SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                           FORM 10-K
                        Amendment No. 2
                                
 X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---  SECURITIES EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 1996

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

                 Commission file number: 1-12592

              WALDEN RESIDENTIAL PROPERTIES, INC.
     (Exact name of Registrant as specified in its charter)
                                
            Maryland                                 75-2506197
   (State or other jurisdiction                   (I.R.S. Employer
       of incorporation or                       Identification No.)
          organization)
                                
One Lincoln Centre, 5400 LBJ Freeway,                   75240
  Suite 400, LB 45, Dallas, Texas                    (Zip Code)
     (Address of principal
       executive offices)
                                
Registrant's telephone number, including area code:  (972) 788-0510
                                
  Securities registered pursuant to Section 12(b) of the Act:
                                
                                
     Title of each class:             Name of each exchange on which registered:
     --------------------             ------------------------------------------
        Common stock,                          New York Stock Exchange
       $.01 par value
                                
  9.16% Series B Convertible                   New York Stock Exchange
  Redeemable Preferred Stock,
       $.01 par value
                                
  9.20% Senior Preferred Stock,                New York Stock Exchange
       $.01 par value

   Securities registered pursuant to Section 12(g) of the Act:  None
                                
Indicate by check mark whether Registrant (1) has filed all report
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 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 Park
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 the registrant was $413,158,242 at March 3, 1997.

The number of shares of common stock outstanding at March 3, 1997
was 17,385,927.

               DOCUMENTS INCORPORATED BY REFERENCE

Certain information in the Registrant's definitive proxy statement
to be filed with the Securities and Exchange Commission related to
the Company's 1997 Annual Meeting of Stockholders is incorporated
by reference in Part III hereof.


<Page 1>
                         EXPLANATORY NOTE

     Walden Residential Properties, Inc., a Maryland corporation,
hereby amends its Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 1996, by revising the attached in
order to respond to a revision request received from the Securities
and Exchange Commission on May 11, 1997.


<Page 2>
                              PART I
Item 1.     Business
--------------------

General
-------

     Walden Residential Properties, Inc. (the "Company") is a
self-administered, self-managed, fully integrated real estate investment
trust ("REIT") focused on middle income multifamily properties
located primarily in selected Southwestern and Southeastern
markets. The Company, a Maryland corporation with headquarters in
Dallas, Texas, was formed in September 1993 to continue and expand
the multifamily property ownership, management, acquisition and
marketing operations and related business objectives and strategies
of The Walden Group, Inc. and its subsidiaries and affiliates
(collectively, "Walden Predecessors"). The Company owned 68
multifamily properties (the "Properties") as of December 31, 1996,
containing 21,407 apartment units.  Approximately 93% of the
Properties are located in the Dallas/Fort Worth, Jacksonville,
Phoenix, Nashville, Austin, Oklahoma City, San Antonio, Tampa,
Tulsa, Houston and Salt Lake City areas (the "Target Markets"),
with the remaining Properties primarily located in other areas in
the Southwest and Southeast regions of the United States. The
Properties had a weighted average occupancy rate of approximately
93.4% at March 2, 1997.  In addition, the Company currently manages
on a fee basis four additional multifamily properties consisting of
1,578 apartment units (the management contracts for four properties
consisting of 720 units were not renewed at the owner's option in
January 1997).

     Upon completion of the Company's initial public offering on
February 9, 1994 (the "IPO"), the Company purchased the multifamily
operations of the Walden Predecessors, including 18 properties
containing 5,895 apartment units (of which a 299-unit property was
sold in April 1995, a 384-unit property was sold in April 1996 and
a 144-unit property was sold in September 1996), and concurrently
purchased two additional properties containing 448 apartment units,
one of which was owned by a third party and the other of which was
principally owned by the Walden Predecessors (collectively, the
"Original Properties").  Since the consummation of the IPO, the
Company has acquired 53 properties (the "Acquisition Properties")
(of which a 242-unit property was sold in December 1995 and a
304-unit property was sold in August 1996), containing an aggregate of
16,437 apartments units, for an aggregate acquisition cost of
$545.1 million. In addition, in connection with one property
acquired in December 1996, the Company acquired approximately 81
acres of adjacent undeveloped land for $4 million.  The land is
zoned for an additional 900 apartment units, which offers the
Company the opportunity to develop apartment communities in the
future.  Management believes that these acquisitions are consistent
with its core acquisition strategy of acquiring well located garden
apartment properties at prices less than replacement costs, which
serve middle income residents and can benefit from the Company's
comprehensive management programs.

     The Company is operated under the direction of Don R. Daseke,
Chairman of the Board and Chief Executive Officer of the Company,
and a management team substantially all of whom were formerly
employed by the Walden Predecessors.  The Company's 19 officers
have an average tenure with the Company and the Walden Predecessors
of nine years and have an average of approximately 18 years
experience in the multifamily property business. The Company is
fully


<Page 3>

integrated with operations that include multifamily property
acquisitions, redevelopment, property management, finance and asset
management.

     The Company's executive offices are located at One Lincoln
Centre, 5400 LBJ Freeway, Suite 400, Dallas, Texas 75240. The
telephone number is (972) 788-0510. The Company was incorporated in
Maryland on September 29, 1993, and the duration of its existence
is perpetual.

Growth Strategies
-----------------

     The Company's primary business objective is to maximize
stockholder value by maintaining long-term growth in funds from
operations for distribution to its stockholders.  Management
believes it can achieve this objective by focusing on the
ownership, management and acquisition of garden apartment
properties that have strong cash flow growth potential and by
holding such properties for long-term investment and capital
appreciation.  The Company has focused its property ownership in
its Target Markets, which are in metropolitan areas in the
Southwest and Southeast regions of the United States.  The Company
believes its Target Markets will experience higher growth rates in
population, household formation and employment than the national
averages.  Specifically, the Company intends to continue the
implementation of the following growth strategies:

     Increased Property Cash Flow.  The Company intends to continue
to take advantage of the positive relationship between apartment
unit supply and demand and to continue raising rents as general
rental conditions permit.  Consistent with this strategy, the
Company will continue to implement aggressive and creative
marketing programs to increase occupancy and rental rates.  The
Company also anticipates increasing its cash flow by controlling
operating expenses, while at the same time maintaining
comprehensive maintenance policies, including non-recurring revenue
enhancement capital improvements (i.e., construction of covered
carports, installation of access gates with perimeter fencing,
energy efficient exterior lighting and water savers and
reconstruction of balconies and exterior stairwells) to maintain
and improve the competitive position of the Properties.

     Acquisitions.  The Company also seeks to increase its funds
from operations by acquiring multifamily properties that have
prospects for long-term growth.  Following the IPO, the Company has
engaged in an active acquisition program, acquiring 53 multifamily
properties, containing 16,437 apartment units.  The Company is
currently focusing its acquisition efforts in the Target Markets
due to the attractive demographics of these markets and the
availability of properties for sale.

Property Management
-------------------

     The Company conducts its property management operations with
an experienced staff of professionals and support personnel,
including property directors and sales directors. The depth of the
organization is intended to enable the Company to deliver quality
services on an uninterrupted basis, thereby promoting resident
satisfaction and improving resident retention. Each of the
Company's owned or managed properties is operated by a staff
specifically selected based on the size, location, age, management
plan and marketing plan of the individual property.


<Page 4>

Personnel are carefully trained in their areas of expertise, such as
property management, marketing and leasing, resident relations and
maintenance.

     The Company's standardized policies and procedures specify
reporting requirements and management guidelines which are to be
applied at each property.  Such policies and procedures facilitate
management consistency in all markets. The Company uses customized
software programs, including an on-site computerized rent roll
system, to provide on-site, regional and executive management with
rapid access to all marketing and accounting information. Weekly
marketing reports are prepared by on-site property directors which
track each property's leasing status, occupancy rate, prospective
resident traffic, unit availability, lease renewals, residents
moving in and out of apartments, notices by residents to vacate
their apartments and delinquent rental charges or other fees.
Accounting elements such as receivables, payables, rent roll status
and budget compliance are regularly monitored through this system.

     Marketing and leasing activities and procedures are designed
to comply with all established Federal, state and local laws and
regulations. The Company generally offers leases having six- to
seven-month terms, with individual property marketing plans
structured to respond to local market conditions. Qualifying
standards for prospective residents are established to comply with
the affordable housing restrictions placed on certain of the
Properties, the Fair Housing Amendments Act of 1988 (the "FHA") and
the regulations thereunder and are designed to stabilize service
levels and income streams.  The Company has 14 properties which are
currently subject to restrictions that require a specified number
of apartments be offered to persons with lower or moderate incomes.
The Company utilizes standard lease contracts promulgated by local
apartment associations to ensure compliance with the most recent
legislative and judicial activities related to multifamily
properties, as well as to permit uniform lease administration
relating to rent collections, security deposit dispositions,
evictions, repairs and renewals.

Third-Party Property Management
-------------------------------

     To maintain its status as a REIT, the Company may earn no more
than 5% of its gross revenues from prohibited sources, including
third-party management contracts. At the time of the IPO, the
amount of third-party management fee income was significant as
compared to the Company's total revenues.  As a result, the
Company's third-party management contracts were performed by WDN
Management Company ("WDN Management").  The Company's gross revenues
have increased and third-party management contracts have decreased
such that third-party management fee income is no longer
significant.  Therefore, effective December 31, 1996, WDN
Management was merged into the Company and its corporate entity was
dissolved.  Currently, the Company manages four multifamily
properties containing 1,578 garden apartment units not owned by the
Company.  Two of such properties are owned by unaffiliated third
parties. The other two properties are owned by three limited
partnerships, each of which has one of the Walden Predecessors as
the general partner. The management contracts may be terminated on
30 days notice.


<Page 5>

Employees
---------

     As of February 28, 1997, the Company employed 601 people, of
which 87 are located at the Company's headquarters in Dallas, Texas
and its regional offices located in Atlanta, Austin, Dallas, Fort
Worth, Houston, Phoenix, San Antonio and Tulsa.  The remaining 514
employees are located at the properties owned by the Company and
those fee managed.  None of the Company's employees is currently
represented by a union. The Company believes that relations with
its employees are good.

Competition
-----------

     All of the Properties are located in developed areas that
include other multifamily properties. The number of multifamily
properties in a particular area could have a material effect on the
Company's ability to lease units at its Properties or at any newly
acquired properties and on the rents charged. Additionally, there
are other housing alternatives that compete with the Properties in
attracting residents. The Properties compete directly with single
family homes that are available for rent in the markets in which
the Properties are located.

     The Company also competes for acquisitions with other
entities, such as insurance companies, pension funds, private
individuals, investment companies and other REITs, which  may have
greater resources than the Company.

Regulation
----------

     General.  Apartment community properties are subject to
various laws, ordinances and regulations, including regulations
relating to recreational facilities such as swimming pools,
activity centers and other common areas. The Company believes that
it has the necessary permits and approvals under present laws,
ordinances and regulations to operate its business in the manner
described herein.

     Americans with Disabilities Act.  The Properties and any newly
acquired or developed multifamily properties must comply with Title
III of the Americans with Disabilities Act of 1990 (the "ADA") to
the extent that such properties are "public accommodations" and/or
"commercial facilities" as defined by the ADA. Compliance with the
ADA requirements could require removal of structural barriers to
handicapped access in certain public areas of the Properties where
such removal is readily achievable. The ADA does not, however,
consider residential properties, such as multifamily properties, to
be public accommodations or commercial facilities, except to the
extent that portions of such facilities, such as leasing offices,
are open to the public. The Company obtained structural reports
from third-party consultants specifying certain modifications to
certain of the Properties that needed to be made in order to bring
such properties into full compliance with the ADA.  The Company has
substantially completed such modifications.

     Fair Housing Amendments Act of 1988.  The FHA requires
multifamily properties first occupied after March 13, 1990 to be
accessible to the handicapped. Noncompliance with the FHA could
result in the imposition of fines or an award of damages to private
litigants. All of the Company's Properties were occupied prior to
March 13, 1990.


<Page 6>

     Affordable Housing Restrictions.  The Company has 14
properties which are subject to restrictions requiring that a
specified percentage of the apartment units in such Properties be
offered to persons with lower or moderate incomes (currently, 67%
of the total number of apartment units in the 14 affected
properties and 16% of the total number of the Company's apartment
units).  Generally, these provisions originated from the use of tax
exempt financing in those instances where it was determined that
the benefits of the lower interest rate associated with such
financing offset the potential reduction of rental income resulting
from such rental restrictions.  In addition, four of these
properties are subject to limits on the amount of rent that can be
charged for certain of the apartment units.  The Company believes
it is in compliance with these restrictions. These restrictions
have not had a material adverse effect on the Company's resident
profile or ability to rent the units, and management does not
anticipate that such restrictions will have a material adverse
effect on future operations or possible sales of the 14 properties
in the future.

     Rent Control Legislation.  State and local rent control laws
in certain jurisdictions limit a property owner's ability to
increase rents and to recover from residents increases in operating
expenses and the costs of capital improvements. Enactment of such
laws has been considered from time to time in other jurisdictions,
although none of the jurisdictions in which the Company presently
operates has adopted such laws. The Company does not presently own,
nor does it intend to acquire, multifamily properties in markets
that are either subject to rent control or in which rent limiting
legislation exists.

Environmental Matters
---------------------

     Under various Federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator
of real estate may be required to investigate and remediate
hazardous or toxic substances or petroleum product releases at such
property and may be held liable to a government entity or third
party for property damage and investigation and remediation costs
incurred by such parties in connection with such contamination.
Such laws typically impose cleanup responsibility and liability
without regard to whether the owner or operator knew of, or caused
the presence of, the contaminants. The costs of investigation,
remediation or removal of such substances may be substantial, and
the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability
to sell or rent such real estate or to borrow using such real
estate as collateral. In addition, some environmental laws create
a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. 
Individuals who arrange for the disposal or treatment of hazardous
or toxic substances may be held liable for the costs of
investigation, remediation or removal of such hazardous or toxic
substances at or from the disposal or treatment facility regardless
of whether such facility is owned or operated by such person.
Finally, the owner of a site may be subject to common law claims by
third parties based on damages and costs resulting from
environmental contamination emanating from a site.

     Certain Federal, state and local laws, ordinances and
regulations govern the removal, encapsulation or disturbance of
asbestos-containing materials ("ACMs") when such materials are in
poor condition or in the event of building remodeling, renovation
or demolition. Such laws may impose liability for the release of
ACMs and may provide for third parties to seek recovery from


<Page 7>

owners or operators of real estate for personal injury associated
with ACMs. In connection with the ownership and operation of its
properties, the Company may be potentially liable for costs in
connection with the matters discussed above.

     All of the Properties have been the subject of environmental
assessments, which are intended to reveal information regarding,
and to evaluate the environmental condition of, the surveyed
properties and surrounding properties. The environmental
assessments generally include a historical review, a public records
review, a preliminary investigation of the site and surrounding
properties, screening for the presence of asbestos and equipment
containing polychlorinated biphenyls and underground storage tanks
and the preparation and issuance of a written report, but do not
include soil sampling or subsurface investigations.

     The environmental assessments on each of the Properties have
revealed elevated lead content in the drinking water at three of
the Properties and ACMs at 25 of the Properties (some of which is
friable, but in good and manageable condition). The consulting firm
that conducted the environmental studies has prepared an operations
and maintenance program recommending procedures to be followed in
dealing with ACMs if they are moved or otherwise disturbed. The
cost to the Company resulting from any future disturbance of the
ACMs will depend upon the magnitude of the disturbance and the
location of the ACMs. The consulting firm advised the Company that
it is not required by Federal law to take any action to address the
lead levels in the water; however, the Company is currently
evaluating the remedial actions and notification options.  The
Company anticipates any such remedial actions and notifications
will cost between $10,000 and $30,000 in the aggregate.

     Environmental assessments performed on the Properties have not
revealed any environmental liability that the Company believes
would have a material adverse effect on the Company's business,
assets, or results of operations, nor is the Company aware of any
such environmental liability. Nevertheless, it is possible that
these assessments did not reveal all environmental liabilities or
that there are material environmental liabilities of which the
Company is unaware. Moreover, no assurances can be given that (i)
future laws, ordinances or regulations will not require any
material expenditures by or impose any material liabilities on the
Company in connection with environmental conditions by or on the
Company or its properties, (ii) the current environmental condition
of a property will not be adversely affected by residents and
occupants of such property, by the condition of properties in the
vicinity of such property (such as the presence of underground
storage tanks) or by third parties unrelated to the Company, or
(iii) prior owners of the Properties did not create environmental
problems of which the Company is not aware.

     The Company believes that the Properties are in compliance in
all material respects with all Federal, state and local laws,
ordinances and regulations regarding hazardous or toxic substances
or petroleum products. Except as otherwise described above, the
Company has not been notified by any governmental authority, and is
not otherwise aware, of any material noncompliance, liability or
claim relating to hazardous or toxic substances or petroleum
products with respect to any of the Properties.


<Page 8>

     The Company accrues for losses associated with environmental
remediation obligations when such losses are probable and
reasonably estimatable.  Accruals for estimated losses from
environmental remediation obligations generally are recognized no
later than completion of the remediation feasibility study.  Such
accruals are adjusted as further information develops or
circumstances change.  Recoveries of environmental remediation
costs from other parties are recorded as assets when their receipt
is deemed probable.  Management is not aware of any environmental
remediation obligations which would materially affect the
operations, financial position or cash flows of the Company.

Insurance
---------

     The Company carries comprehensive liability, fire, extended
coverage and rental loss insurance with respect to all of the
Properties, with policy specifications, insured limits and
deductibles customarily carried for similar properties. There are,
however, certain types of losses (such as losses arising from
earthquakes or wars) that are not generally insured because they
are either uninsurable or not economically insurable. Should an
uninsured loss or a loss in excess of insured limits occur, the
Company could lose its capital invested in the affected property,
as well as the anticipated future revenues from such property and
would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss could
adversely affect the Company. Management believes that the
Properties are currently adequately 
insured in accordance with industry standards.

Item 2.     Properties
----------------------

     The Company's Portfolio.  As of December 31, 1996, the
Company's portfolio consisted of 68 multifamily properties
containing 21,407 apartment units located in 9 states. The
Properties are generally comprised of two and three-story buildings
in landscaped settings and generally include such amenities as a
clubhouse, swimming pools, laundry facilities and cable television
access. Certain of the Properties offer additional amenities such
as saunas, whirlpools, exercise facilities, tennis courts and
covered parking. The Properties contain an average of 315 apartment
units, with the largest property containing 994 apartment units.
The apartment units have an average size of 764 square feet. The
Properties were built between 1978 and 1988 and have a weighted
average age by number of apartment units of approximately 13 years.

The Properties are concentrated in the following markets:

<TABLE>
<CAPTION>
                                Number       Number        Percent 
Location                    of Properties   of Units   of Total Units
--------                    -------------   --------   --------------
<S>                               <C>        <C>             <C>
Dallas/Fort Worth                 26          7,402           34.58%
Jacksonville                       5          1,748            8.16%
Phoenix                            4          1,638            7.65%
Nashville                          3          1,626            7.60%
Austin                             4          1,329            6.21%
Oklahoma City                      4          1,196            5.59%
San Antonio                        5          1,146            5.35%
Tampa                              3          1,080            5.04%
Tulsa                              3          1,008            4.71%
Houston                            3            918            4.29%
Salt Lake City                     2            768            3.59%
                                  --         ------          -------
  Subtotal                        62         19,859           92.77%
Other Markets (a)                  6          1,548            7.23%
                                  --         ------          -------
  Total                           68         21,407          100.00%
</TABLE>

(a)    Represents properties in five different states.


<Page 9>

     No single property accounts for greater than 10% of the
Company's total revenues.  The Properties had a weighted average
occupancy of 94.5% for 1996 and 93.4% at March 2, 1997.  Resident
leases are generally for six- to seven-month terms and often
require security deposits. The Properties are located in mature,
developed neighborhoods. Management believes the Properties are
well built and have been well maintained. 

     Capital Expenditures.  The Company has adopted a policy of
expensing all maintenance and non-major, recurring repair and
replacement items, with the exception of carpet replacement which,
as of July 1, 1996, is capitalized on a prospective basis.  Such
maintenance expense items include, but are not limited to, interior
painting of the units, window blinds, and pool and recreation
facility maintenance.  Non-major expense items include but are not
limited to roofing, exterior painting and asphalt resurfacing under
approximately $10,000.  Repair and maintenance expenses for 1996
were approximately $8.2 million, or $447 per weighted average unit.

     The Company capitalizes all major repairs and replacements
which are not considered part of the normal maintenance of the
Properties or turnover of an apartment unit.  As of July 1, 1996,
the Company revised its method of accounting to capitalize the cost
of replacement carpets, on a prospective basis ($864,000 was
capitalized in 1996 which would have been expensed under the old
policy).  The Company believes that this accounting policy change
is preferable because it is consistent with policies currently
being used by the majority of the largest publicly traded apartment
REITs and provides a better matching of expenses with the related
benefit of the expenditures.  In addition, the Company capitalizes
non-recurring items such as access gates and new carports and
capitalizes all deferred maintenance items of an acquisition
property which are planned at the time of acquisition to bring the
property to satisfactory condition.  Such renovation of an
acquisition property generally takes six to twelve months to
complete, depending on the magnitude of the renovations.

     For the year ended December 31, 1996, the Company incurred
approximately $10.2 million of capital expenditures to its
Properties, of which $5.7 million related to renovation costs for
properties acquired in 1996 and 1995.  An additional $1.0 million
was expended on non-recurring items and $3.5 million was expended
for normal recurring capital expenditures to properties not under
renovation (the "Matured Properties" or "Matured Units") (resulting
in an average cost of $299 per Matured Unit).

     For 1997, the Company has budgeted total capital expenditures
of $31.0 million.  An estimated $11.3 million is to complete the
planned renovations to properties acquired in 1996.  Non-recurring
capital expenditures on Matured Units are estimated to be $13.6
million, which include the construction of covered carports, the
installation of access gates with perimeter fencing, energy
efficient exterior lighting and water savers and reconstruction of
balconies and exterior stairwells.  The remaining budgeted capital
expenditures of $6.1 million represent recurring capital
expenditures on Matured Units (or $372 per Matured Unit).


