SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

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

                                                 Commission  File
For the fiscal year ended December 31, 1996      Number 0-14569

                  SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

        Maryland                                       04-2848939
(State of Organization)                     (I.R.S. Employer Identification No.)

One International Place, Boston, Massachusetts                          02110
     (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number including area code:               (617) 330-8600
                                                                 --------------

        Securities registered pursuant to Section 12(b) of the Act: None


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

                      Units of Limited Partnership Interest
                                (Title of Class)

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-B 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-KSB or any  amendment to
this Form 10-KSB. [ ]


Registrant's revenues for its most recent fiscal year were $24,470,913.

     No market exists for the limited  partnership  interests of the Registrant,
and, therefore, a market value for such interests cannot be determined.


                       DOCUMENTS INCORPORATED BY REFERENCE


Location in Form 10-KSB                            Document
In Which Document is
    Incorporated

Part        I                                      The Confidential Memorandum
                                                   attached as Exhibit  28(a) to
                                                   the Registrant's Registration
                                                   Statement on Form 10 filed on
                                                   April 20, 1986, including all
                                                   Exhibits thereto.


Transitional Small Business Disclosure Format:  Yes ___  No  X




<PAGE>


                                                      PART I

Item 1.           Description of Business.

Organization

         Springhill Lake Investors  Limited  Partnership (the  "Registrant") was
organized as a Maryland limited  partnership  under the Maryland Revised Uniform
Limited  Partnership Act on December 28, 1984, for the purpose of investing as a
general partner in First, Second, Third, Fourth,  Fifth, Sixth, Seventh,  Eighth
and Ninth Springhill Lake Limited Partnerships and Springhill Commercial Limited
Partnership  (collectively,  the "Operating  Partnerships"),  each of which is a
Maryland limited  partnership  owning a section of a garden apartment complex in
Greenbelt,  Maryland (the "Project"). The Registrant is the sole general partner
of each Operating Partnership. The limited partner of each Operating Partnership
is Theodore N. Lerner  ("Lerner"),  a former  general  partner of the  Operating
Partnerships  whose  interest  was  converted  to that of a limited  partner  on
January  16,  1985 in  conjunction  with  the  Registrant's  acquisition  of its
interest in the Operating  Partnerships.  The general partners of the Registrant
are Three Winthrop  Properties,  Inc. ("Three Winthrop" or the "Managing General
Partner") and  Linnaeus-Lexington  Associates  Limited  Partnership  ("Linnaeus-
Lexington") (collectively, the "General Partners"). (See "Change in Control.")

Development

         The  Registrant  was  initially   capitalized   with  nominal   capital
contributions from its General Partners. In April 1985, the Registrant completed
a non-public offering of 649 units of limited partnership interest (the "Units")
pursuant to  Regulation D under the  Securities  Act of 1933 and to the terms of
the  Confidential   Memorandum   dated  January  16,  1985  (the   "Confidential
Memorandum"),  selected  portions of which were filed as Exhibits 28(a) - (d) to
the  Registration  Statement on Form 10, filed on April 20, 1986. The Registrant
raised $40,562,500 in capital  contributions from investors who were admitted to
the Registrant as limited partners  ("Limited  Partners").  The Limited Partners
financed a portion  of their  capital  contributions  by  promissory  notes ("LP
Notes"). As of March 1988, the LP Notes were paid in full.





<PAGE>



         The Registrant purchased its interest in the Operating  Partnerships on
January 16, 1985, for $73,514,921, of which $58,000,000 was financed by means of
a mortgage loan (the  "Original  Mortgage  Loan").  In April 1993,  the Original
Mortgage Loan was  refinanced  with two new loans (the "New Mortgage  Loans") in
the amounts of $58,000,000 and $5,000,000.  The New Mortgage Loans bear interest
at 9.3% and have a term of ten years. Monthly payments of principal and interest
totaled  $541,696 (based on a 25-year  amortization  schedule) for the first two
years of the New  Mortgage  Loans and have  increased  to  $566,137  (based on a
20-year amortization schedule) for the third through tenth years of the loans. A
final  payment of  $49,016,500  is due on May 1, 2003.  In  addition  to monthly
payments  of  principal  and  interest,  the  New  Mortgage  Loans  require  the
Registrant to make payments into various escrow accounts,  including escrows for
real estate taxes and capital  improvements.  See "Item 7, Financial Statements,
Note E" for further information concerning the New Mortgage Loan.

         The Registrant's interest in the Operating  Partnerships entitles it to
90% of profits and losses for tax purposes,  90% of the Operating  Partnerships'
cash flow (after certain priority  distributions),  and 85% of the proceeds of a
sale or disposition of the Project (after certain priority distributions).

         The only business of the  Registrant is investing as a general  partner
in the Operating Partnerships,  and as such, to cause the Operating Partnerships
to own and operate the Project,  until such time as a sale,  if any, of all or a
portion of the  Project  appears to be  advantageous  to the  Registrant  and is
permitted under the terms of the Operating Partnerships' partnership agreements.

         The Operating Partnerships maintain property and liability insurance on
the property which the Registrant believes to be adequate.

Employees

         The Registrant does not have any employees.  Services are performed for
the  Registrant  by the General  Partners and agents  retained by them.  For the
period  January 1, 1993  through  April 30,  1995,  the  Operating  Partnerships
retained Winthrop Management,  a Massachusetts general partnership whose general
partners are affiliated with the Managing General Partner, to be




<PAGE>



primarily  responsible for performing asset management  services,  including the
establishment of leasing policies for the Project,  the setting of rental rates,
the  approval  of  capital  improvement  projects  and  the  supervision  of the
Project's property  management agent.  Winthrop Management was entitled to a fee
equal to 1% of gross revenue actually collected,  payable monthly, through April
30, 1995, at which time the fee was included in the property  management  fee as
discussed below.

         Until May 1, 1995,  Lerner  Corporation,  a Maryland  corporation whose
principal  stockholder  is Lerner,  was the  property  management  agent for the
Project,  charged with the  responsibility  for its  day-to-day  management  and
administrative  functions,  under a ten-year  agreement which expired on January
31, 1995 (the "Lerner Agreement").

         The Lerner  Agreement  provided for a fee equal to 4% of gross  revenue
actually  collected.  On October 17, 1994,  the Operating  Partnerships  sent to
Lerner  Corporation  written  notice of their  intent to  terminate  the  Lerner
Agreement pursuant to its terms on January 31, 1995. By letter dated October 24,
1994, Lerner Corporation  disputed the termination date set forth in the notice,
purporting  that the Lerner  Agreement  could not be terminated  earlier than 90
days following January 31, 1995 (or April 30, 1995).  Lerner Corporation refused
to vacate the Project and  various  legal  actions  were  initiated  between the
Registrant and Lerner Corporation and its affiliates pertaining to the change in
property management.  The disposition of approximately $1,250,000 of partnership
funds and $300,000 of tenant security  deposits also was at issue. (See "Item 3,
Legal  Proceedings").  On May 1, 1995, the Registrant removed Lerner Corporation
as  managing  agent for the  Project  and  engaged  Winthrop  Management  as the
property management agent.

         Management  services  are  now  performed  at the  Project  by  on-site
personnel  all of whom are  employees  of Winthrop  Management.  All payroll and
associated  expenses  of such  on-site  personnel  are fully  reimbursed  by the
Registrant to Winthrop  Management.  Winthrop  Management is paid a fee of 3% of
tenant rent collections and 5% of store commercial income. See "Item 12, Certain
Relationships and Related Transactions".





<PAGE>



Competition

         The real estate  business is highly  competitive  and the  Registrant's
Project  has  active   competition  from  similar  properties  in  the  vicinity
including,  in  certain  instances,   properties  owned  by  affiliates  of  the
Registrant.  Furthermore,  various limited partnerships controlled by affiliates
of the  Managing  General  Partner  are also  engaged in  business  which may be
competitive with the Registrant.  The Registrant is also competing for potential
buyers  with  respect  to the  ultimate  sale of its  properties.  See  "Item 6,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation."

Partnership Agreement Amendment

         In August 1995, the Managing  General  Partner amended Section 11.12 of
the Registrant's partnership agreement to clarify and remove certain ambiguities
pertaining  to the  requirements  for calling and voting at a meeting of limited
partners,  or taking action by written consent of partners in lieu thereof. Such
requirements  include,  among other matters,  that any action by written consent
may be initiated only by the General Partner or by one or more Limited  Partners
holding not less than 10% of the outstanding Units.

Change in Control

         Three Winthrop is the  Registrant's  Managing  General  Partner.  Three
Winthrop is a Massachusetts  corporation  which is a wholly-owned  subsidiary of
First  Winthrop  Corporation,  a Delaware  corporation  which is wholly owned by
Winthrop Financial Associates, A Limited Partnership ("WFA").

