BEDFORD PROPERTY INVESTORS INC/MD, 10-K, 2000-03-31

BEDFORD PROPERTY INVESTORS INC/MD
10-K, 2000-03-31
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1999

Commission file number 1-12222

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

MARYLAND 68-0306514
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices)

Registrant's telephone number, including area code(925) 283-8910

Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered

Common Stock, par value $0.02 per share New York Stock Exchange
Pacific Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X] The aggregate market value
of the voting stock held by non-affiliates of Registrant as of March 10,
2000 was approximately $230,579,000. The number of shares of
Registrant's Common Stock, par value $0.02 per share, outstanding as of
March 10, 2000 was 19,649,910.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement to be mailed to stockholders
in connection with the Registrant's annual meeting of stockholders,
scheduled to be held on May 18, 2000, are incorporated by reference in
Part III of this report. Except as expressly incorporated by reference,
the Registrant's Proxy Statement shall not be deemed to be part of this
report.

When used in this annual report, the words "believes," "anticipates" and
similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected,
including, but not limited to, those set forth in the section entitled
"Potential Factors Affecting Future Operating Results" and "Qualitative
and Quantitative Disclosures About Market Risk" below. Readers are
cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

PART I

ITEM 1. BUSINESS

The Company

Bedford Property Investors, Inc. is a self-administered and self-managed
equity REIT engaged in the business of owning, managing, acquiring and
developing industrial and suburban office properties proximate to
metropolitan areas primarily in the Western United States. As of
December 31, 1999, the Company owned and operated, either directly or
through wholly-owned subsidiaries, 98 properties aggregating
approximately 7.6 million rentable square feet. Of these 98 properties
(the "Properties"), there are 72 industrial (the "Industrial Properties")
and 26 suburban office (the "Suburban Office Properties"). As of
December 31, 1999, the Properties include two projects which were under
rehabilitation. The remaining 96 operating Properties were approximately
97% leased to almost 600 tenants. The Properties are located in Northern
and Southern California, Oregon, Washington, Arizona, Nevada, Colorado,
Texas, Kansas, and Missouri.

In addition to the Properties, the Company owns three suburban office and
two industrial development projects totaling 380,000 rentable square
feet. During 1999, the Company completed shell construction and initial
lease-up on these five projects and as of December 31, 1999, the projects
were approximately 67% leased.

The Company seeks to grow its asset base through the acquisition of
industrial and suburban office properties and portfolios of such
properties, as well as through the development of new industrial and
suburban office properties. The Company's strategy is to operate in
suburban markets that are experiencing, or are expected by the Company
to experience, superior economic growth and that 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. In addition, the Company
believes that certain supply-side constraints, such as limited
availability of undeveloped land in a market, increase a market's
potential for higher than average rental growth over time. The Company
continues to target selected markets in which the Properties are located
as well as selected other markets in which the Company has expertise.

Business Objective and Growth Plan

Business Objective

The Company's business objective is to increase stockholders' long-term
total return through increases in the dividend and the appreciation in
value of the Common Stock. To achieve this objective, the Company seeks
to (i) increase cash flow by internal growth of rents from its existing
Properties, (ii) acquire quality industrial and suburban office
properties and/or portfolios of such properties, (iii) develop new
industrial and suburban office properties, and (iv) repurchase its common
stock.

Internal Growth

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 by retaining existing tenants, (iii) the negotiation
of increases in rental rates and of contractual periodic rent increases
when market conditions permit, and (iv) the strict containment of
operating expenses and capital expenditures.

During 1999, 1,123,000 square feet of leased space expired with a
weighted average base rental rate of $8.48 per square foot.
Approximately 89% of this space has been re-leased, and the weighted
average base rental rate of the new leases is $10.24 per square foot, an
increase of 21%. Past performance is not necessarily indicative of
results that will be obtained in the future, and no assurance can be
given in that regard.

Acquisitions

The Company seeks to acquire industrial and suburban office properties
and/or portfolios of such properties. The Company believes that (i) the
experience of its management team, (ii) its existing $175 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 enable it to effectively
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. However, the Company has in the past
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 individual
properties that do not meet one or more of the foregoing criteria.

Following completion of an initial review of a property, 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. The due diligence also includes an evaluation of the local
market including competitive properties and relevant economic and
demographic information. Mr. Bedford (the Chief Executive Officer),
along with at least one other officer and one other Board member of the
Company, will 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 on an exclusive basis
by Bedford Acquisitions, Inc. (BAI), a California corporation wholly-
owned by Mr. Bedford. BAI receives fees in amounts equal to the lesser
of (i) 1 1/2 % of the gross amount of the aggregate purchase price of
property acquisitions and dispositions, up to 1 1/2 % of any loans arranged
by BAI, plus 5% of development project costs, or (ii) an amount equal to
(a) the aggregate amount of approved expenses funded by BAI through the
time of such acquisition, disposition, loan or development minus (b) the
aggregate amount of fees previously paid to BAI pursuant to such
arrangement. In no event will the aggregate amount of fees paid to BAI
exceed the aggregate amount of costs funded by BAI. The current
agreement with BAI has a one-year term expiring January 1, 2001.

Development

The Company seeks to develop properties in strong markets where (i)
demand for space has caused or is expected to cause occupancy rates to
remain high, (ii) barriers to entry such as scarcity of land or
entitlement challenges exist, and (iii) the project complements the
existing portfolio. 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. The Company plans to
be especially focused on the development of office tech and flex tech
product in 2000. These are multi-tenant buildings designed to meet the
needs of the widest range of uses. The flex tech product anticipates the
changing needs of high-growth tenants and accommodates their need for
flexible facility configurations. The Company evaluates the competitive
environment, demand and rent trends, and development pipelines before
embarking on or acquiring each new development project. The Company is
currently in the process of developing properties in Northern California,
Arizona, Washington, and Colorado, and is considering developing
additional properties in Northern California, Southern California,
Washington and Colorado. The Company's management team has significant
development experience in each of these markets. In 1999, the shell
construction of 380,000 square feet was completed in five projects of
service-flex, tech-flex and office space. Sixty-seven percent of these
projects were leased at year-end.

Share Repurchase

Since 1998, the Company's stock has traded at a discount to its net asset
value (determined based on current cap rate and earning estimates) as a
result of the softening of the REIT market. With a dividend yield close
to 10%, the repurchase and retirement of the Company's common stock
increases the stockholders' ownership in the Company and therefore brings
value to the stockholders' investment.

In July 1998, the Company's board of directors approved a share
repurchase program of 3 million shares which was increased to 4.5 million
shares in September 1999. Since November 1998, the Company has
repurchased and retired 3,458,000 shares at an average price of $16.89
per share.

Corporate Strategies

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

1. Pursue a Market Driven Strategy.

The Company's strategy is to operate in suburban markets which are
experiencing, or are expected by the Company to experience, above average
economic growth, and which are, ideally, subject to supply-side
constraints. The metropolitan areas in which the Company operates have
multiple suburban "cores" and it believes that the potential for growth
in these metropolitan areas is generally greatest in and around these
suburban cores. It is the Company's experience 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 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. Such restrictions limit the supply of new commercial
space, which, when combined with a growing employment and population
base, enhances the long-term return potential for an investment in real
estate assets.

2. Focus its Efforts in the Western United States.

The Company is currently targeting selected suburban markets in the
western United States. Continued economic improvements in these markets,
and related improvements in the commercial property markets, and the
level of investment in industrial or suburban office properties in these
markets should provide the potential for attractive returns through
increased occupancy levels, rents and real estate values. 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.

3. Acquire and Develop "Service-Flex, Tech-Flex and Office-Tech"
Properties.

Among the Company's targeted properties are service and tech-flex
industrial properties as well as office-tech buildings. These buildings
provide for a wider range of function than that offered by traditional
office or industrial properties and are an efficient facility choice for
today's high growth technology sector firms that have frequently changing
space needs. These properties are divisible into units ranging from
approximately 1,500 square feet to approximately 20,000 square feet in
order to accommodate multiple tenants of various sizes and needs. The
buildings, which generally range in size from 8,000 to 80,000 square
feet, have a clear height of 12 to 18 feet and are built using concrete
tilt construction with store fronts incorporated in the front elevation
and service doors in the back elevation. The Company believes that these
properties require more management expertise than other types of
industrial properties and that it has developed such expertise. The
Company also believes that many potential buyers do not wish or are not
well-positioned to undertake such active management. As a result, the
Company believes that it often faces fewer competitors for this product
and is generally able to acquire these properties at above average
yields.

4. Asset Sales

The Company funds a portion of its acquisition activities and share
repurchase program through the sale of selected assets. Such assets
include buildings that have maximized their value or have become obsolete
due to their physical attributes. In addition, the Company continues to
redefine its geographical focus in the western United States and intends
to sell real estate assets that do not fit this western orientation.

5. Neighborhooding

Neighborhooding describes the expansion in areas where the Company owns
existing properties. This strategy capitalizes on management's expertise
and knowledge of the local market, economy and tenant needs for
expansion. It results in efficiency in property management and therefore
enables the Company to acquire or develop properties at greater yields.
The Company utilized this concept in developing projects and acquiring
properties in Fremont, Napa and Petaluma, California; Phoenix, Arizona;
Lenexa, Kansas; Denver, Colorado; and Federal Way, Washington.

Transactions and Significant Events During 1999

Acquisitions and Development

During the year, the Company invested approximately $65 million to
acquire nine Properties, including five Industrial Properties and four
Suburban Office Properties, aggregating approximately 614,000 rentable
square feet. At acquisition, the Company estimated that these
Properties would provide an initial weighted average unleveraged
return on cost (computed as annualized property net operating income
at the date of acquisition divided by the total acquisition cost) of
9.76%. The Company estimates the purchase price of acquisitions
completed in 1999 to be approximately 90% of the replacement cost of
those properties.

The Company also acquired two parcels of vacant land in southeast
Denver, Colorado, aggregating 23.7 acres for a total investment of
approximately $6 million. One of these parcels of land is adjacent to
an existing Property. The Company is in the preliminary planning
stage to develop industrial or office properties on each of these
parcels.

Development activity during the year included (i) the completion of
construction and initial lease-up of five projects located in Arizona,
Washington, and Northern California, adding 380,000 rentable square
feet to the available inventory (as of December 31, 1999, these
projects were approximately 67% leased); (ii) completion of
construction and leasing of one rehabilitation project of 39,000
rentable square feet; and (iii) commencement of construction of one
new project in Colorado, which is expected to add approximately
103,000 rentable square feet to the inventory of available space in
2000. This new leasable space provides the Company with a significant
opportunity to increase its operating revenue.

Sell Selected Assets

During the year, the Company sold four Properties, including three
Industrial Properties and one Suburban Office Property, aggregating
562,000 rentable square feet for $24,726,000. In addition, the
Company sold one 1.39 acre parcel of land for $455,000. The sales
produced gain totaling $7,743,000.

The dispositions of a Suburban Office Property and an Industrial
Property were structured as like-kind exchanges to defer approximately
$9,453,000 of taxable gain. The cash proceeds from other sales were
used to partially fund the repurchases of the Company's common stock.

The Company's Markets

The Properties are located in select markets proximate to metropolitan
areas in Northern and Southern California, Oregon, Washington,
Arizona, Nevada, Colorado, Texas, Kansas and Missouri. From 1994
through the early part of 1998 most of these markets were recovering
from the economic recession of the early 1990s. During this recovery,
these markets were characterized by strong demand for commercial
property without significant increases in supply. The Company
believes that this "recovery phase" of the economic cycle for the real
estate market came to an end during 1998 and that we are now entering
an "equilibrium phase" where supply and demand for properties are more
or less in balance. Accordingly, the Company expects commercial
property values during this equilibrium phase to be driven less by
supply and demand imbalances and more by continuing economic strength
in these markets. This continuing economic strength should result in
the maintenance of high occupancy levels, increasing rents and
potentially increasing real estate values.

In particular, the Company believes that continuing economic growth in
the San Francisco Bay Area (where 32% of the square footage of the
Company's Properties are located) and Seattle (where 12% of the square
footage of the Company's Properties are located) will result in strong
returns on its properties in these markets during the coming year.
These markets are particularly attractive as a result of the excellent
quality of life they offer and their limited supply of new commercial
real estate resulting from both environmental concerns and geographic
barriers. The 2000 edition of Emerging Trends in Real Estate, a
publication of PricewaterhouseCoopers and Lend Lease Real Estate
Investments, ranked San Francisco (for the fourth consecutive year)
and Seattle, as the number one and number seven investment markets in
the United States, respectively, for this equilibrium phase of the
real estate cycle.

Despite this positive outlook, the Company's markets (particularly the
San Francisco Bay Area) remain susceptible to an economic downturn in
Asia. During the first half of 1998, sources have indicated that
California's exports to East Asia fell by 17.5% compared to the first
half of 1997. Although there were indications that the Asian economy
showed signs of recovery in 1999, there can be no assurance that an
economic downturn in Asia will not have an adverse effect on
California's manufacturing sector and accordingly on the California
real estate market and the Company's portfolio.

Operating Performance

For the year ended December 31, 1999, the Company reported income
before gain on sales and extraordinary item of $32,410,000, on rental
revenues of $90,527,000, compared with income before gain on sale and
extraordinary item of $31,496,000, on rental revenues of $73,451,000
for the year ended December 31, 1998. The Company's Funds From
Operations ("FFO": see definition under "Selected Financial Data") for
the year ended December 31, 1999 was $45,554,000 as compared to
$42,312,000 for the year ended December 31, 1998. With the share
repurchase program, this growth in FFO was spread over fewer shares,
increasing the "per share" growth rate.

Increase in Dividends on Common Stock

In December 1999, the Company announced an 8% increase in its
quarterly Common Stock dividend from $0.39 to $0.42 per share, or
$1.68 on an annualized basis. The higher dividend rate commenced with
the Company's dividend for the fourth quarter of 1999. The Company
previously announced, in May 1999, an 8% increase in its quarterly
dividend from $0.36 to $0.39 per share which, together with the
December 1999 increase, represents a total increase of 18% in the
Company's dividends declared for 1999 of $1.56 when compared with the
dividends declared for 1998 of $1.32.

Credit Facility

In June 1998, the Company amended and restated its secured revolving
line of credit facility led by Bank of America. Under the facility,
which matures June 2001, the Company can borrow up to $175 million on
a secured basis. The facility contains an unsecured sub-line of $50
million. The secured loans bear interest at a floating rate equal to
either the lender's published "reference rate" or LIBOR plus a margin
ranging from 1.10% to 1.35% depending on the Company's leverage level.
The unsecured loans bear interest at either the lender's published
"reference rate" or LIBOR plus a margin of 1.50%. At December 31,
1999, the facility, which was all secured, had an outstanding balance
of $137,156,000, with an interest rate of LIBOR plus 1.35%.
Approximately 55% ($75 million) of the loan was fixed at a six-month
LIBOR rate which expires in June 2000.

In February 1999, the credit facility was restructured to include a
$30 million bridge facility which carried the same interest rate as
the $175 million facility. In May 1999, the Company obtained a total
of $108 million of new first mortgage financing from Teachers
Insurance and Annuity Association of America (TIAA). The proceeds
from the mortgage loans were used to repay and retire the $30 million
bridge facility and pay down the outstanding balance on its $175
million line of credit. The Company was in compliance with the
covenants and requirements of its revolving credit facility throughout
1999.

Mortgage Loans Payable

As noted above, in May 1999 the Company obtained a total of $108
million of new first mortgage financing from TIAA. The financing
consists of a $43.45 million 10-year loan, a $37.2 million 8-year
loan, and a $27.35 million 6-year loan, all with interest at a fixed
rate of 7.17%.

In November 1999, the Company secured an additional $22.15 million
mortgage loan from TIAA. The loan has a 7-year term with interest at
a fixed rate of 7.95%.

In December 1999, the Company secured a $4.6 million mortgage loan
from Union Bank. The loan has a 5-year term with interest at a
variable rate of LIBOR plus 2.50%. Proceeds of the mortgage loans
were used to pay down the outstanding balance of the Company's $175
million line of credit.

Dividends

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 twelve times since that time from $0.10
per share in the second quarter of 1993 to $0.42 per share in the
fourth quarter of 1999. In March 2000, the Company declared a
dividend distribution for the first quarter 2000 to its stockholders
in the amount of $0.42 per share of Common Stock, payable 15 days
after the quarter-end.

Tenants

Based on rentable square feet, as of December 31, 1999, the Suburban
Office Properties and Industrial Properties were approximately 97%
occupied by a total of 575 tenants, of which 114 were Suburban Office
Property tenants and 461 were Industrial Property tenants. The
Company's tenants include local, regional, national and international
companies engaged in a wide variety of businesses.

Financing

The Company expects cash flow from operations to be sufficient to pay
operating expenses, real estate taxes, general and administrative
expenses, and interest on indebtedness and to make distributions to
stockholders required to maintain the Company's REIT qualification.

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), and (iii) the sale of certain
real estate investments.

The Company does not anticipate that cash flow from operations will be
sufficient to enable it to repay amounts then outstanding under the
credit facility when it becomes due in 2001. The Company expects to
make such payment by refinancing or extending the credit facility,
obtaining additional third party mortgage financing, or by raising
funds through the sale of certain properties.

Insurance

The Company carries commercial general liability coverage with primary
limits of $1 million per occurrence and $2 million in the aggregate,
as well as a $40 million umbrella liability policy. This coverage
protects the Company against liability claims as well as the cost of
defense. 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 $20 million subject to a
deductible of 5-10% of total insurable value per building with respect
to the earthquake coverage. The Company also carries director and
officer liability insurance with an aggregate limit of $10 million,
and a fidelity bond in the amount of $1 million. This coverage
protects the Company's directors and officers against liability claims
as well as the cost of defense.

Competition, Regulation, and Other Factors

The success of the Company depends upon, among other factors, general
economic conditions and trends, including real estate trends, interest
rates, government regulations and legislation, income tax laws and
zoning laws.

The Company's real estate investments are located in markets in which
they face significant competition for the rental revenues they
generate. Many of the Company's investments, particularly the office
buildings, are located in markets in which there is a significant
supply of available space, resulting in intense competition for
tenants and low rents.

Government Regulations

The Company's properties are subject to various federal, state and
local regulatory requirements such as local building codes and other
similar regulations. The Company believes its properties are
currently in substantial compliance with all applicable regulatory
requirements, although expenditures at its properties 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.

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.

The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any
of its present or former properties. Accordingly, the Company does
not currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity
of the Company. There can be no assurance, however, that future
discoveries or events at the Company's properties, or changes to
current environmental regulations, will not result in such a material
adverse impact.

Other Information

The Company currently employs 29 full time employees. The Company is
not dependent upon a single tenant or a limited number of tenants.

ITEM 2. PROPERTIES

Real Estate Summary
As of December 31, 1999, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):

Number of Percent
Properties Cost of Total

Industrial buildings 56 $ 279,367 41%
Office buildings 25 294,420 43%
Operating properties held for sale 21 80,563 12%
Properties under development 8 19,246 3%
Land held for development 4 6,137 1%

Total 114 $ 679,733 100%

As of December 31, 1999, the Company's real estate investments were
diversified by geographic region as follows:
<TABLE>
<S> <C> <C> <C>
Number of Investment % of Total
Properties Amount Investment

Industrial buildings
Northern California 30 $151,059 22
Arizona 14 65,163 10
Southern California 10 57,951 8
Colorado 2 5,194 1

Total industrial buildings 56 279,367 41

Office buildings
Northern California 6 30,057 4
Arizona 5 34,439 5
Southern California 4 30,771 4
Colorado 2 51,180 8
Greater Seattle Area 7 135,193 20
Nevada 1 12,780 2

Total office buildings 25 294,420 43

Operating properties held for sale
Northern California 1 8,570 1
Arizona 1 4,011 1
Southern California 2 5,033 1
Greater Kansas City Area 9 27,313 4
Texas 6 24,152 3
Greater Portland Area 2 11,484 2

Total operating properties held for sale 21 80,563 12

Properties under development
Northern California 1 660 *
Arizona 3 8,726 1
Colorado 3 6,157 1
Greater Seattle Area 1 3,703 1

Total properties under development 8 19,246 3

Land held for development
Northern California 2 2,133 *
Southern California 1 703 *
Colorado 1 3,301 1

Total land held for development 4 6,137 1

Total 114 $679,733 100%
</TABLE>

* Less than 1%

Percentage Leased and 10% Tenants

The following table sets forth the occupancy rates for each of the last five
years, the number of tenants occupying 10% or more of the developed square
feet at the Property as of the end of the year and the principal business of
the tenants in the Company's properties at December 31, 1999.

Percentage Occupied/Number of Tenants Occupying 10% or more
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999
Property % # % # % # % # % # Principal Business at December 31, 1999

INDUSTRIAL PROPERTIES
Northern California
Building #3 at Contra Costa
Diablo Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Storage of cabling products.

Building #8 at Contra Costa
Diablo Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Warehouse and storage of medical supplies.

Building #18 at
Mason Ind. Park, Concord 83% 2 83% 2 100% 2 92% 2 100% 2 Warehouse of scoffolding materials and
construction supplies; general contractor.

Milpitas Town Center, Milpitas 100% 4 100% 4 100% 4 100% 3 100% 4 Manufacturing of blood glucose meters,
assembly and repair of accelerator
systems, light manufacturing of OEM's
and assembly
and manufacturing of vacuum components.

598 Gibraltar Drive, Milpitas N/A 100% 1 100% 1 100% 1 100% 1 Manufacturing of personal computers.

350 East Plumeria Drive,
San Jose 100% 1 100% 1 100% 1 100% 1 100% 1 Manufacturer of computer chips.

Auburn Court, Fremont 100% 4 100% 4 100% 4 100% 4 68% 3 Manufacturing of computer equipment,
assembly of computer and
other electronic components, lab
engineering, and marketing design.
47650 Westinghouse Drive,
Fremont 100% 1 100% 1 100% 1 100% 1 100% 1 Electronic personal computer board assembly.

410 Allerton, South
San Francisco 100% 1 100% 1 100% 1 100% 1 100% 1 Candy manufacturer and distributor.

400 Grandview, South
San Francisco 100% 5 100% 5 100% 4 100% 4 100% 4 Radiology research and developer, freight
forwarding, manufacturing and distribution of
point-of-sale marketing products.

342 Allerton, South
San Francisco 100% 4 100% 4 100% 4 100% 4 100% 4 Freight forwarding.

301 East Grand, South
San Francisco 71% 2 100% 3 100% 3 100% 3 75% 2 Freight forwarding, and distributor of
MRI equipment.

Fourier Avenue, Fremont N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of testers and equipment for
semi-conductors.

Lundy Avenue, San Jose N/A 100% 2 100% 2 82% 1 100% 2 Testing and distribution of semi-
conductors and other related electronic
components, software sales and
development.

115 Mason Circle, Concord N/A 100% 5 100% 5 100% 5 100% 5 Pipeline servicing company, manufacturer
and welder of pipes, distributor of water
and water dispensers.

47600 Westinghouse Drive,
Fremont N/A 100% 1 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.

860-870 Napa Valley Corporate
Way, Napa N/A 96% 3 86% 3 100% 3 88% 2 Winery, engineering company and software
developer.

47633 Westinghouse Drive,
Fremont N/A 100% 1 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.

47513 Westinghouse Drive,
Fremont N/A N/A N/A 100% 2 100% 2 Manufacturing of semi-conductor
equipment, manufacture
and design of arterial balloon catheters
and other related devices.

Bordeaux Centre, Napa N/A N/A N/A 38% 2 89% 4 Manufacturing and printing of corks,
light manufacturing, warehousing and
distribution of recreational marine
accessories, storage and distribution of
case good wines, design and manufacture
of molded fiber packaging products.

O'Toole Business Park, San Jose N/A 94% 0 90% 0 89% 0 100% 0 N/A

6500 Kaiser Drive, Fremont N/A N/A 100% 1 100% 1 100% 1 Office, research and development, manufacturing
of computers.

Bedford Fremont Business Park,
Fremont N/A N/A 100% 1 100% 1 97% 1 Administration and testing of samples for
managed care organizations.

Spinnaker Court, Fremont N/A N/A 100% 2 100% 2 100% 2 Manufacturing and distribution of
personal computers, peripherals and
related electronic parts and software.

2277 Pine View Way, Petaluma N/A N/A 100% 1 100% 1 100% 1 Manufacturer and distributor of plastic and
glass eyeglass lenses for world-wide
distribution.

The Mondavi Building, Napa N/A N/A 100% 1 100% 1 100% 1 Wine storage and administration.

Monterey Commerce Center 2,
Monterey N/A N/A 100% 1 100% 1 100% 1 Language interpretation - over seas calls.

Monterey Commerce Center 3,
Monterey N/A N/A 100% 3 100% 3 100% 3 Storage of office and long-distance
telephone equipment and medical supplies,
copier sales and distribution.

Parkpoint Business Center,
Santa Rosa N/A N/A N/A 100% 3 100% 3 Customized computer software company,
rehabilitation center, mortgage broker.

2180 S. McDowell, Petaluma N/A N/A N/A 100% 2 81% 1 Manufacturer of high-end, commercial grade
sound equipment.

2190 S. McDowell, Petaluma N/A N/A N/A 100% 2 100% 2 Bread distributor; distributor of paper and
packaging products.

Southern California
Dupont Industrial Center,
Ontario 100% 1 59% 0 100% 1 97% 1 100% 2 Distribution of swimming pool supplies,
and transportation trucking company.

3002 Dow Business Center,
Tustin 83% 0 99% 0 100% 0 99% 0 99% 0 N/A

Carroll Tech I, San Diego N/A 100% 1 100% 1 100% 1 100% 1 Sales and service of point of sales equipment.

Vista 1, Vista N/A 100% 1 100% 1 0% 0 0% 0 N/A

Vista 2, Vista N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of graphite golf club shaft.

Signal Systems Building,
San Diego N/A 100% 1 100% 1 100% 1 100% 1 Developer and manufacturer of avionic
diagnostic equipment.

Carroll Tech II, San Diego N/A 100% 1 100% 1 100% 1 100% 1 Bio-technology company.

2230 Oak Ridge Way, Vista N/A N/A 100% 1 100% 1 100% 1 Manufacturer of eqipment for circuit
board assembly.

5502 Oberlin Drive, San Diego N/A N/A N/A 100% 1 100% 1 Manufacturer of micro-circuits.

6960 Flanders Drive, San Diego N/A N/A N/A 100% 1 100% 1 Geotechnical and environmental consultant.

Canyon Vista Center, San Diego N/A N/A N/A N/A 100% 3 Designer of interactive entertainment
software, full service hearing aid company,
provider of product testing certification.

6325 Lusk Blvd., San Diego N/A N/A N/A N/A 100% 2 Bio-tech company developing diabetes self-
test products and apparel company.

Kansas City, Kansas
Ninety-Ninth Street #3, Lenexa 100% 2 89% 2 100% 2 98% 2 98% 2 Warehouse for computer cables/wiring and
storage of corporate records/supplies.

Lackman Business Center,
Lenexa 98% 2 91% 2 100% 2 98% 3 92% 2 Network and communications specialists.

Ninety-Ninth Street #1, Lenexa 100% 2 100% 2 100% 2 100% 2 100% 3 Tool distribution and surgical instrument
manufacturing.

Ninety-Ninth Street #2, Lenexa 100% 1 100% 1 100% 1 100% 1 100% 1 Drug testing clinic.

Ninety-Ninth Street #4, Lenexa N/A N/A N/A 79% 3 79% 3 Distribution of shrink wrap products,
distributor of computers and computer
related parts, home nursing and health
care administration.

Panorama Business Park,
Kansas City N/A 100% 2 100% 2 91% 2 89% 2 Distribution of pharmaceuticals,
distribution of appliances.

Panorama III, Kansas City N/A N/A N/A N/A 100% 4 Manufacturer of dental products, storage
of pre-packaged baked goods, manufacturer
of intercom and security systems, wholesale
sales and distribution of security systems
parts.

Colorado
Bryant Street Quad, Denver 97% 3 100% 3 100% 3 100% 3 100% 3 Health care provider, photo processing lab,
and radiator coating plant/distributor.

Bryant Street Annex, Denver 100% 2 100% 2 100% 2 100% 2 100% 2 Office supplies distributor and automotive
paint distributor.

Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton 81% 2 91% 3 96% 2 89% 3 95% 3 Software developer and telecommunications.

Twin Oaks Business Center,
Beaverton 94% 3 80% 4 81% 4 84% 4 75% 3 Electronic engineering, electronic
equipment assembly, computer equipment
distributor and postal service.

Arizona
Westech Business Center, Phoenix N/A 93% 0 96% 0 95% 0 96% 0 N/A

Westech II, Phoenix N/A N/A N/A 100% 3 100% 2 Healthcare consultants and travel agency.

2601 W. Broadway, Tempe N/A N/A 100% 1 100% 1 100% 1 Wireless phone service provider.

Phoenix Airport Center #2,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Electronic parts sales and customer
service.

Phoenix Airport Center #3,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Cosmetic manufacturing and distribution.

Phoenix Airport Center #4,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Package delivery/service call center.

Phoenix Airport Center #5,
Phoenix N/A N/A N/A 100% 1 100% 1 Healthcare maintenance organization
corporate office.

Butterfield Business Center,
Tucson N/A N/A 100% 3 100% 3 100% 2 Sears call center, polish/wax research
and development.

Butterfield Tech Center II,
Tucson N/A N/A N/A N/A 56% 2 Package distribution facility and school
book distribution facility.

Greystone Business Park,
Tempe N/A N/A N/A N/A 11% 1 Sales and service of electronic
equipment.

Cimarron Business Park,
Scottsdale N/A N/A N/A 98% 2 97% 2 Printing and sales office, computer
equipment.

Expressway Corporate
Center, Tempe N/A N/A N/A 68% 1 100% 2 Manufacture photographic equipment for
wafer circuiting, and food
supplement manufacturing.

The Adams Brothers Building,
Phoenix N/A N/A N/A N/A 100% 1 Interior design and home products sales.

Bedford Realty Partners, L.P.,
Phoenix N/A N/A N/A N/A 100% 2 Offices and laboratories for
environmental and soils testing and
clinical studies.

Texas
Ferrell Drive, Farmers Branch N/A N/A 100% 5 100% 5 83% 4 Medical products distribution, hardware
distribution, and engineering.

Austin Braker 2, Austin N/A N/A N/A 100% 3 100% 3 Computer technology for television,
lottery and gaming association, computer
sales and customer service.

Austin Rutland 10, Austin N/A N/A N/A 100% 5 100% 5 Service of copier equipment, printing for
small businesses, tool distribution,
environmental field work, trade show and
conference coordination.

Austin Southpark A, B and C,
Austin N/A N/A N/A 100% 4 87% 3 Spare parts storage for computer chip
manufacturer, environmental testing,
proto-type testing for computer chip
manufacturer and valuable storage for
pawn broker.

SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette 100% 2 100% 1 99% 1 100% 2 100% 2 Event planner and organizer, and real
estate investment trust.

100 View Street, Mountain View N/A 100% 4 100% 3 100% 3 100% 4 Architectural servicing, designing and marketing
of integrated circuits for semi-conductors,
computer software design of on-line reporting
and surveying devices.

Canyon Park, San Ramon N/A N/A 100% 2 100% 2 100% 2 Medical administrative offices and
geotechnical lab; soils
testing, engineering services.

Crow Canyon Centre, San Ramon N/A N/A N/A N/A 50% 1 Health care provider.

Monterey Commerce Center 1,
Monterey N/A N/A 87% 4 82% 4 79% 3 Financial services, software development,
telecommunications sales, electronic equipment
sales, and real estate services.

3380 Cypress, Petaluma N/A N/A N/A 100% 1 100% 1 Manufacture hearing devices.

Southern California
Laguna Hills Square, Laguna N/A 86% 2 96% 4 93% 4 95% 4 Medical facility and securities brokerage firm.

Carroll Tech III, San Diego N/A N/A 100% 1 100% 1 100% 1 On-line game developer.

Scripps Wateridge, San Diego N/A N/A 100% 2 100% 2 100% 2 Wireless communications, supplier of
digital wireless communication products and
technologies.

Carroll Tech IV, San Diego N/A N/A N/A N/A 100% 1 Information management for healthcare.

Greater Kansas City Area
6600 College Blvd.,
Overland Park 100% 1 98% 1 100% 1 100% 1 100% 1 Telecommunication.

Didde Building, Overland Park N/A N/A N/A 100% 3 100% 3 Investment firm, printing and packaging
technology corporate offices and reinsurance
brokerage.

Colorado
Oracle Building, Denver N/A N/A 100% 2 100% 2 100% 2 Software company and banking.

Texaco Building, Denver N/A N/A N/A 100% 1 100% 1 Oil company.

Arizona
Executive Center at Southbank,
Phoenix N/A N/A 98% 3 98% 3 98% 3 Post graduate education facilities,
travel agency, and customer
credit call center.

Troika Building, Tucson N/A N/A 100% 1 100% 1 100% 1 Architectural services

Phoenix Airport Center #1,
Phoenix N/A N/A 100% 5 100% 5 100% 3 Electronics, computer sales, banking
services, and security services sales
office.

Cabrillo Executive Center,
Phoenix N/A N/A N/A 97% 2 100% 2 Medical insurance company and software
developer.

Mountain Pointe Office Park,
Phoenix N/A N/A N/A N/A 0% 0 N/A

1355 S. Clearview Avenue,
Mesa N/A N/A N/A N/A 100% 1 Debt collection services.

Greater Seattle Area
Kenyon Center, Bellevue N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of aircraft.

Orillia Office Park, Renton N/A N/A 100% 1 100% 1 100% 1 Manufacturer of aircraft.

Adobe Systems Bldg. 1, Seattle N/A N/A N/A 100% 1 100% 1 Computer software design and engineering.

Adobe Systems Bldg. II, Seattle N/A N/A N/A 77% 1 100% 2 Computer software design and engineering,
non-profit acupuncture and alternative
medicine school and clinic.

Highlands Phase I, Bothell N/A N/A N/A N/A 38% 1 Cellular phone service and sales via the
internet.

The Federal Way Building,
Federal Way N/A N/A N/A N/A 100% 3 Property/casualty insurance company,
electronic equipment manufacturer, and
oil company.

Federal Way Building II,
Federal Way N/A N/A N/A N/A 100% 4 Equipment leasing, commercial real estate
developer, and full service insurance
company.

Texas
9737 Great Hills Trail, Austin N/A N/A 100% 1 100% 1 100% 1 Home mortgage business.

Nevada
U. S. Bank Centre, Reno N/A N/A 94% 1 99% 1 100% 2 Insurance services and mining.
</TABLE>
Lease Expirations - Real Estate Portfolio

The following table presents lease expirations for each of the ten
years beginning January 1, 2000. The table presents: (i) the number
of leases that expire each year, (ii) the square feet covered by such
expiring leases, (iii) the annualized base rent (the "Annualized Base
Rent") represented by such expiring leases and (iv) the percentage of
total Annualized Base Rent for expiring leases.

Number of Percentage
Leases Rentable Annualized of Annualized Base
Year Expiring Square Feet Base Rent Rent

2000 161 1,233,792 12,700,872 16.3%
2001 122 1,046,520 10,862,342 13.9
2002 120 973,187 9,616,715 12.3
2003 71 941,686 10,912,326 14.0
2004 65 1,273,438 12,673,311 16.3
2005 15 638,473 9,852,127 12.6
2006 7 278,645 3,178,135 4.1
2007 6 421,219 2,464,003 3.2
2008 2 12,720 242,724 .3
2009 and thereafter 6 436,286 5,450,952 7.0

Total 575 7,255,966 77,953,507 100.0%

Principal Provisions of Leases

The following table sets forth the principal provisions of leases which
represent more than 10% of the gross leasable area ("GLA") of each of the
Company's Properties and the realty tax rate for each Property for 1999.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Annual # of Square Contract
Property Leases Project Feet of Rent
Taxes/ with 10% or Square Each ($/Sq/Yr) At Lease Renewal
Property Rate More of GLA Feet Tenant End of Year Expiration Options

INDUSTRIAL PROPERTIES
Northern California
Building #3 at Contra Costa $16,465 1 21,840 21,840 $7.80 Feb. 02 1-3 yr.
Diablo Ind. Park, Concord $1.01/100

Building #8 at Contra Costa $23,534 1 31,800 31,800 $6.72 Dec. 00 2-5 yr.
Diablo Ind. Park, Concord $1.01/100

Building #18 at Mason $17,313 2 28,836 7,225 $7.20 May 00 None
Industrial Park, Concord $1.01/100 4,825 $7.49 Feb. 01 None

Milpitas Town Center, $69,454 4 102,620 23,924 $17.40 Apr. 02 1-5 yr.
Milpitas $1.09/100 24,426 $11.28 Apr. 02 1-2 yr.
30,840 $13.80 Jul. 03 1-5 yr.
23,430 $8.12 Jan. 05 None

598 Gibraltar Drive, $46,270 1 45,090 45,090 $10.44 Apr. 01 1-5 yr.
Milpitas $1.10/100

350 East Plumeria Drive, $139,546 1 142,700 142,700 $15.75 Apr. 05 1-5 yr.
San Jose $1.05/100

Auburn Court, Fremont $48,563 3 68,030 16,095 $14.35 Jul. 01 1-5 yr.
$1.04/100 12,060 $13.20 Apr. 03 None
12,060 $7.20 Jul. 00 None

47650 Westinghouse Drive, $15,848 1 24,030 24,030 $10.20 Sep. 04 None
Fremont $1.04/100

410 Allerton, $25,821 1 46,050 46,050 $7.20 Apr. 01 None
South San Francisco $1.03/100

400 Grandview, $86,654 4 107,004 21,841 $7.80 Dec. 03 None
South San Francisco $1.03/100 43,642 $8.06 Jul. 02 1-5 yr.
18,789 $8.64 May 04 1-5 yr.
18,864 $6.60 Jan. 03 None

342 Allerton, $53,537 4 69,312 19,751 $7.20 Mar. 00 None
South San Francisco $1.03/100 9,720 $9.09 Mar. 02 None
30,953 $10.20 Jun. 04 None
8,888 $9.73 Aug. 02 None

301 East Grand, $33,328 2 57,846 26,240 $8.11 Jun. 03 None
South San Francisco $1.03/100 17,206 $5.04 Dec. 03 None

Fourier Avenue, Fremont $106,368 1 104,400 104,400 $8.99 Apr. 04 None
$1.04/100

Lundy Avenue, San Jose $57,815 2 60,428 49,342 $14.40 Apr. 06 1-5 yr.
$1.08/100 11,086 $14.40 Jul. 04 1-5 yr.

115 Mason Circle, Concord $18,806 5 35,000 5,833 $5.47 Jan. 00 None
$1.01/100 5,832 $6.84 Jul. 01 None
8,154 $7.44 Aug. 02 None
7,296 $6.60 Nov. 02 1-3 yr.
7,885 $7.20 Apr. 00 None

47600 Westinghouse Drive, $16,989 1 24,030 24,030 $10.92 Oct. 03 1-3 yr.
Fremont $1.04/100

860-870 Napa Valley Corporate $84,339 2 67,775 13,111 $10.53 Dec. 00 1-5 yr.
Way, Napa $1.03/100 7,558 $10.58 Sep. 01 None

47633 Westinghouse Drive, $53,558 1 50,088 50,088 $12.06 Oct. 03 1-3 yr.
Fremont $1.04/100

47513 Westinghouse Drive, $122,919 2 65,385 35,132 $15.36 Feb. 05 1-5 yr.
Fremont $1.04/100 30,253 $14.40 Feb. 04 1-5 yr.

Bordeaux Centre, Napa $123,903 4 150,000 22,075 $7.62 Nov. 07 2-5 yr.
$1.03/100 16,076 $7.43 Nov. 07 1-5 yr.
51,790 $5.76 Jan. 04 1-5 yr.
18,434 $6.04 Dec. 04 1-5 yr.

O'Toole Business Park, $111,306 0 122,320 N/A N/A N/A N/A
San Jose $1.09/100

6500 Kaiser Drive, Fremont $179,066 1 78,611 78,611 $9.60 Sep. 04 2-5 yr.
$1.04/100

Bedford Fremont Business Center,
Fremont $236,399 1 146,509 71,532 $15.24 Jul. 03 1-3 yr.
$1.04/100

Spinnaker Court, Fremont $167,552 2 98,500 69,230 $8.10 Mar. 00 None
$1.07/100 29,270 $8.59 Mar. 00 None

2277 Pine View Way, $102,816 1 120,480 120,480 $7.25 Mar. 07 2-5 yr.
Petaluma $1.00/100

The Mondavi Building, Napa $99,417 1 120,157 120,157 $5.17 Sep. 12 1-5 yr.
$1.03/100

Monterey Commerce $22,876 1 28,020 28,020 $15.12 Dec. 00 1-3 yr.
Center 2, Monterey $1.00/100

Monterey Commerce $22,574 3 24,240 3,817 $14.28 Jul. 01 1-5 yr.
Center 3, Monterey $1.00/100 3,050 $12.96 Nov. 00 2-3 yr.
17,373 $15.96 Oct. 00 None

Parkpoint Business Center, $74,179 3 67,869 8,767 $15.00 Oct. 02 1-5 yr.
Santa Rosa $1.00/100 7,894 $14.74 Oct. 01 1-5 yr.
17,505 $15.00 Mar. 03 1-5 yr.

2180 McDowell, Petaluma $42,721 1 43,083 35,014 $11.20 Feb. 00 None
$1.00/100

2190 S. McDowell, Petaluma $32,439 2 32,719 17,131 $8.84 Mar. 04 1-5 yr.
$1.00/100 15,588 $7.90 Apr. 06 2-5 yr.

Southern California
Dupont Industrial Center, $205,774 1 451,192 183,244 $2.88 Jan. 07 2-5 yr.
Ontario $1.04/100

3002 Dow Business Center, $189,691 0 192,125 N/A N/A N/A N/A
Tustin $1.01/100

Carroll Tech I, $17,185 1 21,936 21,936 $9.11 Nov. 05 2-3 yr.
San Diego $1.11/100

Vista 1, Vista $20,575 0 42,508 N/A N/A N/A N/A
$1.04/100

Vista 2, Vista $42,050 1 47,550 47,550 $7.15 Sep. 01 2-5 yr.
$1.04/100

Signal Systems Building, $99,254 1 109,780 109,780 $10.42 Aug. 06 2-5 yr.
San Diego $1.02/100

Carroll Tech II, $35,581 1 37,586 37,586 $13.79 Dec. 01 None
San Diego $1.11/100

2230 Oak Ridge Way, $32,845 1 44,063 44,063 $6.63 Aug. 04 2-5 yr.
Vista $1.01/100

5502 Oberlin Drive, $25,531 1 20,771 20,771 $9.96 Mar. 03 1-5 yr.
San Diego $1.11/100

6960 Flanders Drive, $38,442 1 33,144 33,144 $9.98 May 03 1-5 yr.
San Diego $1.11/100

Canyon Vista Center, $61,727 3 63,746 17,591 $7.44 Dec. 04 1-5 yr.
San Diego $1.11/100 18,643 $8.14 Mar. 00 None
27,512 $10.25 May 02 1-5 yr.

6325 Lusk Blvd., $46,691 2 49,942 31,849 $15.48 Nov. 03 None
San Diego $1.11/100 18,093 $7.20 Jun. 01 None

Greater Kansas City Area
Ninety Ninth Street #3, $59,583 2 50,000 13,000 $7.35 Dec. 03 1-5 yr.
Lenexa $9.89/100 31,250 $5.38 May 03 None

Lackman Business Center, $57,934 2 45,956 5,510 $13.52 Feb. 01 1-3 yr.
Lenexa $9.89/100 5,320 $8.50 Jun. 01 None

Ninety-Ninth Street #1, $51,301 3 35,516 19,019 $8.33 Sep. 00 None
Lenexa $9.89/100 8,902 $8.42 Mar. 04 1-5 yr.
4,403 $8.25 Mar. 02 None

Ninety-Ninth Street #2, $23,232 1 12,974 12,974 $8.66 Oct. 04 None
Lenexa $9.89/100

Ninety Ninth Street #4, $92,573 3 68,831 19,540 $5.75 Feb. 01 None
Lenexa $9.89/100 19,316 $5.85 Mar. 03 1-3 yr.
14,751 $7.37 Oct. 02 1-5 yr.

Panorama Business Park, $114,341 2 103,457 12,491 $5.95 Jul. 01 None
Kansas City $9.24/100 12,951 $5.15 Feb. 01 None

Panorama III, Kansas City $57,321 4 46,860 12,122 $8.00 May 02 1-5 yr.
$9.24/100 6,569 $7.99 May 00 1-5 yr.
5,864 $6.10 Mar. 02 None
6,312 $11.20 Dec. 02 2-5 yr.

Colorado
Bryant Street Quad, Denver $84,932 3 155,536 17,440 $4.50 Apr. 02 None
$6.73/100 20,726 $3.30 Feb. 01 1-5 yr.
16,055 $4.11 Feb. 02 1-3 yr.

Bryant Street Annex, Denver $34,547 2 55,000 42,148 $4.25 Nov. 00 3-1 yr.
$6.73/100 12,852 $3.90 Mar. 00 None

Greater Portland Area
Twin Oaks Technology Center, $66,767 3 95,519 11,460 $5.93 Nov. 01 None
Beaverton $1.44/100 10,069 $5.96 M-T-M None
9,732 $10.56 Feb. 03 None

Twin Oaks Business Center, $42,141 3 66,339 7,633 $10.20 Nov. 02 None
Beaverton $1.44/100 6,702 $9.00 Feb. 00 None
11,475 $9.00 Oct. 00 1-3 yr.

Arizona
Westech Business Center, Phoenix $127,276 0 143,940 N/A N/A N/A N/A
$13.64/100

Westech II, Phoenix $110,764 3 80,878 14,615 $8.52 Oct. 04 None
$13.64/100 11,819 $8.97 Nov. 02 1-2 yr.
11,739 $7.80 Nov. 02 1-2 yr.

2601 W. Broadway, Tempe $62,311 1 44,244 44,244 $7.14 Jan. 07 2-5 yr.
$13.21/100

Phoenix Airport Center #2, $60,614 1 35,768 35,768 $7.80 Aug. 01 2-5 yr.
Phoenix $13.64/100

Phoenix Airport Center #3, $56,060 1 55,122 55,122 $7.02 Jul. 01 2-5 yr.
Phoenix $13.64/100

Phoenix Airport Center #4, $33,134 1 30,504 30,504 $7.80 Jun. 00 2-5 yr.
Phoenix $13.64/100

Phoenix Airport Center #5, $92,049 1 60,000 60,000 $8.68 Sep. 02 1-5 yr.
Phoenix $13.64/100

Butterfield Business Center, $94,937 3 95,746 50,000 $6.30 Aug. 04 2-5 yr.
Tucson $16.38/100 14,982 $2.86 Aug. 04 1-5 yr.
22,002 $8.85 Jun. 01 None

Butterfield Tech Center II, $13,711 2 33,082 7,383 $7.31 Mar. 06 2-5 yr.
Tucson $12.61/100 11,064 $6.24 Sep. 02 1-2 yr.

Greystone Business Park, $15,024 1 60,738 6,520 $10.56 Nov. 04 2-3 yr.
Tempe $13.09/100

Cimarron Business Park, $113,317 2 94,800 13,800 $10.31 Mar. 04 None
Scottsdale $12.10/100 9,510 $9.00 Sep. 00 1-4 yr.

Expressway Corporate Center, $87,678 2 79,331 40,528 $8.40 Mar. 03 None
Tempe $13.21/100 18,825 $9.27 Aug. 06 None

The Adams Brothers Building, $32,784 1 71,345 71,345 $4.56 Jan. 04 2-5 yr.
Phoenix $18.83/100

Bedford Realty Partners, L.P., $176,648 2 101,835 13,245 $7.30 Dec. 01 None
Phoenix $18.83/100 30,409 $7.08 Jun. 05 None

Texas
Ferrell Drive, $56,795 4 68,580 11,430 $4.50 Jan. 00 None
Farmers Branch $1.61/100 11,430 $4.20 Feb.00 None
11,430 $4.50 Jul. 01 1-5 yr.
11,430 $4.75 Apr. 02 None

Austin Braker 2, $42,913 3 27,322 16,522 $9.00 Jan. 03 1-3 yr.
Austin $2.60/100 5,400 $7.92 Jan. 04 None
5,400 $9.00 Feb. 03 None

Austin Rutland 10, $69,857 5 54,000 7,200 $6.96 Nov. 01 None
Austin $2.60/100 7,200 $6.84 May 00 None
7,200 $5.64 Sep. 02 None
7,200 $8.40 Aug. 00 None
14,400 $5.40 Dec. 02 1-3 yr.

Austin Southpark A, B, and C, $118,834 3 78,276 13,550 $8.52 Apr. 01 2-3 yr.
Austin $2.60/100 11,957 $7.56 Feb. 00 None
8,100 $8.64 May 03 1-5 yr.

SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette $26,300 2 16,795 3,240 $23.40 Jun. 00 None
$1.11/100 11,062 $24.12 Mar. 05 None

100 View Street, $52,856 4 42,141 5,490 $21.48 Jul. 01 1-5 yr.
Mountain View $1.08/100 12,112 $33.00 Sep. 04 1-5 yr.
5,070 $40.20 Apr. 04 None
7,453 $33.00 May 04 None

Canyon Park, $63,964 2 57,667 48,265 $15.68 Feb. 00 None
San Ramon $1.07/100 9,402 $20.32 Jan. 03 None

Crow Canyon Centre, $10,156 1 39,108 19,615 $25.20 Oct. 06 2-5 yr.
San Ramon $1.06/100

Monterey Commerce Center 1, $61,873 3 50,031 5,809 $19.80 Aug. 02 1-3 yr.
Monterey $1.00/100 7,000 $18.96 Mar. 03 1-5 yr.
19,478 $19.80 Jul. 03 1-5 yr.

3880 Cypress Dr., $65,639 1 35,100 35,100 $13.08 May 07 1-5 yr.
Santa Rosa $1.00/100

Southern California
Laguna Hills Square, Laguna $64,962 4 51,734 8,474 $33.60 Jun. 02 1-5 yr.
$1.05/100 7,368 $25.24 Apr. 05 1-5 yr.
6,391 $24.24 Sep. 00 1-5 yr.
9,229 $19.80 Jun. 02 2-3 yr.

Carroll Tech III, San Diego $23,473 1 29,307 29,307 $9.60 Sep. 04 1-5 yr.
$1.11/100

Scripps Wateridge, San Diego $194,312 2 123,853 49,295 $12.85 Jul. 06 1-5 yr.
$1.11/100 74,558 $13.37 Aug. 05 2-3 yr.

Carroll Tech IV, San Diego $50,963 1 43,415 43,415 $15.00 Dec. 02 1-5 yr.
$1.11/100

Greater Kansas City Area
6600 College Blvd., $187,186 1 79,316 62,441 $11.80 M-T-M None
Overland Park $10.81/100

Didde Building, $54,270 3 20,168 10,962 $19.50 Jan. 08 1-5 yr.
Overland Park $10.81/100 3,667 $16.60 Jan. 02 None
2,132 $17.50 Mar. 01 None

Colorado
Oracle Building, Denver $349,086 2 90,712 10,043 $18.00 Aug. 11 4-5 yr.
$10.75/100 77,090 $24.00 Sep. 03 None

Texaco Building, Denver $570,576 1 237,055 237,055 $18.05 Jan. 05 2-5 yr.
$8.67/100

Arizona
Executive Center at Southbank, $258,438 4 140,157 38,106 $9.74 Apr. 02 1-5 yr.
Phoenix $18.83/100 17,910 $8.44 Sep. 03 2-5 yr.
30,518 $10.00 Jun. 01 2-5 yr.
21,626 $10.00 Jul. 02 2-5 yr.

Troika Building, Tucson $120,424 1 52,000 52,000 $10.00 Oct. 01 None
$17.40/100

Phoenix Airport Center #1, $47,414 5 32,460 11,990 $10.95 Aug. 00 1-5 yr.
Phoenix $13.64/100 4,527 $15.00 Mar. 01 1-5 yr.
4,449 $19.05 Dec. 02 None
4,041 $18.33 Jul. 01 None
4,502 $12.50 Aug. 00 1-5 yr.

Cabrillo Executive Center, $119,103 2 60,321 12,400 $17.75 Aug. 01 1-5 yr.
Phoenix $13.72/100 18,267 $17.50 M-T-M 1-5 yr.

Mountain Pointe Office Park, $5,761 0 54,584 N/A N/A N/A N/A
Phoenix $13.51/100

1355 S. Clearview Avenue, $52,625 1 57,193 57,193 $12.72 Apr. 05 2-5 yr.
Mesa $11.00/100

Greater Seattle Area
Kenyon Center, Bellevue $137,074 1 94,840 94,840 $11.61 Dec. 99 None
$1.11/100

Orillia Office Park, Renton $373,060 1 334,255 334,255 $9.35 Feb. 04 None
$1.34/100

Adobe Systems Bldg. 1, $298,957 1 161,117 161,117 $15.53 Jul. 10 2-5 yr.
Seattle $1.25/100

Adobe Systems Bldg. 2, $243,742 2 136,111 93,211 $15.53 Jul. 10 2-5 yr.
Seattle $1.25/100 19,867 $19.75 May 03 None

Highlands Phase I, $19,314 1 192,256 38,213 $11.38 Aug. 04 1-5 yr.
Bothell $1.34/100

The Federal Way Building, $3,293 3 65,000 32,871 $11.11 Apr. 06 2-3 yr.
Federal Way $1.38/100 7,107 $14.40 Sep. 04 1-5 yr.
19,313 $14.16 Oct. 04 1-5 yr.

Federal Way II, $4,683 4 115,032 30,000 $13.44 Aug. 09 2-5 yr.
Federal Way $1.38/100 20,000 $13.44 Aug. 09 None
22,856 $14.40 Sep. 02 None
42,176 $14.99 Dec. 99 None

Texas
9737 Great Hills Trail, Austin $273,084 1 82,680 82,680 $18.00 Dec. 01 1-5 yr.
$2.60/100

Nevada
U.S. Bank Centre, Reno $137,716 2 104,324 35,361 $17.40 Apr. 00 1-5 yr.
$3.45/100 13,064 $20.76 Jun. 04 None
</TABLE>

Average Base Rent

The following table sets forth for each of the Properties the average
rent at the end of each year for the last five years.

Average Base Rent ($/Sq Ft/Yr) At End of Year

1995 1996 1997 1998 1999
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa Diablo $4.95 $6.64 $6.84 $6.84 $7.80
Building #8 at Contra Costa Diablo $6.00 $6.00 $6.00 $6.00 $6.72
Building #18 at Mason Industrial Park $6.63 $6.78 $6.88 $6.93 $7.22
Milpitas Town Center $7.35 $8.03 $8.90 $10.69 $12.74
598 Gibraltar Drive N/A $9.48 $9.48 $10.44 $10.44
350 East Plumeria Drive $7.80 $7.80 $8.40 $15.00 $15.75
Auburn Court $6.54 $6.78 $7.80 $10.62 $11.25
47650 Westinghouse Drive $5.52 $5.52 $9.00 $9.60 $10.20
410 Allerton $5.16 $5.16 $5.16 $6.60 $7.20
400 Grandview $7.49 $7.53 $7.03 $7.50 $7.95
342 Allerton $6.88 $7.18 $7.57 $7.73 $9.13
301 East Grand $5.92 $5.57 $5.58 $6.30 $6.90
Fourier Avenue N/A $8.99 $8.99 $8.99 $8.99
Lundy Avenue N/A $7.09 $7.09 $7.36 $14.40
115 Mason Circle N/A $6.05 $6.22 $.6.59 $6.78
47600 Westinghouse Drive N/A $5.94 $10.20 $10.56 $10.92
860-870 Napa Valley Corporate N/A $9.44 $8.86 $9.48 $9.90
47633 Westinghouse Drive N/A $11.37 $11.60 $11.83 $12.06
47513 Westinghouse Drive N/A N/A N/A $14.32 $14.92
Bordeaux Centre N/A N/A N/A $7.33 $6.57
O'Toole Business Center N/A $8.75 $10.31 $13.81 $14.38
6500 Kaiser Drive N/A N/A $9.00 $9.60 $9.60
Bedford Fremont Business Center N/A N/A $11.93 $14.63 $16.39
Spinnaker Court N/A N/A $8.01 $8.25 $8.25
2277 Pine View Way N/A N/A $6.91 $6.91 $7.25
The Mondavi Building N/A N/A $4.92 $4.92 $5.17
Monterey Commerce Center 2 N/A N/A $14.16 $14.64 $15.12
Monterey Commerce Center 3 N/A N/A $14.70 $15.22 $15.32
Parkpoint Business Center N/A N/A N/A $15.19 $15.68
2180 McDowell N/A N/A N/A $8.37 $11.20
2190 McDowell N/A N/A N/A $8.19 $8.39

Southern California
Dupont Industrial Center $3.17 $3.53 $3.40 $3.44 $3.67
3002 Dow Business Center $8.88 $8.55 $8.32 $8.86 $9.52
Carroll Tech I N/A $10.35 $11.93 $3.17 $9.11
Vista 1 N/A $5.16 $0.00** $0.00 $0.00

** Bankruptcy
Average Base Rent ($/Sq Ft/Yr) At End of Year

1995 1996 1997 1998 1999
INDUSTRIAL PROPERTIES (continued):
Southern California (continued)
Vista 2 N/A $6.36 $6.61 $6.88 $7.15
Signal Systems Building N/A $7.80 $8.11 $10.20 $10.42
Carroll Tech II N/A N/A $11.52 $12.00 $13.79
2230 Oak Ridge Way N/A N/A N/A $6.49 $6.63
5502 Oberlin Drive N/A N/A N/A $9.96 $9.96
6960 Flanders Drive N/A N/A N/A $9.60 $9.98
Canyon Vista Center N/A N/A N/A N/A $8.86
6325 Lusk Blvd. N/A N/A N/A N/A $12.48

Greater Kansas City Area
Ninety-Ninth Street #3 $5.86 $5.30 $6.08 $6.14 $6.14
Lackman Business Center $8.36 $8.59 $8.77 $9.36 $9.85
Ninety-Ninth Street #1 $7.96 $8.32 $7.72 $7.89 $8.31
Ninety-Ninth Street #2 $7.56 $8.62 $8.62 $8.62 $8.66
Ninety-Ninth Street #4 N/A N/A N/A $6.16 $6.23
Panorama Business Park N/A $6.54 $6.70 $6.87 $7.01
Panorama III N/A N/A N/A N/A $8.83

Colorado
Bryant Street Quad $3.09 $3.39 $3.82 $3.96 $4.13
Bryant Street Annex $4.02 $3.93 $4.09 $4.17 $4.17

Greater Portland Area, Oregon
Twin Oaks Technology Center $7.27 $7.32 $7.67 $7.78 $8.44
Twin Oaks Business Center $7.75 $8.35 $8.86 $8.87 $7.83

Arizona
Westech Business Center N/A $8.85 $9.44 $9.99 $9.97
Westech II N/A N/A N/A $8.86 $8.87
2601 W. Broadway N/A N/A $7.14 $7.14 $7.14
Phoenix Airport Center #2 N/A N/A $7.20 $7.20 $7.80
Phoenix Airport Center #3 N/A N/A $6.36 $6.36 $7.02
Phoenix Airport Center #4 N/A N/A $7.20 $7.80 $7.80
Phoenix Airport Center #5 N/A N/A $7.21 $8.68 $8.68
Butterfield Business Center N/A N/A $7.08 $7.11 $6.38
Butterfield Tech Center II N/A N/A N/A N/A $6.67
Greystone Business Park N/A N/A N/A N/A $10.56
Cimarron Business Park N/A N/A N/A $8.94 $10.09
Expressway Corporate Center N/A N/A N/A $8.21 $8.78
The Adams Brothers Building N/A N/A N/A N/A $4.56
Bedford Realty Partners, L.P. N/A N/A N/A N/A $7.21

Texas
Ferrell Drive N/A N/A $4.55 $4.62 $4.70
Austin Braker 2 N/A N/A N/A $8.79 $8.79
Austin Rutland 10 N/A N/A N/A $6.54 $6.77
Austin Southpark A, B and C N/A N/A N/A $8.38 $8.48

Average Base Rent ($/Sq Ft/Yr) At End of Year

1995 1996 1997 1998 1999

SUBURBAN OFFICE PROPERTIES:
Northern California
Village Green $18.23 $19.99 $23.24 $23.70 $24.45
100 View Street N/A $18.82 $20.10 $21.72 $32.16
Canyon Park N/A N/A $15.92 $16.44 $16.44
Crow Canyon Centre N/A N/A N/A N/A $25.20
Monterey Commerce Center 1 N/A N/A $20.12 $19.78 $19.69
3880 Cypress Drive N/A N/A N/A $13.08 $13.08

Southern California
Laguna Hills Square N/A $25.38 $23.90 $24.79 $25.17
Carroll Tech III N/A N/A $8.52 $8.52 $9.60
Scripps Wateridge N/A N/A $11.41 $12.53 $13.16
Carroll Tech IV N/A N/A N/A N/A $15.00

Greater Kansas City Area
6600 College Boulevard $12.01 $11.99 $12.28 $12.35 $12.32
Didde Building N/A N/A N/A $18.25 $18.61

Colorado
Oracle Building N/A N/A $23.37 $23.34 $23.34
Texaco Building N/A N/A N/A $18.05 $18.05

Arizona
Executive Center at Southbank N/A N/A $9.23 $9.46 $9.64
Troika Building N/A N/A $9.00 $10.00 $10.00
Phoenix Airport Center #1 N/A N/A $13.81 $13.69 $13.97
Cabrillo Executive Center N/A N/A N/A $16.64 $17.03
Mountain Pointe Office Park N/A N/A N/A N/A N/A
1355 S. Clearview Avenue N/A N/A N/A N/A $12.72

Greater Seattle Area
Kenyon Center N/A $11.61 $11.61 $11.61 $11.61
Orillia Office Park N/A N/A $9.35 $9.35 $9.35
Adobe Systems Bldg. 1 N/A N/A N/A $15.53 $15.53
Adobe Systems Bldg. 2 N/A N/A N/A $22.04 $16.71
Highlands Phase I N/A N/A N/A N/A $12.51
The Federal Way Building N/A N/A N/A N/A $12.65
Federal Way II N/A N/A N/A N/A $14.20

Texas
9737 Great Hills Trail N/A N/A $18.00 $18.00 $18.00

Nevada
U.S. Bank Centre N/A N/A $18.59 $18.76 $19.03

Tax Information

The following table sets forth tax information of the Company's real
estate investments at December 31, 1999, as follows: (i) Federal tax
basis, (ii) annual rate of depreciation, (iii) method of depreciation,
and (iv) life claimed, with respect to each property or component
thereof for purposes of depreciation (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Federal Annual Rate of Depreciation Life
Depreciable assets Tax Basis Depreciation Method In Years

INDUSTRIAL PROPERTIES

Northern California $ 3,783 3.18% Straight Line 31.5
107,229 2.56% Straight Line 39.0
111,012

Southern California 63,123 2.56% Straight Line 39.0

Greater Kansas City Area 2,132 3.18% Straight Line 31.5
13,020 2.56% Straight Line 39.0
15,152

Colorado 3,283 2.56% Straight Line 39.0

Greater Portland Area 8,831 2.56% Straight Line 39.0

Arizona 42,287 2.56% Straight Line 39.0

Texas 11,122 2.56% Straight Line 39.0

Total depreciable assets for industrial properties 254,810

SUBURBAN OFFICE PROPERTIES

Northern California 19,156 2.56% Straight Line 39.0

Southern California 21,412 2.56% Straight Line 39.0

Greater Kansas City Area 5,452 2.56% Straight Line 39.0

Colorado 45,619 2.56% Straight Line 39.0

Arizona 34,791 2.56% Straight Line 39.0

Greater Seattle Area 110,317 2.56% Straight Line 39.0

Texas 7,094 2.56% Straight Line 39.0

Nevada 10,677 2.56% Straight Line 39.0

Total depreciable assets for
suburban office properties 254,518

$509,328
</TABLE>

For additional information on the Company's real estate portfolio, see
Note 2 to the Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

Not applicable.