<Page 10a>
                                           WALDEN RESIDENTIAL PROPERTIES, INC.
                                                     APARTMENTS OWNED
<TABLE>
<CAPTION>
                                                                                                                     
                                                                              Total
                                                                  Year      Rentable                         Average 
                                                      Number  Construction     Area    Total     Unit Type  Apt. Size
Metropolitan Area/Property     Location              of Units Completed (1) (Sq. Ft.) Acreage 1BR  2BR  3BR (Sq. Ft.)
--------------------------     --------              -------- ------------- --------- ------- ---  ---  --- --------- 
<S>                            <C>                   <C>          <C>      <C>        <C>   <C>    <C>   <C>   <C>
Austin
------
Ashbury Parke (2)              Austin, TX               416       1983        278,936  13.2    304   112   0   671  
Harper's Creek                 Austin, TX               268       1982        201,838   8.0    228    40   0   753   
Pinto Creek                    Austin, TX               249       1985        199,146  22.6    162    87   0   800    
Trestles of Austin             Austin, TX               396       1984        275,904  10.7    252   144   0   697     
                                                     ------       ----     ---------- ----- ------ ----- ---   ---     
Austin Total/Weighted Average                         1,329       1983        955,824  54.5    946   383   0   719    
                                                     ======       ====     ========== ===== ====== ===== ===   ===     
Dallas/Fort Worth
-----------------
Braden's Walk (2)              Bedford, TX              208       1982        151,040   8.3    128    80   0   726   
Cinnamon Park                  Arlington, TX            272       1985        213,192  13.0    144   112  16   784   
Club at Springlake             Haltom City, TX          200       1986        146,328   8.0    128    72   0   732    
Fielder's Glen                 Arlington, TX            220       1985        165,752  10.0    140    80   0   753    
The Gables                     McKinney, TX             220       1986        169,880  10.0    160    60   0   772   
Greens Crossing                Dallas, TX               364       1984        262,761  10.5    292    72   0   722     
Hilltop (2)                    North Richland Hills, TX 238       1984        179,256  12.2    150    88   0   753   
Newport                        Irving, TX               308       1982        238,768  12.4    208   100   0   775   
Oak Forest (2)                 Bedford, TX              170       1982        136,300   8.7     60   110   0   802   
Pinnacle                       Lewisville, TX           150       1985        119,774   6.3     86    64   0   798   
Post Oak Place                 Euless, TX               354       1983        255,798  11.1    270    84   0   723  
Preston Greens                 Dallas, TX               256       1980        246,340  11.2    164    92   0   962  
Quayle Walk (2)                Arlington, TX            218       1984        160,432  10.3    132    86   0   736  
Reflections of Highpoint       Dallas, TX               372       1986        281,940  11.1    276    96   0   758  
Remington Hill                 Fort Worth, TX           440       1986        339,008  15.0    300   140   0   770
Rivercrest                     Arlington, TX            420       1979        337,056  19.3    320   100   0   803   
Shadow Creek (2)               North Richland Hills, TX 240       1986        181,896  12.2    120   120   0   758  
Springfield                    Mesquite, TX             264       1985        193,212   9.0    192    72   0   732   
Summer Meadows                 Plano, TX                389       1986        323,434  21.6    236   153   0   831  
Summer Villas                  Dallas, TX               460       1984        328,020  15.8    380    80   0   713  
Summers Crossing               Plano, TX                293       1986        238,697  15.7    215    78   0   815   
Summers Landing                Fort Worth, TX           196       1985        139,300   7.8    172    24   0   711  
Timber Creek at Treepoint (2)  Arlington, TX            160       1985        139,680   7.4     48    96  16   873   
Towne Center                   Dallas, TX               392       1978        269,348  11.5    256   136   0   687  
Waterford (2)                  Plano, TX                350       1985        310,746  22.0    102   248   0   888 
Woodridge                      Fort Worth, TX           248       1984        197,600  10.4    128   104  16   797  
                                                     ------       ----     ---------- ----- ------ ----- ---   ---  
Dallas Total/Weighted Average                         7,402       1984      5,725,558 310.8  4,807 2,547  48   774 
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Houston
-------
Copper Cove                    Houston, TX              270       1983        204,240   7.0    192    78   0   756  
Foxboro                        Houston, TX              220       1982        162,712   6.3    160    60   0   740  
Laurel Creek                   Houston, TX              428       1985        323,568  15.8    304   100  24   756 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Houston Total/Weighted Average                          918       1984        690,520  29.1    656   238  24   752  
                                                     ======       ====     ========== ===== ====== ===== ===   === 

<Page 11a>

San Antonio
-----------
Costa del Sol (2)              San Antonio, TX          244       1985        180,798  10.0    170    74   0   741  
Country View                   San Antonio, TX          272       1981        213,120  11.0    176    96   0   784   
Remington (2)                  San Antonio, TX          158       1986        112,018   4.9    108    50   0   709  
Summer Oaks (2)                San Antonio, TX          256       1983        171,464   9.5    184    72   0   670  
Villas of St. Moritz (2)       San Antonio, TX          216       1986        149,040   7.5    136    80   0   690  
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
San Antonio Total/Weighted Average                    1,146       1984        826,440  42.9    774   372   0   721  
                                                     ======       ====     ========== ===== ====== ===== ===   ===  
Other Texas
-----------
Fountaingate/Willowcreek       Wichita Falls, TX        280       1980        252,040  17.8    160   104  16   900 
Settler's Cove                 Beaumont, TX             182       1982        133,654   6.2    138    44   0   734  
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Other Texas Total/Weighted Average                      462       1981        385,694  24.0    298   148  16   835 
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Texas Total/Weighted Average                         11,257       1984      8,584,036 461.3  7,481 3,688  88   763  
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Jacksonville
------------
Bentley Green (2)              Jacksonville, FL         444       1986        308,096  25.7    336   108   0   694 
Brookwood Club                 Jacksonville, FL         360       1987        287,480  15.0    200   160   0   799 
Huntington at Hidden Hills (2) Jacksonville, FL         224       1986        183,200  15.0     64   160   0   818
Remington at Ponte Vedra       Ponte Vedra Beach, FL    344       1986        302,904  28.6    136   208   0   881  
Sandpiper                      Jacksonville, FL         376       1985        289,112  17.0    200   144  32   769    
                                                     ------       ----     ---------- ----- ------ ----- ---   ---   
Jacksonville Total/Weighted Average                   1,748       1986      1,370,792 101.3    936   780  32   784   
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Tampa
-----
Bel Shores                     Largo, FL                250       1985        189,874  22.3    138   112   0   759  
Carlyle at Waters              Tampa, FL                392       1986        281,893  13.0    310    82   0   719  
Three Palms                    Tampa, FL                438       1986        369,362  34.7    254   184   0   843 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Tampa Total/Weighted Average                          1,080       1986        841,129  70.0    702   378   0   779 
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Other Florida
-------------
Saratoga (2)                   Melbourne, FL            210       1986        146,732  14.0    160    50   0   699 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Florida Total/Weighted Average                        3,038       1986      2,358,653 185.3  1,798 1,208  32   776 
                                                     ======       ====     ========== ===== ====== ===== ===   ===

<Page 12a>

Oklahoma City
-------------
Copperfield                    Oklahoma City, OK        262       1983        187,080   7.7    196    66   0   714 
Hunter's Ridge                 Oklahoma City, OK        212       1984        155,587   6.0    148    64   0   734  
Summerfield Place              Oklahoma City, OK        224       1981        154,528   9.0    176    48   0   690 
Woodscape                      Oklahoma City, OK        498       1985        363,073  15.6    348   150   0   729  
                                                     ------       ----     ---------- ----- ------ ----- ---   ---  
Oklahoma City Total/Weighted Average                  1,196       1984        860,268  38.3    868   328   0   719 
                                                     ======       ====     ========== ===== ====== ===== ===   ===  
Tulsa
-----
Burning Tree                   Tulsa, OK                256       1978        156,848  11.3    208    48   0   613 
Cinnamon Stick                 Tulsa, OK                424       1978        256,672  14.6    360    64   0   605 
The Lift                       Tulsa, OK                328       1979        194,168  14.2    280    48   0   592 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Tulsa Total/Weighted Average                          1,008       1978        607,688  40.1    848   160   0   603 
                                                     ======       ====     ========== ===== ====== ===== ===   ===  
Oklahoma Total/Weighted Average                       2,204       1981      1,467,956  78.4  1,716   488   0   666
                                                     ======       ====     ========== ===== ====== ===== ===   ===  

Phoenix
-------
Casa Verde                     Phoenix, AZ              268       1983        178,140   8.2    184    84   0   665  
Meadow Glen (2)                Glendale, AZ             290       1987        242,020  11.2     90   200   0   835 
Terra Vida (2)                 Mesa, AZ                 384       1988        305,600  15.4    128   224  32   796  
Woodstone                      Phoenix, AZ              696       1986        573,564  19.7    432   240  24   824 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Phoenix Total/Weighted Average                        1,638       1986      1,299,324  54.5    834   748  56   793 
                                                     ======       ====     ========== ===== ====== ===== ===   === 
Salt Lake City
--------------
James Pointe                   Murray, UT               312       1985        236,928  11.6    144   168   0   759 
Stillwater                     Murray, UT               456       1986        343,216  15.3    152   304   0   753 
                                                     ------       ----     ---------- ----- ------ ----- ---   --- 
Salt Lake City Total/Weighted Average                   768       1986        580,144  26.9    296   472   0   755 
                                                     ======       ====     ========== ===== ====== ===== ===   ===
Nashville
---------
Nashboro Village               Nashville, TN            994       1982        959,153  60.7    456   426 112   965
Brandywine                     Nashville, TN            300       1985        203,418  21.0    240    60   0   678 
Raintree                       Nashville, TN            332       1985        216,930  24.9    252    80   0   653
                                                     ------       ----     ---------- ----- ------ ----- ---   ---  
Nashville Total/Weighted Average                      1,626       1983      1,379,501 106.6    948   566 112   848 
                                                     ======       ====     ========== ===== ====== ===== ===   === 

<Page 13a>

Other Markets
-------------
Eagle Pointe                   Indianapolis, IN         256       1988        202,000  19.8    152   104   0   789 
Silverado                      Albuquerque, NM          256       1985        183,656   8.1    180    76   0   717 
Winridge                       Aurora, CO (Denver)      364       1986        303,438  15.8    262   102   0   834 
                                                     ------       ----     ---------- ----- ------ ----- ---   ---  
Other Markets Total/Weighted Average                    876       1986        689,094  43.7    594   282   0   787    
                                                     ======       ====     ========== ===== ====== ===== ===   ===  
Total/Weighted Average                               21,407       1984     16,358,708 957.0 13,667 7,452 288   764  
                                                     ======       ====     ========== ===== ====== ===== ===   ===  
</TABLE>

(1)  Year construction completed indicates the year in which the
     final certificate of occupancy for the property was issued.

(2)  Represents a recently acquired property for which certain
     historical information is not available.

(3)  Represents a weighted average for the properties for which
     historical information is available.


<Page 10b>
<TABLE>
<CAPTION>
                                                                                         Average Monthly
                                                                Occupancy (3)        Rental Rate Per Unit (3)
                                                              As of       As of        December     December
Metropolitan Area/Property     Location                     12/31/95    12/31/96         1995         1996
--------------------------     --------                     --------    --------       --------     --------
<S>                            <C>                           <C>         <C>             <C>          <C>
Austin
------
Ashbury Park                   Austin, TX                     N/A        97.8%            N/A          $533
Harper's Creek                 Austin, TX                    95.5%       92.5%           $574          $584
Pinto Creek                    Austin, TX                    93.2%       94.8%           $627          $637
Trestles of Austin             Austin, TX                    96.5%       95.2%           $589          $614
 
Austin Total/Weighted Average                                95.3%       95.4%           $595          $587

Dallas/Fort Worth
-----------------
Braden's Walk (2)              Bedford, TX                   92.3%       98.1%            N/A          $496
Cinnamon Park                  Arlington, TX                 91.9%       93.4%           $523          $550
Club at Springlake             Haltom City, TX               97.5%       94.0%           $457          $483
Fielder's Glen                 Arlington, TX                 94.5%       96.8%           $489          $500
The Gables                     McKinney, TX                  95.9%       92.7%           $582          $602
Greens Crossing                Dallas, TX                    95.3%       91.5%           $452          $482
Hilltop (2)                    North Richland Hills, TX      97.9%       93.7%            N/A          $505
Newport                        Irving, TX                    97.4%       99.0%           $522          $549
Oak Forest (2)                 Bedford, TX                    N/A        99.4%            N/A          $501
Pinnacle                       Lewisville, TX                96.7%       97.3%           $550          $586
Post Oak Place                 Euless, TX                    99.2%       93.5%           $499          $528
Preston Greens                 Dallas, TX                    96.9%       94.5%           $636          $668
Quayle Walk (2)                Arlington, TX                  N/A        95.4%            N/A          $502
Reflections of Highpoint       Dallas, TX                    96.2%       96.5%           $552          $581
Remington Hill                 Fort Worth, TX                97.0%       95.9%           $514          $541
Rivercrest                     Arlington, TX                 94.0%       89.9%           $490          $510
Shadow Creek (2)               North Richland Hills, TX      96.3%       96.7%            N/A          $518
Springfield                    Mesquite, TX                  95.1%       93.6%           $487          $520
Summer Meadows                 Plano, TX                     93.6%       91.0%           $608          $630
Summer Villas                  Dallas, TX                    96.3%       95.4%           $514          $548
Summers Crossing               Plano, TX                     95.6%       94.5%           $602          $626
Summers Landing                Fort Worth, TX                97.4%       95.9%           $512          $539
Timber Creek at Treepoint (2)  Arlington, TX                  N/A        08.8%            N/A          $558
Towne Center                   Dallas, TX                    93.9%       94.4%           $382          $410
Waterford (2)                  Plano, TX                      N/A        92.9%            N/A          $632
Woodridge                      Fort Worth, TX                94.8%       91.5%           $444          $470
                                                             -----       -----           ----          ----
Dallas Total/Weighted Average                                95.7%       94.5%           $514          $541
                                                             =====       =====           ====          ====
Houston
-------
Copper Cove                    Houston, TX                   92.6%       96.3%           $472          $479
Foxboro                        Houston, TX                   94.1%       93.2%           $445          $468
Laurel Creek                   Houston, TX                   95.8%       95.1%           $553          $563
                                                             -----       -----           ----          ----
Houston Total/Weighted Average                               94.5%       95.0%           $503          $516
                                                             =====       =====           ====          ====

<Page 11b>

San Antonio
-----------
Costa Del Sol (2)              San Antonio, TX                N/A        94.3%            N/A          $526
Country View                   San Antonio, TX               92.6%       94.1%           $487          $487
Remington (2)                  San Antonio, TX                N/A        94.3%            N/A          $523
Summer Oaks (2)                San Antonio, TX                N/A        94.5%            N/A          $465
Villas of St. Moritz (2)       San Antonio, TX                N/A        94.0%            N/A          $475
                                                             -----       -----           ----          ----
San Antonio Total/Weighted Average                           92.6%       94.2%           $487          $493
                                                             =====       =====           ====          ====
Other Texas
-----------
Fountaingate/Willowcreek       Wichita Falls, TX             97.9%       92.5%           $501          $521
Settler's Cove                 Beaumont, TX                  94.0%       94.0%           $466          $483
                                                             -----       -----           ----          ----
Other Texas Total/Weighted Average                           96.4%       93.1%           $487          $506
                                                             =====       =====           ====          ====
Texas Total/Weighted Average                                 95.5%       94.6%           $520          $538
                                                             =====       =====           ====          ====
Jacksonville
------------
Bentley Green (2)              Jacksonville, FL               N/A        95.5%            N/A          $555
Brookwood Club                 Jacksonville, FL              97.8%       90.8%           $509          $540
Huntington at Hidden Hills (2) Jacksonville, FL               N/A        91.5%            N/A          $511
Remington at Ponte Vedra       Ponte Vedra Beach, FL         93.6%       94.5%           $617          $648
Sandpiper                      Jacksonville, FL              99.7%       94.7%           $472          $535
                                                             -----       -----           ----          ----
Jacksonville Total/Weighted Average                          97.1%       93.7%           $531          $560
                                                             =====       =====           ====          ====
Tampa
-----
Bel Shores                     Largo, FL                     95.2%       92.8%           $565          $586
Carlyle at Waters              Tampa, FL                     93.1%       95.9%           $476          $492
Three Palms                    Tampa, FL                     88.6%       94.3%           $572          $595
                                                             -----       -----           ----          ----
Tampa Total/Weighted Average                                 91.8%       94.5%           $536          $555
                                                             =====       =====           ====          ====
Other Florida
-------------
Saratoga (2)                   Melbourne, FL                  N/A        94.3%            N/A          $536
                                                             -----       -----           ----          ----
Florida Total/Weighted Average                               94.4%       94.0%           $533          $557
                                                             =====       =====           ====          ====

<Page 12b>

Oklahoma City
-------------
Copperfield                    Oklahoma City, OK             97.3%       98.9%           $441          $459
Hunter's Ridge                 Oklahoma City, OK             92.9%       94.8%           $429          $440
Summerfield Place              Oklahoma City, OK             93.8%       95.1%           $419          $440
Woodscape                      Oklahoma City, OK             90.8%       93.6%           $447          $463
                                                             -----       -----           ----          ----
Oklahoma City Total/Weighted Average                         93.2%       95.3%           $437          $454
                                                             =====       =====           ====          ====
Tulsa
-----
Burning Tree                   Tulsa, OK                     98.4%       92.2%           $333          $346
Cinnamon Stick                 Tulsa, OK                     89.2%       90.1%           $313          $332
The Lift                       Tulsa, OK                     90.2%       89.0%           $310          $333
                                                             -----       -----           ----          ----
Tulsa Total/Weighted Average                                 91.9%       90.3%           $317          $336
                                                             =====       =====           ====          ====
Oklahoma Total/Weighted Average                              92.6%       93.0%           $382          $400
                                                             =====       =====           ====          ====
Phoenix
-------
Casa Verde                     Phoenix, AZ                   91.8%       97.0%           $373          $381
Meadow Glen (2)                Glendale, AZ                   N/A        97.6%            N/A          $604
Terra Vida (2)                 Mesa, AZ                       N/A        94.5%            N/A          $556
Woodstone                      Phoenix, AZ                   95.1%       95.3%           $540          $567
                                                             -----       -----           ----          ----
Phoenix Total/Weighted Average                               94.2%       95.8%           $494          $541
                                                             =====       =====           ====          ====
Salt Lake City
--------------
James Pointe                   Murray, UT                    98.7%       95.2%           $543          $572
Stillwater                     Murray, UT                    98.2%       97.1%           $565          $594
                                                             -----       -----           ----          ----
Salt Lake City Total/Weighted Average                        98.4%       96.3%           $556          $585
                                                             =====       =====           ====          ====
Nashville
---------
Nashboro Village               Nashville, TN                  N/A        92.3%            N/A           N/A
Brandywine                     Nashville, TN                 94.0%       91.7%           $504          $532
Raintree                       Nashville, TN                 97.3%       87.7%           $508          $536
                                                             -----       -----           ----          ----
Nashville Total/Weighted Average                             95.7%       91.2%           $506          $534
                                                             =====       =====           ====          ====

<Page 13b>

Other Markets
-------------
Eagle Pointe                   Indianapolis, IN              94.9%       89.8%           $561          $571
Silverado                      Albuquerque, NM               96.5%       90.6%           $562          $569
Winridge                       Aurora, CO (Denver)           92.6%       95.3%           $578          $605
                                                             -----       -----           ----          ----
Other Markets Total/Weighted Average                         94.4%       92.3%           $569          $585
                                                             =====       =====           ====          ====
Total/Weighted Average                                       95.0%       94.1%           $505          $530
                                                             =====       =====           ====          ====
</TABLE>

(1)   Year construction completed indicates the year in which
      the final certificate of occupancy for the property was issued.

(2)   Represents a recently acquired property for which certain
      historical information is not available.

(3)   Represents a weighted average for the properties for which
      historical information is available.


<Page 14a>
                                           WALDEN RESIDENTIAL PROPERTIES, INC.
                                                   APARTMENT AMENITIES
<TABLE>
<CAPTION>
                                                                              Apartment Amenities
                                                   -------------------------------------------------------------------------
                                                   Patio or Laundry            Mini Cable TV Outside Ceiling       
Metropolitan Area/Property Location                Balcony  Hookups Fireplace Blinds Ready   Storage  Fans   Other
-------------------------- --------                -------  ------- --------- ------ -----   -------  ----   -----
<S>                        <C>                      <C>      <C>      <C>      <C>    <C>      <C>     <C>   <C>  
Austin
------
Ashbury Parke              Austin, TX                ALL      32%      17%      ALL    ALL      ALL     96%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-157 Units;
                                                                                                             Washer/Dryer
                                                                                                             Provided-4 Units
Harper's Creek             Austin, TX                87%      26%      34%      ALL    ALL      64%     29%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-40 Units;
                                                                                                             Microwaves-62 Units
Pinto Creek                Austin, TX                ALL      69%      38%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers
Trestles of Austin         Austin, TX                ALL      64%      21%             ALL      ALL     42%  Washer/Dryer-253
                                                                                                             Units; Frost-Free
                                                                                                             Refrigerators

Dallas/Fort Worth
-----------------
Braden's Walk              Bedford, TX               ALL      77%      19%      ALL    ALL      77%     ALL  Frost-Free
                                                                                                             Refrigerators
Cinnamon Park              Arlington, TX             ALL      71%      ALL      ALL    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers
Club at Springlake         Haltom City, TX           64%      64%      64%      ALL    ALL      26%     ALL  Alarms; Icemakers
Fielder's Glen             Arlington, TX             66%      66%      66%      ALL    ALL      26%     ALL  Frost-Free
                                                                                                             Refrigerators
The Gables                 McKinney, TX              ALL      71%      ALL      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators
Greens Crossing            Dallas, TX                70%      52%      23%      ALL    ALL      70%     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-58 Units
Hilltop                    North Richland Hills, TX  ALL      ALL      45%      ALL    ALL      ALL          Frost-Free
                                                                                                             Refrigerators
Newport                    Irving, TX                83%      45%      38%      ALL    ALL      83%     27%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-52 Units
Oak Forest                 Bedford, TX               ALL      74%      ALL      ALL    ALL                   Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Washer/Dryer
                                                                                                             Provided-25 Units
Pinnacle                   Lewisville, TX            ALL      ALL      50%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves-15 Units
Post Oak Place             Euless, TX                90%      68%      33%      80%    ALL      83%     65%  Frost-Free
                                                                                                             Refrigerators
Preston Greens             Dallas, TX                44%      81%      ALL      ALL    ALL              39%  Covered parking;
                                                                                                             Alarms; Microwaves
Quayle Walk                Arlington, TX             ALL      45%      33%      ALL    ALL      ALL     50%  Frost-Free
                                                                                                             Refrigerators
Reflections of Highpoint   Dallas, TX                ALL      ALL      ALL      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Alarms; Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer Provided
Remington Hill             Fort Worth, TX            ALL      ALL      ALL      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Microwaves; Icemakers;
                                                                                                             Covered Parking;
                                                                                                             Washer/Dryer Provided
Rivercrest                 Arlington, TX             ALL      ALL      ALL      ALL    ALL      11%     ALL  Frost-Free
                                                                                                             Refrigerators-200
                                                                                                             Units;
                                                                                                             Icemakers-20 Units
Shadow Creek               North Richland Hills, TX  ALL      90%      50%      ALL    ALL              10%  Frost-Free
                                                                                                             Refrigerators
Springfield                Mesquite, TX              84%      50%      24%      74%    ALL      84%     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-36 Units
Summer Meadows             Plano, TX                 ALL      ALL      54%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers; Covered
                                                                                                             Parking
Summer Villas              Dallas, TX                ALL      69%      ALL      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers
Summers Crossing           Plano, TX                 75%      ALL      97%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers
Summers Landing            Fort Worth, TX            ALL      71%      80%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers
Timber Creek at Treepoint  Arlington, TX             ALL      74%      67%      ALL    ALL      57%     43%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-110 Units
Towne Center               Dallas, TX                56%                        ALL    ALL      56%     94%  Frost-Free
                                                                                                             Refrigerators-127
                                                                                                             Units;
                                                                                                             Alarms-52 Units
Waterford                  Plano, TX                          ALL      ALL      ALL    ALL      ALL      9%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Covered Parking;
                                                                                                             Washer/Dryer
                                                                                                             Provided-6 Units
Woodridge                  Fort Worth, TX            29%      ALL      81%      ALL    ALL      ALL          Frost-Free
                                                                                                             Refrigerators


<Page 15a>

Houston
-------
Copper Cove                Houston, TX               82%      67%      33%      93%    ALL      82%     41%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-54 Units
Foxboro                    Houston, TX               81%      41%      27%      75%    ALL      95%     34%  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-24 Units
Laurel Creek               Houston, TX               ALL      ALL      57%      ALL    ALL       2%     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Washer/Dryer-94 Units

San Antonio
-----------
Costa del Sol              San Antonio, TX          100%     100%     100%     100%   100%     100%    100%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer
Country View               San Antonio, TX                    ALL      ALL      ALL    ALL              50%  Icemakers;
                                                                                                             Microwaves;
                                                                                                             Alarms
Remington                  San Antonio, TX           ALL      ALL      34%      ALL    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer-4 Units
Summer Oaks                San Antonio, TX           ALL      ALL      50%      ALL    ALL      ALL     34%  Alarms-32 Units;
                                                                                                             Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Washer/Dryer
                                                                                                             Provided-16 Units
Villas of St. Moritz       San Antonio, TX           ALL      81%      15%      ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Microwaves

Other Texas
-----------
Fountaingate/Willowcreek   Wichita Falls, TX         25%      19%       83%     33%    ALL              11%  Covered Parking;
                                                                                                             Microwaves
Settler's Cove             Beaumont, TX              ALL      15%       35%            ALL      64%          Frost-Free
                                                                                                             Refrigerators

Jacksonville
------------
Bentley Green              Jacksonville, FL          ALL                 1%     ALL    ALL      ALL     50%  Microwaves-44 Units;
                                                                                                             Washer/Dryer
                                                                                                             Provided-396 Units
Brookwood Club             Jacksonville, FL          ALL      ALL               ALL    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators
Huntington at Hidden Hills Jacksonville, FL          ALL      71%       71%     ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Covered
                                                                                                             Parking-112 Units
Remington at Ponte Vedra   Ponte Vedra Beach, FL     ALL      ALL               ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer
                                                                                                             Provided
Sandpiper                  Jacksonville, FL          ALL      85%        85%    ALL    ALL      ALL          Frost-Free
                                                                                                             Refrigerators