     Until  December  22,  1994,  Arthur J.  Halleran,  Jr. was the sole general
partner of Linnaeus  Associates  Limited  Partnership  ("Linnaeus") which is the
sole general  partner of WFA. On December 22,  1994,  pursuant to an  Investment
Agreement  entered into among Nomura Asset  Capital  Corporation  ("NACC"),  Mr.
Halleran and certain other  individuals  who comprised the senior  management of
WFA,  the  general  partnership  interest in Linnaeus  was  transferred  to W.L.
Realty, L.P. ("W.L. Realty"). W.L. Realty is a Delaware limited partnership, the
general  partner of which was, until July 18, 1995,  A.I.  Realty  Company,  LLC
("Realtyco").  The equity  securities of Realtyco were held by certain employees
of NACC.




<PAGE>




         On July 18, 1995  Londonderry  Acquisition  II Limited  Partnership,  a
Delaware  limited  partnership  ("Londonderry  II"), an affiliate of Apollo Real
Estate  Advisors,  L.P.  ("Apollo"),  acquired,  among other things,  Realtyco's
general  partner  interest in W.L. Realty and a sixty four percent (64%) limited
partnership interest in W.L. Realty. WFA owns the remaining  thirty-five percent
(35%) limited partnership interest.

         As a result of the foregoing  acquisitions (the "Apollo  Acquisition"),
Londonderry  II is the sole  general  partner of W.L.  Realty  which is the sole
general  partner of Linnaeus,  which in turn is the sole general partner of WFA.
As a result of the foregoing, effective July 18, 1995, Londonderry II became the
controlling  entity of the General Partners.  In connection with the transfer of
control, the officers and directors of WFA resigned and Londonderry II appointed
new officers and directors. See "Item 9, Directors, Executive Officers Promoters
and Control Persons; Compliance With Section 16(a) of the Exchange Act."

         Linnaeus-Lexington is a Massachusetts limited partnership whose general
partners  were Mr.  Halleran and Jonathan W. Wexler,  former  directors of Three
Winthrop and First  Winthrop  Corporation  and former  employees and officers of
WFA. The other  partners of Linnaeus are former  employees and officers of First
Winthrop Corporation and WFA. On July 18, 1995, the general partnership interest
was transferred to WFA.

Tender Offer

         On February 1, 1995,  Aquarius  Acquisition,  L.P., a Delaware  limited
partnership ("Aquarius"), comprised of an entity that was controlled by NACC, as
a general partner and WFA, as limited  partner,  made a tender offer to purchase
Units for cash  consideration  of $36,000 per Unit.  On March 3, 1995,  Aquarius
increased its offer to $36,400 per Unit. On March 21, 1995,  Aquarius  purchased
all 216.65 Units  tendered by Limited  Partners,  representing  33.4% of the 649
outstanding Units. Subsequently, a number of Limited Partners requested Aquarius
to purchase their Units for the price specified in the tender offer.  Subsequent
to the tender offer,  Aquarius purchased an additional 19 Units,  increasing the
total  number  of  Units  purchased  to  235.65  or  36.3%  of the  total  Units
outstanding.





<PAGE>



         The tender offer was commenced shortly following the mailing on January
19,  1995  of a  consent  solicitation  to the  Limited  Partners  by  Greenbelt
Residential Limited Partnership ("Greenbelt'), an affiliate of Lerner. Greenbelt
sought the  consent of a majority  in  interest  of the  Limited  Partners  to a
dissolution  of the  Registrant,  with the stated  goal of forcing a sale of the
Project. The solicitation was unsuccessful.

     As part of the Apollo  Acquisition,  an  affiliate  of Apollo  acquired the
interests  of NACC in  Aquarius.  See "Item 12,  Security  Ownership  of Certain
Beneficial Owners and Management."


Item 2.           Description of Properties.

         The  Registrant  owns  no  property  other  than  its  interest  in the
Operating Partnerships.

         The Project was  initially  acquired by the Operating  Partnerships  in
October 1984 for an initial cost of $73,316,500.  The Project  consists of 2,899
apartment and townhouse units and an eight-store shopping center situated on 154
acres of landscaped  grounds.  The Project also  contains a  clubhouse/community
center, two Olympic-size swimming pools and six tennis courts.

     The rental  market for the  Project  began to soften in 1988 as a result of
weakening general economic  conditions.  In 1990, the rental market became,  and
has remained,  very competitive.  While the Operating  Partnerships were able to
implement  rent increases  through 1992, it also became  necessary to offer rent
concessions  to attract new tenants as leases  expired.  As a result,  effective
rental rates did not increase during 1995 and 1996.




<PAGE>

         The following  table sets forth the average  annual  occupancy rate and
per unit average monthly rental rate at the Project for the years ended December
31, 1996 and 1995:
<TABLE>

                                            Average Rental                         Average Occupancy
                                                     Rate                                    Rate

<S>      <C>                                         <C>                                         <C>
         1995                                        $716                                        91.0%

         1996                                        $716                                        93.4%
</TABLE>

         Upon the  acquisition  of its interests in the Operating  Partnerships,
the Registrant  established a capital improvement program for the Project, which
was estimated to cost approximately $12,550,000. Among other improvements to the
grounds and buildings,  the planned improvements included the renovation of each
of the 2,899 apartment units. As of December 31, 1996,  substantially all of the
units had been renovated. Since 1987, the renovation of apartment units has been
carried out in vacant units only.  Accordingly,  it has taken  several  years to
renovate the apartments units and may require a substantial amount of additional
time to renovate the remainder of the apartment  units. In addition,  due to the
age of the Project  and the need to remain  competitive  in the local  apartment
market,  the scope of the  capital  improvement  program has  expanded  over the
years.  Through  December 31, 1996,  the  Operating  Partnerships  have expended
[$22,822,800] on capital improvements, $3,814,843 of which was expended in 1996.
These capital improvements were funded from the $12,550,000 of Limited Partners'
capital  contributions,  and the balance was funded  from net  operating  income
generated by the Project.  The Registrant currently plans to spend an additional
$2,141,650 on capital improvements in 1997.

         Set  forth  below is a table  showing  the  gross  carrying  value  and
accumulated  depreciation  and  federal  tax basis of each of the  Project as of
December 31, 1996:

             Gross
            Carrying        Accumulated                             Federal
             Value          Depreciation      Rate       Method     Tax Basis

          $97,063,786       $41,381,951      10-25 yrs.  S/L        $34,094,169

         The realty tax rate and realty  taxes paid by the  Project in 1996 were
$4.0993/100 and $1,627,144, respectively.




<PAGE>




Item 3.           Legal Proceedings.

         Three Winthrop  Properties,  Inc. v. Lerner Corp.  (Case No.  129192-V,
filed in the Circuit  Court for  Montgomery  County,  Maryland  on November  18,
1994).  Three Winthrop,  in its capacity as the Managing  General Partner of the
sole general partner of the Partnerships, filed this action seeking, in Count I,
a declaratory  judgment  that:  (i) Three Winthrop was entitled to terminate the
Lerner  Agreement  effective  as of January  31, 1995 so long as notice has been
given 90 days prior to that date;  (ii) Three  Winthrop gave Lerner  Corporation
proper  notice to  terminate  on  October  17,  1994;  and (iii) that the Lerner
Agreement  terminated  on January 31, 1995. In Count II, Three  Winthrop  sought
monetary damages as the result of Lerner  Corporation's  failure to cease acting
as property  management  agent for the project.  Three  Winthrop filed a summary
judgment motion on Count I, which Lerner Corporation  opposed,  and, on February
14, 1995,  the Circuit Court for Montgomery  County,  Maryland  granted  summary
judgment in Three Winthrop's favor on Count I. Lerner Corporation filed a notice
of appeal from this order, as discussed in the immediately  following paragraph.
Count II, the damage claim, has been stayed pending Lerner's appeal.

         Lerner Corporation v. Three Winthrop Properties,  Inc., September Term,
1995,  No. 421, The Court of Special  Appeals of Maryland.  On or about March 7,
1995,  Lerner  Corporation  filed a Notice of Appeal  from the entry of  partial
summary judgment against it as described in the paragraph  immediately above. On
January 23,  1996,  the Court of Special  Appeals of Maryland  issued an opinion
dismissing  the  appeal  of Lerner  Corporation  for lack of  jurisdiction.  The
holding of the Court of Special Appeals does not prevent Lerner Corporation from
taking another appeal after a determination  of the merits of the  Partnerships'
pending  damage claim as described in the paragraph  immediately  above.  Should
Lerner  Corporation  choose  to take a second  appeal  concerning  the  entry of
partial summary judgment against it, Three Winthrop  believes it has meritorious
arguments  in favor of the  affirmance  of the lower  court's  entry of  partial
summary judgment against Lerner Corporation.