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

Not applicable.

PART II

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

The Common Stock of the Company trades on the New York Stock Exchange
and the Pacific Exchange under the symbol "BED." As of December 31,
1999 the Company had 1,056 stockholders of record. A significant
number of these stockholders are also nominees holding stock in street
name for individuals. The following table shows the high and low sale
prices per share reported on the New York Stock Exchange and the
dividends declared per share by the Company on the Common Stock for
each quarterly period during 1998 and 1999.

Dividend
High Low Per Share

1998
First Quarter $22 $19 3/16 $.30
Second Quarter $20 $17 7/16 $.33
Third Quarter $20 1/8 $15 $.33
Fourth Quarter $18 3/4 $15 3/4 $.36

1999
First Quarter $17 3/16 $14 5/8 $.36
Second Quarter $18 7/16 $14 1/2 $.39
Third Quarter $18 1/4 $16 11/16 $.39
Fourth Quarter $17 5/8 $15 11/16 $.42

ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company for the
last five years (which should be read in conjunction with the
discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto contained herein):

(in thousands of dollars, except per share data)
1999 1998 1997 1996 1995

Operating Data:
Rental income $ 90,527 $ 73,451 $ 46,377 $ 27,541 $ 11,695
Gain (loss) on sales of real
estate investments 7,743 - 11,533 406 (642)
Net income 39,855 31,496 31,291 11,021 2,895
Net income applicable
to common stockholders 39,855 31,496 27,791 6,516 1,607

Per common share -
assuming dilution
Income before
extraordinary item $ 1.87 $ 1.38 $ 1.94 $ 1.14 $ 0.52

Net income $ 1.86 $ 1.38 $ 1.94 $ 1.14 $ 0.52

Balance Sheet Data:
Real estate investments $651,038 $581,458 $423,086 $224,501 $128,964
Bank loan payable 137,156 147,443 8,216 46,097 43,250
Mortgage loans payable 206,880 80,116 60,323 51,850 -

Redeemable preferred shares - - - 50,000 50,000
Common and other
stockholders' equity 300,180 347,589 346,426 73,756 32,435

Other Data:
Net cash provided by
operating activities $ 45,540 $ 38,949 $ 25,041 $ 14,378 $ 4,898
Net cash used by
investing activities 72,317 168,018 180,358 96,964 73,259
Net cash provided by
financing activities 27,075 128,994 155,350 82,887 64,655

Funds From Operations(1) 45,554 42,312 25,582 13,645 5,021

Dividends declared per share $ 1.56 $ 1.32 $ 1.13 $ 1.00 $ 0.82

(1) Management considers Funds From Operations to be one measure of
the performance of an equity REIT. Funds From Operations is used by
financial analysts in evaluating REITs and can be one measure of a
REIT's ability to make cash distributions. Presentation of this
information provides the reader with an additional measure to compare
the performance of REITs. Funds From Operations generally is defined
by NAREIT as net income (loss) (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from debt
restructurings, sales of property, and non-recurring items, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Funds From Operations
was computed by the Company in accordance with this definition.
Beginning in the first quarter of 2000, non-recurring items other than
extraordinary items as defined by generally accepted accounting
principles will no longer be excluded in the calculation of Funds From
Operations. Funds From Operations does not represent cash generated
by operating activities in accordance with generally accepted
accounting principles; it is not necessarily indicative of cash
available to fund cash needs and should not be considered as an
alternative to net income (loss) as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure
of liquidity. Further, Funds From Operations as disclosed by other
REITs may not be comparable to the Company's presentation.

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

Overview

The following should be read in conjunction with the Selected Financial
Data and the Consolidated Financial Statements and Notes thereto, all of
which are included herein.

Results of Operations

The Company's operations consist of owning and operating industrial and
suburban office properties located primarily in the western United
States.

Increases in revenues, expenses, net income and cash flows in the years
compared below were due primarily to the acquisition, development and
sale of operating properties as follows:

1999 1998 1997
Number of Square Number of Square Number of Square
Properties Feet Properties Feet Properties Feet
Acquisitions
Industrial 5 334,000 10 531,000 13 1,091,000
Office 4 280,000 6 650,000 13 1,199,000
9 614,000 16 1,181,000 26 2,290,000
Development
Industrial 5 380,000 - - 4 365,000
Sales
Industrial 3 448,000 - - - -
Office 1 114,000 - - 2 213,000
Retail - - - - 1 84,000
4 562,000 - - 3 297,000

Comparison of 1999 to 1998

Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $8,947,000 or 19% in 1999 compared with 1998. This
is due to an increase in rental income of $17,076,000 offset by an
increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $8,129,000.

The increase in rental income and expenses is primarily attributable to
properties acquired and, to a lesser extent, properties developed during
1999 and 1998. These activities increased rental income and rental
expenses in 1999 by $14,787,000 and $7,646,000, respectively, as compared
to 1998. These increases were partially offset by the sale of one
office property and three industrial properties in 1999, which resulted
in a reduction in rental income and rental
expenses of $1,505,000 and $729,000, respectively, as compared to 1998.
The remaining increase in rental income of $3,794,000 and rental expenses
of $1,212,000, is due primarily to increased occupancy in 1999 as
compared to 1998, as well as an overall increase in rental rates.

Expenses
Interest expense, which includes amortization of loan fees, increased
$7,806,000 or 70% in 1999 compared with 1998. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property acquisitions and development activities
during 1998 and 1999 and the repurchase of shares since November 1998.
The amortization of loan fees was $1,495,000 and $1,013,000 for 1999 and
1998, respectively. General and administrative expense increased
$175,000 or 5% from $3,386,000 in 1998 to $3,561,000 in 1999. The 1998
general and administrative expenses included costs of $434,000 related
to the Company exploring strategic alternatives including selling its
portfolio of properties. Such discussions were terminated in the fourth
quarter of 1998. Excluding these costs, general and administrative
expenses increased 21% in 1999 compared with 1998, primarily the result
of increased personnel costs.

Gain on Sale
In March 1999, the Company sold 417 Eccles in South San Francisco,
California, for a net sales price of $1,789,000, which resulted in a gain
of approximately $540,000. In June 1999, the Company sold Woodlands
Tower II in Salt Lake City, Utah, for a net sales price of $13,122,000,
which resulted in a gain of approximately $6,998,000. In June 1999, the
Company also sold Oak Ridge Land in Vista, California, for a net sales
price of $423,000, which resulted in a gain of approximately $45,000.
In August 1999, the Company sold 331 Doherty Avenue in Modesto,
California for a net sales price of $4,012,000, which resulted in a gain
of approximately $218,000. In December 1999, the Company sold
Continental Can in Lenexa, Kansas, for a net sales price of $4,895,000,
which resulted in a loss of approximately $58,000. The sales of
Woodlands Tower II and 331 Doherty Avenue were completed as part of a
tax-deferred exchange, under Section 1031 of the Internal Revenue Code,
in which the Company acquired four properties.

Dividends
The 1999 quarterly dividend declared for each share of common stock was
$0.36 for the first quarter, $0.39 for the second and third quarters, and
$0.42 for the fourth quarter. Consistent with the Company's policy,
dividends are paid in the quarter after the quarter in which they are
declared.

Comparison of 1998 to 1997

Income from Property Operations
Income from property operations increased $16,108,000 or 54% in 1998
compared with 1997. This is due to an increase in rental income of
$27,074,000 offset by an increase in rental expenses of $10,966,000.

The increase in rental income and expenses is primarily attributable to
the acquisition and development of real estate investments during 1998
and 1997. This acquisition and development activity increased rental
income and rental expenses in 1998 by $24,964,000 and $10,133,000,
respectively, as compared to 1997. The remaining increase in rental
income of $5,226,000 is due primarily to overall increases in property
rental rates, while the remaining increase in rental expenses of
$2,113,000 is due primarily to increases in property tax assessments,
landscaping costs and other property operating expenses. These increases
were partially offset by the sales of two office properties and one
retail property in 1997, which resulted in a reduction in rental income
and rental expenses in 1998 of $3,116,000 and $1,280,000, respectively,
as compared to 1997.

Expenses
Interest expense, which includes amortization of loan fees, increased
$3,246,000 or 41% in 1998 compared with 1997. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property acquisitions and development activities
during 1997 and 1998, and higher financing costs incurred in connection
with its credit facility and mortgage loans. The amortization of loan
fees was $1,013,000 and $816,000 for 1998 and 1997, respectively.
General and administrative expense increased $1,049,000 or 45% from
$2,337,000 in 1997 to $3,386,000 in 1998. The 1998 general and
administrative expenses included costs of $434,000 related to the Company
exploring strategic alternatives including selling its portfolio of
properties. Such discussions were terminated in the fourth quarter of
1998. Excluding these costs, general and administrative expenses
increased 26% in 1998 compared with 1997, primarily the result of
managing a larger real estate portfolio. The 1997 general and
administrative expenses included $250,000 alternative minimum tax expense
the Company incurred on the retention and reinvestment of gains on
property sales.

Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a combined sales price of approximately $25,800,000, which
resulted in a gain of $10,785,000. In October 1997, the Company sold
Academy Place Shopping Center in Colorado Springs, Colorado for a sale
price of approximately $7,500,000, which resulted in a gain of
approximately $748,000. Net operating loss carryforwards were utilized
to offset substantially all of the 1997 taxable income remaining after
the deduction of dividends paid in 1997.

Dividends
The 1998 quarterly dividend declared for each share of common stock was
$0.30 for the first quarter, $0.33 for the second and third quarters, and
$0.36 for the fourth quarter. Consistent with the Company's policy,
dividends are paid in the quarter after the quarter in which they are
declared.

Financial Condition

Total assets of the Company at December 31, 1999 increased by $73,086,000
compared with December 31, 1998, primarily as a result of an increase in
real estate investments of $79,752,000. Total liabilities at December
31, 1999 increased by $120,635,000 compared with December 31, 1998,
primarily as a result of the increase in mortgage loan borrowings made
in support of property acquisitions, development, and share repurchases.

Liquidity and Capital Resources

In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35%. The interest rate of the unsecured loans is either the
lender's published "reference rate" or LIBOR plus a margin of 1.50%. As
of December 31, 1999, the facility, which was all secured, had an
outstanding balance of $137,156,000, and an effective interest rate of
7.52%. Approximately 52% ($75 million) of the loan was fixed at a six-
month LIBOR rate which expires in June 2000.

In February 1999, the credit facility was restructured to include a $30
million bridge facility with the same interest rate as the $175 million
facility. In May 1999, the Company obtained a total of $108 million of
new first mortgage financing from Teachers Insurance and Annuity
Association of America (TIAA). The proceeds from the mortgage loans were
used to pay off and retire the $30 million bridge facility and pay down
the outstanding balance on its $175 million line of credit. The $108
million TIAA financings consist of a $43.45 million 10-year loan, a $37.2
million 8-year loan, and a $27.35 million 6-year loan, all with interest
at a fixed rate of 7.17%.

In November 1999, the Company obtained an additional $22.15 million
mortgage loan from TIAA. The loan has a 7-year term with interest at a
fixed rate of 7.95%. In December 1999, the Company obtained a $4.6
million mortgage loan from Union Bank. The loan has a 5-year term with
interest at a variable rate of LIBOR plus 2.50%.

Proceeds from the mortgage loans were used to pay down the outstanding
balance of the Company's $175 million line of credit. The Company was
in compliance with the covenants and requirements of its various debt
financings throughout 1999. The Company anticipates that the cash flow
generated by its real estate investments and funds available under the
above credit facility will be sufficient to meet its short-term liquidity
requirements.

During the twelve months ended December 31, 1999, the Company's operating
activities provided cash flow of $45,540,000. Investing activities
utilized cash of $96,558,000 for real estate acquisitions, offset by
proceeds from real estate sales of $24,241,000. Financing activities
provided net cash flow of $27,075,000 consisting of the proceeds from
bank borrowings and mortgage loans of $276,180,000 and net proceeds from
the exercise of stock options of $2,004,000, offset by repayment of bank
borrowings and mortgage loans of $161,652,000, payment of dividends and
distributions of $32,712,000, redemption of partnership units of
$160,000, and the repurchase of 3,346,625 shares of common stock for
$56,585,000.

The Company expects to fund the cost of acquisitions, capital expenditure
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), and (iii) the sale of certain real estate investments.

The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located, as
well as the willingness of mortgage-lending institutions to make loans
secured by real property. The ability to sell real estate investments
is partially dependent upon the ability of purchasers to obtain financing
at commercially reasonable rates.

Potential Factors Affecting Future Operating Results

Many factors affect the Company's actual financial performance and may
cause the Company's future results to be markedly outside of the
Company's current expectations. These factors include the following:

Interest Rate Fluctuations

At the present time, borrowings under the Company's credit facility and
the $4.6 million mortgage loan from Union Bank bear interest at floating
rates. The Company recognizes that its results from operations may be
negatively impacted by future increases in interest rates and substantial
additional borrowings to finance property acquisitions, development
projects and share repurchases.

Lease Renewals

While the Company historically has been successful in renewing and
reletting space, the Company is subject to the risk that certain leases
expiring in 2000 and beyond may not be renewed, or the terms of renewal
may be less favorable to the Company than current lease terms. The
Company expects to incur costs in making improvements or repairs to its
portfolio of properties required by new or renewing tenants and expects
to incur expenses associated with brokerage commissions payable in
connection with the reletting of space.

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 an increase in the Company's borrowing and other
operating expense.

Government Regulations

The Company's properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes its properties are currently in
substantial compliance with all applicable regulatory requirements,
although expenditures at its properties 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.

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.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any of
its present or former properties. Accordingly, the Company does not
currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity of
the Company. There can be no assurance, however, that future discoveries
or events at the Company's properties, or changes to current
environmental regulations, will not result in such a material adverse
impact.

Financial Performance

Management considers Funds From Operations (FFO) to be one measure of the
performance of an equity REIT. FFO during the three and twelve months
ended December 31, 1999 was $11,014,000 and $45,554,000, respectively.
During the same periods in 1998, FFO was $11,666,000 and $42,312,000,
respectively. FFO is used by financial analysts in evaluating REITs and
can be one measure of a REIT's ability to make cash distributions.
Presentation of this information provides the reader with an additional
measure to compare the performance of REITs. FFO generally is defined
by the National Association of Real Estate Investment Trusts as net
income (loss) (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructurings, sales of
property and non-recurring items, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
FFO was computed by the Company in accordance with this definition.
Beginning in the first quarter of 2000, non-recurring items other than
extraordinary items as defined by generally accepted accounting
principles will no longer be excluded in the calculation of FFO. FFO
does not represent cash generated by operating activities in accordance
with generally accepted accounting principles; it is not necessarily
indicative of cash available to fund cash needs and should not be
considered as an alternative to net income (loss) as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity. Further, FFO as disclosed by other REITs may not
be comparable to the Company's presentation.

Three Months Ended Twelve Months Ended
December 31, December 31,
1999 1998 1999 1998

Funds From Operations (in thousands):

Net income $ 6,962 $ 8,243 $39,855 $31,496

Add:
Depreciation and amortization 3,962 2,958 13,016 10,265
Minority interest 32 31 128 117
Non-recurring portfolio
disposition costs (1) - 434 - 434
Extraordinary item - - 298 -
Loss (gain) on sales 58 - (7,743) -

Funds From Operations $11,014 $11,666 $45,554 $42,312

(1) In the second quarter of 1998, the Company engaged Lehman Brothers,
Inc. as financial advisor to assist the Company in the exploration of
strategic alternatives, which included the potential sale of the
Company's operating portfolio. Due to changes in the real estate
market, the Company abandoned its plan to sell its operating portfolio
and expensed all related costs.

Year 2000 Compliance

The year 2000 issue related to the ability of computer systems and
programs to recognize and process dates after the year 1999. The failure
to distinguish between such dates could have had detrimental effects on
business critical systems and could have caused disruptions in building
services, such as security systems, HVAC/building automation, and energy
management systems.

In the first quarter of 1998, the Company formed a Year 2000 project team
which includes the Chief Operating Officer (COO), legal counsel,
information systems (IS) consultants, and property managers. The COO and
IS consultants conducted monthly meetings to review and monitor progress
relating to the Year 2000 project. The Year 2000 project was divided
into two distinct parts: (1) information systems and (2) embedded
systems.

The information systems portion of the Year 2000 project pertained to the
Company's internal computer systems, hardware and software and entailed
the following actions: (1) compiling an inventory of all hardware and
software used in the Company's information processing systems, including
personal computers, servers, routers, hubs, switches, phone and voice
equipment, operating systems, e-mail systems, accounting software, fixed
asset software, office automation software, internet and other service
providers, wide area and local area network carriers, and web host, (2)
obtaining product certifications from vendors and manufacturers, stating
that their products are Y2K compliant, (3) obtaining Y2K upgrades for
software from web sites and identifying non-Y2K compliant personal
computers, (4) legal review and recommendations by legal counsel, (5)
determining alternative solutions, financial and personnel resources
necessary, and costs to remediate any information systems or components
thereof, which are not Y2K compliant, and (6) completing all system
upgrades to achieve Y2K compliance.

The embedded systems portion of the Year 2000 project was related to
building services, such as HVAC/building automation, electrical,
lighting, emergency power, fire and safety, elevator, parking access,
security, and energy management. This portion of the Year 2000 project
entailed the following: (1) compiling an inventory of all physical
systems on each property where the Company provides any of the
aforementioned services, (2) obtaining product certifications from
vendors and manufacturers, stating that their products are Y2K compliant,
(3) identifying testing procedures and cost of implementation of
solutions, (4) performing selective system tests on a sample of the
Company's portfolio based on the type of the property, tenant makeup,
location, and size, (5) reviewing the results of these tests and
identifying alternative solutions, resources, and costs to remediate any
embedded system or component thereof, which were not Y2K compliant, (6)
developing a review and certification process for newly acquired
properties, (7) legal review and recommendations by the legal counsel,
and (8) completing all embedded system upgrades to achieve Y2K
compliance.

The Company had a "Y2K Weekend Watch" during which personnel were on duty
to insure a staff presence for each building in the Company's real estate
portfolio during the weekend of December 31, 1999. In addition, IS
consultants were on duty to monitor the Company's information systems.
Management is not aware of any significant Year 2000 issues affecting the
Company, and believes that Year 2000 compliance will not have a material
impact on the Company's financial statements. As of December 31, 1999,
the Company had expensed approximately $81,000 on surveys and systems
reviews.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to interest rate changes primarily as a result of
its line of credit and long-term debt used to maintain liquidity and fund
capital expenditures and expansion of the Company's real estate
investment portfolio and operations. The Company's interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower its overall borrowing costs. To
achieve its objectives the Company balances its borrowings between fixed
and variable rate debt. The Company does not enter into derivative or
interest rate transactions for speculative purposes.

The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year of
expected maturity to evaluate the expected cash flows and sensitivity to
interest rate changes (dollars in thousands):
<TABLE>
<C> <C> <C> <C> <C> <C> <C> <C>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value

Variable rate LIBOR debt $ 49 $137,214 $ 63 $ 69 $ 75 $ 4,286 $141,756 $141,756

Average interest rate 8.69% 7.52% 8.69% 8.69% 8.69% 8.69% 7.56% 7.56%

Fixed rate debt $3,360 $ 3,615 $26,353 $21,371 $3,459 $144,122 $202,280 $189,882

Average interest rate 7.34% 7.34% 7.48% 7.07% 7.37% 7.34% 7.33% 8.75%
</TABLE>

As the table incorporates only those exposures that exist as of December
31, 1999, it does not consider those exposures or positions which could
arise after that date. Moreover, because firm commitments are not
presented in the table above, the information presented therein has
limited predictive value. As a result, the Company's ultimate realized
gain or loss with respect to interest rate fluctuations will depend on
the exposures that arise during the period, the Company's hedging
strategies at that time, and interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Schedule Covered by Independent
Auditors' Report

Independent Auditors' Report 51
Consolidated Balance Sheets as of December 31, 1999 and 1998 52
For the Years Ended December 31, 1999, 1998 and 1997:
- - Consolidated Statements of Income 53
- - Consolidated Statements of Stockholders' Equity 54
- - Consolidated Statements of Cash Flows 55
Notes to Consolidated Financial Statements 56
Financial Statement Schedule:
- - Schedule III - Real Estate and Accumulated Depreciation 71

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

None.

PART III

The information required by Items 10 through 13 of Part III is
incorporated by reference from the Registrant's Proxy Statement which
will be mailed to stockholders in connection with the Registrant's annual
meeting of stockholders scheduled to be held on May 18, 2000.

PART IV

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

A. 1. Financial Statements

Independent Auditors' Report.

The following consolidated financial statements of the
Company and its subsidiaries are included in Item 8 of this
report:

Consolidated Balance Sheets as of December 31, 1999 and 1998.

Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997.

Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.

Notes to Consolidated Financial Statements.

2. Financial Statement Schedules

Schedule III - Real Estate and Accumulated Depreciation

All other schedules have been omitted as they are not
applicable, or not required or because the information is
given in the Consolidated Financial Statements or related
Notes to Consolidated Financial Statements.

3. Exhibits

Exhibit No.List of Exhibits

3.1 Charter of the Company, as amended, is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2, Registration No. 333-
921.

3.2 Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.

10.1 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property
Investors Incorporated.

10.4 Second Amended and Restated Credit Agreement dated as of
June 26, 1996, by and between the Company, as Borrower,
Bank of America National Trust and Savings Association
and the several financial institutions (the "Banks") is
incorporated herein by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.

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 Company, as Purchaser, and Tustin
Properties, as Owner, for 3002 Dow Business Center is
incorporated herein by reference to Exhibit 10.19 to the
Company'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 Company is incorporated herein by
reference to Exhibit 10.14 to the Company'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 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.

10.8 Amendment No. 1 to Employment Agreement dated as of
September 18, 1995, by and between Peter B. Bedford and
the Company is incorporated herein by reference to
Exhibit 10.10 to the Company'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 Company, the Buyer, as
amended, is incorporated herein by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K filed on
December 27, 1995.

10.13 Amended and Restated Promissory Note date May 24, 1996
executed by the Company and payable to the order of
Prudential Insurance Company of America is incorporated
herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.

10.14 Loan Agreement dated as of December 24, 1996 between
Bedford Property Investors, Inc. as Borrower and Union
Bank of California, N.A. as Lender is incorporated herein
by reference to Exhibit 10.14 to the Company's Form 10-K
for the year ended December 31, 1996.

10.15 Loan Agreement dated as of January 30, 1998 between
Bedford Property Investors, Inc. as Borrower and
Prudential Insurance Company of America as Lender is
incorporated herein by reference to Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1997.

10.16 The Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.16 to the
Company's Form 10-K for the year ended December 31, 1997.

10.17 Form of Employee Stock Plan Option Agreement between the
Company and the Named Executive Officers under the
Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.17 to the
Company's Form 10-K for the year ended December 31, 1997.

10.18 The Company's Amended and Restated 1992 Directors' Stock
Option Plan is incorporated herein by reference to
Exhibit 10.18 to the Company's Form 10-K for the year
ended December 31, 1997.

10.19 Form of Retention Agreement is incorporated herein by
reference to Exhibit 10.19 to the Company's Form 10-K for
the year ended December 31, 1997.

10.20 Employment Agreement made as of August 4, 1997, by and
between Bedford Property Investors Incorporated and Scott
R. Whitney is incorporated herein by reference to Exhibit
10.20 to the Company's Form 10-K for the year ended
December 31, 1997.

10.21 Employment Agreement made as of November 18, 1997, by and
between Bedford Property Investors Incorporated and
Dennis Klimmek is incorporated herein by reference to
Exhibit 10.21 to the Company's Form 10-K for the year
ended December 31, 1997.

10.22 Credit Agreement made as of February 26, 1999, by and
between Bedford Property Investors Incorporated and Bank
of America National Trust and Savings Association and the
several financial institutions as may be party thereto
from time to time is incorporated herein by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.

10.23 Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Bank of
America National Trust and Savings Association is
incorporated herein by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998.

10.24 Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Union Bank of
California is incorporated herein by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.

10.25 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.

10.26 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.

10.27 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.24 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.

10.28* Promissory Note made as of November 22, 1999, by and
between Bedford Property Investors, Incorporated and
Teachers Insurance and Annuity Association of America.

12* Ratio of Earnings to Fixed Charges.

21.1* Subsidiaries of the Company.

23.1* Consent of KPMG LLP, independent public accountants.

27* Financial Data Schedules

* Filed herewith

B. Reports on Form 8-K

The Company filed on May 11, 1999, a report on Form 8-K
dated May 11, 1999, reporting items 5 and 7.

The following financial statements were filed: (i)
Historical Summary of Gross Income and Direct Operating
Expenses for Cabrillo Executive Center, Parkpoint
Business Center, Cimarron Business Park and Texaco
Building for the year ended December 31, 1997, and (ii)
pro forma income statement showing the effect resulting
from all the Company's acquisitions through December 31,
1998.

Independent Auditors' Report

To the Stockholders and the Board of Directors of
Bedford Property Investors, Inc.:

We have audited the consolidated financial statements of Bedford Property
Investors, Inc. and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the
accompanying index. 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, 1999
and 1998, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1999, 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.

KPMG LLP

San Francisco, California
February 4, 2000

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(in thousands, except share and per share amounts)
<TABLE>
<S> <C> <C>
1999 1998
Assets:

Real estate investments:
Industrial buildings $279,367 $312,911
Office buildings 294,420 258,479
Operating properties held for sale 80,563 -
Properties under development 19,246 24,686
Land held for development 6,137 3,905

679,733 599,981
Less accumulated depreciation 28,695 18,523

651,038 581,458
Cash 1,584 1,286
Other assets 18,788 15,580

$671,410 $598,324

Liabilities and Stockholders' Equity:

Bank loan payable $137,156 $147,443
Mortgage loans payable 206,880 80,116
Accounts payable and accrued expenses 9,767 7,574
Dividends and distributions payable 8,270 8,191
Other liabilities 7,928 6,042

Total liabilities 370,001 249,366

Minority interest in consolidated partnership 1,229 1,369

Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares;
issued and outstanding 19,613,522
shares in 1999 and 22,666,856 shares in 1998 392 453
Additional paid-in capital 353,220 407,760
Accumulated dividends in
excess of net income (53,432) (60,624)
Total stockholders' equity 300,180 347,589

$671,410 $598,324
</TABLE>
See accompanying notes to consolidated financial statements.

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(in thousands, except share and per share amounts)
<TABLE>
<S> <C> <C> <C>
1999 1998 1997

Property operations:
Rental income $90,527 $73,451 $46,377
Rental expenses:
Operating expenses 14,550 11,026 6,852
Real estate taxes 8,074 6,220 3,977
Depreciation and amortization 13,016 10,265 5,716

Income from property operations 54,887 45,940 29,832

General and administrative expenses (3,561) (3,386) (2,337)
Interest income 182 223 289
Interest expense (18,970) (11,164) (7,918)

Income before gain on sales of real
estate investments and minority interest 32,538 31,613 19,866

Gain on sales of real estate investments 7,743 - 11,533

Minority interest (128) (117) (108)

Income before extraordinary item 40,153 31,496 31,291

Extraordinary item-loss on early extinguishment of debt (298) - -

Net income $39,855 $31,496 $31,291

Net income applicable to common stockholders $39,855 $31,496 $27,791

Earnings per share - basic:
Income before extraordinary item $ 1.88 $ 1.39 $ 2.21
Extraordinary item-loss on early extinguishment of debt (0.01) - -

Net income $ 1.87 $ 1.39 $ 2.21

Weighted average number of shares - basic 21,267,088 22,634,656 12,566,065

Earnings per share - diluted:
Income before extraordinary item $ 1.87 $ 1.38 $ 1.94
Extraordinary item-loss on early extinguishment of debt (0.01) - -

Net income $ 1.86 $ 1.38 $ 1.94

Weighted average number of shares - diluted 21,477,013 22,929,807 16,166,454

</TABLE>
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except per share amounts)

<TABLE>
<S> <C> <C> <C> <C>
Accumulated Total
Additional dividends stock-
Common paid-in in excess of holders'
stock capital net income equity

Balances, December 31, 1996 $ 131 $147,622 $(73,997) $ 73,756

Issuance of common stock 321 265,622 - 265,943

Costs of issuance of common stock - (4,990) - (4,990)

Redemption of partnership units - (45) - (45)

Net income - - 31,291 31,291

Dividends to common stockholders
($1.13 per share) - - (16,029) (16,029)

Dividends to preferred stockholders - - (3,500) (3,500)

Balances, December 31, 1997 452 408,209 (62,235) 346,426

Issuance of common stock 1 1,366 - 1,367

Repurchase and retirement of
common stock - (1,815) - (1,815)

Net income - - 31,496 31,496

Dividends to common stockholders - - (29,885) (29,885)
($1.32 per share)

Balances, December 31, 1998 453 407,760 (60,624) 347,589

Issuance of common stock 6 1,978 - 1,984

Repurchase and retirement of common stock (67) (56,518) - (56,585)

Net income - - 39,855 39,855

Dividends to common stockholders
($1.56 per share) - - (32,663) (32,663)

Balances, December 31, 1999 $ 392 $353,220 $(53,432) $300,180
</TABLE>

See accompanying notes to consolidated financial statements.

BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<S> <C> <C> <C>
1999 1998 1997

Operating Activities:
Net income $ 39,855 $ 31,496 $ 31,291
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 128 117 108
Depreciation and amortization 14,212 11,508 6,697
Gain on sales of real estate investments (7,743) - (11,533)
Increase in other assets (4,436) (7,259) (4,655)
Increase in accounts payable and accrued expenses 1,534 1,656 1,282
Increase in other liabilities 1,990 1,431 1,851

Net cash provided by operating activities 45,540 38,949 25,041

Investing Activities:
Investments in real estate (96,558) (168,018) (212,267)
Proceeds from sales of real estate investments 24,241 - 31,909

Net cash used by investing activities (72,317) (168,018) (180,358)

Financing Activities:
Proceeds from bank loan payable 141,972 158,097 167,559
Repayment of bank loan payable (152,657) (19,889) (206,804)
Proceeds from mortgage loans payable 134,208 21,084 -
Repayment of mortgage loans payable (8,995) (1,107) (441)
Issuance of common stock 2,004 1,367 210,953
Repurchase and retirement of common stock (56,585) (1,815) -
Redemption of partnership units (160) (128) (257)
Payment of dividends and distributions (32,712) (28,615) (15,660)

Net cash provided by financing activities 27,075 128,994 155,350

Net increase (decrease) in cash 298 (75) 33
Cash at beginning of year 1,286 1,361 1,328

Cash at end of year $ 1,584 $ 1,286 $ 1,361

Supplemental disclosure of cash flow information
a) Non-cash investing and financing activities:
Debt incurred with real estate acquired $ 5,602 $ - $ 8,914
b) Cash paid during the year for interest, net of amounts
capitalized $ 16,624 $ 9,329 $ 7,291
c) Conversion of preferred stock (see footnote 9) $ - $ - $ 50,000

</TABLE>
See accompanying notes to consolidated financial statements.

BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Summary of Significant Accounting Policies and
Practices

The Company
Bedford Property Investors, Inc. (the "Company") is a Maryland real
estate investment trust with investments primarily in industrial and
suburban office properties concentrated in the western United States.
The Company's common stock trades under the symbol "BED" on both the New
York Stock Exchange and Pacific Exchange.

Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and Bedford Realty Partners, L.P.
All significant inter-entity balances have been eliminated in
consolidation.

Use of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.

Federal Income Taxes
The Company has elected to be taxed 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 and other requirements are met. 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
depreciation. As of December 31, 1999, for federal income tax purposes,
the Company had an ordinary loss carry forward of approximately $32
million. As the Company does not expect to incur income tax liabilities,
the asset value of these losses has been effectively fully reserved. For
federal income tax purposes, dividend distributions made for 1999 were
classified 97% as ordinary income and 3% as capital gain; dividend
distributions made for 1998 were classified 96% as ordinary income and
4% as return of capital; dividend distributions made for 1997 were
classified 88% as ordinary income and 12% as capital gain.

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 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
expensed as incurred. When the Company concludes that the recovery of
the carrying amount of a real estate investment is impaired, it reduces
such carrying amount to the estimated fair value of the investment.
Investments which are considered as held for sale are carried at the
lower of the carrying amount or fair value less costs to sell and such
properties are no longer depreciated.

Income Recognition
Rental income from operating leases is recognized in income on a
straight-line basis over the period of the related lease agreement.
Aggregate rental income exceeded contractual rentals by $2,797,000,
$2,252,000, and $1,644,000 for 1999, 1998, and 1997, respectively.

Per Share Data
Per share data are based on the weighted average number of common shares
outstanding during the year. Stock options issued under the Company's
stock option plans, non-vested restricted stock, and the limited
partnership units of Bedford Realty Partners, L.P. are included in the
calculation of diluted per share data if, upon exercise or vestiture,
they would have a dilutive effect.

Recent Accounting Pronouncements
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-up
Activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The adoption of this statement did not have a
material impact on the Company's financial statements.

In June 1998, the FASB issued Financial Accounting Standard No. 133,
Accounting for Derivatives Instruments and Hedging Activities. SFAS 133,
as amended, is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes that the adoption of
this statement will not have a material impact on the Company's financial
statements.

Note 2 - Real Estate Investments

As of December 31, 1999, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):

Number of Percent
Properties Cost of Total

Industrial buildings 56 $ 279,367 41%
Office buildings 25 294,420 43%
Operating properties held for sale 21 80,563 12%
Properties under development 8 19,246 3%
Land held for development 4 6,137 1%

Total 114 $ 679,733 100%

Note 2 - Real Estate Investments (continued)
The following table sets forth the Company's real estate investments as
of December 31, 1999 (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C>
Less
Development Accumulated
Land Building In Progress Depreciation Total

Industrial buildings
Northern California $ 44,238 $106,821 $ - $ 8,841 $142,218
Arizona 17,173 47,990 - 2,398 62,765
Southern California 17,663 40,288 - 3,031 54,920
Colorado 1,911 3,283 - 345 4,849

Total industrial buildings 80,985 198,382 - 14,615 264,752

Office buildings
Northern California 6,801 23,256 - 1,082 28,975
Arizona 10,622 23,817 - 873 33,566
Southern California 9,361 21,410 - 1,271 29,500
Colorado 5,560 45,620 - 1,771 49,409
Greater Seattle Area 23,652 111,541 - 3,762 131,431
Nevada 2,102 10,678 - 658 12,122

Total office buildings 58,098 236,322 - 9,417 285,003

Operating properties held for sale
Northern California 3,683 4,887 - 373 8,197
Arizona 1,332 2,679 - 153 3,858
Southern California 1,558 3,475 - 144 4,889
Greater Kansas City Area 6,571 20,742 - 2,184 25,129
Texas 5,932 18,220 - 813 23,339
Greater Portland Area 2,652 8,832 - 996 10,488

Total operating properties held for sale 21,728 58,835 - 4,663 75,900

Properties under development
Northern California - - 660 - 660
Arizona - - 8,726 - 8,726
Colorado - - 6,157 - 6,157
Greater Seattle Area - - 3,703 - 3,703

Total properties under development - - 19,246 - 19,246

Land held for development
Northern California 2,133 - - - 2,133
Southern California 703 - - - 703
Colorado 3,301 - - - 3,301

Total land held for development 6,137 - - - 6,137

Total $166,948 $493,539 $19,246 $28,695 $651,038
</TABLE>

Company personnel directly manage all but eleven of the Company's
properties from regional offices in Lafayette, CA; Tustin, CA; Phoenix,
AZ; Lenexa, KS; and Seattle, WA. For the eleven properties located in
markets not served by one of the Company's regional offices, the Company
has subcontracted management to local firms. All financial record-
keeping is centralized at the Company's corporate office in Lafayette,
CA.

Income from property operations for properties held for sale as of
December 31, 1999 was $7,725,000, $6,094,000, and $4,483,000 for the
twelve months ending December 31, 1999, 1998 and 1997, respectively.

During 1999, 1998 and 1997, the Company capitalized interest costs
relating to properties under development totaling $2,148,000, $2,177,000
and $627,000, respectively.

The Company has contractual construction commitments of $13.2 million at
December 31, 1999 relating to eight of its properties under development.

Note 3 - Consolidated Partnership

In December 1996, the Company formed Bedford Realty Partners, L.P. (the
"Operating Partnership"), with the Company as the sole general partner,
for the purpose of acquiring real estate. In exchange for contributing
a property into the Operating Partnership, the owners of the property
receive limited partnership units ("OP Units"). A limited partner can
seek redemption of the OP Units at any time. The Company, at its option,
may redeem the OP Units by either (i) issuing common stock at the rate
of one share of common stock for each OP Unit, or (ii) paying cash to a
limited partner based on the average trading price of its common stock.
Each OP Unit is allocated partnership income and cash flow at a rate
equal to the dividend being paid by the Company on a share of common
stock. Additional partnership income and cash flow is allocated 99% to
the Company and 1% to the limited partners.

This acquisition strategy is referred to as a "Down REIT" transaction;
as long as certain tax attributes are maintained, the income tax
consequences to a limited partner are generally deferred until such time
as the limited partner redeems their OP Units.

On December 17, 1996, the Company acquired a $3.6 million industrial
property located in Modesto, California utilizing the Operating
Partnership. The sellers of the property received 108,495 OP Units. A
director of the Company was a 9% owner of the property, but did not
participate in the approval of the acquisition. In December 1999, the
Modesto, California property was exchanged for a property located in
Phoenix, Arizona. As of December 31, 1999 the Company has redeemed
30,505 OP units for cash.

Note 4 - Leases

Minimum future lease payments to be received as of December 31, 1999 are
as follows (in thousands):

2000 $ 81,135
2001 74,904
2002 63,302
2003 53,049
2004 38,240
Thereafter 64,139
$374,769

The total minimum future lease 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

The Company's activities relating to the acquisition of new properties
and debt and equity financings have been performed by Bedford
Acquisitions, Inc. (BAI) pursuant to a written contract dated January 1,
1995, as amended. The contract provides that BAI is obligated to provide
services to the Company with respect to the Company's acquisition and
financing activities, and that BAI is responsible for the payment of its
expenses incurred in connection therewith. The contract provides that
BAI is to be paid a fee in an amount equal to the lesser of (i) 1 1/2% of
the gross amount of the aggregate purchase price of the property for
acquisitions and dispositions, up to 1 1/2% of any loans arranged by BAI,
plus 5% of development project costs, or (ii) an amount equal to (a) the
aggregate amount of approved expenses funded by BAI through the time of
such acquisition, disposition, loan, or development minus (b) the
aggregate amount of fees previously paid to BAI pursuant to such
arrangement. In no event will the aggregate amount of fees paid to BAI
exceed the aggregate amount of costs funded by BAI. The agreement with
BAI has a term of one year and is renewable at the option of the Company
for additional one-year terms. The current agreement will expire on
January 1, 2001.

For 1999, 1998, and 1997, the Company paid BAI $2,783,000, $2,272,000,
and $3,156,000, respectively, for acquisition and financing activities
performed 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 are properly
includable in direct acquisition costs and capitalized as part of the
asset or financing activities.

Note 6 - Stock Option Plans

Initially 900,000 shares of the Company's Common Stock were reserved for
issuance under the Employee Stock Option Plan (the "Employee Plan"). In
May 1998, the shareholders approved an additional 2,100,000 shares. The
Employee Plan expires in 2003. The Employee Plan provides for
non-qualified stock options and incentive stock options.

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 exercisability of the options. Options granted to employees are
exercisable upon vesting, and 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 of 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.

Initially 250,000 shares of the Company's Common Stock were reserved for
issuance under the Directors' Stock Option Plan (the "Directors' Plan").
In May 1996 and 1997, the shareholders approved an additional 250,000
shares and 500,000 shares, respectively. The Directors' Plan expires 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 25,000 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 ten years.

In September 1995, the Company established a Management Stock Acquisition
program. Under the program, options exercised by key members of
management shortly after 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. During 1999, 1996 and 1995, options for 157,500 shares of
Common Stock were exercised in exchange for notes payable to the Company.
The notes bear interest at 7.5%. The unpaid balance of the notes was
$974,000 and $1,021,000 at December 31, 1999 and 1998, respectively, and
is included in the accompanying consolidated balance sheet as a reduction
of additional paid-in capital.

In addition, the Company may grant restricted stock to key employees.
These shares generally vest over five years and are subject to forfeiture
under certain conditions. For 1999, 1998 and 1997, the Company granted
219,888 shares, 50,200 shares, and 30,000 shares of restricted stock net
of forfeitures, respectively.

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, compensation costs have not been
recognized for either the Employee or the Directors' Plan. Had
compensation costs for the plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:

1999 1998 1997
Net income:
As reported $39,855,000 $31,496,000 $31,291,000
Pro forma 39,496,000 31,158,000 31,045,000

Earnings per share - basic:
As reported $ 1.87 $ 1.39 $ 2.21
Pro forma 1.86 1.38 2.19

Earnings per share - diluted:
As reported $ 1.86 $ 1.38 $ 1.94
Pro forma 1.84 1.36 1.92

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants in 1999, 1998 and 1997, respectively:
dividend yield of 9.4%, 7.3%, and 5.8%; expected volatility of 18.4%,
17.0%, and 16.8%; risk-free interest rates of 6.8%, 4.6%, and 5.7%. The
expected life for the director's options is five years for each period.
The expected life for the employee's options is ten years each for 1998
and five years for 1997.

A summary of the status of the Company's plans as of December 31, 1999,
1998 and 1997 and changes during the years ended on those dates is
presented below:

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
Weighted Avg. Weighted Avg. Weighted Avg.
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Employee Plan
Outstanding at beginning
of year 1,117,250 $18.10 713,750 $16.52 242,250 $12.94
Granted - - 619,000 19.67 483,000 18.25
Exercised (63,500) 13.66 (29,625) 13.03 (7,125) 13.37
Forfeited and cancelled (317,125) 19.15 (185,875) 18.05 (4,375) 14.99

Outstanding at end of year 736,625 $17.72 1,117,250 $18.10 713,750 $16.52

Options exercisable 330,875 239,250 118,750

Weighted average fair value
of options granted during
the year - $ 1.12 $ 1.94

Directors' Plan
Outstanding at beginning
of year 310,000 $15.79 365,000 $11.65 295,000 $ 9.94
Granted 70,000 17.72 70,000 19.56 70,000 18.82
Exercised (25,000) 12.97 (125,000) 5.81 - -
Expired (10,000) 17.72 - - - -

Outstanding at end of year 345,000 $16.33 310,000 $15.79 365,000 $11.65

Options exercisable 345,000 310,000 365,000

Weighted average fair value
of options granted during
the year $ 1.24 $ 1.32 $ 1.59

</TABLE>

The following table summarizes information about stock options
outstanding on December 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
Weighted Avg.
Range of Number Remaining Weighted Avg. Number Weighted Avg.
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price

Employee Plan
$ 8.50 2,750 3.4 $ 8.50 2,750 $ 8.50
11.50 31,625 5.7 11.50 31,625 11.50
13.00 80,250 6.4 13.00 44,250 13.00
13.75 5,000 4.7 13.75 5,000 13.75
17.63 to 20.06 342,000 7.5 18.05 178,500 18.03
19.56 275,000 8.4 19.56 68,750 19.56

$ 8.50 to 20.06 736,625 7.6 $ 17.72 330,875 $ 16.91

Directors' Plan
$11.82 to 11.85 75,000 1.2 11.84 75,000 11.84
14.22 70,000 6.8 14.22 70,000 14.22
17.72 60,000 9.8 17.72 60,000 17.72
18.82 70,000 7.8 18.82 70,000 18.82
19.56 70,000 8.8 19.56 70,000 19.56

$11.82 to 19.56 345,000 6.7 $16.33 345,000 $ 16.33
</TABLE>

Note 7 - Bank Loan Payable

In June 1998, the Company amended and restated its secured revolving line
of credit facility led by Bank of America. Under the facility, which
matures June 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million. The
secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35% depending on the Company's leverage level. The unsecured
loans bear interest at either the lender's published "reference rate" or
LIBOR plus a margin of 1.50%. At December 31, 1999, the facility, which
was all secured, had an outstanding balance of $137,156,000, with an
interest rate of LIBOR plus 1.35%. Approximately 52% ($75 million) of
the loan was fixed at a six-month LIBOR rate which expires in June 2000.
The credit facility is secured by mortgages on 44 properties, which
properties collectively accounted for approximately 45% of the Company's
annualized base rent and approximately 40% of the Company's total real
estate assets as of December 31, 1999, together with the rental proceeds
from such properties.

In February 1999, the credit facility was restructured to include a $30
million bridge facility which carried the same interest rate as the $175
million facility. In May 1999, the Company obtained a total of $108
million of new first mortgage financing from TIAA. The proceeds from the
mortgage loans were used to repay and retire the $30 million bridge
facility and pay down the outstanding balance on its $175 million line
of credit. The credit facility contains various restrictive covenants
including, among other things, a covenant limiting quarterly dividends
to 95% of average Funds From Operations. The Company was in compliance
with the covenants and requirements of its revolving credit facility
throughout 1999.

<PAGE>
The daily weighted average amount owed to the bank was $113,082,000 and
$94,338,000 in 1999 and 1998, respectively. The weighted average
interest rates in these periods were 6.48% and 6.81%, respectively. The
effective interest rate at December 31, 1999 was 7.52%.

Note 8 - Mortgage Loans Payable

Mortgage loans payable at December 31, 1999 and 1998 consist of the
following (in thousands):

<TABLE>
<S> <C> <C>
1999 1998
Floating rate note due December 15, 1999 $ - $ 1,797
7.50% note due January 1, 2002 23,889 24,297
7.02% note due March 15, 2003 19,257 24,717
Floating rate note due January 1, 2005, current rate of 8.69% 4,600 -
7.17% note due June 1, 2005 27,150 -
8.90% note due July 31, 2006 8,513 8,674
6.91% note due July 31, 2006 20,288 20,631
7.95% note due December 1, 2006 22,150 -
7.17% note due June 1, 2007 36,928 -
7.75% note due April 1, 2009 973 -
7.17% note due June 1, 2009 43,132 -
$206,880 $80,116
</TABLE>

The mortgage loans are collaterized by 41 properties at December 31,
1999, which properties collectively accounted for approximately 47% of
the Company's annualized base rent and approximately 45% of the Company's
total real estate assets as of December 31, 1999, together with the
rental proceeds from such properties. The Company was in compliance with
the covenants and requirements of its various mortgage financings
throughout 1999.

The following table presents scheduled principal payments on mortgage
loans as of December 31, 1999 (in thousands):

2000 $ 3,409
2001 3,673
2002 26,416
2003 21,440
2004 3,534
Thereafter 148,408
$206,880

Note 9 - Redeemable Preferred Stock

On September 18, 1995, the Company issued and sold 8,333,334 shares of
Series A Convertible Preferred Stock (the "Convertible Preferred Stock")
for $6.00 per share. Holders of the Convertible Preferred Stock were
entitled to cumulative quarterly dividends in cash in an amount equal to
the greater of (i) $0.135 per share or (ii) the dividends payable on the
Common Stock into which the Convertible Preferred Stock is convertible
plus, in both cases, the accumulated but unpaid dividends on the
Convertible Preferred Stock. Dividends may be declared and paid on
shares of Common Stock only if full cumulative dividends have been paid
or authorized and set apart on all shares of Convertible Preferred Stock.
On October 14, 1997, the 8,333,334 shares of the Series A Convertible
Preferred Stock were converted to 4,166,667 shares of common stock.

Note 10 - Sales of Common Stock

The Company completed the sale of 4,600,000 shares of common stock at $17
3/8 per share in February 1997 and 7,245,000 shares of common stock at
$19 5/8 per share in November 1997. Net cash proceeds from these
offerings were used to pay off the outstanding borrowings under the
Company's credit facility.

Note 11 - Comprehensive Income

There are no adjustments necessary to net income as presented in the
accompanying consolidated statements of income to derive comprehensive
income in accordance with FASB Statement No. 130, Reporting Comprehensive
Income.

Note 12 - Segment Disclosure
The Company has five reportable segments organized by the region in which
they operate: Northern California (Northern California, Utah and Nevada),
Southwest (Arizona and greater Austin, Texas), Southern California,
Northwest (greater Portland, Oregon and greater Seattle, Washington), and
Midwest (greater Kansas City, Kansas/Missouri, greater Dallas, Texas and
Colorado).

The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based upon income from real estate from the combined
properties in each segment.
For the year ended December 31, 1999
(in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated

Rental income $ 32,900 $ 15,726 $ 12,382 $ 15,528 $ 13,991 $ - $ 90,527
Operating expenses and
real estate taxes 7,193 4,274 2,481 3,944 4,456 276 22,624
Depreciation and
amortization 4,624 2,087 1,768 2,509 2,028 - 13,016

Income from property operations $ 21,083 $ 9,365 $ 8,133 $ 9,075 $ 7,507 $ (276) $ 54,887

Percent of income from
property operations 38% 17% 15% 17% 14% (1)% 100%

Interest income(1) 24 3 - 4 - 151 182
Interest expense - - - - - (18,970) (18,970)
General and administrative
expenses - - - - - (3,561) (3,561)

Income before minority interest
and gain on sales 21,107 9,368 8,133 9,079 7,507 (22,656) 32,538

Minority interest - - - - - (128) (128)
Gain (loss) on sales of real estate
investments 7,756 - 45 - (58) - 7,743

Income before extraordinary item 28,863 9,368 8,178 9,079 7,449 (22,784) 40,153

Loss on early extinguishment of debt (298) - - - - - (298)

Net income $ 28,565 $ 9,368 $ 8,178 $ 9,079 $ 7,449 $(22,784) $ 39,855

Real estate investments $205,258 $133,511 $94,458 $150,381 $96,125 $ - $679,733

Additions/dispositions of real
estate investments $ (4,331) $ 24,079 $17,060 $ 37,131 $ 5,813 $ - $ 79,752

Total assets $212,612 $123,411 $101,542 $134,843 $93,991 $5,011 $671,410
</TABLE>

(1) The interest income in Northern California, Southwest, and
Northwest segments represents interest earned from tenant notes
receivable.

For the year ended December 31, 1998 (in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated

Rental income $ 30,759 $ 11,900 $ 10,274 $ 9,281 $ 11,260 $ (23) $ 73,451
Operating expenses and
real estate taxes 6,954 3,200 2,142 1,345 3,261 344 17,246
Depreciation and
amortization 3,939 1,629 1,495 1,586 1,616 - 10,265

Income from property
operations $ 19,866 $ 7,071 $ 6,637 $ 6,350 $ 6,383 $ (367) $ 45,940

Percent of income from
property operations 43% 15% 15% 14% 14% (1)% 100%

Interest income(1) 15 - - 16 - 192 223
Interest expense - - - - - (11,164) (11,164)
General and administrative
expenses - - - - - (3,386) (3,386)

Income before minority interest 19,881 7,071 6,637 6,366 6,383 (14,725) 31,613

Minority interest - - - - - (117) (117)

Net income $ 19,881 $ 7,071 $ 6,637 $ 6,366 $ 6,383 $(14,842) $ 31,496

Real estate investments $209,589 $109,432 $ 77,398 $113,250 $ 90,312 $ - $599,981

Additions to real
estate investments $ 24,182 $ 41,420 $ 6,349 $ 56,852 $ 39,107 $ - $167,910

Total assets $210,867 $103,637 $ 81,708 $109,471 $ 87,670 $ 4,971 $598,324
</TABLE>

(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.

For the year ended December 31, 1997 (in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated

Rental income $ 20,614 $ 5,367 $ 8,637 $ 4,112 $ 4,539 $ 3,108 $ 46,377
Operating expenses and
real estate taxes 4,551 1,336 1,859 415 1,280 1,388 10,829
Depreciation and
amortization 2,799 603 1,105 698 511 - 5,716

Income from property
operations $ 13,264 $ 3,428 $ 5,673 $ 2,999 $ 2,748 $ 1,720 $ 29,832

Percent of income from
property operations 44% 12% 19% 10% 9% 6% 100%

Interest income(1) 9 - - 2 - 278 289
Interest expense - - - - - (7,918) (7,918)
General and administrative
expenses - - - - - (2,337) (2,337)

Income before minority interest
and gain on sales 13,273 3,428 5,673 3,001 2,748 (8,257) 19,866

Minority interest - - - - - (108) (108)
Gain on sale of real estate
investments - - - - - 11,533 11,533

Net income $ 13,273 $ 3,428 $ 5,673 $ 3,001 $ 2,748 $ 3,168 $ 31,291

Real estate investments $185,407 $ 68,012 $ 71,049 $ 56,398 $51,205 $ - $432,071

Additions to real
estate investments $ 82,792 $ 58,764 $ 6,559 $ 33,233 $21,309 $ - $202,657

Total assets $183,714 $ 65,925 $ 73,491 $ 57,005 $49,042 $ 4,726 $433,903
</TABLE>

(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.

Note 13 - Fair Value of Financial Instruments

The carrying values of trade accounts payable and receivable
approximate fair value due to the short-term maturity of these
instruments. Management has determined that the market value of the
$202,280 fixed rate debt is approximately $189,882 based on the terms
of existing debt compared to those available in the marketplace. The
carrying value of variable rate debt approximates fair value, as the
interest rates and other terms are comparable to current market terms.

Note 14 - Earnings per Share

Following is a reconciliation of earnings per share:
(in thousands, except share and per share amounts)

Year Ended December 31,
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
Basic:
Income before extraordinary item $ 40,153 $ 31,496 $ 31,291
Less: Dividends on the Series A
Convertible
Preferred Stock - - (3,500)
Extraordinary item - loss on early
extinguishment of debt (298) - -

Net income applicable to common stockholders $ 39,855 $ 31,496 $ 27,791

Weighted average number of shares - basic 21,267,088 22,634,656 12,566,065

Income before extraordinary item $ 1.88 $ 1.39 $ 2.21
Extraordinary item - loss on early extinguishment of debt (0.01) - -
Net income $ 1.87 $ 1.39 $ 2.21

Diluted:
Income before extraordinary item $ 40,153 $ 31,496 $ 31,291
Add: Minority interest 128 117 108
Extraordinary item - loss on early extinguishment of debt (298) - -
Net income for diluted earnings per share $ 39,983 $ 31,613 $ 31,399

Weighted average number of shares (from above) 21,267,088 22,634,656 12,566,065
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred stock - - 3,264,840
Weighted average shares issuable upon exercise
of dilutive stock options using average
period stock price under the treasury
stock method 62,196 205,522 237,185
Weighted average shares issuable upon the
conversion of operating partnership units 82,402 89,629 98,364
Weighted average shares of non-vested restricted
stock using average period stock
price under the treasury stock method 65,327 - -
Weighted average number of shares -
diluted 21,477,013 22,929,807 16,166,454

Income before extraordinary item $ 1.87 $ 1.38 $ 1.94
Extraordinary item - loss on early extinguishment of debt (0.01) - -
Net income for diluted earnings per share $ 1.86 $ 1.38 $ 1.94
</TABLE>

Note 15 - Quarterly Financial Data-Unaudited

The following is a summary of quarterly results of operations for 1999
and 1998 (in thousands of dollars, except per share data):

<TABLE>
<S> <C> <C> <C> <C>
1999 Quarters Ended 3/31 6/30 9/30 12/31

Rental income $21,359 $22,346 $22,475 $24,347

Income from property operations 12,899 14,229 14,081 13,678

Income before gain on sales of real estate
investments and minority interest 8,274 8,556 8,656 7,052

Net income $ 8,811 $15,267 $ 8,815 $ 6,962

Earnings per share - basic $ 0.39 $ 0.70 $ 0.41 $ 0.35

Earnings per share - diluted $ 0.39 $ 0.70 $ 0.41 $ 0.35

1998 Quarters Ended 3/31 6/30 9/30 12/31

Rental income $15,361 $17,118 $20,156 $20,816

Income from property operations 9,880 10,939 12,191 12,930

Income before gain on sales of real estate
investments and minority interest 7,486 7,896 7,957 8,274

Net income $ 7,457 $ 7,868 $ 7,928 $ 8,243

Earnings per share - basic $ 0.33 $ 0.35 $ 0.35 $ 0.36

Earnings per share - diluted $ 0.33 $ 0.34 $ 0.35 $ 0.36
</TABLE>

BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(in thousands of dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Initial Cost Cost Gross Amount Deprec-
to Company Capitalized Carried at Close of Period Accumu- Date Deprec-
Buildings Subsequent lated De- Con- Date iable
& Improve- to Acquisi- precia- struct- Ac- Life
Description Land ment tion Land Building Total tion ed quired (Years)
Industrial buildings:
Northern California
Building #3 at Contra Costa
Diablo Industrial Park,
Concord* $ 495 $ 1,159 $ 46 $ 495 $ 1,205 $ 1,700 $ 243 1983 12/90 45
Building #8 at Contra Costa
Diablo Industrial Park,
Concord* 877 1,548 203 877 1,751 2,628 426 1981 12/90 45
Building #18 at Mason
Industrial Park, Concord* 610 1,265 126 610 1,391 2,001 287 1984 12/90 45
Milpitas Town Center,
Milpitas* 1,400 4,421 91 1,400 4,512 5,912 540 1983 8/94 45
598 Gibraltar Drive, Milpitas* 535 2,522 - 535 2,522 3,057 780 1996 5/96 45
Auburn Court, Fremont* 1,391 2,473 268 1,415 2,717 4,132 254 1983 12/95 45
47650 Westinghouse Drive,
Fremont* 267 893 59 271 948 1,219 84 1982 12/95 45
410 Allerton, South
San Francisco* 1,333 889 39 1,356 905 2,261 81 1970 12/95 45
400 Grandview, South
San Francisco* 3,246 3,517 945 3,300 4,408 7,708 357 1976 12/95 45
342 Allerton, South
San Francisco* 2,516 1,542 363 2,558 1,863 4,421 176 1969 12/95 45
301 East Grand, South
San Francisco* 2,036 959 160 2,070 1,085 3,155 113 1974 12/95 45
Fourier Avenue, Fremont* 2,120 7,018 - 2,120 7,018 9,138 559 1982 5/96 45
Lundy Avenue, San Jose* 2,055 2,184 216 2,055 2,400 4,455 186 1982 7/96 45
115 Mason Circle, Concord* 697 854 46 697 900 1,597 74 1971 9/96 45
47600 Westinghouse Drive,
Fremont* 356 1,067 43 356 1,110 1,466 82 1982 9/96 45
860-870 Napa Valley Corporate
Way, Napa* 933 3,515 518 933 4,033 4,966 342 1984 9/96 45
47633 Westinghouse Drive,
Fremont* 1,051 3,239 252 1,051 3,491 4,542 246 1983 10/96 45
47513 Westinghouse Drive,
Fremont* 1,624 - 4,088 1,624 4,088 5,712 413 1998 10/96 45
Bordeaux Centre, Napa* 1,151 - 6,476 1,151 6,476 7,627 540 1998 12/96 45
O'Toole Business Park,
San Jose* 3,933 5,748 494 3,933 6,242 10,175 442 1984 12/96 45
6500 Kaiser Drive, Fremont* 1,556 6,411 29 1,556 6,440 7,996 429 1990 1/97 45
Bedford Fremont Business
Center, Fremont* 3,598 9,004 123 3,598 9,127 12,725 606 1990 3/97 45
Spinnaker Court, Fremont* 2,548 5,989 35 2,548 6,024 8,572 357 1986 5/97 45

See accompanying independent
auditors' report.

