<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-K/A

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                       or
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                       Commission File Number 001-12684
                             COLUMBUS REALTY TRUST
            (Exact Name of Registrant as Specified in its Charter)


             TEXAS
(State or other jurisdiction of                      75-2509086
 incorporation or organization)          (I.R.S. Employer Identification Number)

     15851 DALLAS PARKWAY, SUITE 855
         DALLAS, TEXAS 75248
(Address of Principal Executive Offices)
 
     (Registrant's Telephone Number, Including Area Code): (972) 387-1492

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


        Title of each class:         Name of each exchange on which registered.
        --------------------         ------------------------------------------
    COMMON SHARES OF BENEFICIAL                NEW YORK STOCK EXCHANGE
     INTEREST ,$0.01 PAR VALUE

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

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes    X      No____
                                               --------        

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   X
                              ---

The aggregate market value of the voting stock held by nonaffiliates of the
registrant (based on the closing price of such stock as reported on March 6,
1997 through the New York Stock Exchange) was approximately $255,837,000.  There
were 13,059,882 common shares of beneficial interest, $0.01 par value per share,
outstanding as of March 6, 1997.

                     DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the Registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held May 23, 1997, are incorporated by reference
into Part III Items 10, 11, 12 and 13.

     Exhibit Index begins on Page 28.
<PAGE>
 
                             COLUMBUS REALTY TRUST
                                    Part I


ITEM 1.  BUSINESS


     BACKGROUND.  Columbus Realty Trust (the "Company") is a self-administered
     ----------                                                               
and self-managed real estate investment trust ("REIT") formed on October 12,
1993, pursuant to the Texas Real Estate Investment Trust Act.  On December 29,
1993, the Company completed an initial public offering of 6,898,566 common
shares of beneficial interest (the "Initial Public Offering"), and
simultaneously, a business combination involving entities with varying common
ownership (the "Formation Transactions").  As a result of the Formation
Transactions, the Company acquired twelve multifamily residential properties,
two industrial properties and one retail property (collectively, the "Original
Properties").  The Company also acquired various rights with respect to the
acquisition and development of additional multifamily residential properties and
certain other rights, including the rights of its predecessors under certain
third party management contracts.

     The Original Properties contained an aggregate of 2,356 apartments units,
and approximately 475,000 rentable square feet of industrial and retail
property, located primarily in the Dallas/Fort Worth metropolitan area.  During
the period from the Company's Initial Public Offering through December 31, 1996,
the Company has acquired an additional 1,590 apartment units in six properties,
and has completed construction of an additional 1,464 in eight properties,
increasing the total residential portfolio to 5,410 units as of the end of 1996.

     DEVELOPMENT ACTIVITIES.  During 1996, the Company completed construction of
     ----------------------                                                     
five multifamily residential development properties containing a total of 874
units, continued construction on one additional property consisting of 503
units, commenced construction on four new properties to contain an additional
1,082 units and acquired one development site.  The Company entered into a
redevelopment agreement for a mixed-use multifamily residential and retail
project in Houston, Texas, in February 1997.  As of March 6, 1997, the
development activities completed, under construction, and proposed for
construction (collectively, the "Development Properties") are summarized in the
following chart:

                            DEVELOPMENT PROPERTIES
                            ----------------------
<TABLE>
<CAPTION>
                                                           Estimated Total     Actual or Estimated
          Property           Location      No. of Units  Cost (millions)(1)        Completion
          --------         -----------     ------------  ------------------    -------------------
Completed during 1996                    
---------------------                    
<S>                         <C>             <C>           <C>                   <C>
The Abbey                    Dallas, TX               34           $  4.8            Apr, 1996
Hackberry II                 Dallas, TX              192             11.1            Apr, 1996
The Vineyard                 Dallas, TX              116              8.3            May, 1996
Winsted Village              Dallas, TX              314             18.6            Aug, 1996
Columbus Square              Dallas, TX              218             20.4           Sept, 1996
                                                   -----           ------
                                                     874             63.2
Under construction                                            
------------------                                            
Columbus Shore               Dallas, TX              503             40.5                 1997
Addison Circle One           Dallas, TX              460             32.1                 1997
Columbus Pointe             Jackson, MS              240             11.9                 1997
Cole's Corner                Dallas, TX              186             14.2                 1997
The Rice Hotel              Houston, TX              317             33.3                 1997
The Heights of State                                                                      
   -Thomas                   Dallas, TX              196             16.6                 1998
                                                   -----           ------                 
                                                   1,902            148.6                 
Acquired Sites                                                                            
--------------                                                                            
Block 580 - Uptown           Dallas, TX              346             23.5                   (2)
                                                   -----           ------
Grand Totals                                       3,122           $235.3
                                                   =====           ======
</TABLE>
-----------------
     (1)  Includes land cost which is classified separately in the Company's
          financial statements.
     (2)  Commencement and completion dates of construction have not yet been
          determined.

                                       2
<PAGE>
 
     PROPERTY MANAGEMENT.  The Company manages all of its properties through its
     -------------------                                                        
wholly-owned subsidiary, Columbus Management Services, Inc. ("CMSI"), a Texas
corporation.  CMSI provides or arranges third parties to provide leasing,
marketing, resident and tenant services, property management and maintenance,
courtesy patrols and human resource recruiting, training and development, and
reporting functions.  CMSI performs similar functions for third party owners of
three residential properties, and for four condominium associations, all of
which are located in the Dallas/Fort Worth metropolitan area.

     BUSINESS OBJECTIVES.  The Company's primary business objectives are to: (i)
     -------------------                                                        
maximize the cash flow available for distribution per common share; (ii)
maximize the capital appreciation of its property portfolio through active and
intensive property management; (iii) continue the development of high quality
multifamily residential communities in order to increase the Company's presence
as a developer, owner and operator of properties in the "renter by choice"
multifamily residential rental market in each of the Company's targeted
submarkets; (iv) continue to pursue strategic acquisition of existing
multifamily residential properties located within its submarkets, when the
qualities of such properties are consistent with its ownership criteria, and (v)
hold its income-producing properties for long-term investment.

     INDUSTRY SEGMENTS.  The Company is engaged in a single industry segment --
     -----------------                                                         
the acquisition, ownership, development and management of income producing
properties.  For the Company's fiscal year ended December 31, 1996, 91% of the
Company's consolidated net operating income was attributable to its ownership,
operation and management of residential properties, 4% of its consolidated net
operating income was attributable to its ownership, operation and management of
its industrial properties and 5% of its consolidated net operating income was
attributable to its ownership, operation and management of its retail property.
During 1996, no single residential, industrial, or retail tenant accounted for
more than 10% of the Company's consolidated gross revenue.  Additionally during
1996, no single residential, industrial, or retail property accounted for more
than 10% of the Company's consolidated gross revenue.

     EMPLOYEES.  The Company has approximately 200 employees and officers
     ---------                                                           
involved in the administration and operation of its business and properties.
None of the Company's employees is subject to a collective bargaining agreement
and the Company has experienced no labor-related work stoppages.  The Company
considers its relations with its personnel to be good.

     COMPETITION.  All of the Company's multifamily residential properties are
     -----------                                                              
located in developed areas that include other competitive apartment community
properties, and eight of the residential properties as well as two of the
Development Properties under construction are located within a one-mile radius
in the Uptown District of Dallas.  Other developers have constructed and may
construct additional multifamily residential properties in the Company's markets
which compete with the Company's properties and which may result in increased
competition in certain of the Company's markets.  In addition, the Company
competes with other REITS as well as other real estate owners and developers
with respect to the acquisition of land for development and the acquisition of
existing multifamily properties.  The Company may compete with others that have
greater resources than the Company and whose officers and directors have more
experience than the Company's officers and Trust Managers.  Similar competitive
conditions exist with respect to the industrial and retail properties.  In
addition, single-family housing and other forms of multifamily residential
properties provide housing alternatives to potential tenants of upscale
apartment communities.

     AMERICANS WITH DISABILITIES ACT.  The Properties and any newly acquired or
     -------------------------------                                           
developed properties must comply with Title III of the Americans with
Disabilities Act (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 apartment properties to be public accommodations or commercial
facilities, except to the extent portions of such facilities, such as the
leasing office, are open to the public.  The Company believes that its
properties comply with all present requirements under the ADA and applicable
state laws.  Noncompliance could result in imposition of fines or an award of
damages to private litigants.  If required to make material additional changes,
the Company's results of operations could be adversely affected.

                                       3
<PAGE>
 
     ENVIRONMENTAL MATTERS.  The Company is subject to Federal, state and local
     ---------------------                                                     
environmental regulations that apply to the development of real property,
including construction activities, the ownership of real property, and the
operation of multifamily apartment properties.

     In developing properties and constructing apartments, the Company utilizes
environmental consultants to determine whether there are any flood plains,
wetlands or environmentally sensitive areas that are part of the property to be
developed.  If flood plains are identified, development and construction is
planned so that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with Federal and local flood plain management
requirements.
 
     The Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws
subject the owner of real property to claims or liability for the costs of
removal or remediation of hazardous substances that are disposed of on real
property in amounts that require removal or remediation.  Liability under CERCLA
and applicable state superfund laws can be imposed on the owner of real property
or the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility.  The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect the
owner's ability to sell real estate or borrow money using such real estate as
collateral.  In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.

      The Company obtains an environmental investigation of each property that
it considers for purchase or that it owns and  plans to develop.  If there is
any indication of contamination,  sampling of the property is performed by the
environmental consultant.  The environmental investigation report is reviewed
by the Company and counsel prior to purchase of any property.  If necessary,
remediation of contamination is undertaken prior to development.

     The Company has not been notified by any governmental authority of any
noncompliance, claim, or liability in connection with any of its Properties.
The Company has not been notified of a claim for personal injury or property
damage by a private party in connection with any of the Properties in connection
with environmental conditions.  The Company is not aware of any other
environmental condition with respect to any of its Properties that could be
considered to be material.  With respect to the redevelopment of The Rice Hotel,
substantially all of the remediation required to remove asbestos-containing
materials had been completed  prior to the Company's agreement to a land lease
arrangement with the Houston Housing Finance Corporation ("HHFC") on February
27, 1997.  HHFC has financial responsibility to complete the abatement.

     TAX STATUS.  The Company has made an election to be taxed as a real estate
     ----------                                                                
investment trust under Section 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), commencing with its taxable year ending
December 31, 1993.  If the Company qualifies for taxation as a REIT, the Company
generally will not be subject to federal income tax to the extent it distributes
at least 95% of its REIT taxable income to its shareholders.  If the Company
fails to qualify as a REIT in any taxable year, the Company will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates.  Even if the Company qualifies for
taxation as a REIT, the Company may be subject to certain state and local taxes
on its income and property and to federal income and excise taxes on its
undistributed income.

                                       4
<PAGE>
 
ITEM 2.  PROPERTIES

     As of March 6, 1997, the Company owned 37 total properties: 27 completed
multifamily residential properties (the "Residential Properties"), two
industrial properties, one retail property, six multifamily development sites in
various stages of construction (collectively, the "Properties"), and one
acquired site for future development.  The Properties are owned by the Company
in fee simple, and are encumbered as follows:  twenty-six properties (seventeen
multifamily residential, two industrial, one retail, five projects under
construction, and the development site) are subject to a first lien deed of
trust securing the Credit Facility, nine multifamily properties are subject to a
first lien deed of trust securing a mortgage held by Nationwide Life Insurance
Company ("Nationwide"), one multifamily residential property is subject to a
first lien deed of trust securing a loan from another third party, and one
project currently under construction is encumbered by a development and
construction loan payable to Wells Fargo Realty Advisors.  The Company believes
all of the Properties are adequately insured in accordance with industry
standards and lender requirements.

RESIDENTIAL PROPERTIES

     The Residential Properties as of March 6, 1997, consist of multifamily
communities in the following submarkets, as defined by the Company:
<TABLE>
<CAPTION>
 
      Submarket         Properties  # of Units  % of Total
----------------------  ----------  ----------  -----------
<S>                     <C>         <C>         <C>
Uptown District                  9       1,646        29.6%
White Rock                       2         522         9.4
North Dallas                     5       1,201        21.6
DFW/Las Colinas                  8       1,453        26.1
Jackson, Mississippi             3         742        13.3
                                --       -----       -----
 
                                27       5,564       100.0%
                                ==       =====       =====
</TABLE>

     The Company manages all of the Residential Properties through CMSI.  Eight
of the properties have at least 250 units, with the largest property having a
total of 474 units.  The oldest of the properties was completed in 1983, and the
weighted average age of the portfolio at December 31, 1996, was 6.0 years.  The
economic occupancy (defined in footnote 5 of the table which follows) for the
stabilized properties during 1996 was 95.6%, with an average collected rent per
unit of $735 per month, or $0.868 per square foot.

                                       5
<PAGE>
 
RESIDENTIAL PROPERTY INFORMATION

     The following table presents general information concerning the Residential
Properties:
<TABLE>
<CAPTION>
 
                                          YEAR                           AVG.       CURRENT        1996          1996
                                        COMPLETED    NO.                 UNIT       MARKET        RENT            ECO 
                             LOCATION    OR TO BE    OF      SQ. FT.     SIZE      RENT/UNIT    COLLECTED         OCC 
     PROPERTY                   (1)     COMPLETED    UNITS     (2)     (SQ. FT.)      (3)      PER UNIT(4)        (5)
-----------------------------------------------------------------------------------------------------------------------
<S>                          <C>        <C>          <C>    <C>         <C>        <C>         <C>             <C>
Completed Properties:
The Meridian                  Dallas          1991     132    105,314        798     $1,015        $  948       96.0%
The Worthington               Dallas          1993     332    271,484        818      1,064           977       96.9
The Vintage                   Dallas          1993     160    124,909        781        817           741       96.8
The Rock                      Dallas          1988     208    137,120        659        649           625       95.2
Windhaven Village (6)         Dallas          1991     474    391,190        825        528           462      100.0
Parkway Village Villas        Dallas          1986     136    177,831      1,308      1,101         1,046       96.2
Springstead Condos (7)        Dallas          1983      66     76,236      1,155        891           861       91.4
Reflections on McCallum       Dallas          1986     198    157,786        797        641           623       93.1
Town Lake (9)                 Dallas          1987     238    207,553        872        697           670       94.4
The Parks (9)                 Dallas          1986     160    138,430        865        697           670       94.4
Villas at Valley Ranch (7)    Dallas          1985      54     70,014      1,297      1,175         1,133       95.8
Ascension Point (7)           Dallas          1985      79     73,699        933        801           767       94.3
Ascension Point II            Dallas          1995      86     79,676        926        801           814       89.7
The Trace (10)               Jackson, MS      1989     282    207,266        735        562           548       96.5
The Trace II (10)            Jackson, MS      1995     204    149,212        731        562           548       96.5
The Residences                Dallas          1986     196    146,828        749        952           910       96.4
Lakeshore                     Dallas          1988     404    382,588        947        877           881       94.8
Lakeside Village              Dallas          1986     327    258,727        791        768           739       96.1
Hackberry Creek               Dallas          1988     240    204,384        852        777           714       93.9
Hackberry Creek II (8)        Dallas          1996     192    169,380        882        777           768       95.5
The Mark                     Jackson, MS      1984     256    253,032        988        595           583       94.6
Uptown Village                Dallas          1995     300    229,971        767        799           740       97.1
The Abbey (8)                 Dallas          1996      34     43,384      1,276      1,775         1,604       95.7
The Vineyard (8)              Dallas          1996     116     84,485        728        819           794       93.2
Winsted Village (8)           Dallas          1996     314    228,473        728        677           655       94.6
Columbus Square (8)           Dallas          1996     218    187,722        861      1,038         1,005       94.6
The Commons (11)              Dallas          1985     158    101,977        645        685           N/A        N/A
                                                     -----  ---------      -----     ------        ------      -----
                                                                                                               
Subtotals/Averages-Completed     (27 properties)     5,564  4,658,671        837     $  783        $  735       95.6%
                                                                                                               
Development Properties-under construction:                                                                     
Addison Circle One            Dallas          1997     460    412,340        896        N/A           N/A        N/A
Columbus Shore                Dallas          1997     503    398,998        793        N/A           N/A        N/A
Columbus Pointe              Jackson, MS      1997     240    191,015        796        N/A           N/A        N/A
Cole's Corner                 Dallas          1997     186    148,133        796        N/A           N/A        N/A
The Rice Hotel               Houston          1997     317    318,877      1,006        N/A           N/A        N/A
Heights of State-Thomas       Dallas          1998     196    159,897        816        N/A           N/A        N/A
                                                     -----  ---------      -----     ------        ------      -----
                                                                                                               
Subtotals/Averages-Development   (6 properties)      1,902  1,629,260        857        N/A           N/A        N/A
                                                     -----  ---------      -----     ------        ------      -----
                                                                                                               
Totals/Averages                  (33 properties)     7,466  6,287,931        842        N/A           N/A        N/A
                                                     =====  =========      =====     ======        ======      =====
 
</TABLE>

                                       6
<PAGE>
 
________________
Notes:
(1)  Refers to greater metropolitan area of cities indicated.
(2)  Includes only apartment units; excludes common areas and commercial space.
(3)  Weighted average of monthly rates used for new leases and renewals as of
     March 1, 1997.
(4)  Average monthly rent collected per occupied unit for the year ended
     December 31, 1996.
(5)  Total rent collected divided by gross potential rent for the period,
     expressed as a percentage.  Gross potential rent is defined as the maximum
     rent collectible, based on signed leases for occupied units and market
     rates for vacant units.
(6)  Windhaven Village is subject to a master lease with Electronic Data
     Systems.
(7)  The Company does not own all the units in these properties.  Information is
     provided only with respect to  the units owned by the Company.
(8)  Development Properties completed during 1996 reflect rental income and
     occupancy performance from completion of construction through December 31,
     1996.
(9)  Town Lake and The Parks are operated as one property; rent and occupancy
     numbers reflect combined averages.
(10) The Trace I & II are operated as one property; rent and occupancy numbers
     reflect combined averages.
(11) The Company acquired the 158-unit multifamily residential property known as
     The Commons at Turtle Creek in February 1997 from an unaffiliated third
     party.  Data relating to rent collected per unit and economic occupancy for
     1996 cannot be verified by the Company.