     Theodore N. Lerner v. Three Winthrop Properties, Inc. (Case No. CCB94-3601,
filed in U.S. District Court for the District of Maryland, Southern Division, on
December 27, 1994).  Lerner commenced an action against Three Winthrop  alleging
that Three




<PAGE>



Winthrop  breached its  fiduciary  duties to Lerner by failing to  distribute to
Lerner a percentage of the cash flow of the  Partnerships  and by denying Lerner
access to the books and records of the  Partnerships.  Lerner seeks  damages for
the  alleged  breach  and  an  accounting  of  the  books  and  records  of  the
Partnerships.  Lerner's  complaint did not specify a particular  monetary amount
which he seeks,  but he indicated  during  discovery  that he believed he may be
entitled to more than $800,000,  plus interest.  Three Winthrop has acknowledged
that Lerner is entitled to approximately  $365,000 in distributions for calendar
years 1994 and 1995.  Trial in this action  commenced on November 4, 1996. Trial
testimony  concluded  on  January  31,  1997.  After the  conclusion  of closing
arguments on March 6, 1997,  the Court ruled that the plaintiff was not entitled
to  any  amounts  beyond  the  $365,000  which  Three  Winthrop  had  previously
acknowledged was owed to the plaintiff, as discussed above. The Court also ruled
that Three Winthrop had not committed a breach of fiduciary duty.

         Mitchell R. Montgomery, et al. v. Three Winthrop Properties, Inc. (Case
No.  132222,  filed in the  Circuit  Court for  Montgomery  County,  Maryland on
February 7, 1995).  Lerner and two Limited Partners of Springhill Lake Investors
Limited  Partnership  ("Springhill")  filed this  lawsuit on their behalf and on
behalf of the Partnerships,  alleging that Three Winthrop breached its fiduciary
obligations  by taking action to terminate  the Lerner  Agreement and to appoint
Winthrop  Management as the new property  management agent for the project.  The
plaintiffs  sought  to  enjoin  Three  Winthrop  from  appointing  itself or its
affiliate  as  property  management  agent for the  project  and seeks  monetary
damages from Three  Winthrop  for the alleged  breach of its  fiduciary  duties.
During the  pendency of the action,  one of the limited  partner  plaintiffs  in
Springhill  sold his interest in  Springhill  and ceased to be a  plaintiff.  On
January  22,  1996,  the Court  issued an order on Three  Winthrop's  motion for
summary  judgment  pursuant to which  summary  judgment  was entered in favor of
Three Winthrop on all individual  claims in the action as well as the claims the
remaining limited partner in Springhill  purported to bring. The trial commenced
on June 17, 1996. The Court, after hearing the presentation of plaintiff's case,
granted  Three  Winthrop's  motion  for a directed  verdict as to all  remaining
claims in the case.

     First  Virginia  Bank  v.  Three  Winthrop  Properties,   Inc.  and  Lerner
Corporation,  (CA  #95-651  filed  August 4, 1995 in the  Circuit  Court for the
County of Arlington,  Virginia). This case involves a dispute over approximately
$1.3 million in funds  belonging to the  Partnerships.  The money was held in an
account at First  Virginia Bank by Lerner Corp.  in trust for the  Partnerships,
but Lerner Corp.  refused to return the money after its  Management  and Leasing
Agreement with the Partnerships (the "Lerner  Agreement") was terminated.  First
Virginia filed a bill of interpleader naming Three Winthrop and First Springhill
Lake Ltd. Partnership ("First  Springhill"),  in whose name the account had been
maintained,  and First Virginia was released from the action.  First  Springhill
and Three  Winthrop  filed a Petition  for  Release  of Funds and a Third  Party
Complaint against Lerner Corp. alleging claims for declaratory judgment that the
funds belonged to the Partnerships, breach of contract, breach of fiduciary duty
and  conversion.  Lerner Corp.  answered  claiming  that the funds should not be
released because Theodore Lerner claimed some right of set-off against the funds
arising out of potential  judgments in other  actions  involving  Mr. Lerner and
Three Winthrop.  In November 1995, First Springhill and Three Winthrop moved for
summary judgment on their declaratory judgment and breach of contract claims and
seeking  the release of the funds.  In December  1995,  the Court  granted  that
motion and  ordered  that the funds be released  to First  Springhill  and Three
Winthrop and that the remaining claims proceed to trial. In December 1996, First
Springhill Lake Limited Partnership ("First Springhill") and Three Winthrop were
granted summary  judgment on their  declaratory  judgment and breach of contract
claims and the funds at issue in this interpleader action were released to First
Springhill.  In December  1996,  First  Springhill  and Three  Winthrop  filed a
voluntary nonsuit of their breach of fiduciary duty and conversion claims.

     Vernon  Hines et al.,  v.  Lerner  Corporation  et al.,  Civil  Action Nos.
AW-95-1120; AW-95-4023; AW-96-631; and AW-96-2350 U.S.D.C. (D.Md)

         Approximately  300  current  and former  maintenance  employees  at the
Project are seeking  back pay and  liquidated  damages for alleged  overtime pay
violations.  The basis of this  action is that the  employees  claim  that their
overtime pay was improperly calculated using the fluctuating coefficient method.
Cross motions for summary judgment have been brought. A hearing on these motions
is scheduled for April 1997.  The Registrant  intends to vigorously  defend this
action.






<PAGE>



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

         No matter was submitted to a vote of security holders during the period
covered by this report.





<PAGE>




                                     PART II

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

         There  is no  established  public  trading  market  for  Units  in  the
Registrant.  Since the inception of the Registrant in 1986 through 1996, trading
in Units was sporadic and occurred  through private  transactions.  Transfers of
Units are  subject  to  limitations  set forth in the  Registrant's  partnership
agreement  which  require  the prior  written  consent of the  Managing  General
Partner to any such transfer.  The Registrant's  partnership agreement was filed
as Exhibit 3 to the Registrant's  Registration  Statement on Form 10 dated April
30, 1986, as thereafter amended (the "Partnership  Agreement").  As of March 15,
1997, there were 439 Limited Partners holding 649 outstanding Units.

         The Partnership  Agreement requires that Cash Flow (as defined therein)
be  distributed  by the  Registrant to its partners in specified  proportions at
reasonable  intervals during the fiscal year and, in any event, no later than 60
days  after the close of each  fiscal  year.  The  Registrant's  ability to make
distributions of Cash Flow is limited by the level of the Registrant's  reserves
and the extent to which the  Operating  Partnerships  earn more than  sufficient
rental  income from the Project and  interest  income on reserves to (a) pay all
operating  expenses  of the  Project  and the  Operating  Partnerships,  and (b)
distribute  sufficient  funds  to the  Registrant  to  meet  its  administrative
expenses  and the debt service  requirements  of the New  Mortgage  Loans.  Cash
distributions  to holders of Units  amounted  to  approximately  $1,298,000  and
$1,057,870 in the  aggregate,  or $2,000 and $1,630 per Unit for the years ended
December  31,  1995 and  1996  respectively,  which  represented  the Cash  Flow
generated from operations.  See "Item 6, Management's Discussion and Analysis or
Plan of Operation," for information relating to the Registrant's ability to make
future distributions.





<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.

Liquidity and Capital Resources.

         The  Registrant  has  invested  as a general  partner in the  Operating
Partnerships,  and as  such,  receives  distributions  of  cash  flow  from  the
Operating  Partnerships  and is responsible for  expenditures  consisting of (i)
interest  payable on the New Mortgage  Loans and (ii) fees payable to affiliates
of the General Partners.  The General Partners believe that funds distributed by
the  Operating  Partnerships  to the  Registrant  will be sufficient to pay such
expenditures.  As of December  31,  1996,  the  Registrant's  unrestricted  cash
balance was $973,927.

         In April 1993,  the  Registrant  completed the  refinancing  of the $58
million  Original  Mortgage  Loan by  obtaining  the New  Mortgage  Loans in the
amounts of $58,000,000  and  $5,000,000,  respectively.  The proceeds of the New
Mortgage Loans along with $500,000 of the Registrant's reserves were used to (i)
retire the  Original  Mortgage  Loan;  (ii) pay the original  mortgage  lender a
prepayment penalty of $2,833,074;  (iii) establish $1,770,000 in various escrows
and  reserves;   and  (iv)  pay  third-party   closing  costs  of  approximately
$2,300,000.

         The New  Mortgage  Loans bear  interest  at 9.3% and have a term of ten
years.  Monthly  payments of principal  and  interest on the New Mortgage  Loans
totaled  $541,696 (based on a 25-year  amortization  schedule) for the first two
years and have increased to $566,137 (based on a 20-year amortization  schedule)
for the third through tenth years.  A final payment of $49,016,500 is due on May
1, 2003. These payments represent a significant savings relative to the $678,576
monthly payment required by the Original Mortgage Loan.