Industrial buildings (continued):
Northern California (continued)
2277 Pine View Way, Petaluma* 1,861 7,074 2 1,861 7,076 8,937 406 1989 6/97 45
Mondavi Building, Napa* 1,315 5,214 - 1,315 5,214 6,529 261 1985 9/97 45
Building #2 at Monterey
Commerce Center, Monterey* 611 1,833 1 611 1,834 2,445 85 1990 12/97 45
Building #3 at Monterey
Commerce Center, Monterey* 604 1,812 (14) 604 1,798 2,402 84 1990 12/97 45
Parkpoint Business Center,
Santa Rosa* 1,975 4,474 481 1,976 4,954 6,930 213 1981 2/98 45
2180 S. McDowell, Petaluma* 773 3,006 1 774 3,006 3,780 100 1990 7/98 45
2190 S. McDowell, Petaluma* 587 2,283 1 588 2,283 2,871 76 1996 7/98 45

Arizona
Westech Business Center,
Phoenix* 3,531 4,422 452 3,531 4,874 8,405 523 1985 4/96 45
Westech II, Phoenix* 1,033 - 3,967 1,033 3,967 5,000 550 1998 7/96 45
2601 W. Broadway, Tempe* 1,127 2,348 98 1,127 2,446 3,573 130 1977 7/97 45
Building #2 at Phoenix Airport
Center, Phoenix* 723 3,278 16 723 3,294 4,017 176 1990 7/97 45
Building #3 at Phoenix Airport
Center, Phoenix* 682 3,163 - 682 3,163 3,845 170 1990 7/97 45
Building #4 at Phoenix Airport
Center, Phoenix* 517 1,732 - 517 1,732 2,249 93 1990 7/97 45
Building #5 at Phoenix Airport
Center, Phoenix* 1,507 3,860 4 1,507 3,864 5,371 207 1990 7/97 45
Butterfield Business Center,
Tucson* 909 4,230 77 910 4,306 5,216 208 1986 11/97 45
Butterfield Tech Center II,
Tucson 102 - 1,559 102 1,559 1,661 34 1999 11/97 45
Greystone Business Park, Tempe 1,232 - 2,776 1,232 2,776 4,008 3 1999 12/97 45
Cimarron Business Park,
Scottsdale* 1,776 4,471 173 1,778 4,642 6,420 182 1979-85 3/98 45
Expressway Corporate Center,
Tempe 1,467 3,175 208 1,468 3,382 4,850 88 1985 11/98 45
The Adams Brothers Building,
Phoenix 1,572 1,613 49 1,572 1,662 3,234 21 1988-95 6/99 45
Bedford Realty Partners, L.P.,
Phoenix* 992 6,241 80 992 6,321 7,313 12 1986 12/99 45

Southern California
Dupont Industrial Center,
Ontario* 3,588 6,162 202 3,588 6,364 9,952 869 1989 5/94 45
3002 Dow Business Center,
Tustin* 4,209 7,291 948 4,305 8,143 12,448 953 1987-89 12/95 45
Building #1 at Carroll Tech
Center, San Diego* 511 1,372 187 511 1,559 2,070 125 1984 10/96 45

See accompanying independent
auditors' report.

Industrial buildings (continued):
Southern California (continued)
Building #2 at Oak Ridge Business
Center, Vista 566 1,832 - 566 1,832 2,398 129 1990 10/96 45
Signal Systems Building,
San Diego* 2,228 7,264 - 2,228 7,264 9,492 484 1990 12/96 45
Building #2 at Carroll Tech
Center, San Diego* 1,022 2,129 - 1,022 2,129 3,151 154 1984 10/96 45
2230 Oak Ridge Way, Vista* 684 2,191 - 684 2,191 2,875 115 1997 10/97 45
6960 Flanders Drive, San Diego* 864 2,591 (2) 865 2,588 3,453 86 1989 6/98 45
Canyon Vista Center, San Diego* 1,664 4,645 80 1,664 4,725 6,389 79 1986 4/99 45
6325 Lusk Blvd., San Diego* 2,229 3,484 10 2,229 3,494 5,723 39 1991 7/99 45

Colorado
Bryant Street Quad, Denver* 1,394 2,181 140 1,416 2,299 3,715 235 1971-73 12/95 45
Bryant Street Annex, Denver* 487 866 127 495 985 1,480 110 1968 12/95 45

Office buildings:
Northern California
Village Green, Lafayette* 547 1,245 556 743 1,605 2,348 220 1983 7/94 45
100 View Street, Mountain View* 1,020 3,144 298 1,020 3,442 4,462 291 1985 5/96 45
Canyon Park, San Ramon* 1,933 3,098 1,073 1,933 4,171 6,104 164 1971-72 12/97 45
Crow Canyon Centre, San Ramon* 778 - 4,859 778 4,859 5,637 10 1999 12/97 45
Building #1 at Monterey Commerce
Center, Monterey* 616 5,302 117 616 5,419 6,035 271 1990 12/97 45
3380 Cypress Drive, Petaluma* 1,709 3,760 - 1,709 3,760 5,469 125 1989 7/98 45

Arizona
Executive Center at Southbank,
Phoenix* 4,943 7,134 85 4,943 7,219 12,162 460 1989 3/97 45
Building #1 at Phoenix Airport
Center, Phoenix* 944 1,541 46 944 1,587 2,531 84 1990 7/97 45
Phoenix Airport Center Parking,
Phoenix* 1,369 81 - 1,369 81 1,450 4 1990 7/97 45
Cabrillo Executive Center,
Phoenix* 480 5,614 194 481 5,807 6,288 254 1983 2/98 45
Mountain Pointe Office Park,
Phoenix 837 - 3,670 837 3,670 4,507 - 1999 2/98 45
1355 S. Clearview Avenue, Mesa* 2,049 5,450 3 2,049 5,453 7,502 71 1998 6/99 45

See accompanying independent
auditors' report.

Office buildings (continued):
Southern California
Laguna Hills Square, Laguna* 2,436 3,655 542 2,436 4,197 6,633 420 1983 3/96 45
Building #3 at Carroll Tech
Center, San Diego* 716 1,400 56 716 1,456 2,172 103 1984 10/96 45
Scripps Wateridge, San Diego* 4,160 12,472 3 4,160 12,475 16,635 693 1990 6/97 45
Building #4 at Carroll Tech
Center, San Diego* 2,050 3,224 56 2,050 3,280 5,330 55 1986 3/99 45

Colorado
Oracle Building, Denver* 1,860 13,249 60 1,860 13,309 15,169 644 1996 10/97 45
Texaco Building, Denver* 3,699 31,631 682 3,700 32,312 36,012 1,127 1981 5/98 45

Greater Seattle Area
Kenyon Center, Bellevue* 5,095 7,250 92 5,095 7,342 12,437 539 1987 9/96 45
Orillia Office Park, Renton* 10,021 22,975 - 10,021 22,975 32,996 1,277 1986 7/97 45
Adobe Systems Bldg. 1, Seattle* - 22,403 3,923 - 26,326 26,326 877 1998 3/98 45
Adobe Systems Bldg. 2, Seattle* - 18,931 3,353 - 22,284 22,284 757 1998 3/98 45
Highlands Phase I, Bothell 3,828 - 11,299 3,828 11,299 15,127 155 1999 6/98 45
The Federal Way Building,
Federal Way* 2,208 7,009 - 2,208 7,009 9,217 78 1999 6/99 45
Federal Way II, Federal Way 2,500 14,307 - 2,500 14,307 16,807 79 1999 9/99 45

Nevada
U.S. Bank Centre, Reno* 2,102 10,264 414 2,102 10,678 12,780 658 1989 5/97 45

Operating properties held
for sale:
Northern California
350 E. Plumeria Drive,
San Jose* 3,621 4,704 245 3,683 4,887 8,570 373 1983 9/95 45

Arizona
Troika Building, Tucson* 1,332 2,631 47 1,332 2,678 4,010 153 1985 6/97 45

Southern California
Vista I, Vista 646 2,135 64 646 2,199 2,845 116 1990 10/96 45
5502 Oberlin Drive, San Diego 911 1,274 3 912 1,276 2,188 28 1982 3/98 45

Greater Kansas City Area
Ninety-Ninth Street #3,
Lenexa* 360 2,167 191 360 2,358 2,718 511 1990 12/90 45
Lackman Business Center,
Lenexa* 619 1,631 247 628 1,869 2,497 241 1985 9/95 45

See accompanying independent
auditors' report.

Operating properties held
for sale (continued):
Greater Kansas City
Area (continued)
Ninety-Ninth Street #1,
Lenexa* 404 1,547 119 408 1,662 2,070 149 1988 9/95 45
Ninety-Ninth Street #2,
Lenexa 180 555 93 183 645 828 60 1988 9/95 45
6600 College Boulevard,
Overland Park* 2,480 3,880 207 2,518 4,049 6,567 388 1982-83 10/95 45
Ninety-Ninth Street #4,
Lenexa 519 - 3,160 519 3,160 3,679 461 1998 6/96 45
Panorama Business Park,
Kansas City* 675 3,098 309 675 3,407 4,082 286 1984 12/96 45
Didde Building,
Overland Park 810 1,344 59 810 1,403 2,213 60 1981 1/98 45
Panorama III, Kansas City* 468 2,027 163 468 2,190 2,658 27 1986 7/99 45

Texas
9737 Great Hills Trail,
Austin* 2,766 7,028 65 2,766 7,093 9,859 405 1984 5/97 45
Ferrell Drive, Farmers Branch* 1,105 1,639 48 1,106 1,686 2,792 76 1984 12/97 45
Austin Braker 2, Austin 413 1,864 (24) 414 1,839 2,253 62 1982 6/98 45
Austin Rutland 10, Austin 389 2,854 35 390 2,888 3,278 100 1979 6/98 45
Austin Southpark A, B and C,
Austin 1,070 4,647 67 1,072 4,712 5,784 170 1981 6/98 45
Ferrell Drive Land,
Farmers Branch 185 - 3 186 2 188 - N/A 5/98 45

Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton* 1,444 4,836 601 1,469 5,412 6,881 589 1984 12/95 45
Twin Oaks Business Center,
Beaverton* 1,163 2,847 593 1,183 3,420 4,603 407 1984 12/95 45

Properties under development:
Northern California
Carneros Commons Phase I, Napa 500 - 160 500 160 660 - N/A 12/96 45

Arizona
Rio Salado Corporate Centre,
Tempe 1,723 2,882 861 1,723 3,743 5,466 - 1982-84 7/98 45
West Tempe Lots 30 and 31,
Tempe 551 - 65 551 65 616 - N/A 7/98 45
Phoenix Tech Center, Phoenix 1,322 945 376 1,322 1,321 2,643 - 1985 8/98 45

Colorado
Belleview Corporate Plaza II
Office, Denver 2,622 - 459 2,622 459 3,081 - N/A 10/98 45
Belleview Corporate Plaza,
Retail, Denver 807 - 115 807 115 922 - N/A 10/98 45
Belleview Corporate Plaza,
Parking, Denver 487 - 48 487 48 535 - N/A 10/98 45
WaterPark @ Briarwood Phase I,
Englewood 1,002 - 618 1,002 618 1,620 - N/A 4/99 45

See accompanying independent
auditors' report.

Properties under development
(continued):
Greater Seattle Area
Highlands Phase II, Bothell 1,646 - 2,057 1,646 2,057 3,703 - N/A 6/98 45

Land held for development:
Carneros Commons, Phase II,
Napa 461 - - 461 - 461 - N/A 12/96 45
Scripps Land, San Diego, CA 622 - 82 622 82 704 - N/A 6/97 45
Mondavi Land, Napa Lot 12G,
Northern CA 1,150 - 8 1,150 8 1,158 - N/A 3/98 45
210 Lafayette Circle,
Northern CA 511 - 2 511 2 513 - N/A 11/98 45
WaterPark @ Briarwood
Phase II, Englewood 1,002 - - 1,002 - 1,002 - N/A 4/99 45
Belleview Corporate Plaza III,
IV, Denver, CO 2,299 - - 2,299 - 2,299 - N/A 10/99 45

$176,835 $434,128 $68,770 $177,516 $502,217 $679,733 $28,695

(A) (A)
</TABLE>
* Property is encumbered, see footnotes 7 and 8 to the consolidated
financial statements.

See accompanying independent auditors' report.

NOTES TO SCHEDULE III
(in thousands of dollars)

(A) An analysis of the activity in real estate investments for the
years ended December 31, 1999, 1998 and 1997 is presented below:

<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Investment Accumulated Depreciation
1999 1998 1997 1999 1998 1997

BALANCE AT BEGINNING OF PERIOD $599,981 $432,071 $229,414 $18,523 $ 8,985 $4,913
Add (deduct):

Acquisition of 6500 Kaiser Drive - - 7,967 - - -
Acquisition of Bedford Fremont
Business Center - - 12,602 - - -
Acquisition of Spinnaker Court - - 8,537 - - -
Acquisition of 2277 Pine View Way - - 8,935 - - -
Acquisition of Mondavi Building - - 6,529 - - -
Acquisition of Building #2 at Monterey
Commerce Center - - 2,444 - - -
Acquisition of Building #3 at Monterey
Commerce Center - - 2,416 - - -
Acquisition of 2230 Oak Ridge Way - - 2,875 - - -
Acquisition of 2601 W. Broadway - - 3,475 - - -
Acquisition of Building #3 at Phoenix
Airport Center - - 3,845 - - -
Acquisition of Continental Can - - 4,866 - - -
Acquisition of Butterfield Business Center - - 5,139 - - -
Acquisition of Ferrell Drive - - 2,744 - - -
Acquisition of Scripps Wateridge - - 16,632 - - -
Acquisition of Canyon Park - - 5,031 - - -
Acquisition of Building #1 at Monterey
Commerce Center - - 5,918 - - -
Acquisition of Orillia Office Park - - 32,996 - - -
Acquisition of Executive Center
At Southbank - - 12,077 - - -
Acquisition of Building #1 at Phoenix
Airport Center - - 2,485 - - -
Acquisition of Building #2 at Phoenix
Airport Center - - 4,001 - - -
Acquisition of Building #4 at Phoenix
Airport Center - - 2,249 - - -
Acquisition of Building #5 at Phoenix
Airport Center - - 5,367 - - -
Acquisition of Phoenix Airport Center
Parking - - 1,450 - - -
Acquisition of Troika Building - - 3,963 - - -
Acquisition of U.S. Bank Centre - - 12,366 - - -
Acquisition of 9737 Great Hills Trail - - 9,794 - - -
Acquisition of Oracle Building - - 15,109 - - -
Acquisition of Scripps Land - - 622 - - -
Acquisition of Oak Ridge Way Lot - - 359 - - -
Acquisition of Oracle Land - - 1,645 - - -
Acquisition of Butterfield Land - - 102 - - -
Acquisition of Canyon Park Land - - 778 - - -
Acquisition of Eaton Freeway Land - - 1,232 - - -
Sale of 1000 Town Center Drive (B) - - (6,622) - - (780)
Sale of Mariner Court (B) - - (7,864) - - (419)
Sale of Academy Place Shopping Center (C) - - (6,281) - - (110)
Acquisition of Didde Building - 2,207 - - - -
Acquisition of El Caro Executive Center - 6,279 - - - -
Acquisition of Park Point Business Center - 6,897 - - - -
Acquisition of Mountain Pointe Office Park - 2,878 - - - -

See accompanying independent
auditors' report.

Acquisition of Mondavi Land, Napa Lot 12G - 1,157 - - - -
Acquisition of Adobe I - 26,306 - - - -
Acquisition of Adobe II - 22,254 - - - -
Acquisition of 5502 Oberlin Drive - 2,188 - - - -
Acquisition of Cimarron Business Park - 6,322 - - - -
Acquisition of Ferrell Drive Land - 188 - - - -
Acquisition of Texaco Building - 35,698 - - - -
Acquisition of Geocon Building - 3,452 - - - -
Acquisition of Austin Braker 2 - 2,245 - - - -
Acquisition of Austin Rutland 10 - 3,255 - - - -
Acquisition of Austin Southpark A, B and C - 5,753 - - - -
Acquisition of Highlands Campus Land - 8,110 - - - -
Acquisition of Rio Salado Corporate Centre - 4,906 - - - -
Acquisition of West Tempe Land Lots 30 and 31 - 572 - - - -
Acquisition of 3880 Cypress Drive - 5,470 - - - -
Acquisition of 2180 S. McDowell Blvd. - 3,780 - - - -
Acquisition of 2190 S. McDowell Blvd. - 2,870 - - - -
Acquisition of 10232 S. 51st Street - 2,368 - - - -
Acquisition of 210 Lafayette Circle - 511 - - - -
Acquisition of Expressway Corporate Center - 4,644 - - - -
Acquisition of Carroll Tech IV 5,330 - - - - -
Acquisition of Canyon Vista Center 6,389 - - - - -
Acquisition of WaterPark at Briarwood 1,620 - - - - -
Acquisition of 1355 S. Clearview Avenue 7,502 - - - - -
Acquisition of The Adams Brothers Building 3,234 - - - - -
Acquisition of The Federal Way Building 9,217 - - - - -
Acquisition of 6325 Lusk Blvd. 5,723 - - - - -
Acquisition of Panorama III 2,658 - - - - -
Acquisition of Federal Way II 16,807 - - - - -
Acquisition of Belleview Corporate Plaza 6,837 - - - - -
Sale of 417 Eccles (D) (1,200) - - (37) - -
Sale of Woodlands Tower II (E) (6,963) - - (1,031) - -
Sale of Oak Ridge Land (E) (378) - - - - -
Sale of Doherty Avenue (F) (3,909) - - (152) - -
Sale of Continental Can (G) (5,016) - - (124) - -
Capitalized costs 31,901 7,600 16,874 - - -
Depreciation - - - 11,516 9,538 5,381

BALANCE AT END OF PERIOD $679,733 $599,981 $432,071 $28,695 $18,523 $8,985
</TABLE>

(B) The properties were sold in July 1997.
(C) The property was sold in October 1997.
(D) The property was sold in March 1999.
(E) The properties were sold in June 1999.
(F) The property was sold in August 1999.
(G) The property was sold in December 1999.

See accompanying independent auditors' report.

SIGNATURES

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

BEDFORD PROPERTY INVESTORS, INC.

By: /s/ Peter B. Bedford
Peter B. Bedford
Chairman of the Board and
Chief Executive Officer

Dated: March 29, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the Registrant and in the capacity and on the date indicated.

/s/ Peter B. Bedford March 29, 2000
Peter B. Bedford, Chairman of the Board
and Chief Executive Officer

/s/ Claude M. Ballard March 29, 2000
Claude M. Ballard, Director

/s/ Anthony Downs March 29, 2000
Anthony Downs, Director

/s/ Anthony M. Frank March 29, 2000
Anthony M. Frank, Director

/s/ Martin I. Zankel March 29, 2000
Martin I. Zankel, Director

/s/ Thomas H. Nolan, Jr. March 29, 2000
Thomas H. Nolan, Jr., Director

/s/ Hanh Kihara March 29, 2000
Hanh Kihara
Senior Vice President and
Chief Financial Officer

/s/ Krista K. Rowland March 29, 2000
Krista K. Rowland, Vice President Controller

Exhibit 12

Bedford Property Investors, Inc.
Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends and Limited Partner Distributions
(in thousands, except for ratio)

Year Ended December 31,
<TABLE>
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995

Net income $39,855 $31,496 $31,291 $11,021 $ 2,895

Fixed charges - interest and amortization
of loan fees 18,970 11,164 7,918 4,347 1,594

Fixed charges - interest capitalized 2,148 2,177 627 - -

Net income including fixed charges 60,973 44,837 39,836 15,368 4,489

Preferred dividends and limited partner
distributions 128 117 3,608 4,505 1,288

Net income including fixed charges,
preferred dividends and limited
partner distributions $61,101 $44,954 $43,444 $19,873 $ 5,777

Ratio of earnings to fixed charges,
including preferred dividends and
limited partner distributions $ 2.88 $ 3.34 $ 3.57 $ 2.25 $ 2.00

Ratio of earnings to fixed charges,
excluding preferred dividends and
limited partner distributions $ 2.89 $ 3.36 $ 4.66 $ 3.54 $ 2.82
</TABLE>

<PAGE>
Exhibit 21.1

Subsidiaries of Bedford Property Investors, Inc.
<TABLE>
<S> <C> <C>
Name Under
Subsidiary Which Subsidiary is
Name State of Incorporation doing Business

1. ICMPI (Concord Diablo 3), Inc. Delaware ICMPI (Concord Diablo 3), Inc.

2. ICMPI (Concord Diablo 8), Inc. Delaware ICMPI (Concord Diablo 8), Inc.

3. ICMPI (Concord Mason 18), Inc. Delaware ICMPI (Concord Mason 18), Inc.

4. ICMPI (Overland Park), Inc. Delaware ICMPI (Overland Park), Inc.

5. ICMPI (Lenexa), Inc. Delaware ICMPI (Lenexa), Inc.
</TABLE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors
Bedford Property Investors, Inc.:

We consent to incorporation by reference in the registration
statements on Form S-3 (No.'s 333-23687, 333-33643 and 333-33795) and
the registration statements on Form S-8 (No.'s 33-52375, 333-18215,
333-70681 and 333-74707) of Bedford Property Investors, Inc. of our
report dated February 4, 2000, relating to the consolidated balance
sheets of Bedford Property Investors, Inc. as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period
ended December 31, 1999, and the related financial statement schedule
as of December 31, 1999, which report appears in the December 31, 1999
annual report on Form 10-K of Bedford Property Investors, Inc.

KPMG LLP

San Francisco, California
March 29, 2000

<ARTICLE> 5

<S> <C>

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> $ 1,584
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,735
<PP&E> 679,733
<DEPRECIATION> 28,695
<TOTAL-ASSETS> 671,410
<CURRENT-LIABILITIES> 22,583
<BONDS> 344,036
<COMMON> 392
0
0
<OTHER-SE> 299,788
<TOTAL-LIABILITY-AND-EQUITY> 671,410
<SALES> 0
<TOTAL-REVENUES> 90,709
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 39,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,970
<INCOME-PRETAX> 40,153
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,153
<DISCONTINUED> 0
<EXTRAORDINARY> 298
<CHANGES> 0
<NET-INCOME> $39,855
<EPS-BASIC> $ 1.87
<EPS-DILUTED> $ 1.86

</TABLE>

EXHIBIT 10.28

TIAA Appl. #VR-14
M -000473100

PROMISSORY NOTE
Bedford Portfolio #4

$22,150,000 Dated:
November 22,
1999

FOR VALUE RECEIVED, BEDFORD PROPERTY INVESTORS, INC., a
Maryland corporation ("Borrower"), having its principal place of
business at 270 Lafayette Circle, Lafayette, California 94549,
promises to pay to TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA, a New York corporation ("Lender"), or order, at Lender's
offices at 730 Third Avenue, New York, New York 10017 or at such
other place as Lender designates in writing, the principal sum of
TWENTY TWO MILLION ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($22,150,000) (the principal sum or so much of the principal sum as
may be advanced and outstanding from time to time, the "Principal"),
in lawful money of the United States of America, with interest on the
Principal from the date of this Promissory Note (this "Note") through
and including December 1, 2006 (the "Maturity Date") at the fixed rate
of seven and ninety-five one-hundredths percent (7.95%) per annum (the
"Fixed Interest Rate").

This Note is secured by, among other things, the Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement, Bedford Portfolio #4 - California Properties), the
Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing Statement (Bedford Portfolio #4 - Arizona Property) and
the Deed of Trust, Assignment of Leases and Rents, Security Agreement,
and Fixture Filing Statement (Bedford Portfolio #4 - Washington
Property) (collectively referred to as the "Deed of Trust") dated the
date of this Note made by Borrower for the benefit of Lender as
security for the Loan. All capitalized terms not expressly defined in
this Note will have the definitions set forth in the Deed of Trust.

Section 1. Payments of Principal and Fixed Interest.

(a) Borrower will make monthly installment payments ("Debt
Service Payments") as follows:

(i) On December 1, 1999, a payment of accrued interest on the
Principal at the Fixed Interest Rate; and

(ii) On January 1, 2000 and on the first day of each succeeding
calendar month through and including December 1, 2006, payments
in the amount of One Hundred Seventy Thousand Two Hundred
Twenty-Four and 28/100 Dollars ($170,224.28), each of which will
be applied first to accrued interest on the Principal at the
Fixed Interest Rate and then to the Principal.

(b) On the Maturity Date, Borrower will pay the Principal in
full together with accrued interest at the Fixed Interest Rate and all
other amounts due under the Loan Documents.

Section 2. Prepayment Provisions.

(a) The following definitions apply:

"Discount Rate" means the yield on a U.S. Treasury issue selected by
Lender, as published in the Wall Street Journal, two weeks prior to
prepayment, having a maturity date corresponding (or most closely
corresponding, if not identical) to the Maturity Date, and, if
applicable, a coupon rate corresponding (or most closely
corresponding, if not identical) to the Fixed Interest Rate.

"Default Discount Rate" means the Discount Rate less 300 basis points.

"Discounted Value" means the Discounted Value of a Note Payment based
on the following formula:

NP
(1 + R/12)n = Discounted Value

NP = Amount of Note Payment

R = Discount Rate or Default Discount Rate as the case may
be.

n = The number of months between the date of prepayment
and the scheduled date of the Note Payment being
discounted rounded to the nearest integer.

"Note Payments" means (i) the scheduled Debt Service Payments for the
period from the date of prepayment through the Maturity Date and (ii)
the scheduled repayment of Principal, if any, on the Maturity Date.

"Prepayment Date Principal" means the Principal on the date of
prepayment.

(b) This Note may not be prepaid in full or in part before July
1, 2001. Commencing on December 1, 2001, provided there is no Event
of Default that is not cured within the applicable cure period,
Borrower may prepay this Note in full, but not in part, on the first
day of any calendar month, upon 90 days prior notice to Lender and
upon payment in full of the Debt which will include a payment (the
"Prepayment Premium") equal to the greater of (i) an amount equal to
1% (the "Prepayment Percentage") times the Prepayment Date Principal
or (ii) the amount by which the sum of the Discounted Values of Note
Payments, calculated at the Discount Rate plus 50 basis points,
exceeds the Prepayment Date Principal. Provided there is no Event of
Default that is not cured within the applicable cure period, this Note
may be prepaid in full without payment of the Prepayment Premium
during the last 90 days of the Term.

(c) After an Event of Default or upon any prepayment not
permitted by the Loan Documents, any tender of payment of the amount
necessary to satisfy all or any part of the Debt, any decree of
foreclosure, any statement of the amount due at the time of
foreclosure (including foreclosure by power of sale) and any tender of
payment during any redemption period after foreclosure, will include
an amount (the "Evasion Premium") equal to the greater of (i) an
amount equal to the product of the Prepayment Premium plus 300 basis
points times the Prepayment Date Principal, or (ii) the amount by
which the sum of the Discounted Values of the Note Payments,
calculated at the Default Discount Rate, exceeds the Prepayment Date
Principal.

(d) Borrower acknowledges that:

(i) a prepayment will cause damage to Lender;

(ii) the Evasion Premium is intended to compensate Lender for
the loss of its investment and the expense incurred and time and
effort associated with making the Loan, which will not be fully
repaid if the Loan is prepaid;

(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by a prepayment
after an Event of Default or any other prepayment not permitted
by the Loan Documents; and

(iv) the Evasion Premium represents Lender and Borrower's
reasonable estimate of Lender's damages for the prepayment and
is not a penalty.

(e) BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT LENDER WOULD
NOT LEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE WITHOUT
BORROWER'S AGREEMENT, AS SET FORTH ABOVE, TO PAY LENDER A PREPAYMENT
PREMIUM UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE PRINCIPAL
INDEBTEDNESS EVIDENCED FOLLOWING THE ACCELERATION OF THE MATURITY DATE
HEREOF BY REASON OF A DEFAULT HEREUNDER OR UNDER THE DEED OF TRUST
INCLUDING, WITHOUT LIMITATION, A DEFAULT ARISING FROM THE CONVEYANCE
OF ANY RIGHT, TITLE OR INTEREST IN THE PROPERTY ENCUMBERED BY THE DEED
OF TRUST AND BORROWER ACKNOWLEDGES THAT (I) THE GENERAL PARTNERS,
PRINCIPALS OR MEMBERS, AS THE CASE MAY BE, OF BORROWER ARE
KNOWLEDGEABLE REAL ESTATE DEVELOPERS OR INVESTORS, (II) BORROWER FULLY
UNDERSTANDS THE EFFECT OF THE ABOVE WAIVER, (III) THE MAKING OF THE
LOAN BY LENDER AT THE RATE SET FORTH ABOVE IS SUFFICIENT CONSIDERATION
FOR SUCH WAIVER, AND (IV) LENDER WOULD NOT MAKE THE LOAN WITHOUT SUCH
WAIVER, AND BORROWER HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON
BORROWER'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN
THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW.

INITIALS:____________

Section 3. Events of Default:

(a) It is an "Event of Default" under this Note:

(i) if Borrower fails to pay any amount due, as and when
required, under this Note or any other Loan Document and the
failure continues for a period of 5 days; or

(ii) if an Event of Default occurs under any other Loan
Document.

(b) If an Event of Default occurs, Lender may declare all or
any portion of the Debt immediately due and payable ("Acceleration")
and exercise any of the other Remedies.

Section 4. Interest on the Principal will accrue at the
Default Interest Rate from the date an Event of Default occurs.

Section 5. Late Charges.

(a) If Borrower fails to pay any Debt Service Payment when due
and the failure continues for a period of 5 days or more or fails to
pay any amount due under the Loan Documents on the Maturity Date,
Borrower agrees to pay to Lender an amount (a "Late Charge") equal to
five cents ($.05) for each one dollar ($1.00) of the delinquent
payment.

(b) Borrower acknowledges that:

(i) a delinquent payment will cause damage to Lender;

(ii) the Late Charge is intended to compensate Lender for loss
of use of the delinquent payment and the expense incurred and
time and effort associated with recovering the delinquent
payment;

(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by the
delinquency; and

(iv) the Late Charge represents Lender and Borrower's
reasonable estimate of Lender's damages from the delinquency and
is not a penalty.

Section 6. Limitation of Liability. This Note is subject
to the limitations on liability set forth in the Article of the Deed
of Trust entitled "Limitation of Liability".