                                       7
<PAGE>
 
INDUSTRIAL PROPERTIES

     The Post and Paddock Service Center ("Post and Paddock") contains 241,400
square feet and is located in the Great Southwest Industrial District in Grand
Prairie, Texas, one of the largest distribution and industrial parks in the
United States.  As of December 31, 1996, Post and Paddock was 98% occupied by 24
tenants paying an average annual base rent equal to approximately $4.35 per
square foot.

     The Campus Office Technology Center ("Campus Circle"), located in the Las
Colinas Business Park in Irving, Texas, contains 65,410 rentable square feet.
As of December 31, 1996, the building was 100% occupied by three tenants, CAE-
Link Corporation, Vanstar Corporation (formerly CLTX, Inc.), and PAS Financial
Group, paying average annual rents equal to approximately $9.39 per square foot.

RETAIL PROPERTY

     The Towne Crossing Shopping Center ("Towne Crossing") is adjacent to Town
East Mall in the community of Mesquite, Texas, approximately 12 miles east of
the Dallas central business district.  Anchor tenants occupying 10% or more of
the total 168,689 square feet of rentable space include a Kroger Food Market,
AMC Theaters, and Accent Craft Mall.

     As of December 31, 1996, Towne Crossing was approximately 99% occupied.
The three anchor tenants occupy approximately 57% of the leasable area at an
average annual rent of approximately $9.92 per square foot.  Twenty-eight local
tenants, including restaurants, a health club, medical professionals, personal
services and specialty shops, occupy approximately 42% of the total leasable
area at an average annual rent of approximately $10.05 per square foot.

INDUSTRIAL AND RETAIL LEASE TERMS

     The Company's industrial and retail leases provide for monthly payments of
base rent in advance and the reimbursement of operating expenses.  With respect
to the industrial properties, operating expenses are passed through to tenants,
subject to expense stops which are usually equal to the actual operating
expenses for the first year of the term of the lease.  With respect to the
retail leases, tenants generally reimburse their pro rata share of all operating
expenses, without regard to an expense stop.  The commercial and retail leases
do not provide for any free rent, nor permit tenants to abate or offset rents.
The Company's liability under the leases is limited to the Company's interest in
the property in which the leased premises are located.  In the event of a
casualty, the Company generally has the right to terminate any lease or to make
repairs within 180 days before the tenant has a right to terminate.

                                       8
<PAGE>
 
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, other than routine litigation
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and none of which are
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company.


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

     None.

                                       9
<PAGE>
 
                                    Part II


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

     The Company's common shares were listed and began trading on the New York
Stock Exchange on December 22, 1993 under the symbol "CLB".  The following table
sets forth the quarterly high and low sales prices per share as reported on the
New York Stock Exchange and the dividends the Company declared and paid for each
quarter during 1995 and 1996:
<TABLE>
<CAPTION>
 
   Quarter Ended       High    Low    Dividend per share
--------------------  ------  ------  ------------------
<S>                   <C>     <C>     <C>
March 31, 1995        18-7/8      16              $0.375
June 30, 1995             20  17-5/8               0.375
September 30, 1995    20-1/8  18-1/8               0.375
December 31, 1995     19-7/8  17-3/4               0.375
 
March 31, 1996        20-3/4  18-7/8               0.375
June 30, 1996         20-1/8  18-1/4               0.395
September 30, 1996    20-3/4  18-3/4               0.395
December 31, 1996     23-1/4  20-3/8               0.395
</TABLE>

     On March 6, 1997, the last reported sales price of the Company's common
shares on the New York Stock Exchange was 20-7/8 per share.  On March 6, 1997,
the Company had 635 shareholders of record.
 
     In order for the Company to maintain its qualification as a REIT, it must
make annual distributions to the shareholders of at least 95% of its taxable
income.  Under certain circumstances, the Company could be required to make
distributions in order to meet such requirement in excess of its cash available
for distribution, but the Company does not expect this to occur in the
foreseeable future.

     The Company presently expects to continue to pay comparable quarterly
dividends in the foreseeable future.  The amount of such dividends will be
determined, based in part, on the Company's net income and funds from
operations, which will be impacted by several variables, including interest
rates and the overall performance of the Properties and the Development
Properties.  In establishing and declaring future dividend payments, the Company
and its Board of Trust Managers will also evaluate, in addition to the Company's
net income and funds from operations, the distribution requirements under the
REIT provisions of the Internal Revenue Code, and any other factors deemed
relevant to such declaration, including general economic conditions.
Additionally, the Credit Facility contains certain covenants which may, in some
circumstances, restrict the Company's ability to distribute cash to its
shareholders.  These covenants include a specific requirement that no more than
90% of funds from operations may be distributed as dividends related to each
calendar year after December 31, 1994.  For the year ended December 31, 1996,
the Company distributed approximately 94% of its cash available for distribution
to its shareholders, such distributions representing 86% of its funds from
operations.

                                       10
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA

    The succeeding three tables set forth the following information: (1)
selected financial and operating information for the Company on a consolidated
historical basis as of and for the years ended December 31, 1996, 1995 and 1994,
on a consolidated pro forma basis for the year ended December 31, 1993, on a
consolidated historical basis as of December 31, 1993, and for the period from
October 12, 1993 (inception) through December 31, 1993, and on a combined
historical basis for the Columbus Group and Texana Group (collectively, the
"Predecessors") and the Company combined as of December 28, 1993, and December
31, 1992, and for each of the years in the two-year period ended December 31,
1993.  The combined historical results of the Columbus Group have been included
with the combined historical results of the Texana Group (and with the Company
for 1993) in the column entitled "Combined Historical" for the periods presented
in order to permit a meaningful comparison with the Company's historical and pro
forma financial information since the Company, on an ongoing basis, includes the
properties of the Predecessors; (2) selected financial and operating information
on a combined historical basis for the Columbus Group as of  December 28, 1993,
and for the period from January 1, 1993, through December 28, 1993, and as of
and for the year ended December 31, 1992, and (3) selected financial and
operating information on a combined historical basis for the Texana Group as of
December 28, 1993, and for the period from January 1, 1993, through December 28,
1993, and as of and for the year ended December 31, 1992.

    The following selected financial data should be read in conjunction with the
discussion set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and all of the financial statements and
notes thereto included elsewhere in this report.

                                       11
<PAGE>
 
                 SELECTED FINANCIAL AND OPERATING INFORMATION
                COLUMBUS REALTY TRUST AND PREDECESSORS COMBINED
            (in thousands, except share and per share information)
<TABLE>
<CAPTION>
 
                                                                      Columbus      Columbus  
                                                                    Realty Trust     Realty             
                                                                    Consolidated     Trust     
                                                                     Pro Forma      October        Columbus Realty Trust 
                                                                     (1) Year       12, 1993              and
                                                                       Ended         through       Predecessors Combined
                                Columbus Realty Trust, Historical    December 31,    December      Historical Year Ended
                                     Year Ended December 31,                           31,             December 31,
                             --------------------------------------------------------------------------------------------
                                 1996          1995         1994        1993          1993        1993 (2)     1992 (2)
                             ------------  ------------  ----------  -----------  -------------  ----------  ------------
<S>                          <C>           <C>           <C>         <C>          <C>            <C>         <C>
OPERATING DATA:
Revenues:
    Rental                    $    45,910   $    39,023  $   28,963   $   19,365     $      182   $ 19,365    $ 16,220
    Property management               298           479         640          453              5        453         482
    Interest and other              2,322         1,749       1,278          905              1        846         882
                              --------------------------------------------------------------------------------------------  
      Total revenues               48,530        41,251      30,881       20,723            188     20,664      17,584
Operating expenses:                                                                                           
    Property operating and         
     maintenance (3)               12,459        10,118       7,526        5,757             20      5,757       4,613     
    General and                     
     administrative (4)             5,979         5,362       4,612        3,410             21      3,183       2,694
    Interest                        7,884         5,596       2,848          825              9      7,795       6,520
    Interest related to               
     amortization             
     of deferred financing                                                                                    
     costs                            393           515         474          428              4        357         102
    Depreciation and               
     amortization                  10,603         9,232       6,660        4,706             48      4,335       3,333
                              --------------------------------------------------------------------------------------------  
Total expenses                     37,318        30,823      22,120       15,126            102     21,427      17,262
Gain on sale of  real                 
 estate                               246             -           -            -              -          -           -
                              ---------------------------------------------------------------------------------------------
Net income (loss) before      
 extraordinary item           $    11,458   $    10,428  $    8,761   $    5,597     $       86   $   (763)   $    322
Net income per common                
 share    (primary and                                                                                        
 fully diluted)                      $.94          $.90        $.89         $.66           $.01          -           -
Dividends per  common share         $1.56         $1.50      $1.502            -              -          -           -
Weighted average number of                                                                                    
 common  shares                                                                                               
 outstanding:                                                                                                 
Primary                        12,099,291    11,536,110   9,832,417    8,500,084      8,500,084          -           -
Fully diluted                  12,142,069    11,556,269   9,845,759    8,500,084      8,500,084          -           -

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

<TABLE> 
<CAPTION> 
 
                                                                                               Predecessors Combined
                                            Columbus Realty Trust                                   Historical 
                                                December 31,                             December 28,       December 31,
                              --------------------------------------------------         -------------------------------
                                  1996          1995        1994         1993             1993 (2)                1992 (2)
                              -----------   -----------  ----------   ----------         --------                --------
<S>                           <C>           <C>           <C>          <C>                <C>                     <C> 
BALANCE SHEET DATA:                                                                 
Real estate, before                                                                 
 accumulated                                                                        
   depreciation               $   399,813   $   335,046  $  267,786   $  158,946         $133,491                $124,249
Total assets                      374,576       320,976     253,370      149,681          122,619                 116,898
Total debt                        179,855       145,492      79,324       28,063          101,836                 104,842
Shareholders'/owners'             180,078       156,827     161,859      115,460           15,417                   6,018
 equity
</TABLE>

                                       12
<PAGE>
 
            SELECTED HISTORICAL FINANCIAL AND OPERATING INFORMATION
                              THE COLUMBUS GROUP
                                (in thousands)

<TABLE>
<CAPTION>
 
                                                 Period Ended    Year Ended
                                                 December 28,    December 31,
                                                    1993            1992
                                                -----------------------------
<S>                                             <C>              <C>
OPERATING DATA:
Revenues:
Rental                                             $11,331        $ 8,103
Property management                                    253            254
Interest and other                                     265            222
                                                   -------        -------
Total revenues                                      11,849          8,579
                                                                  
Operating expenses:                                               
   Property operating and maintenance                3,078          2,000
    (3)                                                           
   General and administrative (4)                    1,896          1,383
   Interest                                          4,960          3,765
   Interest related to amortization  of                201            102
    deferred financing costs                                      
   Depreciation and amortization                     2,776          1,864
                                                   -------        -------
Total expenses                                      12,911          9,114
                                                                  
Net loss                                           $(1,062)       $  (535)
 
----------------------------------------------------------------------------- 
                                                December 28,    December 31,
                                                    1993            1992
                                                -----------------------------
BALANCE SHEET DATA:
Real estate, before accumulated                   
 depreciation                                     $81,996         $73,490       
Total assets                                       75,429          69,741
Total debt                                         67,432          58,177
Owners' equity                                     4,281            7,258
</TABLE>

                                       13
<PAGE>
 
            SELECTED HISTORICAL FINANCIAL AND OPERATING INFORMATION
                               THE TEXANA GROUP
                                (in thousands)


<TABLE>
<CAPTION>
 
                                          Period Ended   Year Ended
                                          December 28,  December 31,
                                              1993          1992
                                          --------------------------
<S>                                       <C>           <C>
OPERATING DATA:
Revenues:
   Rental                                      $ 7,852       $ 8,117
   Property management                             194           228
   Interest and other                              580           660
                                               -------       ------- 
      Total revenues                             8,626         9,005
 
Operating expenses:
   Property operating and maintenance            2,659         2,613
    (3)
   General and administrative (4)                1,266         1,311
   Interest                                      2,826         2,755
   Interest related to amortization  of            152             -
    deferred financing costs
   Depreciation and amortization                 1,511         1,469
                                               -------       -------
Total expenses                                   8,414         8,148
 
Net income before extraordinary item           $   212       $   857
 
--------------------------------------------------------------------
 
                                          December 28,  December 31,
                                              1993          1992
                                          --------------------------
BALANCE SHEET DATA:

Real estate, before accumulated                
 depreciation                                  $51,495       $50,759         
Total assets                                    47,190        47,157
Total debt                                      34,404        46,665
Owners' equity (deficit)                        11,136        (1,240)

</TABLE>

                                       14
<PAGE>
 
NOTES TO SELECTED FINANCIAL DATA:

(1)  Consolidated pro forma statements of operations reflect adjustments
     principally for (i) reduction of mortgage notes payable and related
     interest expense due to debt repayment, (ii) additional expenses associated
     with operating as a public company, (iii) the increase in basis of certain
     real estate assets for the excess of purchase price over historical cost,
     as well as the related increased depreciation, (iv) proceeds from draws
     under the Credit Facility and the related interest expense and (v) the sale
     of common shares and the application of the net proceeds therefrom (after
     deducting underwriting discounts and commissions and estimated offering
     expenses).
(2)  Represents the audited combined historical financial statements of the
     Columbus Group and the Texana Group.  In 1993, the audited consolidated
     financial statements of Columbus Realty Trust are also included.
(3)  Property operating and maintenance includes repairs and maintenance,
     utilities, real estate taxes and other property operating expenses.
(4)  General and administrative includes advertising expenses, corporate general
     and administrative expenses, and property general and administrative
     expenses.

                                       15
<PAGE>
 
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 appearing elsewhere in this
Form 10-K.

     As of December 31, 1996, the Company owned 5,410 completed residential
units in its real estate portfolio, an increase of 868 units or 19% over the
4,542 units held as of December 31, 1995, and an increase of 1,620 units or 43%
over the 3,790 units held as of December 31, 1994.  During the twelve months
ended December 31, 1996, five newly-constructed multifamily residential projects
comprising 874 units were completed and added to the operating portfolio, and
six individual condominium units in one property were sold.  The net growth in
the number of residential apartment units owned and operated by the Company has
had a significant impact upon the Company's operating results, as hereinafter
described.

RESULTS OF OPERATIONS

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------

     The Company's net income increased approximately $1.0 million to
approximately $11.5 million or $0.94 per common share for the year ended
December 31, 1996, compared with net income of approximately $10.4 million or
$0.90 per common share for the year ended December 31, 1995, primarily as a
result of operations from the multifamily construction projects which were
completed and leased during 1995 and 1996.  Included in net income for the year
ended December 31, 1996, is a net gain of $246,000 from the sale of condominium
units at one of the Company's properties.

     Revenues from all sources totaled approximately $48.5 million in the year
ended December 31, 1996, compared with total revenues of approximately $41.3
million in the year ended December 31, 1995.  Rental revenues totaled
approximately $45.9 million during the year ended December 31, 1996, an increase
of approximately $6.9 million or 17.7% over rental revenues of approximately
$39.0 million in the previous year.  During 1996 the Company received
approximately $5.9 million of additional rental income from the multifamily
development projects completed and leased in 1995 and 1996.  Rental revenues
increased approximately $1.2 million due to rental rate increases at the
Company's stabilized properties operating for both twelve month periods ended
December 31.  Rental revenues includes $12,000 and $15,000 of deferred rental
income in the years ended December 31, 1996 and 1995, respectively.  Property
management income decreased $181,000 or 37.8% from 1995 due to a decrease in
apartment units and retail space managed for third-party owners.  Interest and
other revenues increased $573,000 or 32.8% in 1996 over 1995 primarily due to
increased other income from the properties, including the incremental increase
in other income from the recently completed development projects, increased
yields earned on invested funds, and a $50,000 nonrecurring marketing commission
earned pursuant to the sale of a commercial property formerly managed for an
affiliate of the Company.

     Total expenses during the year ended December 31, 1996, were approximately
$37.3 million, an increase of approximately $6.5 million or 21.1% over total
expenses of approximately $30.8 million in the prior year.  The increase in
total expenses is primarily due to the growth in the size of the Company's
residential operating portfolio as a result of its development and construction
program, an increase in expensed interest, and higher property tax valuations on
certain of the properties.  The increase in the number of stabilized apartment
units was the primary reason for the $456,000 or 14.6% increase in repairs and
maintenance expenses and the $528,000 or 26.7% increase in other property
operating expenses.  Advertising expenses increased $172,000 or 31.2% in 1996
over 1995 primarily as a result of increased advertising and marketing incurred
to support the leasing programs at the newly completed development projects and
to maintain high occupancies at the remaining properties.  Property
administrative expenses increased $429,000 or 15.6% in the year ended December
31, 1996, over 1995 due to salary and benefits increases and additional
personnel managing the newly completed development properties.  Real estate tax
expense increased approximately $1.4 million or 27.0% in 1996 compared with
1995.  Approximately  $687,000 of this increase relates to tax increases due to
higher tax assessments on certain of the properties in the 

                                       16
<PAGE>
 
operating portfolio in both years. The remainder of the increase of $706,000 is
attributable to the development properties added to the portfolio in 1995 and
1996.

     General and administrative expenses incurred for the Company's corporate
activities increased $16,000 or approximately 1% in 1996.  Higher personnel,
administrative, and investor communications costs were offset by lower travel,
franchise tax, and insurance costs.  During the years ended December 31, 1996,
and 1995, the Company awarded restricted common shares to certain of its
executive officers who elected to forego cash-based compensation, and to certain
of its executive officers and employees as bonuses as more fully described in
the notes to financial statements included elsewhere in this Form 10-K.  As a
result, the Company did not recognize compensation expense which would have been
recognized in 1996 and 1995 if such compensation and bonuses had been paid
without restrictions.  However, the Company amortized a portion of the
restricted share awards as compensation and bonus expense over three year
periods from the dates of the respective grants to the extent such amortization
is allocable to operations.  Accordingly, during the years ended December 31,
1996, and 1995, the Company recognized compensation expense for amortization of
restricted common share awards of $233,000 and $134,000, respectively.  If the
Company continues to recognize such amortization attributable to the common
share awards granted in 1995 and 1996 on the same basis as that used in the year
ended December 31, 1996, approximately $274,000, $207,000, and $42,000 of such
amortization expense will be included in operations in the years ended December
31, 1997, 1998, and 1999, respectively.  In March 1997, the Company granted
similar restricted common share awards to certain executive officers and
employees.  If allocated on a basis comparable to those granted in 1996,
approximately $161,000, $214,000, $214,000, and $53,000 of amortization
attributable to operations will be recognized in the years ended December 31,
1997, 1998, 1999, and 2000, respectively.