     The savings were  initially used to fund various  reserves  required by the
New Mortgage Loans.  The reserves are being used principally to complete capital
projects  identified  by  the  lender,   including  drainage   improvements  and
structural  repairs,   as  well  as  ongoing  capital   improvements  and  major
replacements,  like the purchase of new carpets and appliances. The reserves are
released by the lender to the Registrant as capital  improvements  are completed
and reserve  requests are made,  which can be done on a quarterly  basis.  As of
December  31,  1996,  the lender  held  $3,040,285  in reserves on behalf of the
Registrant, along with escrows for real estate taxes of $568,981.

         The Registrant resumed making cash distributions to Limited Partners in
1995.  The  Registrant  made  cash  distributions  to its  limited  partners  of
approximately $1,298,000 ($2,000 per investment Unit) and $1,057,870 ($1,630 per
investment  Unit) for the years ended December 31, 1995 and 1996,  respectively.
It is not  anticipated  that a  distribution  of cash  flow  will be made by the
Registrant in 1997 from 1996 operations.  The Registrant  intends to continue to
limit cash distribution to it partners in the foreseeable future.  However,  the
performance  of the  Registrant's  interest in the Project and its  distribution
policy will continue to be reviewed on a quarterly basis.

         Subsequent  to the tender  offer,  Aquarius had acquired  approximately
35.7% of the Units  through its 1995 tender offer (See "Item 1,  Description  of
Business - Tender Offer"). The General Partners believe that the tender will not
have  a  significant  impact  on  future  operations  or  the  liquidity  of the
Registrant.

         Several  legal  proceedings  are pending as set forth in "Item 3, Legal
Proceedings."  The Managing  General Partner does not expect that the outcome of
any of the proceedings  will have a material  adverse effect on the Registrant's
financial condition
or results of operations.

         Inflation and economic  conditions could affect vacancy levels,  rental
payment defaults and expenses, and thus, could affect the Registrant's revenue's
and net income. The Greenbelt,  Maryland apartment market,  where the Project is
located,  has remained  very  competitive  since 1990.  The  competitive  market
conditions  have been caused  primarily by stagnant demand for apartments in the
Greenbelt  area.  Also,  as  additional  on-campus  student  housing  has become
available at the  University of Maryland,  occupancy  levels in the local market
have been negatively  affected.  In addition,  affordable  housing costs and low
interest rates have converted many apartment clients into homeowners.
<PAGE>

Results of Operations

     Consolidated  net  operating  income  (revenue  less  expenses,   excluding
depreciation and amortization,  interest expense and abandonment loss) increased
by 4.7% for the year  ended  December  31,  1996 as  compared  to the year ended
December 31, 1995 to $9,268,228 from $8,852,885. Total revenue increased by 4.3%
to  $24,470,913  from  $23,467,823  primarily  as a result of  increased  rental
revenue.  Rental  revenues  increased  due to an increase  in average  occupancy
during 1996.  As a result of the increase in occupancy  the property  recognized
gains of $52,066 and $211,208 in laundry income and other income,  respectively.
These  increases  were  partially  offset by an decrease  in interest  income of
$70,949 due to lower average cash balances in 1996 as compared to 1995.

         Total  operating  expenses  rose  in  1996 as  compared  to  1995  from
$14,614,938  to  $15,202,685.  Although  repair and  maintenance,  salaries  and
general  administrative  expenses were lower in 1996 as compared to 1995;  these
reductions  were more than offset by increases in  utilities,  taxes,  operating
expenses, bad debt expense and advertising and rental expenses. A combination of
reduced staffing levels and improved  purchasing and inventory  control were the
primary  reasons for the  reductions  in repair and  maintenance,  salaries  and
general and administrative  expenses.  Utilities increased $1,162,612 in 1996 as
compared to 1995 due to the  increased  occupancy at the Project and an increase
in utility rates. Similarly, taxes increased due to an increase in the tax rate.
Capital  expenditures  in 1996 were  $3,814,843  compared to $1,322,538 in 1995.
Major  capital work  completed in 1996 included  extensive  concrete and asphalt
work,  replacement  of all unit  toilets  with  more  efficient  lo-flow  units,
exterior of all buildings painted and carpet replacement in the apartment units.

<PAGE>
Item 7.   Financial Statements.



         Springhill Lake Investors Limited Partnership and Subsidiaries


                                TABLE OF CONTENTS



INDEPENDENT AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF CHANGES IN
     PARTNERS' EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATED FINANCIAL STATEMENTS AND
                          INDEPENDENT AUDITORS' REPORT

                           SPRINGHILL LAKE INVESTORS
                      LIMITED PARTNERSHIP AND SUBSIDIARIES


                           DECEMBER 31, 1996 AND 1995




                          INDEPENDENT AUDITORS' REPORT


To the Partners of
Springhill Lake Investors Limited Partnership

     We have audited the accompanying  consolidated balance sheets of Springhill
Lake Investors  Partnership  and  Subsidiaries as of December 31, 1996 and 1995,
and the related  consolidated  statements  of  operations,  changes in partners'
equity  (deficit)  and cash flows for the years then ended.  These  consolidated
financial statements are the responsibility of the Partnership's management. Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material  respects,  the financial position of Springhill
Lake Investors Limited  Partnership and Subsidiaries as of December 31, 1996 and
1995,  and the  results of their  operations  and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.




/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 24, 1997, except for note J,
    as to which the date is March 6, 1997



<PAGE>


                                 BALANCE SHEETS

<TABLE>
                                                      ASSETS
                                                                                 1996                  1995
                                                                            --------------        ---------

INVESTMENT IN REAL ESTATE
<S>                                                                           <C>                <C>
    Land                                                                      $  5,833,466       $  5,833,466
    Buildings, improvements and personal property                               91,230,320         87,415,477
                                                                                ----------         ----------

                                                                                97,063,786         93,248,943
    Less accumulated depreciation                                               41,381,951         37,586,954
                                                                                ----------         ----------

                                                                                55,681,835         55,661,989
OTHER ASSETS
    Cash and cash equivalents                                                      973,927            259,960
    Cash - general receiver                                                              -          1,301,138
    Tenant accounts receivable                                                     499,712            470,872
    Accounts receivable - other                                                      8,431                  -
    Tenant security deposits - funded                                              438,621            383,467
    Escrows and reserves                                                         3,609,266          3,392,301
    Prepaid expenses                                                               872,473          1,004,695
    Deferred costs, less accumulated amortization
      of $759,587 and $597,456                                                   1,544,218          1,706,349
                                                                               -----------        -----------

TOTAL ASSETS                                                                   $63,628,483        $64,180,771
                                                                                ==========         ==========
</TABLE>

                                    LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

<TABLE>
<S>                                                                            <C>                <C>
MORTGAGES PAYABLE                                                              $59,683,891        $60,866,515

OTHER LIABILITIES
    Accounts payable and accrued expenses                                        2,767,786            734,536
    Tenant security deposits payable                                               328,592            272,120
    Rent deferred credits                                                          134,439            180,358
                                                                              ------------       ------------

                                                                                62,914,708         62,053,529

MINORITY INTEREST                                                                2,476,980          2,084,650
                                                                               -----------        -----------

CONTINGENCY                                                                              -                  -

PARTNERS' EQUITY (DEFICIT)
    Investor limited partners, units of investor limited
       partnership interest, 649 units authorized and
      outstanding                                                                1,184,368          2,899,876
    General partners                                                            (2,947,573)        (2,857,284)
                                                                               -----------        -----------

                                                                                (1,763,205)            42,592
                                                                               -----------      -------------
TOTAL LIABILITIES AND
  PARTNERS' EQUITY (DEFICIT)                                                   $63,628,483        $64,180,771
                                                                                ==========         ==========
</TABLE>
<PAGE>
                            STATEMENT OF OPERATIONS
<TABLE>
                                                                             1996                  1995
                                                                        ---------------      ----------

REVENUE
<S>                                                                         <C>                   <C>
    Rental income                                                           $23,207,505           $22,396,740
    Laundry income                                                              340,121               288,055
    Other income                                                                731,945               520,737
    Interest income                                                             191,342               262,291
                                                                           ------------            ----------

                                                                             24,470,913            23,467,823
                                                                             ----------            ----------
EXPENSES
  OPERATING EXPENSES
    Utilities                                                                 5,165,058             4,002,446
    Repairs and maintenance                                                   2,100,292             2,158,161
    Taxes                                                                     2,218,750             1,877,005
    Salaries                                                                  1,694,146             1,823,747
    Operating expenses                                                        1,177,337               915,480
    Administrative expenses                                                     468,627             1,440,737
    Bad debt expense                                                            770,878               587,786
    Advertising and rental expenses                                             388,203               264,199
    Insurance                                                                   409,958               617,803
    Asset and property management fees                                          809,436               927,574
                                                                           ------------            ----------