Tampa
-----
Bel Shores                 Largo, FL                 ALL      ALL               ALL    ALL      ALL          Frost-Free
                                                                                                             Refrigerators
Carlyle at Waters          Tampa, FL                 ALL      50%         8%    ALL    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-98 Units
Three Palms                Tampa, FL                 ALL      ALL        50%    ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer
                                                                                                             Provided

Other Florida
-------------
Saratoga                   Melbourne, FL             ALL                  2%    ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Washer/Dryer
                                                                                                             Provided

Oklahoma City
-------------
Copperfield                 Oklahoma City, OK        86%      40%        24%    65%    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-42 Units
Hunter's Ridge              Oklahoma City, OK        74%      41%        30%    ALL    ALL      74%     49%  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-40 Units
Summerfield Place           Oklahoma City, OK        ALL      ALL               ALL    ALL              11%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer
                                                                                                             Provided-175 Units
Woodscape                   Oklahoma City, OK        68%      46%        34%    89%    ALL      68%     77%  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers-58 Units

Tulsa
-----
Burning Tree                Tulsa, OK                ALL                        79%    ALL              53%  Frost-Free
                                                                                                             Refrigerators-46
                                                                                                             Units
Cinnamon Stick              Tulsa, OK                ALL                        64%    ALL              97%  Icemakers-72 Units
The Lift                    Tulsa, OK                ALL                        46%    ALL              31%  Frost-Free
                                                                                                             Refrigerators-43
                                                                                                             Units


<Page 16a>

Phoenix
-------
Casa Verde                  Phoenix, AZ              ALL                        ALL    ALL      ALL          Covered Parking
Meadow Glen                 Glendale, AZ             ALL       ALL       18%    ALL    ALL      ALL     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Covered Parking;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer
                                                                                                             Provided
Terra Vida                  Mesa, AZ                 ALL       67%       75%    ALL    ALL                   Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Covered Parking;
                                                                                                             Washer/Dryer
                                                                                                             Provided-100 Units
Woodstone                   Phoenix, AZ              ALL       ALL       33%    ALL    ALL      84%     ALL  Covered Parking;
                                                                                                             Microwaves

Salt Lake City
--------------
James Pointe                Murray, UT               ALL       ALL       33%    ALL    ALL      ALL          Covered Parking
Stillwater                  Murray, UT               ALL       ALL       33%    ALL    ALL      17%          Covered Parking

Nashville
---------
Nashboro Village            Nashville, TN            ALL       82%       63%    ALL    ALL      83%     ALL  Frost-Free
                                                                                                             Refrigerators-620
                                                                                                             Units;
                                                                                                             Icemakers-621 Units;
                                                                                                             Washer/Dryer
                                                                                                             Provided-120 Units
Brandywine                  Nashville, TN            ALL       42%       16%    ALL    ALL                   Frost-Free
                                                                                                             Refrigerators
Raintree                    Nashville, TN            ALL       42%       16%    ALL    ALL                   Frost-Free
                                                                                                             Refrigerators

Other Markets
-------------
Eagle Pointe                Indianapolis, IN         ALL       ALL       36%    ALL    ALL      ALL          Microwaves
Silverado                   Albuquerque, NM          ALL       30%       25%    ALL    ALL      ALL     ALL  Alarms; Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Microwave
Winridge                    Aurora, CO (Denver)      77%       ALL       ALL    ALL    ALL      77%     ALL  Frost-Free
                                                                                                             Refrigerators;
                                                                                                             Icemakers;
                                                                                                             Microwaves;
                                                                                                             Washer/Dryer Provided
</TABLE>


<Page 14b>

<TABLE>
<CAPTION>
                                                                   Recreational Amenities
                                                  -----------------------------------------------------
                                                             Swimming    Spa/        Sports
Metropolitan Area/Property  Location              Clubhouse    Pools    Jacuzzi   Facilities (2)  Other
--------------------------  --------              ---------  --------   -------   --------------  -----
<S>                         <C>                      <C>        <C>        <C>         <C>        <C>
Austin
------
Ashbury Parke               Austin, TX                           2          1          Yes        BBQ/Picnic Area
Harper's Creek              Austin, TX               Yes         2         Yes         Yes        BBQ/Picnic Area
Pinto Creek                 Austin, TX               Yes         2                     Yes    
Trestles of Austin          Austin, TX               Yes         2         Yes                    BBQ/Picnic Area
 
Dallas/Fort Worth
-----------------
Braden's Walk               Bedford, TX              Yes         1         Yes         Yes        BBQ/Picnic Area
Cinnamon Park               Arlington, TX            Yes         1         Yes         Yes        BBQ/Picnic Area
Club at Springlake          Haltom City, TX          Yes         1                     Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna
Fielder's Glen              Arlington, TX            Yes         2         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna
The Gables                  McKinney, TX             Yes         2         Yes         Yes        BBQ Area;
                                                                                                  Playground Area
Greens Crossing             Dallas, TX               Yes         2         Yes         Yes        BBQ/Picnic Area
Hilltop                     North Richland Hills, TX Yes         1         Yes         Yes        BBQ/Picnic Area
Newport                     Irving, TX               Yes         2         Yes                    BBQ Area;
                                                                                                  Playground Area
Oak Forest                  Bedford, TX              Yes         2                     Yes        BBQ/Picnic Area
Pinnacle                    Lewisville, TX           Yes         1         Yes         Yes        BBQ/Picnic Area
Post Oak Place              Euless, TX               Yes         2         Yes                    BBQ/Picnic Area
Preston Greens              Dallas, TX               Yes         3         Yes                    BBQ/Picnic Area;
                                                                                                  Dry Sauna
Quayle Walk                 Arlington, TX            Yes         1                     Yes        BBQ/Picnic Area
Reflections of Highpoint    Dallas, TX               Yes         4         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna; Pool
                                                                                                  Table; Car Wash
Remington Hill              Fort Worth, TX           Yes         3         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna
Rivercrest                  Arlington, TX            Yes         2         Yes         Yes        BBQ/Picnic Area
Shadow Creek                North Richland Hills, TX Yes         2         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Springfield                 Mesquite, TX             Yes         2         Yes
Summer Meadows              Plano, TX                Yes         2         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Car Wash; Playground
                                                                                                  Area; Pool Table
Summer Villas               Dallas, TX               Yes         3         Yes         Yes        BBQ/Picnic Area
Summers Crossing            Plano, TX                Yes         2         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Summers Landing             Fort Worth, TX           Yes         1         Yes                    BBQ/Picnic Area
Timber Creek at Treepoint   Arlington, TX            Yes         4         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Towne Center                Dallas, TX               Yes         2                     Yes        BBQ/Picnic Area
Waterford                   Plano, TX                            3                     Yes        BBQ/Picnic Area
Woodridge                   Fort Worth, TX                       1                     Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna


<Page 15b>

Houston
-------
Copper Cove                 Houston, TX              Yes         1         Yes
Foxboro                     Houston, TX              Yes         1                                BBQ/Picnic Area
Laurel Creek                Houston, TX              Yes         3         Yes         Yes

San Antonio
-----------
Costa del Sol               San Antonio, TX          Yes         2                     Yes        BBQ/Picnic Area
Country View                San Antonio, TX          Yes         3                                BBQ/Picnic Area
Remington                   San Antonio, TX          Yes         1          1          Yes        BBQ/Picnic Area
Summer Oaks                 San Antonio, TX          Yes         2          1          Yes        BBQ/Picnic Area
Villas of St. Moritz        San Antonio, TX          Yes         1          1          Yes        BBQ/Picnic Area

Other Texas
-----------
Fountaingate/Willowcreek    Wichita Falls, TX        Yes         2                     Yes        Playground Area
Settler's Cove              Beaumont, TX             Yes         1                     Yes        BBQ/Picnic Area

Jacksonville
------------
Bentley Green               Jacksonville, FL         Yes         2          2          Yes        BBQ/Picnic Area
Brookwood Club              Jacksonville, FL         Yes        10                     Yes
Huntington at Hidden Hills  Jacksonville, FL         Yes         1          1          Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Remington at Ponte Vedra    Ponte Vedra Beach, FL    Yes         2         Yes         Yes        Playground Area;
                                                                                                  Dry Sauna; Car Wash
Sandpiper                   Jacksonville, FL         Yes         2         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Car Wash;
                                                                                                  Playground Area

Tampa
-----
Bel Shores                  Largo, FL                Yes         1         Yes         Yes        BBQ Area; Car Wash; Lake
Carlyle at Waters           Tampa, FL                Yes         2         Yes         Yes
Three Palms                 Tampa, FL                Yes         4         Yes         Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna;
                                                                                                  Playground Area;
                                                                                                  Car Wash

Other Florida
-------------
Saratoga                    Melbourne, FL            Yes         1                     Yes        Pool Table

Oklahoma City
-------------
Copperfield                 Oklahoma City, OK        Yes         1         Yes         No
Hunter's Ridge              Oklahoma City, OK        Yes         1         Yes         Yes        BBQ/Picnic Area
Summerfield Place           Oklahoma City, OK        Yes         1                     Yes        BBQ/Picnic Area
Woodscape                   Oklahoma City, OK        Yes         2         Yes         Yes

Tulsa
-----
Burning Tree                Tulsa, OK                Yes         1                     Yes        Playground Area
Cinnamon Stick              Tulsa, OK                Yes         1                     Yes        BBQ/Picnic Area
The Lift                    Tulsa, OK                Yes         1                     Yes        Playground Area


<Page 16b>

Phoenix
-------
Casa Verde                  Phoenix, AZ                          2         Yes                    BBQ/Picnic Area
Meadow Glen                 Glendale, AZ                         2          2          Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Terra Vida                  Mesa, AZ                 Yes         3          2          Yes        BBQ/Picnic Area;
                                                                                                  Playground Area
Woodstone                   Phoenix, AZ              Yes         4         Yes         Yes        BBQ/Picnic Area

Salt Lake City
--------------
James Pointe                Murray, UT               Yes         1         Yes         Yes        Tanning Bed; Pool Table
Stillwater                  Murray, UT               Yes         1         Yes         Yes        Tanning Bed; Pool Table

Nashville
---------
Nashboro Village            Nashville, TN             3          6          2          Yes        BBQ/Picnic Area;
                                                                                                  Two Dry Saunas;
                                                                                                  Community Wide Along
                                                                                                  with Sports Center
Brandywine                  Nashville, TN            Yes         1                     Yes
Raintree                    Nashville, TN            Yes         1                     Yes

Other Markets
-------------
Eagle Pointe                Indianapolis, IN         Yes         1         Yes         Yes        Two Tanning Beds
Silverado                   Albuquerque, NM          Yes         2         Yes         Yes        BBQ/Picnic Area
Winridge                    Aurora, CO (Denver)      Yes         1                     Yes        BBQ/Picnic Area;
                                                                                                  Dry Sauna
</TABLE>

(1)  Amenities exist in all units except where otherwise
     indicated.

(2)  Consists of one or more of the following:  Fitness center,
     tennis court(s), water volleyball, racquetball, basketball
     and/or volleyball courts.


<Page 17>

Item 3.   Legal Proceedings
---------------------------

     Neither the Company nor the Properties are presently subject
to any material litigation nor, to the Company's knowledge, is any
material litigation threatened against the Company or the
Properties.  The Company and the Properties are occasionally
subjected to routine litigation arising in the ordinary course of
business, which has been and is expected to be covered by liability
insurance and none of which has had or is expected to have a
material adverse effect on the business, financial condition,
results of operations or cash flows of the Company.

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

     (a)  (1)  A Special Meeting of holders of the Company's 9.16%
               Series B Convertible Redeemable Preferred Stock was
               held on December 2, 1996.

          (2)  The Series B Preferred Stockholders approved the
               issuance of a series of senior preferred stock:

                    Affirmative     Negative      Abstentions
                    -----------     --------      -----------
                      932,220        339,800        435,280

  (b)  (1)  A Special Meeting of holders of the Company's 9.16%
            Series A Convertible Redeemable Preferred Stock was
            held on December 11, 1996.

       (2)  The Series A Preferred Stockholders approved the
            issuance of a series of senior preferred stock:

                    Affirmative     Negative      Abstentions
                    -----------     --------      -----------
                       66,000          --            12,700


<Page 18>
                             PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters
-----------------------------------------------------------------------

     The common stock of the Company ("Common Stock") has traded on
the New York Stock Exchange ("NYSE") under the symbol "WDN" since
February 2, 1994, the date on which the Common Stock began trading.
The following table sets forth for the periods indicated the high
and low sales prices per common share as reported on the NYSE and
the distributions declared by the Company per share for each such
period in 1996 and 1995:

<TABLE>
<CAPTION>
                                                         Distributions
Quarter Ended                           High      Low      Per Share
-------------                           ----      ---    -------------
<S>                                   <C>       <C>          <C>
March 31, 1996. . . . . . . . . .     $22.125   $20.000      $.465
June 30, 1996 . . . . . . . . . .      21.875    20.250       .465
September 30, 1996. . . . . . . .      21.875    19.750       .465
December 31, 1996 . . . . . . . .      26.000    20.875       .465

March 31, 1995. . . . . . . . . .      20.50     17.875       .455
June 30, 1995 . . . . . . . . . .      19.875    18.00        .455
September 30, 1995. . . . . . . .      19.50     18.125       .455
December 31, 1995 . . . . . . . .      21.00     17.375       .455
</TABLE>

     As of March 3, 1997, the Common Stock was held by 1,315
stockholders of record, including shares held in nominee or street
name by brokers.

     For the year ended December 31, 1996, the Company declared and
paid distributions totaling $1.86 per share of Common Stock.  On
March 3, 1997, the Company paid a distribution of $.4825 per share
to record holders of Common Stock on February 17, 1997,
representing a 3.8% increase in its quarterly distribution and an
annualized distribution of $1.93 per share of Common Stock.

     Pursuant to a provision of the Company's credit facility,
distributions to stockholders may not exceed 90% of funds from
operations, as defined in the credit facility.  The Company does
not anticipate any restrictions on distributions pursuant to this
provision.

     Future distributions made by the Company will be at the
discretion of its Board of Directors and will depend upon numerous
factors, including the gross revenues received from its Properties,
the operating expenses of the Company, capital expenditures for the
Properties and the interest expense incurred in borrowing.

     Distributions by the Company to the extent of its current and
accumulated earnings and profits for Federal income tax purposes
generally will be taxable to stockholders as ordinary dividend
income. Distributions in excess of such earnings and profits
generally will be treated as a non-taxable reduction of the
stockholder's basis in the shares of Common Stock to the extent
thereof (which may have the effect of deferring taxation until such
stockholder's sale of the shares of Common Stock), and thereafter
as taxable gain.  Approximately $0.80 (or 43.3%) of the $1.86


<Page 19>

of distributions in 1996 represented a return of capital.  In
addition, approximately $0.07 (or 3.7%) of the $1.86 distributions
in 1996 represented a capital gain from the sale of real estate
assets.

Item 6.   Selected Financial Data
---------------------------------

     The following tables set forth selected consolidated financial
data for the Company and combined financial data for 18 of the
Original Properties (three of which have been sold, one in April
1995, one in April 1996 and one in September 1996) acquired
concurrently with the closing of the IPO and assets, liabilities
and operations of the Walden Predecessors' operating companies. 
The historical consolidated operating data for the Company for the
years ended December 31, 1996 and 1995 and the period from February
9, 1994 (date of commencement of operations) to December 31, 1994
and the balance sheet data as of December 31, 1996 and 1995 and the
combined operating data of the Walden Predecessors for the period
January 1, 1994 to February 8, 1994, each of the years in the two-year
period ended December 31, 1993 and the balance sheet data as
of December 31, 1993 and 1992 have been derived from the
consolidated financial statements and accounting records of the
Company and the combined financial statements and accounting
records of the Walden Predecessors, respectively, which have been
audited by independent auditors.  The consolidated and combined
historical operating results of the Company and the Walden
Predecessors may not be indicative of future operating results of
the Company. The following selected financial information should be
read in conjunction with the discussion set forth under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and all of the financial statements included
elsewhere in this report.  All amounts are in thousands except per
share and property data.


<Page 20>

<TABLE>
<CAPTION>
                                                             The Company
                                                    -----------------------------
                                                      Year Ended        February 9 to
                                                      December 31,       December 31,
                                                    ---------------     -------------
                                                  1996           1995        1994
                                                  ----           ----        ----
<S>                                             <C>            <C>          <C>
OPERATING DATA
   Revenues
     Rental income . . . . . . . . . . . .      $ 105,602       $ 78,469    $  39,602
     Other property income . . . . . . . .          3,873          3,090        1,493
     Interest income . . . . . . . . . . .          1,433            856          365
     Other income. . . . . . . . . . . . .            263            409          533
                                                ---------       --------    ---------
       Total revenues. . . . . . . . . . .        111,171         82,824       41,993
   Expenses
     Property operating and maintenance. .         37,521         28,748       15,607
     Real estate taxes . . . . . . . . . .         10,039          7,337        3,275
     General and administrative. . . . . .          5,124          3,811        2,507
     Interest expense. . . . . . . . . . .         20,573         17,111        6,288
     Amortization. . . . . . . . . . . . .            916            900          371
     Depreciation. . . . . . . . . . . . .         19,810         15,734        8,589
                                                ---------       --------    ---------
       Total expenses. . . . . . . . . . .         93,983         73,641       36,637
                                                ---------       --------    ---------
   Operating income. . . . . . . . . . . .         17,188          9,183        5,356
   Gain on disposition of real property. .          1,934          1,502          --
                                                ---------       --------    ---------
   Income before extraordinary item. . . .         19,122         10,685        5,356
   Extraordinary loss on debt
    extinguishment . . . . . . . . . . . .         (1,848)        (1,352)         --
                                                ---------       --------    ---------
   Net income. . . . . . . . . . . . . . .         17,274          9,333        5,356
   Preferred distributions . . . . . . . .         (4,092)          (922)         --  
                                                ---------       --------    ---------
   Net income available to common
    stockholders . . . . . . . . . . . . .      $  13,182       $  8,411    $   5,356
                                                =========       ========    =========
   Net income available to common
    stockholders per share . . . . . . . .      $     .90       $    .69    $     .62
                                                =========       ========    =========
   Distributions per share of common
    stock. . . . . . . . . . . . . . . . .      $    1.86       $   1.82    $    1.09
                                                =========       ========    =========
   Weighted average number of common stock
    and common stock equivalent shares
    outstanding. . . . . . . . . . . . . .         14,720         12,155        8,689
                                                =========       ========    =========
PROPERTY DATA
  Total properties (at end of period). . .             68             55           40
  Total units (at end of period) . . . . .         21,407         17,205       12,319
  Total units (weighted average) . . . . .         18,430         14,601        9,140
  Weighted average monthly property
   revenue per unit (a). . . . . . . . . .      $     495       $    465    $     420
OTHER DATA
  Funds from operations (b). . . . . . . .      $  36,998       $ 24,917    $  13,945
  Cash flows provided by (used in):
    Operating activities . . . . . . . . .      $  38,281       $ 31,317    $  16,420
    Investing activities . . . . . . . . .      $(158,668)      $(86,926)   $(256,114)
     Financing activities. . . . . . . . .      $ 143,306       $ 58,121    $ 243,982
</TABLE>

<TABLE>
<CAPTION>
                                                               The Company
                                                   ----------------------------------
                                                               December 31,
                                                   ----------------------------------
                                                   1996           1995           1994
                                                   ----           ----           ----
<S>                                              <C>            <C>            <C>
BALANCE SHEET DATA
  Real estate assets . . . . . . . . . . .       $683,515       $513,341       $329,206
  Accumulated depreciation . . . . . . . .        (41,707)       (23,734)        (8,589)
  Total assets . . . . . . . . . . . . . .        689,714        510,548        334,937
  Mortgage notes payable and credit
    facility . . . . . . . . . . . . . . .        258,908        259,015        165,439
  Stockholders' equity . . . . . . . . . .        411,421        235,127        160,267
</TABLE>
---------------
(a)    Represents rental income and other property income, divided by
       weighted average units, divided by the number of months.

(b)    Management generally considers funds from operations ("FFO")
       to be an appropriate measure of the performance of an equity
       REIT.  FFO is defined as net income (loss) (determined in
       accordance with generally accepted accounting principles),
       excluding gains (or losses) from debt restructuring and sales
       of property, plus depreciation of real estate assets.  FFO
       does not represent cash generated from operating activities in
       accordance with generally accepted accounting principles and
       is not necessarily indicative of cash available to fund cash
       needs and cash distributions.  FFO should not be considered as
       an alternative to net income as an indication of the Company's
       performance or as an alternative to cash flow as a measure of
       liquidity.  In addition, the Company's FFO is not necessarily
       comparable to similar entitled items reported by other REITs. 
       FFO for the 1995 and 1994 periods have been restated to
       reflect the new definition of FFO.


<Page 20>
<TABLE>
<CAPTION>
                                                    Walden Predecessors
                                              --------------------------------
                                              January 1 to       Year Ended
                                               February 8,      December 31,
                                              ------------      ------------
                                                  1994        1993        1992
                                                  ----        ----        ----
<S>                                             <C>         <C>         <C>
OPERATING DATA
   Revenues
     Rental income . . . . . . . . . . . .      $ 3,047     $27,336     $25,668
     Other property income . . . . . . . .          134       1,286       1,089
     Interest income . . . . . . . . . . .           37         124         182
     Property management fees. . . . . . .          150       1,266       1,167
                                                -------     -------     -------
       Total revenues. . . . . . . . . . .        3,368      30,012      28,106
   Expenses
     Property operating and maintenance. .        1,242      11,398      10,813
     Real estate taxes . . . . . . . . . .          226       2,159       2,121
     General and administrative. . . . . .          217       2,263       2,014
     Interest expense. . . . . . . . . . .        1,075      11,456      11,751
     Amortization and financing costs. . .           20       1,417         418
     Depreciation. . . . . . . . . . . . .          633       6,114       6,198
                                                -------     -------     -------
       Total expenses. . . . . . . . . . .        3,413      34,807      33,315
                                                -------     -------     -------
   Net loss (a). . . . . . . . . . . . . .      $   (45)    $(4,795)    $(5,209)
                                                =======     =======     =======
PROPERTY DATA
   Total properties (at end of period) . .           18          18          18
   Total units (at end of period). . . . .        5,895       5,895       5,895
   Total units (weighted average). . . . .        5,895       5,895       5,895
   Weighted average monthly property
     revenue per unit (b). . . . . . . . .      $   421     $   405     $   378
OTHER DATA
  Funds from operations (c). . . . . . . .      $   588     $ 1,370     $ 1,079
  Cash flows provided by (used in):
     Operating activities. . . . . . . . .      $ 1,858     $ 1,698     $ 2,497
     Investing activities. . . . . . . . .      $   --      $   (23)    $   (11)
     Financing activities. . . . . . . . .      $  (311)    $(1,476)    $(2,320)
</TABLE>

<TABLE>
<CAPTION>
                                                          December 31,
                                                        ----------------
                                                        1993        1992
                                                        ----        ----
<S>                                                   <C>         <C>
BALANCE SHEET DATA
  Real estate assets . . . . . . . . . . .            $195,421    $195,421
  Accumulated depreciation and impairment
    allowance. . . . . . . . . . . . . . .             (83,026)    (76,981)
  Total assets . . . . . . . . . . . . . .             121,889     126,495
  Mortgage notes payable . . . . . . . . .             147,322     144,801
  Partners' deficit. . . . . . . . . . . .             (33,610)    (29,256)
</TABLE>
---------------
(a)    Net loss of Walden Predecessors is before income tax benefits and
       extraordinary gains.

(b)    Represents rental income and other property income, divided by
       weighted average units, divided by the number of months.

(c)    Management generally considers FFO to be an appropriate measure of
       the performance of an equity REIT.  FFO is defined as net income
       (loss) (determined in accordance with generally accepted accounting
       principles), excluding gains (or losses) from debt restructuring
       and sales of property, plus depreciation of real estate assets. 
       FFO does not represent cash generated from operating activities in
       accordance with generally accepted accounting principles and is not
       necessarily indicative of cash available to fund cash needs and
       cash distributions.  FFO should not be considered as an alternative
       to net income as an indication of the Company's performance or as
       an alternative to cash flow as a measure of liquidity.   In
       addition, the Company's FFO is not necessarily comparable to
       similar entitled items reported by other REITs.  FFO for the three
       periods presented above have been restated to reflect the new
       definition of FFO.