Section 7. WAIVERS. IN ADDITION TO THE WAIVERS SET FORTH
IN THE ARTICLE OF THE DEED OF TRUST ENTITLED "WAIVERS", BORROWER
WAIVES PRESENTMENT FOR PAYMENT, DEMAND, DISHONOR AND, EXCEPT AS
EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS, NOTICE OF ANY OF THE
FOREGOING. BORROWER FURTHER WAIVES ANY PROTEST, LACK OF DILIGENCE OR
DELAY IN COLLECTION OF THE DEBT OR ENFORCEMENT OF THE LOAN DOCUMENTS.
BORROWER AND ALL INDORSERS, SURETIES AND GUARANTORS OF THE OBLIGATIONS
CONSENT TO ANY EXTENSIONS OF TIME, RENEWALS, WAIVERS AND MODIFICATIONS
THAT LENDER MAY GRANT WITH RESPECT TO THE OBLIGATIONS AND TO THE
RELEASE OF ANY SECURITY FOR THIS NOTE AND AGREE THAT ADDITIONAL
BORROWERS MAY BECOME PARTIES TO THIS NOTE AND ADDITIONAL INDORSERS,
GUARANTORS OR SURETIES MAY BE ADDED WITHOUT NOTICE AND WITHOUT
AFFECTING THE LIABILITY OF THE ORIGINAL BORROWER OR ANY ORIGINAL
INDORSER, SURETY OR GUARANTOR.

Section 8. Commercial Loan. The Loan is made for the
purpose of carrying on a business or commercial activity or acquiring
real or personal property as an investment or carrying on an
investment activity and not for personal or household purposes.

Section 9. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.

Section 10. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.

Section 11. Time of the Essence. Time is of the essence
with respect to the payment and performance of the Obligations.

Section 12. Cross-Default. A default under any other note
now or hereafter secured by the Loan Documents or under any loan
document related to such other note constitutes a default under this
Note and under the other Loan Documents. When the default under the
other note constitutes an Event of Default under that note or the
related loan document, an Event of Default also will exist under this
Note and the other Loan Documents.

Section 13. Construction. Unless expressly provided
otherwise in this Note, this Note will be construed in accordance with
the Exhibit attached to the Deed of Trust entitled "Rules of
Construction".

Section 14. Deed of Trust Provisions Incorporated. To the
extent not otherwise set forth in this Note, the provisions of the
Articles of the Deed of Trust entitled "Expenses and Duty to Defend",
"Waivers", "Notices", and "Miscellaneous" are applicable to this Note
and deemed incorporated by reference as if set forth at length in this
Note.

Section 15. Joint and Several Liability; Successors and
Assigns. If Borrower consists of more than one entity, the
obligations and liabilities of each such entity will be joint and
several. This Note binds Borrower and successors, assigns, heirs,
administrators, executors, agents and representatives and inures to
the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives.

Section 16. Absolute Obligation. Except for the Section of
this Note entitled "Limitation of Liability", no reference in this
Note to the other Loan Documents and no other provision of this Note
or of the other Loan Documents will impair or alter the obligation of
Borrower, which is absolute and unconditional, to pay the Principal,
interest at the Fixed Interest Rate and any other amounts due and
payable under this Note, as and when required.

IN WITNESS WHEREOF, Borrower has executed and delivered this
Note as of the date first set forth above.

BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation

By: /s/Hanh Kihara
Hanh Kihara
Senior Vice President and
Chief Financial Officer

TIAA Appl. #VR-14
M-000473100

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #4 - Arizona Properties

by and between

BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower

and

FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee

for the benefit of

TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender

Properties Known As

Ford Motor Building, 1355 S. Clearview Avenue, Mesa, Arizona

After Recordation This Deed of Trust Should Be Returned To:

Beverly J. Quail, Esquire
Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202

TABLE OF CONTENTS

Page

RECITALS:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .1
Section 1.1. Definitions . . . . . . . . . . . . . . .1
Section 1.2. Rules of Construction . . . . . . . . . .1

ARTICLE II

GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property . . . . . . . . . . .2
Section 2.2. Habendum Clause . . . . . . . . . . . . .4
Section 2.3. Security Agreement. . . . . . . . . . . .4
Section 2.4. Conditions to Grant . . . . . . . . . . .5

ARTICLE III

OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .5
Section 3.1. The Obligations . . . . . . . . . . . . .5

ARTICLE IV

TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .5
Section 4.1. Title to the Property . . . . . . . . . .5
Section 4.2. Authority . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person . . . . . . . . . . . .6
Section 4.4. Litigation. . . . . . . . . . . . . . . .6

ARTICLE V

PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .7
Section 5.1. Status of the Property. . . . . . . . . .7
Section 5.2. Maintenance of the Property . . . . . . .7
Section 5.3. Change in Use . . . . . . . . . . . . . .7
Section 5.4. Waste . . . . . . . . . . . . . . . . . .7
Section 5.5. Inspection of the Property. . . . . . . .8
Section 5.6. Leases and Rents. . . . . . . . . . . . .8
Section 5.7. Parking . . . . . . . . . . . . . . . . .8
Section 5.8. Separate Tax Lot. . . . . . . . . . . . .8
Section 5.9. Changes in Zoning or Restrictive Covenants9
Section 5.10. Lender's Right to Appear. . . . . . . . .9
Section 5.11. Community Facilities District . . . . . .9

ARTICLE VI

IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . .9
Section 6.1. Impositions . . . . . . . . . . . . . . .9
Section 6.2. Accumulations . . . . . . . . . . . . . 10
Section 6.3. Changes in Tax Laws . . . . . . . . . . 12

ARTICLE VII

INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.1. Insurance Coverages . . . . . . . . . . 12
Section 7.2. Casualty and Condemnation . . . . . . . 14
Section 7.3. Application of Proceeds . . . . . . . . 14
Section 7.4. Conditions to Availability of Proceeds for Restoration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. Restoration . . . . . . . . . . . . . . 16

ARTICLE VIII

COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 18
Section 8.1. Compliance with Law . . . . . . . . . . 18
Section 8.2. Compliance with Agreements. . . . . . . 18
Section 8.3. ERISA Compliance. . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing. . . . . . . . . 19

ARTICLE IX

ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.1. Environmental Representations and Warranties19
Section 9.2. Environmental Covenants . . . . . . . . 20

ARTICLE X

FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 21
Section 10.1. Financial Reporting . . . . . . . . . . 21
Section 10.2. Annual Budget . . . . . . . . . . . . . 22

ARTICLE XI

EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 22
Section 11.1. Payment of Expenses . . . . . . . . . . 22
Section 11.2. Duty to Defend. . . . . . . . . . . . . 23

ARTICLE XII

TRANSFERS, LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . 23
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances23
Section 12.2. Permitted Transfers . . . . . . . . . . 24
Section 12.3. Right to Contest Lien . . . . . . . . . 25
Section 12.4. Reconveyance Rights . . . . . . . . . . 26
Section 12.5. Substitution. . . . . . . . . . . . . . 28

ARTICLE XIII

ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 29
Section 13.1. Further Assurances. . . . . . . . . . . 29
Section 13.2. Estoppel Certificates . . . . . . . . . 29

ARTICLE XIV

DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 30
Section 14.1. Events of Default . . . . . . . . . . . 30
Section 14.2. Remedies. . . . . . . . . . . . . . . . 31
Section 14.3. General Provisions Pertaining to Remedies33
Section 14.4. Foreclosure by Power of Sale. . . . . . 33
Section 14.5. General Provisions Pertaining to Receiver and other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 14.7. Application of Proceeds . . . . . . . . 36
Section 14.8. Power of Attorney . . . . . . . . . . . 36
Section 14.9. Tenant at Sufferance. . . . . . . . . . 36

ARTICLE XV

LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 37
Section 15.1. Limitation of Liability . . . . . . . . 37

ARTICLE XVI

WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. . . . 39
Section 16.2. WAIVER OF NOTICE. . . . . . . . . . . . 39
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS 39
Section 16.4. WAIVER OF TRIAL BY JURY . . . . . . . . 40
Section 16.5. WAIVER OF COUNTERCLAIM. . . . . . . . . 40
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING . 40
Section 16.7. WAIVER OF SUBROGATION . . . . . . . . . 40
Section 16.8. GENERAL WAIVER. . . . . . . . . . . . . 40

ARTICLE XVII

NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 17.1. Notices . . . . . . . . . . . . . . . . 41
Section 17.2. Change in Borrower's Name or Place of Business42

ARTICLE XVIII

MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 18.1. Applicable Law. . . . . . . . . . . . . 42
Section 18.2. Usury Limitations . . . . . . . . . . . 43
Section 18.3. Lender's Discretion . . . . . . . . . . 43
Section 18.4. Unenforceable Provisions. . . . . . . . 43
Section 18.5. Survival of Borrower's Obligations. . . 43
Section 18.6. Relationship Between Borrower and Lender;
No Third Party Beneficiaries. . . . . . . . . . . . . . . . 43
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 18.8. Service of Process. . . . . . . . . . . 44
Section 18.9. Entire Agreement. . . . . . . . . . . . 44
Section 18.10. No Oral Amendment . . . . . . . . . . . 44
Section 18.11. Severability. . . . . . . . . . . . . . 44
Section 18.12. Covenants Run with the Land . . . . . . 45
Section 18.13. Time of the Essence . . . . . . . . . . 45
Section 18.14. Subrogation . . . . . . . . . . . . . . 45
Section 18.15. Joint and Several Liability . . . . . . 45
Section 18.16. Successors and Assigns. . . . . . . . . 45
Section 18.17. Duplicates and Counterparts . . . . . . 45
Section 18.18. Deed of Trust as Mortgage . . . . . . . 45

ARTICLE XIX

TRUSTEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 45
Section 19.1 Acceptance of Trust . . . . . . . . . . 45

Exhibit ALEGAL DESCRIPTION . . . . . . . . . . . . . . . . . . 48

Exhibit B

DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 49

Exhibit CRULES OF CONSTRUCTION . . . . . . . . . . . . . . . . 55

<PAGE>
TIAA Appl. #VR-14
M-000473100

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 4 - Arizona Properties

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
November, l999, by BEDFORD PROPERTY INVESTORS, INC. ("Borrower"), a
Maryland corporation, having its principal place of business at 270
Lafayette Circle, Lafayette, California 94549, FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation ("Trustee"), having an
address of P.O. Box 3915, Phoenix, Arizona 85030, for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA ("Lender"), a
New York corporation, having an address at 730 Third Avenue, New York,
New York l0017.

RECITALS:

A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of $22,150,000.

B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of TWENTY TWO MILLION ONE HUNDRED
FIFTY THOUSAND AND NO/100 Dollars ($22,150,000)(that amount or so much
as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on December 1, 2006 (the
"Maturity Date").

C. To secure the Note and the Obligations, this Deed of
Trust conveys, among other things, Borrower's fee interest in the real
property located in the City of Mesa, County of Maricopa, State of
Arizona more particularly described in Exhibit A (the "Land").

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.

Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.

ARTICLE II

GRANTING CLAUSES

Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee for the benefit of Lender in trust, WITH POWER OF SALE, and
grants to Trustee for the benefit of Lender a security interest in,
any and all of the following property, rights, interests and estates
now or in the future owned or held by Borrower (the "Property") for
the uses and purposes set forth in this Deed of Trust:

(i) the Land;

(ii) all buildings and improvements located on the
Land (the "Improvements");

(iii) all easements; rights of way or use,
including any rights of ingress and egress;
streets, roads, ways, sidewalks, alleys and
passages; strips and gores; sewer rights;
water, water rights, water courses,
riparian rights and drainage rights; air
rights and development rights; oil and
mineral rights; and tenements,
hereditaments and appurtenances, in each
instance adjoining or otherwise appurtenant
to or benefitting the Land or the
Improvements;

(iv) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing, heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");

(v) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");

(vi) all inventory (including all goods, merchandise,
raw materials, incidentals, office supplies and
packaging materials) held for sale, lease or
resale or furnished or to be furnished under
contracts of service, or used or consumed in the
ownership, use or operation of the Land, the
Improvements or the Fixtures and Personal
Property, all documents of title evidencing any
part of any of the foregoing and all returned or
repossessed goods arising from or relating to
any sale or disposition of inventory;

(vii) all intangible personal property relating
to the Land, the Improvements or the
Fixtures and Personal Property, including
choses in action and causes of action
(except those personal to Borrower),
corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims
for refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and
any letter of credit, guarantee, claim,
security interest or other security held by
or granted to Borrower to secure payment by
an account debtor of any of the accounts of
Borrower arising out of the ownership, use
or operation of the Land, the Improvements
or the Fixtures and Personal Property, and
documents covering all of the foregoing;
all accounts, accounts receivable,
documents, instruments, money, deposit
accounts, funds deposited in accounts
established with a bank, savings and loan
association, trust company or other
financial institution in connection with
the ownership, use or operation of the
Land, the Improvements or the Fixtures and
Personal Property, including any reserve
accounts or escrow accounts, and all
investments of the funds and all other
general intangibles;

(viii) all awards and other compensation paid
after the date of this Deed of Trust for
any Condemnation (the "Condemnation
Awards");

(ix) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");

(x) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;

(xi) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity and
which are related to the Property, including all
computer or other equipment used to record,
store, manage, manipulate or access the
information (the "Books and Records");

(xii) all deposits and letters of credit held
from time to time by the Accumulations
Depositary to provide reserves for Taxes
and Assessments together with interest
thereon, if any (the "Accumulations") and
the account or accounts in which such
deposits are or may be held; and

(xiii) all after-acquired title to or remainder or
reversion in any of the property described
in this Section; all additions, accessions
and extensions to, improvements of and
substitutions or replacements for any of
such property; all products and all cash
and non-cash proceeds, immediate or remote,
of any sale or other disposition of any of
such property, excluding sales or other
dispositions of inventory in the ordinary
course of the business of operating the
Land or the Improvements; and all
additional lands, estates, interests,
rights or other property acquired by
Borrower after the date of this Deed of
Trust for use in connection with the Land
and Improvements, all without the need for
any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon
Lender's request, any documents reasonably
requested by Lender to further evidence the
foregoing.

Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.

Section 2.3. Security Agreement.

(a) This Deed of Trust is a real property mortgage and
also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.

(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered. Except
as otherwise provided in the Loan Documents, no financing statement in
favor of any secured party other than Lender covering the personal
property described herein or any portion thereof is on file in any
public office. Provided that obsolete and worn-out articles may be
removed concurrently with the replacement or renewal thereof with
property of at least equal value or usefulness in the operation of the
Property; Borrower will not otherwise remove or permit the removal of
the collateral or any part thereof without the prior written
permission of Lender.

Section 2.4. Conditions to Grant. This Deed of Trust is made
on the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.

ARTICLE III

OBLIGATIONS SECURED

Section 3.1. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").

ARTICLE IV

TITLE AND AUTHORITY

Section 4.1. Title to the Property.

(a) Subject to the conveyance effectuated by this Deed of
Trust, Borrower has and will continue to have good and marketable
title in fee simple absolute to the Land and the Improvements and good
and marketable title to the Fixtures and Personal Property, in each
case, free and clear of liens, encumbrances and charges except the
Permitted Exceptions. To Borrower's knowledge, there are no facts or
circumstances that might give rise to a lien, encumbrance or charge on
the Property.

(b) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.

(c) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.

Section 4.2. Authority.

(a) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws of the
state or commonwealth in which it was organized or incorporated and
(ii) duly qualified to conduct business, in good standing, in the
state or commonwealth where the Property is located.

(b) Borrower has and will continue to have all approvals
required by Law or otherwise and full right, power and authority to
(i) own and operate the Property and carry on Borrower's business as
now conducted or as proposed to be conducted; (ii) execute and deliver
the Loan Documents; (iii) grant, mortgage, warrant the title to,
convey, assign and pledge the Property to Lender pursuant to the
provisions of this Deed of Trust; and (iv) perform the Obligations.

(c) The execution and delivery of the Loan Documents and
the performance of the Obligations do not and will not conflict with
or result in a default under any Laws or any Leases or Property
Documents and do not and will not conflict with or result in a default
under any agreement binding upon any party to the Loan Documents.

(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.

Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.

Section 4.4. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.

ARTICLE V

PROPERTY STATUS, MAINTENANCE AND LEASES

Section 5.1. Status of the Property.

(a) Borrower has obtained and will maintain in full force
and effect all certificates, licenses, permits and approvals that are
issued or required by Law or by any entity having jurisdiction over
the Property or over Borrower or that are necessary for the Permitted
Use, for occupancy and operation of the Property for the conveyance
described in this Deed of Trust and for the conduct of Borrower's
business on the Property in accordance with the Permitted Use.

(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.

(c) All roads and streets necessary for service of and
access to the Property for the current or contemplated use of the
Property have been completed and are and will continue to be
serviceable, physically open and dedicated to and accepted by the
Government for use by the public.

(d) The Property is free from damage caused by a Casualty.

(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.

Section 5.2. Maintenance of the Property. Borrower will
maintain the Property in thorough repair and good and safe condition,
suitable for the Permitted Use, including, to the extent necessary,
replacing the Fixtures and Personal Property with property at least
equal in quality and condition to that being replaced and free of
liens. Borrower will not erect any new buildings, building additions
or other structures on the Land or otherwise materially alter the
Improvements without Lender's prior consent which may be withheld in
Lender's sole discretion. Lender shall be deemed to have consented if
it has not responded within 30 days of receipt of Borrower's written
request to the Lender at the addresses set forth herein. In the event
that Borrower does not manage the Property itself, the Property will
be managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.

Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.

Section 5.4. Waste. Borrower will not commit or permit any
waste (including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.

Section 5.5. Inspection of the Property. Subject to the
rights of tenants under the Leases, Lender has the right to enter and
inspect the Property on reasonable prior notice, except during the
existence of an Event of Default, when no prior notice is required.
Lender has the right to engage an independent expert to review and
report on Borrower's compliance with Borrower's obligations under this
Deed of Trust to maintain the Property, comply with Law and refrain
from waste, impairment or deterioration of the Property and the
alteration, demolition or removal of any of the Property except as may
be permitted by the provisions of this Deed of Trust. If the
independent expert's report discloses material failure to comply with
such obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.

Section 5.6. Leases and Rents.

(a) Borrower assigns the Leases and the Rents to Lender
absolutely and unconditionally and not merely as additional collateral
or security for the payment and performance of the Obligations, but
subject to a license back to Borrower of the right to collect the
Rents unless and until an Event of Default occurs at which time the
license will terminate automatically, all as more particularly set
forth in the Assignment, the provisions of which are incorporated in
this Deed of Trust by reference.

(b) Borrower appoints Lender as Borrower's attorney-in-
fact to execute unilaterally and record, at Lender's election, a
document subordinating this Deed of Trust to the Leases, provided that
the subordination will not affect (i) the priority of Lender's
entitlement to Insurance Proceeds or Condemnation Awards or (ii) the
priority of this Deed of Trust over intervening liens or liens arising
under or with respect to the Leases.

Section 5.7. Parking. Borrower will provide, maintain,
monitor and light parking areas within the Property, including any
sidewalks, aisles, streets, driveways, sidewalk cuts and rights-of-way
to and from the adjacent public streets, in a manner consistent with
the Permitted Use and sufficient to accommodate the greatest of: (i)
the number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.

Section 5.8. Separate Tax Lot. The Property is and will
remain assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.

Section 5.9. Changes in Zoning or Restrictive Covenants.
Borrower will not (i) initiate, join in or consent to any change in
any Laws pertaining to zoning, any restrictive covenant or other
restriction which would restrict the Permitted Uses for the Property;
(ii) permit the Property to be used to fulfil any requirements of Law
for the construction or maintenance of any improvements on property
that is not part of the Property; (iii) permit the Property to be used
for any purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.

Section 5.10. Lender's Right to Appear. If Lender determines,
in its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.

Section 5.11. Community Facilities District. Without obtaining
the prior written
consent of Lender, Borrower shall not consent to, or vote in favor of,
the inclusion of all or any part of the Property in any Community
Facilities District formed pursuant to the Community Facilities
District Act, A.R.S. Section 48-701, et seq., as amended from time to
time. Borrower shall immediately give notice to Lender of any
notification or advice that Borrower may receive from any municipality
or other third party of any intent or proposal to include all or any
part of the Property in a Community Facilities District. Lender shall
have the right to file a written objection to the inclusion of all or
any part of the Property in a Community Facilities District, either in
its own name or in the name of Borrower, and to appear at, and
participate in, any hearing with respect to the formation of any such
district.

ARTICLE VI

IMPOSITIONS AND ACCUMULATIONS

Section 6.1. Impositions.

(a) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days before
the date (the "Imposition Penalty Date") that is the earlier of (i)
the date on which the Imposition becomes delinquent and (ii) the date
on which any penalty, interest or charge for non-payment of the
Imposition accrues. If the Imposition is to be paid directly by a
tenant, Borrower shall deliver to Lender proof, in form and content
acceptable to Lender, of tenant's payment of such Impositions 15 days
before the Imposition Penalty Date.

(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.

(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;

(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;

(iii) there is no Event of Default;

(iv) the Proceeding suspends the collection of the
contested Taxes or Assessments;

(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;

(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and

(vii) Borrower either deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties or Borrower pays all
of the contested Taxes or Assessments under
protest.

(d) Installment Payments. If any future Assessment is
payable in installments, Borrower will nevertheless pay the Assessment
in its entirety on the day the first installment becomes due and
payable or a lien, unless Lender, in its sole discretion, approves
payment of the Assessment in installments.

Section 6.2. Accumulations.

(a) If required by Lender pursuant to Subsection 6.2(j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the
Term, Borrower will deposit with the Accumulations Depositary an
amount equal to one-twelfth (1/12) of the annual Taxes and Assessments
as determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.

(b) The Accumulations will be applied to the payment of
Taxes and Assessments. Any excess Accumulations after payment of
Taxes and Assessments will be returned to Borrower or credited against
future payments of the Accumulations, at Lender's election or as
required by Law. If the Accumulations are not sufficient to pay Taxes
and Assessments, Borrower will pay the deficiency to the Accumulations
Depositary within 5 days of demand. At any time after an Event of
Default occurs, Lender may apply the Accumulations as a credit against
any portion of the Debt selected by Lender in its sole discretion.

(c) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until applied
in accordance with the provisions of this Deed of Trust. If Lender is
not the Accumulations Depositary, the Accumulations Depositary will
deliver the Accumulations to Lender upon Lender's demand at any time
after an Event of Default.

(d) If the Property is sold or conveyed, other than by
foreclosure or transfer in lieu of foreclosure, and the Property
remains subject to this Deed of Trust, all right, title and interest
of Borrower to the Accumulations will automatically, and without
necessity of further assignment, be held for the account of the new
owner, subject to the provisions of this Section and Borrower will
have no further interest in the Accumulations.

(e) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which will
be held in a non-interest bearing account (except as required by Law)
and may be commingled with other monies held by the Accumulations
Depositary and will not be held in trust.

(f) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance with the
provisions of this Deed of Trust, in which event any payment of the
contested Taxes or Assessments will be made under protest in the
manner prescribed by Law or, at Lender's election, will be withheld.

(g) If Lender assigns this Deed of Trust, Lender will pay,
or cause the Accumulations Depositary to pay, the unapplied balance of
the Accumulations to or at the direction of the assignee.
Simultaneously with the payment, Lender and the Accumulations
Depositary will be released from all liability with respect to the
Accumulations and Borrower will look solely to the assignee with
respect to the Accumulations. When the Obligations have been fully
satisfied, any unapplied balance of the Accumulations will be returned
to Borrower.

(h) Notwithstanding the requirements set forth in
subsections (a) through (g) of this Section 6.2 and provided Borrower
pays the Taxes and Assessments to the taxing authority when due, as an
alternative to the requirements set forth in subsections (a) through
(g), subject to the limitation in subsection 6.2(j) hereof, at
Closing, Borrower shall, at Borrower's option, either (1) deposit an
amount equal to the annual real estate taxes for the Property next due
in an interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to such
amount in a form satisfactory to Lender, which Letter of Credit shall
be renewed from time to time at least 30 days prior to the expiration
date thereof, pursuant to an agreement satisfactory to Lender to be
held by a depository, satisfactory to Lender, in Lender's sole
discretion. The amount deposited pursuant to this Subsection 6.2(h)
shall be held as additional security for the Obligations for the term
of the Loan. So long as there is no default under the Loan Documents
and so long as Borrower has deposited the required amount or provided
Lender with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.

(i) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any tenant
with a credit rating equivalent to a Standard and Poors rating of BBB-
if the tenant's lease states that real estate taxes are to be paid
directly by the tenant and Borrower provides Lender written evidence
within 30 days after payment verifying payment of real estate taxes.

(j) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights and
remedies under the Loan Documents, draw down on the deposited amount
or Letter of Credit, as the case may be, to pay the real estate taxes
and require Borrower to comply with the provisions set forth in
subsections 6.2(a) through (g) hereof rather than the provisions of
Subsection 6.2(h) hereof, and the requirement to make such deposits
shall not relieve Borrower of the obligation to remedy and cure the
Event of Default.

Section 6.3. Changes in Tax Laws. If a Law requires the
deduction of the Debt from the value of the Property for the purpose
of taxation or imposes a tax, either directly or indirectly, on the
Debt, any Loan Document or Lender's interest in the Property, Borrower
will pay the tax with interest and penalties, if any. If Lender
determines that Borrower's payment of the tax may be unlawful,
unenforceable, usurious or taxable to Lender, the Debt will become
immediately due and payable on 60 days' prior notice unless the tax
must be paid within the 60-day period, in which case, the Debt will be
due and payable within the lesser period in accordance with this
Section 6.3. Notwithstanding anything herein to the contrary, no
Prepayment Premium or Evasion Premium (as such terms are defined in
the Note) shall be due or payable in the event that all or any portion
of the Debt is prepaid as a result of the payment to Lender of the
Debt pursuant to this Section 6.3.

ARTICLE VII

INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION

Section 7.1. Insurance Coverages.

(a) Borrower will maintain such insurance coverages and
endorsements in form and substance and in amounts as Lender may
require in its sole discretion, from time to time. Until Lender
notifies Borrower of changes in Lender's requirements, Borrower will
maintain not less than the insurance coverages and endorsements Lender
required for closing of the Loan for all insurance except earthquake
insurance. Borrower will maintain not less than a $20,000,000
earthquake insurance policy.

(b) The insurance, including renewals, required under this
Section will be issued on valid and enforceable policies and
endorsements satisfactory to Lender (the "Policies"). Each Policy
will contain a standard waiver of subrogation and a replacement cost
endorsement and will provide that Lender will receive not less than 30
days' prior written notice of any cancellation, termination or non-
renewal of a Policy or any material change other than an increase in
coverage and that Lender will be named under a standard mortgage
endorsement as loss payee.

(c) The insurance companies issuing the Policies (the
"Insurers") must be authorized to do business in the State or
Commonwealth where the Property is located, must have been in business
for at least 5 years, must carry an A.M. Best Company, Inc. policy
holder rating of A or better and an A.M. Best Company, Inc. financial
category rating of Class X or better and must be otherwise
satisfactory to Lender. Lender may select an alternative credit
rating agency and may impose different credit rating standards for the
Insurers. Notwithstanding Lender's right to approve the Insurers and
to establish credit rating standards for the Insurers, Lender will not
be responsible for the solvency of any Insurer.

(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.

(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.

(f) Borrower will pay the Insurance Premiums for each
Policy not less than 5 days before the expiration date of the Policy
being replaced or renewed and will deliver to Lender an original or,
if a blanket policy, a certified copy of each Policy marked "Paid" not
less than 15 days prior to the expiration date of the Policy being
replaced or renewed.

(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.

(h) Borrower will not carry any of the insurance required
under this Section on a blanket or umbrella policy without in each
instance Lender's prior approval which may be withheld in Lender's
sole discretion. If Lender approves, Borrower will deliver to Lender
a certified copy of the blanket policy which will allocate to the
Property the amount of coverage required under this Section and
otherwise will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be deemed to
have approved the policy if it has not responded within 30 days of
receipt of Borrower's written request to the Lender at the addresses
set forth herein.

(i) Borrower will give the Insurers prompt notice of any
change in ownership or occupancy of the Property. This subsection
does not abrogate the prohibitions on transfers set forth in this Deed
of Trust.

(j) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations, all of
Borrower's right, title and interest in and to the Policies then in
force will be transferred automatically to the purchaser or
transferee.

Section 7.2. Casualty and Condemnation.

(a) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice of
commencement or notice that such a Condemnation Proceeding will be
commencing. Borrower promptly will deliver to Lender copies of all
documents Borrower delivers or receives relating to the Casualty or
the Condemnation Proceeding, as the case may be.

(b) Borrower authorizes Lender, at Lender's option, to act
on Borrower's behalf to collect, adjust and compromise any claims for
loss, damage or destruction under the Policies on such terms as Lender
determines in Lender's sole discretion. If there is no Event of
Default which remains uncured within the applicable cure period,
Lender shall consult with Borrower before collecting, adjusting or
compromising said claims. Borrower authorizes Lender to act, at
Lender's option, on Borrower's behalf in connection with any
Condemnation Proceeding. Borrower will execute and deliver to Lender
all documents requested by Lender and all documents as may be required
by Law to confirm such authorizations. Nothing in this Section will
be construed to limit or prevent Lender from joining with Borrower
either as a co-defendant or as a co-plaintiff in any Condemnation
Proceeding.

(c) If Lender elects not to act on Borrower's behalf as
provided in this Section, then Borrower promptly will file and
prosecute all claims (including Lender's claims) relating to the
Casualty and will prosecute or defend (including defense of Lender's
interest) any Condemnation Proceeding. Borrower will have the
authority to settle or compromise the claims or Condemnation
Proceeding, as the case may be, provided that Lender has approved in
Lender's sole discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation Awards,
as the case may be (the "Proceeds") will be made payable to Lender and
Borrower. Borrower will endorse the check to Lender immediately upon
Lender presenting the check to Borrower for endorsement or if Borrower
receives the check first, will endorse the check immediately upon
receipt and forward it to Lender. If any Proceeds are paid to
Borrower, Borrower immediately will deposit the Proceeds with Lender,
to be applied or disbursed in accordance with the provisions of this
Deed of Trust. Lender will be responsible for only the Proceeds
actually received by Lender.

Section 7.3. Application of Proceeds. After deducting any
third party and out-of-pocket costs incurred by Lender in collecting
the Proceeds, Lender may, in its sole discretion, (i) apply the
Proceeds as a credit against any portion of the Debt selected by
Lender in its sole discretion of the Debt; (ii) apply the Proceeds to
restore the Improvements, provided that Lender will not be obligated
to see to the proper application of the Proceeds and provided furtherthat any
amounts released for Restoration will not be deemed a payment
on the Debt; or (iii) deliver the Proceeds to Borrower.