     Interest expense increased approximately $2.3 million or 40.9% in the
twelve months ended December 31, 1996, compared with 1995 as a result of an
increase in non-development debt outstanding in the two periods.  The Company's
average non-development debt outstanding under the Credit Facility, plus other
fixed-rate debt, was approximately $108.1 million for the year ended December
31, 1996, compared with an average non-development debt balance of $72.4 million
in the previous year.  The Company's average interest rate for non-development
debt under the Credit Facility was 7.17% in 1996 compared with an average
interest rate of 7.78% on non-development debt under the Credit Facility in
1995.  Interest related to amortization of deferred financing costs decreased
$122,000 or 23.7% in 1996 from 1995 because certain deferred commitment fees
became fully amortized in the fourth quarter of 1995, and as a result of
increased proportionate borrowings under the Credit Facility for development
activities, which decreased the pro-rata share of amortization attributable to
operating activities.

     Depreciation and amortization expense increased approximately $1.4 million
or 14.9% in the year ended December 31, 1996, compared with the twelve months
ended December 31, 1995.  The addition of multifamily residential properties to
the operating portfolio in 1995 and 1996 resulted in approximately $1.3 million
of additional depreciation and amortization expense.  Depreciation and
amortization of the real property and fixed assets on the remaining operating
portfolio and on furnishings and equipment at the corporate offices increased
$176,000 overall.  The increased depreciation and amortization due to capital
improvements undertaken at certain properties in 1995 and 1996 more than offset
decreases in depreciation and amortization of short-lived equipment and
furnishings which have become fully depreciated at certain properties and at the
Company's corporate offices.  In addition, the Company stopped depreciating its
real estate investments in two condominium communities in June 1996 when
marketing efforts to sell the condominium units began and the net book value of
the two properties was reclassified as real estate held for sale.  The
reclassification resulted in a $121,000 decrease in depreciation expense in 1996
from 1995.

     The Company invested approximately $68.2 million in its real estate
portfolio during the year ended December 31, 1996.  Approximately $58.6 million
was invested in the development and construction of ten multifamily residential
apartment projects, five of which were completed as of December 31, 1996.  The
Company acquired three new multifamily residential development sites for
approximately $7.1 million, in aggregate, in 1996.  Additionally, the Company
invested approximately $2.5 million for capital improvements,  purchases of
furniture, fixtures, and equipment, and retail leasing commissions in the year
ended December 31, 1996.  The components of these capital investments were (a)
approximately $1.8 million invested in improvements to the multifamily
residential properties held in the Company's real estate portfolio for one year
or longer, (b) $358,000 invested in 

                                       17
<PAGE>
 
capital improvements to a property acquired in the first quarter of 1995, (c)
$333,000 invested in tenant improvements, capital expenditures, and leasing
commissions for the Company's retail and industrial properties, and (d) $81,000
invested in furniture, fixtures, and equipment for the corporate offices. More
detailed information regarding these capital investments is set forth in the
following table. 
Summary of capital improvements for the year ended December 31, 1996:

<TABLE>
<CAPTION>
 
 
                                        Stabilized Properties (1)     Acquisition Property (2)             Totals
                                        ----------------------------------------------------------------------------------
                                            Amount      Per Unit         Amount       Per Unit       Amount       Per Unit
                                        --------------  ---------     ----------     ---------     ---------      --------
                                        (in thousands)              (in thousands)               (in thousands)
<S>                                     <C>             <C>           <C>            <C>           <C>            <C>
Multifamily residential properties
----------------------------------
Recurring expenditures
 Floor coverings                                $  175     $ 35.97            $ 19   $  116.85       $  194        $ 38.55
 Appliances                                         16        3.28              25      159.01           41           8.24
 Exterior repairs                                  701      144.41              25      155.23          726         144.76
 Furniture, fixtures, & equipment                  203       41.73             118      737.43          321          63.92
 Other                                              63       12.88               3       16.54           66          12.99
                                         -------------   ---------         -------   ---------      -------        -------
Subtotal - recurring                             1,158      238.27             190    1,185.06        1,348         268.46
Revenue generating                                  93       19.25               -           -           93          18.64
Major renovations                                  503      103.48             168    1,055.15          671         133.83
                                         -------------   ---------          ------   ---------      -------        -------
Total multifamily residential                   $1,754     $361.00            $358   $2,240.21        2,112        $420.93
                                         =============   =========          ======   =========                     ======= 
                                                                                                    
Industrial and retail properties (3)                                                                         Per Sq. Ft.
--------------------------------------                                                                             -------
Tenant improvements                                                                                     208        $  0.40
Commissions                                                                                              34            .07
Other                                                                                                    91            .17
                                                                                                     ------        -------
Total industrial and retail                                                                             333        $  0.64
                                                                                                                   =======
Corporate purchases of furniture, fixtures, and equipment                                                81
                                                                                                     ------
Total                                                                                                 2,526
                                                                                                     ======
 
</TABLE>
-----------------------------------
(1)  Multifamily residential properties owned for one year or more as of January
     1, 1996, and multifamily development projects completed and stabilized
     subsequent to the Company's initial public offering (December 29, 1993).
     Per unit computations are based on the average monthly stabilized and
     completed apartment units during the period.  The average number of
     completed units during the year ended December 31, 1996, was  4,857.
(2)  Multifamily residential property acquired and owned by the Company for less
     than one year as of January 1, 1996.  Per unit computations are based on
     160 units.
(3)  Total leasable retail and industrial square footage totals approximately
     525,300 sq. ft.  Includes one retail shopping center, two industrial
     properties, and retail space integrated into four primarily multifamily
     residential properties.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------------------------

     The Company's net income increased approximately $1.7 million to
approximately $10.4 million or $0.90 per common share for the year ended
December 31, 1995, compared with net income of approximately $8.8 million or
$0.89 per common share in 1994.  The additional rents collected from properties
added to the Company's portfolio during 1994 and 1995 is the primary reason for
this increase.  During the twelve months ended December 31, 1995, rental
revenues totaled approximately $39.0 million, an increase of approximately $10.1
million or 34.8% 

                                       18
<PAGE>
 
over rental revenues of approximately $29.0 million in 1994. Rental revenues
generated by properties purchased since January 1, 1994, accounted for
approximately $6.0 million of this increase, while the completion of the Trace
II, Uptown Village, and Ascension Point II projects during 1995 resulted in
additional rental income of approximately $3.2 million. Rental revenues from the
remaining properties in the operating portfolio increased approximately $831,000
in 1995 over the comparable prior year due to higher average occupancy rates and
rental rate increases. The Company recognizes rental revenue from commercial
tenants on a straight-line basis over the terms of the related leases. Rental
revenues includes $15,000 and $13,000 of deferred rental income in the years
ended December 31, 1995 and 1994, respectively. Property management income
decreased $161,000 or 25.2% in 1995 from 1994 because of a decrease in apartment
units and retail space managed for third-party owners. Interest and other
revenues increased $471,000 or 36.9% in 1995 over 1994 primarily due to income
from the properties added to the Company's portfolio, and because of increased
yields earned on invested funds.

     Total expenses during the year ended December 31, 1995, were approximately
$30.8 million, an increase of approximately $8.7 million or 39.4% over total
expenses of approximately $22.1 million in 1994.  The increase in total expenses
is primarily due to the growth in the size of the Company's residential
operating portfolio as a result of its acquisition and development activities.
The increase in the number of apartment units operated by the Company resulted
in a $771,000 or 32.9% increase in repairs and maintenance expenses, a $483,000
or 32.4% increase in other property operating expenses, and a $185,000 or 50.6%
increase in advertising expenses in 1995 compared with 1994.  Property
administrative expenses increased $349,000 or 14.6% in 1995 over 1994 primarily
due to salaries and benefits for personnel managing the new properties.  General
and administrative expenses incurred for the Company's corporate activities
increased $216,000 or 11.8% in 1995 over 1994 as a result of higher costs to
acquire, develop, and manage the Company's larger real estate portfolio.  Real
estate tax expense increased approximately $1.3 million or 36.3% in 1995 over
1994 due to the additional properties owned in 1995, and due to increased tax
assessments on certain of the properties.

     The Company's increased borrowing pursuant to the Credit Facility and other
mortgage debt incurred to fund its construction and acquisition activities in
1994 and 1995 resulted in an increase of approximately $2.7 million or 96.5% in
interest expense in the year ended December 31, 1995, over 1994.  Additionally,
the Company's average cost of borrowing under the Credit Facility for completed
properties increased from 6.33% in 1994 to 7.78% in 1995.  Interest related to
amortization of deferred financing costs increased $41,000 or 8.7% in 1995 over
1994 as the Company incurred additional loan fees in 1995 to obtain an amendment
to the Credit Facility.

     Approximately $2.2 million of the $2.6 million or 38.7% increase in
depreciation and amortization expenses in 1995 over 1994 relates to depreciation
recognized on the additional properties held in the Company's operating
portfolio in 1995 compared with 1994.  The remaining increase is related to an
increase in depreciable assets after capital improvement programs at certain of
the other properties, and investments in furniture, fixtures, office machines,
and computer equipment for the corporate offices.

     The Company invested approximately $64.9 million, in total, in the real
estate portfolio during the year ended December 31, 1995.  Approximately $54.3
million was invested in the development and construction of ten multifamily
residential apartment projects, three of which were completed during the year.
The Company acquired an existing multifamily residential property and two
additional units in the Ascension Point condominium community for approximately
$6.6 million, in the aggregate.  Approximately $1.6 million was invested in
capital improvements to properties acquired in 1994 and 1995, and approximately
$1.2 million was invested in improvements to the multifamily residential
properties held in the Company's original real estate portfolio.  Tenant
improvements and capital expenditures for the Company's retail and industrial
properties totaled $521,000, and investments in furniture, fixtures, and
equipment totaled $605,000 in 1995.  The expenditures for furniture, fixtures,
and equipment were comprised of $432,000 primarily for maintenance equipment,
vehicles, and computers at the properties, and $173,000 for computers and
furnishings at the Company's corporate offices.

CASH FLOW ANALYSIS

     The Company's activities resulted in a net decrease in cash and cash
equivalents of approximately $8.1 million in the year ended December 31, 1996,
compared with a net increase in cash and cash equivalents of 

                                       19
<PAGE>
 
approximately $6.3 million in the previous year ended December 31, 1995. Cash
inflows from the Company's operating activities totaled approximately $19.4
million in 1996, compared with approximately $22.4 million provided by
operations in the year ended December 31, 1995. The Company's investing
activities in the year ended December 31, 1996, totaled approximately $67.8
million compared with approximately $64.9 million in the prior year. The
Company's investment of approximately $68.2 for development of and improvements
to its real estate portfolio was previously described in the discussion of the
results of operations for the year ended December 31, 1996. The sale of six
condominium units at one of the Company's properties provided $520,000 in the
year ended December 31, 1996, partially offset by $84,000 used for additions to
escrow accounts. During the year ended December 31, 1995, the Company invested
approximately $64.9 million in its real estate portfolio. The components of
these investments were approximately $54.3 million invested in properties under
development and construction during the year, approximately $6.6 million for
acquisitions of existing multifamily properties, and approximately $4.0 million
for improvements to the operating portfolio, purchases of furniture and
equipment and additions to escrow accounts.

     Financing activities undertaken in the year ended December 31, 1996,
provided approximately $40.2 million, compared with approximately $48.8 million
in the year ended December 31, 1995.  The primary cash inflows from financing
activities in 1996 were approximately $59.2 million provided from construction
draws, approximately $23.9 million provided from the sale of 1,166,600 of the
Company's common shares, and approximately $5.8 million provided from sales of
common shares of the Company pursuant to shareholder and employee plans.  The
Company's cash outflows from financing activities during 1996 were approximately
$24.8 million for payments on notes payable, approximately $23.0 million for
dividend payments to shareholders, and $793,000 in the aggregate for financing
and common share offering costs.  During the year ended December 31, 1995, the
Company's primary cash inflows from financing activities were approximately
$118.3 million from construction draws and proceeds from a note payable, and
approximately $1.2 million from sales of common shares pursuant to shareholder
and employee plans.  Cash outflows for financing activities in the year ended
December 31, 1995, were approximately $52.2 million for payments on notes
payable, approximately $17.2 million for dividend payments to shareholders, and
approximately $1.4 million in the aggregate for financing and offering costs.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically used cash flow from operations to meet its
dividend payments and short term liquidity requirements, and a combination of
equity, mortgage debt, and credit line debt to finance its development and
acquisition of new properties.  The Company has established a $170 million
credit line (the "Credit Facility") with several lenders as the primary source
of acquisition and development capital, with a view towards replacing that debt
following acquisition (or completion, in the case of a development property) as
market conditions warrant, with either long term fixed rate debt or permanent
equity.  As of March 6, 1997, the Company had a total of $199.1 million in
outstanding debt, consisting of $137.7 million under the Credit Facility (of
which $70.8 million was drawn for development in progress), $59.8 million in
fixed rate debt with an average maturity of 5.1 years, and $1.6 million in
short-term, unsecured debt drawn for acquisition of a new development in
progress.  Prior to its maturity date of May 1, 1997, the Company intends to
retire the $1.6 million in unsecured debt with an incremental draw on the Credit
Facility.

     The Company's long-term financing includes a $50 million loan from
Nationwide Life Insurance Company (the "Nationwide Loan") which bears interest
at a fixed rate of 7.45% and matures in December 2002, with a 25-year principal
amortization schedule.  The loan is collateralized by nine properties formerly
pledged as part of the collateral pool securing the Credit Facility.  In
November 1995 the Company used the $50 million proceeds to retire an equivalent
amount of variable rate debt outstanding under the Credit Facility,
simultaneously releasing the nine properties as collateral for the Nationwide
loan.  The Company completed the refinancing with the goal of fixing its cost on
a significant portion of the Company's debt and reducing exposure to future
interest rate increases.  As of March 6, 1997, approximately $49.1 million was
outstanding under the Nationwide loan.

     The Company currently has under construction a total of 1,902 units in six
multifamily residential communities, and has acquired one additional site upon
which it expects to construct approximately 346 multifamily residential units.
These seven developments are currently projected to cost approximately $172
million, of which $115 million is anticipated to be funded from the Credit
Facility and internally generated cash flow, and the remaining $57 

                                       20
<PAGE>
 
million from third party debt and other sources. Full use of the Company's $170
million availability in the Credit Facility is subject to the Company's ability
to provide sufficient collateral to the lenders during the term of the loan.
Such collateral is currently available to fully utilize the committed loan
amount, plus an additional $12 million of borrowing capacity under the existing
loan-to-value requirements under the terms of the Credit Facility. Additional
collateral value will become available during 1997 as existing developments in
progress are completed and become operational. This should allow the Company to
meet the funding requirements currently contemplated under the Credit Facility
to complete its planned development in progress by either (a) increasing the
facility's current commitment, subject to agreement with the existing lenders,
or (b) releasing certain collateralized assets from the facility for use in
securing additional third party debt.

     While the Company currently intends to continue to use the Credit Facility
as its primary source of development financing, it may in the future use
additional third party secured debt, unsecured public debt, cash flow from
operations, and other sources of debt or equity to fund acquisitions and
development costs, or to refinance the Credit Facility before maturity when
deemed appropriate.  With respect to any development properties, the Company
intends to fund interest payments through additional draws on the various loan
sources until such properties are completed and begin to provide sufficient
income to satisfy debt service requirements and operating expenses.  When the
Credit Facility matures on December 31, 1997, the Company will be required to
secure substitute financing for any balance then outstanding.

     On August 8, 1996, the Company filed a "shelf" Registration Statement with
the Securities and Exchange Commission on Form S-3 to register an aggregate of
$200 million of debt securities, common shares, preferred shares and warrants
(collectively, the "Registered Securities").  The Registered Securities may be
issued separately or together, in separate series, and in amounts and at prices
and terms to be determined by market conditions at the time of offering.  On
October 10, 1996, the Company sold 1,166,600 common shares of beneficial
interest pursuant to the Registration Statement, at a price of $20.50 per share,
or an aggregate purchase price of approximately $23.9 million, to certain
institutional investors.  The net proceeds after transaction expenses were
combined with working capital to retire $24.0 million of debt outstanding under
the Credit Facility.  The proceeds from any future sales of the Registered
Securities under the Registration Statement may be used for general Company
purposes, including the development and acquisition of multifamily residential
properties and further repayment of secured or unsecured indebtedness.

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

     The Company believes that the presentation of funds from operations as
hereinafter defined, when considered with financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of the Company's performance.  However, funds from operations does not
represent cash flow and is not necessarily indicative of cash flow or liquidity
available to the Company, nor should it be considered as an alternative to net
income as an indicator of operating performance.  The Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") initially
adopted a resolution defining funds from operations as net income (loss),
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures.  In March 1995, NAREIT approved for adoption a
"White Paper on Funds from Operations," which modified the definition of funds
from operations to limit adjustments for depreciation and amortization to those
related specifically to real estate investments, and made further
recommendations for disclosures intended to enhance the comparability and
usefulness of the operating data.  In accordance with NAREIT's recommendation,
the Company implemented the modified NAREIT definition beginning in 1996.