<Page 22>

Item 7.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations
-------------------------------------------------------------

Overview
--------

     The following discussion should be read in conjunction with
the "Selected Financial Data" and all of the financial statements
and notes thereto included elsewhere in this report. Such financial
statements and information have been prepared to reflect the
consolidated statements of income of the Company for the years
ended December 31, 1996 and 1995 and the period from February 9,
1994 (date of commencement of operations) through December 31,
1994, the balance sheet of the Company as of December 31, 1996 and
1995 and the historical combined operations of the Walden
Predecessors prior to the consummation of the IPO.  (See the Walden
Residential Properties, Inc. Consolidated Financial Statements and
related Notes and the Walden Predecessors Combined Financial
Statements and related Notes included elsewhere in this report.)

     Changes in revenues and expenses related to the Properties
during 1996 and 1995 are primarily the result of property
acquisitions.  Where appropriate, comparisons are made on a
dollars-per-weighted-average-unit basis in order to adjust for
changes in the number of units owned during each period.  The
results of operations of the Company for the period from February
9, 1994 (date of commencement of operations) to December 31, 1994
and the Walden Predecessors for the period from January 1, 1994 to
February 8, 1994 are combined in this discussion to reflect the
results of operations for the year ended December 31, 1994. 
Revenues and most expenses related to the properties owned by the
Walden Predecessors are comparable to those of the Company. 
However, interest, depreciation and amortization, and general and
administrative expenses of the Company are not necessarily
comparable to those same expenses of the Walden Predecessors due,
in large part, to three factors.  The Company's reduced debt level
as a result of the application of the proceeds from the IPO, offset
by increased indebtedness related to properties acquired in 1994,
1995 and 1996, resulted in a decrease in interest expense in 1994
and an increase in interest expense in 1995 and 1996.  Depreciation
and amortization of the Company increased because of property
acquisitions and basis adjustments made to reflect purchase
accounting for assets acquired on February 9, 1994. General and
administrative expenses increased due to costs associated with
public ownership of the Company and property acquisitions.

Results of Operations
---------------------

     Results of Operations for the Company for the Year Ended
December 31, 1996 Compared to the Year Ended December 31, 1995.

     The weighted average number of units owned increased by 3,829
units in 1996, or 26.2%, from 14,601 units in 1995 to 18,430 units
in 1996 as a result of the acquisition of additional properties. 
Total units owned at December 31, 1995 and 1996 were 17,205 and
21,407, respectively.  The portfolio had a weighted average
occupancy of 94.5% for both 1995 and 1996.


<Page 23>

     The Company owned 36 properties with 11,188 apartment units
throughout both calendar years 1996 and 1995.  The operating
performance of these properties is summarized as follows:

<TABLE>
<CAPTION>
                                                              Year Ended
                                                             December 31,
                                                            -------------
                                                            1996     1995   % Change
                                                            ----     ----   --------
<S>                                                       <C>      <C>        <C>
Rental and other property revenue (in thousands). . . . . $63,623  $60,684     4.8%
Property operating expenses (in thousands) (1). . . . . .  27,675   27,239     1.6%
                                                          -------  -------
Property operating income (in thousands). . . . . . . . . $35,948  $33,445     7.5%
                                                          =======  =======
Weighted average physical occupancy . . . . . . . . . . .   94.4%    94.7%      N/A
                                                          =======  =======
Average monthly revenue per unit. . . . . . . . . . . . . $   474  $   452     4.8%
                                                          =======  =======
Average annual operating and maintenance
  expenses per unit . . . . . . . . . . . . . . . . . . . $ 2,007  $ 1,975     1.6%
                                                          =======  =======
Average annual real estate taxes per unit . . . . . . . . $   467  $   460     1.5%
                                                          =======  =======
Operating expense ratio . . . . . . . . . . . . . . . . .   43.5%    44.9%    (3.1%)
                                                          =======  =======
</TABLE>

(1)    Consists of property operating and maintenance and real estate
       tax expenses.

       The operating performance of properties not owned throughout
both calendar years 1996 and 1995 is summarized as follows:

<TABLE>
<CAPTION>
                                                             Year Ended
                                                            December 31,
                                                           -------------
                                                           1996     1995   % Change
                                                           ----     ----   --------
<S>                                                      <C>      <C>        <C>
Rental and other property revenue (in thousands). . . .  $45,852  $20,875    119.7%
Property operating expenses (in thousands) (1). . . . .   19,885    8,846    124.8%
                                                         -------  -------
Property operating income (in thousands). . . . . . . .  $25,967  $12,029    115.9%
                                                         =======  =======
Weighted average number of units  . . . . . . . . . . .    7,242    3,413    112.2%
                                                         =======  =======
Weighted average physical occupancy . . . . . . . . . .    94.7%    93.8%       N/A
  
Average monthly revenue per unit. . . . . . . . . . . .  $   528  $   510      3.5%
                                                         =======  =======
Average annual operating and maintenance
  expenses per unit . . . . . . . . . . . . . . . . . .  $ 2,081  $ 1,948      6.8%
                                                         =======  =======
Average annual real estate taxes per unit . . . . . . .  $   665  $   644      3.3%
                                                         =======  =======
Operating expense ratio . . . . . . . . . . . . . . . .    43.4%    42.4%      2.4%
                                                         =======  =======
</TABLE>

(1)    Consists of property operating and maintenance and real estate
       tax expenses.


<Page 24>

     Interest income increased $577,000 in 1996, or 67.4%, from
$856,000 in 1995 to $1,433,000 in 1996, primarily as the result of
increased cash balances and interest earned on recourse notes
entered into by certain officers and directors of the Company in
December 1995 and January 1996 in connection with the acquisition
of shares of Common Stock by such persons.

     Other income decreased $146,000 in 1996, or 35.7%, from
$409,000 in 1995 to $263,000 in 1996, primarily due to the
reduction in third-party management contracts and an increase in
operating expenses of WDN Management unrelated to third-party
management contracts.  The number of third-party management
contracts decreased from ten at December 31, 1995 to eight at the
end of 1996.

     General and administrative expenses increased $1.3 million in
1996, or 34.5%, from $3.8 million in 1995 to $5.1 million in 1996. 
This represented a per weighted average unit increase of $17, or
6.5%.  The increase in general and administrative expenses was
primarily due to increased occupancy cost due to the relocation of
the Company's corporate office, increased salaries expense and
increased costs associated with the increased number of
stockholders (quarterly mailings to stockholders, transfer
services, NYSE listing fees, etc.).

     Interest expense increased $3.5 million in 1996, or 20.2%,
from $17.1 million in 1995 to $20.6 million in 1996, due to the
increased weighted average indebtedness of approximately $60.9
million associated with the acquisition of properties offset by a
decreased weighted average interest rate in 1996 of approximately
0.5%.

     Depreciation expense increased $4.1 million in 1996, or 25.9%,
from $15.7 million in 1995 to $19.8 million in 1996, due to
depreciation on additional properties acquired and capital
improvements on existing properties.

     The $1.9 million gain on disposition of real property in 1996
related to the sale of three properties: a 384-unit property
located in Wichita, Kansas on April 24, 1996, a 304-unit property
located in Corpus Christi, Texas on August 30, 1996 and a 144-unit
property located in Stone Mountain, Georgia on September 27, 1996. 
The Company received total net sales proceeds from these
dispositions of approximately $22.9 million, which were used to
purchase additional properties.

     The $1.8 million extraordinary loss on debt extinguishment in
1996 resulted from the write-off of unamortized deferred financing
costs and prepayment penalties incurred in connection with the
refinancings of the Company's credit facility in February 1996
($488,000) and December 1996 ($767,000), the refinancing of $22
million of variable rate tax-exempt debt in May 1996 ($96,000), the
repayment of debt on a property sold in September 1996 ($488,000)
and the refinancing of $14.4 million of fixed rate debt on three
properties in October 1996 ($9,000).

     As of July 1, 1996, the Company revised its method of
accounting to capitalize the cost of replacement carpets, on a
prospective basis ($864,000 was capitalized in 1996 which would
have been expensed under the old policy).  The Company believes
that this accounting policy change is preferable because it is
consistent with policies currently being used by the majority of


<Page 25>

the largest publicly traded apartments REITs and provides a better
matching of expenses with the related benefit of the expenditures.

     Results of Operations for the Company for the Year Ended
December 31, 1995 Compared to the Combined Results of Operations
for the Company and the Walden Predecessors for the Year Ended
December 31, 1994.

     The weighted average number of units owned increased by 5,807
units in 1995, or 66.0%, from 8,794 units in 1994 to 14,601 units
in 1995 as a result of the acquisition of additional properties.
Total units owned at December 31, 1994 and 1995 were 12,319 and
17,205, respectively. The portfolio had a weighted average
occupancy of 94.3% and 94.5% for 1994 and 1995, respectively.

     The Company owned 17 properties with 5,596 apartment units
throughout both calendar years 1995 and 1994.  The operating
performance of these properties is summarized as follows:

<TABLE>
<CAPTION>
                                                             Year Ended
                                                            December 31,
                                                           --------------
                                                           1995      1994   % Change
                                                           ----      ----   --------
<S>                                                      <C>       <C>         <C>
Rental and other property revenue (in thousands). . . .  $30,474   $28,419      7.2%
Property operating expenses (in thousands) (1). . . . .   12,858    12,749      0.9%
                                                         -------   -------
Property operating income (in thousands). . . . . . . .  $17,616   $15,670     12.4%
                                                         =======   =======
Weighted average physical occupancy . . . . . . . . . .    94.7%     94.6%       N/A
                                                         =======   =======
Average monthly revenue per unit. . . . . . . . . . . .  $   454   $   423      7.2%
                                                         =======   =======
Average annual operating and maintenance
  expenses per unit . . . . . . . . . . . . . . . . . .  $ 1,908   $ 1,894      0.7%
                                                         =======   =======
Average annual real estate taxes per unit . . . . . . .  $   390   $   384      1.6%
                                                         =======   =======
Operating expense ratio . . . . . . . . . . . . . . . .    42.2%     44.9%     (6.0%)
                                                         =======   =======
</TABLE>

(1)    Consists of property operating and maintenance and real estate
       tax expenses.


<Page 26>

       The operating performance of properties not owned throughout
both calendar years 1995 and 1994 is summarized as follows:

<TABLE>
<CAPTION>
                                                                   Year Ended
                                                                  December 31,
                                                                 --------------
                                                                 1995      1994   % Change
                                                                 ----      ----   --------
<S>                                                            <C>       <C>        <C>
Rental and other property revenue (in thousands). . . . . . .  $51,085   $15,857    222.2%
Property operating expenses (in thousands) (1). . . . . . . .   23,227     7,601    205.6%
                                                               -------   -------
Property operating income (in thousands). . . . . . . . . . .  $27,858   $ 8,256    237.4%
                                                               =======   =======
Weighted average number of units. . . . . . . . . . . . . . .    9,005     3,198    181.6%
                                                               =======   =======
Weighted average physical occupancy . . . . . . . . . . . . .    94.4%     94.1%       N/A
                                                               =======   =======
Average monthly revenue per unit. . . . . . . . . . . . . . .  $   473   $   413     14.5%
                                                               =======   =======
Average annual operating and maintenance
  expenses per unit . . . . . . . . . . . . . . . . . . . . .  $ 2,007   $ 1,955      2.7%
                                                               =======   =======
Average annual real estate taxes per unit . . . . . . . . . .  $   572   $   422     35.5%
                                                               =======   =======
Operating expense ratio . . . . . . . . . . . . . . . . . . .    45.5%     47.9%     (5.0%)
                                                               =======   =======
</TABLE>

(1)    Consists of property operating and maintenance and real estate
       tax expenses.

       Interest income increased $454,000 in 1995, or 112.9%, from
$402,000 in 1994 to $856,000 in 1995 as the result of increased
cash balances, higher short-term interest rates and interest earned
on recourse notes entered into by certain officers of the Company
in connection with the acquisition of shares of Common Stock by
such persons.

       Property management fees and other income combined decreased
$274,000 in 1995, or 40.1%, from $683,000 in 1994 to $409,000 in
1995.  A portion of the decrease resulted from the termination of
four management contracts in December 1994, due to the Company
purchasing the properties, and the non-renewal of two additional
management contracts in August 1995 at the option of the owners. 
The remaining portion of the decrease was attributable to
accounting for WDN Management on the equity accounting method. At
the close of the IPO, WDN Management was formed to continue the fee
management of multifamily properties for third parties. The Walden
Predecessors accounted for property management income on a combined
basis.  This decrease in revenue is partially offset by a decrease
in general and administrative expenses, also as a result of the
differing accounting treatment.

       General and administrative expense increased $1.1 million in
1995, or 40.7%, from $2.7 million in 1994 to $3.8 million in 1995. 
This represents a per weighted average unit decrease of $49 in
1995, or 15.8%. The increase in general and administrative expenses
was primarily due to increased occupancy cost due to the relocation
of the Company's corporate office, increased salaries expense and
increased costs associated with the increased number of
stockholders (quarterly mailings to stockholders, transfer
services, NYSE listing fees, etc.).


<Page 27>

       Interest expense increased $9.7 million in 1995, or 131%, from
$7.4 million in 1994 to $17.1 million in 1995 due to increased
weighted average indebtedness of approximately $113 million
associated with the acquisition of properties and an increased
weighted average interest rate in 1995 of approximately 0.71%.

       Depreciation and amortization and financing costs increased
$7.0 million in 1995, or 72.9%, from $9.6 million in 1994 to $16.6
million in 1995 primarily due to additional depreciation on
properties acquired since the IPO and additional amortization of
deferred loan costs associated with debt incurred in 1995.

       Of the $1.5 million gain on disposition of real property, $1.1
million resulted from the sale of Sterling Pointe Apartments, a
299-unit property located in Greensboro, North Carolina, in April
1995.  The remaining gain of $.4 million resulted from the sale of
Barrington Oaks, a 242-unit property located in Roswell, Georgia,
in December 1995.  The Company received total net sales proceeds
from these dispositions of approximately $23.2 million.

       The $1.4 million extraordinary loss represented prepayment
penalties and deferred loan costs written off upon repayment of
certain of the Company's indebtedness in 1995.

Liquidity and Capital Resources
-------------------------------

       The Company's principal demands for liquidity are
distributions to its stockholders, ongoing maintenance and repair
of its properties, capital improvements to its properties,
acquisitions of properties, interest on indebtedness and debt
repayments.

       In 1996, the Company received a total of $200.6 million in net
equity proceeds from four public offerings, its dividend
reinvestment plan and stock issued to an officer in January 1996. 
In addition, the Company received approximately $22.9 million from
the sale of three properties, of which $4.2 million represented a
mortgage loan assumed by the buyer in connection with the sale of
one property.  These funds were primarily used to purchase 16
properties (5,034 units) with an aggregate purchase price of
approximately $183.0 million, including $4 million for undeveloped
land.  In connection with the acquisition of these 16 properties,
the Company assumed $14.7 million of existing mortgage indebtedness
and funded $3.3 million in rehabilitation costs.

       Cash and cash equivalents increased $22.9 million, or 337%,
from $6.8 million as of December 31, 1995 to $29.7 million as of
December 31, 1996.

       Net cash provided by operating activities increased by $7.0
million in 1996, from $31.3 million in 1995 to $38.3 million in
1996, primarily due to an increase in property operating income
from properties owned throughout both years, as well as property
operating income from properties acquired in 1996.

       Net  cash  used in investing activities was $158.7 million for
the year ended December 31, 1996, primarily due to $168.2 million
of property acquisitions and $9.5 million of capital


<Page 28>

improvements on the properties, offset by $18.7 million of net cash proceeds
from the sale of three properties in 1996. 

       Net cash provided from financing activities was $143.3 million
for the year ended December 31, 1996, primarily due to a $200.6
million of net proceeds from the sale of stock, less net repayments
of mortgage financings and distributions to stockholders.

       The Company intends to meet its short-term liquidity
requirements, including capital expenditures related to maintaining
and improving its Matured Properties, through cash flow provided by
operations. The Company considers its cash provided by operating
activities to be adequate to meet both its operating requirements
and distribution obligations.  The Company has certain loans which
require principal payments on a monthly basis for which cash
provided by operating activities may or may not be sufficient. 
Accordingly, the Company anticipates borrowing under its credit
facility (the "Credit Facility"), as described below, to fund such
payments, if necessary.

       During the year ended December 31, 1996, the Company spent
approximately $9.5 million in capital expenditures and
rehabilitation expenditures on acquisition properties. 
Rehabilitation costs of $5.3 million and capital expenditures on
Matured Properties of $4.2 million were funded from net cash
provided by operating activities.  The Company has budgeted capital
improvements of $19.7 million for 1997 on its Matured Properties
(of which $13.6 million represents non-recurring costs for the
construction of covered carports, the installation of access gates
with perimeter fencing, energy efficient exterior lighting and
water savers and the reconstruction of balconies and exterior
stairwells) and $11.3 million to complete necessary renovations to
properties acquired in 1996, which are anticipated to be funded
from borrowings under the Credit Facility.

       For the year ended December 31, 1996, the Company paid
distributions of $31.2 million to its common and preferred
stockholders and on the convertible equity securities.  On March 3,
1997, the Company paid distributions of $10.9 million to common and
preferred stockholders of record on February 17, 1997.  The
distribution paid to common stockholders was $.4825 per share,
which equates to an annualized distribution of $1.93 per share, a
3.8% increase over the aggregate $1.86 per share distributions paid
in 1996.

       As of December 31, 1996, the Company had outstanding
indebtedness in the aggregate principal amount of $258.9 million,
consisting of fixed rate conventional and tax-exempt debt in the
amount of $207.8 million and variable rate tax-exempt debt of $51.1
million.


<Page 29>

       During the year ended December 31, 1996, the Company
refinanced, repaid or assumed debt as summarized below (in
thousands):

<TABLE>
<CAPTION>
                                Outstanding                                                            Outstanding
                               Indebtedness                                                           Indebtedness
                                   as of           Debt           Debt           Debt     Principal       as of
                                 12/31/95        Proceeds        Assumed        Repaid    Repayment     12/31/96 
                               ------------      --------        -------        ------    ---------   ------------
<S>                              <C>             <C>            <C>           <C>           <C>          <C>
Fixed rate indebtedness          $179,460        $ 37,470       $ 10,553 (1)  $ (14,418)    $(5,242)     $207,823
Variable rate indebtedness         73,055             --             --         (21,970)        --         51,085
Credit Facility                     6,500         129,300            --        (135,800)        --            --
                                 --------        --------       --------       --------     -------      --------
  Total                          $259,015        $166,770       $ 10,553      $(172,188)    $(5,242)     $258,908
                                 ========        ========       ========      =========     =======      ========
</TABLE>

(1)  Represents mortgages assumed by the Company of $14,748 net of
     a $4,195 mortgage loan assumed by the buyer of one property
     sold in 1996.

     The following table sets forth certain information regarding
the outstanding indebtedness as of December 31, 1996:

<TABLE>
<CAPTION>
                               Weighted Average
                            ---------------------    Outstanding    Percentage
                            Interest     Years to     Principal          of
                              Rate       Maturity    Balance (1)       Total
                            --------     --------    -----------    ----------
<S>                           <C>      <C>             <C>            <C>
Conventional fixed rate       8.70%     7.8 Years      $138,003        53.3%
Tax-exempt fixed rate         6.48%    22.2 Years        69,820        27.0%
                                                       --------       ------
  Total fixed rate            7.95%    12.6 Years       207,823        80.3%
                                                       --------       ------
Tax-exempt variable rate      5.78%     1.5 Years        51,085        19.7%
Credit Facility                N/A      2.1 Years           --          0.0%
                                                       --------       ------
  Total variable rate         5.78%     1.5 Years        51,085        19.7%
                                                       --------       ------
     Total                    7.53%    10.4 Years      $258,908       100.0%
                                                       ========       ======
</TABLE>

(1)    In thousands.

     The Company has no outstanding indebtedness that matures
during the next year.  Of the total indebtedness, principal and
balloon payments become due as follows (in thousands):

<TABLE>
<CAPTION>
                                                    Balloon
                                      Principal     Payments        Total
                                      ---------     --------        -----
<S>                                   <C>           <C>            <C>
1997 . . . . . . . . . . . . . . .    $  3,334      $    --        $  3,334
1998 . . . . . . . . . . . . . . .       3,593        51,085         54,678
1999 . . . . . . . . . . . . . . .       3,888           --           3,888
2000 . . . . . . . . . . . . . . .       4,148         7,067         11,215
2001 . . . . . . . . . . . . . . .       4,321         6,636         10,957
Thereafter . . . . . . . . . . . .      59,074       115,762        174,836
                                      --------      --------       --------
  Total. . . . . . . . . . . . . .    $ 78,358      $180,550       $258,908
                                      ========      ========       ========
</TABLE>


<Page 30>

     On December 4, 1996, the Company entered into the new Credit
Facility with The First National Bank of Boston ("Bank of Boston"). 
This Credit Facility provides an unsecured borrowing capacity of up
to $150 million, with borrowings outstanding under the Credit
Facility initially bearing interest at 1.5% over LIBOR.  The Credit
Facility expires in February 1999.  As of March 3, 1997, there were
no outstanding borrowings under the Credit Facility.

     The Credit Facility contains customary representations,
warranties and events of default which require the Company to
comply with certain affirmative and negative covenants.  The
primary restrictive covenants are as follows:  (1) distributions to
stockholders may not exceed 90% of funds from operations, as
defined in the Credit Facility; (2) secured mortgage indebtedness
may not exceed 40% of the Company's total assets before
depreciation; (3) the Company's fixed charge coverage ratio, as
defined, must exceed 1.60; and (4) the Company's debt service
coverage ratio, as defined, must exceed 2.0.  As of December 31,
1996, Management believes it is in compliance with all covenants of
the Credit Facility.

     As of December 31, 1996, 42 of the Company's real estate
assets are collateral for the various debt agreements.

     The Company expects to meet its long-term liquidity
requirements, such as refinancing mortgages and property
acquisitions, including capital improvements on property
acquisitions, through long-term borrowings, both secured and
unsecured, and the issuance of debt or equity securities.

     The Company's ability to acquire additional properties is
dependent upon its ability to obtain equity or debt financing. 
During 1996, the Company was able to raise additional equity and
incur indebtedness to acquire 16 properties.  As of March 3, 1997,
the Company's debt-to-total-market capitalization ratio was
approximately 29%, leaving the Company the ability to borrow funds
to acquire additional properties in the amount of approximately
$369 million and still maintain its 50% debt-to-total-market
capitalization policy.  When the Company finances its acquisitions
with debt, the Company expects that such acquired properties will
generate cash flow adequate to service the associated indebtedness.

Funds from Operations
---------------------

     Management generally considers funds from operations ("FFO") an
appropriate measure of performance of an equity REIT.  FFO is
defined as net income (determined in accordance with generally
accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation of real
estate assets. The Company believes that in order to facilitate a
clear understanding of its operating results, FFO should be
examined in conjunction with net income (loss) as presented in the
audited consolidated or combined financial statements and
information included elsewhere in this report.  FFO does not
represent cash generated from operating activities in accordance
with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs and
cash distributions.  FFO should not be considered as an alternative
to net income (determined in accordance with generally accepted
accounting principles) as an indication of the Company's
performance or as an alternative to cash


<Page 31>

flow (determined in accordance with generally accepted accounting principles)
as a measure of liquidity.  In addition, the Company's FFO is not
necessarily comparable to similar entitled items reported by other
REITs.

     The National Association of Real Estate Investment Trusts
("NAREIT") adopted certain changes to the calculation of FFO during
1995.  The Company has adopted these changes effective January 1,
1996, and the Company has restated below its 1995 calculation of
FFO for comparative purposes.  Under NAREIT's new definition of
FFO, the Company (as well as other REITs using the old definition)
will no longer add back amortization of financing costs.  The
following is a calculation of  FFO under the new definition (in
thousands):

<TABLE>
<CAPTION>
                                                          1996       1995
                                                          ----       ----
<S>                                                     <C>        <C>
Income before extraordinary item. . . . . . . . . .     $19,122    $10,685
Gain on disposition of real property. . . . . . . .      (1,934)    (1,502)
Depreciation of real estate assets. . . . . . . . .      19,810     15,734
                                                        -------    -------
  Funds from Operations . . . . . . . . . . . . . .     $36,998    $24,917
                                                        =======    =======
</TABLE>

       As discussed in Note (3) in the accompanying financial
statements, effective July 1, 1996, the Company revised its method
of accounting to capitalize the cost of replacement carpets on a
prospective basis.  Following is the effect on depreciation, net
income and FFO for such change in accounting policy for the year
ended December 31, 1996:

<TABLE>
<S>                                                               <C>
Adjustment for change in accounting policy to capitalize
  carpet replacement costs (and effect on funds from
  operations). . . . . . . . . . . . . . . . . . . . . . . . .    $  864

Adjustment for effect of depreciation on capitalized carpet
  replacement costs. . . . . . . . . . . . . . . . . . . . . .       (43)
                                                                  ------
Net effect on net income . . . . . . . . . . . . . . . . . . .    $  821
                                                                  ======
</TABLE>

       FFO increased $12.1 million, or 48.5%, from $24.9 million for
the year ended December 31, 1995 to $37.0 million for the year
ended December 31, 1996.  The increase in FFO was primarily
attributable to additional operating income, which resulted from an
increase in the number of units owned as a result of property
acquisitions and increased operating income from properties owned
throughout both periods.

