i), (ii) and (iii) being hereinafter
referred to as a "Reorganization Event"), then each option shall be
terminated, unless exercised within the thirty (30) days prior to the
effective date. Any such exercise shall be conditional upon the
consummation of the applicable Reorganization Event.

10. Withholding Taxes. Whenever the Company proposes to deliver shares
of Common Stock under the Plan, the Company shall have the right to
require the individual who is to receive the shares to remit to the
Company, prior to the delivery of any certificate or certificates for
such shares, an amount sufficient to satisfy any Federal, state and/or
local tax withholding requirements.

Exhibit 23.3

Consent of Independent Certified Public Accountants

The Board of Directors
Bedford Property Investors, Inc.:

We consent to the use of our report dated February 14, 1995 (relating
to the consolidated financial statements of Bedford Property
Investors, Inc.) included herein and to the reference to our firm
under the heading "Experts" in the prospectus.

San Francisco, California KPMG Peat Marwick LLP
February 9, 1996

<PAGE>

Exhibit 23.4

Consent of Independent Certified Public Accountants

The Board of Directors
Bedford Property Investors, Inc.:

We consent to the use of our reports dated October 11, 1995, November
10, 1995, December 8, 1995 and January 26, 1996 (relating to the
historical summaries of gross income and direct operating expenses of
350 East Plumeria Drive, the Landsing Pacific Portfolio, 6600 College
Boulevard and 3002 Dow Business Center, respectively) included herein
and to the reference to our firm under the heading "Experts" in the
prospectus.

San Francisco, California KPMG Peat Marwick LLP
February 9, 1996