     The Company believes that presentation of funds from operations provides
investors with an industry accepted measurement which helps facilitate
understanding of the Company's ability to meet required dividend payments,
capital expenditures, and principal payments on its debt.  Additionally, the
Company believes funds from operations should be disclosed in conjunction with
net income (or loss) and cash flows from operating, investing, and financing
activities determined in accordance with generally accepted accounting
principles.  Although the Company calculates funds from operations in accordance
with the NAREIT approved definition, there can be no assurance that the
Company's basis for computing funds from operations is comparable with that of
other real estate investment trusts.  Computed in accordance with the modified
definition as described above, funds from operations for the years ended
December 31, 

                                       21
<PAGE>
 
1996, 1995 and 1994, was approximately $21.9 million, $19.5 million and $15.6
million, respectively. The Company's net cash flows from its operating,
investing, and financing activities were approximately ($8.1 million),
approximately $6.3 million, and $465,000, for the years ended December 31, 1996,
1995, and 1994, respectively. More information with respect to the Company's
funds from operations is shown in the table below (in thousands). Refer to the
Company's financial statements included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
 
 
                                              Years ended December 31,
                                            1996       1995        1994
                                          -------------------------------
<S>                                       <C>        <C>        <C>
Net income                                $ 11,458   $ 10,428   $   8,761
Depreciation of real estate assets          10,257      8,828       6,443
Amortization of tenant allowances and          206        194         111
 capitalized leasing costs
Non-cash compensation expense                    -          -         245
                                          --------   --------   ---------
Funds from operations, as adjusted        $ 21,921   $ 19,450   $  15,560
                                          ========   ========   =========
 
Net cash provided by operating            $ 19,417   $ 22,423   $  19,520
 activities
Net cash used in investing activities      (67,777)   (64,937)   (109,440)
Net cash provided by financing              40,247     48,764      90,385
 activities                               --------   --------   ---------
Net (decrease) increase in cash and       $ (8,113)  $  6,250   $     465
 cash   equivalents                       ========   ========   =========
</TABLE>

     Funds from operations for the year ended December 31, 1996, totaled
approximately $21.9 million or $1.81 per common share, compared with funds from
operations of approximately $19.5 million or $1.68 per common share in the
comparable prior period.  The increase in funds from operations of approximately
$2.4 million or 12% in 1996 over 1995 is primarily attributable to the net
operating income provided by the increased number of apartment units in the
Company's portfolio, partially offset by an increase in the amount of expensed
debt service.  Interest expense increased due to borrowings during 1995 and 1996
to fund property acquisitions, and completion of construction of three
multifamily projects in 1995 and five multifamily projects in 1996.  Interest on
debt incurred for construction projects is capitalized prior to completion of
construction.  After completion of construction, interest on such debt is
expensed.

     Funds from operations for the year ended December 31, 1994, was adjusted
for a one time, non-cash compensation expense of $245,000.  The adjustment gives
effect to the grant in the first quarter of 1994 of 13,200 shares at par value
($0.01) to non-executive employees under the Company's Share Bonus Plan
established in connection with the Initial Public Offering.  For tax purposes
and under generally accepted accounting principles, the incremental market value
of these shares was expensed as compensation, but had no impact on the cash flow
of the Company.  Management believes this adjustment to funds from operations is
necessary to accurately reflect the Company's performance for comparative
purposes and to provide the basis for payment of dividends.

RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS

     This Form 10-K, together with other statements and information publicly
disseminated by the Company, contains certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements
are based on current expectations which involve a number or risks and
uncertainties, including, but not limited to, risks due to the market
concentration of the Company's properties in Dallas, Texas and particularly the
Uptown District; risks associated with the acquisition, construction, and
development of multifamily residential properties - including the risk of
oversupply of units or a reduction in demand for apartment units, risks
associated with delays in construction and lease-up, cost increases, and risks
that the Company's acquisition and development properties will fail to perform
as expected; real estate financing risks such as availability of debt or equity
financing in the future and the risk of increasing rates for such financing; as
well as other risks listed from time to time in the Company's reports filed with
the SEC.

                                       22
<PAGE>
 
RECENT DEVELOPMENTS

     On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado.  The Company expects to
complete a purchase of the site when demolition of existing buildings,
remediation of the property, and certain other conditions are met.

     On February 24, 1997, the Company purchased a 158-unit multifamily
residential property known as The Commons at Turtle Creek, located in Dallas,
Texas, for a purchase price of approximately $6.9 million.  The purchase was
funded from the Company's Credit Facility.

     On February 25, 1997, the Company filed a Registration Statement on Form S-
8, registering the issuance of 1,000,000 common shares to be issued pursuant to
the Company's Employee Incentive Plan.

     On February 27, 1997, the Company executed a forty-year land lease
agreement for a redevelopment project, The Rice Hotel, located in Houston,
Texas.  The Rice Hotel is an 18-story structure originally built in 1913.  Under
terms of the agreement, the Company will fund redevelopment of the hotel into a
mixed-use residential and retail facility comprised of 317 loft-style apartments
and 21,000 square feet of retail space. The Company, in partnership with a
Houston development company, will manage all aspects of the renovation,
currently budgeted at approximately $33.3 million, and operations of the project
upon completion.  The Houston Housing Finance Corporation (HHFC), owner of the
land, will fund approximately $6.6 million of abatement and infrastructure
costs, and the Company will provide the balance of the funding.  Concurrently
with closing the lease agreement, the Company guaranteed a $20.0 million
construction loan for the project.  The remainder of the Company's renovation
costs will be funded from draws on the Credit Facility, cash flow from
operations, or other short term financing.

     On March 7, 1997, the Company declared a dividend of $0.395 per common
share, payable on March 25, 1997, to shareholders of record on March 21, 1997.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements and supplementary data are listed in the Index to
Financial Statements and Financial Schedules appearing on Page F-1 of this Form
10-K.


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

     None.

                                       23
<PAGE>
 
                                   Part III


ITEM 10.  TRUST MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Trust Managers and the executive officers of the Company, their
positions and offices with the Company or its subsidiaries, and the expiration
of their current terms as Trust Managers are as follows:
<TABLE>
<CAPTION>
 
Name                       Positions and Offices Held         Term
----                       --------------------------         ----
<S>                  <C>                                      <C>
 
Richard L. Bloch     Chairman of the Board of Trust Managers  1999
Robert L. Shaw       Trust Manager, Chief Executive Officer   1997
Will Cureton         Trust Manager, Chief Operating Officer   1998
Roger T. Staubach    Trust Manager                            1997
James C. Leslie      Trust Manager                            1999
Amy DiGeso           Trust Manager                            1999
Hugh G. Robinson     Trust Manager                            1997
Gregg L. Engles      Trust Manager                            1998
Richard R. Reupke    Chief Financial Officer
J. Michael Lewis     Senior Vice President-Treasurer
Thomas L. Wilkes     Senior Vice President-Management;
                     President, CMSI
Arthur E. Lomenick   Senior Vice President-Development
James F. Duffy       Senior Vice President-Construction
</TABLE>

     Pursuant to the terms of the Amended and Restated Declaration of Trust and
Bylaws of the Company, the Board of Trust Managers will consist of no less than
two and no more than eleven persons. The Board of Trust Managers is divided into
three classes having three-year staggered terms. Trust Managers will hold office
until their successors are duly elected and qualified.

     The following is a biographical summary of the experience of the executive
officers and Trust Managers of the Company:

     Richard L. Bloch,  age 67, has been Chairman of the Board of Trust Managers
     ----------------                                                           
and a Trust Manager since October 1993 and is a member of the Executive
Committee.  Mr. Bloch has served as a Director of City National Bank of Beverly
Hills and its holding company, City National Bank Corporation, since 1976 and of
Cantel Corporation since 1988.  Mr. Bloch served as a Director of Data
Broadcasting Corporation from 1993 through 1995.  He served as Chairman of the
Board and Chief Executive Officer of Filmways, Inc. and Chairman of the Board of
two of its principal subsidiaries, Union Fidelity Insurance and Grossett &
Dunlap, Inc., from 1976 through 1982, and as a member of the board of directors
of Glenayre Technology (formerly known as NuWest Corporation) from 1987 through
1992. He is a co-founder and former principal owner of the Phoenix Suns NBA
basketball team and one of the former owners of the NBC-affiliated KVOA
television station in Tucson, Arizona. Mr. Bloch's real estate experience
includes co-developing and/or owning the Gulf & Western Building in New York
City, a Hyatt Hotel in Los Angeles, the Transamerica Building in Tucson and
several IBM and Allstate Insurance facilities.

     Robert L. Shaw,  age 40, has been Chief Executive Officer of the Company
     --------------                                                          
and a Trust Manager since its inception, and is a member of the Executive
Committee.  Mr. Shaw was a co-founder of Columbus Realty Holdings, Inc. ("CRH"),
a predecessor of the Company, and of its affiliate, Memphis Real Estate, Inc.
("Memphis Real Estate"), and served as President of CRH and Memphis Real Estate
from August 1989 to December 1993.  Mr. Shaw was Executive Vice President of SBC
Development Company from September 1987 to March 1990, and Vice President from
July 1987 to September 1987.  Mr. Shaw has been involved in the construction and
development of multifamily residential properties since 1981.  He serves on the
Board of Directors of the Greater Dallas Chamber of Commerce and the National
Association of Real Estate Investments Trusts.  He is also a  member of the
Young Presidents Organization ("YPO"), the Urban Land Institute, and the
National Multifamily Housing Counsel.  In addition, he serves on the University
of Texas at Dallas Advisory Board.

                                       24
<PAGE>
 
     Will Cureton,  age 46, has been Chief Operating Officer of the Company and
     ------------                                                              
a Trust Manager since its inception, and is a member of the Executive Committee.
Prior to the formation of the Company, from 1987 until December 1993, Mr.
Cureton served as President and Chief Executive Officer of Texana and certain of
its affiliates (the "Texana Group"), which were merged into the Company pursuant
to the Initial Public Offering.  Prior to his affiliation with the Texana Group,
Mr. Cureton was Vice President and Chief Operating Officer of The DicoGroup,
Inc., a Dallas-based oil and gas and real estate company, from 1981 through
1988.  Prior to his association with The DicoGroup, Mr. Cureton joined Coopers &
Lybrand in 1974 as a Certified Public Accountant where he served as real estate
coordinator and audit manager for the Dallas office until 1981. He is a member
of the Real Estate Council and the National Association of Real Estate
Investment Trusts.  Mr. Cureton has been on the Board of Directors of the East
Texas State University Athletic Association since 1989.  He also serves on the
ETSU Foundation Board and its Capital Campaign Steering Committee.

     Roger T. Staubach,  age 55, has been a Trust Manager of the Company since
     -----------------                                                        
December 1993 and is a member of the Audit Committee.  Mr. Staubach is Chairman
and Chief Executive Officer of The Staubach Company, an integrated real estate
company providing services related to office, industrial and retail real estate
with a commitment to represent only the real estate user, which he formed in
1977. He is also a director of a number of affiliates and subsidiaries of The
Staubach Company, and serves as president of several of these entities. Mr.
Staubach is a director of Halliburton Company, Brinker International,  and First
USA, Inc. and a trustee of American AAdvantage Funds.  Mr. Staubach was
quarterback for the Dallas Cowboys professional football team from 1969 through
1979.

     James C. Leslie,  age 41, has been a Trust Manager of the Company since
     ---------------                                                        
December 1993, and is Chairman of the Audit Committee and a member of the
Executive Compensation Committee.  Mr. Leslie is President-Financial Services, a
member of the Office of the President, and a director of The Staubach Company,
positions he has held since February 1996, January 1993 and October 1988,
respectively.  Mr. Leslie was Chief Financial Officer of The Staubach Company
from 1982 to January 1992 and President of Staubach Financial Services from
January 1992 to February 1996.  Mr. Leslie is also President and a board member
of Wolverine Holding Company, and serves on the boards of Forum Retirement
Partners, L.P., and the North Texas Chapter of the Arthritis Foundation. Mr.
Leslie is a certified public accountant.

     Amy DiGeso,  age 44, has been a Trust Manager of the Company since
     ----------                                                        
September 1996.  Ms. DiGeso is currently President and Chief Executive Officer
of Mary Kay Inc., directing all operating responsibilities for Mary Kay Inc.
global business.  She is also a board member of Mary Kay Inc. and of the
Cosmetic, Toiletry, and Fragrance Association.  Prior to her affiliation with
Mary Kay, Ms. DiGeso was with Bankers Trust Company from 1986 to 1992, last
holding the position as Chief of Staff for the Asset and Project Financing
Group, served as Executive Director of Human Resources of Estee Lauder from 1984
to 1986, and with American Express Company from 1978 to 1984, held several
positions culminating in the Chief Administrative Officer role for their direct
marketing business.  She holds an MBA in International Management from Fordham
University, and a BS in Behavioral Science from Penn State.

     Hugh G. Robinson,  age 64, has been a Trust Manager of the Company since
     ----------------                                                        
December 1993 and is a member of the Executive Compensation Committee.  General
Robinson, who retired from the U.S. Army Corps of Engineers as a Major General
in 1983, has served since 1989 as Chairman of the Board and Chief Executive
Officer of The Tetra Group, Inc., which provides construction management and
business development services.  From 1988 to 1995, he was Senior Vice President
and managed the Southwest office of Grigsby Brandford & Co., Inc., a minority
owned investment banking firm specializing in municipal securities.  He was a
member of the board of directors of the Federal Reserve Bank of Dallas from 1985
through 1991, serving as chairman of the board in 1991.  Prior to joining The
Tetra Group, General Robinson held the position of President of Cityplace
Development Corporation, a real estate development company, since its formation
in 1984.  General Robinson is also a member of the boards of directors of A.H.
Belo Corporation (the owner of the Dallas Morning News), TUElectric, Smith
Environmental Technologies, Guaranty Federal Savings Bank, and Circuit City
Stores, Inc.

                                       25
<PAGE>
 
     Gregg L. Engles,  age 39, has been a Trust Manager of the Company since
     ---------------                                                        
December 1993 and is the Chairman of the Executive Compensation Committee and a
member of the Audit Committee.  Mr. Engles is the Chairman and Chief Executive
Officer of Suiza Foods Corporation, a New York Stock Exchange company which owns
and operates dairy processing operations in Florida, California, Nevada and
Puerto Rico and packaged ice operations throughout the United States.  Until
December 1993, Mr. Engles was Chairman of the Board of The Milnot Company, a
branded and private label food products company.  He is also a co-founder of SFE
Citrus Processors, Inc., which owns a Florida bulk citrus processor.

     Richard R. Reupke,  age 41, is Chief Financial Officer and Secretary of the
     -----------------                                                          
Company, positions he has held since October 1993.  From October 1993 to August
1994, Mr. Reupke also served as Treasurer of the Company.  Since June 1994, he
has served as Secretary of CMSI, a wholly owned subsidiary of the Company.  From
August 1988 to December 1993, Mr. Reupke served as Vice President -- Finance of
Texana RAT II Associates, Inc. where he had primary responsibility for all
accounting functions.  Prior to his affiliation with the Texana Group, Mr.
Reupke was Controller for NOVA Properties Co., Controller for Dale C. Bullough &
Associates and Regional Controller for Genex Homes, Inc.  He is a member of the
Apartment Association of Greater Dallas, the Apartment Association of Tarrant
County, and BOMA (Building Owners and Managers Association).

     J. Michael Lewis,  age 47, is Senior Vice President and Treasurer of the
     ----------------                                                        
Company, positions he has held since August 1994.  Prior to joining the Company,
Mr. Lewis accumulated 17 years experience of service which included the
positions of Executive Vice President and Treasurer for Southland Financial
Corporation, a publicly traded financial services holding company, and its
successors, which were the owners, developers and managers of the Las Colinas
development in Irving, Texas, a suburb of Dallas.  Prior to that, he was a
portfolio manager of securities for Southland Trust Company and Southland Life
Insurance Company.  He is a member of the Financial Executives Institute, the
Australian American Chamber of Commerce and serves as Chairman of Providence
Christian School of Texas, and as a director of the Las Colinas Association.

     Thomas L. Wilkes,  age 37, is a Senior Vice President of the Company and
     ----------------                                                        
President of CMSI, a wholly owned subsidiary of the Company, positions he has
held since October 1993.  Mr. Wilkes served as President of CRH Management
Company, a multifamily property management firm and a member of the Columbus
Group, since its formation in October 1990 to December 1993.  Prior thereto, he
was a Senior Divisional Manager in the residential services division of the
Trammell Crow Residential Companies from June 1988 to October 1990 and a
Divisional Manager from December 1986 to May 1988. Before joining Trammell Crow,
Mr. Wilkes served for four years as an officer in the United States Air Force.
Mr. Wilkes is a Certified Property Manager, Registered Apartment Manager, member
of Leadership Dallas Class of 1997, member of National Association of Home &
Apartment Builders, and a member of the Institute of Real Estate Management, and
is on the board of the Apartment Association of Greater Dallas, Bryan's House
and is past  President of the Uptown Dallas Association.

     Arthur E. Lomenick,  age 41, has been a Senior Vice President of the
     ------------------                                                  
Company since October 1994 and was Vice President from October 1993 to October
1994.  Previously, Mr. Lomenick served as Vice President, Investments, for
Memphis Real Estate since January 1993. Prior thereto, Mr. Lomenick was
Executive Vice President of Wolverine Investment Services, a division of The
Staubach Company, from August 1992 to January 1993. Mr. Lomenick served as Vice
President of The Staubach Company from February 1990 through August 1992, and as
Vice President of divisions of The Staubach Company from 1986 through February
1990.  Mr. Lomenick serves on the boards of directors of the Dallas Visual Arts
Center, the Dallas Arts District Association, and the Oaklawn Forum.  He is also
a member of the International Downtown Association (IDA), the Urban Land
Institute (ULI), serving on its Gold Flight Housing Committee, and the Congress
of the New Urbanism.

                                       26
<PAGE>
 
     James F. Duffy,  age 53, has been a Senior Vice President of the Company
     --------------                                                          
since May 1996.  Prior to his affiliation with the Company, Mr. Duffy was
President of the JFD Group, a business consulting firm specializing in the
commercial construction industry.  Prior thereto, he was President of the W. B.
Moore Company from 1991 to 1993, Vice President-Operations of Spring Valley
Construction Company from 1981 to 1990, and Vice President-Commercial for Luther
Hill and Associates, Inc. from 1972 to 1981.  He is a past president of the
Dallas Chapter of Associated General Contractors of America.  He was past
Secretary/Treasurer of the Texas Building Branch-AGC.  He has also served as a
member of the construction degree advisory committees at East Texas State
University, The University of North Texas, and Northlake College.  Mr. Duffy was
a member of the City Council of the Town of Addison from 1986 to 1991, serving
as Mayor Pro Tem and as Chairman of both the Addison Planning and Zoning
Commission and Board of Zoning Adjustment.

     No family relationships exist among any of the Trust Managers or executive
officers of the Company.  No arrangement or understanding exists between any
Trust Manager or executive officer or any other person pursuant to which any
Trust Manager or executive officer was selected as a Trust Manager or executive
officer of the Company.