Inflation
---------

     The Company leases apartments under lease terms generally
ranging from six to 12 months. Management believes that such short-term
lease contracts lessen the impact of inflation due to the
ability to adjust rental rates to market levels as leases expire.

New Accounting Standards
------------------------

     None.

Risks Associated with Forward-Looking Statements  Included in this Form 10-K
----------------------------------------------------------------------------

     This Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which are
intended to be covered by the safe harbors created thereby.  These
statements include the plans and objectives of management for
future operations, including plans and objectives relating to
capital expenditures and rehabilitation costs on the Properties. 
The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. 
Assumptions relating to the foregoing involve judgments with 
respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are
beyond the control of the Company.  Although the Company believes
that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be


<Page 32>

inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Form 10-K will prove to be accurate. 
In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.

Item 8.   Financial Statements and Supplementary Data
-----------------------------------------------------

     Financial statements and supplementary financial information
are contained on pages F-1 through F-29 and S-1 through S-3 of this
report.

Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure
----------------------------------------------------------

     None.


<Page 33>
                             PART III

Item 10.    Directors and Executive Officers of the Registrant
--------------------------------------------------------------

     The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934.

Item 11.    Executive Compensation
----------------------------------

     The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934.

Item 12.    Security Ownership of Certain Beneficial Owners and
            Management
---------------------------------------------------------------

     The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934.

Item 13.    Certain Relationships and Related Transactions
----------------------------------------------------------

     The information required by this item is incorporated by
reference from the Company's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934.

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

  (a)  (1)  Financial Statements:

            The financial statements are contained on pages F-1
            through F-29 of this report.

       (2)  Financial Statement Schedules:

            III. Real Estate and Accumulated Depreciation are
                 presented on pages S-1 through S-3 of this
                 report.

            All other schedules have been omitted because the
            required information of such other schedules is not
            present, is not present in amounts sufficient to
            require submission of the schedule or is included
            in the consolidated financial statements.


<Page 34>

       (3)  Index to Exhibits:

            See Index to Exhibits on page E-1.

  (b)  Reports on Form 8-K:

       A Report on Form 8-K dated September 16, 1996 (including
       amendments), was filed with the Securities and Exchange
       Commission on October 1, 1996,  reporting information
       regarding the acquisition of 14 apartment properties,
       consisting of 3,580 units and the disposition of three
       apartment properties, consisting of 832 units.

       A Report on Form 8-K dated December 16, 1996 (including
       amendments), was filed with the Securities and Exchange
       Commission, reporting information regarding the
       acquisition of three apartment properties, consisting of
       1,454 units.

       A Report on Form 8-K dated December 19, 1996, was filed
       with the Securities and Exchange Commission, reporting
       information regarding the incorporation by reference an
       exhibit labeled "Form of Underwriting Agreement" into the
       Company's Registration Statement on Form S-3
       (Registration No. 333-13809).


<Page 35>
                            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.

                           WALDEN RESIDENTIAL PROPERTIES, INC.

                           By:   /s/ Mark S. Dillinger
                                 ---------------------
                                 Mark S. Dillinger
                                 Executive Vice President &
                                 Chief Financial Officer

                           Date: June 23, 1997
                                 ---------------------


<Page F-1>
                  INDEX TO FINANCIAL STATEMENTS

WALDEN RESIDENTIAL PROPERTIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
  Independent Auditors' Report . . . . . . . . . . . . . . .F-2  
  Consolidated Balance Sheets as of December 31, 1996
     and 1995. . . . . . . . . . . . . . . . . . . . . . . .F-3  
  Consolidated Statements of Income for the years ended
     December 31, 1996 and 1995 and the period from
     February 9, 1994 (date of commencement of operations)
     through December 31, 1994 . . . . . . . . . . . . . . .F-4  
  Consolidated Statements of Stockholders' Equity for the
     three year period ended December 31, 1996 . . . . . . .F-5  
  Consolidated Statements of Cash Flows for the years ended 
     December 31, 1996 and 1995 and the period from
     February 9, 1994 (date of commencement of operations)
     through December 31, 1994 . . . . . . . . . . . . . . .F-6  
  Notes to Consolidated Financial Statements . . . . . . . .F-7  

WALDEN PREDECESSORS
COMBINED FINANCIAL STATEMENTS
  Independent Auditors' Report . . . . . . . . . . . . . . . F-25
  Combined Statement of Operations for the period
     January 1, 1994 through February 8, 1994. . . . . . . . F-26
  Combined Statements of Cash Flows for the period
     January 1, 1994 through February 8, 1994. . . . . . . . F-27
  Notes to Combined Financial Statements . . . . . . . . . . F-28



     The following financial statement supplementary schedule of the
Registrant and its subsidiaries required to be included in
Item 14(a)(2) is listed below:

  Schedule III -- Real Estate and Accumulated Depreciation .S-1  


<Page F-2>
                   INDEPENDENT AUDITORS' REPORT

To the Directors and Stockholders of
Walden Residential Properties, Inc.

     We have audited the accompanying consolidated balance sheets
of Walden Residential Properties, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements
of income and cash flows for the years ended December 31, 1996 and
1995 and the period February 9, 1994 (date of commencement of
operations) through December 31, 1994 and stockholders' equity for
each of the three years in the period ended December 31, 1996.  Our
audits also included the financial statement schedule listed in the
Index at Item 14(a)(2).  These financial statements and financial
statement schedule are the responsibility of the management of
Walden Residential Properties, Inc.  Our responsibility is to
express an opinion on these financial statements and financial
statement schedule based on our audits.

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

     In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Walden
Residential Properties, Inc. and subsidiaries at December 31, 1996
and 1995, and the results of their operations and their cash flows
for the years ended December 31, 1996 and 1995 and the period
February 9, 1994 (date of commencement of operations) through
December 31, 1994 and the changes in stockholders' equity for each
of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.  Also, in
our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.

     As discussed in Note 3 to the consolidated financial
statements, the Company changed its method of accounting for the
cost of replacement carpets effective July 1, 1996.

/s/ Deloitte & Touche LLP
-------------------------

DELOITTE & TOUCHE LLP

Dallas, Texas
March 3, 1997


<Page F-3>
               WALDEN RESIDENTIAL PROPERTIES, INC.
                   CONSOLIDATED BALANCE SHEETS
       (Dollars in thousands, except per share information)

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                ----------------
                                                                1996        1995
                                                                ----        ----
<S>                                                          <C>         <C>
                              ASSETS
Real estate assets, at cost
  Land . . . . . . . . . . . . . . . . . . . . . . .         $ 80,914    $ 60,637
  Buildings and improvements . . . . . . . . . . . .          602,601     452,704
                                                             --------    --------
                                                              683,515     513,341
     Less:  Accumulated depreciation . . . . . . . .          (41,707)    (23,734)
                                                             --------    --------
                                                              641,808     489,607
Receivable from and investment in WDN Management . .              --        1,005
Rent and other receivables . . . . . . . . . . . . .            1,324       1,448
Prepaid and other assets . . . . . . . . . . . . . .            3,146       1,353
Deferred financing costs, net. . . . . . . . . . . .            5,827       4,359
Cash and cash equivalents. . . . . . . . . . . . . .           29,720       6,801
Restricted cash:
  Escrow deposits. . . . . . . . . . . . . . . . . .            5,369       4,105
  Additional collateral on loans . . . . . . . . . .            2,520       1,870
                                                             --------    --------
     Total assets. . . . . . . . . . . . . . . . . .         $689,714    $510,548
                                                             ========    ========
               LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Mortgage notes payable . . . . . . . . . . . . . .         $258,908    $252,515
  Credit facility. . . . . . . . . . . . . . . . . .              --        6,500
  Accrued real estate taxes. . . . . . . . . . . . .            7,960       6,522
  Accounts payable . . . . . . . . . . . . . . . . .            5,653       4,815
  Accrued expenses and other liabilities . . . . . .            5,395       4,608
  Preferred distribution payable on convertible
    equity securities. . . . . . . . . . . . . . . .              377         461
                                                             --------    --------
     Total liabilities . . . . . . . . . . . . . . .          278,293     275,421
Commitments and contingencies
Stockholders' equity:
  Convertible equity securities. . . . . . . . . . .           14,886      18,608
  Preferred stock, $.01 par value per share,
    10,000 shares authorized, 5,786 shares issued
    and outstanding as of December 31, 1996 and no
    shares issued as of December 31, 1995 (aggregate
    liquidation value of $144,650) . . . . . . . . .               58         --
  Common stock, $.01 par value per share,
    50,000 shares authorized, 16,880 shares issued
    and outstanding as of December 31, 1996 and
    14,190 shares issued and outstanding as of
    December 31, 1995. . . . . . . . . . . . . . . .              169         142
  Excess stock, $.01 par value per share,
    60,000 shares authorized, no shares issued . . .              --          --
  Additional paid in capital . . . . . . . . . . . .          432,974     238,899
  Officer and director notes for stock purchases . .           (5,263)     (4,971)
  Distributions in excess of net income. . . . . . .          (31,403)    (17,551)
                                                             --------    --------
     Total stockholders' equity. . . . . . . . . . .          411,421     235,127
                                                             --------    --------
       Total liabilities and stockholders' equity. .         $689,714    $510,548
                                                             ========    ========
</TABLE>

          See Notes to Consolidated Financial Statements.


<Page F-4>

               WALDEN RESIDENTIAL PROPERTIES, INC.
                CONSOLIDATED STATEMENTS OF INCOME
       (Dollars in thousands, except per share information)

<TABLE>
<CAPTION>
                                                                     For the Period
                                            For the Year Ended      February 9, 1994
                                               December 31,         (Commencement of
                                            ------------------     Operations) through
                                            1996          1995      December 31, 1994
                                            ----          ----     -------------------
<S>                                       <C>           <C>             <C>
REVENUES
  Rental income. . . . . . . . . . . . .  $105,602      $ 78,469        $ 39,602
  Other property income. . . . . . . . .     3,873         3,090           1,493
  Interest income. . . . . . . . . . . .     1,433           856             365
  Other income . . . . . . . . . . . . .       263           409             533
                                          --------      --------        --------
     Total revenues. . . . . . . . . . .   111,171        82,824          41,993
EXPENSES
  Property operating and maintenance . .    37,521        28,748          15,607
  Real estate taxes. . . . . . . . . . .    10,039         7,337           3,275
  General and administrative . . . . . .     5,124         3,811           2,507
  Interest . . . . . . . . . . . . . . .    20,573        17,111           6,288
  Amortization . . . . . . . . . . . . .       916           900             371
  Depreciation . . . . . . . . . . . . .    19,810        15,734           8,589
                                          --------      --------        --------
     Total expenses. . . . . . . . . . .    93,983        73,641          36,637
                                          --------      --------        --------
Operating income . . . . . . . . . . . .    17,188         9,183           5,356
  Gain on disposition of real property .     1,934         1,502             --
                                          --------      --------        --------
Income before extraordinary item            19,122        10,685           5,356
  Extraordinary loss on debt
    extinguishment . . . . . . . . . . .    (1,848)       (1,352)            --
                                          --------      --------        --------
Net income . . . . . . . . . . . . . . .    17,274         9,333           5,356
  Preferred distributions. . . . . . . .    (4,092)         (922)            --
Net income available to common
  stockholders . . . . . . . . . . . . .  $ 13,182      $  8,411        $  5,356
                                          ========      ========        ========
Income per share:
  Before extraordinary item, less
    preferred distributions. . . . . . .  $   1.02      $    .80        $    .62
  Extraordinary loss on debt
    extinguishment . . . . . . . . . . .      (.12)         (.11)            --
                                          --------      --------        --------
  Net income available to common
    stockholders . . . . . . . . . . . .  $    .90      $    .69        $    .62
                                          ========      ========        ========
Weighted average number of common stock
  and common stock equivalent shares
  outstanding. . . . . . . . . . . . . .    14,720        12,155           8,689
                                          ========      ========        ========
</TABLE>

         See Notes to Consolidated Financial Statements.


<Page F-5>

                            WALDEN RESIDENTIAL PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                      (In thousands)

<TABLE>
<CAPTION>
                                           Convertible                                           Additional
                                             Equity     Preferred Stock        Common Stock       Paid In
                                           Securities  Shares   Par Value   Shares   Par Value    Capital
                                           ----------  ------   ---------   ------   ---------   ----------
<S>                                        <C>         <C>        <C>       <C>        <C>        <C>     
Balance, January 1, 1994 . . . . . . . . . $   --        --       $ --           1     $ --       $      1
 Public offerings, net of offering costs
   and reduction for carryover basis . . .               --         --       9,886        99       163,727
 Officers' stock purchase. . . . . . . . .                                     183         2         3,818 
 Distributions . . . . . . . . . . . . . .                                                                 
 Net income. . . . . . . . . . . . . . . .                                                               
                                           -------     -----      -----     ------     -----      --------
Balance, December 31, 1994 . . . . . . . .     --        --         --      10,070       101       167,546
 Stock and convertible equity securities
   issued to purchase real estate assets .  18,608                             216         2         4,205
 Public offering, net of offering costs. .                                   3,500        35        60,138
 Stock issued under the dividend
   reinvestment plan . . . . . . . . . . .                                     404         4         7,037
 Repurchases of the Company's
   common stock. . . . . . . . . . . . . .                                                               
 Officers'/Directors' stock purchase . . .                                                             (27)
 Distributions . . . . . . . . . . . . . .                                                                
 Net income. . . . . . . . . . . . . . . .                                                                
                                           -------     -----      -----     ------     -----      --------
Balance, December 31, 1995 . . . . . . . .  18,608       --         --      14,190       142       238,899
 Repurchases of the Company's
   common stock. . . . . . . . . . . . . .                                                               
 Officers'/Directors' stock purchase . . .                                      19       --            (22)
 Retirement of common stock
   repurchased . . . . . . . . . . . . . .                                    (318)       (3)       (6,075)
 Public offerings, net of offering costs .             5,800         58      2,756        28       196,094
 Conversion of preferred stock to
   common stock. . . . . . . . . . . . . .               (14)       --          16       --   
 Stock issued under the dividend
   reinvestment plan . . . . . . . . . . .                                     217         2         4,331
 Repurchase of convertible equity
   securities. . . . . . . . . . . . . . .  (3,722)                                                   (253)
 Distributions . . . . . . . . . . . . . .                                                                
 Net income. . . . . . . . . . . . . . . .                                                                
                                           -------     -----      -----     ------     -----      --------
Balance, December 31, 1996                 $14,886     5,786      $  58     16,880     $ 169      $432,974 
                                           =======     =====      =====     ======     =====      ======== 
</TABLE>
<TABLE>
<CAPTION>
                                                   Officer/Director              Distributions
                                                   Notes for Stock     Stock     in Excess of
                                                      Purchases     Repurchases   Net Income
                                                   ---------------  -----------  -------------
<S>                                                   <C>             <C>           <C>
Balance, January 1, 1994 . . . . . . . . .            $   --          $   --        $    -- 
   Public offerings, net of offering
     costs and reduction for carryover
     basis . . . . . . . . . . . . . . . .            
   Officers' stock purchase. . . . . . . .             (3,438)
   Distributions . . . . . . . . . . . . .                                            (9,298)
   Net income. . . . . . . . . . . . . . .                                             5,356
                                                      -------         -------       --------
Balance, December 31, 1994 . . . . . . . .             (3,438)            --          (3,942)
   Stock and convertible equity securities
     issued to purchase real estate
     assets. . . . . . . . . . . . . . . .
   Public offering, net of offering costs.
   Stock issued under the dividend
     reinvestment plan . . . . . . . . . .
   Repurchases of the Company's common
     stock . . . . . . . . . . . . . . . .                             (2,038)
   Officers'/Directors' stock purchase . .             (1,533)          2,038
   Distributions . . . . . . . . . . . . .                                           (22,942)
   Net income. . . . . . . . . . . . . . .                                             9,333
                                                      -------         -------       --------
Balance, December 31, 1995 . . . . . . . .             (4,971)            --         (17,551)
   Repurchases of the Company's common
     stock . . . . . . . . . . . . . . . .                             (6,462)
   Officers'/Directors' stock purchase . .               (292)            387
   Retirement of common stock repurchased.                              6,075
   Public offerings, net of offering 
     costs . . . . . . . . . . . . . . . .
   Conversion of preferred stock to 
     common stock. . . . . . . . . . . . .
   Stock issued under the dividend
     reinvestment plan . . . . . . . . . .
   Repurchase of convertible equity
     securities. . . . . . . . . . . . . .
   Distributions . . . . . . . . . . . . .                                           (31,126)
   Net income. . . . . . . . . . . . . . .                                            17,274
                                                      -------          -------      --------
Balance, December 31, 1996 . . . . . . . .            $(5,263)         $   --       $(31,403)
                                                      =======          =======      ========
</TABLE>
                          See Notes to Consolidated Financial Statements.


<Page F-6>
                     WALDEN RESIDENTIAL PROPERTIES, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                        For the Period
                                             For the Year Ended        February 9, 1994
                                                December 31,           (Commencement of
                                             ------------------      Operations) through
                                             1996          1995       December 31, 1994
                                             ----          ----      -------------------
<S>                                       <C>           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income . . . . . . . . . . . .      $ 17,274      $  9,333          $  5,356
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
     Depreciation and amortization .        20,726        16,634             8,960
     Gain on disposition of real
       property. . . . . . . . . . .        (1,934)       (1,502)              --
     Extraordinary loss on debt
       extinguishment. . . . . . . .         1,848         1,352               --
     Net effect of changes in
       operating accounts:
       Escrow deposits . . . . . . .        (1,299)         (850)           (3,255)
       Other assets. . . . . . . . .          (784)          203            (3,872)
       Accrued real estate taxes . .         1,438         3,521             3,001
       Accounts payable. . . . . . .           492         1,352             2,936
       Other liabilities . . . . . .           520         1,274             3,294
                                          --------      --------          --------
          Net cash provided by
            operating activities . .        38,281        31,317            16,420
                                          --------      --------          --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of real estate
    assets, net of noncash
    items shown below. . . . . . . . .    (168,219)     (103,631)         (251,513)
  Real estate asset additions. . . . .      (9,455)       (6,451)           (4,601)
  Proceeds from disposition of real
    property, net of noncash items
    shown below. . . . . . . . . . . .      18,667        23,156               --
  Purchase of WDN Management net
    assets, net of noncash item
    shown below. . . . . . . . . . . .         339           --                --
                                          --------      --------          --------
     Net cash used in investing
       activities. . . . . . . . . . .    (158,668)      (86,926)         (256,114)
                                          --------      --------          --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from stock issuance,
    net of issuance costs. . . . . . .     200,614        67,723           170,768
  Purchase of the Company's
    common stock . . . . . . . . . . .      (6,573)       (1,928)              --
  Purchase of convertible equity
    securities . . . . . . . . . . . .      (3,975)          --                --   
  Distributions paid . . . . . . . . .     (31,210)      (22,481)           (9,298)
  Proceeds from mortgage notes payable
    and credit facility. . . . . . . .     166,770       152,471           108,704
  Payment of mortgage notes payable
    and credit facility. . . . . . . .    (172,188)     (130,753)          (22,550)
  Principal reductions of debt . . . .      (5,242)       (1,197)             (504)
  Payment of financing costs . . . . .      (4,143)       (3,751)           (2,317)
  Prepayment penalties on debt
    extinguishment . . . . . . . . . .         (97)         (914)              --
  Additional collateral on loans . . .        (650)       (1,049)             (821)
                                          --------      --------          --------
     Net cash provided by financing
       activities. . . . . . . . . . .     143,306        58,121           243,982
                                          --------      --------          --------
NET INCREASE IN CASH AND CASH
  EQUIVALENTS. . . . . . . . . . . . .      22,919         2,512             4,288

CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD. . . . . . . . . . . . . .       6,801         4,289                 1
                                          --------      --------          --------
CASH AND CASH EQUIVALENTS, END OF
  PERIOD . . . . . . . . . . . . . . .    $ 29,720      $  6,801          $  4,289
                                          ========      ========          ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
  Cash paid for interest . . . . . . .    $ 20,706      $ 16,916          $  5,222
                                          ========      ========          ========
SUPPLEMENTAL DISCLOSURE OF NONCASH
  INVESTING AND FINANCING ACTIVITIES:
  Items related to purchase of assets:
     Mortgage notes assumed. . . . . .    $ 14,748      $ 73,055          $ 79,789
                                          ========      ========          ========
     Securities issued for purchase
       of assets . . . . . . . . . . .    $    --       $ 22,825          $    137
                                          ========      ========          ========
     Basis adjustment attributable to
       restricted shares . . . . . . .    $    --       $    --           $  6,697
                                          ========      ========          ========
  Accrued real estate asset
    additions. . . . . . . . . . . . .    $    517      $    416          $    --
                                          ========      ========          ========
  Purchase of WDN Management net
    assets . . . . . . . . . . . . . .    $    354      $    --           $    --
                                          ========      ========          ========
  Mortgage note assumed by buyer upon
    disposition of property. . . . . .    $  4,195      $    --           $    --
                                          ========      ========          ========
  Notes receivable for officers' and
    directors' stock purchases . . . .    $    292      $  1,533          $  3,438
                                          ========      ========          ========
  Preferred distribution payable on
    convertible equity securities. . .    $    377      $    461          $    --
                                          ========      ========          ========
</TABLE>

               See Notes to Consolidated Financial Statements.


<Page F-7>

(1)  Organization
-----------------

     Walden Residential Properties, Inc. (the "Company") was formed
on September 29, 1993 as a Maryland corporation to continue the
multifamily operations of The Walden Group, Inc. (collectively with
its subsidiaries and predecessors "Walden").  The Company was
capitalized on September 29, 1993 upon the sale of 1,000 shares of
common stock for $1,000 to Don R. Daseke, the sole director and
executive officer of Walden, which amount represented the only
asset of the Company as of December 31, 1993.  On February 9, 1994
(date of commencement of operations), the Company completed an
initial public offering ("IPO") of its common stock, which is
listed on the New York Stock Exchange.

     The Company is a self-administered and self-managed equity
real estate investment trust ("REIT") as defined under the Internal
Revenue Code of 1986, as amended.  As of December 31, 1996, the
Company owned 68 multifamily properties, containing 21,407
apartment units, primarily in the Southwest and Southeast regions
of the United States.

(2)  Basis of Presentation and Summary of Significant Accounting Policies
-------------------------------------------------------------------------

     Principles of Consolidation
     ---------------------------

     The accompanying consolidated financial statements include the
accounts of the Company, eight wholly-owned subsidiaries (three of
which were formed in 1996 and one of which was merged into the
Company on December 31, 1996), eight wholly-owned limited
partnerships (one of which was formed in 1996) and a limited
partnership which  owns 13 multifamily  properties in which  the
Company  has  a  controlling  interest (see Note 10).  The Company
had no operations for the period September 29, 1993 through
February 8, 1994.  All material intercompany transactions and
account balances have been eliminated in consolidation.

     Income Recognition
     ------------------

     Rental, interest and other income are recorded on the accrual
method of accounting as earned.

     Rental Operations
     -----------------

     As of December 31, 1996, the Company owned 68 multifamily
properties in nine states; with 53% of its apartment units located
in Texas and 43% located in Florida, Oklahoma, Arizona, Tennessee
and Utah.  Of the total units owned, 7,402 units, or 35%, are
located in the Dallas/Fort Worth area in 18 different submarkets. 
Apartment units are leased to residents on terms of one year or
less, with monthly payments due in advance.  Certain of the
properties are subject to Federal, state and local statutes  or
other restrictions requiring that a percentage of apartments be
made available to lower or moderate income families.  In
management's opinion, due to the


<Page F-8>

number of residents, the type and diversity of markets in which
the properties operate and the collection terms, there is no
concentration of credit risk.