      TOTAL OPERATING EXPENSES                                               15,202,685            14,614,938

    Abandonment loss                                                                  -                     -
    Interest expense                                                          5,611,020             5,716,730
    Depreciation and amortization                                             3,957,128             3,917,798
                                                                            -----------            ----------

      TOTAL EXPENSES                                                         24,770,833            24,249,466
                                                                             ----------            ----------

    Loss before minority interest                                              (299,920)             (781,643)

    Minority interest in net earnings of
      operating partnerships                                                   (392,330)             (379,073)
                                                                             ----------           -----------

NET LOSS                                                                    $  (692,250)         $ (1,160,716)
                                                                             ==========           ===========

Net loss allocated to general partners                                     $    (34,612)       $      (58,036)
                                                                            ============        =============

Net loss allocated to investor limited partners                             $  (657,638)         $ (1,102,680)
                                                                             ==========           ===========

Net loss per unit of investor partnership
  interest  outstanding                                                   $      (1,013)      $        (1,699)
                                                                           ============        ==============

Weighted average units of investor limited
  partnership interest outstanding                                     $            649    $              649
                                                                        ===============     =================
</TABLE>


<TABLE>
                                                                                   Investor
                                                            General                 limited
                                                           partners                 partners              Total

<S>               <C> <C>                                  <C>                      <C>                  <C>
Balance, December 31, 1994                                 $(2,730,932)             $ 5,300,556          $ 2,569,624

Distributions to partners                                      (68,316)              (1,298,000)          (1,366,316)

Net loss                                                       (58,036)              (1,102,680)          (1,160,716)
                                                          ------------                ---------           ----------

Balance, December 31, 1995                                  (2,857,284)               2,899,876               42,592

Distributions to partners                                      (55,677)              (1,057,870)          (1,113,547)

Net loss                                                       (34,612)                (657,638)            (692,250)
                                                          ------------               ----------          -----------

Balance, December 31, 1996                                 $(2,947,573)              $1,184,368          $(1,763,205)
                                                            ==========                =========           ==========

</TABLE>
<PAGE>
                            STATEMENTS OF CASH FLOWS
<TABLE>

       1996                                                                                      1995
        Cash flows from operating activities
<S>                                                                                          <C>               <C>
           Net loss                                                                          $  (692,250)      $(1,160,716)
           Adjustments to reconcile net loss to net
           cash provided by operating activities
              Minority interest in net earnings of operating partnerships                        392,330           379,073
              Depreciation                                                                     3,794,997         3,698,520
              Amortization                                                                       162,131           219,278
              Increase in tenant accounts receivable                                             (28,840)         (211,210)
              Increase in accounts receivable - other                                             (8,431)                -
              Decrease  in due to affiliates                                                           -           (21,375)
              Increase in escrows and reserves                                                  (216,965)         (983,870)
              Decrease in other assets                                                                 -             3,351
              Decrease (increase) in prepaid expenses                                            132,222           (35,619)
              Increase in accounts payable and accrued expenses                                2,033,250           137,754
              Net security deposits received (paid)                                                1,318           (97,144)
              (Decrease) increase in rent deferred credits                                       (45,919)          180,358
                                                                                             ------------     ------------

                    Net cash provided by operating activities                                  5,523,843         2,108,400
                                                                                               ---------       -----------

        Cash flows from investing activities
           Investment in real estate                                                          (3,814,843)       (1,322,538)
                                                                                               ---------        ----------

                    Net cash used in investing activities                                     (3,814,843)       (1,322,538)
                                                                                               ---------        ----------

        Cash flows from financing activities
           Principal payments on mortgages                                                    (1,182,624)         (982,086)
           Distributions to partners                                                          (1,113,547)       (1,366,316)
                                                                                               ---------        ----------

                    Net cash used in financing activities                                     (2,296,171)       (2,348,402)
                                                                                               ---------        ----------

                    NET DECREASE IN CASH
                        AND CASH EQUIVALENTS                                                    (587,171)       (1,562,540)

        Cash and cash equivalents, beginning                                                   1,561,098         3,123,638
                                                                                               ---------        ----------

        Cash and cash equivalents, ending                                                    $   973,927       $ 1,561,098
                                                                                              ==========        ==========

        Supplemental disclosure of cash flow information
           Cash paid for interest                                                             $5,611,020      $  5,716,730
                                                                                               =========       ===========
</TABLE>

Significant  noncash  investing  and  financing  activities:

     During 1995, fully depreciated rental property of $269,381 was abandoned by
     the Operating Partnerships.


                 See notes to consolidated financial statements
<PAGE>

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
              POLICIES

    Springhill  Lake  Investors  Limited  Partnership  ("the  Partnership"),   a
    Maryland limited partnership was formed on December 28, 1984, to acquire and
    own  a  90%  general   partnership   interest  in  Springhill  Lake  Limited
    Partnerships I through IX and Springhill Commercial Limited Partnership (the
    "Operating  Partnerships").  The Operating  Partnerships own and operate the
    Springhill  Lake  Apartments  complex in  Greenbelt,  Maryland.  The complex
    consists of 2,899 apartment and townhouse units and an eight- store shopping
    center.  The  Partnership  and  Operating  Partnerships  will  terminate  on
    December  31,  2035,  or  earlier  upon the  occurrence  of  certain  events
    specified in the Partnership Agreement.

    Basis or Presentation

    The accompanying  consolidated  financial statements include the accounts of
    the  Partnership  and  the  Operating  Partnerships.  Theodore  N.  Lerner's
    ownership in the  Operating  Partnerships  has been  reflected as a minority
    interest  in  the  accompanying   consolidated  financial  statements.   All
    significant  intercompany  accounts and transactions have been eliminated in
    consolidation.

    Use of Estimates

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

    Investment in Real Estate

    Investment in real estate is carried at cost.  Depreciation  is provided for
    on a straight-line  basis using estimated  useful lives of 25 years for real
    property  and 10 years for  personal  property.  For  income  tax  purposes,
    accelerated lives and methods are used.

    Deferred Costs

    Deferred costs are  capitalized  and amortized on the  straight-line  method
    over the term of the loan agreements.

    Rental Income

    Rental income is recognized as rentals become due. Rental payments  received
    in  advance  are  deferred  until  earned.   Leases  between  the  Operating
    Partnerships and tenants of the property are operating leases.

    Cash equivalents

    For purposes of the statement of cash flows,  the partnership  considers all
    highly liquid  investments  with  maturities of less than three months to be
    cash equivalents. The carrying amount approximates fair value because of the
    short maturity of these instruments.

    Income Taxes

    No provision for income taxes is reflected in the accompanying  consolidated
    financial  statements.  Each partner is required to report on his individual
    tax return his allocable  share of income,  gains,  losses,  deductions  and
    credits.

    Net Loss Per Unit of Limited Partnership Interest Outstanding

    Net loss per unit of limited partnership  interest outstanding is calculated
    based upon the weighted average number of units outstanding during the year.
<PAGE>
NOTE B - INVESTMENT IN REAL ESTATE

    Buildings, improvements and personal property consist of the following:
<TABLE>

                                                    Useful                           December 31,
                                                      Life                    1996                     1995
-----                                               ------               ------------                 --------

<S>                                                     <C>               <C>                      <C>
     Buildings                                          25                $68,640,167              $68,640,167
     Building improvements                              25                 16,459,855               13,983,502
     Personal property                                  10                  6,130,298                4,791,808
                                                                          -----------              -----------

                                                                           91,230,320               87,415,477
     Less accumulated depreciation                                         41,381,951               37,586,954
                                                                           ----------               ----------

                                                                          $49,848,369              $49,828,523
                                                                           ==========               ==========
</TABLE>

NOTE C - TAXABLE LOSS

    The  Partnership's  taxable  losses  for 1996 and 1995  differ  from the net
    losses for financial  reporting  purposes primarily due to the difference in
    the  recognition of  depreciation.  The  reconciliation  of the net loss for
    financial  reporting purposes to the taxable losses for 1996 and 1995 are as
    follows:

<TABLE>
                                                                               1996                  1995
                                                                            ----------            -------

<S>                                                                       <C>                    <C>
    Net loss for financial reporting purposes                             $   (692,250)          $(1,160,716)
    Rent deferred credits                                                      (45,919)               180,358
    Excess of accelerated depreciation for
       income tax purposes                                                    (618,750)              (485,775)
    Other                                                                       31,589                 (5,507)
                                                                          ------------          --------------

    Taxable losses                                                         $(1,325,330)           $(1,471,640)
                                                                            ==========             ==========
</TABLE>
<PAGE>




NOTE D - RELATED PARTY TRANSACTIONS

    The property was managed by Lerner Corporation,  whose principal stockholder
    is a limited partner of the Operating  Partnerships  through April 30, 1995.
    The  management  agreement  provided  for a  management  fee  equal to 4% of
    monthly  income.  The amount  charged to operations  during 1995 amounted to
    $302,002.