Section 7.4. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:

(i) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;

(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;

(iii) all Leases in effect immediately prior to
the Destruction Event and all Property
Documents in effect immediately prior to
the Destruction Event that are essential to
the use and operation of the Property
continue in full force and effect
notwithstanding the Destruction Event;

(iv) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;

(v) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;

(vi) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;

(vii) Lender is reasonably satisfied that the
proceeds of any business interruption
insurance in effect together with other
available gross revenues from the Property
are sufficient to pay Debt Service Payments
after paying the Impositions, Insurance
Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;

(viii) Lender is reasonably satisfied that
Restoration will be completed on or before
the date (the "Restoration Completion
Date") that is the earliest of: (A) 12
months prior to the Maturity Date; (B) 12
months after the Destruction Event; (C) the
earliest date required for completion of
Restoration under any Lease or any Property
Document; or (D) any date required by Law;
and

(ix) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that, if the Rents do not provide such
debt service coverage, then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.

Section 7.5. Restoration.

(a) If the total Proceeds for any Destruction Event are
$250,000.00 or less and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration, Lender
will disburse to Borrower the entire amount received by Lender and
Borrower will commence Restoration promptly after the Destruction
Event and complete Restoration not later than the Restoration
Completion Date.

(b) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under this
Article to make the Proceeds available for Restoration, Lender will
disburse the Proceeds and any Additional Funds (the "Restoration
Funds") upon Borrower's request as Restoration progresses, generally
in accordance with normal construction lending practices for
disbursing funds for construction costs, provided that the following
conditions are met:

(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;

(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;

(iii) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of
the request, and such other documents as
Lender may request including mechanics'
lien, waivers and title insurance
endorsements;

(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender; or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender ; and

(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.

(c) If an Event of Default occurs at any time after the
Destruction Event, then Lender will have no further obligation to make
any remaining Proceeds available for Restoration and may apply any
remaining Proceeds as a credit against any portion of the Debt
selected by Lender in its sole discretion.

(d) Lender may elect at any time prior to commencement of
Restoration or while work is in progress to retain, at Borrower's
expense, an independent engineer or other consultant to review the
plans and specifications, to inspect the work as it progresses and to
provide reports. If any matter included in a report by the engineer
or consultant engaged by Lender is not in compliance with approved
plans and specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.

(e) If Borrower fails to commence and complete Restoration
in accordance with the terms of this Article, then in addition to the
Remedies, Lender may elect to restore the Improvements on Borrower's
behalf and reimburse itself out of the Restoration Funds for costs and
expenses incurred by Lender in restoring the Improvements, or Lender
may apply the Restoration Funds as a credit against any portion of the
Debt selected by Lender in its sole discretion.

(f) Lender may commingle the Restoration Funds with its
general assets and will not be liable to pay any interest or other
return on the Restoration Funds unless otherwise required by Law.
Lender will not hold any Restoration Funds in trust. Lender may elect
to deposit the Restoration Funds with a depositary satisfactory to
Lender under a disbursement and security agreement satisfactory to
Lender.

(g) Borrower will pay all of Lender's out-of-pocket and
third party expenses incurred in connection with a Destruction Event
or Restoration. If Borrower fails to do so, then in addition to the
Remedies, Lender may from time to time reimburse itself out of the
Restoration Funds.

(h) Any excess Proceeds, excluding any proceeds from
business interruption insurance maintained by Borrower, remaining
after Restoration less than $100,000, shall be delivered to Borrower.
If the excess Proceeds remaining after Restoration are more than
$100,000, Lender may elect, in its sole discretion to apply any excess
as a credit against any portion of the Debt as selected by Lender in
its sole discretion or to deliver the excess to Borrower.

ARTICLE VIII

COMPLIANCE WITH LAW AND AGREEMENTS

Section 8.1. Compliance with Law. Borrower, the Property and
the use of the Property comply and will continue to comply with Law
and with all agreements and conditions necessary to preserve and
extend all rights, licenses, permits, privileges, franchises and
concessions (including zoning variances, special exceptions and non-
conforming uses) relating to the Property or Borrower. Borrower will
notify Lender of the commencement of any investigation or Proceeding
relating to a possible violation of Law immediately after Borrower
receives notice thereof and, will deliver promptly to Lender copies of
all documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.

Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein. Borrower will
deliver promptly to Lender copies of any notices of default or of
termination that Borrower receives or delivers relating to any
Property Document.

Section 8.3. ERISA Compliance.

(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") that is subject to
Title I of ERISA or a "plan" as defined in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, and Borrower's
assets do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the
Code.

(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.

(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan Documents,
including Lender's exercise of the Remedies, to be a non-exempt
prohibited transaction under ERISA.

Section 8.4. Section 6045(e) Filing. Borrower will supply or
cause to be supplied to Lender either (i) a copy of a completed Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker
and Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.

ARTICLE IX

ENVIRONMENTAL

Section 9.1. Environmental Representations and Warranties.

Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:

(i) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and

(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.

Section 9.2. Environmental Covenants.

(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.

(b) No Environmental Activity will occur on the Property
other than the use, storage and disposal of Hazardous Substances which
(A) is in the ordinary course of business consistent with the
Permitted Use; (B) is in compliance with all Environmental Laws; and
(C) does not create a risk of Material Environmental Contamination of
the Property.

(c) Borrower will notify Lender promptly upon Borrower
becoming aware of (i) any Material Environmental Contamination of the
Property or (ii) any Environmental Activity with respect to the
Property that is not in accordance with the preceding subsection (b).
Borrower promptly will deliver to Lender copies of all documents
delivered to or received by Borrower regarding the matters set forth
in this subsection, including notices of Proceedings or investigations
concerning any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental Laws).
Borrower's notification of Lender in accordance with the provisions of
this subsection will not be deemed to excuse any default under the
Loan Documents resulting from the violation of Environmental Laws or
the Material Environmental Contamination of the Property or
Environmental Activity that is the subject of the notice. If Borrower
receives notice of a suspected violation of Environmental Laws in the
vicinity of the Property that poses a risk of Material Environmental
Contamination of the Property, Borrower will give Lender notice and
copies of any documents received relating to such suspected violation.

(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.

(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage and (vii)
Borrower acknowledges that the results of the assessment are to be
solely for Lender's benefit and Borrower may not rely on such results
for any purpose. The consultant's assessment and reports will be at
Borrower's expense (i) if the reports disclose any material adverse
change in the environmental condition of the Property from that
disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.

(f) If Lender has reasonable cause to believe that there
is Environmental Activity at the Property, Lender may elect in its
sole discretion to direct the Trustee to reconvey any portion of the
Property affected by the Environmental Activity and Borrower will
accept the reconveyance.

ARTICLE X

FINANCIAL REPORTING

Section 10.1. Financial Reporting.

(a) Borrower will deliver to Lender within 90 days after
the close of each Fiscal Year an annual financial statement, certified
by the chief financial officer of Borrower (the "Annual Financial
Statement") for the Property for the Fiscal Year, which will include a
comparative balance sheet, a cash flow statement, an income and
expense statement, a detailed breakdown of all receipts and expenses
and all supporting schedules. Upon request of Lender, Borrower will
also deliver to Lender within 90 days after the close of each Fiscal
Year the Form 10-K Annual Report to the Security and Exchange
Commission for Borrower. The Annual Financial Statement for the
Property will be:

(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial
Statement fairly presents the financial position
of the Property;

(ii) accompanied by an opinion of the chief financial
officer of Borrower that, in all material
respects, the Annual Financial Statement fairly
presents the financial position of the Property;

(iii) separate and distinct from any consolidated
statement or report for Borrower or any
other entity or any other property.

Section 10.2. Annual Budget. Not less than 30 days prior to
the end of each Fiscal Year, Borrower will deliver to Lender, a
detailed comparative budget (the "Budget") for the Property for the
next succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.

ARTICLE XI

EXPENSES AND DUTY TO DEFEND

Section 11.1. Payment of Expenses.

(a) Borrower is obligated to pay all fees and expenses
(the "Expenses") incurred by Lender, Trustee or that are otherwise
payable in connection with the Loan, the Property or Borrower,
including attorneys' fees and expenses and any fees and expenses
relating to (i) the preparation, execution, acknowledgment, delivery
and recording or filing of the Loan Documents; (ii) any Proceeding or
other claim asserted against Lender; (iii) any inspection, assessment,
survey and test permitted under the Loan Documents; (iv) any
Destruction Event; (v) the preservation of Trustee's title, Lender's
security and the exercise of any rights or remedies available at Law,
in equity or otherwise; and (vi) the Leases and the Property
Documents.

(b) Borrower will pay the Expenses promptly on demand,
together with any applicable interest, premiums or penalties. If
Lender pays any of the Expenses, Borrower will reimburse Lender the
amount paid by Lender promptly upon demand, together with interest on
such amount at the Fixed Interest Rate from the date Lender paid the
Expenses through the fifth day after demand. Interest on such amount
will be at the Default Interest Rate from the sixth day after demand
through and including the date Borrower reimburses Lender. The
Expenses together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.

Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not responded within 30 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.

ARTICLE XII

TRANSFERS, LIENS AND ENCUMBRANCES

Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.

(a) Borrower acknowledges that in making the Loan, Lender
is relying to a material extent on the business expertise and net
worth of Borrower and Borrower's general partners, members or
principals and on the continuing interest that each of them has,
directly or indirectly, in the Property. Accordingly, except as
specifically set forth in this Deed of Trust, Borrower (i) will not,
and will not permit its partners, members or principals to, effect a
Transfer without Lender's prior approval, which may be withheld in
Lender's sole discretion and (ii) will keep the Property free from all
liens and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have approved a
Transfer if it has not responded within 90 days of receipt of
Borrower's written request providing any information required by
Lender as to the proposed Transfer to the Lender at the addresses set
forth herein. A "Transfer" is defined as any sale, grant, lease
(other than bona fide third-party space leases with tenants),
conveyance, assignment or other transfer of, or any encumbrance or
pledge against, the Property, any interest in the Property, any
interest of Borrower's partners, members or principals in the
Property, or any change in Borrower's composition, in each instance
whether voluntary or involuntary, direct or indirect, by operation of
law or otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A Transfer
shall not include the public trading of shares of the Borrower in
accordance with applicable law.

(b) Borrower represents, warrants and covenants that:

(i) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of August 1999 (the "Existing Shareholders")
are: Bedford Preferred No. 1 Limited
Partnership; Heitman PRA Security Advisors,
Inc.; ICM Asset Management; Lend Lease Rosen
Real Estate Securities, LLC; and Peter Bedford.

Section 12.2. Permitted Transfers.

(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, providedthat the
following conditions are met:

(i) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;

(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;

(iii) the proposed Permitted Transfer will not
result in a violation of any of the
covenants contained in the Section
entitled, "ERISA Compliance" and Borrower
will deliver to Lender such documentation
of compliance as Lender requests in its
sole discretion;

(iv) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender; and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);

(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and

(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.

(b) Upon compliance with the conditions set forth in the
preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided for
in Section 12.1.

(i) Transfers of shares in Borrower among the
Existing Shareholders;

(iii) A one-time sale of the Property together
with the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #4 -
California Properties) and the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Financing Statement (Bedford Portfolio #4 -
Washington Property) both dated the date of this Deed
of Trust, executed by Borrower and which also secures
the Note ("Portfolio #4"), to one, unaffiliated, bona
fide purchaser, provided that the following conditions
are met:

(A) the transferee has a net worth of at least
$25,000,000;

(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;

(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and

(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and

(E) Borrower pays to Lender a transfer fee of
one-half percent (0.5%) of the outstanding Principal.

Section 12.3. Right to Contest Liens. Borrower, at its own
expense, may contest the amount, validity or application, in whole or
in part, of any mechanic's, materialmen's or environmental liens in
which event Lender will refrain from exercising any of the Remedies,
provided that the following conditions are met:

(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;

(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;

(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;

(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;

(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;

(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case, in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and

(vii) with respect to an environmental lien,
Borrower is using best efforts to mitigate
or prevent any deterioration of the
Property resulting from the alleged
violation of any Environmental Laws or the
alleged Environmental Activity.

Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the property listed in Exhibit A and the
property listed in Exhibit A-1, Exhibit A-2 or Exhibit A-3 of the Deed
of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing Statement (Bedford Portfolio #4 - California
Properties) and the property listed in Exhibit A of the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture
Financing Statement (Bedford Portfolio #4 - Washington Property), both
dated the date of this Deed of Trust and both of which also secure the
Note (each of the five described properties being referred to as a
"Release Parcel") at any time more than 24 months after the execution
of this Deed of Trust, provided that the following conditions are met
for each reconveyance:

(i) Borrower shall not be entitled to the
reconveyance of more than two Release Parcels;
one reconveyance of a Release Parcel shall be
solely for the purpose of a sale and a transfer
of the Release Parcel to a bona fide purchaser.
The reconveyance of any Release Parcel shall
occur simultaneously with the addition of one or
more new properties to secure the Loan, in
accordance with the provisions of Section 12.5
of this Deed of Trust and the securing of the
lien of the Lender's mortgage to encumber the
Substitution Property (as defined in Section
12.5);

(ii) not less than 60 days prior to the proposed
date of reconveyance, Borrower delivers to
Lender a notice setting forth (A) the
proposed date of the reconveyance, (B) the
name of the proposed transferee (if the
Release Parcel is adjacent to a property
still covered by this Deed of Trust); (C)
the intended use of the Release Parcel; (D)
any other information reasonably necessary
for Lender to analyze the terms of the
reconveyance. Not less than 30 days prior
to the proposed reconveyance, Borrower will
deliver to Lender a copy of the contract of
sale or ground lease;

(iii) on the date Borrower delivers to Lender
notice of the proposed reconveyance and on
the date of the reconveyance, there is no
default under the Loan Documents on either
the notice date or the release date;

(iv) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
reconveyance, that the reconveyance does not
violate any of the provisions of the Property
Documents or the Leases and, to the extent
necessary to comply with the Property Documents
or the Leases, that the transferee has assumed
all of Borrower's obligations relating to the
Release Parcel under the Property Documents;

(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property and on the
Portfolio #4 California and Washington
Properties or in the amount of coverage; (C)
consents to the reconveyance; (D) waives any
defense resulting from the reconveyance; (E) to
the extent of the value of the Release Parcel,
waives any right of subrogation; and (F)
includes the Substitution Property (as defined
in Section 12.5) or in the alternative a
separate title insurance policy that affects the
foregoing;

(vi) not less than 10 days prior to the date of the
reconveyance, Borrower delivers to Lender
consents to the reconveyance and substitution by
entities holding liens affecting the Property or
holding any other interest in the Property that
would be affected by the reconveyance and
substitution, including parties to any Property
Documents or to any Leases;

(vii) Borrower pays all expenses relating to the
reconveyance of the Release Parcel and the
addition of the Substitution Property,
including Lender's reasonable attorney's
fees if outside counsel is engaged by
Lender;

(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;

(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;

(x) The remaining Property together with the
remaining Portfolio #4 California and Washington
Properties together with the Substitution
Property must have a loan to value ratio of no
more than 65% and provide a debt service
coverage ratio of at least 1.50 times the debt
service coverage (in a manner reasonably
determined by Lender); and

(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
65% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property, the remaining
Portfolio #4 California and Washington
Properties and the Substitution Property.

Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
September 3, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property and the Portfolio #4 California and Washington Properties
shall be subject to a maximum loan-to-value ratio of 65%, have, at a
minimum, a debt service coverage ratio equal to 1.50, and a lease
expiration profile acceptable to Lender. Furthermore, Lender will not
approve a substitution that would negatively impact the loan portfolio
with regard to its geographic diversity, credit risk, leasing pro
formas, tenant quality, lease expiration risk and other similar
factors, including the ability to legally cross-default and cross-
collateralize the Substitution Property with the remainder of the
portfolio, to be determined in Lender's sole discretion. Borrower
shall provide Lender with such information and documentation
(including leases and other property documents) as Lender shall deem
necessary to make an informed decision and properly evaluate the
proposed substitution. The Substitution Property will be required to
have a value of not less than 90% of the fair market value of the
Release Parcel to be reconveyed. Borrower shall be responsible for
all costs and expenses, including, without limitation, reasonable
attorney's fees (if outside counsel is engaged by Lender), incurred by
Lender in connection with any proposed transaction along with title
insurance premium and engineering, environmental and appraisal reports
associated with such substitution.

ARTICLE XIII

ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 13.1. Further Assurances.

(a) Borrower will execute, acknowledge and deliver to
Lender or to any other entity Lender designates any additional or
replacement documents and perform any additional actions that Lender
determines are reasonably necessary to evidence, perfect or protect
Lender's first lien on and prior security interest in the Property or
to carry out the intent or facilitate the performance of the
provisions of the Loan Documents.

(b) Borrower appoints Lender as Borrower's attorney-in-
fact to perform, at Lender's election, any actions and to execute and
record any of the additional or replacement documents referred to in
this Section, in each instance only at Lender's election and only to
the extent Borrower has failed 3 days after written notice to Borrower
to comply with the terms of this Section.

Section 13.2. Estoppel Certificates.

(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.

(b) If Lender requests, Borrower promptly will deliver to
Lender or to any entity Lender designates a certificate from each
party to any Property Document, certifying that the Property Document
is in full force and effect with no defaults or events which, with the
passage of time or the giving of notice, would constitute an event of
default under the Property Document and that there are no defenses or
offsets against the performance of its obligations under the Property
Document.

(c) If Lender requests, Borrower promptly will deliver to
Lender, or to any entity Lender designates, a certificate from each
tenant under a Lease then affecting the Property, certifying to any
facts regarding the Lease as Lender may require, including that the
Lease is in full force and effect with no defaults or events which,
with the passage of time or the giving of notice, would constitute an
event of default under the Lease by any party, that the rent has not
been paid more than one month in advance and that the tenant claims no
defense or offset against the performance of its obligations under the
Lease.

ARTICLE XIV

DEFAULTS AND REMEDIES

Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:

(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;

(ii) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;

(iii) if Borrower is in default beyond any
applicable grace and cure period under any
other mortgage, deed of trust, deed to
secure debt or other security agreement
encumbering the Property whether junior or
senior to the lien of this Deed of Trust;

(iv) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #4 -
California Properties) and/or the Deed of Trust,
Assignment of Leases and Rents, Security
Agreement and Fixture Financing Statement
(Bedford Portfolio #4 - Washington Property)
evidencing and securing the Loan made by Lender
in favor of Borrower pursuant to the Note and
encumbering the Portfolio #4;

(v) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;

(vi) if Borrower abandons the Property or ceases to
conduct its business at the Property; or

(vii) if there is a default in the performance of
any other provision of any Loan Document or
if there is any inaccuracy or falsehood in
any representation or warranty contained in
any Loan Document which is not remedied
within 30 days after Borrower receives
notice thereof, provided that if the
default, inaccuracy or falsehood is of a
nature that it cannot be cured within the
30-day period and during that period
Borrower commences to cure, and thereafter
diligently continues to cure, the default,
inaccuracy or falsehood, then the 30-day
period will be extended for a reasonable
period not to exceed 120 days after the
notice to Borrower.

Section 14.2. Remedies.

(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:

(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");

(ii) pay or perform any Obligation;

(iii) institute a Proceeding for the specific
performance of any Obligation;

(iv) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;

(v) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;

(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale, all or any portion of the
Property, in any court of competent
jurisdiction;

(vii) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed
of Trust for the balance of the Debt not
then due;

(viii) cause Trustee to commence sale of
Borrower's interest in the Property
pursuant to applicable law;

(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and

(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.

(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.

Section 14.3. General Provisions Pertaining to Remedies.

(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise, at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.

(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.

(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.

(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.

(e) Lender's and Trustee's right to exercise any Remedy
will not be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as extending
any cure period or constitute a waiver of the default or Event of
Default.

(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.

(g) Lender's acceptance of partial payment or receipt of
Rents will not extend or affect any grace period or constitute a
waiver of a default or Event of Default or constitute a rescission of
Acceleration.

Section 14.4. Foreclosure by Power of Sale.

(a) Should Lender elect, following an Event of Default, to
foreclose this Deed of Trust by exercise of the power of sale
contained in this Deed of Trust, Lender will notify Trustee and
deposit, if required by Trustee, with Trustee this Deed of Trust, the
Note and such of the other Loan Documents as Trustee may require.

(b) Upon receipt of the notice from Lender, Trustee will
have recorded, published and delivered to Borrower any notice of
default as is then required by Law. Trustee will, without demand on
Borrower after lapse of any time as may then be required by Law and
after notice of sale having been given as required by Law, sell the
Property at the time and place of sale fixed by it in the notice of
sale, either as a whole, or in separate lots or parcels or items and
in such order as Lender may direct Trustee so to do, at public auction
to the highest bidder as provided by Law. Trustee will deliver to the
purchaser of the Property a good and sufficient deed or deeds
conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matter or fact
will be conclusive proof of the truthfulness of the recitals. Any
person, including Borrower, Trustee or Lender may purchase at the
sale, and Borrower will warrant and defend the title of the purchaser.

(c) After deducting all costs, fees and expenses of Lender
and Trustee, including costs of evidence of title in connection with
sale, Lender will apply the proceeds of sale in the following
priority, to payment of (i) first, all sums expended under the terms
of the Loan Documents, not then repaid, with accrued interest at the
Default Rate; (ii) second, the Debt in such order as Lender
determines; and (iii) the remainder, if any to the person or persons
legally entitled to it.

(d) Trustee may postpone sale of all or any portion of the
Property as permitted by Law, and without further notice make such
sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.

(e) A sale of less than the whole of the Property or any
defective or irregular sale made under this Deed of Trust will not
exhaust the power of sale provided for in this Deed of Trust; and
subsequent sales may be made until the Obligations have been
satisfied, or the entire Property sold, without defect or
irregularity.

Section 14.5. General Provisions Pertaining to Receiver and
other Remedies.

(a) If an Event of Default occurs and without notice to
Borrower, any court of competent jurisdiction will, upon application
by Lender, appoint a Receiver as designated in the application and
issue an injunction prohibiting Borrower from interfering with the
Receiver, collecting Rents, disposing of any Rents or any part of the
Property, committing waste or doing any other act that will tend to
affect the preservation of the Leases, the Rents and the Property and
Borrower approves the appointment of the designated Receiver or any
other Receiver appointed by the court. By execution of this Deed of
Trust, Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender or Trustee,
either before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any, liable
for the payment of any portion of the Debt and the performance of any
portion of the Obligations and without regard to the value of the
Property or whether the Property is occupied as a homestead and
without bond being required of the applicant.

(b) The Receiver will be vested with the fullest powers
permitted by Law including all powers necessary or usual in similar
cases for the protection, possession and operation of the Property and
all the powers and duties of Lender as a mortgagee-in-possession as
provided in this Deed of Trust and may continue to exercise all the
usual powers and duties until the Receiver is discharged by the court.

(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:

(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;

(ii) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;

(iii) collect, sue for and give receipts for the
Rents and, after paying all expenses of
collection, including reasonable
receiver's, broker's and attorney's fees,
apply the net collections to any portion of
the Debt selected by Lender in its sole
discretion,

(iv) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;

(v) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;

(vi) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver); and

(vii) perform any act in the place of Borrower
that Lender or the Receiver deems necessary
(A) to preserve the value, marketability or
rentability of the Property; (B) to
increase the gross receipts from the
Property; or (C) otherwise to protect
Borrower's and Lender's respective
interests in the Property.

(d) Borrower appoints Lender as Borrower's attorney-in-
fact, at Lender's election, to perform any actions and to execute and
record any instruments necessary to effectuate the actions described
in this Section, in each instance only at Lender's election and only
to the extent Borrower has failed to comply with the provisions of
this Section.

Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. The following provisions will apply to any
Proceeding to foreclose and to any sale of the Property by power of
sale or pursuant to a judgment of foreclosure and sale:

(i) Lender's or Trustee's right to institute a
Proceeding to foreclose or to sell by power of
sale will not be exhausted by a Proceeding or a
sale that is defective or not completed or by
conducting separate sales of portions of the
Property;

(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;

(iii) with respect to sale pursuant to a judgment
of foreclosure and sale, the Property may
be sold as an entirety or in parcels, at
one or more sales, at the time and place,
on terms and in the order that Lender deems
expedient in its sole discretion;

(iv) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's or Trustee's rights and remedies with
respect to the unmatured portion of the Debt;

(v) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and

(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.

Section 14.7. Application of Proceeds. Lender may apply the
proceeds of any sale of the Property pursuant to a judgment of
foreclosure and sale and any other amounts collected by Lender in
connection with the exercise of the Remedies to payment of the Debt in
such priority and proportions as Lender may determine in its sole
discretion or in such priority and proportions as required by Law.

Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.

Section 14.9. Tenant at Sufferance. If Lender, Trustee, or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee, or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.

ARTICLE XV

LIMITATION OF LIABILITY

Section 15.1. Limitation of Liability.

(a) Notwithstanding any provision in the Loan Documents to
the contrary, except as set forth in subsections (b) and (c), if
Lender seeks to enforce the collection of the Debt, Lender will
foreclose this Deed of Trust instead of instituting suit on the Note.
If a lesser sum is realized from a foreclosure of this Deed of Trust
and sale of the Property than the then outstanding Debt, Lender will
not institute any Proceeding against Borrower or Borrower's general
partners, if any, for or on account of the deficiency, except as set
forth in subsections (b) and (c).

(b) The limitation of liability in subsection (a) will not
affect or impair (i) the lien of this Deed of Trust or Lender's other
rights and Remedies under the Loan Documents, including Lender's right
as mortgagee or secured party to commence an action to foreclose any
lien or security interest Lender has under the Loan Documents; (ii)
the validity of the Loan Documents or the Obligations; (iii) Lender's
rights under any Loan Document that are not expressly non-recourse; or
(iv) Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection with
the Obligations.

(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:

(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property and that certain Certificate Regarding
Tenants Estoppels dated of even date herewith);
or (E) Borrower's performance of the
Obligations;

(ii) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;

(iii) the cost of remediation of any
Environmental Activity affecting the
Property, any diminution in the value of
the Property arising from any Environmental
Activity affecting the Property and any
other losses suffered and liabilities and
expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";

(iv) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;

(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;

(vi) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;

(vii) all protective advances and other payments
made by Lender pursuant to express
provisions of the Loan Documents to protect
Lender's security interest in the Property
or to protect the assignment of the
property described in and effected by the
Assignment, but only to the extent that the
Rents would have been sufficient to permit
Borrower to make the payment and Borrower
failed to do so;

(viii) all mechanics' or similar liens relating to
work performed on or materials delivered to
the Property prior to a foreclosure sale of
the Property, but only to the extent Lender
had advanced funds to pay for the work or
materials;

(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;

(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers".

(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and

(xii) all losses suffered and liabilities and
expenses incurred by Lender relating to any
default by Borrower under any of the
provisions of this Deed of Trust relating
to ERISA including the prohibition on any
Transfer that results in a violation of
ERISA.

(d) Nothing under subsection (a) above will be deemed to
be a waiver of any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code or
under any other Law relating to bankruptcy or insolvency to file a
claim for the full amount of the Debt or to require that all
collateral will continue to secure all of the Obligations in
accordance with the Loan Documents.

ARTICLE XVI

WAIVERS

Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.

Section 16.2. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER OR TRUSTEE WITH RESPECT TO THE LOAN
DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER OR TRUSTEE IS EXPRESSLY
REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.

Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS.
BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER
RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i)
SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY
POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE.
BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT,
VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND
EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.

Section 16.4. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL
BY JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR TRUSTEE RELATING TO
THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.

Section 16.5. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE
RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN
COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY
PROCEEDING LENDER OR TRUSTEE BRINGS AGAINST BORROWER RELATING TO THE
LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.

Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.

Section 16.7. WAIVER OF SUBROGATION. BORROWER WAIVES ALL
RIGHTS OF SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR
AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE
LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN
DOCUMENTS HAVE BEEN TERMINATED.

Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (A)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (B) LENDER WOULD NOT MAKE THE LOAN
WITHOUT THE PROVISIONS OF THIS ARTICLE; (C) THE LOAN IS A COMMERCIAL
OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR COMMONWEALTH WHERE THE
PROPERTY IS LOCATED NEGOTIATED BY LENDER AND BORROWER AND THEIR
RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (D) ALL WAIVERS BY BORROWER
IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND
KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED BY COUNSEL OF
BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE
BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN
RIGHT AND PRIVILEGE. THE FOREGOING ACKNOWLEDGMENT IS MADE WITH THE
INTENT THAT LENDER AND ANY SUBSEQUENT HOLDER OF THE NOTE WILL RELY ON
THE ACKNOWLEDGMENT.

ARTICLE XVII

NOTICES

Section 17.1. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:

If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Dennis Klimmek, Esq.
Senior Vice President and General Counsel
Application #VR-14
Mortgage #000473100

If to Lender:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Director of Portfolio Management
for Mortgage and Real Estate Division
Region: Midwest

TIAA Appl. # VR-14
M - 000473100

with a courtesy copy to:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Vice President and Chief Counsel,
Mortgage and Real Estate Law

TIAA Appl. # VR-14
M - 000473100

If to Trustee: First American Title Insurance Company
P.O. Box 3915
Phoenix, Arizona 85030
Attention: Pamela Nicolini

Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.

Section 17.2. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.

ARTICLE XVIII

MISCELLANEOUS

Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.

Section 18.2. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.

Section 18.3. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.

Section 18.4. Unenforceable Provisions. If any provision in
the Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.

Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of this
property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.

Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries.
(a) Lender is not a partner of or joint venturer with
Borrower or any other entity as a result of the Loan or Lender's
rights under the Loan Documents; the relationship between Lender and
Borrower is strictly that of creditor and debtor. Each Loan Document
is an agreement between the parties to that Loan Document for the
mutual benefit of the parties and no entities other than the parties
to that Loan Document will be a third party beneficiary or will have
any claim against Lender or Borrower by virtue of the Loan Document.
As between Lender and Borrower, any actions taken by Lender under the
Loan Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any responsibility to
Borrower or to any other entity by virtue of Lender's actions.

(b) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have standing to
require satisfaction of the conditions in accordance with their
provisions or will be entitled to assume that Lender will refuse to
perform its obligations in the absence of strict compliance with any
of the conditions.

Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of the Loan Documents, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.

Section 18.8. Service of Process. Borrower irrevocably
consents to service of process by registered or certified mail,
postage prepaid, return receipt requested, to Borrower at its address
set forth in the Article entitled "Notices" or any other address to
which such address has been changed as permitted hereunder.

Section 18.9. Entire Agreement. Oral agreements or
commitments between Borrower and Lender to lend money, to extend
credit or to forbear from enforcing repayment of a debt, including
promises to extend or renew the debt, are not enforceable. Any
agreements among Borrower, Lender and Trustee relating to the Loan are
contained in the Loan Documents, which contain the complete and
exclusive statement of the agreements among Borrower, Lender and
Trustee, except as Borrower, Lender and, if applicable, Trustee may
later agree in writing to amend the Loan Documents. The language of
each Loan Document will be construed as a whole according to its fair
meaning and will not be construed against the draftsman.