     Cash and Cash Equivalents
     -------------------------

     All cash and investments in money market accounts, excluding
restricted cash, that have a maturity of three months or less at
the time of purchase are considered to be cash and cash
equivalents.

     Restricted Cash
     ---------------

     Restricted cash consists of two major components: (1) security
deposits and escrow deposits held by lenders for the payment of
property taxes, insurance and replacement reserves, and (2)
additional collateral on mortgage notes payable. Restricted cash
related to security and escrow deposits is invested primarily in
short-term securities.  Restricted cash related to additional
collateral on mortgage notes is invested in long-term government
securities.  The additional collateral is not available for general
operating purposes.

     Real Estate Assets and Depreciation
     -----------------------------------

     Expenditures directly related to the acquisition and
improvement of real estate assets are capitalized at cost as land,
buildings and improvements. The Company capitalizes the cost of
appliances, exterior painting, roof replacement and expenditures
for other major property improvements, as well as rehabilitation
costs incurred for properties acquired.  Effective July 1, 1996,
the Company revised its method of accounting to capitalize the cost
of replacement carpets on a prospective basis (see Note 3).

     Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets which range from 14 to
30 years for buildings and five, ten or 15 years for personal
property. 

     The Company's management routinely reviews its investments for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  Based
on the Company's policy for reviewing impairment of long-lived
assets (reviewing expected future cash flows of its properties),
there was no adjustment necessary for impairment of properties
during the three year period ended December 31, 1996.

     Deferred Financing Costs and Amortization
     -----------------------------------------

     Legal fees and other costs associated with obtaining financing
have been capitalized and are amortized over the terms of the
related debt.  Financing costs were reported net of amortization of
$632,000 and $732,000 as of December 31, 1996 and 1995,
respectively.


<Page F-8>

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

     The Company elected to be taxed as a REIT for Federal income
tax purposes as provided under the Internal Revenue Code of 1986,
as amended, effective with its taxable year ending December 31,
1994. As a result, the Company generally will not be subject to
Federal income taxation if it distributes 95% of its REIT taxable
income to its stockholders and satisfies certain other
requirements.  The Company qualified as a REIT for its taxable
years ended December 31, 1995 and 1994 and anticipates that its
method of operations will enable it to continue to satisfy the
requirements for such qualification.

     Stock-based Compensation
     ------------------------

     The Company has elected not to recognize compensation expense
as calculated under Statement of Financial Accounting Standards No.
123 ("SFAS No. 123"), but rather will continue recognizing expense
as prescribed by APB Opinion No. 25.  Disclosure of amounts
required by SFAS No. 123 are included in Note 9.

     Net Income Per Share of Common Stock
     ------------------------------------

     Net income per share of common stock has been computed by
dividing net income available to common stockholders by the
weighted average number of common stock and common stock equivalent
shares outstanding.  Net income available to common stockholders is
net income less the preferred distributions on the Company's
preferred stock and convertible equity securities (see Note 10). 
Common stock equivalents  include the weighted average number of
assumed equivalent shares outstanding from stock options if
dilutive. Fully diluted net income per share of common stock is not
materially dilutive and is not presented.

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

     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
certain assets, liabilities, revenues and expenses as of and for
the reporting periods.  Actual results  may differ from such
estimates.

     Environmental Remediation Costs
     -------------------------------

     The Company accrues for losses associated with environmental
remediation obligations when such losses are probable and
reasonably estimatable.  Accruals for estimated losses from
environmental remediation obligations generally are recognized no
later than completion of the remediation feasibility study.  Such
accruals are adjusted as further information develops or
circumstances change.  Recoveries of environmental remediation
costs from other parties are recorded as assets when their receipt
is deemed probable.  The Company's management is not


<Page F-10>

aware of any environmental remediation obligations which would
materially affect the operations, financial position or cash flows
of the Company.

     Reclassifications
     -----------------

     Certain previously reported amounts have been reclassified to
conform to current financial statement presentation.

(3)  Change in Accounting Policy
--------------------------------

     Effective July 1, 1996, the Company revised its method of
accounting to capitalize the cost of replacement carpets on a
prospective basis  ($864,000 capitalized in 1996 which would have
been expensed under the old policy, which represents $.06 per share
of common stock).  The Company believes that this accounting policy
change is preferable because it is consistent with policies
currently being used by the majority of the largest publicly traded
apartment REITs and provides a better matching of expenses with the
related benefit of the expenditures.

     Following is pro forma information as if the revised
capitalization policy was in effect as of February 9, 1994 (the
date the Company's operations commenced):

<TABLE>
<CAPTION>
                                                         Year Ended
                                                        December 31,       For the Period
                                                     -----------------  February 9, 1994 to
                                                     1996         1995   December 31, 1994
                                                     ----         ----  -------------------
<S>                                                <C>          <C>           <C>
Income before extraordinary item as reported. . .  $19,122      $10,685       $ 5,356
Add:  Adjustment for change in accounting policy
  to capitalize carpet replacement costs. . . . .      264          875           518
                                                   -------      -------       -------
Income before extraordinary item as adjusted. . .  $19,386      $11,560       $ 5,874
                                                   =======      =======       =======
Net income as adjusted. . . . . . . . . . . . . .  $17,538      $10,208       $ 5,874
                                                   =======      =======       =======
Net income available to common stockholders
  as adjusted . . . . . . . . . . . . . . . . . .  $13,446      $ 9,286       $ 5,874
                                                   =======      =======       =======
Income per share:
  Before extraordinary item, less preferred
    distributions as reported . . . . . . . . . .  $  1.02      $   .80       $   .62
  Adjustment for effect of change in accounting
    policy. . . . . . . . . . . . . . . . . . . .      .02          .08           .06
                                                   -------      -------       -------
  Income before extraordinary item, less
    preferred distributions as adjusted . . . . .  $  1.04      $   .88       $   .68
                                                   =======      =======       =======
  Net income available to common stockholders
    as reported . . . . . . . . . . . . . . . . .  $   .90      $   .69       $   .62
  Adjustment for effect of change in accounting
    policy. . . . . . . . . . . . . . . . . . . .      .02          .08           .06
                                                   -------      -------       -------
  Net income available to common stockholders
    as adjusted . . . . . . . . . . . . . . . . .  $   .92      $   .77       $   .68
                                                   =======      =======       =======
</TABLE>


<Page F-11>

(4)    Acquisitions and Dispositions
------------------------------------

     Acquisitions
     ------------

     During 1996 the Company acquired 16 apartment properties
containing 5,034 units (or 1,631 weighted average units) for a cost
of $179.0 million.  In addition, in connection with one property
acquired in December 1996, the Company acquired approximately 81
acres of adjacent undeveloped land for $4 million.  During 1995,
the Company acquired 17 multifamily properties containing 5,427
units (or 2,505 weighted average units) for a cost of $199.5
million.  The properties acquired in 1996 and 1995 are located in
the states of Texas, Oklahoma, Florida, New Mexico, Colorado,
Georgia, Arizona and Tennessee.

     The acquisitions are accounted for by the purchase method of
accounting, and the accompanying consolidated financial statements
reflect the results of operations of the acquired properties since
the date of purchase.

     On January 8, 1997, the Company acquired a 208-unit apartment
property located in Arlington, Texas, for approximately $5.7
million.  The acquisition was funded from proceeds of a December
public equity offering.  This property is being operated in
combination with an adjacent property acquired by the Company in
September 1996 so that the Company still owns a total of 68
properties.

     Dispositions
     ------------

     During 1996 the Company disposed of three multifamily
properties: a 384-unit property located in Wichita Kansas, on April
24, 1996; a 304-unit property located in Corpus Christi, Texas, on
August 30, 1996; and a 144-unit property located in Stone Mountain,
Georgia, on September 27, 1996.  During 1995 the Company disposed
of two multifamily properties:  a 299-unit property, located in
Greensboro, North Carolina, on April 7, 1995 and a 242-unit
property, located in Roswell, Georgia, on December 28, 1995.  In
connection with these dispositions, the Company reported gains in
the amount of $1,934,000 and $1,502,000 for the year ended December
31, 1996 and 1995, respectively.

     Pro Forma Information (Unaudited)
     ---------------------------------

     The following unaudited condensed pro forma information for
the two years ended December 31, 1996 was prepared from the
financial statements of the Company by adjusting for the effect of
all public offerings and all property dispositions and acquisitions
in 1996 and 1995, including debt used to finance acquisitions or
repaid from proceeds of dispositions, as if all of these
transactions had occurred on January 1, 1995.  The pro forma
results do not include gains on property dispositions or
extraordinary losses on early extinguishment of debt.  The
following information is not necessarily indicative of what the
performance would have been had the


<Page F-12>

Company owned these properties for the entire period, nor does it
purport to represent future results of operations of the Company.
(In thousands, except per share information.)

<TABLE>
<CAPTION>
                                                        Pro Forma
                                                     -----------------
                                                        Year Ended
                                                        December 31,
                                                     -----------------
                                                     1996         1995
                                                     ----         ----
<S>                                               <C>          <C>
Revenues . . . . . . . . . . . . . . . . . . .    $129,448     $123,711
Expenses . . . . . . . . . . . . . . . . . . .     105,774      104,181
                                                  --------     --------
Net income . . . . . . . . . . . . . . . . . .      23,674       19,530
Preferred distributions. . . . . . . . . . . .     (15,001)     (15,206)
                                                  --------     --------
Net income available to common stockholders. .    $  8,673     $  4,324
                                                  ========     ========
Net income available to common stockholders
  per share. . . . . . . . . . . . . . . . . .    $    .51     $    .26
                                                  ========     ========
Weighted average shares of common stock
  outstanding. . . . . . . . . . . . . . . . .      16,880       16,681
                                                  ========     ========
</TABLE>

(5)    Real Estate Assets
-------------------------

     Changes  in  real  estate assets  and related  accumulated
depreciation for the years ended December 31, 1996 and 1995 are as
follows (in thousands):

<TABLE>
<S>                                                                 <C>
Real estate assets:
  Balance at January 1, 1995 . . . . . . . . . . . . . . . . .      $329,206
  Purchase of real estate assets . . . . . . . . . . . . . . .       199,511
  Sale of real estate assets . . . . . . . . . . . . . . . . .       (22,243)
  Fixed asset additions. . . . . . . . . . . . . . . . . . . .         6,867
                                                                    --------
     Balance at December 31, 1995. . . . . . . . . . . . . . .       513,341
  Purchase of real estate assets . . . . . . . . . . . . . . .       182,967
  Sale of real estate assets . . . . . . . . . . . . . . . . .       (22,765)
  Fixed asset additions. . . . . . . . . . . . . . . . . . . .         9,972
                                                                    --------
     Balance at December 31, 1996. . . . . . . . . . . . . . .      $683,515
                                                                    ========
Accumulated depreciation:
  Balance at January 1, 1995 . . . . . . . . . . . . . . . . .      $  8,589
  Depreciation expense . . . . . . . . . . . . . . . . . . . .        15,734
  Write off related to real estate assets sold . . . . . . . .          (589)
                                                                    --------
     Balance at December 31, 1995. . . . . . . . . . . . . . .        23,734
  Depreciation expense . . . . . . . . . . . . . . . . . . . .        19,810
  Write off related to real estate assets sold . . . . . . . .        (1,837) 
                                                                    --------
     Balance at December 31, 1996. . . . . . . . . . . . . . .      $ 41,707
                                                                    ========
</TABLE>

(6)    WDN Management Company
-----------------------------

     For the period February 9, 1994 through December 31, 1996, the
Company owned 5% of the voting common stock and 100% of the non-voting
common stock (which represented 95%


<Page F-13>

of the economic interest) of WDN Management Company ("WDN
Management"). The remaining 95% of the voting common stock (which
represented a 5% economic interest) was owned by the Company's four
executive officers.  For this period, the results of operations of
WDN Management were accounted for on the equity method.  On
December 31, 1996, the Company purchased the additional 5% economic
interest in WDN Management from the four executive officers for
$15,000 which represents the four executive officers' original cost
of the shares.  At such time, WDN Management and its wholly-owned
subsidiary were merged into the Company and WDN Management was
dissolved.  Following  is a summary of the net assets of WDN
Management purchased by the Company (in thousands):

<TABLE>
<S>                                                                   <C>
Prepaid and other assets . . . . . . . . . . . . . . . . . . .        $1,022
Accounts receivable. . . . . . . . . . . . . . . . . . . . . .            48
Amortizable assets . . . . . . . . . . . . . . . . . . . . . .             8
Accounts payable . . . . . . . . . . . . . . . . . . . . . . .            58
Accrued expenses and other liabilities . . . . . . . . . . . .          (267)
Note payable to the Company. . . . . . . . . . . . . . . . . .          (923)*
Stockholder's equity . . . . . . . . . . . . . . . . . . . . .          (300)*
                                                                      ------
  Net noncash assets purchased . . . . . . . . . . . . . . . .          (354)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           354
                                                                      ------
                                                                      $    0
                                                                      ======
</TABLE>

* Amounts were eliminated with the Company's Receivable from and
  Investment in WDN Management balance as of December 31, 1996.

     Employee Benefit Plan
     ---------------------

     Effective October 1, 1995, WDN Management adopted a 401(k)
Plan (the "Plan") for its employees and the employees of the
Company.  The Plan is a voluntary defined contribution plan. 
Employees are eligible to participate in the Plan on the earlier of
April 1 or October 1 following the date the employee has completed
one year of service, as defined, with the Company.  Each
participant may make contributions to the Plan by means of a
pre-tax salary deferral in an amount up to 15% of the participant's
annual compensation (not to exceed $9,500 and $9,240 per annum for
1996 and 1995, respectively).  In 1996, WDN Management made an
annual matching contribution on the participant's behalf for
$217,000. This represented up to 6% and 3% of the participant's
annual compensation for the periods from October 1, 1995 through
March 31, 1996 and from April 1, 1996 through September 30, 1996,
respectively.  The Company will match up to 3% of the participant's
annual compensation through March 31, 1997.  The amount relating to
the Company's employees was reimbursed to WDN Management by the
Company.  A participant's salary deferral contribution is 100%
vested and nonforfeitable.  A participant will become vested in the
Company's matching contributions as follows:  20% after three years
of service, 40% after four years, 60% after five years, 80% after
six years and 100% after seven years.


<Page F-14>

(7)    Mortgage Notes Payable and Credit Facility
-------------------------------------------------

     Mortgage notes payable and the Company's credit facility (the
"Credit Facility") consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                 As of December 31, 1996               Principal Balance
                                        ------------------------------------------     as of December 31,
                                        Weighted Average         Weighted Average     --------------------
                                         Interest Rate           Years to Maturity    1996            1995
                                        ----------------         -----------------    ----            ----
<S>                                           <C>                    <C>            <C>            <C>
Conventional Mortgage Notes:

  Mortgage notes payable
     to the Federal National
     Mortgage Association. . . . . . .        8.73%                   7.1 Years     $ 48,343       $ 47,740

  Mortgage notes payable
     to insurance companies. . . . . .        8.69%                   8.4 Years       86,452         90,352

  Mortgage notes - other . . . . . . .        8.50%                   3.6 Years        3,208          3,239
                                              -----                  ----------     --------       --------
                                              8.70%                   7.8 Years      138,003        141,331

Tax-exempt Mortgage Notes:

  Fixed rate . . . . . . . . . . . . .        6.48%                  22.2 Years       69,820         38,129
  Variable rate. . . . . . . . . . . .        5.78%                   1.5 Years       51,085         73,055
                                              -----                  ----------     --------       --------
                                              5.76%                  12.5 Years      120,905        111,184

Credit Facility. . . . . . . . . . . .          --                    2.1 Years          --           6,500
                                              -----                  ----------     --------       --------
  Total/Weighted Average . . . . . . .        7.53%                  10.4 Years     $258,908       $259,015
                                              =====                  ==========     ========
</TABLE>

     As of December 31, 1996, 42 of the Company's 68 properties are
collateral for the various mortgage loans.  Substantially all of
the Company's real estate assets were collateral for the various
mortgage loans as of December 31, 1995.

     Conventional Mortgage Notes Payable
     -----------------------------------

     Conventional mortgage notes  payable include 15 loans
encumbering 30 properties at December 31, 1996 and 31 properties at
December 31, 1995.  These mortgage notes are payable in monthly
installments aggregating approximately $1.2 million, including
principal and interest at various fixed rates ranging from 7.0% to
9.22% per annum.  Scheduled maturities are at  various dates
ranging from August 1, 2000 through December 1, 2005.


<Page F-15>

     Tax-Exempt Mortgage Notes Payable
     ---------------------------------

     At December 31, 1996, 12 of the Company's properties are
encumbered by 11 mortgage notes (as of December 31, 1995, 11
properties were encumbered by ten mortgage notes) which were
financed from the proceeds of tax-exempt bonds and which have
credit enhancements.  Mortgage notes of approximately $69.8 million
are payable in monthly installments of approximately $0.5 million,
including principal and interest at fixed rates ranging from 6.13%
to 6.7% per annum.  These mortgage notes have scheduled maturities
ranging from October 1, 2005 through September 1, 2028.  The
remaining mortgage notes have variable interest rates, are payable
in monthly installments of interest only and have a weighted
average interest rate of 5.78% as of December 31, 1996.  The bonds
underlying these mortgage notes are scheduled to mature on May 1,
2024, while the credit enhancements mature on June 30, 1998.  The
Company has guaranteed $6.4 million and $2.7 million of the
tax-exempt mortgage notes as of December 31, 1996 and 1995,
respectively.

     Credit Facility
     ---------------

     The Company obtained a $50 million Credit Facility from The
First National Bank of Boston ("Bank of Boston") on February 9,
1994 in conjunction with the IPO.  In September 1995, the Company,
at its option, reduced the Credit Facility, which was principally
used for working capital, property acquisitions and renovations of
property acquisitions, to $25 million.  The Credit Facility was
scheduled to expire on February 8, 1996.  The interest rate was
based on LIBOR (which was 5.94% as of December 31, 1995) plus
2.25%.  As of December 31, 1995, the Credit Facility was secured by
six properties and had a balance of $6.5 million.

     On February 8, 1996, the Company entered into a new Credit
Facility with Bank of Boston.  This Credit Facility provided
financing up to $75 million.  At the Company's election, the
interest rate on borrowings was at a floating rate equal to either
(i) 1% over the lender's base rate, or (ii) 1.60% to 1.75% over
LIBOR.

     On December 4, 1996, the Company entered into a second new
Credit Facility with Bank of Boston.  This Credit Facility provides
an unsecured borrowing capacity of up to $150 million, with
borrowings outstanding under the Credit Facility initially bearing
interest at 1.5% over LIBOR.  The new Credit Facility expires in
February 1999.

     On December 31, 1996, the outstanding balance of the Credit
Facility was repaid, of which $24.7 million was used from the net
proceeds of 1,076,000 shares of common stock sold on December 24,
1996.  Had the stock offering and debt repayment occurred on
January 1, 1996, the net income available to common stockholders
would have been $14,201,000 (or $0.90 per share of common stock).

     The Credit Facility contains customary representations,
warranties and events of default which require the Company to
comply with certain affirmative and negative covenants.  The


<Page F-16>

primary restrictive covenants are as follows: (1) distributions to
stockholders may not exceed 90% of funds from operations, as
defined in the Credit Facility; (2) secured mortgage indebtedness
may not exceed 40% of the Company's total assets before
depreciation; (3) the Company's fixed charge coverage ratio, as
defined, must exceed 1.60; and (4) the Company's debt service
coverage ratio, as defined, must exceed 2.0.  As of December 31,
1996, the Company's management believes it is in compliance with
all covenants of the Credit Facility.

     Principal Debt Maturities
     -------------------------

     Principal debt maturities, including balloon payments, for the
next five years are as follows (in thousands):

<TABLE>
<S>                                                     <C>
1997. . . . . . . . . . . . . . . . . . . . . . . .     $  3,334
1998. . . . . . . . . . . . . . . . . . . . . . . .       54,678
1999. . . . . . . . . . . . . . . . . . . . . . . .        3,888
2000. . . . . . . . . . . . . . . . . . . . . . . .       11,215
2001. . . . . . . . . . . . . . . . . . . . . . . .       10,957
Thereafter. . . . . . . . . . . . . . . . . . . . .      174,836
                                                        --------
  Total . . . . . . . . . . . . . . . . . . . . . .     $258,908
                                                        ========
</TABLE>

     Extraordinary Items
     -------------------

     During 1996, the Company refinanced approximately $36.4
million of mortgage loans and the Credit Facility prior to
maturity, which resulted in an aggregate extraordinary loss of $1.8
million.  During 1995, the Company refinanced $73.3 million of
mortgage loans prior to maturity, which resulted in an aggregate
extraordinary loss of $1.4 million.  These losses represented
prepayment fees and unamortized financing costs related to the debt
retired.

(8)    Officer and Director Notes for Stock Purchases
-----------------------------------------------------

     On July 19, 1994, the Company issued 183,000 shares of its
common stock, at $20.875 per share (the closing sales price of the
common stock on the New York Stock Exchange for that date), to its
four executive officers and to seven other officers of the Company.
Each officer acquiring stock paid 10% of the purchase price in
cash, with the remaining 90% loaned by the Company. Each such loan
is evidenced by a note with a five year term, bearing interest at
a fixed rate of 7.25% per annum, payable quarterly, and is secured
by a pledge of the shares of common stock purchased by each officer
pursuant to such loans.  One officer, Don R. Daseke, is personally
liable for the indebtedness evidenced by his note, while the loans
to each of the other officers are non-recourse.

     On December 14, 1995, the Company agreed to issue shares of
common stock at $19.375 per share, the closing sales price of the
common stock on the New York Stock Exchange for that date,  to the
four executive officers, three other officers and four directors. 
On December 20, 1995, the Company agreed to issue 122,600 shares of
its common stock to such officers and


<Page F-17>

directors.  On such date, the closing sales price of the
Company's common stock on the New York Stock Exchange was
$19.50 per share.  Of such shares of common stock, the Company
issued 103,800 on December 28, 1995 and 18,800 on January 18, 1996.
Such shares were issued from common stock repurchased pursuant
to the Company's stock repurchase program (see Note 10).  Each
officer and director acquiring stock paid 20% and 50%, respectively,
of the purchase price in cash with the remaining amount loaned by
the Company.  Each loan is evidenced by a note with a five year
term, bearing interest at a fixed rate of 8% per annum, payable
quarterly, and is secured by a pledge of the shares of common
stock purchased.  In addition, each officer and director
is personally liable for the indebtedness evidenced by the
respective note.

(9)    Stock Option Plan
------------------------

     The Company adopted a stock option plan (the "Plan") in 1994
to provide incentives to officers, key employees and directors.
Stock options granted under the Plan include non-qualified options
and incentive stock options (the "ISOs").  Options granted to
directors  vest over a one-year period.  Options previously granted
to officers and employees vest ratably over a four-year period. 
All options expire ten years from the date of grant. Shares of
common stock reserved for issuance under the Plan are in an amount
equal to 10% of the Company's outstanding shares.  As of December
31, 1996, 1,687,956 shares of common stock were reserved for
issuance under the Plan.  The Plan limits the number of shares of
common stock issuable pursuant to ISOs to 1,000,000.  Following is
a summary of stock option activity for the periods ended December
31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                                     1996       1995       1994
                                                     ----       ----       ----
<S>                                              <C>          <C>        <C>
Options outstanding, beginning of year . .         792,500    521,350        --

     Granted . . . . . . . . . . . . . . .         603,250    286,150    521,350
     Exercised (at $19.25 per share) . . .            (125)    (1,875)       --
     Canceled. . . . . . . . . . . . . . .          (2,875)   (13,125)       --
                                                 ---------    -------    -------
Options outstanding, end of year . . . . .       1,392,750    792,500    521,350
($18.47 - $21.25 per share)                      =========    =======    =======
</TABLE>

     As of December 31, 1996, options for 356,900 shares of common
stock are exercisable at prices ranging from $18.47 to $19.25 per
share.

     On February 5, 1997, the Company granted ISOs for 96,750
shares of common stock to certain officers and other employees and
granted non-qualified options for 150,000 shares of common stock to
its four executive officers, all at an exercise price of $26.00 per
share, which was the closing sales price of the Company's common
stock on that date.