    Winthrop Management, an affiliate of the general partner, began managing the
    property  as of  May  1,  1995.  The  management  agreement  provides  for a
    management  fee  equal  to 3% of  tenant  rent  collections  and 5% of store
    commercial  income.  The amount  charged to operations  during 1996 and 1995
    amounted to $699,436 and $440,071,  respectively.  For the period January 1,
    1993 through April 30, 1995, Winthrop  Management  supervised the management
    agent in the performance of its duties and the capital improvement  program.
    The  management  fee for these  services  was equal to 1% of monthly  income
    through April 30, 1995,  and is included in the property  management  fee on
    the statement of operations. This fee amounted to $75,501 in 1995.

    The Operating Partnerships paid Springfield Facilities,  Inc., an affiliate,
    a rental fee for the use of the recreational  facilities.  This fee is based
    on the affiliate's cost of operating these facilities.  Rent expense charged
    to operations for the years ended December 31, 1996 and 1995 was $36,914 and
    $225,888, respectively.

    Winthrop Financial Associates, an affiliate of the general partner, receives
    an annual asset management fee of $100,000,  which was charged to operations
    for the years ended December 31, 1996 and 1995.

    Asset and property  management  fees for 1996 and 1995 include an annual fee
    of $10,000 to Winthrop  Financial  Co.,  Inc.,  an  affiliate of the general
    partner, for administration of the Partnership.

<PAGE>

NOTE E - MORTGAGES PAYABLE

    The Partnership  has two mortgages  having  original  principal  balances of
    $58,000,000  and  $5,000,000.  The mortgages bear interest at a rate of 9.3%
    and a final  payment  of  $49,016,500  is due on May 1,  2003.  The  monthly
    principal and interest installments,  which commenced on April 30, 1993, are
    as follows:

<TABLE>
                                                       Mortgage*                         Monthly
                         Period                          Term                          Installment

<S>                  <C>                               <C>                                <C>
                     Years 1-2                         25 yrs                             $541,696
                     Years 3-10                        20 yrs                             $566,137
</TABLE>

    *    Mortgage term  represents the period over which monthly  principal and
         interest payments are based.

    The Partnership  expensed interest on the mortgages totaling  $5,611,020 and
    $5,716,730 in 1996 and 1995, respectively.

    Based on the  interest  rates of loans  with  similar  maturities  currently
    available  to the  Partnership,  the  combined  estimated  fair value of the
    mortgages payable is $62,085,0371.

    Aggregate  principal  payments  required under the mortgages at December 31,
    1996 are as follows:
<TABLE>

<S>                            <C>                                                       <C>
                               1997                                                      $  1,287,440
                               1998                                                         1,412,410
                               1999                                                         1,549,510
                               2000                                                         1,699,918
                               2001                                                         1,864,926
                         Thereafter                                                        51,869,687

                                                                                          $59,683,891
</TABLE>

    The mortgages are secured by a pledge of the  Partnership's  interest in the
    Operating  Partnerships,  and joint and several  guarantees by the Operating
    Partnerships which, in




<PAGE>

    turn,  are  secured  by  an  indemnity   first  mortgage  on  the  Operating
    Partnerships and a pledge of the stock of Springfield  Facilities,  Inc., an
    affiliate.

NOTE F - OPERATING LEASES

    One of the  Operating  Partnerships  leases  retail  space to tenants in the
    shopping  center  under the terms of  operating  leases  expiring in various
    years through March 31, 2001. The leases call for base monthly  rentals plus
    additional  charges for  passthroughs  and percentage  rent.  Minimum future
    rental  payments  to be  received  subsequent  to  December  31, 1996 are as
    follows:

<TABLE>
<S>                                                                                   <C>
                                 Year ending December 31, 1997                        $  84,814
                                                          1998                           53,032
                                                          1999                           40,316
                                                          2000                           27,600
                                                          2001                           27,600
                                                                                       --------

                                                                                       $233,362
</TABLE>

NOTE G - CONCENTRATION OF CREDIT RISK

    At December 31, 1996, the  Partnership and the Operating  Partnerships  have
    cash in the amount of  $3,322,017  and $287,249,  respectively,  held by the
    mortgage lender. These accounts are insured by the Federal Deposit Insurance
    Corporation  up to $100,000 for each account.  The uninsured  portion of the
    balance at December 31, 1996 is $3,222,017 and $187,249, respectively.

    As of December 31, 1996,  the Operating  Partnerships  have bank deposits in
    excess of federally insured limits totaling $343,526.

NOTE H - DEFERRED COSTS

    The following is a summary of deferred costs and the unamortized balances at
    December 31, 1996 and 1995:
<TABLE>
                                                                                 Unamortized            Unamortized
                                                                                   Balance                Balance
                                      Amortization                                 December               December
                                         Period                 Cost               31, 1996              31, 1995
<S>                                   <C>                    <C>                  <C>                    <C>
      Refinancing Costs               5/93 -  5/03           $1,244,386           $  807,118             $912,549
      Attorney Fees                   5/93 -  4/95              114,419                    -                    -
      Other Deferred Costs            5/93 - 12/09              945,000              737,100              793,800
                                                             ----------           ----------             ----------

                                                             $2,303,805           $1,544,218           $1,706,349
                                                              =========            =========              =========
</TABLE>

NOTE I - INVESTMENT IN OPERATING PARTNERSHIPS

     The condensed,  summarized  combined financial  statements of the Operating
     Partnerships as of December 31, 1996 and 1995 and for each of the two years
     in the period ended December 31, 1996 are as follows:

                                        SUMMARIZED COMBINED BALANCE SHEETS

<TABLE>
                                            December 31, 1996 and 1995

                                                      ASSETS
                                                                                  1996                   1995
                                                                               ----------             -------
<S>                                                                           <C>                    <C>
       Buildings, improvements and personal
         property net of accumulated
         depreciation of $41,381,951 and
         $37,586,954                                                          $49,848,369            $49,828,523
       Land                                                                     5,833,466              5,833,466
       Other assets                                                             3,066,047              3,335,115
                                                                              -----------            -----------

       TOTAL ASSETS                                                           $58,747,882            $58,997,104
                                                                               ==========             ==========

LIABILITIES AND PARTNERS' EQUITY

       Liabilities
       Accounts payable and
           accrued expenses                                                  $  2,755,328          $     634,010
       Other liabilities                                                          463,031                452,478
                                                                             ------------           ------------

                                                                                3,218,359              1,086,488
                                                                              -----------            -----------
       Partners' equity
         Springhill Lake Investors

           Limited Partnership                                                 53,052,543             55,825,966
         Other limited partners                                                 2,476,980              2,084,650
                                                                              -----------            -----------

                                                                               55,529,523             57,910,616
                                                                               ----------             ----------

       TOTAL LIABILITIES AND PARTNERS' EQUITY                                 $58,747,882            $58,997,104
                                                                               ==========             ==========
</TABLE>
<PAGE>
NOTE I - INVESTMENT IN OPERATING PARTNERSHIPS (Continued)

SUMMARIZED COMBINED STATEMENTS OF EARNINGS

Years ended December 31, 1996 and 1995
<TABLE>

                                                                                  1996               1995
                                                                               ----------         -------

    Revenue
<S>                                                                              <C>               <C>
       Rental income                                                             $23,207,505       $22,396,740
       Interest and other income                                                   1,101,927           904,625
                                                                                 -----------      ------------

                                                                                  24,309,432        23,301,365

    Expenses
       Depreciation                                                                3,794,997          3,698,520
       Operating expenses                                                         12,339,389         11,667,031
       Taxes and insurance                                                         2,628,708          2,494,808
                                                                                 -----------        -----------

                                                                                  18,763,094         17,860,359

    Net Earnings                                                                $  5,546,338       $  5,441,006
                                                                                 ===========        ===========
</TABLE>

NOTE J - LITIGATION

    In November 1994, Three Winthrop Properties, Inc. ("Three Winthrop") brought
    suit  in its  capacity  as  managing  general  partner  of  Springhill  Lake
    Investors   Limited   Partnership  as  general   partner  of  the  Operating
    Partnerships against the defendant,  manager of the Partnerships'  apartment
    complex.  Three  Winthrop  sought to  enforce  the  notice  and  termination
    provisions of the management and leasing agreement with the defendant and to
    recover damages for the defendants' refusal to comply therewith.