Section 18.10. No Oral Amendment. The Loan Documents may not
be amended, waived or terminated orally or by any act or omission made
individually by Borrower, Lender or Trustee but may be amended, waived
or terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.

Section 18.11. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.

Section 18.12. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.

Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.

Section 18.14. Subrogation. If the Principal or any other
amount advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.

Section 18.15. Joint and Several Liability. If Borrower
consists of more than one person or entity, the obligations and
liabilities of each such person or entity under this Deed of Trust are
joint and several.

Section 18.16. Successors and Assigns. The Loan Documents bind
the parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.

Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.

Section 18.18. Deed of Trust as Mortgage. If for any reason
this Deed of Trust shall be
ineffective as a Deed of Trust, it shall be construed and enforced as
a realty mortgage with Borrower being the Mortgagor and Lender being
the Mortgagee.

ARTICLE XIX

TRUSTEE PROVISIONS

Section 19.1 Acceptance of Trust.

(a) Trustee accepts this Trust upon recordation of this
Deed of Trust as provided by Law. Except as provided by Law, Trustee
is not obligated to notify any party of a pending sale under this Deed
of Trust or of a Proceeding in which Borrower, Lender or Trustee is a
party.

(b) Lender may from time to time unilaterally substitute a
successor to Trustee pursuant to a recordable instrument that complies
with Law for substitution of Trustees. The recorded substitution will
be conclusive proof of proper substitution of trustee who will,
without conveyance from predecessor trustee, succeed to all of the
predecessor trustee's title, estate, rights, powers and duties.

IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.

BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation

By: /s/Hanh Kihara
Hanh Kihara
Senior Vice President and
Chief Financial Officer

<PAGE>
ACKNOWLEDGMENT

STATE OF )
) SS:
COUNTY OF )

On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.

WITNESS my hand and official seal.

Signature:

______________________________
Name (Typed or Printed)

<PAGE>
Exhibit A

LEGAL DESCRIPTION

Ford Motor Building, 1355 S. Clearview Avenue, Mesa, Arizona

<PAGE>
Exhibit B

DEFINITIONS

"Acceleration" is defined in Section 14.2(a)(i).

"Accumulations" is defined in Section 2.1(xii).

"Accumulations Depositary" is defined in Section 6.2(a).

"Additional Funds" is defined in Section 7.4(v).

"Annual Financial Statement" is defined in Section 10.1(a).

"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.

"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.

"Bankruptcy Code" means Title 11 of the United States Code.

"Books and Records" is defined in Section 2.1(xi).

"Borrower" is defined in the introductory paragraph.

"Budget" is defined in Section 10.2.

"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.

"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.

"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.

"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets

"Condemnation Awards" is defined in Section 2.1(viii).

"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.

"CPA" is defined as an independent certified public accountant
satisfactory to Lender.

"Debt" is defined in Section 3.1.

"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.

"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.

"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.

"Destruction Event" is defined in Section 7.4.

"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.

"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.

"Environmental Report" is defined as the report prepared by IT
Corporation, dated October 22, 1999 as to the Property described in
Exhibit A.

"ERISA" is defined in Section 8.3(a).

"Event of Default" is defined in Section 14.1.

"Existing Shareholder" is defined in Section 12.1(b).

"Expenses" is defined in Section 11.1(a).

"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and includes all supporting schedules prepared or
used by the CPA in auditing the Annual Financial Statement or in
issuing its opinion.

"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.

"Fixed Interest Rate" is defined as 7.95% per annum.

"Fixtures and Personal Property" is defined in Section 2.1(iv).

"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division and any subdivision or agency
of any of them and any entity to which any of them has delegated
authority.

"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.

"Imposition Penalty Date" is defined in Section 6.1(a).

"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.

"Improvements" is defined in Section 2.1(ii).

"Individual Property" is defined in Recital D of the Assignment.

"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.

"Insurance Proceeds" is defined in Section 2.1(ix).

"Insurers" is defined in Section 7.1(c).

"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.

"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.

"Land" is defined in the Recitals.

"Late Charge" is defined in the Note.

"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.

"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.

"Lender" is defined in the introductory paragraph.

"Loan" is defined in the Recitals.

"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #4 - California
Properties) and the Deed of Trust, Assignment of Leases and Rents;
Security Agreement and Fixture Financing Statement (Bedford Portfolio
#4 - Washington Property) all dated the date of this Deed of Trust and
securing the Note, the Assignment, the Assignment of Leases and Rents
(Bedford Portfolio #3 - California Properties) and the Assignment of
Leases and Rents (Bedford Portfolio #4 - Washington Property) all
dated the date of this Deed of Trust and securing the Note and all
documents now or hereafter executed by Borrower or held by Lender or
Trustee relating to the Loan, including all amendments.

"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.

"Maturity Date" is defined in the Recitals.

"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan as the
maximum rate may be increased or decreased from time to time.

"Note" is defined in the Recitals.

"Note Payments" is defined in the Note.

"Notices" is defined in Section 17.1.

"Obligations" is defined in Section 3.1.

"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.

"Permitted Transfers" is defined in Section 12.2(b).

"Permitted Use" is defined as use as first-class commercial office
buildings with respect to the property described in Exhibit A, known
as 1355 S. Clearview Avenue, Mesa, Arizona, and uses incidentally and
directly related to such uses.

"Policies" is defined in Section 7.1(b).

"Prepayment Premium" is defined in the Note.

"Principal" is defined in the Recitals.

"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.

"Proceeds" is defined in Section 7.2(c).

"Property" is defined in Section 2.1.

"Property Documents" is defined in Section 2.1(v).

"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.

"Release Parcel" is defined in Section 12.4.

"Remedies" is defined in Section 14.2(a).

"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees, accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance, and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.

"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.

"Restoration Completion Date" is defined in Section 7.4(viii).

"Restoration Funds" is defined in Section 7.5(b).

"Substitution Property" is defined in Section 12.5.

"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.

"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.

"Transfer" is defined in Section 12.1(a).

"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.

<PAGE>
Exhibit C

RULES OF CONSTRUCTION

(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.

(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".

(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".

(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.

(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.

(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.

(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.

(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.

(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.

(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases and the Property Documents, includes any
future amendments to the Law, document or agreement, as the case may
be.

(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.

(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.

(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.

(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.

(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.

(p) The unmodified word "days" means calendar days.

<PAGE>
TIAA Appl. #VR-14
M-000473100

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #4 - California Properties

BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower

and

FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee

for the benefit of

TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender

Properties Known As

Carroll Tech IV, 8928 Terman Court, San Diego
LNX Corp. Building, 6325 Lusk Boulevard, San Diego
Canyon Park Development, 2001 Crow Canyon Road, San Ramon, California

After Recordation This Deed of Trust Should Be Returned To:

Beverly J. Quail, Esquire
c/o Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202

<PAGE>
TABLE OF CONTENTS

Page

RECITALS:. . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION. . . . .2
Section 1.1. Definitions. . . . . . . . . . . . . . . . . .2
Section 1.2. Rules of Construction. . . . . . . . . . . . .2

ARTICLE II GRANTING CLAUSES . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property. . . . . . . . . . . . . .2
Section 2.2. Habendum Clause. . . . . . . . . . . . . . . .5
Section 2.3. Security Agreement . . . . . . . . . . . . . .5
Section 2.4. Conditions to Grant. . . . . . . . . . . . . .5

ARTICLE III OBLIGATIONS SECURED. . . . . . . . . . . . . .5
Section 3.1. The Obligations. . . . . . . . . . . . . . . .5

ARTICLE IV TITLE AND AUTHORITY. . . . . . . . . . . . . .6
Section 4.1. Title to the Property. . . . . . . . . . . . .6
Section 4.2. Authority. . . . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person. . . . . . . . . . . . . . .7
Section 4.4. Litigation . . . . . . . . . . . . . . . . . .7

ARTICLE V PROPERTY STATUS, MAINTENANCE AND LEASES. . . .7
Section 5.1. Status of the Property . . . . . . . . . . . .7
Section 5.2. Maintenance of the Property. . . . . . . . . .8
Section 5.3. Change in Use. . . . . . . . . . . . . . . . .8
Section 5.4. Waste. . . . . . . . . . . . . . . . . . . . .8
Section 5.5. Inspection of the Property . . . . . . . . . .8
Section 5.6. Leases and Rents . . . . . . . . . . . . . . .8
Section 5.7. Parking. . . . . . . . . . . . . . . . . . . .9
Section 5.8. Separate Tax Lot . . . . . . . . . . . . . . .9
Section 5.9. Changes in Zoning or Restrictive Covenants . .9
Section 5.10. Lender's Right to Appear . . . . . . . . . . .9

ARTICLE VI IMPOSITIONS AND ACCUMULATIONS. . . . . . . . .9
Section 6.1. Impositions. . . . . . . . . . . . . . . . . .9
Section 6.2. Accumulations. . . . . . . . . . . . . . . . 10
Section 6.3. Changes in Tax Laws. . . . . . . . . . . . . 12

ARTICLE VII INSURANCE, CASUALTY, CONDEMNATION AND RESTORATION. 13
Section 7.1. Insurance Coverages. . . . . . . . . . . . . 13
Section 7.2. Casualty and Condemnation. . . . . . . . . . 14
Section 7.3. Application of Proceeds. . . . . . . . . . . 15
Section 7.4. Conditions to Availability of Proceeds for Restoration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. Restoration. . . . . . . . . . . . . . . . . 16

ARTICLE VIII COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . 18
Section 8.1. Compliance with Law. . . . . . . . . . . . . 18
Section 8.2. Compliance with Agreements . . . . . . . . . 19
Section 8.3. ERISA Compliance . . . . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing . . . . . . . . . . . 19

ARTICLE IX ENVIRONMENTAL. . . . . . . . . . . . . . . . 20
Section 9.1. Environmental Representations and Warranties 20
Section 9.2. Environmental Covenants. . . . . . . . . . . 20

ARTICLE X FINANCIAL REPORTING. . . . . . . . . . . . . 21
Section 10.1. Financial Reporting. . . . . . . . . . . . . 21
Section 10.2. Annual Budget. . . . . . . . . . . . . . . . 22

ARTICLE XI EXPENSES AND DUTY TO DEFEND. . . . . . . . . 22
Section 11.1. Payment of Expenses. . . . . . . . . . . . . 22
Section 11.2. Duty to Defend . . . . . . . . . . . . . . . 23

ARTICLE XII TRANSFERS, LIENS AND ENCUMBRANCES . . . . . . . . 23
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances23
Section 12.2. Permitted Transfers. . . . . . . . . . . . . 24
Section 12.3. Right to Contest Lien. . . . . . . . . . . . 25
Section 12.4. Reconveyance Rights. . . . . . . . . . . . . 26
Section 12.5. Substitution . . . . . . . . . . . . . . . . 28

ARTICLE XIII ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.1. Further Assurances . . . . . . . . . . . . . 29
Section 13.2. Estoppel Certificates. . . . . . . . . . . . 30

ARTICLE XIV DEFAULTS AND REMEDIES . . . . . . . . . . . . . . 30
Section 14.1. Events of Default. . . . . . . . . . . . . . 30
Section 14.2. Remedies . . . . . . . . . . . . . . . . . . 32
Section 14.3. General Provisions Pertaining to Remedies. . 33
Section 14.4. Foreclosure by Power of Sale . . . . . . . . 34
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver . . . . . . . . . . . . . . . . . . . . 34
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 14.7. Application of Proceeds. . . . . . . . . . . 37
Section 14.8. Power of Attorney. . . . . . . . . . . . . . 37
Section 14.9. Tenant at Sufferance . . . . . . . . . . . . 37

ARTICLE XV LIMITATION OF LIABILITY . . . . . . . . . . . . . 37
Section 15.1. Limitation of Liability. . . . . . . . . . . 37

ARTICLE XVI WAIVERS. . . . . . . . . . . . . . . . . . . . . 39
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS . . . . . . 39
Section 16.2. WAIVER OF NOTICE . . . . . . . . . . . . . . 40
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS. . . 40
Section 16.4. WAIVER OF TRIAL BY JURY. . . . . . . . . . . 40
Section 16.5. WAIVER OF COUNTERCLAIM . . . . . . . . . . . 40
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. . . . 40
Section 16.7. WAIVER OF SUBROGATION. . . . . . . . . . . . 40
Section 16.8. GENERAL WAIVER . . . . . . . . . . . . . . . 40

ARTICLE XVII NOTICES . . . . . . . . . . . . . . . . . . . . 41
Section 17.1. Notices. . . . . . . . . . . . . . . . . . . 41
Section 17.2. Change in Borrower's Name or Place of Business42

ARTICLE XVIII MISCELLANEOUS. . . . . . . . . . . . . . . . . 43
Section 18.1. Applicable Law . . . . . . . . . . . . . . . 43
Section 18.2. Usury Limitations. . . . . . . . . . . . . . 43
Section 18.3. Lender's Discretion. . . . . . . . . . . . . 43
Section 18.4. Unenforceable Provisions . . . . . . . . . . 43
Section 18.5. Survival of Borrower's Obligations . . . . . 43
Section 18.6. Relationship Between Borrower and Lender; No Third
Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . 44
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 18.8. Service of Process . . . . . . . . . . . . . 44
Section 18.9. Entire Agreement . . . . . . . . . . . . . . 44
Section 18.10. No Oral Amendment . . . . . . . . . . . . . 45
Section 18.11. Severability . . . . . . . . . . . . . . . . 45
Section 18.12. Covenants Run with the Land. . . . . . . . . 45
Section 18.13. Time of the Essence. . . . . . . . . . . . . 45
Section 18.14. Subrogation. . . . . . . . . . . . . . . . . 45
Section 18.15. Joint and Several Liability . . . . . . . . 45
Section 18.16. Successors and Assigns . . . . . . . . . . . 45
Section 18.17. Duplicates and Counterparts. . . . . . . . . . 45

ARTICLE XIX TRUSTEE PROVISIONS . . . . . . . . . . . . . . . 46
Section 19.1 Acceptance of Trust. . . . . . . . . . . . . 46

Exhibit A LEGAL DESCRIPTION. . . . . . . . . . . . . .A-1

Exhibit B DEFINITIONS. . . . . . . . . . . . . . . . .B-1

Exhibit C RULES OF CONSTRUCTION. . . . . . . . . . . .C-1

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 4 - California Properties

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
November, l999, by BEDFORD PROPERTY INVESTORS, INC., a Maryland
corporation ("Borrower"), having its principal place of business at
270 Lafayette Circle, Lafayette, California 94549, and FIRST AMERICAN
TITLE INSURANCE COMPANY ("Trustee"), a California corporation, having
an office at 1850 Mt. Diablo Boulevard, Walnut Creek, California
94596, for the benefit of TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation ("Lender"), having an address at
730 Third Avenue, New York, New York l0017.

RECITALS:

A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of $22,150,000.

B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of TWENTY-TWO MILLION ONE HUNDRED
FIFTY THOUSAND AND NO/100 Dollars ($22,150,000) (that amount or so
much as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on December 1, 2006 (the
"Maturity Date").

C. To secure the Note and the Obligations, this Deed of
Trust conveys, among other things, Borrower's fee interest in the real
property located in the Cities of San Diego and San Ramon, Counties of
San Diego and Contra Costa, State of California more particularly
described in Exhibits A-1, A-2 and A-3 (the "Land").

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.

Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.

ARTICLE II

GRANTING CLAUSES

Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee in trust, WITH POWER OF SALE, and grants to Trustee a security
interest in any and all of the following property, rights, interests
and estates now or in the future owned or held by Borrower (the
"Property") for the uses and purposes set forth in this Deed of Trust:

(i) the Land;

(ii) all buildings and improvements located on the
Land (the "Improvements");

(viii) all awards and other compensation paid
after the date of this Deed of Trust for
any Condemnation (the "Condemnation
Awards");

(ix) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");

Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.

Section 2.3. Security Agreement.

(a) This Deed of Trust is a real property deed of trust
and also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.

(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered; (v) the
debtor is Bedford Property Investors, Inc., a Maryland corporation
whose address is 270 Lafayette Circle, Lafayette, California 94549;
(vi) the secured party is Teachers Insurance and Annuity Association
of America, a New York corporation, whose address is 730 Third Avenue,
New York, New York 10070; (vii) the record owner of the Property is
Bedford Property Investors, Inc., a Maryland corporation, whose
address is stated above. Except as otherwise provided in the Loan
Documents, no financing statement in favor of any secured party other
than Lender covering the personal property described herein or any
portion thereof is on file in any public office. Provided that
obsolete and worn-out articles may be removed concurrently with the
replacement or renewal thereof with property of at least equal value
or usefulness in the operation of the Property; Borrower will not
otherwise remove or permit the removal of the collateral or any part
thereof without the prior written permission of Lender.

ARTICLE III

OBLIGATIONS SECURED

ARTICLE IV

TITLE AND AUTHORITY

Section 4.1. Title to the Property.

(b) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.

(c) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.

Section 4.2. Authority.

(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.

Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.

ARTICLE V

PROPERTY STATUS, MAINTENANCE AND LEASES

Section 5.1. Status of the Property.

(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.

(d) The Property is free from damage caused by a Casualty.

(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.

Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.

Section 5.6. Leases and Rents.

ARTICLE VI

IMPOSITIONS AND ACCUMULATIONS

Section 6.1. Impositions.

(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.

(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;

(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;

(iii) there is no Event of Default;

(iv) Borrower pays the contested Taxes or Assessments
under protest;

(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;

(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and

(vii) Borrower either (a) deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties, or (b) Borrower
pays all of the contested Taxes or
Assessments under protest.

Section 6.2. Accumulations.

(a) If required by Lender pursuant to Subsection 6.2 (j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the Term
Borrower will deposit with the Accumulations Depositary an amount
equal to one-twelfth (1/12) of the annual Taxes and Assessments as
determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.

ARTICLE VII

INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION

Section 7.1. Insurance Coverages.

(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.

(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.

(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.

Section 7.2. Casualty and Condemnation.

(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;

Section 7.5. Restoration.

(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;

(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;

(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender; and

(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.

(h) Any excess Proceeds, excluding any proceeds from
business interruption insurance maintained by Borrower, remaining
after Restoration less than $100,000 shall be delivered to Borrower.
If the excess Proceeds remaining after Restoration are more than
$100,000, Lender may elect, in its sole discretion to apply any excess
as a credit against any portion of the Debt as selected by Lender in
its sole discretion or to deliver the excess to Borrower.

ARTICLE VIII

COMPLIANCE WITH LAW AND AGREEMENTS

Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to Lender at the addresses set forth herein. Borrower will deliver
promptly to Lender copies of any notices of default or of termination
that Borrower receives or delivers relating to any Property Document.

Section 8.3. ERISA Compliance.

(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA, and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.

ARTICLE IX

ENVIRONMENTAL

Section 9.1. Environmental Representations and Warranties.

Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:

(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.

Section 9.2. Environmental Covenants.

(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.

(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.

(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage; and
(vii) Borrower acknowledges that the results of the assessment are to
be solely for Lender's benefit and Borrower may not rely on such
results for any purpose. The consultant's assessment and reports will
be at Borrower's expense (i) if the reports disclose any material
adverse change in the environmental condition of the Property from
that disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.

ARTICLE X

FINANCIAL REPORTING

Section 10.1. Financial Reporting.

(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial Statement fairly
presents the financial position of the Property;

(ii) accompanied by an opinion of the chief
financial officer of Borrower that, in all material respects,
the Annual Financial Statement fairly presents the financial
position of the Property; and

(iii) separate and distinct from any consolidated
statement or report for Borrower or any other entity or any
other property.

ARTICLE XI

EXPENSES AND DUTY TO DEFEND

Section 11.1. Payment of Expenses.

Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not yet responded within 30 days of receipt of Borrower's written
request to Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.

ARTICLE XII

TRANSFERS, LIENS AND ENCUMBRANCES

Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.

(b) Borrower represents, warrants and covenants that:

Section 12.2. Permitted Transfers.

(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, providedthat the
following conditions are met:

(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;

(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and

(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.

(i) Transfers of shares in Borrower among the
Existing Shareholders;

(ii) Public trading of shares in Borrower in
accordance with applicable law (for public trading of
Borrower's shares, Borrower will not be required to
notify Lender in the event of trading in its shares
and Borrower shall not be required to reimburse the
Lender for the review of trades); and
(iii) A one-time sale of the Property together
with the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #4 -
Arizona Property) and the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Financing Statement (Bedford Portfolio #4 - Washington
Property) both dated the date of this Deed of Trust,
executed by Borrower and both of which also secure the
Note ("Portfolio #4") to one, unaffiliated, bona fide
purchaser, provided that the following conditions are
met:

(A) the transferee has a net worth of at least
$25,000,000;

(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and

(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and

(E) Borrower pays to Lender a transfer fee of
one-half percent
(0.5%) of the outstanding Principal.

(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;

(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;

(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;

(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;

(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;

(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and

Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the property listed in Exhibit A-1,
Exhibit A-2 or Exhibit A-3 and the property listed in Exhibit A of the
Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing Statement (Bedford Portfolio #4 - Arizona Property) and
the property listed in Exhibit A of the Deed of Trust Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement
(Bedford Portfolio #4 - Washington Property), both dated the date of
this Deed of Trust and both of which also secure the Note (each of the
five described properties being referred to as a "Release Parcel") at
any time more than 24 months after the execution of this Deed of
Trust, provided that the following conditions are met for each
reconveyance:

(ii) not less than 60 days prior to the proposed
date of reconveyance, Borrower delivers to
Lender a notice setting forth (A) the
proposed date of the reconveyance, (B) the
name of the proposed transferee (if the
Release Parcel is adjacent to a property
still covered by this Deed of Trust); (C)
the intended use of the Release Parcel; and
(D) any other information reasonably
necessary for Lender to analyze the terms
of the reconveyance. Not less than 30
days prior to the proposed reconveyance,
Borrower will deliver to Lender a copy of
the contract of sale or ground lease;

(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property and on the
Portfolio #4 Arizona and Washington Properties
or in the amount of coverage; (C) consents to
the reconveyance; (D) waives any defense
resulting from the reconveyance; (E) to the
extent of the value of the Release Parcel,
waives any right of subrogation; and (F)
includes the Substitution Property (as defined
in Section 12.5) or in the alternative a
separate title insurance policy that affects the
foregoing;

(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;

(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;

(x) The remaining Property together with the
remaining Portfolio #4 Arizona and Washington
Properties together with the Substitution
Property must have a loan to value ratio of no
more than 65% and provide a debt service
coverage ratio of at least 1.50 times the debt
service coverage (in a manner reasonably
determined by Lender); and

(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
65% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property, the remaining
Portfolio #4 Arizona and Washington Properties
and the Substitution Property.

Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
September 3, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property and the Portfolio #4 Arizona and Washington Properties
shall be subject to a maximum loan-to-value ratio of 65%, have, at a
minimum, a debt service coverage ratio equal to 1.50, and a lease
expiration profile acceptable to Lender. Furthermore, Lender will not
approve a substitution that would negatively impact the loan portfolio
with regard to its geographic diversity, credit risk, leasing pro
formas, tenant quality, lease expiration risk and other similar
factors, including the ability to legally cross-default and cross-
collateralize the Substitution Property with the remainder of the
portfolio, to be determined in Lender's sole discretion. Borrower
shall provide Lender with such information and documentation
(including leases and other property documents) as Lender shall deem
necessary to make an informed decision and properly evaluate the
proposed substitution. The Substitution Property will be required to
have a value of not less than 90% of the fair market value of the
Release Parcel to be reconveyed. Borrower shall be responsible for
all costs and expenses, including, without limitation, reasonable
attorney's fees (if outside counsel is engaged by Lender), incurred by
Lender in connection with any proposed transaction along with title
insurance premium and engineering, environmental and appraisal reports
associated with such substitution.

ARTICLE XIII

ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 13.1. Further Assurances.

Section 13.2. Estoppel Certificates.

(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan, Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.

ARTICLE XIV

DEFAULTS AND REMEDIES

Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:

(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;

(iv) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #4 - Arizona
Property) and/or the Deed of Trust, Assignment
of Leases and Rents, Security Agreement and
Fixture Financing Statement (Bedford Portfolio
#4 - Washington Property) evidencing and
securing the Loan made by Lender in favor of
Borrower pursuant to the Note and encumbering
the Portfolio #4;

(v) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;

(vi) if Borrower abandons the Property or ceases to
conduct its business at the Property; or

Section 14.2. Remedies.

(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:

(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");

(ii) pay or perform any Obligation;

(iii) institute a Proceeding for the specific
performance of any Obligation;

(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale all or any portion of the
Property, in any court of competent
jurisdiction;

(viii) deliver to Trustee a declaration of default
and demand for sale and a notice of default
and election to cause Borrower's interest
in the Property to be sold, which notice
Trustee or Lender will file in the official
records of the county in which the Property
is located;

(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and

(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.

(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.

Section 14.3. General Provisions Pertaining to Remedies.

(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise; at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.

(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.

(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.

(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.

(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.

Section 14.4. Foreclosure by Power of Sale.

Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver.

(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:

(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;

(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;

(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.

Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.

Section 14.9. Tenant at Sufferance. If Lender, Trustee or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.

ARTICLE XV

LIMITATION OF LIABILITY

Section 15.1. Limitation of Liability.

(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:

(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property and that certain Certificate Regarding
Tenant Estoppels dated of even date herewith) or
(E) Borrower's performance of the Obligations;

(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;

(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;

(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers";

(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and

ARTICLE XVI

WAIVERS

Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.

Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (i)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (ii) LENDER WOULD NOT MAKE THE
LOAN WITHOUT THE PROVISIONS OF THIS ARTICLE; (iii) THE LOAN IS A
COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR
COMMONWEALTH WHERE THE PROPERTY IS LOCATED NEGOTIATED BY LENDER AND
BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (iv) ALL
WAIVERS BY BORROWER IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED
BY COUNSEL OF BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE
RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND
ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. THE FOREGOING
ACKNOWLEDGMENT IS MADE WITH THE INTENT THAT LENDER AND ANY SUBSEQUENT
HOLDER OF THE NOTE WILL RELY ON THE ACKNOWLEDGMENT.

ARTICLE XVII

NOTICES

If to Lender: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Director of Portfolio
Management for
Mortgage and Real Estate Division
Region: Midwest
Application #VR-14
Mortgage #000473100

with a courtesy
copy to: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Vice President and Chief
Counsel - Mortgage and Real Estate Law
Application #VR-14
Mortgage #000473100

If to Trustee: First American Title Insurance Company
1850 Mt. Diablo Boulevard, Suite 300
Walnut Creek, California 94596
Attention: Pamela Nicolini

ARTICLE XVIII

MISCELLANEOUS

Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.

Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of the
Property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.

Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of this Deed of Trust, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.

Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.

Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.

ARTICLE XIX

TRUSTEE PROVISIONS

Section 19.1 Acceptance of Trust.

IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.

BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation

By: /s/Hanh Kihara
Hanh Kihara
Senior Vice President and
Chief Financial Officer

ACKNOWLEDGMENT

STATE OF )
) SS:
COUNTY OF )

WITNESS my hand and official seal.

Signature:

______________________________
Name (Typed or Printed)

<PAGE>
Exhibit A

LEGAL DESCRIPTION

Exhibit A-1

Legal Description of Property #1
Carroll Tech IV, 8928 Terman Court, San Diego, California

<PAGE>
Exhibit A-2

Legal Description of Property #2

LNX Corp. Building, 6325 Lusk Boulevard, San Diego, California

Exhibit A-3

Legal Description of Property #3
Canyon Park Development - 2001
Crow Canyon Road, San Ramon, California

<PAGE>
Exhibit B

DEFINITIONS

"Acceleration" is defined in Section 14.2(a)(i).

"Accumulations" is defined in Section 2.1(xii).

"Accumulations Depositary" is defined in Section 6.2(a).

"Additional Funds" is defined in Section 7.4(v).

"Annual Financial Statement" is defined in Section 10.1(a).

"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.

"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.

"Bankruptcy Code" means Title 11 of the United States Code.

"Books and Records" is defined in Section 2.1(xi).

"Borrower" is defined in the introductory paragraph.

"Budget" is defined in Section 10.2.

"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.

"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.

"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.

"Condemnation Awards" is defined in Section 2.1(viii).

"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.

"CPA" is defined as an independent certified public accountant
satisfactory to Lender.

"Debt" is defined in Section 3.1.

"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.

"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.

"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.

"Destruction Event" is defined in Section 7.4.

"Environmental Report" is defined as the report prepared by IT
Corporation, dated October 15, 1999 as to the Property described in
Exhibit A-1, and dated October 15, 1999 as to the Property described
in Exhibit A-2, and dated October 18, 1999 as to the Property
described in Exhibit A-3, all as amended.

"ERISA" is defined in Section 8.3(a).

"Event of Default" is defined in Section 14.1.

"Existing Shareholder" is defined in Section 12.1(b).

"Expenses" is defined in Section 11.1(a).

"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.

"Fixed Interest Rate" is defined as 7.95% per annum.

"Fixtures and Personal Property" is defined in Section 2.1(iv).

"Imposition Penalty Date" is defined in Section 6.1(a).

"Improvements" is defined in Section 2.1(ii).

"Individual Property" is defined in Recital D of the Assignment.

"Insurance Proceeds" is defined in Section 2.1(ix).

"Insurers" is defined in Section 7.1(c).

"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.

"Land" is defined in the Recitals.

"Late Charge" is defined in the Note.

"Lender" is defined in the introductory paragraph.

"Loan" is defined in the Recitals.

"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #4 Arizona Property) and
the Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Financing Statement (Bedford Portfolio #4 - Washington
Property) both dated the date of this Deed of Trust and securing the
Note, the Assignment, the Assignment of Leases and Rents (Bedford
Portfolio #4 - Arizona Property) and the Assignment of Leases and
Rents (Bedford Portfolio #4 Washington Property), all dated the date
of this Deed of Trust and securing the Note and all documents now or
hereafter executed by Borrower or held by Lender or Trustee relating
to the Loan, including all amendments.

"Maturity Date" is defined in the Recitals.

"Note" is defined in the Recitals.

"Note Payments" is defined in the Note.

"Notices" is defined in Section 17.1.

"Obligations" is defined in Section 3.1.

"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.

"Permitted Transfers" is defined in Section 12.2(b).

"Permitted Use" is defined as use as first-class suburban commercial
office building with respect to the property described in Exhibit A-1,
known as 8928 Terman Court, San Diego, California and as a first-class
industrial building and research and development building with respect
to the property described in Exhibit A-2 known as 6325 Lusk Boulevard,
San Diego, California and as a first-class commercial office building
with respect to the property described in Exhibit A-3, known as 2001
Crow Canyon Road, San Ramon, California and uses incidentally and
directly related to such uses.