     SFAS No. 123, "Accounting for Stock-Based Compensation," 
requires companies to use recognized option pricing models to
estimate the fair value of stock based compensation, including
stock options.  The Company has elected not to recognize
compensation expense as


<Page F-18>

calculated under SFAS No. 123, but rather will continue recognizing
expense as prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees," as allowed under SFAS No. 123.

     Had compensation expense been determined based on the fair
value at the grant dates for the stock option grants consistent
with the method of SFAS No. 123, the Company's net income and net
income per common share would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                              1996      1995
                                                              ----      ----
<S>                                                         <C>       <C>
Net income available to common stockholders:

     As reported (in thousands). . . . . . . . . .          $13,182   $ 8,411
     Pro forma (in thousands). . . . . . . . . . .          $12,492   $ 8,068

Net income available to common stockholders per share:

     As reported . . . . . . . . . . . . . . . . .          $  0.90   $  0.69
     Pro forma . . . . . . . . . . . . . . . . . .          $  0.85   $  0.66

Stock options issued (in thousands). . . . . . . .              603       286
Weighted average exercise price. . . . . . . . . .          $ 21.16   $ 19.21
Average compensation value of options granted
  per option (1) . . . . . . . . . . . . . . . . .          $  1.14   $  1.20
Compensation cost (in thousands) . . . . . . . . .          $   690   $   343
</TABLE>

(1)  Calculated in accordance with the binomial model, using the
     following assumptions; (i) expected volatility computed using
     the monthly average of the Company's common stock market price
     as listed on the New York Stock Exchange for the period
     February 1994 through July 1996, which market price volatility
     averaged 11.92%; (ii) expected dividend yield ranging from
     8.75% to 9.90%; (iii) expected option term of six years and
     (iv) risk-free rate of return as of the date of grant, which
     ranged from 5.39% to 7.61%, based on extrapolated yield of six
     year U.S. Treasury securities.

(10) Stockholders' Equity
-------------------------

     Convertible Equity Securities
     -----------------------------

     In June 1995, the Company acquired a controlling interest in
a limited partnership (the "Partnership") which currently owns 13
multifamily properties.  This Partnership is being accounted for as
wholly-owned since the limited partnership interests in the
Partnership which were not purchased by the Company are only
exchangeable for shares  of  the  Company's  common  stock  at the
option of  the interest  holders, but no later than June 30, 2018,
and are accounted for as convertible equity securities.  The
limited partnership interests were initially exchangeable for an
aggregate of 1,012,660 shares of the Company's common stock.  In
September 1996, the Company purchased a limited partner's interest
in the Partnership (which was exchangeable for 202,532 shares of
common stock) for $4.0 million.  As a result, as of


<Page F-19>

December 31, 1996, the remaining limited partnership interests
not owned by the Company are exchangeable for an aggregate of
810,128 shares of the Company's common stock.

     The convertible equity securities were valued at $18.375 per
share, which was the market price of the Company's common  stock on
June 30, 1995.  Prior to exchange, the holders of the limited
partnership interests are entitled to receive quarterly
distributions from the Partnership equal to the greater of the
Company's actual distributions per share or $.455 per share on the
number of exchangeable shares of common stock (810,128 shares as of
December 31, 1996).  Distributions of $1,705,000 and $922,000 were
paid to the interest holders for the years ended December 31, 1996
and 1995, respectively.

     Shelf Registrations
     -------------------

     On March 31, 1995, the Company filed a shelf registration
statement for 500,000 shares of common stock issuable pursuant to
a Dividend Reinvestment and Stock Purchase Plan ("DRP").  Such
shares issued under this DRP were at 95% of the average of the high
and low sales price of the Company's common stock on the respective
issue date.  On March 19, 1996, the Company filed another shelf
registration statement for 1,000,000 shares of common stock issued
pursuant to the DRP.  The DRP was revised such that the issue price
of dividend reinvestment purchases is 95% of the closing sales
price on the day preceding the respective issue date.  Effective
December 5, 1996, the DRP was further amended to allow optional
cash purchases of common stock to be acquired at 97% of the closing
market price on the day preceding such purchase.  In addition, the
DRP was revised to allow distributions to preferred stockholders to
be reinvested into common stock on the same terms as distributions
to common stockholders.

     On June 2, 1995, the Company filed a shelf registration
statement for $150,000,000 in shares of common or preferred stock. 
On October 18, 1996, the Company filed another registration
statement for $150,000,000 in shares of common or preferred stock
or stock warrants.  The amount of securities available for issuance
under these registration statements at December 31, 1996 are
$6,032,000 and $23,907,000, respectively.


<Page F-20>

     Public Offerings
     ----------------

     The Company was capitalized on September 29, 1993, upon the
issuance of 1,000 shares of common stock.  Following is a summary
of the Company's public offerings through December 31, 1996:

<TABLE>
<CAPTION>
                                          Date              Issue
Description                              Issued             Price     Shares       Net Proceeds
-----------                              ------             -----     ------       ------------
                                                                  (In thousands)  (In thousands)
<S>                                     <C>                <C>        <C>           <C>
Common Stock:
  IPO. . . . . . . . . . . . .          February 9, 1994   $19.250     8,386 (1)    $143,680 (2)
  Follow-on offerings:
                                        November 7, 1994   $19.250     1,500          26,706
                                        June 23, 1995      $18.375     3,500          60,173
                                        August 27, 1996    $20.625     1,680          32,626 (2)
                                        December 24, 1996  $24.250     1,076 (3)      24,710
                                                                      ------        --------
                                                                      16,142         287,895
                                                                      ------        --------
Preferred Stock/Warrants:
  9.16% Series A Convertible
     Redeemable Preferred
     Stock . . . . . . . . . .          April 26, 1996     $25.000     1,800          43,500
  9.20% Senior Preferred
     Stock and Warrants. . . .          December 27, 1996  $25.000     4,000          95,344
                                                                      ------        --------
                                                                       5,800         138,844
                                                                      ------        --------
Total public offerings . . . .                                        21,942        $426,739
                                                                      ======        ========
</TABLE>

(1)  Includes 645 shares issued to Walden and certain officers of
     Walden (the "Restricted Shares").

(2)  Includes overallotment option exercised.

(3)    Effective January 21, 1997, 161,400 shares of common stock
       were issued pursuant to an overallotment option, resulting in
       net equity proceeds of $3.7 million.

     Preferred Stock and Warrants
     ----------------------------

     On April 26, 1996, the Company sold 1,800,000 shares of a
9.16% Series A Convertible Redeemable Preferred Stock ("Series A")
at $25.00 per share.  On August 14, 1996, 1,707,300 shares of
Series A were exchanged for the same number of shares of a 9.16%
Series B Convertible Redeemable Preferred Stock ("Series B").  Both
Series A and B are convertible into 1.1406 shares of common stock
and are redeemable by the Company on or after April 30, 2006 at
$25.00 per share.  Distributions on both Series A and B are
cumulative and are equal to the greater of (i) $2.29 per annum or
(ii) the distributions on the number of shares of common stock into
which a share of Series A and B is convertible.  On July 1, 1996,
14,000 shares of Series A were converted into 15,968 shares of
common stock.  On January 7, 1997, 17,800 shares of Series B were
converted into 20,302 shares of common stock.


<Page F-21>

     On December 27, 1996, the Company sold 4,000,000 units at
$25.00 per unit.  Each unit represented one share of 9.20% Senior
Preferred Stock and one detachable warrant.  The preferred stock is
not convertible into common stock and is redeemable by the Company
on or after December 31, 2006 at $25.00 per share.  Distributions
on the preferred stock are cumulative.

     A warrant may be exchanged for one-third share of common stock
at an exercise price of $26.875 per share.  The warrants expire on
January 1, 2002.

     The aggregate liquidation preference of the Company's
preferred stock as of December 31, 1996 is $144,650,000.

     Restricted Stock
     ----------------

     On February 6, 1997, the Company adopted a Long-Term Incentive
Plan to attract and retain individuals to serve as directors,
officers and employees of the Company.  On February 12, 1997, the
Company issued 107,500 restricted shares of common stock under this
plan to its four executive officers, directors and certain other
employees of the Company.  The shares issued to the non-employee
directors vest ratably over a three-year period; while the shares
issued to the executive officers and other employees vest over a
ten-year period, with an initial vesting of 40% after the fourth
anniversary and a 10% annual vesting thereafter.

     Other Stock Issuances
     ---------------------

     On April 19, 1995, the Company acquired a multifamily property
for $14 million.  The acquisition was funded by $9.8 million in
financing and the issuance of 215,700 shares of the Company's
common stock at a price of $19.55 per share.

     Pursuant to the DRP, the Company issued 403,973 and 216,867
shares of common stock during 1995 and 1996, respectively.

     As discussed in Note 8, 183,000 shares of common stock were
sold to 11 officers of the Company on July 19, 1994; 103,800 shares
of common stock were sold to seven officers and four directors on
December 28, 1995 and 18,800 shares were sold to one officer on
January 18, 1996.  All of the stock sold was pursuant to an
officer/director stock purchase plan.

     Stock Repurchases
     -----------------

     In December 1995, the Company announced its intention to
repurchase shares of its common stock.  During 1995, the Company
repurchased 103,800 shares of its common stock at a cost of
$2,038,000, of which $110,000 was not paid until January 1996.  All
103,800 shares were reissued to officers and directors on December
28, 1995.  During 1996, the Company repurchased 318,300 shares of
its common stock at a cost of $6,462,000; of which 18,800 shares


<Page F-22>

were reissued on January 18, 1996 pursuant to an officer and
director stock purchase agreement (see Note 8).  The remaining
299,500 shares were retired in 1996.

     Distributions to Common and Preferred Stockholders
     --------------------------------------------------

     For the year ended December 31, 1996, the Company paid
distributions of $27.0 million to its common stockholders (or $1.86
per share of common stock), of which 43.3% represented a return of
capital, 3.7% represented a long-term capital gain and 53.0%
represented ordinary taxable dividend income.  In addition, the
Company paid distributions of $2.4 million on its 9.16% Convertible
Redeemable Preferred Stock (Series A and B) (or $1.335 per share),
of which 6.53% represented a long-term capital gain and 93.47%
represented ordinary taxable dividend income.

     For the year ended December 31, 1995, the Company paid
distributions of $22,020,000 (or $1.82 per share of common stock),
of which 45.75% represented a return of capital, 3.84% represented
a long-term capital gain and 50.41% represented ordinary taxable
dividend income.  For the period February 9, 1994 through December
31, 1994, the Company paid distributions of $9,298,000 (or $1.09
per share of common stock), of which 5% represented a return of
capital and 95% represented ordinary taxable dividend income.

     On March 3, 1997, the Company paid common and preferred
distributions of $10.9 million to stockholders of record on
February 17, 1997.  The common stockholders were paid $.4825 per
share; the 9.16% Convertible Redeemable Preferred Stockholders
(Series A and B) were paid $.5725 per share and the 9.20% Senior
Preferred Stockholders were paid a partial distribution of $.4096
per share.

(11)   Fair Value Disclosure of Financial Instruments
-----------------------------------------------------

     The following disclosure of estimated fair value of financial
instruments was determined by the Company using available market
information and appropriate valuation methodologies.  However,
considerable judgement is necessary to interpret market data and
develop the related estimates of fair value.  Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts that could be realized upon disposition of the financial
instruments.  The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.

     Cash and cash equivalents, receivables (including notes
receivable from officers and directors), accounts payable and
accrued expenses and other liabilities are carried at amounts which
reasonably approximate their fair value.

     The fixed rate mortgage notes payable of $207.8 million as of
December 31, 1996, have a fair value of $211.7 million (excluding
prepayment penalties) as estimated based upon interest rates
available for  the issuance of  debt  with similar terms and
remaining maturities as of December 31, 1996.  Of these mortgage
notes, $178.0 million are not prepayable at December


<Page F-23>

31, 1996.  The remaining notes are subject to prepayment penalties
of $1.9 million at December 31, 1996, which would be required to
retire these notes prior to maturity.  The floating rate mortgage
notes payable balance of $51.1 million at December 31, 1996 reasonably
approximates fair value.

     The fixed rate mortgage notes payable of $179.5 million as of
December 31, 1995, have a fair value of $194.7 million (excluding
prepayment penalties) as estimated based upon interest rates 
available for  the issuance of  debt  with similar terms and
remaining maturities as of December 31, 1995.  Of these mortgage
notes, $150.4 million are not prepayable at December 31, 1995.  The
remaining notes are subject to prepayment penalties of $1.6 million
at December 31, 1995, which would be required to retire these notes
prior to maturity.  The floating rate mortgage notes payable
balance of $79.5 million at December 31, 1995 reasonably
approximates fair value.

     The fair value estimates presented herein are based on
information available to management as of December 31, 1996 and
1995.  Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented herein.

(12)   Commitments and Contingencies
------------------------------------

     The Company is subject to various legal proceedings and claims
that arise in the ordinary course of business. These matters are
generally covered by insurance. While the resolution of these
matters cannot be predicted with certainty, management believes
that the final outcome of such matters will not have a material
adverse effect on the financial position, results of operations or
cash flows of the Company.

     Effective October 1, 1995, the Company entered into a lease
agreement for its corporate office space.  The lease requires
monthly lease payments of $25,000 for a period of sixty months.

     On February 6, 1997, the Company entered into five-year
employment agreements with its four executive officers for which
the aggregate compensation of the four executive officers is
approximately $4.5 million. Under such agreements, the Company is
liable for the compensation benefits for two years of the
agreements if an executive officer were to be terminated without
cause, as defined.

     On January 10, 1997, the Company executed a contract to
acquire seven apartment properties located in Austin, Texas and
Phoenix, Arizona, containing 1,937 units for a total acquisition
cost of approximately $69.5 million.  In connection therewith, the
Company deposited $100,000 of earnest money.  The property
acquisitions are subject to the completion of normal due diligence
procedures and there is no assurance the Company will purchase such
properties.


<Page F-24>

(13)   Quarterly Financial Data (Unaudited)
-------------------------------------------

     Summarized quarterly financial information for the three year
period ended December 31, 1996 is as follows (in thousands, except
per share amounts):

<TABLE>
<CAPTION>
                                                      1996 Quarters Ended
                                     --------------------------------------------------------
                                     March 31      June 30      September 30      December 31      Total
                                     --------      -------      ------------      -----------      -----
<S>                                   <C>          <C>             <C>               <C>         <C>
Revenues . . . . . . . . . . .        $25,275      $25,962         $28,899           $31,035     $111,171
Expenses . . . . . . . . . . .         21,755       22,117          24,136            25,975       93,983
                                      -------      -------         -------           -------     --------
Operating income . . . . . . .          3,520        3,845           4,763             5,060       17,188
Gain on disposition of real
  property . . . . . . . . . .            --         1,272             724               (62)       1,934
Extraordinary loss on debt
  extinguishment . . . . . . .           (488)         (96)           (488)             (776)      (1,848)
Preferred distributions. . . .           (471)        (813)         (1,409)           (1,399)      (4,092)
                                      -------      -------         -------           -------     --------
Net income available to
  common stockholders. . . . .        $ 2,561      $ 4,208         $ 3,590           $ 2,823     $ 13,182
                                      =======      =======         =======           =======     ========
Net income per share:
Before extraordinary item, less
  preferred distributions. . .        $   .21      $   .31         $   .28           $   .23     $   1.02
Extraordinary loss on debt
  extinguishment . . . . . . .           (.03)        (.01)           (.03)             (.05)        (.12)
                                      -------      -------         -------           -------     --------
Net income available to
  common stockholders. . . . .        $   .18      $   .30         $   .25           $   .18     $    .90
                                      =======      =======         =======           =======     ========
</TABLE>

<TABLE>
<CAPTION>
                                                      1995 Quarters Ended
                                    --------------------------------------------------------
                                    March 31      June 30      September 30      December 31      Total
                                    --------      -------      ------------      -----------      -----
<S>                                  <C>          <C>             <C>               <C>          <C>
Revenues . . . . . . . . . . .       $16,729      $17,571         $23,826           $24,698      $82,824
Expenses . . . . . . . . . . .        15,181       15,979          21,035            21,446       73,641
                                     -------      -------         -------           -------      -------
Operating income . . . . . . .         1,548        1,592           2,791             3,252        9,183
Gain on disposition of real
  property . . . . . . . . . .           --         1,110             --                392        1,502
Extraordinary loss on debt
  extinguishment . . . . . . .           --          (465)            --               (887)      (1,352)
Preferred distributions. . . .           --           --             (461)             (461)        (922)
                                     -------      -------         -------           -------      -------
Net income available to
  common stockholders. . . . .       $ 1,548      $ 2,237         $ 2,330           $ 2,296      $ 8,411
                                     =======      =======         =======           =======      =======
Net income per share:
Before extraordinary item, less
  preferred distributions. . .       $   .15      $   .26         $   .17           $   .22      $   .80
Extraordinary loss on debt
  extinguishment . . . . . . .           --          (.04)            --               (.07)        (.11)
                                     -------      -------         -------           -------      -------
Net income available to
  common stockholders. . . . .       $   .15      $   .22         $   .17           $   .15      $   .69
                                     =======      =======         =======           =======      =======
</TABLE>


<Page F-25>
                   INDEPENDENT AUDITORS' REPORT

To the Partners and Stockholders of
Walden Predecessors

     We have audited the accompanying combined statements of
operations and cash flows of Walden Predecessors for the period
January 1, 1994 through February 8, 1994 (date of sale of assets to
Walden Residential Properties, Inc.).  Walden Predecessors consist
of the combination of seventeen individual properties, one limited
partnership and four affiliated operating companies or their
predecessors as described in Note 1, all of which are affiliated
with The Walden Group, Inc., its subsidiaries and predecessors or
with Mr. Don R. Daseke.  These financial statements are the
responsibility of the management of Walden Predecessors.  Our
responsibility is to express an opinion on these financial
statements based on our audit.

     We conducted our audit in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
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 audit
provides a reasonable basis for our opinion.

     In our opinion, such combined financial statements present
fairly, in all material respects, the results of operations and
cash flows of Walden Predecessors for the period January 1, 1994
through February 8, 1994 in conformity with generally accepted
accounting principles.

/s/ Deloitte & Touche LLP
-------------------------

DELOITTE & TOUCHE LLP

Dallas, Texas
March 3, 1995


<Page F-26>
                      WALDEN PREDECESSORS
                COMBINED STATEMENT OF OPERATIONS
              FOR THE PERIOD FROM JANUARY 1, 1994
                    THROUGH FEBRUARY 8, 1994
                         (In thousands)

<TABLE>
<S>                                                                <C>
REVENUES
  Rental income. . . . . . . . . . . . . . . . . . . . . . .       $3,047
  Other property income. . . . . . . . . . . . . . . . . . .          171
  Property management fees (including $68 from affiliates) .          150
                                                                   ------
     Total revenues. . . . . . . . . . . . . . . . . . . . .        3,368
                                                                   ------
EXPENSES
  Property operating and maintenance . . . . . . . . . . . .        1,242
  Real estate taxes. . . . . . . . . . . . . . . . . . . . .          226
  General and administrative . . . . . . . . . . . . . . . .          217
  Interest . . . . . . . . . . . . . . . . . . . . . . . . .        1,075
  Financing costs and amortization . . . . . . . . . . . . .           20
  Depreciation . . . . . . . . . . . . . . . . . . . . . . .          633
                                                                   ------
     Total expenses. . . . . . . . . . . . . . . . . . . . .        3,413
                                                                   ------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . .       $  (45)
                                                                   ======
</TABLE>

           See Notes to Combined Financial Statements.


<Page F-27>
                      WALDEN PREDECESSORS
                COMBINED STATEMENT OF CASH FLOWS
              FOR THE PERIOD FROM JANUARY 1, 1994
                    THROUGH FEBRUARY 8, 1994
                         (In thousands)

<TABLE>
<S>                                                              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . .     $  (45)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
     Depreciation and amortization . . . . . . . . . . . . .        653
     Net effect of changes in operating accounts:
       Escrow deposits . . . . . . . . . . . . . . . . . . .        663
       Other assets. . . . . . . . . . . . . . . . . . . . .        (54)
       Real estate taxes payable . . . . . . . . . . . . . .       (777)
       Accounts payable. . . . . . . . . . . . . . . . . . .      1,840
       Accrued and deferred interest . . . . . . . . . . . .       (432)
       Other liabilities . . . . . . . . . . . . . . . . . .         10
                                                                 ------
          Net cash provided by operating activities               1,858

CASH FLOWS FROM FINANCING ACTIVITIES:
  Additional collateral on loans . . . . . . . . . . . . . .        (56)
  Capital distributions. . . . . . . . . . . . . . . . . . .        (27)
  Principal reductions on mortgage notes . . . . . . . . . .       (228)
                                                                 ------
     Net cash used in financing activities . . . . . . . . .       (311)
                                                                 ------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . .      1,547

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . .      1,171
                                                                 ------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . .     $2,718
                                                                 ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest . . . . . . . . . . . . . . . . . .     $1,507
                                                                 ======
</TABLE>

           See Notes to Combined Financial Statements.


<Page F-28>
                       WALDEN PREDECESSORS
              NOTES TO COMBINED FINANCIAL STATEMENTS
               FOR THE PERIOD FROM JANUARY 1, 1994
                     THROUGH FEBRUARY 8, 1994
                      (Dollars in thousands)

(1)    Organization and Summary of Significant Accounting Policies
------------------------------------------------------------------

     Organization
     ------------

     Walden Predecessors (not a legal entity) consists of the
combination of all of the operations of 17 individual properties,
one limited partnership (which owns one property) and four
operating companies and their predecessors, all of which were sold
to Walden Residential Properties, Inc. on February 9, 1994.  All of
these entities are either affiliated with The Walden Group, Inc. or
Don R. Daseke, its sole director and chief executive officer.

     Principles of Combination
     -------------------------

     The accounts of each of the entities comprising Walden
Predecessors are combined in the financial statements.  All
significant inter-entity transactions have been eliminated in
combination.

     Income Recognition
     ------------------

     Rental, interest and other income are recorded on the accrual
method of accounting as earned.

     Rental Operations
     -----------------

     Walden Predecessors include 18 apartment properties (the
"Properties") located in nine states.  Apartment units are leased
to residents on terms of one year or less, with monthly payments
due in advance.  Certain of the Properties are subject to Federal,
state and local statutes or other restrictions requiring a
percentage of apartments be made available to lower or moderate
income families.  In management's opinion, due to the number of
residents, the type and diversity of markets and submarkets in
which the Properties operate, and the collection terms, there is no
concentration of credit risk.

     Real Estate Assets and Depreciation
     -----------------------------------

     All buildings and improvements are depreciated over their
estimated useful lives of 10 to 30 years using the straight line
method.  Expenditures of the Properties for normal maintenance,
furnishings and equipment are expenses as incurred.

     Equipment, Net
     --------------

     Equipment is reported at cost net of depreciation computed on
the straight line method over 10 years.


<Page F-29>

     Deferred Financing Costs and Amortization
     -----------------------------------------

     Certain of the Properties have incurred legal fees and other
costs associated with obtaining financing.  Such amounts are
capitalized and amortized over the terms of the related debt on the
straight line method which approximates the interest method of
amortization.

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

     No provision for income taxes has been made in the
accompanying combined financial statements for the combined
operations of the Properties since Walden Predecessors is not
responsible for any income taxes.

(2)    Mortgage Notes Payable
-----------------------------

     The majority of the Walden Predecessors' debt is fixed rate
debt with effective interest rates ranging from 0% to 12.5%.  The
weighted average interest rate on the variable rate debt is 2.4%. 
Additional fees on this debt aggregate 0.73%.

(3)    Transactions With Partners and Affiliates
------------------------------------------------

     Walden Predecessors provide management services under 30-day
cancelable contracts for other properties affiliated with The
Walden Group, Inc.  These contracts require fees to be paid to
Walden Predecessors equal to 3.5% to 5% of gross receipts, plus
reimbursement of applicable expenses.  Such management fee income
from affiliates included in property management fees totaled $54
for the period January 1, 1994 through February 8, 1994.

     Walden Predecessors also provide asset management and data
processing services under contract for other properties affiliated
with The Walden Group, Inc.  These contracts require a fixed cost
per unit and fees equal to 1% of gross receipts to be paid to
Walden Predecessors.  Such fee income from affiliates included in
property management fees totaled $14 for the period January 1, 1994
through February 8, 1994.

(4)    Subsequent Events
------------------------

     In February 1994, the Properties were sold to Walden
Residential Properties, Inc. (REIT) for $123.9 million of cash plus
the assumption of approximately $34.2 million of existing
mortgages.  In addition, certain assets and liabilities were
transferred to the REIT in exchange for restricted shares of Common
Stock therein.  Debt not assumed was paid off by the respective
entities and any remaining assets or liabilities (which were
immaterial) of the Walden Predecessors remained with the respective
entities.                            