    On or about February 13, 1995, the Court granted partial  summary  judgement
    in favor of Three Winthrop  regarding its  interpretation  of the notice and
    termination provisions of the management and leasing agreement.

    Defendant appealed the Court's entry of partial summary judgment against it,
    as discussed below. The Operating  Partnerships'  damage claim,  which along
    with  discovery  was stayed during the pendency of the  defendant's  appeal,
    remains pending.
<PAGE>
NOTE J - LITIGATION (Continued)

    On or about March 7, 1995, Lerner  Corporation filed a Notice of Appeal from
    the entry of partial summary  judgment  against it as described  immediately
    above.  On January 23, 1996, the Court of Special Appeals of Maryland issued
    an  opinion  dismissing  the  appeal  of  Lerner  Corporation  for  lack  of
    jurisdiction.  The holding of the Court of Special  Appeals does not prevent
    Lerner  Corporation  from taking another appeal after a determination on the
    merits of Three  Winthrop  pending  damage  claim as  described  immediately
    above.  Should Lerner  Corporation choose to take a second appeal concerning
    the entry of partial summary judgment  against it as described above,  Three
    Winthrop believes it has meritorious arguments in favor of the affirmance of
    the  lower  court's  entry  of  partial  summary   judgment  against  Lerner
    Corporation.

    In  December  1994,  Three  Winthrop  was sued by a limited  partner  in the
    Operating Partnerships.  Plaintiff's complaint asserted claims against Three
    Winthrop for an  accounting  and breach of  fiduciary  duty.  The  plaintiff
    contends, in substance,  that Three Winthrop, as managing general partner of
    the  general  partner  of the  Operating  Partnerships,  has  failed to make
    certain  distributions  to him.  Plaintiff's  complaint  does not  specify a
    particular  monetary amount which he seeks,  but plaintiff's  expert witness
    has  indicated   that  he  believes  that   plaintiff  may  be  entitled  to
    approximately $600,000 in distributions.

    Three  Winthrop  has   acknowledged   that  the  plaintiff  is  entitled  to
    approximately  $365,000 in  distributions  for calendar years 1994 and 1995,
    but  was  unable  to make  those  distributions  to  plaintiff  because  the
    plaintiff's  closely-held  corporation,   which  previously  served  as  the
    property manager for the Operating Partnerships'  property,  refused to hand
    over control of the Operating Partnerships' operating accounts.

    Discovery  has  concluded  and trial  commenced  on November 4, 1996,  Trial
    testimony concluded on January 31, 1997.

     After the conclusion of closing arguments on March 6, 1997, the Court ruled
     that the  plaintiff  was not  entitled to any amounts  beyond the  $365,000
     which Three Winthrop had previously acknowledged was owed to the plaintiff,
     as  discussed  above.  The Court also ruled  that  Three  Winthrop  had not
     committed a breach of fiduciary duty.

     Two limited partners in Springhill Lake Investors Limited  Partnership (the
     "Investor   Partnership")   and  one  limited   partner  in  the  Operating
     Partnerships  brought  suit  against  Three  Winthrop  in its  capacity  as
     managing general partner of the Investor  Partnership  which in turn is the
     general  partner of the  Operating  Partnerships.  Plaintiffs  purported to
     assert  individual  claims  and  claims  of  the  respective  Partnerships.
     Plaintiffs  alleged  that Three  Winthrop  breached its  fiduciary  duty be
     discharging the managing agent for the Partnerships' property and replacing
     it with an affiliate of Three Winthrop.
<PAGE>



NOTE J - LITIGATION (Continued)

    During the pendency of the action,  one of the limited partner plaintiffs in
    the Investor  Partnership sold his interest in the Investor  Partnership and
    ceased to be a plaintiff.  On January 22, 1996, the Court issued an order on
    Three  Winthrop's  motion for summary  judgment  pursuant  to which  summary
    judgment  was entered in favor of Three  Winthrop on all of the  plaintiffs'
    individual claims.

    On June 17, 1996, trial commenced. The Court, after hearing the presentation
    of the  plaintiff's  case,  granted Three  Winthrop's  motion for a directed
    verdict as to all remaining claims in the case on June 17, 1996.

    Springhill  Lake and/or  Lerner  Corporation  is  currently a defendant in a
    lawsuit brought against them by approximately 30 employees  seeking back pay
    and  liquidated  damages for alleged  overtime pay violations and one racial
    discrimination lawsuit. All are still in discovery stages.

    Partnership's  management  does not  expect  that the  outcome of any of the
    suits  will  have a  material  adverse  effect on the  Partnership's  or the
    Operating Partnerships' financial conditions or results of operations.
<PAGE>



Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

                  None.

                                                     PART III

Item 9.           Directors, Executive Officers, Promoters and Control
                  Persons; Compliance With Section 16(a) of the Exchange
                  Act.

         The  Registrant  has no  directors  or  officers.  Three  Winthrop  and
Linnaeus-Lexington are the General Partners of the Registrant. Three Winthrop is
the Managing  General  Partner.  As of March 1, 1997, the names of the directors
and executive  officers of Three Winthrop and the position held by each of them,
are as follows:

                                                        Has Served as
                             Position Held with         a Director or
Name                         Three Winthrop             Officer Since

Michael L. Ashner            Chief Executive Officer      1-96
                              and Director

Richard J. McCready          President and
                             Chief Operating Officer      7-95

Jeffrey Furber               Executive Vice President     7-95
                             and Clerk

Edward Williams              Chief Financial Officer      4-96
                             Vice President and
                             Treasurer

Peter Braverman              Senior Vice President        1-96

         Michael  L.  Ashner,  age 45, has been the Chief  Executive  Officer of
Winthrop Financial  Associates,  A Limited Partnership ("WFA") since January 15,
1996.  From June 1994 until January 1996,  Mr. Ashner was a Director,  President
and Co-chairman of National Property  Investors,  Inc., a real estate investment
company  ("NPI").  Mr. Ashner was also a Director and  executive  officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition,  since 1981 Mr. Ashner has been  President of Exeter  Capital
Corporation,  a firm which has organized and  administered  real estate  limited
partnerships.

     Richard J. McCready,  age 38, is the President and Chief Operating  Officer
of WFA and its  subsidiaries.  Mr.  McCready  previously  served  as a  Managing
Director,  Vice  President and Clerk of WFA and a Director,  Vice  President and
Clerk of the Managing  General  Partner and all other  subsidiaries  of WFA. Mr.
McCready joined the Winthrop organization in 1990.

         Jeffrey  Furber,  age 37, has been the Executive  Vice President of WFA
and the President of Winthrop  Management  since January 1996. Mr. Furber served
as a Managing  Director of WFA from January 1991 to December  1995 and as a Vice
President from June 1984 until December 1990.

         Edward V. Williams, age 56, has been the Chief Financial Officer of WFA
since April 1996. From June 1991 through March 1996, Mr. Williams was Controller
of NPI and NPI  Management.  Prior to 1991, Mr.  Williams held other real estate
related positions including Treasurer of Johnstown American Companies and Senior
Manager at Price Waterhouse.

         Peter Braverman,  age 45, has been a Senior Vice President of WFA since
January  1996.  From June 1995 until  January  1996,  Mr.  Braverman  was a Vice
President  of NPI and NPI  Management.  From June 1991  until  March  1994,  Mr.
Braverman  was  President  of  the  Braverman  Group,  a  firm  specializing  in
management consulting for the real estate and construction industries. From 1988
to 1991, Mr. Braverman was a Vice President and Assistant Secretary of Fischbach
Corporation, a publicly traded, international real estate and construction firm.

     One or more of the  above  persons  are also  directors  or  officers  of a
general  partner (or  general  partner of a general  partner)  of the  following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the  Securities  and Exchange Act of 1934, or are subject to
the reporting  requirements of Section 15(d) of such Act:  Winthrop  Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners
81  Limited   Partnership;   Winthrop   Residential   Associates  I,  A  Limited
Partnership; Winthrop Residential Associates II, A Limited Partnership; Winthrop
Residential  Associates  III, A Limited  Partnership;  1626 New York  Associates
Limited Partnership; 1999 Broadway Associates Limited Partnership;  Indian River
Citrus  Investors  Limited  Partnership;  Nantucket  Island  Associates  Limited
Partnership; One Financial Place Limited Partnership;  Presidential Associates I
Limited Partnership;  Riverside Park Associates Limited Partnership;  Twelve AMH
Associates   Limited   Partnership;   Winthrop   California   Investors  Limited
Partnership;  Winthrop Growth Investors I Limited Partnership;  Winthrop Interim
Partners  I, A  Limited  Partnership;  Southeastern  Income  Properties  Limited
Partnership;  Southeastern  Income Properties II Limited  Partnership;  Winthrop
Miami Associates Limited  Partnership and Winthrop  Apartment  Investors Limited
Partnership.