     The information contained in the paragraph related to compliance with
Section 16(a) of the Securities and Exchange Act of 1934, under the heading
"Proposal One: Election of Trust Managers, Trust Managers Whose Terms Will
Continue After the Meeting" of the Proxy Statement for the Annual Meeting of
Shareholders to be held May 23, 1997 (the "Proxy Statement") is incorporated
herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

     The section entitled "Executive Compensation" of the Proxy Statement is
incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The section entitled "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The section entitled "Certain Relationships and Transactions" of the Proxy
Statement is incorporated herein by reference.

                                       27
<PAGE>
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

   (a) The following documents are filed as part of this Report:

       (1) Financial Statements - The index to the Financial Statements is
           included in page F-1 of this report.

       (2) Exhibits:


EXHIBIT
  NO.             DESCRIPTION
-------           ------------
  3.1   --Amended and Restated Declaration of Trust of the Company (9)
  3.2   --Bylaws of the Company (9)
  4.1   --Form of certificate representing common shares of beneficial 
           interest, par value $.01 per share, of the Company (3)
 10.1   --Form of Registration Rights Agreement among the Company and the
           persons named therein (1)
 10.4+  --Employment Agreement between the Company and Richard L. Bloch (15)
 10.5+  --Employment Agreement between the Company and Robert L. Shaw (15)
 10.6+  --Employment Agreement between the Company and Will Cureton (15)
 10.7+  --Employment Agreement between the Company and Richard R. Reupke (15)
 10.8+  --Employment Agreement between the Company and Thomas L. Wilkes (15)
 10.9+  --Employment Agreement between the Company and J. Michael Lewis (15)
 10.10+ --Employment Agreement between the Company and Arthur E. Lomenick (15)
 10.11+ --Employment Agreement between the Company and James F. Duffy (15)
 10.12  --Form of Indemnification Agreement by and between the Company and 
           its executive officers and Trust Managers (1)
 10.13  --Fourth Amendment to Master Lease Agreement between the Company and
           Electronic Data Systems Corporation pertaining to Windhaven Village
           (6)
 10.14  --Lease Agreement between the Company and Madison Office Building, 
           Inc. pertaining to the Madison Office Building (2)
 10.15+ --Columbus Realty Trust 1993 Share Bonus Plan (4)
 10.16+ --Columbus Realty Trust 1993 Share Option Plan (4)
 10.17  --Second Amended and Restated Loan Agreement between the Company, Bank
           One, Texas, NA, Bank United of Texas FSB, Comerica Bank-Texas and
           Bank One, Texas NA, as agent for the Banks (8)
 10.18  --First Modification to the Second Amended and Restated Loan Agreement
           between the Company, Bank One, Texas, NA, Bank United of Texas FSB,
           Wells Fargo Realty Advisors Funding, Incorporated, Texas Commerce
           Bank NA, Comerica Bank - Texas, and Bank One, Texas NA, as agent for
           the Banks (14)
 10.19  --Second Modification to the Second Amended and Restated Loan Agreement
           between the Company, Bank One, Texas, NA, Bank United of Texas FSB,
           Wells Fargo Realty Advisors Funding, Incorporated, Texas Commerce
           Bank NA, Comerica Bank - Texas, and Bank One, Texas NA, as agent for
           the Banks (14)
 10.20  --$50,000,000 Mortgage Note between the Company and Nationwide Life
           Insurance Company (14)

 10.21  --Form of Assignment of Limited Partnership Interests (1)
 10.22  --Form of Waiver and Contribution Agreement (3)
 10.23+ --Columbus Realty Trust 401(k) Plan and Trust (5)
 10.24  --Columbus Realty Trust Amended and Restated Dividend Reinvestment and
           Share Purchase Plan (7)
 10.25+ --Columbus Realty Trust Share Bonus Plan (No. 2) (8)
 10.26+ --Columbus Realty Trust Employee Stock Purchase Plan (10)
 10.27+ --Columbus Realty Trust Long Term Management Incentive Plan (11)
 10.28+ --Columbus Realty Trust Long Term Employee Incentive Plan (12)

                                       28
<PAGE>
 
 10.29+ --Form of Long Term Management Incentive Plan Performance - Based Stock
           and Dividend Equivalent Award Agreement by and between the Company
           and Richard Bloch, Robert L. Shaw and Will Cureton. (15)

 10.30  --Third Modification to the Second Amended and Restated Loan Agreement
           between the Company, Bank One, Texas N.A., Bank United of Texas FSB,
           Wells Fargo Realty Advisors Funding Incorporated, Texas Commerce Bank
           N.A., Comerica Bank-Texas, and Bank One, Texas N.A., as agent for the
           Banks. (15)

11      --Statement regarding computation of net income per common share (13)
21.1    --Schedule of Subsidiaries of the Company (5)
23.1*   --Consent of Ernst & Young LLP
27.1    --Financial Data Schedule (15)
99.1*   --Notice of Annual Meeting of Shareholders to be held May 23, 1997, and 
           Proxy Statement
--------------------------------------                                          
  
  +     Management Contract or Compensatory Plan or Arrangement 
  *     Filed herewith
 (1)    Previously filed with Amendment No. 1 to the Company's Registration
        Statement on Form S-11 (Registration No. 33-70218) filed with the
        Securities and Exchange Commission on November 26, 1993 and incorporated
        herein by reference.
 (2)    Previously filed with Amendment No. 2 to the Company's Registration
        Statement on Form S-11 (Registration No. 33-70218) filed with the
        Securities and Exchange Commission on December 13, 1993 and incorporated
        herein by reference.
 (3)    Previously filed with Post-Effective Amendment No. 1 to the Company's
        Registration Statement on Form S-11 (Registration No. 33-70218) filed
        with the Securities and Exchange Commission on December 23, 1993 and
        incorporated herein by reference.
 (4)    Previously filed with the Company's Registration Statement on Form S-11
        (Registration No. 33-80544) filed with the Securities and Exchange
        Commission on June 21, 1994 and incorporated herein by reference.
 (5)    Previously filed with Amendment No. 1 to the Company's Registration
        Statement on Form S-11 (Registration No. 33-80544) filed with the
        Securities and Exchange Commission on June 30, 1994 and incorporated
        herein by reference.
 (6)    Previously filed with Amendment No. 1 to the Company's Registration
        Statement on Form S-3 (Registration No. 33-88672) filed with the
        Securities and Exchange Commission on January 30, 1995 and incorporated
        herein by reference.
 (7)    Previously filed with Post Effective Amendment to the Company's
        Registration Statement on Form S-3 (Registration No. 33-90146) filed
        with the Securities and Exchange Commission on September 28, 1995 and
        incorporated herein by reference.    
 (8)    Previously filed with the Company's Registration Statement on Form S-8
        (Registration No. 33-90492) filed with the Securities and Exchange
        Commission on March 21, 1995 and incorporated herein by reference.
 (9)    Previously filed with the Company's Registration Statement on Form S-3
        (Registration No. 333-09775) filed with the Securities and Exchange
        Commission on August 8, 1996 and incorporated herein by reference.
(10)    Previously filed with the Company's Registration Statement on Post
        Effective Amendment No. 1 to Form S-8 (Registration No. 33-94798) filed
        with the Securities and Exchange Commission on August 28, 1995 and
        incorporated herein by reference.
(11)    Previously filed with the Company's Registration Statement on Form S-8
        (Registration No. 333-02276) filed with the Securities and Exchange
        Commission on March 12, 1996 and incorporated herein by reference.
(12)    Previously filed with the Company's Registration Statement on Form S-8
        (Registration No. 333-22307) filed with the Securities and Exchange
        Commission on February 25, 1997 and incorporated herein by reference.

                                       29
<PAGE>
 
(13)    Incorporated by reference to Note 6 of Item 8 - Financial Statements of
        this Form 10-K
(14)    Previously filed with the Company's Annual Report on Form 10-K for the
        year ended December 31, 1995.
(15)    Previously filed with the Company's Annual Report on Form 10-K for the
        year ended December 31, 1996.

(b)  Reports on Form 8-K:
        None.

                                       30
<PAGE>
 
                                  SIGNATURES

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

                                    COLUMBUS REALTY TRUST
                                    (Registrant)

May 23, 1997                        /s/  ROBERT L. SHAW
                                    -----------------------
                                    Chief Executive Officer

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
Name                               Position                Date
----                               --------                ----     
 
/s/  RICHARD L. BLOCH     Trust Manager and            May 23, 1997
------------------------
Richard L. Bloch          Chairman of the Board
 
/s/  ROBERT L. SHAW       Trust Manager and            May 23, 1997
------------------------
Robert L. Shaw            Chief Executive Officer
 
/s/  WILL CURETON         Trust Manager and            May 23, 1997
------------------------
Will Cureton              Chief Operating Officer
 
/s/  ROGER T. STAUBACH    Trust Manager                May 23, 1997
------------------------
Roger T. Staubach
 
/s/  RICHARD R. REUPKE    Chief Financial Officer and  May 23, 1997
------------------------
Richard R. Reupke         Secretary
 
/s/  JAMES C. LESLIE      Trust Manager                May 23, 1997
------------------------
James C. Leslie
 
/s/  AMY DIGESO           Trust Manager                May 23, 1997
------------------------
Amy DiGeso
 
/s/  HUGH G. ROBINSON     Trust Manager                May 23, 1997
------------------------
Hugh G. Robinson
 
/s/  GREGG L. ENGLES      Trust Manager                May 23, 1997
------------------------
Gregg L. Engles

                                       31
<PAGE>
 
                         INDEX TO FINANCIAL STATEMENTS
 
 
Columbus Realty Trust
 
  Report of Independent Auditors                          F-2
                                                    
 
  Consolidated Financial Statements:
 
     Consolidated Balance Sheets as of
      December 31, 1996, and December               
      31, 1995                                            F-3
 
  
     Consolidated Statements of
      Operations for the years ended                
      December 31, 1996, 1995 and 1994                    F-4
 
 
     Consolidated Statements of
      Shareholders' Equity for the years
      ended December 31, 1996, 1995 and
      1994                                                F-5
 
     Consolidated Statements of Cash
      Flows for the years ended
      December 31, 1996, 1995 and 1994                    F-6
 
 
     Notes to Consolidated Financial
      Statements                                          F-7
 
 
  Supplementary Data:
     Schedule III - Real Estate
     Investments and Accumulated       
     Depreciation                                         F-24
 
 
     Notes to Schedule III - Real
      Estate Investments and             
      Accumulated Depreciation                            F-27
 
 

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, and therefore have been omitted.

                                      F-1
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS

Board of Trust Managers
Columbus Realty Trust


We have audited the accompanying consolidated balance sheets of Columbus Realty
Trust as of December 31, 1996, and 1995 and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. Our audits also included the financial
statement schedule of Columbus Realty Trust listed in the Index referenced at
Item 14(a). These financial statements and schedule are the responsibility of
management of Columbus Realty Trust. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Columbus Realty Trust as of December 31, 1996, and 1995 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.



                                                               ERNST & YOUNG LLP



Dallas, Texas
January 28, 1997, except for
 Note 15, as to which the date
 is March 7, 1997

                                      F-2
<PAGE>
 
                             COLUMBUS REALTY TRUST
                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)
<TABLE>
<CAPTION>
 
                  ASSETS
                                               DECEMBER 31,
                                        -------------------------
                                            1996           1995
                                        -------------------------
<S>                                     <C>             <C>
Real estate:
  Land                                    $ 54,399       $ 48,104
  Buildings and improvements               285,104        232,428
  Furniture, fixtures, and equipment         4,696          4,433
  Construction-in-progress                  55,614         50,081
                                        -------------------------
                                           399,813        335,046
  Less accumulated depreciation             40,492         31,667
                                        -------------------------
  Real estate held for investment          359,321        303,379
  Real estate held for sale                  3,980              -
                                        -------------------------
                                           363,301        303,379
 
Cash and cash equivalents                    2,641         10,754
Restricted cash                                554            470
Accounts receivable                            663            861
Receivables from affiliates                    152            418
Deferred assets, net of accumulated
 amortization of $1,112 and $932              
 at December 31, 1996 and 1995,
 respectively                                  420            454
Deferred financing costs, net of
 accumulated amortization of $2,197 and     
 $1,438 at December 31, 1996 and 1995,
 respectively                                1,316          1,795
Other assets                                 5,529          2,845
                                        -------------------------
Total assets                              $374,576       $320,976
                                        =========================
 
          LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Notes payable                           $179,855       $145,492
  Accrued dividends                              -          4,322
  Accounts payable and accrued expenses      3,536          4,912
  Accrued interest                             288            292
  Accrued property taxes                     6,727          5,203
  Tenant security deposits                   1,671          1,273
  Prepaid rent                                 358            592
  Minority interest                          2,063          2,063
                                        -------------------------
Total liabilities                          194,498        164,149
Shareholders' equity:
  Preferred shares, $.01 par value;
   10,000,000 shares authorized;
   none issued or outstanding                    -              -
  Common shares, $.01 par value;
   100,000,000 shares authorized;
   13,059,137 and 11,524,618 shares
    issued at December 31, 1996                
   and 1995, respectively                      131            115
  Additional paid-in capital               206,564        176,061
  Retained earnings (deficit)              (26,611)       (19,343)
                                        -------------------------
 
                                           180,084        156,833
  Less 900 common shares in treasury,
   at cost                                       6              6
                                        -------------------------
 
Total shareholders' equity                 180,078        156,827
                                        -------------------------
Total liabilities and shareholders'       
 equity                                   $374,576       $320,976
                                        =========================
</TABLE> 
     The accompanying notes are an integral part of the financial statements.

                                      F-3
<PAGE>
 
                             COLUMBUS REALTY TRUST

                     CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                (In thousands, except share and per share data)
<TABLE>
<CAPTION>
 
 
                                             1996         1995         1994
                                        --------------------------------------
 
<S>                                       <C>          <C>          <C>
Revenues:
 Rental                                   $    45,910  $    39,023  $   28,963
 Property management                              298          479         640
 Interest and other                             2,322        1,749       1,278
                                        --------------------------------------
Total revenues                                 48,530       41,251      30,881
 
Expenses:
 Repairs and maintenance                        3,573        3,117       2,346
 Other property operating                       2,504        1,976       1,493
 Advertising                                      723          551         366
 General and administrative - properties        3,183        2,754       2,405
 General and administrative - corporate         2,073        2,057       1,841
 Real estate taxes                              6,382        5,025       3,687
 Interest                                       7,884        5,596       2,848
 Interest related to amortization of                           515
  deferred financing costs                        393                      474
 
 Depreciation and amortization                 10,603        9,232       6,660
                                        --------------------------------------
Total expenses                                 37,318       30,823      22,120
                                        --------------------------------------
 
Income from operations                         11,212       10,428       8,761
   Gain on sale of real estate                    246            -           -
                                        --------------------------------------
Net income                                $    11,458  $    10,428  $    8,761
                                        ======================================
 
Net income per common share, primary
 and fully diluted:
 Income from operations                         $0.92        $0.90       $0.89
  Gain on sale of real estate                    0.02            -           -
                                        --------------------------------------
 Net income                                     $0.94        $0.90       $0.89
                                        ======================================
 
 
Weighted average number of common shares
 outstanding (including common share
  equivalents):
 Primary                                   12,099,291   11,536,110   9,832,417
 Fully diluted                             12,142,069   11,556,269   9,845,759
</TABLE>
      The accompanying notes are an integral part of the financial statements.

                                      F-4
<PAGE>
 
                             COLUMBUS REALTY TRUST

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                       (In thousands, except share data)
<TABLE>
<CAPTION>
 
 
 
                               Common Shares                                           Treasury Shares
                           --------------------                                  --------------------------
                                                                 Retained                                            Total 
                               Number               Paid-in      Earnings           Number of                    Shareholders'
                             of Shares     Amount   Capital      (Deficit)           Shares        Amount            Equity
                           -------------------------------------------------------------------------------------------------------
 
<S>                          <C>           <C>    <C>            <C>                  <C>          <C>      <C>
Balance at December 31,                    
 1993                         8,500,084    $ 85   $121,722       $ (6,347)                 -       $ -            $115,460 
 Dividends declared                   -       -          -        (14,962)                 -         -             (14,962)
Net adjustments to                            
 purchase price                       -       -       (103)             -                  -         -                (103)
Issuance of common shares,
 net of offering costs        2,900,000      29     52,435              -                  -         -              52,464
 
Issuance of common shares
 under employee plan             13,200       -        245              -                  -         -                 245
 
Repurchase of common shares           -       -          -              -                900        (6)                 (6)
Net income                            -       -          -          8,761                  -         -               8,761
                             ---------------------------------------------------------------------------------------------
Balance at December 31,                     
 1994                        11,413,284     114    174,299        (12,548)               900        (6)            161,859

Dividends declared                    -       -          -        (17,223)                 -        -              (17,223)
Issuance of common shares
 under employee and                            
 shareholder plans              112,234       1      1,762              -                  -        -                1,763
Net income                            -       -          -         10,428                  -        -               10,428
                             --------------------------------------------------------------------------------------------- 
Balance at December 31,                     
 1995                        11,525,518     115    176,061        (19,343)               900       (6)             156,827 
 
Dividends declared                    -       -          -        (18,726)                 -        -              (18,726)
Issuance of common
 shares, net                                  
 of offering costs            1,166,600      12     23,477              -                  -        -               23,489
Issuance of common shares
 under employee and             
 shareholder plans              352,019       4      6,762              -                  -        -                6,766
Option exercise                  15,000       -        264              -                  -        -                  264
Net income                            -       -          -         11,458                  -        -               11,458
                             ---------------------------------------------------------------------------------------------
Balance at December 31,      
 1996                        13,059,137    $131   $206,564       $(26,611)               900      $(6)            $180,078
                             ============================================================================================= 
 
</TABLE>
     The accompanying notes are an integral part of the  financial statements.