<Page S-0>


                   WALDEN RESIDENTIAL PROPERTIES, INC.
         SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                        AS OF DECEMBER 31, 1996


<Page S-1a>

                   WALDEN RESIDENTIAL PROPERTIES, INC.
         Schedule III - Real Estate and Accumulated Depreciation
                        As of December 31, 1996
                            (In thousands)

<TABLE>
<CAPTION>
                                                                                                   Costs Capitalized
                                                                                                     Subsequent to
             Description                                   Initial Cost to Company                    Acquisition
----------------------------------------------------------------------------------------------------------------------
                                                                                     Capital
                                                                     Buildings    Improvements             Buildings
Property Name               Location          Encumbrances   Land & Improvements      1996         Land & Improvements
-------------               --------          ------------   ---- --------------  ------------     ---- --------------
<S>                         <C>                 <C>       <C>        <C>           <C>             <C>     <C>
Original Properties
-------------------
Burning Tree                Tulsa, OK           $  2,411  $   635    $  3,475      $   173         $  --   $   346
Casa Verde                  Phoenix, AZ            2,023    1,027       3,586           40            --       197
Cinnamon Stick              Tulsa, OK              3,219      962       5,565           63            --       478
Club at Springlake          Haltom City, TX          --       613       2,648           78            --       105
Country View                San Antonio, TX         (A)       719       5,302          107            --       322
Eagle Pointe                Indianapolis, IN        (A)       494       7,993           90             (4)     188
Fountaingate/Willowcreek    Wichita Falls, TX        --       751       6,498           68            --       404
James Pointe                Murray, UT             8,355    1,040      10,937           69            (28)     107
The Lift                    Tulsa, OK              2,779      804       4,164          192            --       346
Post Oak Place              Euless, TX               --     1,570       6,582          136            --       443
Preston Greens              Dallas, TX               --     1,468       6,687          181            --       333
Raintree                    Nashville, TN          5,315      715       6,457          361            --       696
Settler's Cove              Beaumont, TX           3,208      159       5,056          141            --       325
Stillwater                  Murray, UT            12,191    2,019      16,839          397              3      496
Trestles of Austin          Austin, TX              (A)     1,100       9,977           87            --       271
Woodridge                   Fort Worth, TX           --       340       2,586           29            --       213
Woodstone                   Phoenix, AZ           12,859    4,325      14,342          191            --       321
                                                --------  -------    --------      -------         ------  -------
  Subtotal                                        52,360   18,741     118,694        2,403            (29)   5,591
                                                --------  -------    --------      -------         ------  -------

1994 Acquisitions
-----------------
Bel Shores                  Largo, FL              4,714    1,847       6,072          289            --       529
Brookwood Club              Jacksonville, FL       6,938      952       8,647           92            --       813
Carlyle at Waters           Tampa, FL               (B)     1,678      11,154          578            --       837
Cinnamon Park               Arlington, TX           (A)       855       7,723           23            --        94
Copper Cove                 Houston, TX              --       935       6,194          153            --       313
Copperfield                 Oklahoma City, OK      4,206      357       6,473           11            --       135
Fielder's Glen              Arlington, TX           (A)       556       5,031           89            --       246
Foxboro                     Houston, TX             (A)       800       3,882           54            --       352
The Gables                  McKinney, TX            (A)       544       6,885           43            --       205
Greens Crossing             Dallas, TX              (B)     1,368       6,795           96            --       337
Harper's Creek              Austin, TX              (A)       868       8,871          112            --       230
Hunter's Ridge              Oklahoma City, OK      3,596      300       4,927           20            --       167
Newport                     Irving, TX             7,192    1,200       8,878          104            --       217
Rivercrest                  Arlington, TX          5,461    1,650       7,877          113            --       587
Silverado                   Albuquerque, NM         (B)     1,194       8,082           19            --       162
Springfield                 Mesquite, TX            (A)     1,042       6,507          (33)           --       149
Summerfield Place           Oklahoma City, OK       (A)       619       5,586           20            --       139
Towne Center                Dallas, TX             4,695    1,024       5,651          173            --       352
Woodscape                   Oklahoma City, OK       (A)     1,077      13,280           31            --       306
                                                --------  -------    --------      -------         ------  -------
  Subtotal                                        36,802   18,866     138,515        1,987            --     6,170
                                                --------  -------    --------      -------         ------  -------

<Page S-2a>

1995 Acquisitions
-----------------
Braden's Walk               Bedford, TX              --       542       5,075          317            --       317
Hilltop                     N. Richland Hills, TX    --       801       5,314          256            --       162
Laurel Creek                Houston, TX             (A)     2,067      12,011          135            --       499
Pinnacle                    Lewisville, TX           --       672       4,190           20            --       132
Pinto Creek                 Austin, TX              (A)       487       8,403           44            --       274
Reflections of Highpoint    Dallas, TX            12,490    1,984      12,358           54            --       216
Remington at Ponte Vedra    Ponte Vedra, FL       12,000    1,425      13,468          243            --       502
Remington Hill              Fort Worth, TX        13,880    1,846      11,847           88            --       287
Sandpiper                   Jacksonville, FL        (B)     1,102      10,377          615            --       707
Shadow Creek                N. Richland Hills, TX    --       666       5,899          276            --       278
Summer Meadows              Plano, TX             12,460    2,393      14,908           78            --       344
Summer Villas               Dallas, TX               --     2,270      14,140          119            --       251
Summers Crossing            Plano, TX              9,300    1,730      10,774           21            --       345
Summers Landing             Fort Worth, TX           --       819       5,259           11            --       301
Three Palms                 Tampa, FL               (C)     1,735      14,017          138            --       457
Winridge                    Aurora, CO            12,715      790      15,939           53            --       338
                                                --------  -------    --------      -------         ------  -------
  Subtotal                                        72,845   21,329     163,979        2,468            --     5,410
                                                --------  -------    --------      -------         ------  -------
1996 Acquisitions
-----------------
Ashbury Parke               Austin, TX               --     2,007      11,591          243            --       243
Bentley Green               Jacksonville, FL         --     1,430      14,095          355            --       355
Brandywine                  Nashville, TN            --       646       8,479          463            --       463
Costa del Sol               San Antonio, TX          --       871       6,432          124            --       124
Huntington at Hidden Hills  Jacksonville, FL         --       722       6,165          651            --       651
Meadow Glen                 Phoenix, AZ            7,125    1,802      10,754           18            --        18
Nashboro Village            Nashville, TN            --     6,151      42,837           13            --        13
Oak Forest                  Bedford, TX              --       443       4,366           85            --        85
Quayle Walk                 Arlington, TX            --       731       5,687          105            --       105
Remington                   San Antonio, TX          --       427       4,411          142            --       142
Saratoga                    Melbourne, FL            --       676       5,788           96            --        96
Summer Oaks                 San Antonio, TX          --       826       5,624          159            --       159
Terra Vida                  Mesa, AZ               7,530    1,929      13,383          368            --       368
Timber Creek at Treepoint   Arlington, TX            --       537       4,381          114            --       114
Villas of St. Moritz        San Antonio, TX          --       653       5,544          255            --       255
Waterford on the Meadow     Plano, TX                --     2,156      11,423           91            --        91

  Subtotal                                        14,655   22,007     160,960        3,282            --     3,282
                                                --------  -------    --------      -------         ------  -------
Grand Total                                     $176,662  $80,943    $582,148      $10,140         $  (29) $20,453
                                                ========  =======    ========      =======         ======  =======
</TABLE>


<Page S-3a>

(A)  Property is pledged as collateral under a $58.43 million
     mortgage note payable to an insurance company.

(B)  Property is pledged as collateral under a $23.816 million
     mortgage note payable to an insurance company.

(C)  Property is pledged as additional collateral under the
     mortgage notes secured by Reflections of Highpoint, Remington
     at Ponte Vedra, Remington Hill and Winridge.

(D)  Depreciation is computed on a straight-line basis over the
     estimated useful lives of the related assets which range
     from 14 to 30 years for buildings and 5, 10 or 15 years for
     personal property.

(E)  The aggregate cost for Federal income tax purposes at
     December 31, 1996 is approximately $685.1 million.

<Page S-1b>
<TABLE>
<CAPTION>
                                                        Gross Amount at Which 
             Description                            Carried at December 31, 1996                           
--------------------------------------------------------------------------------------------------------------------------------
                                                           Buildings               Accumulated        Date         Depreciable
Property Name              Location                Land & Improvements     Total   Depreciation      Acquired   Life (Years) (D)
-------------              --------                ---- --------------     -----   ------------      --------   ----------------
<S>                        <C>                  <C>         <C>         <C>          <C>               <C>
Original Properties
-------------------
Burning Tree               Tulsa, OK            $   635     $  3,821    $  4,456     $  (772)          02/94
Casa Verde                 Phoenix, AZ            1,027        3,783       4,810        (586)          02/94
Cinnamon Stick             Tulsa, OK                962        6,043       7,005      (1,231)          02/94
Club at Springlake         Haltom City, TX          613        2,753       3,366        (403)          02/94
Country View               San Antonio, TX          719        5,624       6,343        (930)          02/94
Eagle Pointe               Indianapolis, IN         490        8,181       8,671      (1,036)          02/94
Fountaingate/Willowcreek   Wichita Falls, TX        751        6,902       7,653      (1,041)          02/94
James Pointe               Murray, UT             1,012       11,044      12,056      (1,516)          02/94
The Lift                   Tulsa, OK                804        4,510       5,314        (785)          02/94
Post Oak Place             Euless, TX             1,570        7,025       8,595      (1,053)          02/94
Preston Greens             Dallas, TX             1,468        7,020       8,488      (1,178)          02/94
Raintree                   Nashville, TN            715        7,153       7,868        (993)          02/94
Settler's Cove             Beaumont, TX             159        5,381       5,540        (864)          02/94
Stillwater                 Murray, UT             2,022       17,335      19,357      (2,297)          02/94
Trestles of Austin         Austin, TX             1,100       10,248      11,348      (1,524)          02/94
Woodridge                  Fort Worth, TX           340        2,799       3,139        (431)          02/94
Woodstone                  Phoenix, AZ            4,325       14,663      18,988      (1,921)          02/94
                                                -------     --------    --------   ---------
  Subtotal                                       18,712      124,285     142,997     (18,561)
                                                -------     --------    --------   ---------
1994 Acquisitions
-----------------
Bel Shores                 Largo, FL              1,847        6,601       8,448        (697)          03/94
Brookwood Club             Jacksonville, FL         952        9,460      10,412        (790)          11/94
Carlyle at Waters          Tampa, FL              1,678       11,991      13,669        (862)          12/94
Cinnamon Park              Arlington, TX            855        7,817       8,672        (642)          09/94
Copper Cove                Houston, TX              935        6,507       7,442        (589)          06/94
Copperfield                Oklahoma City, OK        357        6,608       6,965        (601)          06/94
Fielder's Glen             Arlington, TX            556        5,277       5,833        (515)          05/94
Foxboro                    Houston, TX              800        4,234       5,034        (423)          06/94
The Gables                 McKinney, TX             544        7,090       7,634        (680)          05/94
Greens Crossing            Dallas, TX             1,368        7,132       8,500        (539)          12/94
Harper's Creek             Austin, TX               868        9,101       9,969        (797)          06/94
Hunter's Ridge             Oklahoma City, OK        300        5,094       5,394        (472)          06/94
Newport                    Irving, TX             1,200        9,095      10,295        (800)          06/94
Rivercrest                 Arlington, TX          1,650        8,464      10,114        (868)          04/94
Silverado                  Albuquerque, NM        1,194        8,244       9,438        (599)          12/94
Springfield                Mesquite, TX           1,042        6,656       7,698        (598)          06/94
Summerfield Place          Oklahoma City, OK        619        5,725       6,344        (439)          11/94
Towne Center               Dallas, TX             1,024        6,003       7,027        (557)          06/94
Woodscape                  Oklahoma City, OK      1,077       13,586      14,663      (1,216)          06/94
                                                -------     --------    --------    --------
  Subtotal                                       18,866      144,685     163,551     (12,684)
                                                -------     --------    --------    --------

<Page S-2b>

1995 Acquisitions
-----------------
Braden's Walk              Bedford, TX              542        5,392       5,934        (202)          12/95
Hilltop                    N. Richland Hills, TX    801        5,476       6,277        (202)          12/95
Laurel Creek               Houston, TX            2,067       12,510      14,577        (776)          04/95
Pinnacle                   Lewisville, TX           672        4,322       4,994        (230)          06/95
Pinto Creek                Austin, TX               487        8,677       9,164        (605)          01/95
Reflections of Highpoint   Dallas, TX             1,984       12,574      14,558        (662)          06/95
Remington at Ponte Vedra   Ponte Vedra, FL        1,425       13,970      15,395        (736)          06/95
Remington Hill             Fort Worth, TX         1,846       12,134      13,980        (645)          06/95
Sandpiper                  Jacksonville, FL       1,102       11,084      12,186        (499)          10/95
Shadow Creek               N. Richland Hills, TX    666        6,177       6,843        (226)          12/95
Summer Meadows             Plano, TX              2,393       15,252      17,645        (806)          06/95
Summer Villas              Dallas, TX             2,270       14,391      16,661        (750)          06/95
Summers Crossing           Plano, TX              1,730       11,119      12,849        (585)          06/95
Summers Landing            Fort Worth, TX           819        5,560       6,379        (308)          06/95
Three Palms                Tampa, FL              1,735       14,474      16,209        (774)          06/95
Winridge                   Aurora, CO               790       16,277      17,067        (854)          06/95
                                                -------     --------    --------    --------
  Subtotal                                       21,329      169,389     190,718      (8,860)
                                                -------     --------    --------    --------
1996 Acquisitions
-----------------
Ashbury Parke              Austin, TX             2,007       11,834      13,841        (204)          06/96
Bentley Green              Jacksonville, FL       1,430       14,450      15,880        (178)          08/96 & 09/96
Brandywine                 Nashville, TN            646        8,942       9,588        (104)          08/96
Costa del Sol              San Antonio, TX          871        6,556       7,427        (115)          06/96
Huntington at Hidden Hills Jacksonville, FL         722        6,816       7,538         (95)          08/96
Meadow Glen                Phoenix, AZ            1,802       10,772      12,574         (31)          11/96
Nashboro Village           Nashville, TN          6,151       42,850      49,001          (4)          12/96
Oak Forest                 Bedford, TX              443        4,451       4,894         (42)          10/96
Quayle Walk                Arlington, TX            731        5,792       6,523         (58)          09/96
Remington                  San Antonio, TX          427        4,553       4,980         (79)          06/96
Saratoga                   Melbourne, FL            676        5,884       6,560         (67)          09/96
Summer Oaks                San Antonio, TX          826        5,783       6,609        (101)          06/96
Terra Vida                 Mesa, AZ               1,929       13,751      15,680        (269)          06/96
Timber Creek at Treepoint  Arlington, TX            537        4,495       5,032         (46)          09/96
Villas of St. Moritz       San Antonio, TX          653        5,799       6,452        (101)          06/96
Waterford on the Meadow    Plano, TX              2,156       11,514      13,670        (108)          09/96
                                                -------     --------    --------    --------
  Subtotal                                       22,007      164,242     186,249      (1,602)
                                                -------     --------    --------    --------
Grand Total                                     $80,914     $602,601    $683,515    $(41,707)
                                                =======     ========    ========    ========
</TABLE>


<Page S-3b>

(A)  Property is pledged as collateral under a $58.43 million
     mortgage note payable to an insurance company.

(B)  Property is pledged as collateral under a $23.816 million
     mortgage note payable to an insurance company.

(C)  Property is pledged as additional collateral under the
     mortgage notes secured by Reflections of Highpoint, Remington
     at Ponte Vedra, Remington Hill and Winridge.

(D)  Depreciation is computed on a straight-line basis over the
     estimated useful lives of the related assets which range
     from 14 to 30 years for buildings and 5, 10 or 15 years for
     personal property.

(E)  The aggregate cost for Federal income tax purposes at
     December 31, 1996 is approximately $685.1 million.


<Page E-1>

                              EXHIBIT INDEX

         Exhibit No.       Description
         ----------        -----------

            3.1   Articles of Amendment and Restatement of the
                  Company.   (1)

            3.2   Restated Bylaws of the Company.   (1)

            4.1   Specimen of certificate representing shares of
                  Common Stock.   (2)

            4.2   Form of certificate representing shares of 9.16%
                  Series A Convertible Redeemable Preferred Stock. 
                   (6)

            4.3   Form of certificate representing shares of 9.16%
                  Series B Convertible Redeemable Preferred Stock. 
                   (6)

            4.4   Form of certificate representing shares of 9.20%
                  Senior Preferred Stock.   (6)

            4.5   Form of Articles Supplementary relating to 9.20%
                  Senior Preferred Stock.   (6)

            4.6   Specimen of certificate representing shares of
                  9.20% Senior Preferred Stock.   (8)

            4.7   Form of Articles Supplementary designating the
                  rights of the holders of 9.20% Senior Preferred
                  Stock.   (8)

           10.1   Dividend Reinvestment and Stock Purchase Plan. 
                   (3)

           10.2   Promissory Note by and between Crossing &
                  Meadows Partnership, Ltd. and Collin County
                  Housing Finance Corporation ($12,580,000), dated
                  as of February 1, 1996.   (5)

           10.3   Promissory Note by and between Crossing &
                  Meadows Partnership, Ltd. and Collin County
                  Housing Finance Corporation ($9,390,000), dated
                  as of February 1, 1996.   (5)

           10.4   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and America
                  First Arizona REIT, Inc., dated as of April 12,
                  1996 (Laguna Point Apartments).   (5)

           10.5   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and IBEX
                  Costa del Sol Corp., dated as of April 29, 1996
                  (Costa del Sol Apartments).   (5)


<Page E-2>

           10.6   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and IBEX
                  Remington Corp., dated as of April 29, 1996
                  (Remington Apartments).   (5)

           10.7   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and IBEX
                  Summer Oaks Corporation, dated as of April 29,
                  1996 (Summer Oaks Apartments).   (5)

           10.8   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and IBEX St.
                  Moritz Corp., dated as of April 29, 1996 (Villas
                  of St. Moritz Apartments).   (5)

           10.9   Purchase and Sale Agreement by and between
                  Woodwinds, Ltd. and Walden Residential
                  Properties, Inc., dated as of May 1, 1996
                  (Brandywine Apartments).   (7)

          10.10   Real Estate Acquisition Contract and Escrow
                  Instructions by and between Stonegate Lewisville
                  Associates, Ltd. and Walden Residential
                  Properties, Inc., dated as of May 21, 1996
                  (Ashbury Parke Apartments).   (5)

          10.11   Assignment and Assumption Agreement by and among
                  America First Arizona REIT, Inc., Walden AZ
                  Corporation, The Industrial Development
                  Authority of the County of Maricopa and First
                  Bank National Association, dated as of June 4,
                  1996.   (5)

          10.12   Agreement of Sale and Purchase by and between
                  Walden Residential Properties, Inc. and Meadow
                  Glen Limited Partnership, dated as of June 17,
                  1996 (Meadow Glen Apartments).   *

          10.13   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and Florida
                  Raintree I Associates, Ltd., dated as of June
                  26, 1996 (Princeton Meadows II Apartments).  
                  (7)

          10.14   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and Cozumel
                  Associates, Ltd., dated as of June 26, 1996
                  (Cozumel Apartments).   (7)

          10.15   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and TE-TWO
                  Real Estate Limited Partnership, dated as of
                  July 26, 1996 (Princeton Meadows I Apartments). 
                   (7)


<Page E-3>

          10.16   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and Quayle
                  Walk Apartments Partners, dated as of July 29,
                  1996 (Quayle Walk Apartments).   (7)

          10.17   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and Timber
                  Creek Apartments Partners, dated as of July 29,
                  1996 (Timber Creek Apartments).   (7)

          10.18   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc. and
                  Waterford Partners, dated as of July 29, 1996
                  (Waterford on the Meadow Apartments).   (7)

          10.19   Real Estate Sales Contract by and between 1991
                  Treepoint Village Limited Partnership and Walden
                  Residential Properties, Inc., dated as of July
                  29, 1996 (Treepoint Village Apartments).   *

          10.20   First Amendment to the Real Estate Sales
                  Contract by and between 1991 Treepoint Village
                  Limited Partnership and Walden Residential
                  Properties, Inc., dated as of August 8, 1996
                  (Treepoint Village Apartments).   *

          10.21   Purchase and Sale Agreement by and between
                  Walden Residential Properties, Inc., Mark Paskin
                  and Marcia Paskin, dated as of August 14, 1996
                  (Oak Forest Apartments).   (7)

          10.22   First Amendment to the Agreement of Sale and
                  Purchase by and between Walden Residential
                  Properties, Inc. and Meadow Glen Limited
                  Partnership, dated as of September 15, 1996
                  (Meadow Glen Apartments).   *

          10.23   Agreement of Sale and Purchase by and between
                  Nashboro Village Apartments, L.P. and Walden
                  Residential Properties, Inc., dated as of
                  November 15, 1996 (Nashboro Village).   *

          10.24   First Amendment to the Agreement of Sale and
                  Purchase by and between Nashboro Village
                  Apartments, L.P. and Walden Residential
                  Properties, Inc., dated as of November 25, 1996
                  (Nashboro Village).   *


<Page E-4>

          10.25   Revolving Credit Agreement among WDN Properties,
                  Ltd., The First National Bank of Boston, the
                  Other Banks which are a Party to this Agreement,
                  the Other Banks which may become Parties to this
                  Agreement, and The First National Bank of Boston
                  (as Agent), dated as of December 4, 1996.   *

          10.26   Unconditional Guaranty of Payment and
                  Performance among Walden Residential Properties,
                  Inc., Walden Residential Operating Partnership,
                  L.P., WDN Properties, Inc., The First National
                  Bank of Boston, Bank of Montreal (Chicago
                  Branch), Dresdner Bank AG (New York and Grand
                  Cayman Branches), and Signet Bank, dated as of
                  December 4, 1996.   *

          10.27   Second Amendment to the Agreement of Sale and
                  Purchase by and between Nashboro Village
                  Apartments, L.P. and Walden Residential
                  Properties, Inc., dated as of December 13, 1996
                  (Nashboro Village).   *

           11.1   Computation of Net Income per Share.   *

           12.1   Computation of Ratio of Earnings to Combined
                  Fixed Charges and Preferred Stock Dividends.  
                  *

           18.1   Letter regarding a change in accounting
                  principles.   *

           21.1   Schedule of Subsidiaries of the Company.   *

           23.1   Independent Auditors' Consent.   *

           27.1   Financial Data Schedule.   *



*    Filed herewith.

(1)  Previously filed with the Amendment No. 3 to the Company's
     Registration Statement on Form S-11 (Registration No. 33-70132)
     filed with the Securities and Exchange Commission on
     December 23, 1993 and incorporated herein by reference.

(2)  Previously filed with the Company's Registration Statement on
     Form S-3 (Registration No. 33-90438) filed with the Securities
     and Exchange Commission on March 8, 1995 and incorporated
     herein by reference.


<Page E-5>

(3)  Previously filed with the Company's Registration Statement on
     Form S-3 (Registration No. 333-02520) filed with the
     Securities and Exchange Commission on March 19, 1996 and
     incorporated herein by reference.

(4)  Previously filed with the Company's Form 8-K filed with the
     Securities and Exchange Commission on April 23, 1996 and
     incorporated herein by reference.  (Previously numbered
     Exhibit 4.1)

(5)  Previously filed with the Company's Form 10-Q filed with the
     Securities and Exchange Commission on August 7, 1996 and
     herein incorporated by reference.  (Previously numbered
     Exhibits 10.1 through 10.9)

(6)  Previously filed with the Company's Registration Statement on
     Form S-3 (Registration No. 33-13809) filed with the Securities
     and Exchange Commission on October 9, 1996 and herein
     incorporated by reference. 

(7)  Previously filed with the Company's Form 10-Q filed with the
     Securities and Exchange Commission on November 12, 1996 and
     herein incorporated by reference.  (Previously numbered
     Exhibits 10.10 through 10.18)

(8)  Previously filed with the Company's Form 8-A filed with the
     Securities and Exchange Commission on December 20, 1996 and
     herein incorporated by reference.  (Previously numbered
     Exhibit 1.1 and 2.3)