         Except as indicated  above,  neither the  Registrant nor Three Winthrop
has any  significant  employees  within the meaning of Item 401(b) of Regulation
S-B. There are no family relationships among the officers and directors of Three
Winthrop.

         Based  solely  upon a review  of Forms 3 and 4 and  amendments  thereto
furnished to the Registrant  under Rule 16a-3(e)  during the  Registrant's  most
recent  fiscal  year  and  Forms  5 and  amendments  thereto  furnished  to  the
Registrant  with respect to its most recent fiscal year,  the  Registrant is not
aware of any director,  officer or beneficial  owner of more than ten percent of
the units of limited partnership  interest in the Registrant that failed to file
on a timely basis, as disclosed in the above Forms,  reports required by section
16(a) of the  Exchange  Act during the most recent  fiscal year or prior  fiscal
years.

Item 10.          Executive Compensation.

         The Registrant is not required to and did not pay any  compensation  to
the officers or directors of the Managing General Partner.  The Managing General
Partner  does not  presently  pay any  compensation  to any of its  officers and
directors (See "Item 12, Certain Relationships and Related Transactions").

Item 11.          Security Ownership of Certain Beneficial Owners and
                  Management.

         (a)      Security Ownership of Certain Beneficial Owners.

         Three Winthrop and  Linnaeus-Lexington  own all the outstanding general
partnership interests in the Registrant.  As General Partners, they are entitled
in the aggregate to 5% of the  Registrant's net income or loss for tax purposes,
5% of the  Registrant's  Cash Flow  distributions  and,  after certain  priority
distributions,  29.4% of the proceeds from a Capital  Transaction (as defined in
the Registrant's Partnership Agreement).

<PAGE>



         On March 21,  1995,  Aquarius  Acquisition,  L.P.,  a Delaware  limited
partnership  ("Aquarius"),  presently  comprised  of an entity  affiliated  with
Apollo, as a general partner and WFA, as limited partner,  acquired 216.65 Units
tendered by Limited Partners,  representing  33.4% of the 649 outstanding Units.
Subsequent  to the tender  offer,  Aquarius  purchased an  additional  19 Units,
increasing  the total number of Units  purchased to 235.65 or 36.3% of the total
Units outstanding.

         No  other  person  or  group  is  known  by  the  Registrant  to be the
beneficial owner of more than 5% of the outstanding partnership interests in the
Registrant as of the date hereof.

         (b)      Security Ownership of Management.

         Except with respect to the tender offer, no executive officer, director
or general partner of Three Winthrop or  Linnaeus-Lexington or WFA own any units
of the  Registrant,  or  has  the  right  to  acquire  beneficial  ownership  of
additional Units.

         (c)      Changes in Control.

         There  exists no  arrangement  known to the  Registrant  which may at a
subsequent date result in a change in control of the Registrant.

Item 12.          Certain Relationships and Related Transactions.

         (a)      Transactions with Management and Others.

         The  General  Partners  and their  affiliates  are  entitled to receive
certain cash distributions from and allocations of taxable profits and losses of
the Registrant.  In addition,  the General Partners and their affiliates receive
certain  fees  and  compensation  paid  by  the  Registrant  and  the  Operating
Partnerships  for services  rendered in  connection  with the  management of the
Registrant and the Operating Partnerships.

         The  following  table  sets  forth  the  amounts  of the  fees and cash
distributions  which the  Registrant and the Operating  Partnerships  paid to or
accrued  for the account of the General  Partners  or their  affiliates  for the
years ended December 31, 1996 and 1995:


<PAGE>


<TABLE>


Recipient                                   Type of Compensation                              1996               1995

<S>                                         <C>                                          <C>               <C>
Winthrop Financial                          Partnership Admin. Fee                       $100,000          $100,000
   Associates
Winthrop Financial Co.,                     Partnership Admin. Fee                         10,000            10,000
Inc.
Winthrop Management                         Asset Management Fee                             -               75,501
Winthrop Management                         Management Fee                                699,436           440,071
Three Winthrop                              Cash Distributions                              1,114             1,366
Linnaeus-Lexington                          Cash Distributions                             54,563            66,949
</TABLE>


         As a result of its  ownership  of  235.65  limited  partnership  Units,
Aquarius could be in a position to significantly  influence all voting decisions
with respect to the Registrant.  Under the Registrant's  partnership  agreement,
unitholders  holding a majority  of the Units are  entitled  to take action with
respect to a variety of matters.  When voting on matters,  Aquarius would in all
likelihood  vote the Units it acquired in a manner  favorable to the interest of
the  Managing  General  Partner  because of its  affiliation  with the  Managing
General Partner.

         There  is  no   indebtedness  to  the  Registrant  by  Three  Winthrop,
Linnaeus-Lexington or any of their officers, directors or partners.
<PAGE>
                                     Part IV

Item 13.          Exhibits and Reports on Form 8-K

(a)      Exhibits:

         The Exhibits listed on the accompanying  Index to Exhibits are filed as
         part of this Annual  Report and  incorporated  in this Annual Report as
         set forth in said Index.

(b)      Reports on Form 8-K - None

<PAGE>
                                                    SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.

                             SPRINGHILL LAKE INVESTORS LIMITED
                             PARTNERSHIP

                             By:  THREE WINTHROP PROPERTIES, INC.
                                  Managing General Partner

                                  By: /s/ Michael L. Ashner
                                     Michael L. Ashner
                                     Chief Executive Officer

                              Date:  March 29, 1997

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

Signature/Name          Title                     Date


/s/ Michael L. Ashner   Chief Executive           March 29, 1997
---------------------
Michael L. Ashner        Officer and Director


/s/ Edward V. Williams  Chief Financial Officer   March 29, 1997
Edward V. Williams


<PAGE>



                                                 Index to Exhibits

Exhibit
Number                              Document

3.4.              Amended and Restated Limited Partnership Agreement and
                  Certificate of Amendment of Springhill Lake Investors
                  Limited Partnership(1)

3.4.(a)           Amendment to Amended and Restated Limited Partnership
                  Agreement of Springhill Lake Investors Limited
                  Partnership dated August 23, 1995 (3)

10.(a)            Amended and Restated Limited Partnership Agreement and
                  Certificate of Amendment of First Springhill Lake
                  Limited Partnership (Partnership Agreements of Second -
                  Ninth Springhill Lake Limited Partnerships are
                  substantially identical)(1)

   (b)            Loan Agreement dated as of April 30, 1993 between
                  Springhill Lake Investors Limited Partnership and
                  Marvin M. Franklin, Mark P. Snyderman and J. Grant
                  Monahon, as Trustees of AEW #207 Trust(2)

   (m)            $58,000,000 Amended and Restated Promissory Note from
                  Springhill Lake Investors Limited Partnership to Marvin
                  M. Franklin, Mark P. Snyderman and J. Grant Monahon, as
                  Trustees of AEW #207 Trust dated April 30, 1993(2)

   (n)            $5,000,000 Second Promissory Note from Springhill Lake
                  Investors Limited Partnership to Marvin M. Franklin,
                  Mark P. Snyderman and J. Grant Monahon, as Trustees of
                  AEW #207 Trust dated April 30, 1993(2)

   (o)            Amended and Restated Indemnity and Deed of Trust and
                  Security Agreement between the Operating Partnerships
                  and James C. Oliver and Fred Wolf, II, Trustees, dated
                  as of April 30, 1993(2)

   (p)            Second Indemnity and Deed of Trust and Security
                  Agreement between the Operating Partnerships and James
                  C. Oliver and Fred Wolf, II, Trustees, dated as of
                  April 30, 1993(2)





<PAGE>


   (q)            Indemnity Agreement dated as of April 30, 1993 between
                  Springhill Lake Investors Limited Partnership and
                  Winthrop Financial Associates, A Limited Partnership(2)

   (r)            Amended and Restated Guaranty and Indemnity Agreement
                  of Property Owners dated as of April 30, 1994 between
                  the Operating Partnerships and Marvin M. Franklin, Mark
                  P. Snyderman and J. Grant Monahon, as Trustees of AEW
                  #207 Trust(2)

   (s)            Second Guaranty and Indemnity Agreement of Property
                  Owners dated as of April 30, 1994 between the Operating
                  Partnerships and Marvin M. Franklin, Mark P. Snyderman
                  and J. Grant Monahon, as Trustees of AEW #207 Trust(2)
---------------

(1)      Incorporated herein by reference to the Registrant's
         Registration Statement on Form 10 dated April 30, 1986, as
         thereafter amended.

(2)      Incorporated  herein by reference to the Registrant's  Annual Report on
         Form 10-K for the year ended December 31, 1993.

(3)      Incorporated herein by reference to the Registrant's  Current Report on
         Form 8-K dated August 23, 1995, as filed September 5, 1995.