                                      F-5
<PAGE>
 
                             COLUMBUS REALTY TRUST

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                (In thousands)
<TABLE>
<CAPTION>
 
                                                    1996       1995        1994
                                                ---------------------------------
<S>                                             <C>        <C>        <C>
OPERATING ACTIVITIES
Net income                                      $ 11,458   $ 10,428   $   8,761
Adjustments to reconcile net income to
 net cash provided by operating
 activities:
  Depreciation and amortization                   10,603      9,232       6,660
  Amortization of deferred financing                 
   costs                                             393        515         474
  Gain on sale of real estate                       (246)         -           -
  Noncash compensation expense related
   to issuance of shares to employees                  -          -         245
 
  Net effect of changes in operating              
   assets and liabilities                         (2,791)     2,248       3,380
                                               ---------------------------------
Net cash provided by operating                    
 activities                                       19,417     22,423      19,520
 
INVESTING ACTIVITIES
Acquisition of properties                         (7,095)    (6,648)    (84,862)
Acquisition of ownership interests in                  
 predecessors                                          -          -        (103)
Payment of construction costs                    (58,592)   (54,322)    (20,465)
Proceeds from sale of real estate                    520          -           -
Improvements to real estate investments           (2,214)    (3,331)     (2,638)
Purchase of furniture, fixtures, and                
 equipment                                          (312)      (605)       (933)
Increase in restricted cash                          (84)       (31)       (439)
                                               ---------------------------------
Net cash used in investing activities            (67,777)   (64,937)   (109,440)
 
FINANCING ACTIVITIES
Net proceeds from offerings of common             
 shares                                           23,915          -      53,114
Proceeds from employee and shareholder             
 plans                                             5,810      1,188           -
Payment of offering costs                           (513)      (231)     (2,132)
Proceeds from notes payable                       59,206    118,342     103,813
Payment of financing costs                          (280)    (1,180)     (1,170)
Payment of notes payable                         (24,843)   (52,174)    (52,552)
Payment of dividends                             (23,048)   (17,181)    (10,682)
Purchase of treasury stock                             -          -          (6)
                                                --------------------------------
Net cash provided by financing                    
 activities                                       40,247     48,764      90,385
                                                --------------------------------
 
Net (decrease) increase in cash and               
 cash equivalents                                 (8,113)     6,250         465
Cash and cash equivalents at beginning            
 of period                                        10,754      4,504       4,039
                                               ---------------------------------
 
Cash and cash equivalents at end of       
 period                                          $  2,641   $ 10,754   $   4,504
                                               =================================
 
Supplemental cash flow information:
  Interest payments, including $5,148,
   $3,072 and $941 capitalized in 1996, 
   1995 and 1994, respectively                   $ 13,036   $  8,619   $   3,555
 
Noncash investing and financing
 activities:
  Issuance of shares under employee              
   plans                                         $  1,305   $    807   $       -
  Contribution of land                           $      -   $  2,063   $       -
</TABLE>

     The accompanying notes are an integral part of the financial statements.

                                      F-6
<PAGE>
 
                             COLUMBUS REALTY TRUST

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1996

1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND FORMATION

Columbus Realty Trust (the Company) was organized as a Texas real estate
investment trust on October 12, 1993, to continue the multifamily operations of
Columbus Realty Holdings, Inc. (CRH) and certain of its affiliates and
predecessors (collectively, the Columbus Group). The Company commenced
operations December 29, 1993, upon completion of an initial public offering of
6,898,566 common shares at a price of $17.25 per share.

Net proceeds from the public offering were approximately $111.6 million before
offering costs. In connection with the offering, the Company drew $15 million on
a credit facility agreement (the Credit Facility, more fully described in Note
5), for total proceeds of approximately $126.6 million. The proceeds were
primarily used to pay off mortgage notes payable and the related debt prepayment
penalties of the Columbus Group and of Texana-RAT II Associates, Inc. and
certain of its affiliates (collectively, the Texana Group), and for the
acquisition of the ownership interests in certain properties of the Columbus
Group and the Texana Group (collectively, the predecessors to Columbus Realty
Trust).

Upon consummation of the public offering, the ownership interests of the
predecessors to Columbus Realty Trust in twelve multifamily residential
properties, two industrial properties and one retail property were transferred
to the Company. The properties are located primarily in the greater Dallas,
Texas, metropolitan area. In addition, the property management contracts of
affiliates of the predecessors to Columbus Realty Trust were transferred to
Columbus Management Services, Inc. (CMSI), a wholly owned subsidiary of the
Company. CMSI manages the properties of the Company, as well as properties owned
by other parties.

The ownership interests, with a net book value of approximately $17.0 million,
and the property management contracts were acquired for a purchase price of
approximately $16.2 million, plus 1,601,518 common shares and options for
100,000 shares at an option price of $19.8375 per share.

For financial reporting purposes, the ownership interests acquired were recorded
by the Company at their historical values, with the exception of the payments
made to the third-party owners, which have been accounted for under the purchase
method of accounting. The payments made to third-party owners have been
allocated to the related real estate based on their estimated fair values.

CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of the Company and
its subsidiaries, CMSI, and Addison Circle One, Ltd. The formation of Addison
Circle One, Ltd. is more fully discussed in Note 3. All significant intercompany
transactions and accounts have been eliminated. Certain prior year financial
statement amounts have been reclassified to conform with current year
presentation.

USES OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statement and accompanying notes.
Actual results could differ from those estimates.

                                      F-7
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (CONTINUED)

INCOME TAXES

The Company has made an election to be taxed as a real estate investment trust
(REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the Code). As a REIT, the Company generally is not subject to federal
income tax to the extent it distributes at least 95% of its REIT taxable income
to its shareholders. Shareholders are taxed on dividends declared and must
report such dividends as either ordinary income, short term gains, long term
gains, or as return of capital. No provision for federal income taxes has been
included in the Company's financial statements as of December 31, 1996, 1995, or
1994 (see Note 6).

If the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain state
and local taxes on its income and property and to federal income and excise
taxes on its undistributed income.

Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting purposes
due to differences for federal tax purposes in the estimated useful lives used
to compute depreciation and the carrying value (basis) of the investment in
properties.

REVENUE RECOGNITION

Rental income attributable to residential leases is recorded when due from
residents. Rental income from the industrial and retail properties is recognized
on a straight-line basis over the term of the related lease.

REAL ESTATE ASSETS AND RELATED DEPRECIATION

Real estate assets held for investment are stated at depreciated cost unless the
asset is determined to be impaired. The Company records impairment losses on its
real estate assets when events and circumstances indicate that the assets might
be impaired and the expected undiscounted cash flows are less than the carrying
amounts of those assets. In cases where the Company does not expect to recover
its carrying costs, the Company reduces its carrying costs to fair value. No
such impairment losses have been recognized to date.

Real estate assets held for sale are stated at the lower of depreciated cost, or
fair market value less selling costs at the date the Company begins marketing
efforts to sell the properties. The Company records impairment losses on real
estate investments held for sale if the Company determines the fair market value
less selling costs is less than depreciated cost. No such impairment losses on
real estate held for sale have been recognized to date. In 1996, the Company
began marketing efforts with respect to certain of its condominium units (see
Note 4). No depreciation of the real estate assets held for sale has been
recognized since the inception of marketing efforts for the properties.

                                      F-8
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (CONTINUED)

REAL ESTATE ASSETS AND RELATED DEPRECIATION (CONTINUED)

Costs related directly to the acquisition, development and improvement of real
estate, including tenant improvements on the industrial and retail properties,
are capitalized. Interest costs incurred during construction periods are
capitalized.

Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterments are capitalized and depreciated over their estimated useful
lives. Depreciation is computed on a straight-line basis over the expected
useful lives of depreciable property, which is generally 15 to 40 years for
buildings and improvements, and 5 to 7 years for furniture, fixtures and
equipment.

Costs incurred in connection with resident turnover such as unit cleaning,
painting, carpet cleaning or replacement, appliance replacement, and other
associated costs are expensed as incurred.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less.

RESTRICTED CASH

Restricted cash includes an escrow account established for property taxes on a
property and a construction deposit for public infrastructure improvements made
on one of the Company's development projects.

DEFERRED ASSETS

Deferred assets include costs incurred in obtaining tenant leases at the
Company's industrial and retail properties. Such costs are amortized over the
term of the related lease using the straight-line method.

DEFERRED FINANCING COSTS

Loan origination costs and commitment fees are deferred and amortized on a
straight-line basis, which approximates the effective interest method, over the
initial term of the related note payable.

STOCK COMPENSATION

The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and intends to continue to do so. See Note 7 for a
discussion of the Company's stock compensation arrangements and pro forma
disclosure of the effect on income from operations and earnings per share of
such arrangements pursuant to the requirements of Financial Accounting Standards
Board Statement 123, Accounting for Stock-Based Compensation (SFAS 123).

                                      F-9
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (CONTINUED)

CONCENTRATIONS

The Company invests primarily in multifamily residential properties. At December
31, 1996, the Company owned 26 multifamily residential properties, two
industrial properties, one retail property, one development site, and had five
multifamily residential properties under development. All but three of these
properties are located in the Dallas, Texas, metropolitan area. The multifamily
residential industry is highly competitive and the Company competes with other
REITs as well as other real estate owners and developers with respect to the
acquisition of land for development and the acquisition of existing multifamily
residential properties. In addition the Company's properties compete with other
multifamily residential properties for residents. The Company believes that the
location and quality of its multifamily residential properties, the management
services and amenities provided to residents, and its long-term commitment to
the ownership of its properties and to its surrounding communities are the
principal competitive factors affecting its real estate investments.

2.  REAL ESTATE

YEAR ENDED DECEMBER 31, 1996

ACQUISITIONS OF DEVELOPMENT SITES

The Company purchased four multifamily residential development sites in the year
ended December 31, 1996. All of the acquisitions were funded through the
Company's Credit Facility more fully described in Note 5.

Two development sites were purchased in the Uptown district of Dallas, Texas,
for an aggregate purchase price of approximately $5.2 million in January 1996.
Construction of a 196-unit multifamily residential project, The Heights of
State-Thomas, began on one of the sites in the fourth quarter of 1996.
Development of the second site is expected to begin in 1997. A third multifamily
development site in the Uptown district was acquired in July 1996 for
approximately $1.3 million. Construction of a 186-unit multifamily residential
project, Cole's Corner, began on this site in August 1996.

The Company acquired a multifamily residential development site in Jackson,
Mississippi, for approximately $620,000 in February 1996. Construction of a 240-
unit multifamily residential project, Columbus Pointe, began on this site in the
second quarter of 1996.

COMPLETED CONSTRUCTION

The Company completed construction of five multifamily residential projects
during the year ended December 31, 1996. The aggregate development and
construction costs of the projects as set forth in the table below have been
reclassified from construction in progress to buildings and improvements in the
Company's consolidated financial statements as of December 31, 1996.

                                      F-10
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996
2.  REAL ESTATE (CONTINUED)

COMPLETED CONSTRUCTION (CONTINUED)
<TABLE>
<CAPTION>
 
                                     Number                          Development/Construction
    Project Name       Location     of Units     Completion Date               Cost
    ------------       --------     --------     ---------------               ----           
<S>                   <C>           <C>          <C>                 <C>
                                                                          (in thousands)
Hackberry Creek II    Dallas, TX       192       April 1996                  $ 9,617
The Abbey             Dallas, TX        34       April 1996                    4,364
The Vineyard          Dallas, TX       116        May 1996                     7,418
Winsted Village       Dallas, TX       314       August 1996                  15,881
Columbus Square       Dallas, TX       218     September 1996                 18,120
                                       ---                                    -------
                                       874                                    $55,400
                                       ===                                    =======
</TABLE>
YEAR ENDED DECEMBER 31, 1995

ACQUISITIONS

In March 1995 the Company acquired a 160-unit multifamily residential property
known as The Parks, located in Coppell, Texas. The purchase price of
approximately $6.6 million was funded through the Company's Credit Facility.

The Company acquired two condominium units in the Ascension Point Phase I
condominium community located in Arlington, Texas, during the year ended
December 31, 1995, for purchases prices totaling $98,000. The purchases were
funded from the Company's cash reserves.

COMPLETED CONSTRUCTION

The Company completed construction of three apartment projects during the year
ended December 31, 1995, as set forth in the table below.
<TABLE>
<CAPTION>
 
                                       Number                         Development/Construction
    Project Name       Location       of Units     Completion Date             Cost
    ------------       --------       --------     ---------------             ----            
<S>                   <C>             <C>          <C>                <C>
                                                                           (in thousands)
Trace II              Jackson, MS        204        January 1995             $ 7,488
Uptown Village        Dallas, TX         300          May 1995                13,144
Ascension Point II    Dallas, TX          86       September 1995              4,598
                                         ---                                  -------
                                         590                                 $25,230
                                         ===                                  =======
</TABLE>
3.  REAL ESTATE JOINT VENTURE

In December 1995 the Company executed a partnership agreement with Gaylord
Properties, Inc. for the development and construction of a 460-unit multifamily
and retail development to be known as Addison Circle One. The partnership,
Addison Circle One, Ltd., was formed pursuant to a master development agreement
between the Company and Gaylord Properties, Inc. The Company paid an affiliate
$150,000 in January 1996 upon formation of Addison Circle One, Ltd. See Note 10.

                                      F-11
<PAGE>
 
                             COLUMBUS REALTY TRUST

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

3.  REAL ESTATE JOINT VENTURE (CONTINUED)

The Company, as general partner in Addison Circle One, Ltd. made an initial
capital contribution of approximately $8.6 million to the partnership, funded
through the Company's Credit Facility. Gaylord Properties, Inc., as limited
partner, contributed the development site valued at $2.1 million to the
partnership. The limited partner contribution has been reflected in the
Company's consolidated financial statements as a minority interest. The assets
and liabilities of Addison Circle One, Ltd. have been consolidated in the
Company's consolidated balance sheets as of December 31, 1996, and 1995. The
formation and operations of Addison Circle One, Ltd. had no effect on the
Company's statements of operations for the years ended December 31, 1996, and
1995.

The Company is solely responsible for the operation of the partnership,
construction and development of Addison Circle One, and management of the
property upon completion. Construction on Addison Circle One began in January
1996. Addison Circle One, Ltd., obtained a $21.3 million construction loan for
the unfunded projected development costs in June 1996, as more fully described
in Note 5.

4.  REAL ESTATE HELD FOR SALE

In June 1996 the Company began marketing efforts to sell 130 condominium units
owned by it in the Springstead and Villas of Valley Ranch condominium
communities located in Dallas, Texas. The aggregate net book value of the
condominium properties totaling approximately $4.0 million has been classified
as real estate held for sale in the Company's consolidated financial statements
as of December 31, 1996.

Six units in the Villas of Valley Ranch condominium community were sold during
the year ended December 31, 1996, for net proceeds of $433,000 resulting in a
net gain of approximately $246,000.

5.  NOTES PAYABLE

CREDIT FACILITY

The Company's $170 million Credit Facility is secured by a first mortgage and
assignment of rents on all of the Company's real estate portfolio, except for
the Lakeside Village Apartments and nine properties securing a loan from
Nationwide Life Insurance Company, more fully described below. The Credit
Facility, as amended in February 1995 and March 1996, bears interest at LIBOR
(5.50% at December 31, 1996) plus 165 basis points on completed property debt
and LIBOR plus 205 basis points on development property debt. When the Credit
Facility matures on December 31, 1997, the Company will be required to secure
substitute financing for the balance then outstanding.

Approximately $118.0 million and $84.7 million was outstanding under the Credit
Facility at December 31, 1996, and 1995, respectively. The unused commitment
under the Credit Facility at December 31, 1996, was approximately $52.0 million.
The Company's weighted average borrowing rates during 1996 were 7.10% on
completed property debt and 7.53% on development debt. The Company's weighted
average borrowing rates during 1995 were 7.78% on completed property debt and
8.22% on development debt. The Company's ability to draw amounts under the
Credit Facility from time to time is subject to the satisfaction of certain
conditions. The payment of dividends and capital share repurchases are
restricted to 90% of funds from operations, as defined by NAREIT, plus net
taxable gain from the sale of properties.

                                      F-12
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

5.  NOTES PAYABLE  (CONTINUED)

CREDIT FACILITY (CONTINUED)

The Credit Facility requires the Company to maintain a minimum level of tangible
net worth and also to meet specified ratios of liabilities to market
capitalization, liquid assets and debt to market capitalization.

CONSTRUCTION LOAN

In June 1996 Addison Circle One, Ltd., an affiliated partnership, the majority
interest of which is held by the Company, obtained a $21.3 million construction
loan from Wells Fargo Realty Advisors Funding, Inc. (Wells Fargo). The loan will
be funded in increments corresponding to the development and construction costs
incurred to complete the Addison Circle One multifamily residential and retail
project more fully described in Note 3.

The Wells Fargo loan is secured by a first lien deed of trust on the land and
improvements comprising the project and a security interest in its rents and
leases. Interest is due and payable monthly at LIBOR plus 165 basis points
applied to the daily principal balance outstanding (7.27% at December 31, 1996).
The loan matures in June 1999 when the principal balance then outstanding is
due. Approximately $1.9 million had been drawn on the construction loan as of
December 31, 1996.

MORTGAGE LOANS

In November 1995, $50 million of variable rate debt outstanding under the Credit
Facility was retired when the Company closed on a $50 million loan from
Nationwide Life Insurance Company (Nationwide). The 7.45% fixed-rate loan
(principal balance of approximately $49.3 million at December 31, 1996) is
collateralized by nine completed multifamily residential properties. Regular
principal payments required to amortize the note are $768,000 in 1997, $828,000
in 1998, $892,000 in 1999, $960,000 in 2000, approximately $1.0 million in 2001,
and approximately $1.0 million in 2002 until the note's maturity in November
2002 when the scheduled unpaid principal balance of approximately $43.8 million
is due.

The Company obtained approximately $11 million in financing from an unaffiliated
third party in connection with the purchase of the Lakeside Village Apartments
in May 1994. The note payable (principal balance of approximately $10.7 million
at December 31, 1996) bears interest at 7% per annum, requires monthly payments
of principal and interest, and matures in May 1999 when the scheduled unpaid
principal balance of approximately $10.4 million is due. Regular principal
payments required to amortize the note are $133,000 in 1997, $143,000 in 1998,
and $62,000 in 1999.

6.  SHAREHOLDERS' EQUITY

Common shareholders are entitled to one vote for each share held on all matters
presented for a vote of shareholders. There is no right of cumulative voting in
connection with the election of Trust Managers. Shareholders are entitled to
receive pro rata, such dividends, if any, as may be declared by the Board of
Trust Managers in their discretion from funds legally available. Upon
liquidation or dissolution, shareholders are entitled to share ratably in all
assets available for distribution to shareholders, subject to the rights of the
holders of the Company's creditors and to the rights of any preferred class of
the Company's securities (if any are outstanding). The common shareholders have
no redemption, preference, conversion, exchange or preemptive rights to
subscribe to any securities of the Company. The common shares issued are fully
paid and non-assessable.

                                      F-13
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

6.  SHAREHOLDERS' EQUITY (CONTINUED)

For the Company to qualify as a REIT under the Code, not more than 50% in value
of its outstanding common shares may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include pension funds and
certain other tax-exempt entities) during the last half of a taxable year, and
such shares must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months, or during a proportionate part of a
shorter taxable year. The Company's Declaration of Trust provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 9.8% of the total outstanding shares, subject to certain
exceptions.

EQUITY OFFERINGS

The Company sold 2,700,000 common shares in a second public offering in July
1994, receiving net proceeds of approximately $48.8 million after underwriting
commissions and offering costs. In August 1994, the Company received
approximately $3.8 million for an additional 200,000 shares sold pursuant to the
underwriters' exercise of a portion of an overallotment option. The aggregate
net proceeds of approximately $52.6 million were used to repay a portion of the
indebtedness then outstanding on the Company's Credit Facility.

In January 1995 the Company registered for resale 1,940,618 restricted common
shares issued in connection with the formation of the Company with the
Securities and Exchange Commission. Approximately $78,000 was incurred for legal
and accounting fees related to the registration, and has been reflected in the
Company's financial statements as additional paid in capital.

The Company registered an aggregate of $200 million of debt securities, common
shares, preferred shares and warrants (collectively, the Registered Securities)
pursuant to a "shelf" Registration Statement with the Securities and Exchange
Commission in August 1996. The Registered Securities may be issued separately or
together, in separate series, and in amounts and at prices and terms to be
determined by the Company. In October 1996 the Company completed the sale of
1,166,600 of the Registered Securities to certain institutional investors. The
Company received net proceeds of approximately $23.5 million after expenses from
the sale of such common shares for $20.50 per share. The proceeds were used to
repay a portion of the Company's indebtedness under the Credit Facility.

INCOME PER SHARE

Income per share has been computed by dividing net income by the weighted
average number of common shares and dilutive common share equivalents
outstanding during the periods presented. In years in which there are no
earnings, common share equivalents are not included in the computation as they
are anti-dilutive.

                                      F-14
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

6.  SHAREHOLDERS' EQUITY (CONTINUED)

DIVIDENDS

During the year ended December 31, 1996, the Company modified its policy
regarding the timing of its declaration and payment of quarterly dividends such
that dividends will be declared and paid in the same calendar quarter. The
following table presents the sources of the four quarterly dividends declared
during the year ended December 31, 1996 on a per common share basis. The
characterization of the dividends for federal income tax purposes has been
allocated based upon the earnings and profits of the Company for the year ended
December 31, 1996.

<TABLE>
<CAPTION>
 
                                                                               Long-term    
                                                  Ordinary         Return       Capital     Total 
     Record                      Payment           Income        of Capital       Gain      Dividend
      Date                         Date            (63.3%)        (35.1%)        (1.6%)      (100%)
---------------------------------------------------------------------------------------------------
<S>                           <C>                <C>         <C>           <C>             <C> 
March 25, 1996                 April 15, 1996      $0.237        $0.132          $0.006      $0.375
June 28, 1996                   July 15, 1996       0.250         0.139           0.006       0.395
September 30, 1996            October 15, 1996      0.250         0.139           0.006       0.395
December 23, 1996             December 26, 1996     0.250         0.139           0.006       0.395
                                                 --------------------------------------------------
                                                   $0.987        $0.549          $0.024      $1.560
                                                 --------------------------------------------------
</TABLE> 
 
DIVIDEND REINVESTMENT PLAN

Effective with the first quarterly dividend in 1995, the Company adopted a
dividend reinvestment and share purchase plan (the Dividend Reinvestment Plan).
Under terms of the Dividend Reinvestment Plan, common shareholders are eligible
to purchase the Company's common shares directly from the Company with all or
any portion of the quarterly dividend for a purchase price of 95% of the then
current market price for the shares. Shareholders may also make additional cash
purchases of additional shares on the same terms, not to exceed $10,000 per
quarter, subject to certain other limitations. Under the Dividend Reinvestment
Plan, the Company issued 276,762 common shares for net proceeds of approximately
$5.4 million in the year ended December 31, 1996, and 63,669 common shares for
net proceeds of approximately $1.0 million in the year ended December 31, 1995.

7.  SHARE OPTION PLANS

In connection with the initial public offering, the Company established the
Columbus Realty Trust 1993 Share Option Plan (the Share Option Plan). A maximum
of 1,400,000 common shares were reserved for issuance under the Share Option
Plan which provides for the grant of incentive and nonqualified options. The
plan provides for the right of an option holder to elect to receive, in lieu of
common shares issuable upon exercise of the option, cash or common shares equal
to the excess of the market price of the common shares over the exercise price
for such common shares. The share options are exercisable beginning six months
from the date they are granted and are exercisable over a period determined by
the Plan Administrators, but no longer than ten years after the date they are
granted. All common share options authorized under the plan were granted as of
December 31, 1996.

                                      F-15
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

7.  SHARE OPTION PLANS (CONTINUED)

In January 1996 the Company established the Long-Term Management Incentive Plan
(Management Incentive Plan) pursuant to which the Plan Administrators are
authorized to award 500,000 common shares in the form of share options, share
purchase awards and restricted and unrestricted share awards under such terms as
allowed in the plan. Pursuant to the Management Incentive Plan, the Company
awarded 228,876 nonqualified options to employee and non-employee Trust
Managers, executives and employees in the year ended December 31, 1996.

Additionally, 260,000 common shares were reserved for issuance pursuant to
performance based share performance awards to certain executive officers and
11,124 common shares were awarded as share bonuses as described in Note 8.

The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method of that statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model and the following assumptions: a dividend yield of 7.826%
and a volatility factor of 0.165 based on the average monthly closing price of
the Company's common shares since inception (December 29, 1993), risk free
interest rates ranging from 5.80% to 6.89% corresponding to the expected lives
of the grants, and expected lives generally corresponding to the terms of the
grants (weighted average of approximately nine years).

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of the pro forma disclosures required by SFAS 123, the estimated
fair value of options granted after December 31, 1994, is amortized to expense
over the options' vesting periods. SFAS 123 does not require pro forma
presentation for the year ended December 31, 1994, or earlier. The Company's pro
forma information follows (in thousands except for share and per share data):

<TABLE>
<CAPTION>
                                          Year Ended December 31,
                                             1996         1995
                                        --------------------------
<S>                                     <C>            <C>
Pro forma net income                      $    11,162  $    10,369
 
Pro forma earnings per share              $      0.91  $      0.90
Pro forma fully diluted weighted
 average number of common                         
 shares outstanding                        12,221,123   11,557,721
</TABLE>

                                      F-16
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


7.  SHARE OPTION PLANS (CONTINUED)

SUMMARY OF SHARE OPTION ACTIVITY
<TABLE>
<CAPTION>
 
                                 Number of Options,      Number of Options,      Number of              Total
                                  Share Option Plan       Incentive  Plans       Options, Other        Options
                                 --------------------------------------------------------------------------------------
 <S>                             <C>                       <C>                    <C>                   <C> 
Outstanding, December 31, 1993       860,000   (a)                 -               340,000  (b)         1,200,000
Options granted                       50,000   (c)                 -                     -                 50,000
Options exercised                          -                       -                     -                      -
Options expired                            -                       -                     -                      -
                                 --------------------------------------------------------------------------------------
Outstanding, December 31, 1994        910,000                      -               340,000               1,250,000
 
Options granted                       335,000                      -                     -                 335,000  (d)
Options exercised                           -                      -                     -                       -
Options expired                             -                      -                     -                       -
                                 -------------------------------------------------------------------------------------- 
Outstanding, December 31, 1995       1,245,000                     -               340,000               1,585,000  (e)
Options granted                        155,000                228,876                    -                 383,876  (f)
Options exercised                      (15,000)                     -                    -                 (15,000) (g)
Options expired                              -                      -                    -                       -
                                 --------------------------------------------------------------------------------------
Outstanding, December 31, 1996       1,385,000                 228,876             340,000               1,953,876  (h)
                                 ======================================================================================
</TABLE>
_________________________

(a) Option prices range from $17.25 to $17.375 per share.

(b) Granted to affiliates and non-affiliates in connection with development site
    acquisitions. Option price of $19.8375 per share.

(c) Option prices range from $17.25 to $18.375 per share.

(d) Weighted average option price of $18.60 per share. Weighted average fair
    value according to the Black Scholes option valuation model of $1.15 per
    share.

(e) Weighted average option price of $18.11 per share.

(f) Weighted average option price of $20.39 per share. Weighted average fair
    value according to the Black Scholes option valuation model of $1.20 per
    share.

(g) Weighted average option price of $17.63 per share.

(h) Weighted average option price and contractual life of $18.56 per share and
    93.8 months, respectively. Option prices range from $17.25 to $20.875 per
    share.

The number of common share options exercisable as of December 31, 1996, 1995,
and 1994 were 1,670,137; 1,363,781; and 965,442, respectively. The weighted
average option price of options exercisable at December 31, 1996, is $18.31.

8. SHARE BONUS AND INCENTIVE PLANS

The Company has established certain bonus and incentive plans for the purpose of
advancing the long term interests of the Company and its shareholders by
increasing the grantees' ownership in the Company, and providing additional
incentive to promote its success and growth.

                                      F-17
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


8.  SHARE BONUS AND INCENTIVE PLANS (CONTINUED)

During the year ended December 31, 1994, the Company issued all of the 13,200
common shares authorized for issuance under the Columbus Realty Trust 1993 Share
Bonus Plan to certain nonexecutive employees and other key personnel for a
purchase price equal to par value ($.01 per share). The difference between the
fair market value for the shares on the date issued and the purchase price was
$245,000 and was recognized as compensation expense in the Company's
consolidated financial statements for the year ended December 31, 1994.

During the years ended December 31, 1996, and 1995, pursuant to the Share Bonus
Plan and the Management Incentive Plan, the Company granted 34,085 and 17,649
restricted common shares, respectively, to certain executive officers at their
election in lieu of payment of annual base salary, such shares having fair
market values on the dates of grant of $652,000 and $333,000, respectively,
equal to 150% of the annual base salary otherwise payable. The determination to
grant common shares having a fair market value of 150% over the base salary
otherwise payable was based upon the risks of forfeiture of the shares awarded
and the other restrictions on transfer of the shares described below. In
addition, the Company granted 33,749 and 25,641 restricted common shares in the
years ended December 31, 1996 and 1995, (having fair market values on the dates
of grant of $646,000 and $474,000, respectively) to certain executive officers
and other employees as bonuses. The restricted common shares are generally
subject to forfeiture in the event of termination of the recipient's employment
with the Company within the three year period following the dates of grant, and
may not be transferred until the end of the three-year restricted periods.

Each of the restricted common shares was granted for a purchase price of $0.01
per share. The difference between the purchase prices of the common shares and
the aggregate fair market values of the common shares on the dates of grant
(approximately $1.3 million in 1996 and $807,000 in 1995) will, to the extent
such amounts are allocable to operations, be amortized as compensation expense
ratably over the three-year periods commencing on the dates of grant.
Accordingly, during the years ended December 31, 1996, and 1995, the Company did
not recognize the compensation expense which would have been recognized if such
annual base salaries and bonuses had been paid. However, for the years ended
December 31, 1996, and 1995, the Company recognized $107,000 and $45,000,
respectively, as amortization of deferred compensation expense, and $126,000 and
$89,000, respectively, as bonus expense, based upon the portion of the
amortization of the fair market values of restricted common shares granted in
1996 and 1995 allocable to operations.

In November 1996 the Company entered into performance based stock and dividend
equivalent award agreements with its Chairman of the Board, Chief Executive
Officer, and Chief Operating Officer. Under terms of the agreements, an
aggregate of 260,000 common shares could be issued to the three executive
officers in 2000 or 2002 if certain company performance criteria is met.
Additionally, such executive officers could receive dividend equivalent
payments, plus interest and reinvestment earnings, on the 260,000 common shares
annually for the period beginning in January 1997. The performance based stock
will be issued and the dividend equivalent payments will be made if the increase
in the total return on the Company's common shares for the applicable period
exceeds (by a specified amount) the weighted average total return per common
share of all publicly traded equity residential apartment REITs, as determined
by NAREIT indices.

                                      F-18
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


9.  EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK PURCHASE PLAN

On July 23, 1995, the Company established the Columbus Realty Trust Employee
Stock Purchase Plan whereby employees of the Company are eligible to purchase
common shares directly from the Company for a purchase price equal to 85% of the
current market price on the date of purchase. Employees are limited to purchases
aggregating a market value of no more than $25,000 per plan year based on the
market price on the first day of the plan year. Under the Employee Stock
Purchase Plan, the Company issued 7,423 common shares for net proceeds of
$121,000 in the year ended December 31, 1996, and 5,275 common shares for net
proceeds of $51,000 in the year ended December 31, 1995.

401(K) SAVINGS PLAN

Pursuant to Columbus Realty Trust 401(k) Savings Plan (the 401(k) Plan),
eligible employees (as defined in the 401(k) Plan) may join the 401(k) Plan on
semi-annual enrollment dates. Participants may elect to defer up to 15% of their
annual compensation to a maximum of $9,500 as pre-tax contributions to the plan
(subject to certain limitations for highly-compensated employees). The Company
has the option, but is not required, to make contributions to the 401(k) Plan.
In January 1997 the Company contributed $27,000 to the 401(k) Plan for the
benefit of participants contributing the 401(k) Plan during the six month period
ended December 31, 1996.


10. TRANSACTIONS WITH AFFILIATES

<TABLE>
<CAPTION>
Receivables from affiliates include the   
 following (in thousands):                 December 31,
                                          --------------
                                            1996   1995
                                          --------------
<S>                                       <C>    <C>
 Amounts advanced to condominium          
  homeowners' associations                 $ 54    $ 47
 Amounts advanced to non-management          
  employees                                  34      12
 Receivable from Employee Stock               
  Purchase Plan                               3       1
 Amounts advanced to affiliates in
  ordinary course of business for third       
  party property management                   6     353
 Amounts receivable from owners of
  predecessors in connection with the        
  acquisition of their interests             55       5
                                          -------------
                                           $152    $418
                                          =============
</TABLE>

The Company provides property management services in connection with the
management of certain properties owned by affiliates. Property management fee
income relating to these contracts during the years ended December 31, 1996,
1995 and 1994, was approximately $238,000, $331,000, and $379,000, respectively.
Included in management fee income from affiliates in the year ended December 31,
1996, is $197,000 attributable to the Madison Office Building (The Madison),
which the affiliates sold in January 1996. The Company received a marketing fee
of $50,000 pursuant to the sale.

                                      F-19
<PAGE>
 
                             COLUMBUS REALTY TRUST
                            
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996


10. TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Company paid approximately $160,000 and $106,000 in rent for office space at
The Madison in the years ended December 31, 1995 and 1994, respectively. The
Company continues to occupy the office space at The Madison pursuant to its
lease obligation more fully described in Note 11.

In January 1996 the Company paid $150,000 to Wolverine Asset Management, Inc.,
an affiliate of a Trust Manager, for real estate advisory services in connection
with the joint development agreement with Gaylord Properties, Inc. more fully
described in Note 14.

The Company entered into certain note purchase agreements pursuant to borrowing
arrangements between a bank and two of the Company's executive officers in the
year ended December 31, 1996, as more fully described in Note 14.

11. OPERATING LEASES

The Company receives rental income from the properties under operating leases
with terms ranging from less than one year to twenty years for the industrial
and retail properties, and less than one year for most of the residential
properties.

The minimum future rentals under operating leases for the industrial and retail
properties as of December 31, 1996, are as follows (in thousands):

<TABLE>
<CAPTION>
 
      Year Ending December 31,
      ------------------------
           <S>                         <C>
            1997                       $ 5,424
            1998                         5,052
            1999                         4,067
            2000                         1,594
            2001                         1,229
         Thereafter                      3,295
                                       -------
                                       $20,661
                                       =======
</TABLE>

Included in the rentals under operating leases is one multifamily residential
property that is subject to a master lease expiring in October 1999 with
Electronic Data Systems (EDS). EDS has an option to purchase the property at the
end of each lease year with the purchase price compounding 5% each year the
option is not exercised.

The original term of Company's lease for its corporate offices at The Madison
expired December 31, 1996, subject to three one-month renewal options. The
Company expects to exercise all three renewal options for monthly base rent
payments of approximately $15,000.

                                      F-20
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash equivalents, accounts receivable, accounts payable and accrued expenses and
other liabilities are carried at amounts that reasonably approximate their fair
values. Notes payable result from (a) draws made on the Company's Credit
Facility and the Wells Fargo loan during the years ended December 31, 1996, and
1995, which accrue interest at floating interest rates based on market rates and
(b) two first mortgage loans that accrue interest at 7.0% and 7.45%. The
carrying values of the notes payable at December 31, 1996, and 1995 reasonably
approximate their fair values.

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited results of operations for 1996,
1995, and 1994 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                              Quarter Ended
                                              -------------
                                March 31  June 30  September 30  December 31
                                --------  -------  ------------  -----------
<S>                             <C>       <C>      <C>           <C>
Year ended December 31, 1996
------------------------------
Total revenues                   $10,934  $11,762     $12,554      $13,280
Net income                         2,696    2,809       2,848        3,105
 
Per common share:
 Net income                      $  0.23  $  0.24     $  0.24      $  0.24
 
Year ended December 31, 1995
------------------------------
Total revenues                   $ 9,414  $10,271     $10,668      $10,898
Net income                         2,546    2,491       2,650        2,741
 
Per common share:
 Net income                      $  0.22  $  0.22     $  0.23      $  0.24
 
Year ended December 31, 1994
------------------------------
Total revenues                   $ 6,237  $ 7,385     $ 8,379      $ 8,880
Net income                         1,829    1,979       2,458        2,495
 
Per common share:
 Net income                      $  0.21  $  0.23     $  0.23      $  0.22
</TABLE>

14. COMMITMENTS AND CONTINGENCIES

GENERAL

The Company is subject to legal proceedings, claims and liabilities which arise
in the ordinary course of its business. In the opinion of the Company, none of
such proceedings is material in relation to the Company's consolidated financial
statements.

                                      F-21
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

14. COMMITMENTS AND CONTINGENCIES (CONTINUED)

JOINT DEVELOPMENT AGREEMENT

The Company has entered into a joint development agreement with Gaylord
Properties, Inc., to develop between 2,500 and 3,500 multifamily residential
units in Addison, Texas. The first development under the agreement, Addison
Circle One, is described in Note 3. The Company has the option, but is not
obligated, to pursue additional development activities under the joint
development agreement, subject to the agreement of Gaylord.

NOTE PURCHASE AGREEMENTS

In June 1996 the Company entered into Note Purchase Agreements (Purchase
Agreements) pursuant to loans made between Bank One, Texas, N.A. (Bank One), and
two of the Company's executive officers. The loans, in the form of credit
facilities which may be drawn upon at the discretion of the borrowers up to
maximum principal amounts of $350,000 and $300,000, are secured by pledges of
36,532 and 32,066 of the Company's common shares, respectively, owned by such
executive officers. Should an event of default occur, Bank One may require the
Company to purchase the notes for a purchase price equal to the balance then
outstanding under the terms of the note agreements. If the Company is required
to purchase the notes, the Company will obtain all rights of Bank One, as a
secured party, with respect to the common shares securing the loans. Based on
the closing market price for the Company's common shares on December 31, 1996,
of $22.75, the market value of the pledged shares was approximately $831,000,
and $730,000, respectively.

Such loans require quarterly interest-only payments beginning August 1, 1996,
and mature on June 12, 1999. Interest accrues at floating rates determined by
Bank One. The applicable interest rate in effect as of December 31, 1996, was
8.25% on principal balances outstanding under the credit facilities of $150,000
and $100,000. The borrowers were current on all obligations under the loans as
of December 31, 1996.

LETTER OF CREDIT

Addison Circle One Ltd. obtained an irrevocable standby letter of credit of
approximately $3.4 million in the year ended December 31, 1996. The letter of
credit was obtained for the benefit of the Town of Addison, Texas, as a guaranty
for payment of certain public infrastructure costs required in the construction
of the Addison Circle One multifamily residential project. As of December 31,
1996, no amounts had been drawn on the letter, which expires on June 30, 1997.

15. SUBSEQUENT EVENTS

REAL ESTATE TRANSACTIONS

On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado. The Company expects to
complete a purchase of the site when demolition of existing buildings,
remediation of the properties, and certain other conditions are met.

                                      F-22
<PAGE>
 
                             COLUMBUS REALTY TRUST

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               DECEMBER 31, 1996

15. SUBSEQUENT EVENTS (CONTINUED)

REAL ESTATE TRANSACTIONS (CONTINUED)

On February 24, 1997, the Company purchased a 158-unit multifamily residential
property known as The Commons at Turtle Creek, located in Dallas, Texas, for a
purchase price of approximately $6.9 million. The purchase was funded from the
Company's Credit Facility.

On February 27, 1997, the Company executed a forty-year land lease agreement for
a redevelopment project, The Rice Hotel, located in Houston, Texas. The Rice
Hotel is an 18-story structure originally built in 1913. Under terms of the
agreement, the Company will fund redevelopment of the hotel into a mixed-use
residential and retail facility comprised of 317 loft-style apartments and
21,000 square feet of retail space. The Company, in partnership with a Houston-
based development company, will manage all aspects of the renovation, currently
budgeted at approximately $33.3 million, and operations of the project upon
completion. The Houston Housing Finance Corporation (HHFC), owner of the land,
will fund approximately $6.6 million of abatement and infrastructure costs, and
the Company will provide the balance of the funding. Concurrently with closing
the lease agreement, the Company guaranteed a $20.0 million construction loan
for the project. The remainder of the Company's renovation costs will be funded
from draws on the Credit Facility or other short term financing.

OTHER

On February 25, 1997 the Company filed a Registration Statement on Form S-8 with
the Securities and Exchange Commission registering 1,000,000 common shares for
issuance pursuant to the Columbus Realty Trust Employee Incentive Plan.

On March 7, 1997, the Company declared a dividend of $0.395 per common share,
payable on March 25, 1997, to shareholders of record on March 21, 1997.

                                      F-23
<PAGE>
 
                             COLUMBUS REALTY TRUST
      SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                (IN THOUSANDS)
<TABLE>
<CAPTION>     
                                                                                         Gross Amount at Which                   
                                             Initial Costs       Costs        Real   Carried at Close of Period(a)               
                                            ---------------   Capitalized    Estate  ------------------------------              
                                Related            Bldgs &     Subsequent   Disposed          Bldgs &  Construction              
Description                   Encumbrances  Land  Imprvmnts  to Acquisition    Of    Land    Imprvmnts  In Progress    Total    
-------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>          <C>    <C>        <C>            <C>     <C>       <C>        <C>           <C>       
Residential Properties:                                                                                                        
---------------------------                                                                                                    
High-rise Apartments:                                                                                                          
 The Residences, Dallas, TX         (b)    $   638  $12,421      $  1,233     $ -   $   638   $ 13,654        $ -      $ 14,292  
Mid-rise Apartments:                                                                                                           
 The Abbey, Dallas, TX              (b)        385        -         4,364       -        385      4,364         -         4,749  
 Columbus Square, Dallas, TX        (b)      1,960        -        18,122       -      1,960     18,122         -        20,082  
 Lakeshore, Irving, TX              (b)      3,030   25,970         1,688       -      3,030     27,658         -        30,688  
 The Meridian, Dallas, TX           (b)      2,227        -         8,537       -      2,227      8,537         -        10,764  
 Uptown Village, Dallas, TX         (b)      2,083        -        13,244       -      2,083     13,244         -        15,327  
 The Vineyard, Dallas, TX           (b)        864        -         7,418       -        864      7,418         -         8,282  
 Winsted Village, Dallas, TX        (b)      2,642        -        15,881       -      2,642     15,881         -        18,523  
 The Worthington, Dallas, TX        (b)      3,648        -        26,200       -      3,648     26,200         -        29,848  
Garden Apartments:                                                                                                             
 Ascension Point, Arlington, TX     (b)        410    2,633           131       -        410      2,764         -         3,174  
 Ascension Point II, Arlington, TX  (b)        470        -         4,681       -        470      4,681         -         5,151  
 Hackberry Creek, Irving, TX        (b)      1,800   10,200           382       -      1,800     10,582         -        12,382  
 Hackberry Creek II, Irving, TX     (b)      1,448        -         9,617       -      1,448      9,617         -        11,065  
 Lakeside, Dallas, TX               (c)      3,066   15,084           731       -      3,066     15,815         -        18,881  
 The Mark, Jackson, MS              (d)        762   10,013           950       -        762     10,963         -        11,725  
 Parkway Village, Dallas, TX        (d)      1,020    5,936           353       -      1,020      6,289         -         7,309  
 Reflections on McCallum,           
  Dallas, TX                        (d)        903    5,231           494       -        903      5,725         -         6,628
 The Rock, Dallas, TX               (d)        696    3,304         4,909       -        696      8,213         -         8,909  
 Town Lake/The Parks,          
  Coppell,  TX                 (d), (h)      3,547    5,124         9,653       -      3,547     14,777         -        18,324 
 The Trace, Jackson, MS        (d), (i)      1,435        -        14,862       -      1,435     14,862         -        16,297  
 The Vintage, Dallas, TX            (b)      1,100        -         6,753       -      1,100      6,753         -         7,853  
 Windhaven Village, Plano, TX       (d)      3,564        -        16,183       -      3,564     16,183         -        19,747  
                                          -------------------------------------------------------------------------------------
 Total Residential Properties               37,698   95,916       166,386       -     37,698    262,302         -       300,000  
</TABLE> 

<TABLE> 
<CAPTION> 
                                                                                                Depre-   
                                                                                                ciable
                                                                                                Lives
                                             Accmltd           Date of              Date          in
                                              Deprec         Construction         Acquired      Years
                                             -------         ------------         --------      ------
<S>                                          <C>             <C>                  <C>           <C> 
Residential Properties:
-----------------------
High-rise Apartments:                                                                                                           
 The Residences, Dallas, TX                  $1,662                1987           12/93          5-27
Mid-rise Apartments:                                                                    
 The Abbey, Dallas, TX                          119          12/94-4/96            4/94          5-27
 Columbus Square, Dallas, TX                    323          12/94-9/96            4/94          5-27
 Lakeshore, Irving, TX                        2,793                1987            4/94          5-27
 The Meridian, Dallas, TX                     1,841           5/90-6/91            4/90          5-27
 Uptown Village, Dallas TX                      864           1/94-5/95            1/94          5-27
 The Vineyard, Dallas, TX                       112          12/94-5/96            4/94          5-27
 Winsted Village, Dallas, TX                    144           8/94-8/96            8/94          5-27
 The Worthington, Dallas, TX                  4,214           6/91-2/93            8/90          5-27
Garden Apartments:                                                                      
 Ascension Point, Arlington, TX                 766                1985            6/88          5-27
 Ascension Point II, Arlington, TX              246           8/94-9/95            8/94          5-27
 Hackberry Creek, Irving, TX                    967                1987            8/94          5-27
 Hackberry Creek II, Irving, TX                 262           2/95-8/96            8/94          5-27
 Lakeside, Dallas, TX                         1,622                1986            5/94          5-27
 The Mark, Jackson, MS                          963                1984           10/94          5-27
 Parkway Village, Dallas, TX                  2,108                1986            6/88          5-27
 Reflections on McCallum,                                                               
  Dallas, TX                                  1,878                1986            6/88          5-27
 The Rock, Dallas, TX                         2,637          2/88-12/88            2/88          5-27
 Town Lake/The Parks,                                                                   
  Coppell,  TX                                3,530           1/86-4/87            1/86          5-27
 The Trace, Jackson, MS                       2,775           5/88-7/89            4/88          5-27
 The Vintage, Dallas, TX                        875          1/93-10/93            1/93          5-27
 Windhaven Village, Plano,                    3,782           3/90-3/91            3/90          5-27
                                           --------
Total Residential                                         
   Properties                                34,483                       
                                                                                                                     
</TABLE>

                                      F-24
<PAGE>
 
                             COLUMBUS REALTY TRUST
      SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                (IN THOUSANDS)
<TABLE>
<CAPTION>     
                                                                                         Gross Amount at Which                   
                                             Initial Costs       Costs        Real   Carried at Close of Period(a)               
                                            ---------------   Capitalized    Estate  ------------------------------              
                                Related            Bldgs &     Subsequent   Disposed            Bldgs &   Construction              

Description                   Encumbrances  Land  Imprvmnts  to Acquisition    Of      Land    Imprvmnts  In Progress    Total    
-------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>         <C>     <C>        <C>            <C>       <C>      <C>        <C>           <C>       
Commercial Properties:
----------------------
Industrial:
 Post and Paddock, Grand          
  Prairie, TX                       (b)      859       5,021      2,418           -       859      7,439          -         8,298 
 Campus Circle, Irving, TX          (b)      417       2,861      1,231           -       417      4,092          -         4,509 
Shopping Centers:                                                                                                                 
 Towne Crossing,                                                                                                                
  Mesquite, TX                      (b)    2,341      13,727      1,300           -     2,341     15,027          -        17,368
                                         ---------------------------------------------------------------------------------------- 
Total Commercial Properties                3,617      21,609      4,949           -     3,617     26,558          -        30,175 
                                                                                                                                  
Construction-in-progress                                                                                                          
------------------------                                                                                                          
Addison Circle One,                                                                                                               
 Addison, TX                    (b),(f)    2,063           -     12,863           -     2,063          -     12,863        14,926
Coles Corner, Dallas, TX            (b)    1,290           -      3,043           -     1,290          -      3,043         4,333
Columbus Shore, Irving, TX          (b)    3,926           -     32,883           -     3,926          -     32,883        36,809
Columbus Pointe,  Jackson, MS       (b)      620           -      4,873           -       620          -      4,873         5,493
The Heights of St. Thomas,                                                                                                        
 Dallas, TX                         (b)    2,293           -      1,460           -     2,293          -      1,460         3,753
Uptown Block 580, Dallas, TX        (b)    2,892           -        492           -     2,892          -        492         3,384
                                         ---------------------------------------------------------------------------------------- 
Total Construction-in-progress:           13,084           -     55,614           -    13,084          -     55,614        68,698 
                                         ---------------------------------------------------------------------------------------- 
Total Real Estate held                                                                                                            
 for Investment                           54,399     117,525    226,949           -    54,399    288,860     55,614       398,873
----------------------                                                                                                            
Real Estate held for Sale:          (g)                                                                                           
--------------------------                                                                                                        
Springstead Condominiums,                                                                                                         
 Dallas, TX                         (b)      426       2,466        114           -       426      2,580           -        3,006
Villas at Valley Ranch                                                                                                            
 Condominiums, Irving, TX      (b), (g)      374       2,172        148       (260)       338      2,096           -        2,434 
Total Real Estate held for                                                                                                        
 Sale                                        800       4,638        262       (260)       764      4,676           -        5,440
--------------------------               ---------------------------------------------------------------------------------------- 
Total Real Estate                                                                                                                 
 Investments                             $55,199    $122,163   $227,110       (260)   $55,163   $293,536      55,614      404,313 
----------------------------             ========================================================================================
</TABLE>

<TABLE>
<CAPTION>     
                                                                                      Depre-
                                                                                      ciable
                                                                                      Lives
                                                         Accmltd      Date of          in
Description                                Total         Deprec     Construction      Years
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>        <C>               <C>                         
Commercial Properties:        
----------------------
Industrial:                   
 Post and Paddock, Grand                    
  Prairie, TX                               1,481          1986       6/88             5-40 
 Campus Circle, Irving, TX                    875          1986       6/88             5-40
Shopping Centers:                                                          
 Towne Crossing,                                                           
 Mesquite, TX                               3,272          1985       6/88             5-40 
                                          -------                          
Total Commercial Properties                 5,628                          
Construction-in-progress                                                   
----------------------------                                               
Addison Circle One,                                                        
 Addison, TX                                    -          (f)        9/95             N/A 
Coles Corner, Dallas, TX                        -          (f)        7/96             N/A
Columbus Shore, Irving, TX                      -          (f)       11/94             N/A
Columbus Pointe,  Jackson, MS                   -          (f)        2/96             N/A
The Heights of St. Thomas,                                                 
 Dallas, TX                                     -          (f)        1/96             N/A 
Uptown Block 580, Dallas, TX                    -          (f)        1/96             N/A
                                          -------                          
Total Construction-in-progress                  -                          
                                          -------                          
Total Real Estate held                     40,111                          
 for Investment                                                            
----------------------                                                     
Real Estate held for Sale:                                                 
--------------------------                                                 
Springstead Condominiums,                     789          1983       6/88             N/A
 Dallas, TX                                                                
Villas at Valley Ranch                                                     
 Condominiums, Irving, TX                     671          1985       6/88             N/A
                                          -------
Total Real Estate held for                  
 Sale                                       1,460 
--------------------------                -------
Total Real Estate             
 Investments                              $41,571 
------------                              =======
</TABLE> 

                                      F-25
<PAGE>
 
____________________________
 (a)  The aggregate cost of real estate investments for federal income tax
      purposes is approximately $399.3 million at December 31, 1996.
 (b)  Denotes an operating property or property under construction which
      collateralizes the Company's borrowings under its Credit Facility.
      Such borrowings totaled approximately $118.0 million at December 31, 1996.
 (c)  Denotes a property encumbered by a first mortgage loan of approximately
      $10.7 million at December 31, 1996.
 (d)  Denotes a property encumbered by a first mortgage loan of approximately
      $49.2 million at December 31, 1996.
 (e)  Denotes a multifamily residential property under construction as of
      December 31, 1996.
 (f)  In addition to the Company's borrowings under its Credit Facility, the
      property is encumbered by a construction loan upon which approximately
      $1.9 million had been drawn at December 31, 1996.
 (g)  The Company's real estate investment in two condominium communities (130
      units in aggregate) were marketed for sale beginning in June 1996.
      The Company sold six of the units in the year ended December 31, 1996. 
      Cost net of accumulated depreciation is presented as real estate held 
      for sale in the Company's financial statements.
 (h)  Management and operations of Towne Lake Apartments and The Parks
      Apartments were combined for financial reporting purposes as of January 1,
      1996.
 (i)  Management and operations of Phases I and II of the Trace Apartments
      were combined for financial reporting purposes as of January 1, 1996.

                                      F-26
<PAGE>
 
                             COLUMBUS REALTY TRUST

  NOTES TO SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION


Changes in real estate and accumulated depreciation for the years ended December
31, 1996, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
                                            1996       1995      1994
                                          -----------------------------
<S>                                       <C>        <C>       <C>
Real estate investments:
 Balance at beginning of period           $334,192   $267,061  $158,776
 Real estate acquisitions (a)                7,095      8,711    84,862
 Construction-in-progress                   60,991     54,644    20,465
 Reclassification to real estate held       
  for sale                                  (5,699)         -         - 
 Additions and improvements                  2,294      3,776     2,958
                                          -----------------------------
 Real estate held for investment           398,873    334,192   267,061
 
 Reclassification to real estate held        
  for sale                                   5,699          -         - 
 Accumulated depreciation of real           
  estate held for sale                      (1,532)         -         - 
 Net book value of real estate sold           (187)         -         -
                                          ----------------------------- 
 Real estate held for sale                   3,980          -         -
                                          -----------------------------
 Total real estate investments            $402,853   $334,192  $267,061
                                          =============================
 
Accumulated depreciation:
 Balance at beginning of period           $ 31,411   $ 22,600  $ 16,166
 Depreciation                               10,232      8,811     6,434
 Reclassification to real estate held       (1,532)         -         -
  for sale
                                          -----------------------------
         Balance at end of period         $ 40,111   $ 31,411  $ 22,600
                                          =============================
</TABLE>
(a) Includes the contribution of land by a limited partner pursuant to formation
    of a real estate joint venture in the year ended December 31, 1995.

                                      F-27